Corporate Governance

REPORT ON COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

PART II - SHAREHOLDERS

PUBLIC DISCLOSURE AND TRANSPARENCY

PART IV – STAKEHOLDERS

PART V - BOARD OF DIRECTORS

PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

Efforts have been made in fulfillment of compliance with Corporate Governance Principles published by the Capital Markets Board to the utmost extent. Our company has implemented all mandatory principles as determined by the Corporate Governance Communiqué and has complied with most of the non-mandatory Corporate Governance Principles of the same Communiqué. The principles that are exceptionally not complied with are stated under the relevant headings below, together with the reasons of non-compliance. Explanations on this issue are here below. The Corporate Governance Committee pursues its activities.

PART II - SHAREHOLDERS

2.1. Investor Relations Department

The duties of the Investor Relations Department that ensures the connection between investors and our

The manager of the Investor Relations Department is Melis Aylıkçı Berber who has a Degree in Corporate Management Rating Surveyor and an Advanced Degree in Capital Market Transactions. The Board of Directors appointed Melis Aylıkçı Berber as Manager of Investor Relations Department with their decision dated 05.01.2016 and this was disclosed to the public on 05.01.2016.

The manager of the Investor Relations Department reports to CEO Ayhan Yavrucu. The report regarding activities conducted was presented to the Board of Directors on 24.01.2018.

Moreover, Lawyer Aysel Yürür, Manager of Shareholders Legal Service, has been appointed to conduct activities of the Investor Relations Department.

Contact information:
Phone : 0212 310 33 00 - 0212 227 52 00 (Pbx)
Fax : 0212 236 42 08
E-mail adress: melis.aylikci@alarko.com.tr
aysel.yurur@alarko.com.tr

The Investor Relations Department has conducted the coordination of the Company's Corporate Governance Complience Applications and fulfillment of the obligations resulting from the Capital Markets Legislation as well as queries of investors within term. Queries of 95 investors have been answered within the term.

2.2. Exercise of Shareholders' Right to Obtain Information

Our company exercises due care and diligence regarding the use of all shareholders' right to obtain information. Any kind of information that would possibly affect exercising of shareholders' rights is made available to the shareholders through the website of the Company in the "Investor Relations" section. These information and statements are regularly revised and updated.

The applications received from the shareholders requesting information are mostly related to investments, turnover, and capital increase and dividend payments of the Company. These questions and replies were communicated with the Board of Directors

Company's articles of association contain no provision regarding appointment of an independent auditor. During the fiscal year no request was made for the appointment of an independent auditor.

2.3. Information About General Assembly

The Ordinary Annual General Shareholders meeting was held at Headquarters in Muallim Naci Cad. No:69 Ortaköy Beşiktaş - İstanbul with a quorum of 76,05 % and the participation of media members.

The shareholders are invited to the General Meeting by a notice delivered no later than 3 (three) weeks before the meeting by using the methods of public announcement as stipulated in the legislation and other communication means, including without limitation electronic mail to ensure that such invitation is available to maximum possible number of shareholders. The notice of the meeting was published on the internet page of the Public Disclosure Platform (KAP), on the web-site of the Company, as well as on the issue of the Turkish Trade Registry Gazette and one of the national newspapers.

The media members, interest owners and middle and the top management of the Company have the right to attend the General Assembly on condition complying with internal guidelines regarding the operating principles and methods of the General Assembly holding the meeting and participation

Before the General Assembly Meeting, the activity report, auditor's report, financial statements, meeting agenda and profit distribution proposal of the Board were made ready in the meeting building for the control/ evaluation of the shareholders. This information is available on the web-site of the Company in the "Investor Relations" section as well. Board's proposal for the distribution of profit was announced to the public through the Public Disclosure Platform (KAP).

At the general assembly meetings, the shareholders exercise their rights to ask questions and such questions are duly handled and replied. No suggestions were presented other than by major shareholders

The minutes of the General Shareholders' meetings are held at the headquarters of the Company open to the shareholders for review. Furthermore, the meeting minutes and the list of attendants of the General Shareholders' Meetings and resolutions are published via Public Disclosure Platform and also available on the Company's web-site in the "Investor Relations" section.

During the period, total amount of contributions and donations made by the Company is TL 7.000 and information on the contributions and benefits to shareholder was provided through a separate item on the agenda.

2.4. Voting Rights and Minority Rights

The articles of association of the Company grant no privileges with respect to voting rights and do not provide any right in participating to management and cumulative voting system. Minority rights have not been determined as less than one twentieth of the capital by the Articles of Association. The companies with cross share-holding did not vote at the general meeting

2.5. Dividend Right

Our company has adopted a profit distribution policy which is outlined in the annual report and the report on compliance with corporate governance principles and also made available to the public on the Company's web-site.

Our company distributes profit within the frame of Capital Market Regulations, Turkish Commercial Code, Tax Legislation, other concerned regulations and the provision stipulated under Main Articles of Association of our Company.

The amount of profit to be distributed is determined by taking into consideration the funds that may be needed in line with the investment policy of the company and other cash requirements

Our company as a principal will distribute annually at least 5% of Its distributable profit to the shareholders as dividend in cash or bonus shares via capital increase. In case of extraordinary economic circumstances the dividend may be distributed at a lower rate than the rate above mentioned, or may not be distributed at all. In such a case this is specified with a Board of Directors resolution and announced to the public with a disclosure.

The Board of Directors resolves the proposal related to profit distribution each year and presents it to the approval of the General Assembly

In principal, dividend distribution starts on May 31st in case the proposal of the Board of Directors related to profit distribution is approved by the General Assembly. The General Assembly may determine the date of distribution of profit provided that such date shall not be later than the last day of the current account period of which the General Assembly is held.

Our company does not distribute dividend in advance during the year in principal.

Our company has no shares granting privileges related to distribution of profit. Distribution of profit is carried out within legal period

Our Company distributed TL 69.274.770 (gross) profit in year 2017

2.6. Transfer of Shares

The articles of incorporation of the company do not contain any provisions which restrict the transfer of shares

PART III – PUBLIC DISCLOSURE AND TRANSPARENCY

3.1.Company's Corporate Web-site and its Content

Alarko Holding A.Ş. has a corporate web site. The address of the web site is www.alarko.com.tr. All information that the corporate web site contains is also prepared and published in English for use of the foreign investors. "Report on Compliance with Corporate Governance Principles" which contains a number of links for the following headings may be accessed from the "Investor Relations" link on the web site.

Information provided in Part II of the Corporate Governance Principles is accessible via the links in following article 3.1 as well.

LIST OF LINKS:

PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

PART II – SHAREHOLDERS
  • 2.1. Shareholders Relations Department
  • 2.2. Exercise of Right to Information by Shareholders
  • 2.3. Information on General Assembly Meetings
  • 2.4. Voting Rights and Minority Rights
  • 2.5. Dividend Rights
  • 2.6. Transfer of Shares
PART III - PUBLIC DISCLOSURE AND TRANSPARENCY
3.1. Corporate Web-site and Its Content
  • Trade Register information
  • Recent partnership and management structure
  • Detailed information on preference stocks
  • Current text of Company's Articles of Association including date and issue number of Trade Register Gazettes where amendments thereto are published
  • Disclosure of material Events
  • Annual Reports
  • Periodical Financial Reports
  • Registration Statements and Public Offering Circulars
  • Agendas of General Assembly Meetings
  • Lists of Attendance and Minutes of General Assembly Meetings
  • Specimen Form for Voting by Proxy
  • Specimen Form for compulsory information prepared in collection of share certificates or proxy by way of invitation.
  • Profit distribution Policy
  • Disclosure Policy
  • Remuneration
  • Working Principals and Members of Comitees
  • Minutes of Board Meetings where important decisions that may affect the value of Capital Market Instruments are taken
  • Frequently Asked Questions (requests for information, questions and denunciations received by the Company and their answers
3.2. Annual Report
PART IV – STAKEHOLDERS
  • 4.1. Informing Stakeholders
  • 4.2. Participation of stakeholders in Management
  • 4.3. Human Resources Policy
  • 4.4. Rules of Ethics and Social Accountability
PART V - BOARD OF DIRECTORS
  • 5.1.Structure and Composition of Board of Directors
  • 5.2. Principles of Conduct of the Board of Directors
  • 5.3. The Number, Structure and Independence of Committees
  • 5.4.Risk Management and Internal Control Mechanism
  • 5.5. Strategic Objectives of the Company
  • 5.6. Financial Rights
3.2. Annual Report

The Annual report contains information set out in the Corporate Governance principles

PART IV – STAKEHOLDERS
4.1. Informing Stakeholders

Stakeholders of the Company are regularly informed on matters they are involved.

Employees of the Company are kept informed by means of annual meetings held regularly and additionally, the developments within the Company are announced through in-house magazines "Bizim Dünyamız [Our World]" and "News" that are published on a semi-annual basis.

On the other hand, a comprehensive information effort is carried out through our web-site, e-bulletins and annual reports

The stakeholders may inform the Corporate Governance Committee or the Auditing Committee through the Investor Relations Department of any act, conduct or transaction that is contrary to the legislation or the rules of ethics.

4.2. Participation of Stakeholders in Management

No particular model is developed regarding participation of stakeholders in the management of the Company Rights of stakeholders are protected by virtue of applicable legislation

4.3. Human Resources Policy

The human resources policy developed and adopted by the Company is clearly described in "Our Policy Manual" which is published regularly on an annual basis and communicated to employees through annual meetings.

The criteria for personnel recruitment are specified in writing and strictly adhered to these criteria. Qualifications, background and personal characteristics, including but not limited to physiological, psychological and intellectual, are taken into account in the recruitment process. These qualifications and characteristics are measured, analyzed and evaluated through a written test. Following an initial interview and assessment by the human resources department the applicant is interviewed by the manager of the department where the applicant would be working, if hired.

All employees are treated equally in respect of recruitment, training and promotion and training plans and strategies are developed and implemented in order to develop and increase their knowledge, skills and experience. All employees are provided training on a regular basis each year

Written job descriptions are prepared for all employees. The criteria for appraising performance and rewarding performance are determined each year and put into place after reaching an agreement with employees on the matter. Performance measurements and evaluations are conducted for all employees using the performance appraisal system, which is in place, and the outcomes of performance appraisals and reviews are taken into consideration in determining salary increases and career progression plans

On the other hand, a certain number of employees are awarded with a "Golden Badge" on a regular basis each year for their outstanding performance. In addition to the foregoing, winners of the "Innovation Award" competition, which is held on a regular basis each year, are awarded with a prize. This rewarding mechanism is used as a tool to increase motivation of creative employees.

The Company strives and will continue to strive to provide a safe and secure work environment for its employees and to continuously maintain and improve this environment

4.4. Rules of Ethic and Social Accountability

The rules of ethic which are also set forth in the Philosophy of Alarko Group of Companies approved by the Board of Directors and Audit Advisory and Approval Board (AAAB) and adopted by all Employees and Management of Alarko Holding A.Ş. are outlined below in summary form. These rules of ethic comply with the Alarko's policies, objectives, targets and core principles and form an integral part of these policies, objectives, targets, and core principles

  • Acting honestly in all business activities towards the Government, Clients, Shareholders, Personnel, Partners, and Sub- and By- Industries.
  • Protecting the environment and maintaining the inter-company social balance in all its activities.
  • Orienting the customers without forcing and giving priority to their needs.
  • Maintaining high quality at all times, trying to supply the best at the lowest price even when the customers are satisfied and contented with what is already given.
  • Achieving the profits deserved by the shareholders under the current conditions
  • Give priority to teamwork as a corporation performing systematically on the basis of pre-defined procedures, share profit, loss, success and failure

We design, develop and formulate our policies based on this philosophy. This philosophy statement is framed and posted prominently in all premises and offices owned or occupied by the Alarko Group of Companies. Furthermore, all employees are informed about these rules through the Policy Meeting, which is held regularly on an annual basis, and Our Policy Manual which is published regularly on an annual basis. In addition to all the foregoing, both our existing and newly recruited employees are provided with detailed information about this philosophy through regular training

This philosophy statement containing the rules of ethic is also posted both on the intercompany intranet and on the Company's website at www.alarko.com.tr. All employees of Alarko Holding are obliged to strictly adhere to and comply with these rules. Compliance with rules of ethics by employees is followed-up and monitored by immediate superiors in the hierarchical structure. All employees of Alarko Holding are responsible for immediately notifying the management of any act or behavior contrary to the rules of ethics.

Any contrary act or behavior noticed, notified or suspected by the Board of Auditors, , the Chief Executive Officer or other managers are reviewed by the Board of Directors or instructed to be reviewed by the Auditing Committee to ensure compliance therewith. Appropriate disciplinary actions are imposed against employees found to violate any of these rules.

Alarko Holding A.Ş. has always been highly sensitive and proactive towards its social responsibilities and always acts in compliance with regulations and ethical rules regarding public health and safety, and protection of consumers and environment.

Both Alarko Holding A.Ş and its affiliates, subsidiaries and other group of companies and their respective employees, expert teams and related industries have adopted and committed to implement the following rules in all of their activities and business operations for the purpose of protecting the environment and nature.

  • To become thoroughly familiar with all applicable laws, regulations, policies, procedures, requirements and standards regarding the protection of the environment and to fulfill and comply with all criteria, requirements and provisions introduced by these laws, regulations, policies, procedures, requirements and standards,
  • To take all measures necessary to protect pollution of air, water, soil and noise in all activities and business operations,
  • To protect animal and plant life and to ensure recycling of waste
  • To make cooperation with governmental organizations, institutions, public agencies, private sector companies, and organizations and all other non-governmental organizations for the purpose of developing policies and systems aimed at protection of the environment,
  • To continue to carry out research and development activities aimed at developing environment friendly production systems and products,
  • To optimize the consumption of natural resources and energy,
  • To carry out continuous training activities in order to make a valuable contribution to raise awareness for the protection of the environment and nature, to increase awareness of our employees on environmental issues, and to employ state-of-the-art technology to achieve these goals.

There is no litigation or warning filed against our Company neither in the current year nor in the past for damages on the environment

The Alarko Education- Culture Foundation, which was established in 1986 to focus on activities in education, training and culture, has granted scholarships to a large number of students. The Foundation has, from the very beginning up to the present, granted gratuitous scholarships to approximately a total of 2.950 students consisting 1.700 higher education students and 1.250 high school students. 140 students were awarded scholarships for training year 2017-2018.

PART V – BOARD OF DIRECTORS
5.1. The Structure and Composition of the Board of Directors
Board of Directors
  • İzzet Garih Chairman
  • Vedat Aksel Alaton Vice Chairman
  • Ayhan Yavrucu Member, Chief Executive Officer
  • Leyla Alaton Member
  • Niv Garih Member
  • Prof. Dr. Ahmet Zeyyat Hatipoğlu Member (Independent)
  • İzzet Cemal Kişmir Member (Independent)
  • Mehmet Dönmez Member (Independent)

There are three independent members in the Board of Directors. Board members are not restricted in assuming positions in other organizations or entities which are not related to the Company. Other than the Chief Executive Officer Ayhan Yavrucu and Member of the Board Niv Garih no member of the Board of Directors holds office of executive administration.

Nominating Committee has not been constituted yet and in accordance with the Corporate Governance Communiqué of the Capital Markets Board the Corporate Governance Committee undertakes the duties and activities of the Nominating Committee

Three candidates were nominated for independent members of the Corporate Governance Committee and assessment was made as to whether or not the candidates qualify criteria for independent status and the results of the assessment was submitted for the approval of the Board of Directors with a report on 25.03.2016. Each independent board member provided a statement of independence and no situation that might compromise the independence of a board candidate has occurred as of the relevant operating period.

Curriculum vitae, terms of office and assignments outside the company of board members are presented in the previous sections of the Annual Report and also published on the corporate web-site of the Company. To avoid repetition, such information is not covered here.

5.2. Principles of Conduct of the Board of Directors

The Board of Directors is convened at least quarterly within thirty (30) days following the closure of each quarter and/or whenever the Company's business requires. The Chairman sets the agenda of board meetings after consultation with other board members and the Chief Executive Officer and ensures that the agenda is sent to all members three (3) calendar days before the meeting. The board members will endeavor to attend all scheduled board meetings and express opinions. Board members may participate in board meetings remotely using electronic means. The opinions of a member who is not present at a meeting but sent his/her opinions in writing to the Board of Directors will be presented for the consideration of other board members. Each board member has one voting right. The board member associated with a related party is not allowed to vote in the Board meeting concerning transactions with related parties. The quorum required for a board meeting is determined by the articles of association

10 Board meetings were held in the relevant period. All members have attended to the meetings held during the period.

All resolutions were made unanimously and without dissent or reservation

Board members do not reserve the right to cast weighted votes and/or powers of veto.

In 2017, we had no related party transactions and any transaction that had a material effect on our business, financial position which by reason of its nature requires to be submitted for the approval of the independent board members.

Board Members are in no way restricted in assuming positions in other organizations or entities other than the company.

5.3. The Number, Structure and Independence of the Committees formed by the Board of Directors

New committees were formed and operating principles and procedures were designed, developed, adopted and implemented for these committees in accordance with the provisions of the Capital Markets Board's Corporate Governance Communiqué and Turkish Commercial Code.

Accordingly;

A Corporate Governance Committee consisting of 4 members has been formed in order to introduce and develop corporate governance practices, and Independent Board Member İzzet Cemal Kişmir was elected as the President of the committee whereas Board Members İzzet Garih and Vedat Aksel Alaton and manager of the Investor Relations Department Melis Aylıkçı Berber were elected as the members of the said committee. In 2017, the Corporate Governance Committee held 2 meeting, with the attendance of all committee members and submitted a report to the Board of Directors about its activities.

A Committee for Early Detection of Risks consisting of 3 members has been formed to advise the Board of Directors on issues related to early detection of risks and to establish and to implement an effective risk management system, an Independent Board Member Prof. Dr. Ahmet Zeyyat Hatipoğlu was elected as the President of the committee whereas Board Members İzzet Garih and Vedat Aksel Alaton were elected as the members of the said committee. In 2017, the Committee for Early Detection of Risks held six meetings, with the attendance of all committee members and the outcomes of these meetings were reported, in writing, to the Board of Directors.

Independent Board Member Prof. Dr. Ahmet Zeyyat Hatipoğlu was elected as the President of the Committee in Charge of Audit (Auditing Committee), which already exists and is affiliated to the Board of Directors, whereas Independent Board Member İzzet Cemal Kişmir was elected as the member of the said committee. In 2017, the Auditing Committee held five meetings with the attendance of all committee members and the outcomes of these meetings were reported, in writing, to the Board of Directors.

Information on the specific duties and responsibilities of these committees, and their composition and operating procedures was publicly disclosed through the Public Disclosure Platform (KAP) and the Company's website to inform investors.

The members of each committee consist of non-executive members of the Board.

Three independent members have been elected as member of the Board of Directors in compliance with the compositional requirements of the Board. Independent Members hold office in more than one committee due to the requirement that the Presidents of the Corporate Governance Committee and Committee for Early Detection of Risks are to be elected from among independent members of the board and that all of the members of the Auditing Committee are to be elected from among independent members

5.4. Risk Management and Internal Control Mechanism

The Board of Directors has established and put in place an effective risk management and internal control mechanism. Managerial risks are periodically reviewed and assessed by the Audit Advisory and Approval Board (AAAB) and the Committee for Early Detection of Risks consisting of the members of the Board of Directors. The Committee for Early Detection has adopted a resolution aimed at the development, establishment, and implementation and updating of an effective internal control mechanism across the entire Group. In line with this resolution, the Group's Auditing Department has been entrusted with the task of guidance and supervision of the internal control mechanism and of regular review and auditing of its effective implementation, functionality and operability. The Group's Auditing Department conducts reviews and audits internal control mechanism at regular intervals in a periodic manner in accordance with the approved audit programs and submits its opinion and reports the findings of such audits to the top management

The Committee in charge of Auditing (Auditing Committee), after reviewing and assessing the opinion of the Group's Auditing Department and the findings reported, submits its recommendations on the matter to the Audit Advisory and Approval Board. The Audit Advisory and Approval Board, the Committee for Early Detection of Risks and the Committee in charge of Auditing determine the measures to be taken and then give the required instructions to the company's managers through the Chief Executive Officer.

5.5. Strategic Goal of the Company

The main vision of the Company is to become a stronger, well respected, pioneering global company that grows through the diversity it embraces and differentiation it creates

The Company's main mission is to carry Alarko to the future by adopting the highest universally accepted

Startegic objectives developed by the Chief Executive Officer, evaluated by the Audit Advisory and Approval Board and submitted to the Board of Directors for approval. The realization level of the approved objectives is communicated to the Board and Audit Advisory and Approval Board and their realization level is evaluated.

5.6. Financial Benefits

The total remuneration and other benefits of a similar nature granted to the members of the Board of Directors and senior management during 2017 amounted to TL 18.935.998 in gross terms

Shareholders were provided with information as to the principles and rules for the determination of the remuneration payable to the Members of the Board of Directors and senior management as a separate article, and information about the principles and rules for the determination of the remuneration payable to the Members of the Board of Directors and senior management was publicly disclosed through the Public Disclosure Platform (KAP) and posted on the Company's website to inform investors. The disclosures have been made in the basis of the total remuneration of members of the Board of Directors and senior managers.

No travel expenses, accommodation allowances, entertainment allowances, other business allowances or other financial benefits, in cash or in kind, and pension schemes or other retirement plans were provided to the members of the Board of Directors

The Company has neither given any loan nor credit to any board member or senior management nor extended any personal loan to any board member or senior management through any third party and has not provided any security or guarantee in favor of a board member or senior management, including standing as a surety or guarantor.