CREATING SUSTAINABLE VALUE

Transcription

1 CREATING SUSTAINABLE VALUE Annual Report 2017

2 CONTENTS General Independent Auditor Report CCI 2025 Vision CCI Operating Geography Key Financial and Operational Indicators Message from the Chairman Message from the CEO Operational Review Creating Value for Our Consumers Creating Value for Our Customers Creating Value for Our Employees Creating Value for Our Investors Creating Value for the Environment and the Community Corporate Review Board of Directors Independence Declarations of Board Members Senior Management Shareholding Structure Corporate Structure Dividend Distribution Proposal Additional Information Related to Operations Corporate Governance Principles Compliance Report Financial Review Operational Overview Statement of Responsibility Pursuant to Capital Markets Board Financial Reporting Communique Consolidated Financial Statements & Independent Audit Report Glossary of Terms Shareholder s Information

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4 CCI 2025 VISION Be the best FMCG company across our markets. Our Values Passion We put our hearts and minds into what we do. Accountability We act with a high sense of responsibility and hold ourselves accountable. Teamwork We collaborate for our collective success. Integrity We are open, honest, ethical and we trust and respect each other. Roadmap to 2025 Customer -centric organization Value-added customer solutions Competitive cost to serve Customer & Consumer Being the preferred partner of our customers, offering our consumers a wide choice of products fit for every lifestyle and occasion Total beverage mindset Commercial excellence Corporate governance Environmental footprint Workplace rights Social license to operate Community Being a good corporate citizen CREATE CREATE VALUE People Great place to work Capability and leadership Engaged, diverse and inclusive High performing One Team culture Corporate Profile CCI is the sixth-largest bottler in the Coca-Cola system in terms of sales volume. CCI produces, distributes and sells sparkling and still beverages of The Coca-Cola Company (TCCC) across Turkey, Pakistan, Kazakhstan, Azerbaijan, Kyrgyzstan, Turkmenistan, Jordan, Iraq, Syria and Tajikistan. CCI employs close to 9,000 people and has a total of 25 plants, offering a wide range of beverages to a consumer base of 400 million people. In addition to sparkling beverages, the product portfolio includes juices, waters, sports and energy drinks, teas and iced teas. CCI s shares are traded on Borsa Istanbul (BIST) under CCOLA.IS, American depositary receipts (ADR) are traded over the counter in the United States under COLAY, Eurobond is traded on Irish Stock Exchange under CCOLAT tickers. 5

5 CCI Operating Geography Key Financial and Operational Indicators (1 January - 31 December 2017) Percentage GDP per CCI s market CCI s Population of population capita Per-capita share in ranking in (2017) under 30 (thousands $) consumption of sparkling sparkling (millions) (1) (2015) (1) (2017) (3) NARTD (L) (4) beverages (5) beverages Turkey % % 1 Pakistan (2) 64% % 2 Iraq % Jordan % Syria % Kazakhstan % % 1 Azerbaijan % % 1 Turkmenistan % % 1 Kyrgyzstan % % 1 Tajikistan % Source: (1) UN, (2) Pakistan Bureau of Statistics, (3) IMF, (4) CCI and TCCC estimations, (5) Nielsen & Ipsos as of December 2017 (for Turkmenistan as of October 2017) GDP per capita based on purchasing power parity (PPP). Sales Volume 1,237 million unit cases Sales Volume Increase 4.1% TURKEY INTERNATIONAL CONSOLIDATED 3.3% 4.9% 4.1% EBIT Net Sales Revenue 8,521 million TL Net Sales Increase 20.9% TURKEY INTERNATIONAL CONSOLIDATED 11.7% 30.4% 20.9% EBITDA 874 million TL 1,379 million TL KAZAKHSTAN EBIT Increase 36.4% EBITDA Increase 26.2% TURKEY INTERNATIONAL CONSOLIDATED TURKEY INTERNATIONAL CONSOLIDATED TURKEY AZERBAIJAN 49.6% 48.5% 36.4% 37.3% 31.4% 26.2% KYRGYZSTAN TAJIKISTAN Financial Highlights SYRIA JORDAN IRAQ TURKMENISTAN PAKISTAN Consolidated (million TL) Sales Volume (million UC) 1,189 1,237 Net Sales Revenue 7,050 8,521 EBIT EBIT Margin 9.1% 10.3% EBITDA 1,093 1,379 EBITDA Margin 15.5% 16.2% Net Income (28) 238 Net Income Margin (0.4)% 2.8% Total Equity 4,997 5,440 Total Assets 10,456 13,394 Net Debt 2,293 2,

6 CHAIRMAN LETTER 2017 has been a year in which CCI regained growth momentum in all of its key markets. We have been disclosing our sustainability performance and practices through our Sustainability Report according to international GRI standards every year since This year we increased the coverage of our report by adding full data from Kyrgyzstan for the first time, covering 88% of CCI s total production volume. Encouraging and supporting volunteerism to give back to our communities is one of the building blocks of our organizational culture. In May 2017, we took a very important step by launching the CCI Volunteering Program in Turkey, to encourage and support volunteering activities of our employees. This year, projects realized by CCI volunteers in 17 cities across Turkey served a population of close to 95,000 people. Meanwhile, we continue to collaborate with the World Wildlife Fund to increase public access to safe drinking water in Pakistan. Our 24 water filtration plants in Pakistan enable clean drinking water access for more than 750,000 people, improving the living standards of local communities and reducing the prevalence of waterborne diseases. Dear Stakeholders, 2017 has been a year in which CCI regained growth momentum in all of its key markets. Our strategic focus on profitable growth, supported by improving macroeconomic conditions and successful market execution enabled us to enjoy profitable growth in Our consolidated volume increased by 4.1%, reaching 1.24 billion unit cases. Our net sales revenue was up by 20.9% to 8.5 billion and our EBITDA grew by 26.2% to reach 1.4 bn. We continued to generate solid free cash flow in 2017, reaching 729 million, through higher operating profitability, improving net working capital and disciplined management of capital expenditures. We Continue to Invest in Our Geography In August 2017, we inaugurated our 10 th plant in Turkey in Isparta, with the honorable presence of President Recep Tayyip Erdoğan. Isparta Plant is a 110 million investment, which will serve the Mediterranean basin and the interior of the Aegean region, especially focusing on the tourism potential of these regions. Moreover, following the opening of our Multan plant in Pakistan last year, we started the construction of our new Faisalabad plant this year. Faisalabad is expected to start production in 2018 as our 6 th plant in Pakistan. It will make a 15% contribution to our production capacity in Pakistan, our biggest market in terms of population. Increased Recognition in Sustainability We continue to work to enhance the well-being and quality of life of youth through sports. Our Move! program continued in Turkey and Kazakhstan, touching the lives of thousands of youth. Our Olympic Moves program engaged more than 100,000 youth through sports competitions in Azerbaijan. Outlook for 2018 In 2018, we will continue to seize opportunities offered by our geography to achieve sustainable and profitable growth. We will work hard to develop our business, with an objective to create value for all our stakeholders. Looking towards 2018, in Turkey, we expect economic growth to be supported by consumer demand and fiscal spending in a pre-election year, while inflationary pressures and currency volatility are likely to persist as concerns. In Pakistan, the outlook for economic growth is favorable on the back of CPEC investments, improved availability of energy and growth-supporting structural reforms, although we do expect some political uncertainty in the short term. In the Middle East, we expect the current challenges in the political and macroeconomic environment to prevail, still posing risks to our business. In Central Asia, we expect another year of strong performance, supported by improved macroeconomic conditions and some firming of commodity prices. CCI is operating in regions that are abundant with growth opportunities. Our geography consists of emerging markets that are characterized by high GDP and population growth. We serve a consumer base of 400 million, whose average per capita beverage consumption is significantly lower than consumption levels in developed markets. Starting as a local bottler in Turkey and gradually expanding to a wide geography of 10 countries, CCI s sales volume has grown over threefold within the past 10 years, making CCI the world s sixth-largest bottler in terms of sales volume. Our total investment amount in our entire operating geography exceeded $2 billion over this period of exponential growth, with $1 billion invested in Turkey alone. We want to be recognized as one of the most responsible corporate citizens by all of our stakeholders. We, therefore, focus our efforts on embedding sustainability principles into everything we do and uphold our values of transparency and accountability in all our actions. Our efforts yield good results, and I am pleased to say that CCI is recognized by many national and international institutions as one of the leading companies in its geography in terms of sustainability performance. We are the only company from Turkey listed in the UNGC 100 index since Since 2015, we are one of Turkey s leading companies included in the Borsa Istanbul s Sustainability Index. In 2017, we were selected to be included in numerous prestigious sustainability indices, including the MSCI ESG Leaders Index and FTSE4Good Emerging Index. As a final word, I would like to recognize all of our employees for another year of hard work and success, thanks to their dedication and valuable contributions. I would also like to express my deepest gratitude to all of our stakeholders for their valuable trust and support to CCI. Tuncay Özilhan Chairman 8 9

7 CEO LETTER In line with our disciplined financial approach, in early 2018 we successfully completed a hedging transaction for approximately one third of our net FX exposure through cross-currency swaps. We will continue our disciplined approach in balance sheet management and effectively manage our FX exposure. Gaining Pace Towards Our 2025 Goals We are pleased with the robust growth achieved across our key markets in Dear stakeholders, CCI is the world s sixth-largest Coca-Cola bottler, operating in 10 countries with 25 production plants and annual sales volume of over 1.2 billion unit cases. We serve a consumer base of 400 million in a geography that consists of emerging markets which offer significant growth potential. CCI s business strategy focuses on capitalizing on the rich growth opportunities offered by our existing geography to achieve sustainable profitable growth, while expanding into new markets that offer high growth potential through mergers and acquisitions. I am very pleased to share that CCI completed 2017 with accelerated growth in volume, revenue and EBITDA, in line with our guidance. Our consolidated volume was up by 4.1%, reaching 1.24 billion unit cases, while our net sales revenue increased to 8,5 billion, exceeding volume growth. Our EBITDA grew by 26%, also significantly exceeding revenue growth. Overall, we are pleased with the robust growth achieved across all of our key markets. Turkey accounted for half of CCI s sales volume in 2017, with international operations making up the other half. Our focus on smaller packs across our key markets in 2017 was a major contributor to improved penetration, along with transaction and revenue growth. In Turkey, we delivered 3.3% volume growth, registering the highest growth of the past 5 years, supported by an improving macroeconomic environment, stronger consumer sentiment and a better tourism season. We had quality volume growth with increasing revenue per unit case in the sparkling category, posting growth for the first time in 5 years. International operations delivered 4.9% volume growth, primarily driven by Kazakhstan, Pakistan, Azerbaijan and Iraq. Our Pakistan operations grew by 3.5%, building on last year s robust growth, supported by positive economic momentum and successful campaigns. In Pakistan, we have primarily focused on achieving profitable volume growth through pricing and effective discount management, which resulted in a significant improvement in operational profitability. Brand Coca-Cola, with the highest brand love score globally, outperformed the sparkling category and was more than double the nearest competitor in Pakistan. We were pleased to see Central Asia returning to its positive momentum in 2017, driven especially by higher oil prices. Our volume increased by 7.0%, mainly due to strong performance in Kazakhstan and Azerbaijan, supported by improving consumer sentiment in the aftermath of the economic slowdown successful consumer activities and strengthened market execution. Our volume in the Middle East grew by 5.5%. Our main market Iraq also grew by 5.5%, despite the challenging operating environment, driven by the sparkling category and supported by improved market execution and increasing penetration. Jordan posted 5.0% growth for the year. Our consolidated net income reached 238 million in 2017, supported by better operating profitability and lower net FX losses. Our consolidated capex was 499 million, corresponding to 5.9% capex/sales ratio. Coupled with improving net working capital, we continued to generate solid free cash flow in 2017, reaching 729 million. In 2017, we realized a very successful Eurobond issuance with strong demand from investors, which resulted in both a longer maturity and a lower financing cost. The remarkable success of this transaction reaffirmed investors confidence in CCI and further strengthened our position for future growth opportunities. We continue to focus on creating value for all our stakeholders, which is fundamental to reach our 2025 vision of being the best FMCG company across our markets. In 2017, we maintained our investment focus on new technologies and our people, in order to make CCI a learning organization and optimize our business. We successfully continued to develop our Right Execution Daily (RED) practices across our operations. Following its successful implementation in Turkey in 2016, we started to use photo recognition technology for RED in Iraq. We are taking steps to use this effective technology in all our operations in This year we also launched OneCCI, an end-to-end transformation program that will impact all aspects of CCI s operations, including infrastructure, tools, processes, services and capability. OneCCI will be one of the key enablers for us to achieve our 2025 goals, driving us towards greater productivity and flexibility with standard, effective, efficient and agile processes and systems. In order to stay on the right track towards our 2025 vision, we continue to honor our commitment to integrate sustainability principles into all aspects of our operations. Our efforts are reflected in our strong performance in environment, society and corporate governance practices, which continue to be recognized by national and international institutions, adding further value to our business. We Expect to Continue Our Profitable Growth Although affected by frequent political and macroeconomic fluctuations, our markets offer us favorable macroeconomic and demographic conditions such as high levels of GDP, rapid population growth and low per capita beverage consumption levels. CCI is well positioned to take advantage of these favorable conditions and turn them into profitable growth opportunities. In 2018, we anticipate to continue the grow in our key markets such as Turkey, Pakistan and Kazakhstan and expect to maintain our growth trend. In the Middle East, challenges arising from unfavorable political and macroeconomic circumstances are expected to continue. We will continue to focus on sustainable and profitable volume growth in our key markets. We will work to further increase our efficiency and enhance our capabilities as an organization, while investing in our employees. With our strong market positions, proven management skills and disciplined financial management, we will grow our business profitably and take firm steps towards our 2025 goals. Burak Başarır CEO 10 11

8 OPERATIONAL REVIEW CREATING VALUE FOR OUR CONSUMERS OUR CUSTOMERS OUR EMPLOYEES OUR INVESTORS THE ENVIRONMENT AND THE COMMUNITY 12 13

9 Tea 9% Water 14% CREATING VALUE FOR OUR CONSUMERS We continued to create value for the 400 million consumers in our geography with our rich product portfolio, new product launches, consumer initiatives and promotions in Consolidated sales volume was up by 4.1% to 1,237 million unit cases (UC) in 2017, driven by solid performance of sparkling (up 3.3%), stills (up 8.5%) and non-ready-to-drink (NRTD) tea (up 20.9%). Half of total sales volume came from Turkey in 2017, while the other half came from international operations. Consolidated Volume Split by Category (2017) Stills (excluding water) 6% Turkey Achieved the Highest Growth of the Past 5 Years Sparkling 71% In 2017, Turkey operations delivered volume growth of 3.3%, registering the highest growth of the past 5 years. This was mainly driven by sparkling (up 1.7%), stills (up 4.1%) and NRTD tea (up 20.7%). Water contracted by 6.8% in 2017, in line with our strategy to improve category profitability. Our initiatives to drive revenue through quality volume growth resulted in positive sparkling growth for the first time in 5 years. The share of immediate consumption (IC) packages in the sparkling category maintained momentum, rising to 22% from 20% in 2016, with the number of transactions growing by 9%, outpacing volume growth. Volume Share of International Operations Reached 50% In 2017, our international operations delivered 4.9% volume growth, primarily driven by growth in Kazakhstan, Pakistan, Azerbaijan and Iraq. In Pakistan, volume rose by 3.5%. This was mainly due to our focus on profitable volume growth and price increases in early 2017 for the first time in 3 years, which slowed down overall volume growth. Brand Coca-Cola outperformed the sparkling category via improved market execution and successful consumer activities such as Coke Studio. In the Middle East, volume grew by 5.5%, with Iraq posting 5.5% growth, mainly driven by sparkling. Jordan recorded 5.0% growth for the year. Market Share in Turkey (2017) % Sıralama % Ranking Sparkling 63 1 Juice 25 1 Ice Tea 19 3 Water Exc Hod 4 3 Black Tea 5 4 Herbal Tea 47 1 Source: Nielsen Sparkling Beverages Market Share (2017) % Ranking Turkey 63 1 Pakistan 37 2 Iraq - 2 Jordan - 2 Syria - - Kazakhstan 49 1 Azerbaijan 75 1 Turkmenistan 61 1 Kyrgyzstan 68 1 Tajikistan - - Source: Nielsen for Turkey, Pakistan and Kazakhstan; Ipsos for Azerbaijan, Turkmenistan ve Kyrgyzstan. *As of December 2017 (for Turkmenistan as of October 2017) Central Asia registered 7.0% growth, mainly due to strong performance in Kazakhstan and Azerbaijan. Kazakhstan posted 17.5% volume growth, representing a record high volume in the aftermath of the macroeconomic slowdown. Strong market execution, successful consumer activities and higher oil prices supporting the economy led to double-digit growth in all categories in Kazakhstan. Azerbaijan, our second largest market in the region, posted 27.2% volume growth, mainly from strong growth in the sparkling category. Turkmenistan registered 45.8% volume contraction due to a worsened macroeconomic backdrop which resulted in limitations on currency convertibility, causing interruptions to our operations. Iraq 9% Volume Split by Geography (2017) Other 7% Kazakhstan 9% Pakistan 25% Turkey 50% 14 15

10 CCI TURKEY - BRAND PORTFOLIO SPARKLING BEVERAGE BRANDS & FLAVORS COCA-COLA COCA-COLA ZERO COCA-COLA LIGHT FANTA (Orange, Mandarin) SPRITE (Lemon) SCHWEPPES (Bitter Lemon, Mandarin, Tonic, 100% Apple, 100% Apple-Pomegranate, 100% Apple- Sour Cherry, Lime, Soda) SENSUN Our 10 th Plant in Turkey Inaugurated in Isparta by President Recep Tayyip Erdoğan The new plants of CCI and Anadolu Etap were inaugurated in Isparta with a ceremony attended by President Recep Tayyip Erdogan, Anadolu Group and CCI Chairman Tuncay Özilhan, TCCC Chairman Muhtar Kent, CCI CEO Burak Başarır and many guests. The Isparta plant was realised with an investment value of TL110 million and serves the Mediterranean basin and the interior of the Aegean region, primarily focusing on the tourism potential of these regions. STILL BEVERAGE BRANDS & FLAVORS BURN (Regular, Royal, Lemon Ice) MONSTER (Energy, Khaos, Assault) GLADIATOR CAPPY (Orange, Pure Orange, Peach, Apricot, Sour Cherry, Mix, Pineapple, Atom, Apple, Tomato, 100% Apple, 100% Apple- Mix, 100% Apple-Peach, 100% Apple-Sour Cherry, Pulpy Peach, Pulpy Orange, Pulpy Mandarin, Pulpy Mixed, Ramadan Scherbet, Traditional Lemonade) FUSE TEA (Lemon, Peach, Mango - Pineapple, Watermelon, Mango Papatya, Cube Cube) POWERADE (Ice Blast, Sun Rush) DAMLA SU DAMLA MİNERA (Plain Soda, Apple, Lemon) ZICO ILLY Coca-Cola is Now One Brand Damla Water Won the Superior Taste Award Damla Water, which had won the Superior Taste Award from the International Taste & Quality Institute in 2014, received the same award in 2017 with all of its four sources. Damla Water won three stars with high marks in the tests for water coming from its sources in Uludağ, Sapanca, Köyceğiz and Hazar. It became the only natural spring water brand in Turkey whose water from all four springs has won the Superior Taste Award and three stars. Coca-Cola launched its One Brand strategy in Turkey, following its latest global strategy which is a milestone in the brand s history. While emphasizing that Coca-Cola is for everyone, Coca-Cola presents consumers with three options, Coca-Cola original, Coca-Cola Light and Coca-Cola Zero that share the same values and visual iconography, to meet different consumer choices. The strategy enables consumers to choose the Coca-Cola that suits their taste, lifestyle and diet from the three options. The strategy was announced with en extensive communication campaign that lasted throughout Turkey Launched a Brand-New Flavor: Fuse Tea Cube Cube Fuse Tea launched its brand new Cube Cube taste in Turkey in April. The peachflavored green tea with peach cubes is unique in the iced tea category. Fuse Tea Cube Cube comes in 330 ml and 1 L PET bottles. Groundbreaking Ceremony for Our New Faisalabad Plant in Pakistan We started construction of our new plant in Faisalabad with a groundbreaking ceremony attended by Anadolu Group and Coca-Cola İçecek Chairman Tuncay Özilhan, TCCC Europe, Middle East and Africa President Brian Smith and our CEO Burak Başarır. Faisalabad plant project is spread over 118,000 m2 and will comprise two high-speed PET lines and one RGB line that will have a 15% contribution to CCI Pakistan s production capacity. It will serve to meet the increasing consumer demand across Pakistan. Sprite Animated Youth with Refreshing Promises Following up on the success of last year s Answering Cans campaign, Sprite conquered the hearts of youth this year with another fun campaign called Refreshing Promises. Launched in February, the campaign helped increase brand love and awareness of consumers by using Sprite packages to express expectations of youth about life in a witty manner. The campaign covered 330 ml can, 1 L PET and 1.5 L PET packages with a new design, and was supported by TV commercials and digital media. CCI Tajikistan Awarded as the Golden Brand of the Year In December, CCI Tajikistan received the Golden Brand of the Year award from Tajikistan s Ministry of Economic Development and Trade, competing among FMCG companies in Tajikistan based on sales volume, marketing activities and sponsorship events. The award is the highest award ever received by the CCI as a food and beverage company in Tajikistan. Burn Lemon Ice with a New and Unique Taste In January, Turkey offered consumers Burn Lemon Ice, a brand-new energy drink with a unique lemon taste. The new drink, available only in selected stores, aims to attract new consumers to the energy drink market with its unique taste and increase the consumption frequency of existing consumers. Burn Lemon Ice is available in 250 ml cans

11 330 ml Sleek Cans Launched in Turkey In Turkey, the 30-year old classic cans were replaced with sleek cans in April. The change included all regular 330 ml Coca-Cola, Fanta, Sprite, Fuse Tea and Cappy packages. Pakistan Broke the Guinness World Record for the Largest Packaged Product Display In September, CCI Pakistan broke the Guinness World Record by setting up the world s largest packaged product display at Metro Cash & Carry in Lahore, Pakistan. The display measured 1, m3, covered 100,000 cases and almost 1 million liters of Coca-Cola products. Turkey Launched Cappy s New Visual Identity Cappy started 2017 with a new visual identity that reflects its main priority of always emphasizing the goodness of fruits. Cappy s new visual identity is based on the idea of goodness that comes from the earth, which means good fruits. The PET pack design of Pulpy, Cappy s premium product that differentiates itself with fruit particles, was also changed to further emphasize its premium character. New Fanta Bottle Launch in Kazakhstan CCI Kazakhstan launched the new Fanta bottle with a brand new innovative design. Fanta s new bottle design aims to further popularize the drink among youth with its spiral concept. The new design is used for 0.5 L and 1 L bottles. Turkey Launched Fanta s New Logo and New Spiral Bottle In April, Turkey launched Fanta s brand-new logo and new spiral bottle. The new spiral bottle design and unique logo permanently replaced the old ones for all Fanta PET and can sizes. Fanta s new logo reflects the brand s young and creative spirit, and its new bottle with its spiral and unique form is fit to quickly attract the attention of youth. Kazakhstan Launched Monster Energy CCI Kazakhstan launched Monster Energy with a big event in April attended by employees, partners and the media. A rock music band, BMX performers and Monster Girls performed shows at the event to entertain guests and reflect the Monster spirit. In Kazakhstan PET 300 ml Launch CCI Kazakhstan launched PET 300 ml bottles for Coca-Cola, Fanta and Sprite. The new immediate consumption pack is easy to carry and comes at an affordable price. In Pakistan Cappy Joosi Launch In May, CCI Pakistan launched Cappy Joosi in 200 ml Tetra Pak packaging with a spectacular launch in Lahore. Cappy Joosi was launched with apple and mango flavors. Coca-Cola Zero in 1 L Glass Bottles in Turkey The new 1 L glass bottle for Coca-Cola Zero was launched in Turkey in April. Pakistan Launched Monster Energy CCI Pakistan launched Monster Energy, the world s fastest-growing brand in the energy drink sector and known for its association with action sports, music and gaming. Monster Energy is available in 355 ml premium cans in Pakistan

12 Fuse Tea Dushes Launched in Kazakhstan CCI Kazakhstan launched Fuse Tea Dushes as a brand-new flavor with pear and sage in the summer. The new Fuse Tea Dushes tastes like dushes, a local lemonade with a strong heritage. In Turkmenistan Bonaqua 5 L Launch CCI Turkmenistan launched Bonaqua 5 L to offer large size packaged water for home consumption in August. In Iraq Fanta Fruity Launch CCI Iraq launched the new Fanta Fruity in Ramadan to expand its flavored portfolio in two package sizes, can 250 ml and PET 750 ml. Kazakhstan Launched 1.75 L Bottles In March, CCI Kazakhstan launched Coca-Cola, Fanta and Sprite 1.75 L bottles. The new bottles to offer consumers an alternative size for the products. In Azerbaijan New Year Campaign CCI Azerbaijan organized the Coca-Cola Festive Caravan to celebrate New Year and bring feelings of happiness, joy and togetherness to consumers, inviting everyone to say Thank you to those who make the holiday so memorable. The caravan toured seven cities covering 45% of the country s population. CCI also visited 25,000 households in six cities to bring Coke magic to families. In Turkmenistan Fanta Orange Mandarin Launch Kyrgyzstan Launched One Brand Campaign CCI Kyrgyzstan launched the One Brand marketing campaign, following Coca-Cola s new global strategy for delivering one brand image, one value and one product to consumers. The campaign was supported by sampling where consumers were offered Coca-Cola classic and Coca-Cola without sugar under the single brand identity of Coca-Cola. Tajikistan Launched Share a Coke as Its Biggest Ever Marketing Campaign CCI Tajikistan launched Share a Coke as its biggest ever marketing campaign in August. The first launch event took place at CCI plant for employees, and the second for distributors, partners and other stakeholders. Participants in both events received personalized campaign t-shirts and Coke bottles that featured their names. With 40 male and 40 female names, Share a Coke campaign created a big hype in social media and a significant impact on brand awareness. Tajikistan Launched Coca-Cola Zero To meet the increasing demand for low calorie products, CCI Tajikistan launched Coca- Cola Zero in 500 ml PET packages in June. In December, CCI Turkmenistan launched the new Fanta Orange Mandarin in PET 1 L to expand flavor choices in Turkmenistan. In Jordan 250 ml Can Launch CCI Jordan re-launched a 250 ml can for Coca-Cola in August. Monster Energy Launch in Jordan In May, CCI introduced Monster Energy to consumers in Jordan, a global brand considered a giant in the USA and rapidly picking up in all European markets. The launch enhanced CCI s portfolio and profitability in Jordan. Monster energy drink is available in Jordan with three flavors in 355 ml premium cans

13 CREATING VALUE FOR OUR CUSTOMERS In line with our 2025 vision, we aim to build a company that creates shareholder value and delivers sustainable long-term growth and also be the preferred partner of our customers. Our goal is to create value for our customers by providing unparalleled commercial strategies, practices and leadingedge solutions that enable the perfect shopper experience every time. Winning with the customer is the key motivation behind our customer-centric organization, our joint initiatives with customers and our superior execution. In order to reach 400 million consumers, we work with more than 793,000 sales points, including supermarkets, restaurants, convenience stores, hotels and other retail outlets. We deliver our products to customers from 25 plants, and keep our entire organization focused on ensuring that we offer the highest quality products to our customers. We continue to invest in coolers to help our consumers gain more access to cold products. We have over 1 million coolers across the geography we serve. We invest in environmentally friendly coolers and always work to develop more technological and innovative cooler solutions to ensure that our future coolers would be more energy efficient with less carbon footprint. Through these activities, we aim to boost our sales volume and profitability while enhancing our relations with customers. Furthermore, we strive to use the most efficient and most cost-effective sales and distribution methods for our customers and consumers. We invest in technology to be a single point of contact to carry out our sales, business, training and finance transactions between CCI and our customers. For that purpose, we have the CCI Next project which is an ecommerce platform to add the best value to our customers and consumers, using FMCG technology solutions. We offer a perfect online shopping experience for our consumers and customers through CCI Online Shopping Platform. We implement FutureProof RTM which is a new and innovative RTM model in our Turkey operation. In order to better serve our small traditional segment customers, we use omni channel capabilities and take orders with our state-of-the-art call center. This enables us to re-evaluate the vehicles we need in the field and gives us an opportunity to decrease CO 2 gas emissions. Our new RTM model brings about new practices for urban routes where we will be using fully electric and solar powered motorcycles for selected services in Turkey s top 3 cities. One of our main objectives is to attain sustainable, profitable revenue and volume growth via granular decisions through an insight- and data-driven growth model. We work proactively to shape and manage our product mix to enhance profitability and maximize market share. We successfully manage our product portfolio to enhance our consumer proposition and optimize volume and value share across categories, brands, packs and flavors. Our growth with smaller packs across key markets in 2017 has been a major driver of improved penetration, transaction and revenue growth. We use various tools to ensure that we offer consumers the right product, in the right pack, at the right price to suit the right occasion. Promotional campaigns and occasion-based marketing activities are among the most important tools we use to promote customer relations and increase sales volume at points of sale. We optimize our investments while delivering a strong customer value proposition. All this allows us to meet consumer needs while improving or maintaining revenue growth from every case we sell to customers. RED Practices In 2017, we successfully continued our Right Execution Daily (RED) drive in all our countries to put our strategy into practice at the point of sale and to keep the shopper at the forefront when building our strategy. By implementing our RED project with increasing capacity and performance every year, we effectively monitor and follow merchandising standards and practices at our sales points, which enables us to offer products to our customers and consumers in an optimal way. In 2016, we started to use photo recognition as the latest technology for RED tracking to add value to our sales team by using activity-based performance monitoring. This technology serves to automate and enhance store audits. It enables wider, faster and more accurate information flow, which allows for increased audit coverage and decreased time spent for auditing. It thereby allows us to balance quality with productivity in our processes. Moreover, our sales teams find the opportunity to improve the merchandising standards of our customers, since they are personally responsible for taking pictures at the points of sale. Following Turkey s successful implementation in 2016, we started to use this technology in Iraq in Azerbaijan and Kazakhstan are planning to start using the photo recognition technology by early 2018 and the rest of our operations by the end of the year. Distributor Satisfaction Survey The business objective of the Distributor Satisfaction Survey is to find out the satisfaction level of CCI s distributors, determine the factors that affect expectations of the distributors, measure CCI s current performance for these factors and identify the actions necessary to improve performance. CCI Turkey s 2017 survey score was up by 1.4 points from its 2016 score, reaching 86%. Customer Satisfaction Survey This survey is designed to track CCI s customer satisfaction regularly in different regions and channels. The survey allows us to see our own and other players performance and satisfaction levels from a customer perspective. Identifying the key drivers for satisfaction or dissatisfaction, it enables us to understand the gap between customers expectations and our current levels of service. We conduct this survey once every two years in all CCI countries. In 2017, 3500 customers in Turkey, Iraq and Azerbaijan were interviewed face-to-face to determine and take the actions necessary to improve our customer services. CCI Customer Interaction Center CCI Customer Interaction Center s mission is to understand and satisfy customers and distributors needs and meet their expectations with an approach to provide them the best service. We create various flexible workflows for customers, distributors and new customer possibilities. We conduct issue-based customer satisfaction surveys and take proactive action. We call back most of our incoming callers about their service requests to ensure that they are satisfied with our solutions. In 2017 we realized 80,000 outbound calls. We analyze all our calls instantly and prepare issue-based reports. We monitor our service and quality levels every day and take action when necessary. In 2017, we created 275,000 service requests in different subjects. Joint Business Plan Meetings with Customers We shared our One Brand strategy and business plans with our customers through our Joint Business Plan meetings attended by 172 people representing 50 customers in

14 CREATING VALUE FOR OUR EMPLOYEES In 2017, we remained focused on making CCI a Great Place to Work where our people continue to develop and grow, thus creating incremental value for themselves and our business. Our efforts transformed our Human Resources function to a new investment center that would enable us to keep working on sustainable success in a continuously changing world. We firmly believe that we must live our core values in order to create a winning culture, which is driven by ownership, business-oriented functions and internalized people leadership. This remained the foundation for all our initiatives. Our key focal point throughout 2017 was developing people-centric strategies and programs that support us in gearing up to manage our talents and develop our leaders so that we have a strong succession bench and the necessary talent pipelines to be successful as one high performing team. Talent Acquisition In 2017, we re-visited our talent acquisition infrastructure to gauge its effectiveness in meeting business needs and identify if there are any improvement areas. Overall, we confirmed that our infrastructure has been sufficient in terms of meeting our organizational needs. We organized assessment centers for certain critical roles in our commercial teams, to ensure an even better job fit that would enable us to hire the most suitable candidates, who, upon joining us, would add value to our business. Furthermore, proactively building external talent pipelines using different mechanisms was also one of our key focus areas in We added questions to enable assessment on CCI s core values to our General & Competency Based Interview Questions manual, used by recruiters and hiring managers. We continued to run our internship programs across all our geographies, which have proven to be a useful source to build a reliable and sustainable external talent pipeline for entry-level positions. Our corporate website, including the career section, went through an overhaul and was re-launched with a new look and feel. The new design was created keeping in mind the younger generations and providing a more engaging and happier user experience. We continued our presence in social media as a source to attract talent. Performance and Talent Management In line with our 2025 vision, our objective is to create a talent and performance culture within CCI, whereby every employee is highly capable, has a high degree of loyalty, is engaged, lives CCI values, supports and drives diversity, exhibits high performance and acts in one team spirit; along with a corporate culture that nurtures our talents and leaders. Our talent management strategy, which encourages employees to have the performance, potential and capability to grow in CCI, focuses on the following: Mobility, Critical experiences, Living CCI values, Demonstrating leadership behaviors, Capability to resume responsibility for the next two roles (N+2 levels), Adaptability & forward-looking, Proficiency in English and bilingual, Energetic, Digital literacy. In line with our objective to identify and develop our future leaders, one of our most important priorities in 2017 regarding talent management was our Talent Development Platform. On this platform, every employee is perceived as a talent and is therefore subject to regular evaluation by management. In this evaluation, carried out to determine our future leaders and to form our talent pool, qualities such as flexibility, agility, motivation and loyalty are considered along with a good performance record. We believe that in identifying future leaders and determining areas for improvement, the biggest responsibility lies with managers who supervise our employees. Once evaluations are done and consensus is reached by the managers that supervise the employee at all levels, evaluations are calibrated at the final stage with the participation of the CEO. And eventually, CCI s talent pool is formed based on both country and position, along with backup plans. We use CCI Talent Management Principles and communicate with all our employees on our intranet to support our employees and managers in the process and keep the process standard across CCI. In addition, we also use CCI Career Navigation Framework which describes all top-level management positions and all critical positions on a country and region basis. The framework gives a general definition of all the critical positions and lists the required and preferred qualities and skills for each position, along with the training and development requirements. It also defines which positions feed critical positions and who can be nominated for which position, thereby serving as a unique career compass for our employees. As CCI, this year we monitored international career opportunities on a country and system level in a broader framework and realized the necessary transfer of knowledge, experience and skills

15 Talent Technologies We ensure that the human resources processes implemented to reach our strategic targets outlined in our vision are supported by the necessary new generation technological infrastructure. With this objective, we standardize the primary human resources data in all CCI countries and monitor it through a single platform with increased productivity. We strengthen employee experience by integrating human resources processes to SuccessFactors technology platform and supporting it by mobile and interactive applications. In this respect the career section on our website, which is integrated with the e-recruitment module of SuccessFactors, allows us to reach all the external talent in CCI countries and offer career development opportunities to our employees. We manage our performance management processes using the performance management module of SuccessFactors, providing mobile access, instant feedback and coaching support to our employees. Total Rewards We support our vision of being the best FMCG company across our markets by offering our employees competitive remuneration and side benefits that reward high performance. We offer compensation packages that support both short and long-term success on an equal basis, regardless of the employees gender, race, language, etc., to make sure that our employees are fairly compensated with high standards for their performance and the value they create. Following our values of equality and fairness, we consider the size of the job and the area of responsibility to determine the ranks of our employees. We make sure that the position of our employees in the job market and our compensation packages remain balanced and competitive by closely following the job market. We realize pay increases in line with our company s strategies based on performance evaluation and our basic pay management process, taking into account the internal relationship dynamics between different positions and external job market conditions. We also aim to raise the living and working standards of our employees and meet their social needs by offering them various side benefits such as private health insurance, life insurance, employee sponsored personal retirement plan, seniority awards and financial support for graduate studies. CCI Continues to Invest in Learning and Leadership Development We continue to create and sustain a learning culture in which employees focus on developing themselves not only in functional skills but also in people management skills and leadership capabilities. At CCI our learning and development activities are mainly focused on commercial leadership and functional capability development. We Support Commercial Development We increase our employees commercial capability across our geography through commercial development programs. We conduct standardized and country-specific customized training sessions in the classroom, in the field and on the job in all our country operations. More than 3,900 sales colleagues completed our basic sales training Collaborating for Value in This training focuses on developing relationships with customers that create mutual value by following the ten basic steps of sales and leveraging the power of partnership. We Cultivate Strong Leaders Accelerate is CCI s first leadership development program developed in-house for Executive Committee members and country General Managers, where participants do not only listen to keynote speakers but also engage in practice and deliver results to deal with some real-time business and people challenges. ilead Leadership Program The ilead2020 program was completed in 2016 and its results and contribution to developing and strengthening leadership capabilities in CCI were evaluated in Results proved that the program was a huge success, which led to ilead2025. We completed its structure, flow and design and identified our external partner to deliver the program in two modules, which will focus on our six leadership behaviors under Authentic Leadership and Sustaining Performance in VUCA World main titles. Primary objectives of ilead2025 are as follows: Build leadership capabilities across CCI to inspire sustainable performance in a constantly changing operational environment, Create and foster leaders who are aligned with overall 2025 roadmap and prepare today for tomorrow, Develop leadership capabilities to deliver successful business results in VUCA world. Manager on Board (MOB) Program A program for managers to help them work more effectively, MOB was completed in all CCI countries with 467 participants. Supervisor on Board (SOB) Program A program for those who become managers for the first time, SOB was also completed in all CCI countries with 905 participants. Business English Language Development Program was another key initiative taken in Across CCI, having business English Language proficiency was identified as a common development opportunity. We remain focused on providing learning opportunities to support functional knowledge. Our Finance Leader Certification Program, launched in 2014 as a hybrid learning methodology for finance employees up to the manager level, continued in 2017 with its 3 rd round involving 39 participants from all CCI countries. Another focus area in 2017 was to make Learning Management Solution (LMS) a one-point solution for training recording and reporting, and use it to the fullest potential with all its extra features. Employee Engagement Advancing towards our 2025 vision targets, we know that our most important asset that will help make CCI the best place to work is our employees. Therefore, in order to receive opinions and suggestions from our employees regarding their experience in CCI, we organize employee engagement surveys every two years. Through these surveys, we determine our strengths and opportunities for improvement from the perspective of our local and international employees, and take the necessary steps to support the sustainable development of our company based on this feedback. With our Leadership in Field program, we create opportunities for our employees to observe and question our leaders, encouraging open and transparent communication which is crucial for effective engagement. Our Pakistan team conducted the Value Play Shop project in 2017, which was an outcome of action plans from our last engagement survey. In 2017 around 1,500 employees, half of CCI Pakistan s staff (including nonmanagerial), participated in the program and 1,500 more are expected to participate in

16 Number of Employees as of 2017 Year-End Total Male Female Turkey 2,325 1, Kazakhstan Kyrgyzstan Azerbaijan Turkmenistan Tajikistan Iraq Jordan Pakistan 2,955 2, Syria Total 8,097 7, Our Most Important Guide: CCI Code of Ethics CCI s most valuable asset is the Coca-Cola brand and its employees that create it. This brand represents unique and very essential qualities such as esteem that arises from honesty and reliability. This esteem stems from shared values and especially from the meticulous dedication to carry out the company s activities in the best way. Workplace Rights Policy CCI s success is founded on our company values, our operational excellence standards, our commitment to comply with laws and our respect for the unique culture and traditions of the societies in which we operate. We value our relationship with our employees, as we achieve success through the contribution of each and every one of them. We are determined to build open and participatory workplaces where universal human rights are recognized, and where all employees are valued and encouraged to do their best. The CCI Workplace Rights Policy (WRP) is based on international standards of human rights according to the United Nations Universal Declaration of Human Rights, International Labor Organization Declaration of Basic Work Principles and Rights, and United Nations Global Compact. With this strong basis of support, we fully integrate human and workplace rights into our practices, our corporate values and our sustainability strategy. As one of our key 2025 vision priorities, we convey this message continually and consistently across our supply chain. The CCI Workplace Rights Policy covers the following topics: Freedom of association and collective bargaining, Working hours and wages, Prohibition of forced labor, A safe and healthy workplace, Commitment not to employ child labor, Workplace security, Prevention of arbitrary discrimination, Community and stakeholder engagement. Independent audits of Workplace Rights Policy and Supplier Guidance Principles compliance took place in CCI plants in Turkey, Turkmenistan, Pakistan, Azerbaijan, Kazakhstan and Tajikistan passed the audits successfully. CCI Code of Ethics and Workplace Rights Policy, two crucial elements for CCI s aspiration of being the best place to work and its successful sustainable growth, were announced in In the same year, Ethics and Compliance Committee was formed, and CCI Ethics and Compliance Director and Local Ethics and Compliance Managers were appointed. In addition, new communication channels including a website and a phone line, managed by an independent third party, were created. CCI Kyrgyzstan Won HR Excellence Award for the Second Time In October, CCI Kyrgyzstan won the professional HR Excellence award for the second time, being voted as the best employer by job seekers. The awards are distributed every year by the recruiting agency WIND HR Solutions in Kyrgyzstan to companies that have a strong position in Kyrgyzstan s labor market and are preferred by job seekers as the best employer. Accountability and integrity are of vital importance in terms of representing our company and our brands in the most appropriate way and enhancing our reputation. To guide us in upholding these values in our behaviors and business practices, the CCI Code of Ethics highlights the following four main principles: 1. Act with integrity and honesty, 2. Safeguard business and financial records and keep them accurate, complete and correct, 3. Safeguard the interests of CCI and avoid any conflicts of interest, 4. Treat everyone fairly act in accordance with the law. The CCI Ethics and telephone service, introduced to facilitate and support the implementation of the CCI Code of Ethics, allows all employees to anonymously report their ethical concerns and complaints related to the company through an independent institution. Available in Turkish, English, Arabic and Russian, the CCI Ethics service can be reached via , telephone or Internet. Occupational Health and Safety is CCI s Priority At CCI, we recognize that our people are our most valuable asset. Every CCI employee in our entire operating geography is important to us; therefore, we give utmost priority to the health and safety of our employees. In 2017, we improved our reporting by making it leaner and more efficient. We assess occupational health and safety performance with an inclusive maturity KPI that allows us to determine needs and focus areas. We continued to standardize the level of safety practices in all our operations, We improved our audit and inspection system in all our operations, which led to advancement in guidance and transparency, Leading effectively and explicitly by example, our leaders encouraged our employees to become more proactive in workplace safety

17 CREATING VALUE FOR OUR INVESTORS Between the public offering on 12 May 2006 and 2017 year-end, CCI s share price increased by 351% on a TL basis and 67% on a USD basis. During the same period, CCI s share price outperformed the Borsa Istanbul-100 Index by 55%. CCI s share price increased by 4% in As CCI Investor Relations Department, we aim to build a trustworthy relationship between CCI and its existing and potential investors by sharing regular, comprehensive and accurate information. In this context, CCI participated in 14 investor conferences and roadshows in 2017, meeting with 289 analysts and investors. Currently, CCI is covered by 21 equity analysts. As compliance with corporate governance principles becomes increasingly important with the changing regulations of the Capital Markets Board, we continue to advance our practices further. In 2017, our corporate governance rating was confirmed as 9.45 out of More information about CCI can be found on our corporate website Sustainable Growth In our geography, we use our strengths in the most effective way and successfully replicate the operating models we have developed in Turkey in all of our operating countries. In line with our 2025 vision, we aim to grow our business through acquisitions as well as organic growth. We closely monitor potential countries and operations to evaluate investment opportunities to support our growth. This process is managed in the most effective and efficient way to capitalize on all the potential benefits offered by acquisitions and to ensure healthy growth for CCI. Dividend Policy As a general rule and respecting the current provisions of the Capital Markets Board, with the exception of investment periods requiring high cash outflows, distributing dividends of up to 50% of the distributable net profit to shareholders has been adopted. Maintenance of this policy is among the primary objectives of CCI, except for special conditions which might arise from extraordinary developments in general economic conditions, as well as investment and other funding requirements necessary for the long-term growth of CCI. Without prejudice to the investment plans and operational requirements, the Board of Directors may propose a dividend distribution at a rate to be higher than the upper limit determined, subject to the approval of the General Assembly. Credit Rating As of 7 July 2017 Fitch Ratings has upgraded CCI s Long Term Foreign Currency (FC) Issuer Default Rating (IDR) and senior unsecured rating to BBB from BBB-. The Long Term Local Currency (LC) IDR is affirmed at BBB. The IDR Outlooks are Stable. The Long-Term FC and LC IDRs have been taken up one notch to reflect the operational and strategic relationship with The Coca-Cola Company (TCCC) and Fitch s view of diminished transfer and convertibility risks. The implied support by TCCC is reflected by Fitch in its LC IDR which has been rated BBB with Stable Outlook since Becoming the highest rated corporation by Fitch in Turkey, CCI s BBB rating is now two-notches above the sovereign rating and one-notch above the Country Ceiling. Moody s affirmed the Baa3 issuer rating and the negative outlook of CCI in its credit opinion dated 11 September The negative rating outlook is in line with the outlook on the Ba1 sovereign rating of Turkey, and reflects CCI s credit links with the Turkish economy and its material exposure to the domestic operating environment. Moody s standalone assessment incorporates CCI s substantial financial flexibility to pursue growth, including its moderate capacity to undertake debt-funded expansion, in line with its past transactions. CCOLA.IS Share Price ( ) We prioritize creating value for our stakeholders during this process. In addition to creating long-term value for our investors, we continue to enhance our reputation in various areas such as energy efficiency, health and safety and corporate governance with our sustainability principles and strategy. Thanks to our successful practices, CCI was included in Borsa Istanbul Sustainability Index for the third consecutive year in November

18 CREATING VALUE FOR THE ENVIRONMENT AND COMMUNITY Our primary goal in our efforts for the environment and communities is to be recognized as one of the most responsible corporate citizens by all of our stakeholders. As the sixth-largest bottler in the Coca-Cola system, we are aware of the impact that our operations have on the environment and communities. Our primary goal in our efforts for the environment and communities is to ensure the long-term viability of our business by being proactive and innovative in environmental protection and to be recognized as one of the most responsible corporate citizens by all stakeholders. As we advance towards our growth targets set by our 2025 vision, we are embedding sustainability principles into all our processes, engaging in innovative practices to achieve our objective. Our 2025 vision is to be the best FMCG company across our markets. Our sustainability strategy, guided by this vision, focuses on the issues that are material for our stakeholders and our company. We closely evaluate and manage these issues under six major titles: community development, environmental footprint, economic development, workplace rights, consumer well-being and customer value. Community Development As CCI, we work in collaboration with the communities in our operating geography in order to enhance their well-being and quality of life, especially focusing on youth and women. In doing this, we collaborate with local and international NGOs and encourage our employees to take an active role in our initiatives through volunteering. For this purpose, we launched the CCI Volunteering Program in 2017 to systematically encourage and support volunteering activities for all our employees. Under the program, we realized 1 international, 8 national projects and 8 local activities in 17 cities across Turkey with more than 700 volunteers in We launched our Move! social responsibility program in Turkey in 2013 to enhance the well-being and quality of life of youth through physical activity and sports, and successfully expanded it to Pakistan, Iraq and Kazakhstan. Likewise, we are expanding Coca-Cola grassroots football tournaments to all our operating geography. Through our women entrepreneurship program Coca-Cola Belestery, we support women s contribution to the local economy in Kazakhstan, in line with our commitments to the UN Women Empowerment Principles (WEP) signed in We collaborate with NGOs in Pakistan to develop and execute clean water projects to increase public access to clean drinking water. We currently provide clean drinking water to more than 750,000 people through 24 water filtration plants established in different cities in Pakistan. As stated in our Articles of Incorporation, we donate a percentage of our pretax profit to the Anadolu Foundation in Turkey, which develop and implement projects with youth that benefit the environment and society. Environmental Footprint We are aware of the direct link between environmental sustainability and the sustainability of our business. Therefore, we always seek to produce more by using fewer resources and creating less waste. Our environmental approach focuses on preventing pollution, reducing waste, reusing and recycling. Our efforts are directed towards minimizing our water consumption, reducing our total carbon footprint and reducing the amount of waste generated in our operations, along with the conservation of natural resources. Every year we implement various Operational Excellence projects in order to reduce our energy consumption and carbon footprint. In 2016, we achieved total energy savings of approximately 1620 million MJ through the projects conducted in our plants in Turkey, Kazakhstan, Jordan, Azerbaijan, Pakistan and Kyrgyzstan. We reduced our total C0 2 emissions by 6920 tons through numerous efficiency and optimization projects. In 2016, thanks to our environment-friendly coolers, we achieved a C0 2 reduction of approximately 230,000 tons, equal to the amount of C0 2 that 19.2 million trees annually extract from the atmosphere. 60% of our coolers in Turkey are HFC-free coolers. 88% of our coolers are equipped with EMD (energy management device) in Turkey, 72.5% in Kyrgyzstan, 50% in Azerbaijan and 41% in Kazakhstan. We produced all 330 ml Damla water bottles in Turkey using PlantBottle resin, which uses up to 30% plant-based material. Through our Lightweight projects, we saved 2,869 tons of resin in Turkey, Kazakhstan, Jordan, Azerbaijan, Pakistan and Kyrgyzstan. In 2016, we reached a recycling rate of 52% Key Performance Indicators Energy Water Total Use GHG Use Waste Ratio Emissions Ratio Recycling Country Year (MJ/L) Ratio(gCO,-e/L) (L/L) Rate (%) Turkey * 29.09** 1.47* Target Jordan Target Kazakhstan Target Azerbaijan Target Pakistan Target 0.43 tbd tbd tbd Kyrgyzstan Target for our plastic, glass, metal and aluminum packaging waste in Turkey. We fully support TCCC s ultimate global goal of replenishing every drop of water used. In 2016, we saved around 296,078 m 3 of water in our Turkey, Kazakhstan, Jordan, Azerbaijan, Pakistan and Kyrgyzstan operations. Our Turkey operation is one of least energy and water consuming operations in the world. Since 2006, we decreased our water consumption per liter of product rate by 19% in Turkey. Our water replenishment rate in Turkey reached 150%, corresponding to about 4.27 billion liters of water. In order to protect the environment and communities in our operating geography, we comply with local legal requirements, international standards and TCCC KORE requirements in our sustainability practices. It is mandatory for all our operations to install quality, food, environment, energy, and occupational health and safety management systems. All our plants in Azerbaijan, Kyrgyzstan, Jordan, Iraq, Kazakhstan, Pakistan, Turkmenistan, Tajikistan and Turkey hold the ISO 9001, ISO 14001, OHSAS and FSSC standards certificates. Moreover, all our plants, sales operations and offices in Turkey are certified with ISO Energy Management System and ISO GHG Standard. All our plants where we produce preforms i.e., Ankara, Çorlu, Sapanca, Pakistan-Lahore, Kazakhstan- Almaty and Azerbaijan-Baku) hold PAS 223 Packaging certificates. We continue to work on establishing energy management systems in all of our country operations. * Figures have received limited assurance from the independent auditing firm EY. ** Figure has been verified by SGS

19 Economic Development CCI conducts bottling and distribution operations with 25 plants in 10 countries, creating a positive economic impact both directly and indirectly. Our products are produced, sourced (where possible), distributed and sold locally. A bottle of Coca- Cola creates added value for multiple sectors during its journey from the production line to the consumer. Many sectors, including agriculture, energy, production, logistics, transportation, distribution, retail, cooling, advertising, media and packaging play a role in the production of a single bottle of Coke. Our suppliers play an important role in creating this impact. Our local procurement policy supports the sustainable development of local economies and we support our suppliers to improve their sustainability performance with effective supplier development practices. Our business stimulates job creation throughout our value cycle. We contribute to the economic success of each community by employing local people, paying taxes to governments, paying suppliers for goods, services and capital equipment, and supporting community investment programs. An independent economic impact study conducted for CCI Pakistan showed that CCI Pakistan has an output multiplier of 5, which means that an injection of Rs 1 by CCI Pakistan generates Rs 5 in Pakistan s economy. Additionally, CCI s tax multiplier in Pakistan is 2, which means for every Rs 1 tax paid by CCI Pakistan, almost Rs 2 are generated in taxation for the state. For our Turkey operations, every 1 generated by the Coca-Cola system in Turkey yields 6.8 in the economy. Additionally, our operations enable 2.5 billion value added in the retail business and generate income for 145,000 farmers. Corporate Governance and Workplace Rights Every year we set new sustainability goals, measure our performance, and share our results and practices with all our stakeholders through our sustainability report prepared in accordance with GRI standards. We give utmost priority to transparency, integrity and accountability in corporate governance. These values are of vital importance for us to represent our company and brands in the best way, and to build an excellent reputation. To ensure this, we conform to many national and international standards, and continue to regularly report our activities in various areas as required by the different organizations that we adhere to. Our employees are key to our success. It is our main responsibility to create a workplace environment in which they feel valued, encouraged, and where their workplace and human rights are recognized and respected. The CCI Workplace Rights Policy (WRP) is our guide to sustaining these values within all of our operations. Since 2002, as part of our commitment to protect our employees and safeguard our value chain, we require our suppliers to comply with the Supplier Guiding Principles (SGP), which determine the social, environmental, ethical and economic minimums that TCCC and its bottlers expect from suppliers, and also cover our WRP. We consistently cultivate effective communication, and conduct audit and development practices in order to ensure that our suppliers adhere to our principles. Moreover, we use the CCI Code of Ethics to guide our employees and make sure that they remain loyal to our values and behave accordingly. Our Corporate Governance Committee ensures full implementation and enforcement of the Code of Ethics. Consumer Well-Being and Customer Care While we offer our consumers a wide choice of products fit for every lifestyle and occasion, product safety and quality remain the priority of our commitment to well-being. We aim to meet the ever-evolving preferences of our consumers and provide more choice in our beverage portfolio with a total beverage mindset. We provide affordable, ready, innovative products for all occasions. We offer more than 25 brands to our consumers. 10% of our product portfolio is composed of low or nocalorie products. We provide our consumers with clear, understandable and scientific information regarding our products. We comply with labeling regulations in the countries where our products are sold and provide our consumers with nutritional information about all of our products, allowing them to make choices that best fit their lifestyles. Responsible advertising and marketing forms another important component of our engagement with consumers. Specifically, to honor the rights of parents and caregivers to make the appropriate choices for their children, we do not engage in advertising or marketing activities targeting children under the age of 12. For information on our activities regarding Customer Care, please see the Creating Value for Our Customers section of the report. External Recognition Our efforts and successes in the field of sustainability are acknowledged and prized by various institutions both in Turkey and internationally. In 2017, we marked many important successes in sustainability on both a national and an international scale. CCI is One of Turkey s Climate Leaders CCI is the First and Only Turkish Company in the UNGC 100 Index Since its launch by the United Nations Global Compact (UNGC) in 2013, CCI continues to be the first and the only company in Turkey to be included in the UNGC 100 Index. The 100 companies listed in the index are selected from the eligible UNGC members around the world. Members that have implemented and demonstrated an executive commitment to the 10 principles of the UNGC and continuously improve and disclose their sustainability performance and maintain baseline profitability are selected for the index. BIST SÜRDÜRÜLEBİLİRLİK ENDEKSİ CCI was honored with the Climate Leadership Award by CDP Turkey in performance and transparency categories three times, in 2012, 2014 and As a member of the CDP Turkey Water Program since 2015, we submit a Water Transparency Report to CDP every year. CCI Listed in the BIST Sustainability Index Based on the evaluation of its sustainability practices and performance in , CCI was selected among the Borsa Istanbul (BIST) companies to be included in the BIST Sustainability Index for the period between November 2017 and October CCI had become one of the first 29 companies to be included in the BIST Sustainability Index in

20 CCI Listed in the MSCI ESG Leaders Index Following the evaluation of our environment, society and corporate governance performance for , we were selected by Morgan Stanley Capital International to be included in the 2017 MSCI ESG Leaders Index, receiving an AA score in our evaluation. CCI was first listed in the MSCI Global Sustainability Index in We Enhanced the Well-Being and Quality of Life of Youth with Move! Başla! Physical Activity Festival on Children s Day CCI Listed in the FTSE4Good Emerging Index In early 2017, CCI was selected to be included in the FTSE4Good Emerging Index due to its high performance in the fields of environment, society and corporate governance. The FTSE4Good Emerging Index was launched in 2016 by FTSE Russell, a global leader in indexes and data that are used by investors globally. It is an extension to the FTSE4Good Index Series, which is designed to measure the performance of companies demonstrating strong environment, society and corporate governance practices. Our Move! social responsibility program was launched in 2013 in Turkey with the aim of raising awareness of young people on active and healthy living and helping them to develop a lifelong habit of physical activity. Following its success in Turkey, the program was expanded to Pakistan and Iraq in 2014, and Kazakhstan in Various sports and training activities organized within the program resulted in significant enhancement of the well-being and quality of life of thousands of young people that benefited from the program. This year, a day long physical activity festival was organized on April 23rd Children s Day at a junior high school in Istanbul, which also serves refugee children from Syria. The festival aimed to help children from different cultural backgrounds socialize and connect through various sports and team games. Sports areas in the school were reorganized and renovated, with new activity areas created for children by Başla! teams as part of the event. Basketball, volleyball, mini badminton, athleticism, handball and dance activities were organized with the participation of close to 500 students and CCI volunteers. CCI Joined the ECPI Emerging Markets ESG Equity Index As of December 2017, CCI became a constituent of ECPI Emerging Markets ESG Equity index. ECPI is a leading rating and index company dedicated to environmental, social and governance performance research. ECPI Indices are used for benchmarking, thematic investment, risk management purposes and to create index-tracking investment strategies or exchange-traded funds. CCI Included in Vigeo Eiris Best Emerging Markets Performers Ranking In December, CCI was included in Vigeo Eiris Best Emerging Markets Performers Ranking, chosen as one of the 100 most advanced companies within the Equitics Emerging Markets Universe that consists of 850 companies from 37 sectors and 31 countries. Companies included in this index achieve the highest scores, as determined by a review based on 38 criteria, divided into six key areas of corporate environmental, social and governance responsibility, assessed by Vigeo Eiris. Turkey Between 2013 and 2017, Başla! program mobilized around 125 thousand youth in Turkey for a more active and healthy lifestyle. In line with the program s mission, we supported projects developed and implemented by physical education teachers at schools. As part of the projects, young people participated in activities in a wide range of branches including athletics, gymnastics, table tennis, basketball, volleyball, dance, step, korfball, bocce, archery, handball and badminton. With the addition of 2 more cities in 2017, thousands of students in 134 schools from 16 cities across Turkey benefited from the program since its launch in Social Responsibility Innovation Award to Başla! In March 2017, Başla! was honored with another prize, this time from Turkey, receiving the Innovation Prize at the Corporate Social Responsibility Awards organized by the Turkish Confederation of Employer Associations (TISK). Previously in 2015, the program was selected as one of the best corporate social responsibility programs of 2015 in Europe, receiving a bronze Stevie award at the 12 th Annual International Business Awards. It was also honored by the Coca-Cola system in 2015, receiving Excellence Award in the individual Wellbeing category at the Coca-Cola Eurasia and Africa Sustainability Awards Move! Supports Young Social Entrepreneurs in Kazakhstan Move! program was expanded to Kazakhstan in March 2015, and was implemented in 19 schools from low-income rural areas in the Akmola region. It focused on helping physical education (PE) teachers to develop their personal and professional capacities, meanwhile introducing creative and innovative learning methods. Between 2015 and 2016, more than 40 PE teachers were trained and around 3,000 students benefited from the renovation of sports facilities and donation of sports equipment. In 2017, we expanded the scope of the program in Kazakhstan to help a wider section of the society and address a wider range of issues related to community development. With this purpose, in 2017 the program focused on addressing the most significant social and environmental problems in Kazakhstan and developing social entrepreneurship, project management and social engineering skills among the youth. For this purpose, a social entrepreneurship project competition was organized where a shortlist of 10 projects to address major socio-environmental problems in Kazakhstan were evaluated by NGOs, state and media representatives. The selected top 3 young entrepreneurs received total funding of 1 million Kazakh Tenges and assistance from the Eurasia Fund to realize their projects

21 CCI Volunteering Program: We Support Volunteers and They Support Our Communities Encouraging and supporting employee volunteerism is one of the building blocks of CCI s organizational culture. Within its 2025 vision, one of CCI s main goals is to be recognized as one of the most responsible corporate citizens by all stakeholders. To reach this objective, CCI supports civic initiatives that help build stronger communities, focusing on social needs such as women empowerment, youth development and environmental protection. In doing this, CCI collaborates with local and international NGOs and encourages its employees to take an active role through volunteering. In May 2017, we took a very important step by launching the CCI Volunteering Program to systematically encourage and support volunteering activities for all our employees. The program was launched first in Turkey, to be gradually expanded to other CCI countries. As part of the program, we collaborate with around a dozen civil associations and foundations, as well as the Ministry of Education, universities and local governments. Under the Volunteering Program, CCI employees can apply individually or as a group to become volunteers through the company s intranet platform indicating their preferred fields of activity. The program s Coordination Team, supported by Local Teams, collects the applications and organizes meetings for volunteering candidates where they learn about the volunteering process and discuss the roadmap for their project. Volunteers can ask for CCI s financial support, or partner with one of the program s external partners. SUSTAINABILITY REPORT 2016 CCI Released 2016 Sustainability Report An evaluation is also carried out at the end of each activity or project to ensure the effectiveness of the program. The program is supported by CCI s leadership team whose members also volunteer in its activities and mentor volunteer teams. In 2017, we realized 1 international, 8 national projects and 8 local activities in 17 cities across Turkey under the program serving a population of close to 95,000 people that consisted of various special groups such as disadvantaged women, children and families, refugee children, youth, elderly and persons with disabilities. More than 700 employees volunteered in the program spending more than 3000 volunteer hours. Our volunteers collaborated with more than 40 external partners. With more and more CCI employees realizing the value of volunteering for their own lives and the society, CCI s Volunteering Program is supporting a growing community of CCI volunteers ready to take joint action to make a positive difference in the society. The program is expected to further support and strengthen the volunteering spirit that has long been cherished across CCI s wide geography. The report includes information on our sustainability practices and performance results in Turkey, Jordan, Azerbaijan, Kazakhstan, Pakistan and Kyrgyzstan. We expanded the scope of the report this year by including full data from Kyrgyzstan, allowing the coverage of the report to reach 88% of CCI s total production volume. The content of the report was prepared in accordance with the core option of the GRI Sustainability Reporting Guidelines. The report, which has limited assurance from an independent audit company, also serves as CCI s Communication on Progress to the UN Global Compact and its progress report for the UN Women s Empowerment Principles. CCI Mersin Plant Received Efficiency Award In May, CCI Mersin plant received the second prize in the Midsize Enterprises category with its Tetra Lines Automatic Pallet Truck System project at the 2017 Efficiency Projects Competition organized by the Turkish Ministry of Science, Industry and Technology. CCI Received Water Efficiency Award from the Sustainability Academy in Turkey In October, CCI received the grand prize in Water Efficiency category at the 4 th Sustainable Business Awards in Turkey. The awards are organized every year by the Sustainability Academy to award Turkish companies that apply the most sustainable business models in various fields of activity. CCI received the 2017 award with its Water Efficiency Monitoring System project developed and implemented by its Damla water plant in Sapanca. CCI Global Leadership Development Program Our third Global Leadership Development Program, organized in collaboration with Anadolu Foundation since 2014, was held at Boğaziçi University. 20 fellows from 10 different countries participated in various training sessions and seminars for 7 days. During the week fellows met with professionals from Turkish public, private and NGO sectors and journalists, and visited several private sector institutions and NGOs at the end of the program. CCI Kazakhstan Won Community Service Award CCI Kazakhstan won the 2017 Community Service Award given by the American Chamber of Commerce for its successful implementation of CSR projects such as Move!, Coca-Cola Belestery and Coca-Cola Bylgary Dop. CCI Received Recycling Award from the Turkish Ministry of Environment In February CCI received a recycling award from the Turkish Ministry of Environment and Urbanization in appreciation of its efforts to recycle product packages. CCI recycles 52% of its product packages in collaboration with ÇEVKO. The award came as a recognition of CCI s successful practices to reach waste management targets for the FMCG sector in Turkey

22 Coca-Cola School Cup in Azerbaijan CCI Azerbaijan organized the 6 th Coca-Cola School Cup in collaboration with the Association of Football Federations and the Ministry of Education of Azerbaijan. The tournament aims to promote sports among the youth, and requires each participating team to have at least one female player. More than 200,000 youth and 1,584 teams from 76 districts participated in the tournament this year. CCI Kyrgyzstan Received Best Taxpayer Award In July, CCI Kyrgyzstan received Kyrgyzstan s Best Taxpayer Award given by the State Tax Affairs of the Kyrgyz Republic. CCI was given the award for its contribution to the economy of the Kyrgyz Republic and its flawless application of the tax legislation. Olympic Moves Engaged More than 100,000 Teens in Azerbaijan The Olympic Moves program, supported globally by Coca-Cola, was launched in 2015 in Azerbaijan with the collaboration of Coca-Cola, the National Olympic Committee of Azerbaijan, the Ministry of Education and the Ministry of Youth and Sport. The program s mission is to increase sports participation among youth and thereby foster healthier, happier and more active communities. It also helps teens to acquire life skills such as team play and fair competition, and inspires them to excel in their efforts through the power of sports and Olympic values. In 2017, the program engaged more than 100,000 teens in Azerbaijan through school level and city level competitions in basketball, volleyball, cycling, athletics and badminton. This year 3 participants of the program, 3 female cyclists, also participated in the European Youth Olympic Festival; marking a first in Azerbaijan s history where 3 female athletes represented the country in cycling category on an international level. We Provide Clean Drinking Water to More Than 750,000 People in Pakistan Paani Clean Water Project was launched by CCI Pakistan in collaboration with the World Wildlife Fund (WWF) in 2014 with the objective of increasing public access to safe drinking water. By the end of 2016, the project had reached a total of 20 water filtration plants offering free clean drinking water to local communities in cities such as Karachi, Rahim Yar Khan and Lahore. On average, each filtration plant has the capacity of producing over 2000 liters of clean drinking water per hour and serves a community of over 20,000 people every day. More plants were built in 2017, reaching 24 filtration plants set up in densely populated communities enabling water access for more than 750,000 people. The plants help improve the living standards of the local population and reduce the prevalence of waterborne diseases. The project s impact study conducted by WWF suggested that there has been a significant decrease (10-15%) in instances of waterborne diseases in the project s beneficiary communities. Grassroots Football Tournament in Turkmenistan In May, CCI Turkmenistan organized the 2017 Grassroots Football Tournament, also known as the Coca-Cola School Cup, in collaboration with the Turkmenistan Football Federation and the Turkmenistan Sports Committee in Ashgabat. Around 5000 students of ages from 140 schools competed in the tournament. Bylgary Dop Reached Thousands of Youth in Kazakhstan Jointly organized every year in Kazakhstan by Coca-Cola and the Football Federation of Kazakhstan since 2006, Coca-Cola Bylgary Dop grassroots football tournament reached around 220,000 children aged from more than 6100 schools in its 11 th season during the academic year. Honored twice by UEFA awards, Coca-Cola Bylgary Dop is the largest football tournament in Kazakhstan reaching 80% of the country s student population and opens the doors of a professional football career for youth. Copa Coca-Cola 5 th Season Completed in Iraq The 5 th season of Copa Coca-Cola grassroots football tournament in Iraq was organized in October in Baghdad. The tournament, organized every year in partnership with the Ministry of Education, had started with boys schools in Baghdad, with girls schools joining in last year. This year the tournament brought together more than 2400 boys and girls under 15 from around 300 schools in 7 Iraqi provinces

23 CORPORATE REVIEW 43

24 BOARD OF DIRECTORS Tuncay Özilhan Chairman of the Board Mr. Özilhan has been the Chairman of the Board of CCI since He started his career as General Director of Erciyas Biracılık in He became Coordinator of the Beer Group and General Coordinator at Anadolu Endüstri Holding before his appointment to Anadolu Group as CEO in Mr. Özilhan has been the Chairman of the Board of Anadolu Group since 2007, and he also acts as the Chairman of various Anadolu Group companies including Anadolu Efes Biracılık and Coca-Cola Satış ve Dağıtım. Mr. Özilhan served as TÜSİAD s (Turkish Industry and Business Association) Chairman from 2001 to 2003 and he is currently the Chairman of its High Advisory Council. His other responsibilities include; Member of the Board of Directors and Chairman of the Turkish Russian Business Council at the Foreign Economic Relations Board (DEİK), Honorary Consul for the Republic of Estonia and President of the Anadolu Efes Sports Club. Tuncay Özilhan holds The Order of the Rising Sun, Gold and Silver Star, constituting one of the most important orders awarded by Japanese government. Salih Metin Ecevit Board Member Born in 1946, Mr. Ecevit graduated from the Faculty of Political Sciences in He received a master s degree from Syracuse University in Economics in Between 1967 and 1980, he worked as the Tax Inspector and Deputy General Manager of General Directorate of Revenues in Finance Ministry. Mr. Ecevit joined Anadolu Group in 1980 and assumed responsibilities in the automotive companies of the Group at various levels such as General Manager, Board Member and Chairman of the Board. He retired in 2006 as per the Group s age requirements, while he was serving as the Automotive Group President. Between 1992 and 2004 he served as a Board Member and the Chairman of the Turkish Association of Imported Car Distributors. He currently serves as a Board Member in Coca-Cola İçecek A.Ş. and many other Anadolu Group companies. Galya Frayman Molinas Vice Chairman of the Board Galya Frayman Molinas heads Global Strategy & Insights at The Coca-Cola Company. In this role, she is responsible for leading the development of global corporate strategy for growth and driving next generation insights and analytics capabilities. She began her career at Coca-Cola in 1996, leading Marketing in Turkey, Central Europe & Russia until She served as marketing function lead in Coca-Cola Eurasia Group, which included Russia, India, Adriatic & Balkans, Caucasus & Central Asia and Middle East geographies 2005 through In 2009, Molinas was named Coca-Cola Turkey Business Unit President; her responsibilities were extended to Caucasus and Central Asia in 2012 and she served in this capacity until Before joining The Coca-Cola Company, Molinas spent seven years in brand management at Unilever Turkey. Prior to this, she earned a Bachelor s degree in Economics and Administrative Sciences from Bogazici University. Molinas serves as the Vice Chairman of the Board at Coca-Cola İçecek since She is a member of the Advisory Board of Harvard Business School s MENA and Central Asia Research Center and is a trustee of the Bogazici University Foundation. She served as a founding member of Coca-Cola Global Women s Leadership Council. She was the President of the Coca-Cola Foundation in Turkey in Molinas chaired Turkey Business Council for Sustainability for four years and served at the Board of YASED, Turkey s International Investors Association for three terms. Mehmet Hurşit Zorlu Board Member Mr. Zorlu has been a Board Member of CCI since He holds a Bachelor of Science degree in Economics from Istanbul University. Prior to joining Anadolu Group in 1984, he held various positions in Toz Metal and Turkish Airlines. Mr. Zorlu joined Anadolu Group as a Marketing Specialist at the Efes Beverage Group and held various positions including Assistant Marketing Manager, Assistant Project Development Manager, Project Development Manager and Business Development & Investor Relations Director. Mr. Zorlu held the position of Chief Financial Officer (CFO) for Efes Beverage Group between and the position of CFO for Anadolu Group between From 2013 onwards he served as the Deputy CEO of Anadolu Group, until his appointment as the CEO of Anadolu Group in February He also currently acts as a Board Member in various Anadolu Group companies. Mr. Zorlu serves as a Board Member in Turkish Investor Relations Society (TUYİD). Armağan Özgörkey Yönetim Kurulu Üyesi Talip Altuğ Aksoy Board Member T. Altuğ Aksoy received his bachelor s degree in economics from Oglethorpe University in USA. He began his career as Finance Assistant Specialist at Anadolu Group in 1995 and was appointed as a Finance Specialist in Mr. Aksoy worked as Human Resources and Treasury Specialist from 1998 to He served as Director of Sales and Marketing at Efes Invest from 2000 to 2003 and was appointed as the Director of Trade and Export at Efes Beer Group in January Continuing his career at the Group as the Director of Purchasing and Logistics from 2006, Mr. Aksoy was appointed Director of Supply Chain of Efes Beer Group in June In November 2011, he was appointed as Efes Turkey Managing Director and served in this position until January Mr. Aksoy still continues to serve as a Board Member in various Anadolu Group companies. Kamilhan Süleyman Yazıcı Board Member Kamil Yazici holds a bachelor s degree in business administration from Emory University in USA, an MBA degree from AIBEC (American Institute of Business and Economics) in Russia and has completed the GMP program at Harvard Business School. Starting his career in Anadolu Group Finance Department in 2000, Mr. Yazici later worked in Anadolu Efes Russia Marketing Department between and was appointed New Product Development Manager in Continuing his career in Russia as Logistic Systems Manager during , Mr. Yazici was appointed as Supply Chain Director in 2008 and as Development Director in Mr. Yazici assumed the role of Anadolu Efes Moldova Managing Director between and was later appointed as Market Development Director in Anadolu Efes Headquarters, a position held until April Mr. Yazici currently serves as Board Member and Vice-Chairman in Anadolu Group companies. Ahmet Boyacıoğlu Board Member Born in 1946, Ahmet Boyacıoğlu holds a bachelor s degree in Business Administration from the Middle East Technical University. Mr. Boyacıoğlu began his professional career with the Efes Beverage Group (Anadolu Efes) in He served in various positions from 1973 to 2005 including Bursa Region Sales Manager, Ege Biracılık ve Malt San. A.Ş. Sales Manager, Güney Biracılık ve Malt San. A.Ş. General Manager, Ege Biracılık ve Malt San. A.Ş. General Manager, Eastern Europe President, International Beer Operations Group President, and Strategy and Business Development Director. Mr. Boyacıoğlu was appointed as the President of the Efes Beer Group in May 2005 and retired on 1 February

25 BOARD OF DIRECTORS Dr. Cem M. Kozlu Board Member Dr. Cem Kozlu received his bachelor s degree from Denison University, MBA from Stanford University and PhD from Boğaziçi University. Dr. Kozlu held executive positions at NCR in the US, Procter&Gamble in Switzerland and was the General Manager in Komili for 12 years. He was appointed as the General Manager and Chairman of the Board of Directors of Turkish Airlines in 1988 and held these positions until He also served as the Chairman of the Association of European Airlines (AEA) in Cem Kozlu remained in public service as a member of the Turkish Parliament from 1991 to 1995 and as the Chairman of the THY Board of Directors from 1997 to Dr. Kozlu has held different positions in The Coca Cola Company since Before retiring in 2006, he was the Group President responsible for 51 countries in the Vienna-based Central Europe, Eurasia and Middle East Group and served as a consultant in The Coca-Cola Company Eurasia & Africa Group between 2007 and Kozlu held board membership positions in Hürriyet, TAV and The Marmara Hotels & Residences and was the Chairman of the Board of Directors of Singapore based Evyap Asia. Currently, Cem Kozlu serves as a member of the Board of Directors of İstanbul-based Coca Cola İçecek, AG Anadolu Group, Efes Biracılık ve Malt Sanayii, Kamil Yazıcı Yönetim ve Danışmanlık, Pegasus Airlines and Vienna -based DO & CO Aktiengesellschaft and as a member of the Board of Trustees of Anadolu- Johns Hopkins Sağlık Merkezi (Anadolu-Johns Hopkins Health Center), Anadolu Vakfı (Anadolu Foundation) and İstanbul Modern Sanatlar Vakfı (İstanbul Modern Arts Foundation). He is also the Chairman of the Board of Directors of Global Relations Forum. Dr. Kozlu, who served as a lecturer at Boğaziçi and Denison universities at different times, has 10 published books, numerous articles and management TV series. Hamit Sedat Eratalar Independent Board Member Born in İstanbul in 1952, Mr. Sedat Hamit Eratalar completed his high school education at İstanbul Erkek Lisesi and obtained his bachelor s degree from Ankara University Faculty of Political Sciences Department of Economics and Finance. He started working in Germany in 1975 as fiscal inspector and joined the Arthur Andersen Ltd. Şti. in 1980, where served in various positions. At the same time, he served as a statutory auditor in Turkcell, Tüpraş, HSBC Bank A.Ş. and Finans Bank A.Ş. During the period he was a partner and CEO in Eratalar Yönetim Danışmanlığı A.Ş. and between he served as a consultant in DRT Danışmanlık A.Ş. Presently he acts as the Member of the Board of Directors of Deutsche Bank A.Ş., Knauf Alçı Sanayi A.Ş., Adel Kalemcilik A.Ş. and Borusan Group and partner in Eratalar Yeminli Mali Müşavirlik Ltd Şti. Mr. Eratalar, who knows knows English and German is a member of TUSIAD and Tax Advisory committee. Hamit Eratalar complies with all of the independent member requirements, defined in the Capital Markets Board (CMB) Corporate Governance Principles. Mehmet Mete Başol Independent Board Member Born in 1957, Mete Başol graduated with a BSc degree from the Arizona State University, Department of Economics, and started his career in banking by making the economic evaluations of a variety of investment projects and by preparing sectoral reports at the Medium Term Loans division of Interbank in In 1988, he transferred to the Turkish Merchant Bank, which was an investment bank established jointly by Bankers Tust Co. Newyork and T. İş Bankası, as the Treasury, Fund Management and Foreign Relations Manager. In 1992 he also assumed the responsibility for the capital markets group as the Assistant General Manager. In 1995, upon the purchase of the bank completely by the Bankers Trust, he was elected to the Membership of the Board of Directors and the Credit Committee. He assumed the offices of Chairman of the Board of Directors and the General Manager of the bank whose title was changed as Bankers Trust A.Ş during During the period , he participated as Executive Director in the joint Board of Directors of the public banks which were established pursuant to the law (T.C Ziraat Bankası, T. Halk Bankası, T.Emlak Bankası).Subsequently he has formed Tridea Consulting with two other partners where he advised small to medium sized companieson finanacıal and managerial issues. He has not served as the advisor at Coca-Cola İçecek A.Ş. and the Anadolu Group companies during After 2009 he has continued the similar work under his own entity. He served as the Member of the Board of Directors of Galatasaray Sportif A.Ş. ( ), T. İş Bankası A.Ş ( ), Dedeman Holding A.Ş. ( ) and Dedeman Turizm Otelcilik Yatırım A.Ş ( ). Presently he serves as a member of the Board of Directors of Nurol Investment Bank Inc. (2014), Enerya Gaz Dağıtım A.Ş. and Enerya Gaz Ticaret A.Ş. (2015), Coca-Cola İçecek A.Ş. ve Anadolu Efes Biracılık ve Malt Sanayi A.Ş. Mehmet Mete Başol complies with all of the independent member requirements, defined in the Capital Markets Board (CMB) Corporate Governance Principles. İzzet Karaca Independent Board Member Born in 1954, İzzet Karaca graduated from Boğaziçi University Industrial Engineering Department in Having started his professional career in 1977 at Koç Research and Development Centre, he held Industrial Engineer and IT Manager position until Between 1985 and 1988, Mr. Karaca worked as Systems and Organization Director at Ford Otosan. From 1988 onwards, he held several positions at Unilever in Germany, Turkey and Baltic States including Internal Audit Group Manager, Logistics Manager, Commercial Director and Managing Director. In addition, between 2011 and 2013, İzzet Karaca served as the Chairperson at YASED (International Investors Association). After serving as Executive Chairman at Unilever Turkey and Unilever NAMET RUB (North Africa, Middle East, Russia, Ukraine and Belarus) and being a member of the Unilever CEO Forum, Mr. Karaca retired from his duties as of 31 December In 2015, he published his first book called The New CEO is... You. İzzet Karaca complies with all of the independent member requirements, defined in the Capital Markets Board (CMB) Corporate Governance Principles. Ahmet Cemal Dördüncü Independent Board Member Ahmet C. Dördüncü, born in Istanbul in 1953, graduated from the Business Administration Department in Çukurova University and did postgraduate studies in Mannheim and Hannover Universities. He started his career in Claas OHG company and continued in Mercedes Benz A.Ş. in Turkey between 1984 and He joined Sabancı Group in 1987 and took various duties in Kordsa A.Ş. until He worked as the General Manager/President in DUSA South America and then DUSA North America in Following his duty of Presidency of Strategic Planning and Business Development Group in H.Ö. Sabancı Holding A.Ş. in 2004, he served as the Chief Executor Officer of the same group between 2005 and Ahmet C. Dördüncü has been serving as the Chief Executive Officer of Akkök Holding since January He is one of the founding members of the National Innovation Initiative and knows English, German, Portuguese and Spanish. He is the Chairman of Akiş GYO and Gizem Frit, as well as serving as a Board Member in several Akkök Holding companies. Dördüncü is also a Board Member in Anadolu Isuzu Otomotiv Sanayii ve Ticaret A.Ş., Coca-Cola İçecek A.Ş., Anadolu Efes Biracılık ve Malt Sanayii A.Ş. and International Paper Co. Mr. Dördüncü complies with all of the independent member requirements, defined in the Capital Markets Board (CMB) Corporate Governance Principles. Dr. Yılmaz Argüden Strategist, Sustainability and Corporate Governance Advisor Dr. Argüden is the Chairman of ARGE Consulting, a management consulting firm known for value creating strategies and institution building. He is also the Chairman of Rothschild investment bank in Türkiye. His career spans the private sector, public sector, multinational institutions, NGOs, and academia. Dr. Argüden served on the boards of more than 50 national and international corporations. He is an adjunct Professor of Business Strategy, an author of numerous books and a columnist focusing on business and strategy issues. He is a renowned governance expert and has been selected as a member of the Private Sector Advisory Group of the IFC s Global Corporate Governance Group; he is also the Vice-Chairman of the Governance Committee of the Business at OECD. He is the founder of the non-profit Argüden Governance Academy. As the elected Chair of Local Networks Advisory Group, he represented the National Networks on the Board of the UN Global Compact, the world s largest sustainability platform. He is an Eisenhower Fellow, a recipient of numerous leadership, distinguished citizenship and career awards. Dr. Argüden was selected by the World Economic Forum as a Global Leader for Tomorrow for his commitment to improving the state of the world

26 STATEMENT OF INDEPENDENT STATUS I hereby declare and state that I hereby declare and state that I hereby declare and state that I hereby declare and state that No employment relationship has been established during the last five years between me, my spouse and my relatives by blood or marriage up to second degree and the company, partnerships which the company controls the management of or has material influence over or shareholders who control the management of or have material influence over the company and legal entities which these shareholders control the management of, which has caused me to assume important duties and responsibilities in an executive position nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same, No employment relationship has been established during the last five years between me, my spouse and my relatives by blood or marriage up to second degree and the company, partnerships which the company controls the management of or has material influence over or shareholders who control the management of or have material influence over the company and legal entities which these shareholders control the management of, which has caused me to assume important duties and responsibilities in an executive position nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same, No employment relationship has been established during the last five years between me, my spouse and my relatives by blood or marriage up to second degree and the company, partnerships which the company controls the management of or has material influence over or shareholders who control the management of or have material influence over the company and legal entities which these shareholders control the management of, which has caused me to assume important duties and responsibilities in an executive position nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same, No employment relationship has been established during the last five years between me, my spouse and my relatives by blood or marriage up to second degree and the company, partnerships which the company controls the management of or has material influence over or shareholders who control the management of or have material influence over the company and legal entities which these shareholders control the management of, which has caused me to assume important duties and responsibilities in an executive position nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same, I was not a shareholder of (%5 and more) nor held an executive position which would cause me to assume important duties and responsibilities or officiated as a board member, during the last five years, in any company from or to which the company purchases or sells a substantial quantity of services or products based on agreements made, during the periods these services or products were sold or purchased including especially those companies which carry out audit (including tax audits, legal audits, internal audits), rating and consultancy services for the company, I was not a shareholder of (%5 and more) nor held an executive position which would cause me to assume important duties and responsibilities or officiated as a board member, during the last five years, in any company from or to which the company purchases or sells a substantial quantity of services or products based on agreements made, during the periods these services or products were sold or purchased including especially those companies which carry out audit (including tax audits, legal audits, internal audits), rating and consultancy services for the company, I was not a shareholder of (%5 and more) nor held an executive position which would cause me to assume important duties and responsibilities or officiated as a board member, during the last five years, in any company from or to which the company purchases or sells a substantial quantity of services or products based on agreements made, during the periods these services or products were sold or purchased including especially those companies which carry out audit (including tax audits, legal audits, internal audits), rating and consultancy services for the company, I was not a shareholder of (%5 and more) nor held an executive position which would cause me to assume important duties and responsibilities or officiated as a board member, during the last five years, in any company from or to which the company purchases or sells a substantial quantity of services or products based on agreements made, during the periods these services or products were sold or purchased including especially those companies which carry out audit (including tax audits, legal audits, internal audits), rating and consultancy services for the company, I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent board member, I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent board member, I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent board member, I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent board member, I am not a full time employee with any public entity or organization following my election as a member with the exception of employment as a university professor provided that such employment is in compliance with the laws and regulations that are applicable to universities, I am not a full time employee with any public entity or organization following my election as a member with the exception of employment as a university professor provided that such employment is in compliance with the laws and regulations that are applicable to universities, I am not a full time employee with any public entity or organization following my election as a member with the exception of employment as a university professor provided that such employment is in compliance with the laws and regulations that are applicable to universities, I am not a full time employee with any public entity or organization following my election as a member with the exception of employment as a university professor provided that such employment is in compliance with the laws and regulations that are applicable to universities, I am considered a resident of Turkey according to Income Tax Law, I am considered a resident of Turkey according to Income Tax Law, I am considered a resident of Turkey according to Income Tax Law, I am considered a resident of Turkey according to Income Tax Law, I have strong ethical standards, professional reputation and experience that shall allow me to contribute positively to the activities of the company, maintain partiality in conflicts of interests between the company and its shareholders and decide freely by taking into account the rights of beneficiaries; I have strong ethical standards, professional reputation and experience that shall allow me to contribute positively to the activities of the company, maintain partiality in conflicts of interests between the company and its shareholders and decide freely by taking into account the rights of beneficiaries; I have strong ethical standards, professional reputation and experience that shall allow me to contribute positively to the activities of the company, maintain partiality in conflicts of interests between the company and its shareholders and decide freely by taking into account the rights of beneficiaries; I have strong ethical standards, professional reputation and experience that shall allow me to contribute positively to the activities of the company, maintain partiality in conflicts of interests between the company and its shareholders and decide freely by taking into account the rights of beneficiaries; I am able to dedicate a sufficient amount of time to the affairs of the company in a manner to follow up the conduct of company activities and duly perform the duties I have assumed, I am able to dedicate a sufficient amount of time to the affairs of the company in a manner to follow up the conduct of company activities and duly perform the duties I have assumed, I am able to dedicate a sufficient amount of time to the affairs of the company in a manner to follow up the conduct of company activities and duly perform the duties I have assumed, I am able to dedicate a sufficient amount of time to the affairs of the company in a manner to follow up the conduct of company activities and duly perform the duties I have assumed, I did not officiate as a board member at the board of directors of the company for longer than 6 years during the last ten years, I did not officiate as a board member at the board of directors of the company for longer than 6 years during the last ten years, I did not officiate as a board member at the board of directors of the company for longer than 6 years during the last ten years, I did not officiate as a board member at the board of directors of the company for longer than 6 years during the last ten years, I am not officiating as an independent board member with more than three of the companies which the company controls or shareholders that control the management of the company control the management and in total more than five of the companies which are traded on the stock exchange I am not officiating as an independent board member with more than three of the companies which the company controls or shareholders that control the management of the company control the management and in total more than five of the companies which are traded on the stock exchange I am not officiating as an independent board member with more than three of the companies which the company controls or shareholders that control the management of the company control the management and in total more than five of the companies which are traded on the stock exchange I am not officiating as an independent board member with more than three of the companies which the company controls or shareholders that control the management of the company control the management and in total more than five of the companies which are traded on the stock exchange I am not registrated and announced as a board member representing a legal entity I am not registrated and announced as a board member representing a legal entity I am not registrated and announced as a board member representing a legal entity I am not registrated and announced as a board member representing a legal entity and thus I shall carry out the duties imposed upon me due to my being a board member as an independent member. and thus I shall carry out the duties imposed upon me due to my being a board member as an independent member. and thus I shall carry out the duties imposed upon me due to my being a board member as an independent member. and thus I shall carry out the duties imposed upon me due to my being a board member as an independent member Ahmet Cemal Dördüncü Hamit Sedat Eratalar Mehmet Mete Başol İzzet Karaca 48 49

27 SENIOR MANAGEMENT Ali Hüroğlu Supply Chain Services Director Ali Hüroğlu has been serving as CCI Group Supply Chain Services Director for Turkey and International Operations since He joined the Coca-Cola system as the plant manager of the former Trabzon production facility under the responsibility of the Black Sea Sales Center in Following this, Mr. Hüroğlu worked on the construction of the Mersin production facility and was responsible for the South and Southeast Sales Center. In 1995, he was transferred to the operations department, assuming the position of operations manager of the Mersin plant in 1996, and later he was promoted to be the Ankara Plant and East Region Group Operation Manager. Prior to joining the Coca-Cola system, he worked for HEMA Gear manufacturing as a process engineer from 1983 to 1985 and for General Dynamics Forth Worth-Texas as a trainee from 1985 to He then returned to Turkey in 1986 and worked on an F-16 aircraft design and manufacturing project in Turkish Aerospace Industries in Ankara from until Mr. Hüroğlu holds both Bachelor of Science and Master of Science degrees in Mechanical Engineering from Black Sea Technical University and he is a member of the Association of Beverage Producers (MEDER). Since 2008 he has been an Executive Committee member of the Coca-Cola Global Supply Chain Council. Mr. Hüroğlu has 36 years of professional experience. Ahmet Öztürk* Internal Audit Director Ahmet Öztürk was appointed as Coca-Cola İçecek Internal Audit Director as of 1 January He joined Anadolu Group in August 1995, having graduated from Bilkent University, with a major in Economics. He started his career as an Assistant Financial Control Specialist and continued to work in different roles and responsibilities in group companies, serving as CFO of Coca-Cola Turkmenistan, Coca-Cola Azerbaijan, Efes Ukraine and Efes Serbia between 1999 and 2007 respectively. Öztürk was appointed as the Internal Auditor of Efes Beer Group International operations in July 2007 and promoted to become the Internal Audit Director of Anadolu Efes in January Atilla D. Yerlikaya Corporate Affairs Director Atilla D. Yerlikaya holds a BA in Economics from Boğaziçi University. After having worked as a journalist and publisher for more than ten years, he took senior managerial positions at Philip Morris SA and Shell. He joined Coca-Cola İçecek in 2007 as Group Corporate Affairs Director. Yerlikaya is currently the Chairman of the Turkish-Pakistan Business Council of DEIK (Turkish Foreign Economic Relations Board), Board Member of the Turkish- Azerbaijan Business Council and Turkish-Kyrgyzystan Business Council in DEIK, Deputy Chairman of UN Global Compact Turkey Network, and Chairman of the Public Affairs Institute. Burak Başarır CEO Burak Başarır was appointed as CEO on 1 January He joined CCI in 1998 and assumed increasing managerial responsibilities in finance and commercial functions. He was named CFO in 2005 and played an integral role during CCI s IPO process, while effectively managing the financial integration of Efes Invest with CCI in He was honored as the Best CFO in Turkey by Thomson Reuters Extel in He led the largest operation of CCI in terms of volume and sales as the Turkey Region President between 2010 and Başarır holds a BA in business administration and a minor in computer sciences from American River College. He studied management in California State University of Sacramento between 1990 and 1992 and received a B.S. degree in Business Administration from the Middle East Technical University in Başarır has more than 20 years of work experience and prior to joining CCI, he worked for Arthur Anderson as a Senior Auditor. He is the President of the Corporate Volunteers Association (ÖSGD) and a member of the Turkish Industry and Business Association (TUSIAD). Ebru Özgen Group Human Resources Director Ebru Özgen was appointed as the Group Human Resources Director for Coca-Cola İçecek A.Ş. as of 1 January She joined CCI as Budget and Planning Supervisor in 1997, worked as Finance Manager between and East Region Finance Manager between Özgen was appointed as Turkey Budget Planning and Commercial Finance Manager in 2010 with increased management responsibilities. In 2013 she was promoted to become Turkey Finance Director, and as a member of CCI Turkey Leadership Team she was responsible for the coordination of finance operations that support strategic business targets. Özgen started her career in 1992 in Arthur Andersen. She has a bachelor s degree in Business Administration from the Middle East Technical University and an MBA in International Banking and Finance from the University of Birmingham. In 2009, she earned a master s degree on Law and Economics from Bilkent University. Özgen is a CIM certified CPA and independent auditor, and has two children. R. Ertuğrul Onur General Counsel Atty. R. Ertuğrul Onur has been serving as the General Counsel of CCI since He is also currently the Head of CCI Ethics and Compliance Committee. He established the CCI Compliance & Ethics Program and served as CCI Ethics and Compliance Officer between 2013 and He graduated from Istanbul University s Law Faculty in Following the completion of his traineeship in the Konya Bar Association, he worked as a research assistant in the same Law Faculty. Mr. Onur served as Legal Counsel for Mobil Oil Türk A.Ş. and BP Petrolleri A.Ş. between 1995 and He also worked as BP Turkey Employee Representative, BP Oil Europe Works Council Member and BP Oil Europe Works Council Link Committee Member. Prior to joining the Coca-Cola system, he set up the legal department in Pfizer İlaçları and served as Assistant General Manager and Legal Director. Mr. Onur implemented various compliance programs as the Compliance Liaison Officer in Pfizer Turkey. Mr. Onur has 29 years of work experience and is a member of the Istanbul Bar Association. Gökhan Kıpçak Chief Information Officer Gökhan Kıpçak received his BS degree in Mechanical Engineering and MS degree in Industrial Engineering from Istanbul Technical University in He started his career in Elginkan Group as Information Systems Engineer responsible for production and sales systems. He joined the Coca-Cola system in Turkey in 1991 and held various positions in the Information Technology function until He then worked for The Coca-Cola Company and Coca-Cola Amatil to establish IT systems for the Coca-Cola bottling operation in South Korea. He came back to CCI in 2000 and led the implementation of core Sales, Finance and Supply Chain information systems in all CCI operations. He was appointed as the Group Chief Information Officer of CCI as of Kıpçak was awarded as Turkey s Best CIO in 2012 by the CIO Magazine. Lisani Cenk Atasayan Region Director, Central Asia Lisani Atasayan graduated from Boğaziçi University with a major in Economics and later went on to study Business Administration and Computer Science majors at the University of Guelph, before obtaining an MBA degree from the University of Windsor in Canada. Atasayan began his career in Coca-Cola İçecek as a Financial Analyst in 1997, continuing as the Financial Analysis and Planning Manager between 1999 and He was appointed as the Finance Manager for Coca-Cola İçecek s Marmara Region in 2004 and later as the International Operations Finance Director with increasing management responsibilities in Between 2010 and 2013, he made important contributions to the growth of Coca-Cola İçecek in Azerbaijan where he served as the General Manager. Between 2014 and 2016 he served as Coca-Cola İçecek General Manager of Turkey operation. As of January 2017, Atasayan was appointed as CCI Central Asia Regional Director responsible for Kazakhstan, Kyrgyzstan, Azerbaijan, Turkmenistan and Tajikistan. Meltem Metin Strategic Business Development Director Meltem Metin, a graduate of Istanbul University with a major in Business Administration in English, started her career in Pamukbank as a management trainee. She transferred to Anadolu Group to work as a specialist in the Financial Control Directorate in She became a Financial Controller in Anadolu Endüstri Holding before being transferred to Efes Sınai Yatırım Holding in 1998, working first as a Financial Controller, then as the Regional Finance Manager. In May 2000, she was appointed as the Finance Manager of Efes Sınai s Kazakhstan operations (CCAB), and in 2005 she additionally assumed the role of Finance Manager for its Kyrgyzstan operations (CCBB). Subsequently she was appointed as the General Manager of CCAB in February 2002, and she was additionally appointed to the same position for CCBB in June With 19 years of professional experience, Metin has been serving as the Group Strategic Business Development Director in CCI since May Michael Coombs Chief Financial Officer Michael Coombs was appointed to the position of CFO as of 1 January He was the Group CFO for Coca-Cola Eurasia and Africa Group between April and December Prior to this, he held the position of Vice President and CFO of Coca-Cola East Japan, his most recent role in a career spanning more than thirty years in the global Coca-Cola system. Following a number of finance assignments within the Coca-Cola system in South Africa, the UK and France, in 1997 Michael moved to Istanbul, where he served as the CFO of CCI. He was appointed as the General Manager of TurkeCom in 2001, an ebusiness joint venture between The Coca-Cola Company and a number of Turkish conglomerates. Two years later, he moved back to the Turkish bottler to resume the position of CFO. From January 2005, he held the position of CFO for Coca-Cola Japan (CCJC). Between 2009 and 2013, he led two of Coca-Cola s bottling businesses in Japan as the president of Tone CCBC and Coca-Cola Central Japan. Michael has broad Coca-Cola system experience in the key markets of South Africa, Britain, France, and Turkey and over the last eleven years, in Japan. He holds a Bachelor s degree in commerce from the University of South Africa and an M.B.A. from the University of South Florida. N. Orhun Köstem Region Director, Middle East and Pakistan N. Orhun Köstem was appointed as CCI Middle East and Pakistan Region Director as of 1 January Köstem joined Anadolu Group in 1994 and assumed different senior executive positions such as Corporate Finance and Investor Relations Director of Efes Beverage Group, Finance Director of Efes Breweries International, Corporate Finance Coordinator of the Anadolu Group and Coca-Cola İçecek Chief Financial Officer. In 2015, he was listed among Turkey s Most Influential 50 CFOs by Fortune Turkey Magazine. He was awarded as Turkey s Best CFO in the Investor Relations Awards organized by Thomson Reuters Extel in 2011 and 2013, while he was also honored with the CFO of the Year award by Management Events in He holds a BSc in Mechanical Engineering and an MBA from the Middle East Technical University, as well as an MA in Law and Economics from Bilgi University. Köstem is one of the three authors of the book A Window to Capital Markets: The A to Z of Public Offering and Investor Relations published in Osman Kazdal Commercial Excellence Director Osman Kazdal was appointed as the Commercial Excellence Director of Coca-Cola İçecek as of 1 January He started his career in CCI in He assumed several senior leadership roles in the commercial function until He served as the General Manager of CCI Kazakhstan between and as the Central Asia Regional Director responsible for CCI Kazakhstan, Kyrgyzstan, Azerbaijan, Turkmenistan and Tajikistan between 2014 and Kazdal holds a BA degree in Economics from Uludağ University and an MBA degree from Marmara University. He is married and has three children. Tugay Keskin Turkey General Manager Tugay Keskin was appointed as Coca-Cola İçecek Turkey General Manager as of 1 January Keskin joined CCI in 1993 and served in different positions in Turkey sales function until his appointment as Turkey Sales Director in He worked as Turkey Sales Director between and Turkey Commercial Director between Having served as CCI Commercial Excellence Director between 2014 and 2016, Keskin is a graduate of Ankara University Faculty of Political Science. (*) Ahmet Öztürk was appointed as Internal Audit Director to replace Gökhan İzmirli, as of 1 January

28 SHAREHOLDING STRUCTURE DIVIDEND DISTRIBUTION PROPOSAL Publicly Traded Özgörkey Holding A.Ş. 26.7% The Coca-Cola Export Corporation 20.1% 2.9% Anadolu Efes Biracılık ve Malt Sanayi A.Ş. 50.3% As per the resolution of the Board of Directors of Coca-Cola İçecek (CCI) dated February 27, 2018; In 2017, our Company recorded a net income of TL 237,627, in the consolidated financial statements prepared in accordance with the Turkish Financial Reporting Standards. The Board of Directors resolved to propose to the General Assembly the distribution of a total TL 200,189, gross dividends to be paid starting from May 25, Of this amount, after the deduction of the 2016 fiscal year net loss ( ,00 TL) and statutory liabilities, TL 170,000, will be paid from 2017 net income, and TL 30,189, will be paid from 2009 extraordinary reserves. As per the proposal, the remainder of 2017 net income will be added to the extraordinary reserves. Subject to the approval of the General Assembly, a gross cash dividend of TL 0, 787 per 100 shares, representing TL 1 nominal value, will be paid to Turkey-based full and limited corporate taxpayers, who receive dividends through an established business or a representative office in Turkey. Other shareholders will receive gross TL 0, 787 (net TL 0, 66895) per 100 shares. Özgörkey Holding A.Ş s ownership decreased from %3.69% to 2.91% during the period. CORPORATE STRUCTURE Coca-Cola İçecek A.Ş % Tuncay Özilhan Chairman Coca-Cola Satış ve Dağıtım A.Ş., Turkey 99.97% % Tonus Turkish-Kazakh Joint Venture L.L.P, Kazakhstan CCI International Holland B.V. The Netherlands Mahmudiye Kaynak Suyu Ltd. Şti., Turkey % 51.23% J.V. Coca-Cola Almaty Bottlers L.L.P., Kazakhstan %* 48.77% 83.57% Azerbaijan Coca-Cola Bottlers LLC., Azerbaijan 99.87%* 16.31% 70.49% Coca-Cola Bishkek Bottlers CISC, Kyrgyzstan %* 29.51% Turkmenistan Coca-Cola Bottlers, Turkmenistan The Coca-Cola Bottling 59.50% Company of Jordan Ltd., 90.00% Jordan Coca-Cola Beverages Pakistan Ltd., Pakistan 49.67% Syrian Soft Drink Sales and Distribution L.L.C., Syria 50.00% Al Waha for Soft Drinks, Juices, Mineral Water, Plastics and Plastic Caps Production L.L.C., Iraq 80.03%* % Waha Beverages B.V. The Netherlands Coca-Cola Beverages Tajikistan L.L.C., Tajikistan 80.03% % (CC) Company for Beverages Industry/Ltd., Iraq % * Direct and indirect 52 53

29 ADDITIONAL INFORMATION RELATED TO OPERATIONS Major factors affecting business performance, changes in the operational environment of the business, company strategies towards changes, investment and dividend policies to strengthen company performance Major factors affecting business performance, changes in the operational environment and CCI s strategies towards these changes are covered in the annual report, especially in the Basis of Presentation note of the Consolidated Financial Statements of the Independent Audit Report and Financial Performance Review section. CCI is a growth-oriented company which takes the following criteria into consideration when making investment decisions: the internal rate of return (IRR) of the realized investments should be equal to or greater than a specified target rate, payback periods should fall within a specified period depending on the investment, and the return on invested capital (ROIC) should be greater than the weighted average cost of capital (WACC). CCI s operating geography is large, and all feasibility studies for investments are assessed in accordance with macroeconomic and demographic assumptions as well as medium/long-term strategic targets of the company. CCI s dividend policy is covered in the Corporate Governance Principles Compliance Report. Company policies for risk management and sources of funding CCI finances its investments through its operating cash, capital injections, long-term foreign currency loans (USD and EUR) from Turkish and foreign banks and long-term funding via Eurobond and private placement to the qualified foreign institutional investors. CCI s policies on risk management are covered in the Corporate Governance Principles Compliance Report. Risk Detection Committee, which was established under the arrangements, terms and principles of Turkish Commercial Code, Capital Markets Legislation and CMB s Corporate Governance Principles, assesses, manages and reports Group risks. Some of the Group s priority risks are defined as political instability and security, cyber security, exchange rate volatility, sustainable talent capability, corporate reputation, water and environmental impact of packaging, changing consumer preferences, discriminatory tax and regulations, channel mix shift, economic slowdown, law and order and industrial relations. Group does not expect any adverse effect on the business related to any significant regulatory changes and/or legal arrangements by the authorities. All compliance efforts are in place and there is no legal dispute that may adversely affect the business. Financial Risks: The Group s principal financial instruments are comprised of bank borrowings, bond issues, cash and short-term deposits. The main purpose of these financial instruments is to raise financing for the Group s operations. The Group has various other financial instruments such as trade payables and trade receivables, which arise directly from its operations. The main risks arising from the Group s financial instruments are interest rate risk, liquidity risk, foreign currency risk, and credit risk. The Group s management and board of directors review and agree policies for managing each of these risks which are summarized below. The Group also monitors the market price risk arising from all financial instruments. (a) Capital Management The primary objective of the Group s capital management is to ensure that it maintains a strong credit rating and healthy capital ratio in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders or return capital to shareholders and may decide to issue new shares or sell assets to decrease net financial debt. (c) Foreign Currency Risk The Group is exposed to exchange rate fluctuations due to the nature of its business. This risk occurs due to purchases, sales, demand / time deposits and bank borrowings of the Group, which are denominated in currencies other than the functional currency. The Group manages its foreign currency risk by balancing the amount of foreign currency denominated assets and liabilities. (d) Credit Risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments that potentially subject the Group to significant concentration of credit risk consist principally of cash and cash equivalents and trade receivables. Maximum credit risk on the Group is limited to the amounts disclosed in the financial statements. The Group maintains cash and cash equivalents with various financial institutions. It is the Group s policy to limit exposure to any one institution and revalue the credibility of the related financial institutions continuously. The credit risk associated with trade receivables is partially limited due to a large customer base and management s limitation on the extension of credit to customers. The Group generally requires collateral to extend credit to its customers excluding its distributors. (e) Liquidity Risk Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The Group intends to maintain the continuity and variability of cash inflows through long-term bank loans, bond issues, cash and short-term deposit management. (f) Commodity Price Risk The Company may be affected by the volatility of certain commodities such as sugar, aluminum and resin. As its operating activities require the ongoing purchase of these commodities, the Company s management has a risk management strategy regarding commodity price risk and its mitigation. Based on a 12-month anticipated amount of can to be purchased, the Company hedges the purchase price using commodity (aluminum) swap contracts and aluminum swap call option. Research and development activities Research and development activities are conducted by The Coca-Cola Company (TCCC), and CCI benefits from the transfer of TCCC s information and know-how. Changes and the reasons for the changes in the Articles of Association There is no change in the Articles of Association in Issuance of Capital Market Instruments As of September 19, 2017, Group completed the sale of nominal US$500 million 7-year fixed rate bonds, with the maturity date of 19 September 2024, with a coupon rate of 4,215% and a re-offer yield of 4.215%, listed in the Irish Stock Exchange. (b) Interest Rate Risk The Group is exposed to interest rate risk through the impact of changes in rates on interest-bearing assets and liabilities. The Group manages interest rate risk by balancing the interest rate of assets and liabilities or derivative financial instruments. Certain parts of the interest rates related to borrowings are based on market interest rates; therefore, the Group is exposed to interest rate fluctuations on domestic and international markets. The Group s exposure to market risk for changes in interest rates relates primarily to the Group s debt obligations

30 Production Capacity and Capacity Utilization Rates Annual production capacity calculations are based on a formula provided by The Coca-Cola Company to all bottlers of Coca-Cola products. Calculations are made according to high season capacity utilization rates (CUR). Capacity is defined as the product obtained by multiplying the hourly unit case output of a plant with targeted utilization. Because package mix and sales may change from year to year, production capacity calculations for one year may not be directly comparable to such calculations for other years. Alcohol Free Beverages (mn unit case) Capacity CUR (%) Capacity CUR (%) Pakistan % % Jordan 36 50% 37 46% Turkmenistan 31 50% 29 97% Azerbaijan 57 54% 58 42% Kyrgyzstan 18 86% 18 83% Kazakhstan % % Iraq % % Turkey % % Tajikistan 16 19% 18 19% Total 1,507 74% 1,461 74% Donations CCI didn t make any donations to Anadolu Education and Welfare Foundation (identified in 15. of the Articles of Association of our company) during The Company donated 492, to other nonprofit associations. Information about the facilities other than head office CCI operates in 10 countries with headquarters in Istanbul. There are production plants in each country we operate in, except of Syria, for a total of 25. The Corporate Structure table is available on page 52. Definitions related to the internal audit and risk management systems during the period of consolidated financial statement preparations CCI s Internal Audit department periodically audits all companies and units which are consolidated. A work plan of the department is approved by the Audit Committee annually and revised in accordance with relevant changes during the year. Companies which are subject to consolidation are audited by the Group s Internal Audit department according to international standards published by The Institute of Internal Auditors. Strategies applied to improve the Company s financial structure Our Company utilizes long-term loans to finance its investments as well as medium and short-term loans to finance its working capital requirements. For a sustainable, healthy financing structure, our main priorities are to diversify the funding sources, to achieve optimum maturity of the funding need, to mitigate the foreign exchange risk diversifying the currencies, to keep good relationships with the financial institutions while closely monitoring the market. Labor movements, labor agreements, and benefits provided to laborers Number of personnel employed as of year-end: 31 December December 2016 Blue collar 3,442 3,779 White collar 4,655 4,986 Total Number of Employees 8,097 8,765 Collective Bargaining Agreement: Our Company agreed with Tek-Gıda İş Sendikası (Labor Union) on the terms of the collective bargaining agreement for the period 1 January December The agreement includes comprehensive improvements and rearrangements as it is the first collective bargaining agreement since the expiry of the last agreement on March 31, The main terms of the collective bargaining agreement are as follows: For the first year of the agreement, gross wages of the union member employees increased by 700 TL per person per month and additionally 20 TL was paid for each year of seniority, effective from on top of the minimum wage increase. In the second year of the agreement, gross wages increased as per the Consumer Price Index plus 100 TL per person per month. Annual social package increased by 31% for the first year and for the second year in line with Consumer Price Index. In addition, for each year of seniority, 700 TL gross one-off payment made, collectively

31 Trade Registry Information Paid-in Capital : Registration Date : Registration number : Trade Registry Office : Istanbul Chamber of Commerce Mersis Number : Information on conflicts of interest which arise between the Company and organizations which provide services to the Company in areas such as investment consultancy and rating and those measures adopted by the Company to prevent such conflicts No situations which would result in conflicts of interest were observed during the period. With respect to purchases of investment consultancy and rating services, CCI has complied with all legislative provisions including the CMB legislation. Furthermore, regarding the selection of organizations providing investment consultancy and rating services, the utmost care was taken, using internal procedures and reporting mechanisms prepared for this purpose, to prevent any situation which could lead to conflicts of interest. Amendment to the Industry Tax Legislation According to the law (Omnibus Bill) numbered 7061 published in the Official Gazette dated December 5, 2017, flavoured soda, plain soda, nectars, juice drinks, other flavoured soft drinks including lemonade, energy drinks, iced tea and sports drinks will be subject to a special consumption tax of 10%, effective January 1, As per the aforementioned law, flavoured mineral water and 100% juice drinks are exempt from special consumption tax. Bottling Agreement Renewed Coca-Cola Icecek and The Coca-Cola Company have renewed the existing Bottling Agreement for a further 10 years effective January 1, Other The Company did not purchase any of its own shares during the reporting period. The Company did not undergo any special audits during the reporting period. The company did, however, undergo regular audits by public authorities as required by the laws and regulations to which it is subject. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Coca-Cola İçecek (CCI) adopts the Corporate Governance Principles as an important part of its management. In this context, CCI received 8.3 out of 10 following the studies conducted by SAHA Kurumsal Yönetim ve Kredi Derecelendirme A.Ş. (SAHA) and qualified for listing in the BIST Corporate Governance Index in Since then, CCI s Corporate Governance Rating has increased steadily, with the latest revision confirmed as 9.45, as of 3 July SECTION I: CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE STATEMENT Coca-Cola İçecek A.Ş. (CCI) conducts all of its operations within the framework of all existing regulations and the Corporate Governance Principles, which are prepared by CMB. The Corporate Governance Compliance Report includes information regarding the application of each item of the Corporate Governance Principles by our company, as well as if there are principles which were not applied, the reasons for not applying these principles, the conflicts of interest arising from not applying these principles and whether there is a plan to change the company s management applications in the framework of the principles. Our Company complied with the Corporate Governance Principles issued by CMB except for the below-mentioned provisions that were voluntary, in the period of There are no conflicts of interest arising from the below-mentioned provisions that are not implemented. Currently, there is only one woman Board member in our Board of Directors. It is recommended by the Corporate Governance Committee to the Board of Directors to increase women members in the Board in the coming years and our efforts continue in this regard. In accordance with Article of the Corporate Governance Principles, the remuneration and all other benefits provided to Board members and senior managers are made public through our annual report. However, the declaration is not made separately for each member, but a cumulative number is provided for all board members and senior management separately. CCI s Articles of Association do not restrict the transfer of Class C shares. However, there are certain stipulations for the transfer of Class A and Class B Shares. Class A and Class B shares have certain privileged rights with respect to management. CCI has a Board of Directors consisting of 12 members, 7 of whom are nominated by Class A shareholders and 1 of whom is nominated by Class B Shareholders. The remaining 4 Directors are independent. As of the reporting date (31 December 2017), the Company was not a respondent in any suit whose outcome would be capable of significantly affecting either the Company s financial position or the conduct of its business. As of the reporting date, no administrative or judicial action had been initiated against the Company or any member of its Board on account of any violation of the requirements of law. As of the reporting date, no member of Company s Board of Directors had demanded the issuance of any report as provided for under Article 199/4 of the Turkish Commercial Code. İzzet Karaca Corporate Governance Committee Chairman M. Hurşit Zorlu Corporate Governance Committee Member All resolutions taken in the General Assembly were fulfilled. No extraordinary general assemblies were held during the period. The Company s financial position is solid. There is no risk of its having insufficient capital or becoming insolvent. As a result of the explanations and determinations given in the Affiliation Report it was concluded that there was no transaction which Coca-Cola İçecek A.Ş. carried out with its controlling companies and their affiliated companies through the direction of the controlling company or for the purpose of obtaining results that would only serve the interests of the controlling company or any of its affiliated companies. Nor were there any measures which were adopted or failed to be adopted for the benefit of the controlling company or any of its affiliated companies. It was further concluded that, based on the conditions and situation known to us, in all kinds of transactions which Coca-Cola İçecek A.Ş carried out during 2017 with its controlling company and its affiliated companies a counter act on arm s length basis was provided in each such transaction to ensure the competitive continuation of activities under the then current market conditions and that there were no measures which were adopted or failed to be adopted in a manner that would inflict losses on the company in favor of the controlling company of Coca-Cola İçecek A.Ş. and its affiliates and that, within this context, there was no transaction or measure that would require a set-off. M. Mete Başol Dr. R. Yılmaz Argüden Corporate Governance Committee Member Corporate Governance Committee Member Yeşim Tohma Corporate Governance Committee Member 58 59

32 SECTION II: SHAREHOLDERS 2.1. Shareholder Relations Department CCI has an Investor Relations Department reporting directly to the Chief Financial Officer (CFO) Michael Anthony Coombs and managing the relations of the company with its shareholders. The individuals in charge of investor relations are as follows: Yeşim Tohma Group Investor Relations Manager Tel: Fax: Licenses: Capital Market Activities Level 3 License Certificate (no: ), Corporate Governance Rating Specialist License (no: ) Dr. Nebahat Rodoplu Doğan Investor Relations Executive Tel: Fax: nebahat.rodoplu@cci.com.tr Licenses: Capital Market Activities Level 3 License Certificate (no: ), Corporate Governance Rating Specialist License (no: ) Özge Taşkeli Investor Relations Executive Tel: Fax: ozge.taskeli@cci.com.tr Licenses: Capital Market Activities Level 3 License Certificate (no: ), Corporate Governance Rating Specialist License (no:702106) Questions directed to the Investor Relations Department are answered in accordance with CCI Disclosure Policy. During 2017, CCI management and the Investor Relations Department attended 14 investor conferences and roadshows and organized 28 conference calls and met with 289 investors/analysts from 220 companies and investment funds at its headquarters, investors/analysts offices, investor conferences or teleconferences. CCI organized 4 webcasts, each day after the quarterly earnings releases to discuss the related quarter s financial performance. The Investor Relations Department meets with analysts and investors on a regular basis to share developments and respond to inquiries relating to CCI s strategres, operational and financial performance. These meetings are held within the context of equality principles and each presentation shared with analysts or investors are made public via CCI s web site. The Corporate Governance Committee is responsible for monitoring the activities of the Investor Relations Department of our company. Within this context, the Committee determines the standards for all announcements and main principles of investor relations, reviews these standards and principles and compliance with these every year, and gives necessary advice to the Board of Directors. The report that is prepared by the Investor Relations Department regarding its activities and submitted to the Corporate Governance Committee at every meeting held by the Committee is also submitted to the Board of Directors by the Committee. In 2017, five Committee meetings were held, whose dates are provided in Attachment-1. In accordance with the Corporate Governance Principles, Yeşim Tohma, who has been working as Investor Relations Manager, was appointed as a member of the Corporate Governance Committee, according to the Board decision dated Details regarding the activities performed by this department in 2017 can be found in our Company s 2017 Annual Report The Use of Shareholders Rights to Obtain Information The CCI Disclosure Policy includes equal treatment to all shareholders, and provides that accurate disclosure with similar content reaches every recipient at the same time. Information requests from shareholders regarding matters that are not yet within the public domain are also evaluated according to this policy and selective disclosure is never permitted. Information is disclosed by means of announcements to the Public Disclosure Platform and via press releases. In order to raise shareholder accessibility to publicly available information and as per article no 2.1 of Section II of the Corporate Governance Principles, all public announcements are posted in Turkish and English on the Company s web site ( In addition, all announcements are distributed by to those registered in the Company s database. There is no specific condition required to be included in this list and all requests by investors, analysts and interested parties to be included in this list are encouraged and accepted. Provision for the request to assign a special auditor is not arranged as an individual right in CCI s Articles of Association. Our company acts in accordance with the relevant articles of the Turkish Commercial Code regarding the right to request for a special audit. In 2017, there has not been any request by shareholders for the assignment of a special auditor General Assembly Meetings The annual Ordinary General Assembly of CCI was held on April 10, 2017 at the headquarters of the Company with a quorum of 81.8% constituted by the total present 208,083, TL nominal value shares out of 25,437,078,200 common shares - with 1 Kr par value. CCI s domestic and foreign shareholders attended the General Assembly in person or by proxy. Registered shareholders were informed through invitation letters, dated March 16, 2017, about the day, hour, venue and agenda of the meeting. The day, hour, venue and agenda of the meeting was announced on the Turkish Commercial Registry Journal no 9286, dated March 17, 2017, and Sözcü newspaper, dated March 17, 2017, as well as on CCI s web site at com.tr. The General Assembly Informative Document was prepared and published on the company web site on March 16, Before the meeting, 2016 Annual Report of the Board of Directors including the Balance Sheet and Income Statement, Corporate Governance Compliance Report, dividend distribution proposal of the Board of Directors, Independent External Audit Report were made ready for the evaluation of our shareholders at our headquarters and our website, at least three weeks prior to the date of the General Assembly and it was printed and delivered to the General Assembly participants. The proxy forms for attendance by proxy is also available on our website to ease the process of attendance. Although there is no such article in our Articles of Association, the General Assembly meetings of our company are open to public including the stakeholders and the media without having the right to speak. No media representatives were present during the General Assembly meeting on April 10, Nonetheless, a Corporate Governance Rating Agency representative was present as a guest at the meeting. A presentation regarding the developments in 2016 was given to participants. In the General Assembly, shareholders used their rights to raise questions and these questions were answered. Questions asked during the General Assembly meeting and responses to these were recorded in the meeting minutes. The Shareholders had no request relating to any agenda items. There has not been any transaction that required the approval of the majority of the independent Board members for the Board of Directors to make a decision, and where the decision was left to be resolved by the General Assembly because this condition was not met. The shareholders were informed about CCI s donations as a separate agenda in the General Assembly

33 Shareholders who have a management control, members of the Board of Directors, managers with administrative responsibility and their spouses, relatives by blood or marriage up to second degree have not conducted a significant transaction with the company or subsidiaries thereof which may cause a conflict of interest, and/or conduct a transaction on behalf of themselves or a third party which is in the field of activity of the company or subsidiaries thereof, or become an unlimited shareholder to a corporation which operates in the same field of activity with the company or subsidiaries thereof. There were also no transactions conducted by persons who have the opportunity to access information of the company in a privileged manner, on their behalf within the scope of the company s field of activity. Minutes of the General Assembly meeting and list of attendees were announced to the public on the same day with the General Assembly through the Public Disclosure Platform. Minutes of the General Assembly meeting and Lists of Attendees are also available both in English and in Turkish for the information of our shareholders on our web site Voting Rights and Minority Rights The Company s Articles of Association does not grant any privilege regarding voting rights. Each share is entitled to 1 (one) vote at ordinary or extraordinary General Assembly Meetings. Shareholders may be represented at General Meetings by proxies given either to other shareholders or to those who are not shareholders. Such proxy holders who are also shareholders shall have the right, apart from their own vote, to vote for each share which they represent. The form of the proxy shall be determined and announced by the Board of Directors in compliance with the relevant CMB legislation. While our company avoids practices, which make the use of voting rights difficult, various mechanisms have been set in place to enable every shareholder, including cross-border shareholders, to use their voting rights in a proper and simple manner. In this context, according to Article 10(e) of the Articles of Association of the company regarding Participation in the General Assembly via Electronic Means, shareholders having the right to attend the General Assembly can attend the meeting electronically in accordance with article 1527 of the Turkish Commercial Code. In accordance with this article of the Articles of Association, at the 2016 Ordinary General Assembly meeting, shareholders and their representatives were able to use their rights as mentioned in the regulation. While utmost care is given to the use of minority rights, our Articles of Association regulates the usage of all minority rights in accordance with regulations. The Articles of Association of our company does not include any article broadening the extent of minority rights compared to the Law. There is no cross-shareholding relationship with the majority shareholders of our Company Dividend Rights As a result of the voting held in the Ordinary General Assembly of CCI dated April 15, 2014, it was resolved with a majority of votes comprising the affirmative votes that the amendment text regarding the Dividend Policy of the Company for 2013 and subsequent years be approved as-is and the Dividend Policy be amended in accordance with the Capital Markets Board s Communiqué on Dividends dated January 23, 2014, number II Dividend Distribution Policy Our Company carries out dividend distributions pursuant to the provisions of the Turkish Commercial Code, Capital Markets Regulations, Tax Regulations and other relevant regulations as well as in accordance with the article on dividend distribution of our Company s Articles of Association. Our Company targets to distribute an amount not to exceed 50% of the distributable profit as cash and/or bonus shares each year. This dividend distribution policy is subject to the investment and other funding needs that may be required for the long-term growth of the Company and any special cases that may arise due to the extraordinary developments in the economic conditions. The Board of Directors adopts a resolution on dividend distribution for each accounting period and submits it for the approval of the General Assembly. Dividend distribution commences on the date to be determined by the General Assembly which shall not be later than the end of the year during which the General Assembly Meeting is held. The Company may consider making advance dividend payments or paying out the dividends in equal or variable installments. Without prejudice to the investment plans and operational requirements, the Board of Directors may propose a dividend distribution at a rate to be higher than the upper limit determined, subject to the approval of the General Assembly. Share groups do not have any privileges with respect to dividends. Dividend Policy was submitted for the information of the General Assembly on April 15, 2014 and published both in the Annual Report and on the website. While dividend policy of our company is available on our website and annual report, detailed explanations and tables regarding the distribution of profit for the year 2016 are also provided in our Company s 2016 Annual Report. According to the decision taken in the Ordinary General Assembly of CCI dated April 10, 2017, a total 50,111, gross dividend was paid starting from May 22, As the fiscal year 2016 ended with a loss, this amount was paid from extraordinary reserves for the year 2012, after legal liabilities are deducted. A gross dividend of 0,197 was paid per 100 shares, representing 1 nominal value. Turkey based full and limited corporate tax payers, who receive dividends through an established business or a representative office in Turkey received a net amount of 0,197 per 100 shares, and other shareholders received a net amount of 0,16745 per 100 shares Transfer of Shares The provisions regarding transfer of A and B Group shares are contained in the Company s Articles of Association. However, the Articles of Association does not restrict the transfer of Class C Shares. The Articles of the Association is available in both Turkish and English on CCI s web site at

34 SECTION III: PUBLIC DISCLOSURE AND TRANSPARENCY 3.1. Corporate Web Site and Content CCI s corporate web site is hosted at The web site is maintained in both Turkish and English and its content and form comply with the requirements set forth in the CMB Corporate Governance Principals. On the web site, all information required as per article no 2.1 in Section II of CMB s Corporate Governance Principles is available. Announcements of financial statements, except for material events and footnotes which are mandatory to be disclosed to public in accordance with capital markets regulations, are simultaneously being disclosed at Public Disclosure Platform in English as well as in Turkish Annual Report The Annual Report of our company is prepared in detail and in a way that the public may have access to the full and accurate information about the operations of our company, and includes information as required by Article no in Section 2 of the Corporate Governance Principles in addition to the related regulations and the other requirements specified in other parts of the Corporate Governance Principles. SECTION IV: STAKEHOLDERS 4.1. Informing Stakeholders One of the key policies of the Company is to create timely and applicable solutions for any employee and other stakeholders issues. CCI informs employees, suppliers, customers and other stakeholders on related matters using a variety of methods. Coca-Cola Icecek s Employee Compensation Policy as required by the non-mandatory Article no of Corporate Governance Principles and in March 2015, as provided below and immediately disclosed at company website. COCA-COLA İÇECEK A.Ş. EMPLOYEE COMPENSATION POLICY At our Company, while determining Employee Compensation Policy (the Compensation Policy ), provisions of Labor Code no (the Labor Code ), 14th Article in force of former Labor Code no (the 14th Article ) and Coca Cola İçecek A.Ş. s Human Resources Policy provisions are taken as basis. On the other hand, while determining and practicing Compensation Policy for employees who are within the scope of the Collective Bargaining Agreement ( CBA ), the severance and notice payment provisions of the CBA are applicable. Severance Payments Severance Payments are made in accordance with the duration of employment, to employee or his/her legal inheritors in case of decease of the employee, - Whose labor contract has ended according to conditions that require severance payment as stipulated in the Labor Code and the 14th Article and, - Who has at least one year labor at the Company. Number of days that taken into account for determining severance payment to be paid to employees are as written on Company Regulations and for members of the Union, as on CBA. Notice Payments In case of any requirement of notice period; the procedure is followed in accordance with the 17th Article of the Labor Code or, for the employees who are members of the union, in accordance with the provisions set forth in CBA. Besides, labor contract of the relevant employee may be concluded upon payment in cash of the service fee up to the end of notice period. In case of conditions that require giving notice period, permission for job seeking is granted to the relevant employee. The Coca-Cola Hot Line is active ( ) for consumer inquiries. Consumers, customers and shareholders may also reach us through the communication forms on our web site at Information exchange with distributors and other customers is ensured by periodic distributor meetings as well as site meetings held by personnel in charge in various locations. Furthermore, customers and suppliers are able to relay their views to Company s management, verbally or in writing. Meetings are held with suppliers so as to improve the quality of the materials and services purchased, as well as on other industrial developments and pilot activities that are conducted with respect to coproduced projects. Through the wide data information network established with our customers, we can exchange information on a real-time basis. Through our e-sales system operating on the internet, our customers are immediately informed of modifications put into effect, training is provided where necessary and satisfaction surveys are conducted. The Corporate Governance Committee has developed necessary mechanisms for stakeholders to report Company s illegal or unethical practices to the Corporate Governance Committee or the Audit Committee. In addition, according to its own charter, the Corporate Governance Committee is responsible for monitoring whether the management establishes a system regarding the Company s code of business conduct and ethics. The Audit Committee, on the other hand, reviews whether the management monitors Company s compliance to such code of business conduct and code of ethics, assesses the risk of abuse of such and provides trainings on such codes of business conduct and ethics as well as their abuses Participation of the Stakeholders in Management Our stakeholders are defined as persons, groups or corporations that we affect through our operations or that affect us through their actions. The opinions and the evaluations of our stakeholders by the below stated platforms, are taken into consideration in the decision processes

35 Stakeholders Employees Distributors/Sellers Shareholders Customers Suppliers Investors Public Institutions and Organizations NGOs Union Media Consumers Sector Groups Society Dialog Platform Employee Engagement and Satisfaction Survey, Newsline, Newsletter, CokePort, Digital Info Boards, Townhall Meetings, press reports, CCIdea Platform and Innovation Day, CCI training programs, leadership development trainings, sales incentive programs, Reputation Surveys, volunteer programs. Distributor meetings, Process improvement studies, regular visits, training programs, plant visits, distributor satisfaction questionnaire, Distributor portal, CCI Call Center General Assemblies, website, Public Disclosure Platform (PDP) Trainings, support programs, regular visits, plant visits, Coca-Cola Customer Road Show, Customer Satisfaction Survey, CCI Call Center, Focus group studies, business planning meetings Training programs, improvement audits, plant visits, supplier days, supplier performance scores, supplier surveys, cooperation portal, industrial development and pilot activities. Annual report, investor conferences, analyst meetings, investor presentations, CSR reports, website, webcast, Investor Relations department, distributions, special case announcements, Public Disclosure Platform, direct feedback forms through CCI s corporate website, CDP Climate Change Report, CDP Water Report, Sustainability Index Assessment. Information for contribution to sector development, full compliance with the laws and regulations, support regarding infrastructure investments, Reputation Surveys Project partnerships, corporate and individual employee memberships, participation in conferences and presentations, Reputation Surveys, Stakeholder Day. Union representation, collective labor agreements, representative meetings, plant visits Periodical information, regular updated statements, support programs, regular visits, website, plant visits, Reputation Surveys Coca-Cola Call Center, Coca-Cola Open to Curiosity Platform, Coca-Cola Social Interaction Center,website, informative publications, plant visits, product labels Corporate memberships, joint projects, participation in meetings and conferences. CCI Community Champion Awards, Coca-Cola Open to Curiosity Platform, Donations, website, plant visits, support programs, voluntary practices, Coca-Cola Call Center, information through mass communication, product labels, advertisement and marketing activities, environmental training sessions, social engagement projects, field studies, meetings, survey and eliciting opinions, Reputation Surveys, Annual report, Sustainability Report 4.3. Human Resources Policy CCI Human Resources policy aims to build a highly capable organization and be the employer of choice. Accordingly, CCI Human Resources Policy has been founded on the continuous development in the main strategic priorities as stated below: Systematically build key organizational capabilities to increase competitive power Develop and maintain a pipeline of diverse talent for leadership bench strength Foster highly engaged & high performance workforce Build an inclusive one Company culture Starting from workforce planning, all human resources processes such as recruitment, performance management, talent management, training and development, compensation and benefits management are based on ensuring, encouraging and rewarding continuous development and superior performance. Within this context, employee development is one of the most important annual individual goals both for all managers and all employees and their performance is evaluated accordingly. For the development and superior performance of our employees, we focus not only knowledge and skill development, but we also focus on competency development. As CCI, we have identified Leadership Behaviors as looking ahead, impact and influence, drive for result, partnering with customer, inspiring others, diversity and inclusion. We aim to recruit talents and to develop our employees in these capabilities. We believe that, for continuous improvement and superior performance, being perceived by our employees as an open, fair and sensitive company who protects the material and moral rights and listen to the employees views and proposals and improve them, is of vital importance. Accordingly, all human resources policies and procedures are published on a platform which is open to all employees, vacant positions are announced to employees, employee views and proposals are collected on a regular basis by internal customer satisfaction and employee engagement surveys, action plans are prepared and put into force for improvement areas. In addition, all employees can access our online learning platform in their development areas, and the communication between employees and the management team is supported by applications such as open door and human resources information meetings. Employee representation in Turkey operations is ensured on the following committees as a member of the Committee: Occupational Health and Safety Committee: Works on issues of occupational health and safety, evaluates the risks of the business environment, follows implementation of CCI occupational health and safety policies and procedures, guides employees on this issue and performs other activities stipulated by the regulations in this regard. The committee works on issues of occupational health and safety. The employees are represented by either a Trade Union Representative (if facility is unionized), foreman representative or HR and Admin Responsible. Employee representatives participate in studies for health and security in the workplace, monitor the studies, request for measures and precautions, give suggestions and represent workers in similar matters particularly on health and security. Participation of employees in activities related to Occupational Safety and Health are encouraged at the highest level to create and maintain a Safety Culture. Women s Networking Committee: CCI Women s Networks are platforms for female employees to interact and organize various activities focusing on networking, capability development, leadership skills and empowerment in the workplace and community

36 Meal and Cafeteria Service Quality Improvement Committee: Established to collect employees opinions in order improve meal service and daily menu selection according to the dietary recommendation of the company doctor. Employees are represented by either the HR and Admin Responsible or Trade Union Representative if the facility is unionized. Disciplinary Board: Disciplinary Committee established in accordance with the Collective Bargaining Agreement is available in workplaces, for unionized employees. This committee is formed of three employer representatives, one of whom acts as chairman and two trade union representatives. The committee meets to decide and to make the assessment of prohibited actions, determined under the Collective Bargaining Agreement. For all employees outside the scope of the Collective Bargaining Agreement, the Central Disciplinary Committee is available, formed in accordance with the Disciplinary Procedure. Legal director and Human Resources Director were also included in the committee. This committee meets with the participation of Function Directors and Legal Managers to evaluate and decide on actions to be subject to the Ethic Code, Health & Safety and violation of Company policies and Procedures under the Disciplinary Procedure. Decisions taken are approved by the Turkey General Manager. Accident Evaluation Committee: Established to evaluate the responsibility of the employee who has been involved in a traffic accident while using a Company car in the accident. The Committee is formed by representatives from HR, supervisor of the employee and Fleet and Garage Supervisor. The Committee analyses the situation and decides to implement conditions that are stated in the Car Accidents Policy. In addition to the above mentioned Committees, in each unionized facility, trade union representatives operate for the continuity of work performance under the provisions of the Bargaining Legislation and Collective Bargaining Agreement and undertake the following responsibilities: Protecting and improving the cooperation and occupational peace between the worker and the employer at the workplace; Receiving requests and complaints of workers, finding solutions for these requests and complaints in collaboration with the employer; Protecting the rights and interests of the workers; Helping the execution of the working standards stated in the Collective Agreement; Fulfilling all other liabilities imposed by the relevant legislation Ethical Rules and Social Responsibility CCI s most valuable wealth is the Coca-Cola brand and its employees creating it. This brand presents very unique and significant qualities such as its esteem with respect to honesty and reliance. This esteem comes from the shared values and especially from fastidiousness about continuing the Company s activities in the best way possible. sustainable packaging, energy efficiency and climate protection. The Coca-Cola System develops and supports projects that help the cultural and social development of the communities in which it operates in with special emphasis on improving the quality of life of the people in their living environments. Within this framework, CCI aims to find sustainable solutions for environmental problems in coordination with nonprofit organizations. As per the Company s Articles of Association, we donate some part of our profit before taxes to the Anadolu Education and Welfare Foundation. The Anadolu Education and Welfare Foundation, an organization that invests in areas related to community health and education, social welfare and healthcare field, was established in 1979 and has completed more than 50 projects to date that include hospitals, schools, and sports complexes and made donations Sustainability As a Coca-Cola bottler with annual sales exceeding 1 billion unit cases, we are aware of our impact on the environment and society. In this context, we continuously seek to better integrate our sustainability efforts into our daily actions. Having published the 9th Sustainability Report of CCI, we extended the scope and boundaries of the latest report by including full data for CCI Pakistan. With the inclusion of Pakistan, the coverage of the report reached 88% of CCI s total production volume and 85% of CCI s employees as of December 31, Since joining the UN Global Compact in 2009, we have been firmly committed to supporting its ten principles. Accordingly, we continue to strive for improvement in our policies and practices on human rights, labour conditions, environment and anti-corruption. Our objective is to further integrate these principles into our business where they matter most and effectively track our performance. Health & safety metrics are followed regularly by CCI management and reported to the board. Campaigns such as Golden Safety Rules Awareness, Hand In Hand Safety program and health and safety trainings are conducted and health & safety KPI s are reported to the Board regularly. In recognition of our efforts, CCI has been the first and only Turkish UNGC 100 Sustainability Index company since Building on our success, in 2015 we were chosen among the 29 companies to be quoted in Borsa Istanbul s (BIST 50) Sustainability Index. CCI was included in Borsa Istanbul Sustainability Index for the third consecutive year in Meanwhile, we have continued our disclosure to CDP Turkey since With its sixth Climate Change report to CDP Turkey, CCI was recognized as one of Climate Change Leaders of Turkey in CCI also submitted its fourth water report to the CDP Water Program in Our ongoing efforts to further advance our sustainability performance have been recognized by a number of prominent international institutions. CCI was included in MSCI ESG Leaders Index, receiving AA rating for the second time and ranking 5th among global beverage companies in CCI has also been chosen to be included in FTSE4Good Index for the second year and ECPI Sustainability Index for the first time in CCI s Code of Ethics was updated on April 30, 2013 and expanded in a manner to apply to all countries where CCI operates. The Ethics and Compliance Committee was formed and the CCI Ethics and Compliance Director and Local Ethics and Compliance Managers were appointed. In addition, new ethics communication channels and a website and communications line, managed by an independent third party, were created. The Company comprehensively discloses its social, environmental and economic impacts in its operating geography through Corporate Social Responsibility Reports prepared in line with international reporting standards. (CCI s detailed Sustainability Reports are available at The company together with The Coca-Cola Company, sees corporate responsibility as creating a value for and an investment on the community, its employees, stakeholders, the society, the environment and its own future. The focus points of managing the environmental impacts of the activities are water management, 68 69

37 SECTION V: BOARD OF DIRECTORS 5.1. Structure and Composition of the Board of Directors The Company is managed and represented by a Board of Directors comprised of twelve members elected by the General Assembly. CCI has a Board of Directors consisting of 12 members, 7 of whom are nominated by Class A shareholders and 1 of whom is nominated by Class B Shareholders. The remaining 4 Directors are independent. The Board of Directors of the Company is as follows: Tuncay Özilhan Chairman (Non-executive) Galya Frayman Molinas Vice Chairman (Non-executive) Mehmet Hurşit Zorlu Member (Non-executive) Salih Metin Ecevit Member (Non-executive) Talip Altuğ Aksoy Member (Non-executive) Kamilhan Süleyman Yazıcı Member (Non-executive) Mehmet Cem Kozlu Member (Non-executive) Ahmet Boyacıoğlu Member (Non-executive) Ahmet Cemal Dördüncü Member (Independent) Hamit Sedat Eratalar Member (Independent) Mehmet Mete Başol Member (Independent) İzzet Karaca Member (Independent) The Board Members were elected to the Board of Directors for 1 year at the Ordinary General Assembly meeting which was held on April 10, 2017 to officiate until the Ordinary General Assembly Meeting which is to be held to discuss the results of the 2017 activity year. At the same General Assembly meeting, it was resolved to authorize the Chairman and the Members of Board of Directors to perform the operations and acts as stated in Articles 395 and 396 of the Turkish Commercial Code. According to Corporate Governance Principles on Board restructurings, in the case where a separate Nomination Committee, cannot be established, the Corporate Governance Committee can fulfill the responsibilities of this committee. In that respect, the Corporate Governance Committee assessed the candidate proposals of Ahmet Cemal Dördüncü, Hamit Sedat Eratalar, Mehmet Mete Başol and İzzet Karaca to become an independent member, including the ones made by the Board and shareholders, by taking into consideration of whether or not the candidate meets the independency criteria and submitted this assessment as a report dated February 6, 2017 to the Board on February 7, 2017 for its approval. The candidates for the independent board membership submitted their written statements to the Corporate Governance Committee at the time they were proposed as candidates, that they are independent within the framework of the law, Articles of Association and the principles. The written statement by all independent Board members declaring their independent status in the context of the principles in the regulatory framework, Articles of Association and the communiqué is as follows: I hereby declare and state that; No employment relationship has been established during the last five years between me, my spouse and my relatives by blood or marriage up to second degree and the company, partnerships which the company controls the management of or has material influence over or shareholders who control the management of or have material influence over the company and legal entities which these shareholders control the management of, which has caused me to assume important duties and responsibilities in an executive position nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same, I was not a shareholder of (5% and more) nor held an executive position which would cause me to assume important duties and responsibilities or officiated as a board member, during the last five years, in any company from or to which the company purchases or sells a substantial quantity of services or products based on agreements made, during the periods these services or products were sold or purchased including especially those companies which carry out audit (including tax audits, legal audits, internal audits), rating and consultancy services for the company, I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent board member, I am not a full-time employee with any public entity or organization following my election as a member with the exception of employment as a university professor provided that such employment is in compliance with the laws and regulations that are applicable to universities, I am assumed to be a resident in Turkey in accordance with the Income Tax Law dated , numbered 193; I have strong ethical standards, professional reputation and experience that shall allow me to contribute positively to the activities of the company, maintain partiality in conflicts of interests between the company and its shareholders and decide freely by taking into account the rights of beneficiaries; I am able to dedicate a sufficient amount of time to the affairs of the company in a manner to follow up the conduct of company activities and duly perform the duties I have assumed, I did not officiate as a board member on the board of directors of the company for longer than 6 years during the last ten years, I am not officiating as an independent board member with more than three of the companies which the company controls or shareholders that control the management of the company control the management and in total more than five of the companies which are traded on the stock exchange and thus I shall carry out the duties imposed upon me due to my being a board member as an independent member. The statement of independent status and the curriculum vitae of the Board members which also include their responsibilities outside of our Company, are present both in the 2017 Annual Report and the website of our Company. The Company does not impose any restrictions concerning additional duties that its Board Members may assume outside the Company. Individuals who were elected as Independent Board Members were neither registered nor declared on behalf of a corporate identity. In 2017, there arose no situation which revoked the independence of the independent members of the Board of Directors. Ms. Galya Frayman Molinas is the only women member in our Company s Board of Directors. It is recommended by the Corporate Governance Committee to the Board of Directors to increase women members in the Board in order to reach a target ratio, not less than 25% as stated in the Article no of the Corporate Governance Principles in the coming years and our efforts continue within this regard Principle Activities of the Board of Directors The procedures and frequency of Board meetings, meeting and resolution quorum, process of asserting objections and the validity of Board resolutions are explicitly laid down in the Articles of Association. The agenda of Board meetings is comprised of agenda issues designated in the previous Board meeting for further negotiation in the next meeting along with the issues designated by the Company s Senior Management. Any Board Member may also, by reporting to Senior Management, add other agenda items. Issues that are required to be discussed by the Board are compiled at the office of the CFO with the aim of developing the agenda of the next meeting. Dates of the Board meetings are fixed at the beginning of the year and the Board members are notified of the meeting dates accordingly

38 The Board holds its ordinary meetings approximately 5 times a year and the Board members also may convene upon any extraordinary situation and negotiate and render resolutions on critical agenda issues. The Chairman, the Vice-Chairman and each Board member shall have the right to call the Board for a meeting by sending an invitation at least 15 (fifteen) days prior to such a meeting to all other Board members and/or insert items to be discussed on the agenda of such meetings. Invitations to such meetings should be sent by facsimile to be followed by a hard copy delivered by courier against written acknowledgement of receipt or by registered mail. The Board members may waive such invitation requirement in writing. Board meetings shall be held at the head offices of the Company or at any other place in or outside Turkey as the Board shall decide with an ordinary meeting and decision quorum. The Board of Directors may take decisions without holding a meeting pursuant to Article 390/4 of the Turkish Commercial Code. The meeting and decision quorum as provided in the Company s Articles of Association shall apply to such decisions as well. Five Board Meetings were held in The Legal Director acts in the capacity of Secretariat on the Board of Directors. All questions that arise during the meetings and all issues negotiated are recorded into the minutes of the meeting. The rate of participation of Board Members in these five meetings during 2017 has been 93% and Board members aim to attend every meeting and to present an opinion. The opinions of those members who fail to attend the meeting but submit their opinions in writing shall be conveyed to the other members. Meeting proceedings in the nature of trade secrets are not disclosed to the public. However, all of the critical matters resolved are announced through a special case announcement. Board Members do not reserve the right to cast weighted votes and/or powers of veto. Each member, including the Chairman, possesses an equal vote. The Board resolutions related to the related party transactions of our Company are taken with the majority vote of the independent members, in accordance with the Corporate Governance Principles. Since there are no transactions that are in the scope of the significant transactions in 2017 as per the Corporate Governance Principles Communiqué, the majority of the independent members have participated in the Board resolutions. Our Company is insured against damages that may be caused due to the faults of the members of the Board of Directors during the execution of their duties and the relevant insurance exceeds 25% of the Company s capital as stated in the Article no of the Corporate Governance Principles. The total annual responsibility limit is determined according to the management s decision and currently the limit is expected to remain at its current levels Number, Structure and Independence of the Committees established under the Board There are three committees active under CCI s Board of Directors. Audit Committee Upon resolution of the Board of Directors dated July 21, 2004, the Audit Committee was established. As per the resolution of the Board of Directors dated May 3, 2017, Board Member Mehmet Mete Başol was elected as the Chairman and Mr. Hamit Sedat Eratalar as the member of the Audit Committee. Corporate Governance Committee CCI s Board of Directors, at its meeting on July 31, 2008, resolved to establish a Corporate Governance Committee comprised of members of the Board of Directors. In accordance with the decision of the Board of Directors on May 3, 2017, Mr. İzzet Karaca was appointed as the Chairman and; Mr. Mehmet Hurşit Zorlu, Mr. Recep Yılmaz Argüden, Mr. Mehmet Mete Başol and Mr. Deniz Can Yücel as the members of the Corporate Governance Committee. Effective as of November 14, 2017, Mrs. Yeşim Tohma has been appointed as the member of the Corporate Governance Committee for the place vacated by the resignation of Mr. Deniz Can Yücel. Risk Detection Committee Upon resolution of the Board dated 23 May 2012, the Risk Detection Committee was established. As per the resolution of the Board dated May 3, 2017, Board Member Mr. Ahmet Cemal Dördüncü was elected as the Chairman and İzzet Karaca as the member of the Risk Detection Committee. As per Article no of the Corporate Governance Principles and the Board resolution dated 3 May 2017, all members of the Audit Committee and the chairman of other committees are independent. Likewise, in line with the Principles, the chief executive/general manager does not have a role in any of the committees. Except for Mehmet Mete Başol and İzzet Karaca who are members of two committees as their knowledge and experience are useful for both committees, no other Board member has a role in more than one committee. Members of the committees constituted within the Board are as follows: Independent Member Executive Audit Committee Mehmet Mete Başol - Chairman Yes No Hamit Sedat Eratalar - Member Yes No Corporate Governance Committee İzzet Karaca - Chairman Yes No Mehmet Hurşit Zorlu - Member No No Mehmet Mete Başol Member Yes No Recep Yılmaz Argüden* - Member No No Yeşim Tohma* - Member No Yes Risk Detection Committee Ahmet Cemal Dördüncü - Chairman Yes No İzzet Karaca - Member Yes No (*) Not a Board Member at CCI Evaluation of the Board of Directors regarding the working principles and efficiency of Committees constituted within the Board is presented as attachment to the Corporate Governance Compliance Report (Attachment 1) Risk Management and Internal Control Mechanism CCI s management has the primary ownership for the Risk Management and Internal Control System. Enterprise Risk Management (ERM), which directly reports to the Risk Committee, acts as a facilitator and provides assurance and consultancy services in the risk management area. Under the ERM framework, CCI s top management determines important opportunities and threats and manages them according to risk appetite. Enterprise Risk Management, developed for the aim of determining CCI business strategies, is a systematic and disciplined process consisting of all company processes and is being affected by all company employees. With the coordination of ERM function, risk events are assessed in terms of reaching Company s goals and priority risks are determined. Top risks and the action plans needed to mitigate those risks are periodically shared with the members of the Risk Detection Committee to be reported to the Board of Directors. This process which is integrated with strategic planning is also supported by an ERM tool for better management and sustainability. Some of the tools used to manage risks are stated below; Performance and risk indicators are used as early warning systems in order to trace risks and take necessary precautions on time. The SAP system that is integrated to all procedures in the Company is an efficient technological decision support system that is used for this purpose. SAP supplies operational results in real time that eliminates the human error and improves the efficiency of the early detection of risks and internal control system. On the other hand, our high technology internal communications system enables us to quickly act and generate immediate solutions to problems as they occur. Business continuity and crisis management are in place to prevent or mitigate any losses created by production or business interruption due to environmental risks or supply chain problems. This process is also supported by an effective insurance program. Investments for backup systems are being made against any data loss due to extraordinary events. Additionally, environmental factors and extraordinary situations are monitored on an immediate basis and investigations are made towards taking necessary measures against the causes to minimize risk

39 The CCI Internal Audit Department, based on the results of the risk assessment, evaluate the Company s risk management and internal control system on a regular basis and report to Audit Committee as well as Company management to ensure: Accuracy and reliability of financial and operational information Effectiveness and efficiency of operations Safeguarding of Company assets Compliance with laws, regulations, and contracts 5.5. Strategic Objectives of the Company Within the scope of the annual Strategic Business Plans, targets and key performance indicators are established parallel to our Company s vision and mission. These targets and key performance indicators are approved by the Board of Directors during the budget meetings held at the end of the previous year. The Board reviews operating results in comparison with previous year performances and targeted indicators in its ordinary meetings Financial Benefits At the Ordinary General Assembly dated April 10, 2017 it is resolved that a net annual remuneration of 96,000 to each of the independent BOD members, for their duties as independent members, to be paid on a monthly basis, for the period There is no other compensation or interest provided to the Board. The determination of financial rights and benefits to which Board Members are entitled to is not based upon the performance of Board Members. All Board Members and Managers are covered by the Directors & Officers Liability insurance. The existing Directors & Officers Liability insurance of Our Company s Board of Directors and All Managers against damages that may be caused due to the faults of the members of the during the execution of their duties and the total annual responsibility limit of the Directors & Officers Liability insurance (the coverage level) exceeds 25% of the Company s capital as stated in the Article no of the Corporate Governance Principles dated 3 January CCI has neither given any loan nor credit to any Board Member, nor served any personal loan to any beneficiary through any third party and has not served any security or guarantee such as indemnity to the interest of any third party. According to Article no of the Corporate Governance Principles, the remuneration principles of the Board members and managers having administrative responsibility should be in written form and the shareholders should be enabled to give their opinion after submitting these written remuneration principles to their reviews with a separate article in the General Assembly. The remuneration policy which was prepared to identify the remuneration system and practices applicable to and the other rights and benefits to the board members and top management, is published on our web site. In accordance with the Article of the Corporate Governance Principles, the remunerations and all other benefits provided to Board members and top management are made public through our annual report. However, the declaration is not made separately for each member, but a cumulative number is given for all board members and senior management separately. Attachment 1 EVALUATION OF THE BOARD OF DIRECTORS REGARDING THE WORKING PRINCIPLES AND EFFICIENCY OF THE COMMITTEES FORMED WITHIN THE BOARD After the selection of Chairman and members made in accordance with the Corporate Governance Principles, with the Board resolution dated May 3, 2017, it has been decided to: Appoint independent Board member Mr. Mehmet Mete Başol as the Chairman of the Audit Committee and Mr. Hamit Sedat Eratalar as member of the Audit Committee, Appoint independent Board member, Mr. İzzet Karaca as the Chairman of the Corporate Governance Committee and Board member Mr. Mehmet Hurşit Zor, independent Board member Mehmet Mete Başol, Mr. Recep Yılmaz Argüden and Mr. Deniz Can Yücel as members of the Corporate Governance Committee, (as of November 14, 2017, Mrs. Yeşim Tohma has been appointed for the place vacated by the resignation of Mr. Deniz Can Yücel.) Appoint Independent Board member Mr. Ahmet Cemal Dördüncü as the Chairman; and independent Board member Mr. İzzet Karaca as the member of the Risk Detection Committee. Charters regarding functions and working principles of the three aforementioned Committees were revised in accordance with the new Corporate Governance Principles were approved on April 30, 2014 and were made available to the public on our corporate website. In 2017, all committees constituted within the Board of Directors have performed their functions as required in Corporate Governance Principles and their own Charters, and performed efficiently. In compliance with the required manner to ensure the efficiency of their functions, their Charters and annual meeting schedules; The Audit Committee met four times on February 17, 2017, May 29, 2017, September 19, 2017 and December 8, 2017, The Corporate Governance Committee met five times on February 21, 2017, May 30, 2017, July 25, 2017, September 26, 2017 and December 19, 2017, The Risk Detection Committee met three times on May 30, 2017, July 20, 2017 and December 8, 2017 and submitted reports to the Board, consisting of information pertaining to their work and results of the meetings held during the year. The Risk Detection Committee submitted reports to the Board six times in 2017 with bi-monthly reports, including information about their activities. According to this, The Audit Committee that is responsible for taking all necessary measures in order to ensure that internal and external audits are carried out adequately and transparently, as well as efficient performance of the internal control system; has submitted all of its suggestions on areas it is responsible for including its opinion and suggestions on the internal audit and internal control system. The Corporate Governance Committee, that has been established to follow the company s compliance to the Corporate Governance Principles, develop improvement processes in this area and submit suggestions to the Board, has determined whether or not the Corporate Governance Principles were applied in the company, and if not, the reason for any digression, and also determined the conflicts of interests, if any, that have occurred due to not complying with these principles totally and advised the Board on ways that will improve the corporate governance practices. The committee also monitored the works of the Investor Relations Department. The Risk Detection Committee, that has worked on early determination of risks that will endanger the existence, development and sustainability of the company, has worked on the application of due precautions regarding the determined risks and has worked for the aim to manage the risks, scrutinized the systems of risk management of the company in accordance with the Corporate Governance Principles and Charter of the Risk Detection Committee

40 FINANCIAL REVIEW

41 OPERATIONAL OVERVIEW FINANCIAL OVERVIEW Sales Volume Consolidated: In FY17, consolidated sales volume increased by 4.1%, in line with our guidance. This was driven by solid performance of Sparkling (up 3.3%), Stills (up 8.5%) and non-ready-to-drink ( NRTD ) Tea (up 20.9%), while Water volume declined by 3.2%. The share of Turkey operations within total sales volume was 50% in FY17 compared to 51% in FY16. Growth Breakdown Sparkling 3.7% 3.3% 71% 71% Stills (excluding water) (3.7%) 8.5% 6% 6% Water 3.8% (3.2%) 15% 14% Tea (NRTD) 3.6% 20.9% 8% 9% Total 3.2% 4.1% 100% 100% Turkey: In FY17, Turkey operations delivered volume growth of 3.3%, registering the highest growth of the past 5 years. This was mainly driven by Sparkling (up 1.7%), Stills (up 4.1%) and NRTD tea (up 20.7%). Water contracted by 6.8% in FY17, in line with our strategy to improve category profitability. Our initiatives to drive revenue through quality volume growth resulted in positive Sparkling growth for the first time in 5 years. The share of immediate consumption ( IC ) packages in the Sparkling category increased to 22% from 20% in FY16, with the number of transactions growing by 9%, outpacing volume growth. Throughout 2017, the launch of the One Brand Strategy, the transition to 330 ml sleek cans and the launch of Fanta Frontier stood out as successful innovations. Operational Overview International: In FY17, our international operations delivered 4.9% volume growth, primarily driven by growth in Kazakhstan, Pakistan, Azerbaijan and Iraq. In Pakistan, volume rose by 3.5%. This was mainly due to our focus on profitable volume growth and price increases in early 2017 for the first time in 3 years, which slowed down overall volume growth. Brand Coca-Cola outperformed the Sparkling category via improved market execution and successful consumer activities such as Coke Studio. Across the Middle East, volume grew by 5.5%, with Iraq posting 5.5% growth, mainly driven by Sparkling. Jordan recorded 5.0% growth for the year. Central Asia registered 7.0% growth, mainly due to strong performance in Kazakhstan and Azerbaijan. Kazakhstan posted 17.5% volume growth, representing a record high volume in the aftermath of the economic slowdown. Strong market execution, successful consumer activities and higher oil prices supporting the economy led to double-digit growth in all categories in Kazakhstan. Azerbaijan, our second largest market in the region, posted 27.2% volume growth, mainly driven by strong growth in the Sparkling category. Turkmenistan registered 45.8% volume contraction due to a worsened macroeconomic backdrop which resulted in limitations on currency convertibility, causing interruptions to our operations. Net sales revenue (NSR) increased by 20.9%, mainly driven by double-digit revenue growth in Turkey operations and positive FX conversion impact of International operations. On an FX-neutral(1) basis, consolidated NSR was up by 9.8%, on the back of increasing volume, strong pricing and positive sales mix. In Turkey, NSR was up by 11.7%, mainly driven by pricing, successful promotion management and improving packaging mix. NSR per unit case maintained its momentum throughout the year, recording 8.1% growth as our revenue growth initiatives continued to deliver solid results. In our International operations, NSR increased by 30.4% or 7.8% on an FX-neutral basis. Strong volume growth in Central Asia and NSR per unit case growth in Pakistan were the main drivers of top-line in 2017, while NSR per unit case was up by 2.8%, on an FX-neutral basis. Net Sales Revenue (TL m) NSR per UC (TL) 2017 Yoy Change 2017 Yoy Change Turkey 4, % % International 4, % % International (FX Neutral) 3, % % Consolidated 8, % % Consolidated (FX Neutral) 7, % % (1) FX-Neutral: Using constant FX rates when converting country P&L s to TL. Gross margin improved by 11 bps to 34.0% with raw material costs as a percentage of revenue remaining almost flat on a consolidated basis. In Turkey, stronger NSR per unit case more than offset higher packaging costs and paved the way for margin expansion. Turkey s gross margin improved by 101 bps to 38.4% in In our International operations, gross margin remained almost flat at 30.2% as margin expansion in Pakistan and Kazakhstan compensated for lower margins in Turkmenistan and Iraq. EBIT margin improved by 117 bps to 10.3%, primarily driven by Turkey operations. This was due to 11 bps decrease in cost of sales, 32 bps decrease in G&A expenses and 73 bps decrease in SD&M expenses as a percentage of revenue. Operating expenses as a percentage of revenue declined both in Turkey and in international operations. EBITDA margin expanded by 68 bps to 16.2% in 2017, reflecting better operating profitability in Turkey and lower OpEx/Sales. Net financial expense decreased by 10.3% mainly due to lower net interest expense and FX loss. Non-controlling interest (minority interest) decreased by 13.6% in 2017, mostly attributable to the Pakistan impact. Our effective tax rate was 33% in 2017 compared to 68% in The effective tax rate may vary quarterly, depending on the different tax rates, the mix of taxable profits by country, non-deductible expenses, tax incentives and other one-off items. Net income was TL 238 m in 2017 vs. TL28 m loss* in 2016 mainly due to higher operating profit and lower net financial expense. * The number also includes impairment of South Iraq goodwill of TL 54 mn, reflected on financial tables as of 31 December

42 Financial Income / (Expense) Breakdown Financial Income / (Expense) (TL m) Interest income Interest expense (-) (162) (208) Other financial FX gain / (loss) Realized FX gain / (loss) - Borrowings (32) (14) Unrealized FX gain / (loss) - Borrowings (482) (522) Financial Income / (Expense) Net (490) (439) Free cash flow increased to TL 729m in 2017, up by 13.7% compared to 2016, mostly attributable to higher cash from operating activities and lower capital expenditure. CapEx / Net Sales was 5.9% in 2017 compared to 7.3% in Within the total capital expenditure of TL 499m, 46% was related to Turkey while 54% was related to International operations. Consolidated debt increased by 48.1% to USD 1,587 mn as of 2017 end, compared to year-end The increase was due to the Eurobond issuance of USD 500 m in September 2017, to refinance the existing Eurobond with upcoming maturity in Consolidated cash was USD 1,032 m, USD 612 m higher than year-end 2016, also reflecting the recent Eurobond proceeds held in cash, bringing net debt to USD 555 m as of Net Debt/EBITDA* ratio improved to 1.52x in 2017 from 2.10x in Financial Lecerage Ratios * Net Debt/EBITDA Debt Ratio (Total Fin. Debt/Total Assets) 36% 45% 36% Fin. Debt-to-Equity Ratio 75% 110% 75% 2018 GUIDANCE Volume growth: 2%-4% in Turkey 8%-10% in international operations 4%-6% on a consolidated basis Net revenue growth: 8%-10% in Turkey 12%-14% in international operations (FX-neutral) 10%-12% on a consolidated basis (FX-neutral) EBITDA Margin: Flat in Turkey Slight improvement in international operations Slight improvement on a consolidated basis Capex/Sales: 7%-8% (on a comparable basis) Net debt/ EBITDA: Lower than 1.5x (on an FX-neutral and organic basis) The business outlook of the Company is subject to the risks which are stated in the annual report and financial reports. (*) Excluding the refinanced USD 500 m Eurobond As of 31 December 2017, excluding the refinanced Eurobond, 75% of our consolidated financial debt was in USD, 23% in EUR and the remaining 2% in TL, Pakistani Rupee and Kazakh Tenge. The average duration of the consolidated debt portfolio was 3.3 years (4.4 years excluding 2018 USD 500 m Eurobond) and the maturity profile was as follows: Maturity Date % of total debt 47% 2% 7% 1% 1% 9% 33% 80 81

43 BOARD OF DIRECTORS RESOLUTION ON THE APPROVAL OF FINANCIAL STATEMENTS AND ANNUAL REPORT RESOLUTION DATE: February 27, 2018 RESOLUTION NUMBER: 5 STATEMENT OF RESPONSIBILITY PURSUANT TO CAPITAL MARKETS BOARD COMMUNIQUE: II-14.1, SECTION 2 ARTICLE 9 February 27, 2018 The Company s audited consolidated financial statements for the accounting period of January December 2017, footnotes, which ended on and twelve-month Annual Report, prepared pursuant to the legislation and the Turkish Accounting Standards / Turkish Financial Reporting Standards framework issued in accordance with Capital Markets Board s (CMB) Communiqué on Principles of Financial Reporting in Capital Markets (II-14.1), approved by the Board of Directors and Audit Committee are attached below. We declare that, a) We have examined the consolidated financial statements and annual report dated December 31, 2017; b) Within the framework of information available in so far as our duties and responsibilities, the financial statements and annual report do not contain any mispresentation of the facts on major issues, or any omissions that may be construed as misleading as of the date of the disclose; c) Within the framework of information available in so far as our duties and responsibilities, the financial statements prepared pursuant to the Communiqué No: II-14.1 fairly reflect the facts about the assets, liabilities, profits and losses of the Company along with its consolidated subsidiaries and the annual report fairly reflects the progress and performance of business and the Company s financial condition, together with material risks and uncertainties exposed by the entity. Regards, Michael Coombs CFO Mehmet Mete Başol Audit Committee Chairman Hamit Sedat Eratalar Audit Committee Member

44 COCA-COLA İÇECEK ANONİM ŞİRKETİ CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 WITH INDEPENDENT AUDITOR S REPORT

45 86

46

47 91