Doğuş Otomotiv continued to be Turkey s leading

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2 Annual Report 2015

3 CONTENTS Corporate Profile 4 Financial Indicators 6 Stock Performance 7 Milestones 8 Board of Directors 10 Executive Board 12 Chairman s Message 14 Chief Executive Officer s Message 16 Chief Financial Officer 18 Turkish Economy and the Automotive Industry 20 Doğuş Otomotiv in Traffic is Life! 26 About Doğuş Group 28 Our Brands 29 Volkswagen Passenger Car 30 Audi 32 SEAT 34 ŠKODA 36 Bentley & Lamborghini 38 Porsche 40 Volkswagen Commercial Vehicles 42 Scania 44 Meiller 46 Scania Engines 48 Thermo King 50 Doğuş Oto 52 D-Auto Suisse 54 D-Auto LLC 56 DOD 58 vdf 60 TüvtÜrk 62 Spare Parts and Logistics 64 Doğuş Sigorta 66 Corporate Governance Principles Compliance Report 68 General Information 84 Appendix 1. Dividend Distribution Proposal and Table 102 Appendix 2. Statement of Responsibility on Financial Reports 103 Appendix 3. Independent Auditors Report Related to Annual Report 104

4 Corporate Profile Doğuş Otomotiv continued to be Turkey s leading automotive importer and one of the biggest automotive distributors in 2015, which marks the company s 21st year in the industry. Doğuş Otomotiv determines its business plans according to its vision of offering creative services beyond expectations, and builds its corporate strategy with the aim of being present in all the areas of the automotive value chain. Doğuş Otomotiv has the biggest brand portfolio and the widest service network in the Turkish automotive industry. Representing 13 international brands, each of which is the leader of its respective sector among passenger cars, light commercial vehicles, heavy commercial vehicles, industrial and marine engines, and cooling systems, Doğuş Otomotiv provides its individual and corporate customers a wide array of products made up of more than 80 models of Volkswagen Passenger Car, Audi, SEAT, ŠKODA, Bentley, Lamborghini, Bugatti, Porsche, Volkswagen Commercial Vehicle, Scania, and Meiller. The company also competes in the industrial and marine engines market with its Scania Engines brand, and in the cooling systems market with its Thermo King brand. Unconditional customer satisfaction is the top priority of Doğuş Otomotiv in the services it provides, and the company has one of the largest Authorized Dealer and Service network of Turkey. With more than 520 contact points throughout Turkey, Doğuş Otomotiv is able to render widespread and uninterrupted service to its customers in sales, aftersales, and spare parts. In order to be a global company, Doğuş Otomotiv has also made investments to carry its successful operation in Turkey to overseas. As a result of the close and trust-based cooperation it has developed with VW Group, the company has begun operations in 2009 as an Authorized Porsche Dealership and Service outlet under the name of D-Auto Suisse SA in Lausanne, Switzerland. Also, as part of its operations abroad, Doğuş Otomotiv has established the company D-Auto LLC in 2014 headquartered in Erbil to provide distributorship services in Northern Iraq for Volkswagen and Audi brands. With its more than 2,000 employees, Doğuş Otomotiv is one of the most important players in the Turkish automotive industry. Thanks to the customer-satisfaction oriented dynamic service concept, which it has pursued since the day it was founded, Doğuş Otomotiv has always been among the most popular and most trusted brands in Turkey according to corporate reputation surveys. Since its initial public offering in 2004, Doğuş Otomotiv shares are traded at the Istanbul Stock Exchange (BIST) under the ticker symbol DOAS. IS. Doğuş Otomotiv shapes all its business processes parallel to its environmental and social responsibility concept. In line with this perspective, Doğuş Otomotiv has published the first Corporate Responsibility Report of its industry in Turkey in 2009 and undersigned the UN Global Compact in In order to positively impact awareness and perception of the overall responsibility for traffic in the community, the Company has uninterruptedly continued for 11 years its social responsibility project known as Traffic is Life!, first initiated in Traffic is Life! is a corporate responsibility platform carrying out projects that are education oriented, separately planned for all age groups and conducted in public collaboration. So far, it has been awarded with many prizes. Doğuş Otomotiv is a member of Doğuş Group, which operates in the financial services, automotive, construction, media, tourism and services, real estate, energy and the food and beverage industries. 4 / Doğuş otomotiv

5 Sales Performance Financial Indicators * Includes short-term loans, short-term portions of long-term loans, long-term loans, cash and equivalent. ** Includes tangible asset entries. Doğuş Otomotiv s shares are traded on Borsa Istanbul (BIST) under the ticker DOAS.IS ANNUAL REPORT / 5

6 FINANCIAL INDICATORS Doğuş Otomotiv had a successful performance in 2015 with a total sales revenue of 10,889 million TRY and net profit of 302 million TRY. The main financial performance indicators for the last three years are presented below. SALES (mio TRY) GROSS PROFIT MARGIN (%) OPERATING EXPENSES/SALES (%) EBIT MARGIN (%) NET PROFIT (mio TRY) NET PROFIT MARGIN (%) TOTAL ASSETS (mio TRY) TOTAL EQUITY (mio TL) NET FINANCIAL DEBT*/EQUITY * Includes short-term loans, short-term portions of long-term loans, long-term loans, cash and equivalent. ROA (%) ROE (%) CAPEX (mio TRY)** ** Includes tangible asset entries 6 / Doğuş otomotiv

7 STOCK PERFORMANCE BIST Code: DOAS.IS Reuters Code: DOAS.IS Bloomberg Code: DOAS.TI Stock Performance in 2015 Number of stocks: 220,000,000 Initial public offering: Free float rate: 34.5% In 2015, Doğuş Otomotiv share trade was represented by 15% capital gain on aggregate. * As of 31 December 2014 (Source: Reuters) PERCENTAGE OF FOREIGN OWNERSHIP (%) The Percentage of Foreign Ownership in DOAS has reached 52% in EARNINGS PER SHARE PRICE/EARNINGS RATE In 2015, Earnings per Share increased to In 2015, the Price/Earnings Rate was realized as ANNUAL REPORT / 7

8 MILESTONES Scania Industrial and Marine Engines distributorship contract signed SEAT distributorship agreement and partnership with Yüce Auto 5.8% Market Share Distributorship contract with Volkswagen AG Volkswagen and Audi distributorship agreement Porsche distributorship agreement Customs duties on vehicles imported from the EU abolished Škoda distributorship agreement and partnership with Yüce Auto Used car operations established Scania distributorship agreement 0.5% Market Share Thermo King distributorship agreement Groundbreaking ceremony of Porsche deailership in Lausanne Thermo King letter of intent Krone Doğuş Treyler Plant groundbreaking ceremony Opening Meiller Doğuş Damper Plant Establishing Porsche Lausanne D-Auto Suisse SA Doğuş Otomotiv 15 th anniversary All brands located under the same roof at Şekerpınar Opening of Porsche Lausanne Publishing Sustainability Report Global Compact Agreement 12.6% Market Share Corporate Governance Rating (7.80 Point) Doğuş Bilgi İşlem ve Teknoloji Hizmetleri A.Ş. established 15.4% Market Share The title of the Company With the Highest Increase in Corporate Governance Rating (8.63 Point) 8 / Doğuş otomotiv

9 Krone distributorship agreement Joint venture on consumer financing with Volkswagen Financial Services AG Assembling operations Merger of automotive companies under Doğuş Otomotiv Initial Public Offering of Doğuş Otomotiv Doğuş Otomotiv corporate social responsibility project First dividend paid Doğuş Otomotiv acquired 100% of SEAT Lamborghini letter of intent Bentley letter of intent 11.4% Market Share Bugatti letter of intent Opening of OtoMotion Oto-Fix Exspres Service established Porsche dealership contract in Lausanne Krone - Doğuş coproduction agreement 17,8% Market Share Corporate Governance Rating rose to 9.05 Opening Krone Doğuş Treyler Plant Establishing Erbil D-Auto LLC, Iraq TÜVTÜRK established by the cooperation of AKFEN and TÜV SÜD Volkswagen Marine Engines agreement Meiller distributorship and coproduction agreement LeasePlan partnership for fleet services Second dividend paid Production agreement with Krone Lamborghini distributorship agreement 20.1% Market Share Offering financial services in the heavy commercial vehicle sector, Scania Finans becomes part of Volkswagen Doğuş Finans A.Ş % Market Share VW Doğuş Finans AŞ acquired MAN Finansman. Rating increased to Corporate Governance Rating rose to 9.25 Maintains leadership in total automotive market throughout the year Production partnership and distributorship agreement with Krone came to an end. Meiller production came to an end (though Meiller distributorship continues) 2015 ANNUAL REPORT / 9

10 BOARD OF DIRECTORS There is nothing to stop us Ferruh EKER Independent Member of the Board of Directors Hayrullah Murat AKA Member of the Board of Directors Emine Gülden ÖZGÜL Independent Member of the Board of Directors Süleyman Kadir TUĞTEKİN Vice Chairman Aclan ACAR Chairman 10 / Doğuş otomotiv

11 let the race begin... Dr. Recep Yılmaz ARGÜDEN Independent Member of the Board of Directors Özlem Denizmen KOCATEPE Member of the Board of Directors Ekrem Nevzat ÖZTANGUT Member of the Board of Directors Emir Ali BİLALOĞLU Member of the Board of Directors 2015 ANNUAL REPORT / 11

12 EXECUTIVE BOARD DETERMINATION, PRODUCTIVITY Kerem GÜVEN Executive Board Member Anıl GÜRSOY Executive Board Member Emir Ali BİLALOĞLU Executive Board Officer Tolga SENYÜCEL Executive Board Member Vedat UYGUN Executive Board Member 12 / Doğuş otomotiv

13 HARD WORK, INNOVATIVENESS Mustafa KARABAYIR Executive Board Member Giovanni Gino BOTTARO Executive Board Member İlhami EKSİN Executive Board Member Dr. İzzet Berk ÇAĞDAŞ Executive Board Member 2015 ANNUAL REPORT / 13

14 CHAIRMAN S MESSAGE A year of records For Turkey as well as the whole World, 2015 was a year difficult to forget, because there were many critical developments. Even after seven years, the effects of an unparalleled crisis that shook the global economy continued to be felt in Overall, investments and growth performances remained below 2008 levels. Developed countries were the worst hit, because they suffered from the effects of the crisis. Developing countries were relatively less affected by the crisis, but still had a difficult year in terms of their growth performances because of the turbulent business environment and the uncertainties that followed. FED s line of action regarding interest rates was awaited with anticipation, and it decided to gradually increase interest rates after an interval of ten years, which slowed down the flow of capital to developing countries. Meanwhile China, the second largest economy in the world and the driving force of global economy throughout the crisis, had its worst performance in 25 years, causing serious worries. Volatility and instability in interest and exchange rates continued throughout the year, leading the IMF to lower its growth expectation for the world economy to 3.1 percent, the lowest since The economy remained a global agenda item in 2015, and political developments continued to be shaped by crises. Causing trouble between Russia and the West, the crisis in Ukraine was accompanied by uncertainties in the Middle East, especially in Syria, and the refugee crisis. The rush of refugees remained one of the most pressing issues on the agenda of Turkey and Europe, causing great sorrow for all of us. Inhuman acts of terrorism both in Turkey and abroad had their impact not only on the economic and social spheres of countries but on the personal lives of people as well. The whole world went through these difficult economic and political conditions, and Turkey also had its share. In addition to the economic turbulence caused by unstable exchange rates, there were two general elections in Turkey in Despite developments such as the crises with Syria and Russia and acts of terrorism, all of which decreased confidence, the Turkish economy managed to grow by 2.5 percent during the first quarter, 3.8 percent during the second, and 4.0 percent during the third, ending the first three quarters with an average growth rate of 3.4 percent. This showed once again the resilience of the Turkish economy in face of crises, unlike other similar countries. Falling oil prices in 2015 also helped Turkey to maintain its deficit balance. The weak tendency for growth in the global automotive market continued in As of the third quarter, the total automotive production level in the world was expected to rise by 1 percent, reaching 91.5 million vehicles. For Turkey, 2015 was a year of triple records in the automotive industry. Growing well above the average rate of the overall economy, the automotive industry had its best year ever in terms of sales, production, and exports. Passenger car and light commercial vehicle sales increased by 26.1 percent on the previous year, reaching 968,017 units, while the total size of the automotive market passed the 1 million mark when heavy commercial vehicle sales are counted in. As a result of the recovery and new industrial investments in Europe, Turkey s greatest export market, the industry had a successful year. The number of vehicles produced in Turkey grew by 16 percent on the previous year, reaching 1.36 million vehicles in These positive developments in the market were also reflected in the performance of Doğuş Otomotiv, one of the major players of the Turkish automotive industry was a year in which the company reached all its targets and set new records. Almost all our brands went beyond their respective annual sales targets and ended the year with growth rates surpassing market growth, breaking new ground in the process on a number of occasions. Volkswagen passed the 100,000 units mark for the first time in Turkey, making all of us proud by becoming the best-selling brand in Turkey for the third consecutive year. This was the result of our long-term efforts aiming at customer satisfaction, and our success made Doğuş Otomotiv once again the biggest automotive distributor in Turkey in Excessive emission rates in certain Volkswagen engines was an issue widely discussed in 2015, and Doğul Otomotiv closely followed the developments as did other Volkswagen distributors around the world. The EA189 EU5 1.6 TDI engines used in the Jetta and Caddy models were the subject of these discussions, and Doğuş Otomotive voluntarily took these models off the market temporarily, while no limitations were placed on other models. Regarding the diesel vehicles whose sales were interrupted, we have made necessary plans to implement in 2016 the technical solution approved by KBA (the German Federal Motor Transport Authority). In this year of many firsts, almost all our brands ended the year by going far above their sales targets and growing beyond the market average. Another important development of 2015 was the continued expansion of Volkswagen Doğuş Finansman (VDF), one of our subsidiaries, through the acquisition of Scania Finansman AŞ and MAN Finansman AŞ shares. Again in 2015, we have decided to terminate our production partnership and distributorship agreement with Krone, one of our industrial subsidiaries. 14 / Doğuş otomotiv

15 We have also stopped production at Meiller, another one of our industrial subsidiaries, and have modified our business model to continue collaborating with the same brand as its distributor. In order to make Doğuş Otomotive a company that supports responsible business and has incorporated social contributions into its corporate culture, we have made steady and concrete progress in 2015 in our efforts for sustainability, which we had begun six years ago as the pioneering company of our industry. The Traffic is Life! platform is our most special endeavor among the various types of social responsibility work our company carries out directed at contributing to social progress, and we engage in projects that will reach all segments of society, create a positive cultural change in traffic, and set an example to the rest of the industry. Traffic is Life! is one of the longest-term social responsibility platforms regarding traffic, and reaches a variety of levels in education from primary school to university with its special content and programs, touching the lives of students of all ages. We have maintained for 12 years that Traffic is Life! without losing our initial excitement, and made it a part of our approach to sustainability, the indispensable element of the way we do business. It is still our priority to increase the quality and impact of the work we do, and to find solutions to the needs we detect. On November 2, 2015, our company was included on the list of BIST Sustainability Index, created with the shares of BIST companies that show the highest performance in terms of sustainability. In addition, our company received the award for The Company with the Highest Rating in the Board of Directors Category as part of the 9th Corporate Governance Awards organized by the Corporate Governance Association of Turkey (TKYD). Maintaining success is always more difficult than attaining it. Doğuş Otomotiv never settles for the achievements it has already attained, but always strives to improve itself further; our priority is to offer creative services beyond expectations and we always try to perform better and carry the satisfaction of our customers to higher levels. Going beyond expectations and creativity are goals that can only be reached with the concerted and honest effort of our employees. As we leave behind a year filled with records, I would like to thank all my teammates that have contributed to this success and made it sustainable. In our struggle to turn our dreams into reality, I am also grateful to all our investors and shareholders for their confidence in us and the support they have given us. In order to reach its goals, Doğuş Otomotiv operates with the collective efforts and productive cooperation of a big family, from vehicle supply to sales and service points. As the last link in this chain, our authorized sales and services network deserves to be thanked for their care and exceptional success in representing Doğuş Otomotiv. The correct and efficient use of current technologies is of great importance in making this cooperation and orchestration possible. I believe Doğuş Teknoloji deserves special mention for their contributions in this area now occupies its special place in the history of Doğuş Otomotiv as the year in which all the links in the chain that reaches from the producer to the consumer have come together perfectly and worked together in harmony. At the beginning of a new year, we are getting ready for a race where we focus on raising the bar we ourselves have set. There is nothing to stop us let the race begin... Sincerely, Aclan Acar Chairman of the Board 2015 ANNUAL REPORT / 15

16 CHIEF EXECUTIVE OFFICER S MESSAGE 2015 was a year where we accomplished our goals Dear Stakeholders, The Turkish economy was seriously jolted in 2015 by problems such as two general elections, the tension with Russia, regional developments, global financial uncertainties, and terrorist attacks. Despite all these difficulties, the automobile industry succeeded in breaking three records simultaneously for the first time with its production, exports, and total market figures in The automobile market figures in 2015 showed a 16 percent increase in total production on the previous year, reaching 1 million 359 thousand units. The total market size grew by 25 percent on the previous year, reaching 1million 2 thousand units. Total automotive exports increased by 12 percent and reached 992 thousand units. Total light commercial vehicle sales and imported light commercial vehicle sales increased by 43 and 31 percent respectively on the previous year. In 2015, as Doğuş Otomotiv we reached all our set targets. We especially saw a positive return on our investments in recent years for increasing customer satisfaction. With a market experience of 21 years, Doğuş Otomotiv became the leading automotive importer and distributor with over 2 thousand employees, 13 prestigious international brands and more than 80 models, as well as its retail, service, and spare parts operations; it now offers value to over 150 thousand customers annually at more than 520 customer touch points. Raising its market share from 20.1 to 20.6 percent, it retained its market leader position for the fourth consecutive year. The international brands we represent, of which each is a leader in their own sector, have all performed outstandingly in attaining their goals in Volkswagen Passenger Car closed 2015 with a record sales figure of over 100 thousand vehicles. Our Volkswagen Passenger Car and Commercial Vehicle brands excelled in the Turkish market by remaining the market leader for three consecutive years. Doğuş Otomotiv, without compromise, has maintained its focus on customer satisfaction through its dynamic services approach and thus was placed among Turkey s most loved and trusted brands in the corporate reputation survey. Doğuş Otomotiv Increased Its market share from 20.1 to 20.6 percent In 2016, maintaining its position for the fourth consecutive year as the leading automotive importer and distributor in Turkey. Our brands took important steps in customer satisfaction efforts last year. Porsche Driving Center was opened in Istanbul in 2015, offering potential customers the opportunity for an unparalleled driving experience. SEAT placed third in the world in the Top Service People competition that measures the best service advisor. For Audi, 2015 brought not only a serious sales success but also a step beyond the concept of customer satisfaction in its after-sales services. Audi Turkey left behind all its opponents, winning the first place at IACS and immediately afterwards the World Championship at Audi Twin Cup. This is the second time Audi Turkey has won first place, which constitutes a clear example for sustainable success. Following an evaluation prepared by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş. to determine the level of compliance with the Corporate Governance Principles issued by the Capital Markets Board of Turkey, it has been concluded that our Corporate Governance Rating has increased from 9,25 to 9,42. While our brands performed with outstanding achievements, the company with Turkey s largest brands and services network in its industry, Dogus Otomotiv, has taken compliance with laws and legislation as its basic starting point for setting its business performance targets up to par with international standards. In addition to all these important developments, we have received noteworthy awards last year. Volkswagen placed first in four separate categories at the Automobile Gladiators competition organized by Otomotiv Distribütörleri Derneği (Automotive Distributors Association). This competition is regarded in our industry as a certificate of respectability and trust, and Volkswagen Passenger Car won The Best Digital and Social Media Application of the Year The Best Magazine Application of the Year and The Best-Selling Automobile Brand awards, while Volkswagen Passenger Car and Commercial Vehicle won The Best-Selling Automobile and Light Commercial Vehicle Brand award. Doğuş Otomotiv builds its business philosophy on customer satisfaction and continues all its operations in line with its quality-focused service approach; in 2015, it has taken innovative steps to reach its aim of creating fan customers by bringing its service quality to the highest level in order to create a unique customer experience. 16 / Doğuş otomotiv

17 Taking as our starting point the increasing resemblance of products and services in the automotive industry, we have already made a difference during the first year of our Value and Care Center, which aims to give a unique experience to our customers, makes them feel special in every moment of the communication process, and responds to all their requests and needs at the highest level possible. The Value and Care Center operates under Doğuş Otomotiv, and has successfully contributed to the business processes of both the brands and the Authorized Dealers and Services. In parallel with the increase in vehicle sales and service entries in 2015, the increase in business volume turnover was 41 percent. The Value and Care Center contacted close to one million customers during the year, becoming the most active entity in its area of expertise in the Turkish automotive industry. Doğuş Otomotiv undertook a series of innovative and sustainable HR operations in 2015 that supported the Top Employer Brand approach through making its employees feel valued and creating a shared culture. Employing personel who possess the competences required by the company s dynamism, know the importance of the customer, are eager to learn and improve, have long-term high performance, contribute to their professional and personal development and allow them to use their potential in the most efficient manner were among the priorities of Doğuş Otomotiv. Doğuş Otomotiv invested in the development of not only the employees at the company headquarters but also those working at the Authorized Dealers and Services dispersed throughout Turkey. Aiming to ensure unity in HR processes and customer satisfaction, Doğuş Otomotiv organized activities at more than 520 Authorized Dealer and Service centers in 46 provinces for 13 brands as part of DRIVE ( Doğuş Otomotiv in Rotası İnsan ve Eğitim active since 2013) in order to make corporate structures concerning HR more effective and to develop a corporate structure approach. Since 2010, Doğuş Otomotiv has been publishing annual Corporate Social Responsibility Reports, constituting an example in responsible corporate citizenship. Our Traffic is Life! platform, which commenced in 2004 and has now become the most long-lived corporate responsibility project, continued in 2015 with projects aimed at children and the youth. Since the day it was founded, Doğuş Otomotiv has believed in the importance of stakeholder expectations and regarded stakeholder participation as part of its vision; it will continue to take into consideration the views and considerations of its stakeholders, thus detecting opportunities and risks in advance, and will move forward with the aim of being a sustainable company. Leaving a year of many difficulties successfully behind, Doğuş Otomotiv and its brands, employees, and all its stakeholders have high hopes for the future. The secret to our success lies in the steps we are taking to carry our present success to the future by upholding values such as determination, productivity, hard work, innovativeness, and idealism within a more corporate framework. I believe with all my heart that we will continue our progress, taking strong steps as a big family in Respectfully, E. Ali Bilaloğlu CEO 2015 ANNUAL REPORT / 17

18 DR. BERK ÇAĞDAŞ CHIEF FINANCIAL OFFICER Market leader for the 4th consecutive year increase in profitability and turnover 2015 was a challenging year both because of the successive general elections and the adverse effects of the political, social, and macroeconomic developments in the region where Turkey is also located. One of the noteworthy issues of 2015 was FED s increasing interest rates after a period of nine years and the repercussions of this policy change in developing economies such as Turkey. In addition, national consumer confidence index dropped to 58.5 in September, the lowest in six years. The General Directorate of Financial and Administrative Affairs closely followed negative developments in this period, emphasized coordination among departments, and strengthened its financial operations with the dynamic and scenario-supported budget infrastructure and systematic monthly forecast monitoring. This made it possible for departments to carry out their respective planning and cost control comprehensively. In terms of administrative affairs and procurement, 2015 was a year during which operations regarding internal customers, supplier relations, and work safety became more widespread. In addition, information technology applications were employed to allow processes to be managed more effectively and in line with regulations, models and applications were designed to enrich risk perspective, and our employees were offered training opportunities. Stakeholders were informed through various platforms in a timely manner regarding developments throughout the year. The use of new platforms in financial transactions and continued improvements in operations resulted in efficiency and cost advantages in As per our priorities, we formed financial scenarios regarding market and operational risks, implemented monitoring activities under changing market conditions on a daily basis, and controlled risks by reducing their impact to a minimum. In addition, all items of our working capital were financed with appropriate funding costs and the rational financial structure was successfully managed. The average working capital turnover for the year was 5.07, and the average balance for the loans used to finance the working capital was 1.3 billion liras. Our company maintained its market leadership with a market share of 20.6 percent, increasing its revenues by 42 percent and its operating profit by 40 percent on the previous year. The amount of imports financed in 2015 was 3.1 billion euros, while the total foreign currency received was 3 billion euros. Our company increased its Corporate Governance RatIng from 9.25 to 9.42 In 2015, and was awarded by the Corporate Governance Association of Turkey. The e-transformation process, which had begun in 2014 with e-invoices, extended to the use of e-ledger in 2015, and all preparations have been made for the transition to e-archive in Financial reports prepared in compliance with current regulations, generally accepted standards and principles and according to company procedureswere supported by independent auditing and completed in designated periods. The infrastructure and automation processes that reinforce efficiency will continue in 2016, as it has been in 2015, in close cooperation with relevant departments and in line with the company s vision and targets. The internet-based Procurement System was implemented in the beginning of 2015, resulting in an increase in the efficiency of the Administrative Affairs Department. The Supplier Data Warehouse project, carried out in collaboration with Doğuş Holding, has also been implemented this year. In addition to 900 suppliers and a procurement volume of 170 million liras, a total investment of approximately 80 million liras has been made for the main project we have carried on, the Kartal Showroom, Service, and Office Tower. During this period, we have improved inspections for facility safety with video analysis cameras and traffic safety with camera-supported service vehicles carrying company personnel. The Employee Satisfaction Survey conducted to measure the satisfaction of our employees regarding centralized procurement and to get their feedback has produced a result of 84 percent satisfaction. Following the risk-centered restructuring process implemented in May 2015, the Financial Controlling and Risk Management Department has revamped its risk management operations with a systematic approach. 18 / Doğuş otomotiv

19 The department shared its performance, status, and risk reports as well as other briefs and suggestions with senior management in a timely manner; it also created a new risk assessment and evaluation model based on work conducted in terms of Strategic Financial Risk Management. Further, it has supported its stakeholders in terms of policies, procedures, and regulations, providing consultancy services to affiliations, subsidiaries, and internal departments for wider use of control applications. Throughout these processes, it has worked in regular communication and coordination with auditing teams, consultants, and authorities concerned. In addition to Doğuş Otomotiv operations, our department has meticulously carried out various processes for our affiliates and subsidiaries such as finance, budget, reporting, control, monitoring, etc. It supported Doğuş Oto Pazarlama, D-Auto Suisse SA (Switzerland), D-Auto LLC (Iraq), and Doğuş Teknoloji for the successful and efficient implementation of their operations in Our Company continues its investor relations activities in a proactive manner and has ended the year successfully in line with its departmental strategy. The Investor Relations Department participated in 19 conferences and roadshows with regards to operational, financial and other developments and meetings were held with over 500 corporate investors and analysts. Meetings with new funds considering investment in our company in 2015, accounted for 20 percent of all meetings; Asia and the Middle East were added to the list that expressed interest in our Company. At the briefings and teleconferences organized for analysts, we presented quarterly consolidated financial results to inform them on our operations, financial status, and strategies. Our Company has shown once again that it continues its operations having fully adopted the principles of fairness, transparency, accountability, and responsibility. According to the Rating Report published in December, our Company has shown the highest improvement in the Board of Directors category, increasing its Corporate Governance Rating from 9.25 to 9.42, which was awarded by the Corporate Governance Association of Turkey on January 14, Another achievement of our Company this year has been the inclusion among companies that will be trading in the BIST Sustainability Index from November 2015 to October 2016, effective November 2, Owing it to the methods we have developed in a systematic way so as to identify uncertainties in a timely manner and take necessary precautions, and to the new applications we support with our strong financial structure, we are also confident about We will strive to protect our unique status attained through the years with effective risk management, lean management benefits, spending discipline, investment planning, and compliance with regulations and will continue to offer all our stakeholders reliable and sustainable services ANNUAL REPORT / 19

20 TURKISH ECONOMY AND THE AUTOMOTIVE INDUSTRY Uncertainties abounded throughout the world in 2015, with economic recovery stalling and political and social incidents shaping the agenda as much as economic developments, while Turkey grew by 3.4 percent in the first three quarters, below the accepted potential level of 5 percent. The greatest support for growth came from internal demand, as exports shrank by 8.6 percent on the previous year, dropping to billion dollars, and imports shrank by 14.5 percent to billion dollars. The fall in oil prices was key in the reduction of foreign trade deficit by 25.5 percent. As for the automotive industry, 2015 was a year of records, with three records broken in total market, production, and exports simultaneously for the first time ever. The Turkish automotive market grew by 27 percent on the previous year, reaching 1,005,156 units; total production grew by 16 percent, reaching 1,358,796, and automotive exports grew by 12 percent, reaching 992,335 units. In 2015, a total of 726,477 passenger cars and 245,027 light commercial vehicles were sold. Heavy commercial vehicles sales increased by 8.5 percent on the previous year, reaching 33,652 units. GNP GROWTH RATE (Fixed Prices)(%) CPI INFLATION (%) EXPORTS (Billion dollars) IMPORTS (Billion dollars) Automotive Market Sales Units (Wholesale Units) 20 / Doğuş otomotiv

21 DOĞUŞ OTOMOTİV IN 2015 Doğuş Otomotiv celebrated its 21st anniversary in 2015 as the leading automotive importer and distributor in Turkey, with 13 international brands, more than 80 models, sales, after-sales and spare parts services, over 2000 employees and 520 customer contact points serving more than 150 thousand customers. Doğuş Otomotiv increased its market share in 2015 and remained the market leader in the Turkish automotive industry for the 4th consecutive year will be remembered as a difficult year due to political and economic changes throughout the world. Despite these difficulties, the automobile industry succeeded in breaking three records simultaneously for the first time with its production, exports, and total market figures in The total retail automobile and light commercial vehicle market in Turkey was 767,681 units in 2014, which increased by 26.1 percent in 2015, reaching 968,017 units. Automobile sales increased by percent, from 587,331 units in 2014 to 725,596 units, and light commercial vehicle sales increased by percent, from 180,350 units in 2014 to 242,421 units in Doğuş Otomotiv increased its total retail sales excluding heavy commercial vehicles from 154,301 units to 199,226 units, which signaled a market share increase from 20.1 percent to 20.6 percent. Turkey s leading automotive distributor, Doğuş Otomotiv has continued in 2015 to make it possible for the world s most valuable brands to perform successfully in Turkey, and continued to grow with the added value and competitive advantage of these brands; it became consistently stronger thanks to its vision of offering creative services beyond expectations and its principle of working with a focus on customer satisfaction. Doğuş Otomotiv has strengthened its already strong position in the Turkish automotive industry in 2015 with: 13 distributorships bringing together the strongest automotive brands of the world, A total vehicle park of more than 1,500,000 vehicles, Over 520 customer touch points, Over 2000 employees, Over 80 different models offered in a wide array of products, 203,082 units of retail vehicle sales (including heavy vehicles), and 23,000 units of second-hand vehicle sales. Success in sales The brands under Doğuş Otomotiv had a spectacularly successful year in 2015 and broke sales records. Volkswagen Passenger Car determined its marketing strategy according to its vision of being the best-selling and most innovative automotive brand in the world, and ended the year successfully by increasing its sales by 26.9 percent on the previous year in 2015 in the passenger car market that grew by 23.5 percent. Volkswagen Passenger Car was elected the most loved automobile brand for the third consecutive time and increased its market share by selling more than 100,000 retail vehicles, in line with its target. Doğuş Otomotiv started importing the Audi brand to Turkey in 1994, and in 2015, the brand reached its highest sales figures in its history with sales of 20,000 units. With a customer loyalty rate of 75 percent, which is held as an example throughout Europe, the brand succeeded in increasing its after-sales services turnover by 18 percent. The new Q7 was also introduced into the Turkish market in SEAT has been continuing its operations in Turkey under Doğuş Otomotiv since 1998, and in 2015, it also reached its highest market share by increasing its sales volume by 33 percent outgrowing the market. SEAT sold 16,911 units in 2015 and attained a market share of 2.3 percent. One factor in this sales success was the increase in SEAT s share in fleet sales. SEAT s fleet sales increased by 70% on the previous year, which marks the biggest figure in its history of fleet sales. ŠKODA increased its sales in Turkey by 53 percent on the previous year with 22,107 units sold and a market share of 3.05 percent. Bentley fortified its place in the upper luxury segment market by selling 19 units, and carried its brand image to the highest level. Lamborghini Huracan sold and delivered 6 units in For Porsche, 2015 was a year of firsts and records. Porsche Türkiye continued its stable growth in 2015, increasing the units sold by 46 percent on the previous year, and marking a new record with 861 vehicles sold. Porsche Türkiye placed second in sales volume among the 26 countries for the Central and Eastern European region. Volkswagen Commercial Vehicle increased its sales in the light commercial market by 31.8 percent. Maintaining its third place in the total market, Volkswagen Commercial Vehicle was leading the imported commercial vehicle sales. The brand sold 31,642 units and took a 13.1 percent share of the light commercial vehicle market, while it remained the leader in the imported commercial vehicle market with a share of 29.5 percent. The Volkswagen brand was the best-selling brand for the third consecutive year with its combined sales in passenger cars and commercial vehicles ANNUAL REPORT / 21

22 DOĞUŞ OTOMOTIV IN 2015 Sales Units (Retail) 22 / Doğuş otomotiv

23 Volkswagen Commercial Vehicle carried out important product launches in The New Caravelle, the New Transporter, the New Caddy, Crafter Premium, and the New Amarok Exclusive were launched in the Turkish market in Scania ended 2015 with a sales figure of units, the highest since its entry into the Turkish market. Meiller increased its sales to 407 units in 2015, marking an increase of 31 percent on the previous year. As a market leader of diesel coolers for many years, Thermo King sold 606 units in 2015 thanks to its fleet sales, and maintained its leadership. After-sales services Doğuş Otomotiv builds its business philosophy on customer satisfaction and continues all its operations in line with its quality-focused service approach; in 2015, it has taken innovative steps to reach its aim of creating fan customers by bringing its service quality to the highest level in order to create a unique customer experience. The Value and Care Center, created to offer sales and after-sales services to users of the brands distributed in Turkey by Doğuş Otomotiv, received full score in its first year from vehicle owners, and by contacting nearly one million customers in one year it became the most active entity in its area of expertise in the Turkish automotive industry. Volkswagen Passenger Car after-sales services extended its service network in 2015 by opening two new Authorized Services, Demoto Kütahya and Aykan Osmaniye, thereby bringing the number of its Authorized Service points throughout Turkey to 75. Three Volkswagen Authorized Services in Turkey have been selected to the list of 100 Best Authorized Services in Europe at the 5th Service Quality Awards Competition run by Volkswagen AG. A total of nearly 573,000 vehicle entries in a year, an average of 47,750 customers per month, are processed at our Authorized Services. In 2015, the spare parts revenue increased by 19 percent, while labor revenue increased by 25 percent. The IACS survey conducted annually by Audi AG in order to measure customer satisfaction regarding after-sales services and determine their relative position among its competitors, Audi Turkey came in first with the unparalleled services it offered. In order to raise the quality of its services even further, Audi after-sales services launched new projects in Self Reception, one of Audi s digital projects, decreased the wait period of customers at the point of vehicle entry. Customers visiting the service are able to open work orders themselves and make their payments online at vehicle delivery using the Self Reception Kiosk. Audi after-sales services achieved significant success placing first in the Dealer Satisfaction Survey (DSS) which is conducted every year by Audi AG with the participation of Service managers and company owners. This successful result demonstrates that communication and collaboration with business partners has reached the highest level. Porsche s vehicle park grew by 6% in 2015; service campaigns and Porsche Accessories-Boutique Marketing efforts resulted in a 63-percent increase in Accessories-Boutique sales and a 7-percent increase in work orders on the previous year. The Authorized Service loyalty commitment of customers was 79 percent, and the customer satisfaction survey indicated a satisfaction level of points, thanks to the customerfocused service approach. Sales and technical training grew by 228 percent on the previous year in The newly available Porsche Boutique Online sales system made it possible for customers to buy Porsche boutique products online. SEAT s year-round actions resulted in a 62-percent Authorized Service commitment by customers, and thanks to the customer-focused service approach, after-sales customer satisfaction level was measured as 99.5 points in the survey. Scania received 60,850 work orders in 2015, serving its customers at 20 Authorized Service points with 295 technicians and a total of 380 personnel. Authorized Service loyalty commitment level was 77 percent in Spare Parts and Logistics Spare Parts and Logistics manages the importation, warehousing and distribution of vehicles and spare parts to Authorized Dealers of the world s most prestigious brands such as Volkswagen, Audi, SEAT, ŠKODA, Porsche, Bentley, Lamborghini, Scania, and Meiller, as well as Scania Industrial and Marine Engines, Thermo King Transport Temperature Control Systems, and their affiliated products. Spare Parts and Logistics imported 186,312 vehicles and dispatched 201,739 vehicles to Authorized Dealers, ending the year with a total revenue of TRY 724 million generated by the sales of spare parts and accessories. Awards Doğuş Otomotiv and its brands received numerous awards in Doğuş Otomotiv raised its rating from 9,25 in 2014 to 9,42 in 2015, and won the Company with the Highest Rating in the Board of Directors Category award at the 9th Corporate Governance Summit organized by Corporate Governance Association of Turkey (TKYD). Volkswagen Passenger Car demonstrated its success not only in sales but also in communications as well, and was elected the most loved automobile brand for the third consecutive year in the independent survey of Mediacat Ipsos. The brand received the Chrystal Apple Award with its Lovemark communications campaign, and the Passat model received the Car of the Year award. At the yearly Twin Cup World Finals organized by Audi AG throughout the world in the field of after-sales services, Şenyıldız Otomotiv representing Audi Türkiye, won the world champion title. 75 teams from 38 countries participated in the 11th year of finals, where Şenyıldız Otomotiv became the first and only Authorized Service in the history of the Twin Cup to win the world championship twice. Audi also received the grand award in the press category of Chrystal Apple Advertising Awards ANNUAL REPORT / 23

24 DOĞUŞ OTOMOTIV IN 2015 Porsche s QR-code advertisement for 911 Carrera 4 GTS received the Bronze Apple award in the Best Press Application award at the Chrystal Apple competition, one of the most prestigious marketing awards. At the Kırmızı Awards held by Kırmızı magazine of the Hürriyet publishing group to reward creative press ads, Volkswagen Commercial Vehicle s Caddy magazine ad received the Commercial Vehicle award; at the Chrystal Apple awards, it also received the Silver Award in the automotive subcategory of the press category. One of the most prestigious awards of the automotive sector, the International Van of the Year award in 2015 went to the Transporter model for the third time. Volkswagen Commercial Vehicle won the second prize at the Direct Marketing Awards in the Special Projects category with Amarok Beacon. At the 2015 Gladiators of the Sales and Communications Awards organized by the Automotive Distributors Association, Volkswagen placed first in 4 separate categories. Volkswagen Passenger Car won the Digital and Social Media Application of the Year, Magazine Application of the Year, and Best-Selling Automobile Brand awards, while Volkswagen Passenger Car and Commercial Vehicle won the Best-Selling Passenger Car and Commercial Vehicle award. In the traditional Best Commercial Vehicles and Brands competition held by German magazines specializing in commercial vehicles, Meiller was selected The Best Damper in 2015 for the 11th consecutive time. At the Best Brand awards organized by Lastauto Omnibus, Trans Aktuell and Fernfahrer, the most important publications of the commercial vehicle sector in Germany, readers voted Thermo King as the best brand in the cooler units category for the 11th time. D-Auto Suisse SA The successful retail activities carried out by Doğuş Otomotiv in Turkey are applied in Switzerland through D-Auto Suisse SA, continuing such operations as a Porsche dealer since With its 39 employees, D-Auto Suisse SA increased its sales on the previous year by 39%, selling 351 new vehicles and setting a new sales record. D-Auto LLC Doğuş Otomotiv signed an Exclusive Distributorship agreement with Volkswagen and Audi in 2013 for the Iraqi region, and continues its sales and after-sales services operations there under D-Auto LLC, a company founded in Erbil and 100% owned by Doğuş Otomotiv. The company signed a distributorship agreement for Iraq with Volkwagen Commercial Vehicle in December 2015, thus representing three brands. D-Auto LLC serves its customers with 22 personnel at a facility covering 7500 square meters was a year when economic stagnation in Iraq became more pronounced, which had a negative impact on the automotive industry, causing the market to shrink significantly. D- Auto LLC sold 37 new vehicles in The high-quality service experience it offers its customers and the highly trained technical personnel make D- Auto LLC the service point of choice among customers, who brought in vehicles in 2015 for after-sales services. Doğuş Oto Providing sales services for new and second-hand vehicles, spare parts and accessories and offering insurance, financing, and after-sales support services to its customers at 6 locations in Istanbul, Ankara, and Bursa for the 7 brands it represents (VW Passenger Car, VW Commercial Vehicle, Audi, Porsche, SEAT, ŠKODA, and DOD), Doğuş Oto sold a total of 59,948 new vehicles and had 240,201 vehicle entries at service points in 2015, surpassing its targets. In parallel with the increase in vehicle sales and service entries, Doğuş Oto s business volume and the number of customers contacted increased significantly. DOD Turkey s biggest brand in corporate second-hand vehicles, DOD has become the symbol of corporate identity and trust in the second-hand sector; as a result of the changes in its business model and the expansion in its supply network, it has increased the number of its business partners in 2015, which brought a serious growth in supplies and sales. As a result, DOD continued its stable growth in 2015 with 23,125 vehicles sold. The number on partnering companies doubled on the previous year in order to expand the Authorized Dealer supply network and increase variety of the vehicle park; growth in operations resulted in an increase of 38 percent in vehicle supply and 69 percent in vehicle sales on the previous year. New supplier agreements also contributed to stock variety and numbers. As a result of the operational changes in 2015, the stock turnover rate of vehicles decreased by 23 percent and stock financing costs dropped by 28 percent. The changes in the business model in cash purchases and premium vehicle sales at DOD retail points, which was begun in 2014, continued in 2015, resulting in a 24-percent turnover increase on the previous year. Retail sales points reached their highest turnover and unit sales figures, breaking two separate records. TÜVTÜRK Making an important contribution to traffic and vehicle safety as the sole institution entrusted and authorized with periodical vehicle inspections in Turkey, TÜVTÜRK had a successful year in Prioritizing positive customer experience, TÜVTÜRK continued its investments in this area in Attaining growth in all of its operations and especially in periodical vehicle inspections, its turnover increased by 13.7 percent on the previous year, rising from TRY 1,167 million to TRY 1,327 million. TÜVTÜRK increased the number of its fixed stations to 207 with the addition of new stations in 2015, and its mobile stations to 106. The number of vehicles undergoing periodical inspection rose by 2.5 percent, reaching 8,091,000. vdf Automotive Financing vdf performed significantly above its targets in 2015 thanks to its product and service approach that focuses on customer satisfaction. With a 33% penetration among Volkswagen Group 24 / Doğuş otomotiv