EN Annual Report 2014 2014 ANNUAL REPORT Table of Contents 6 K›raça Holding 8 Message from The Chairman of The Board 10 Board of Directors 14 Business Partners 16 Turkish Economy on the Verge of 2015 22 Automotive Sector and Position of Karsan in the Sector 26 Karsan Press Review 46 Financial Reports a) Board of Directors’ Annual Report Regarding Year 2014 b) Corporate Governance Compliance Report c) Financial Statements and Independent Auditor’s Report 4 5 Karsan Annual Report 2014 Kıraça Holding Kıraça Holding was founded by İnan Kıraç and Klod Nahum in 1998, as Kıraça Group of Companies. Kıraça Holding, which operates in the international business arena, aims to bring in the idle facilities resulting from excess capacity within the automotive sector back to the Turkish economy, to organize the dispersed structure of the independent aftermarket sector through a new marketing and distribution model. The most important management principle of the Group, respect for people and professionalism, is beeing applied in management positions with its young team. Today, Kıraça Holding operates in the automotive, marine, design-engineering and energy sectors. The activities of the Suna-İnan Kıraç Foundation in education, culture, arts and healthcare shed a different light to the achievements of the Holding in industry and trade. Within the Foundation are also the Pera Museum and the Istanbul Research Institute. 6 7 Karsan Annual Report 2014 Message from Distinguished Shareholders, the Chairman The automotive industry, which is the biggest exporter system construction. The taxi prototype we introduced industry in Turkey, increased its production volume in was well received by the London Mayor and taxi drivers of the Board 2014, thanks to an increase in exports compensating the whom were present in the event. shrinking domestic market. With our Karsan branded vehicles we participated to Taking into account recent developments in the Turkish the Busworld Turkey in April 2014, the IAA Commercial automotive industry, we continued to launch new Vehicles Fair in Hanover in September 2014, and the products to the market with our own brand in line with our Transist show in December 2014. In Commercial Vehicles vision: “Limitless Transportation Solutions”. In 2014, we Fair in Hanover, we introduced to Europe and the delivered a great performance and gained a market share world, Hyundai H350 light commercial vehicles series exceeding 30% in urban transportation with our Karsan we produced for our business partner Hyundai Motor branded JEST minibus, which we introduced in 2013. With Company. This was a proud moment for all of us. our sales of 941 vehicles in 2014 we became the market leader in İstanbul, which has the largest urban minibus In 2014, in addition to our existing operations, we also park in Turkey. Karsan JEST is well beyond its competitors invested in total TL 211 million in production and product with its low floor design and wheelchair accessibility, development. We completed our investments required and I am fully confident that 2015 will be even a more under the “Production and Supply Agreement” we signed successful year given JEST’s compliance with the law with Hyundai Motor Company (HMC) in November 2012 requiring urban transportation vehicles to be wheelchair to manufacture more than 200,000 vehicles in the first accessible. seven years, and we are now ready to start production in 2015. We signed an agreement in May 2014 to make In line with our goal to offer state-of-the art products and Karsan Marketing Co., the exclusive distributor in Turkey service solutions to the urban transportation industry, for the new Hyundai H350 light commercial vehicles with taking into account the need for urban transformation, a 3-6 ton maximum load capacity to be manufactured by we introduced Karsan branded 8m long ATAK and STAR Karsan. 2014 has been a year of investment for us where buses in the International Busworld Turkey Fair in April we took another step towards a sustainable growth and 2014. We aim to become an international actor in urban we issued bonds twice in 2014, one for TL 100 million with transportation, and we introduced our new product two-year maturity, and another for TL 180 million with family to European customers and represented our three-year maturity. We have been awarded the “Bonds brand successfully in the IAA Commercial Vehicles Fair Award of the Year” by Bonds & Loans Award Turkey in the in Hanover, which is one of the world’s most important category of bonds issued in local currency. trade fair for transport. In 2015, we will continue to strengthen our own brand We design our buses with a modern transportation and achieve our vision of “Limitless Transportation vision to meet diverse needs of cities, and in 2013, we Solutions”. We are entering a period, where we will reap were awarded with a contract by the Konya Metropolitan fruits of the seven-year production and supply agreement Municipality in 2013. In 2014, we delivered forty 18 meter we signed with HMC, and the investments that we made. long articulated buses with an approximate value of Euro We are reaching our goals step by step and I would like 13 million, completing our production successfully under to use this opportunity to extend my gratitude to our this contract. shareholders, customers, business partners, employees, and stakeholders who have all stood by our side. We established a wholly owned subsidiary in Italy; Karsan Italy s.r.l. in order to sell our vehicles to foreign markets Yours sincerely, and to offer after-sales services. İnan KIRAÇ We continued our efforts to develop our Concept V1 Chairman of the Board vehicle in line with our objective to create our own Karsan Otomotiv Sanayii ve Ticaret A.Ş. brand. In January 2014, we participated in the Zero Emissions London Taxi Launch Event held by the London Municipality with Concept V1 which is capable to meet needs of all metropoles worldwide with its passenger and/or commercial versions, thanks to its modular 8 9 Karsan Annual Report 2014 Board of Directors İnan Kıraç began his career as a Sales Officer in1961 at Ormak A.Ş., a division of Koç Group. In 1966, he was promoted as the General Manager of Otoyol, the manufacturing company of Fiat trucks and midibuses. He later became the General Manager of Tofaş Oto Ticaret, the sales and distribution company of Fiat cars produced in Turkey. Kıraç was then promoted as the Vice President and later on President of the Koç Holding Automotive Group. He served as the CEO of Koç Holding until his retirement in 1998. İnan Kıraç was privy to every development in the Turkish automotive industry and left his signature on many great automotive factories. İnan Kıraç Chairman 10 11 Karsan Annual Report 2014 Klod Nahum Antonio Bene Vice Chairman Board Member Klod Nahum joined the Koç Group after he graduated from the London University of Kings After mechanical engineering studies, Bene started to work in Alfa Romeo S.p.A. in 1972. College with a masters in automotive engineering. He began his career as a technical He served as Director of FIAT Auto S.p.A Mirafiori Plant, Platform and Industrial Director. maintenance officer in1969 at Tofaş Oto A.Ş., a division of Koç Group. In 1980, he moved Later, he served as Ferrari S.p.A. Industrial General Manager and as TOFAS Türk Otomobil to Switzerland as the President of the Kofisa Trading Company, where he began forming Fabrikası A.Ş. CEO between 2002-2004, and until 2005 he served as Senior Vice President Koç Group’s other foreign trading companies. He was appointed as Vice President of the and Global Industrial Director. International Trade Group in 1991 and was promoted to President in 1997. During the period of Nahum’s service to the International Trade Group the gross turnover went from $10 million to $1,6 billion. He is currently the Managing Director and Founding Partner of the Kıraça Group. Jan Nahum Giancarlo Boschetti Executive Director Independent Board Member Jan Nahum graduated from the Royal Collage of Art with a degree in Automotive Designing After graduating from Mechanical Engineering and Economy, Giancarlo Boschetti, started after his engineering education in Robert College. In 1973, he joined the Koç Group as to work in Fiat Group in 1964 where he occupied different positions for nearly 40 years. He project engineer. Until 2002, he took part in various positions in automotive companies served as Global CEO of Iveco S.p.A. from 1991 to 2001, as Global CEO of Fiat Auto between of the Group. He served as the General Manager of Otokar between 1984-1994 and then 2002-2003. Giancarlo Boschetti serves as Board Member to many international companies. of Tofaş between 1994-1997. Between 2002-2004, he served as the Head of International Business Development at Fiat S.p.A. In between 2005-2007 he served as the General Manager of Petrol Ofisi. He is now the Founding Partner of Hexagon Danışmanlık A.Ş. Nadir Özşahin İpek Kıraç Independent Board Member Board Member Nadir Özşahin graduated from Istanbul University Faculty of Economics in 1965. Özşahin İpek Kıraç graduated from Koç High School in 2002, and received her undergraduate degree began his career as an auditor at the Ministry of Finance in 1965. In 1974, Özşahin started from Brown University’s Biology Department in 2007. She continues her graduate studies working in the private sector, and served as a Coordinator, Vice President and President at Brown University’s Public Health department. As a Founding Board of Directors Member of Audit and Finance Group at Koç Holding A.Ş. Following his retirement in 2003, Özşahin of the Suna and İnan Kıraç Foundation, İpek Kıraç is also a Member of the Management worked as a certified public accountant between2004-2005 , and a Board Member of Döktaş Committee of Koç High School, Member of the Board of Directors at Temel Ticaret ve Yatırım Döküm Sanayi A.Ş.