2013 Fiscal Year General Assembly Meeting March 27, Registered Capital TL Issued Capital TL

Transcription

1 ALARKO CARRIER SANAYİ VE TİCARET A.Ş. Annual Report 2013

2 2013 Fiscal Year General Assembly Meeting March 27, 2014 Registered Capital TL Issued Capital TL

3 CONTENTS Message from the Board of Directors Board of Directors and Auditors Meeting Agenda General Organization Board of Directors Annual Report General Information Regarding our Business Financial Highlights Proposal for Profit Distribution Report on Compliance with Corporate Governance Principles Independent Auditors Report and Financial Statements Independent Auditors Report Statements of Financial Position Statements of Comprehensive Income Statements of Cash Flows Statements of Changes in Equity Notes to the Financial Statements

4 The Main Manufacturing Plant - Gebze

5 MESSAGE FROM THE BOARD OF DIRECTORS Dear Shareholders, We have left behind a rather animated year both politically and economically. The political and economical events that developed both at home and abroad determined the agenda. Following the 2 nd quarter of 2013, capital movements began to reverse and a flow from the economies of developing countries towards that of developed countries was observed. The first reasons for this reversal were the signs of recovery in the USA economy and FED s slow down of asset purchase program. This flow was accelerated by the structural problems and political uncertainty in developing countries. In our country, the structural problems we underlined in previous years continued with no change. The effect of capital movements was felt more strongly in our country because the necessary precautions had not been taken. The trade deficit of approximately US$ 100 billion and the current deficit of US$ 65 billion led up to further dissociate our country from other developing countries. Targets were not attained in inflation or either growth or unemployment rates. The annual CPI rate was 7,4 % and PPI 6,97 %. It is estimated that the growth determined in the medium term program will fall short of the targeted rate. Hence, a rate of 10% employment is expected as a result of this decline in the growth rate. We can already foresee that 2014 is going to be a difficult year due to the high drop in the value of the Turkish Lira in December 2013 and the fact that capital movements turned towards the economies of developed countries. Once again, this shows how important it is to probe the structural problems of economy and apply the monetary and financial policies that will solve these problems in a systematic way. Applying politics that will open the way to production of high technology products and services that will create added value will prevent the year 2014 from being a lost year both for our country and our industrialists. Our company s balanced and flexible management policies have brought their results in 2013 and were the most important tools in attaining our goals. Thanks to our plans and programs prepared in accordance with long years of knowledge and experience and which can be revised rapidly, we were less affected by the adversities in economy as well as the high competition. We made a point of adapting ourselves to the shrinkage and expansion developing in our sector. Therefore, all our departments reviewed their strategies and ways of doing business continuously and made changes whenever necessary. This resulted in the development of our departments skills to develop synergy. Considering our principle of Quality in Service and Production we have expedited our efforts to add innovative and quality products to our product range. Esteemed shareholders, you have always given us your support in our efforts. No doubt the commitment of our employees and their efforts contributed greatly to attain these results. We truly believe that we will attain our goals in 2014 and will take our Company to a higher level. With these feelings and thoughts, we greet your esteemed assembly with respect. İshak Alaton, Chairman of the Board 3

6 BOARD OF DIRECTORS AND AUDITORS Board of Directors * Name and Surname Task From To... İshak Alaton Chairman Philippe Didier Delpech Vice Chairman Ümit Nuri Yıldız Director Rolando Anibal Furlong Director Mehmet Dönmez Independent Director Hatice Figen Eren Independent Director * Members of the Board of Directors don t have any executive function in the Company. Auditor Denge Bağımsız Denetim Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of MAZARS) Independent Auditor Denge Bağımsız Denetim Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of MAZARS) Powers and Limits of Members of the Board of Directors Powers and responsibilities of the Chairman of the Board and Board Members and managers are set forth in the Company s Articles of Association and the relevant articles of the Turkish Commercial Code. 4

7 INFORMATION REGARDING MEMBERS OF THE BOARD İshak ALATON Chairman of the Board Alaton was born in Istanbul in He graduated from the French Lycee Saint Michel in He worked as welder and draftsman at the Motala Locomotive Factory in Sweden between 1951 and In 1954 he returned to Turkey and established the company that became the kernel of the Alarko Group with Dr. Üzeyir Garih. Ishak Alaton is presently the chairman of the Board of Alarko Holding and some of the companies of the Group. He speaks Swedish, English, French and Spanish. Alaton holds the Swedish First Class Order of the Polar Star and the Medal of Commander of Civil Merit Order of Spain. İshak Alaton does not qualify as independent director according to the Capital Markets Board Communiqué Numbered II Philippe Didier DELPECH Deputy Chairman of the Board Delpech was born in Limoux France in He graduated from the Engineering Department of ENIT in France in He got an MBA degree from the European School of Management of ESCP-EAP in France in He worked as International Marketing Manager at ABB France between 1988 and 1991, and as Sales and Marketing Director of ABB from 1992 to Delpech joined the Carrier Group after working as Deputy General Manager of Danfoss between 1996 and He is currently the President of EMEA at UTC Climate, Controls and Security. In addition to his native French, he speaks English and Spanish. Philippe Didier Delpech does not qualify as independent director according to the Capital Markets Board Communiqué Numbered II Ümit Nuri YILDIZ Member of the Board Ümit Nuri Yıldız was born in Erzurum in He graduated from the Department of Business Administration, Faculty of Political Sciences in He obtained his MS degree from University of Illinois.In 1987, he started working as Assistant Auditor at Board of Auditors of the Ministry of Finance. Yıldız continued to work in the Ministry as Auditor and Chief Auditor until He was appointed Deputy General Manager of the Turkish Employment Organization in He resigned from his position and joined the Alarko Group of Companies in Yıldız who is presently working as Financial Analysis, System and Planning Coordinator at Alarko Group is also a member of the Board of various companies within the group. Yıldız speaks English and is married with two children. Ümit Nuri Yıldız does not qualify as independent director according to the Capital Markets Board Communique Numbered II

8 Rolando Anibal FURLONG Member of the Board Furlong was born in Buenos Aires, Argentina in He obtained his undergraduate degree from the Management Department of Buenos Aires University, Argentina in 1991 and from the Accounting Department of the same university in He obtained his MBA degree from Wharton University in the USA in 1995 and joined the Carrier Group of Companies. He is presently working as Director, Strategy and Business Partnerships EMEA at UTC Climate, Controls and Security. In addition to his native Spanish, he speaks English and French. Rolando Anibal Furlong does not qualify as independent director according to the Capital Markets Board Communiqué Numbered II Hatice Figen EREN Independent Member of the Board Eren was born in France in She graduated from the Department of European Law of Strasbourg Robert Schuman University in 2001 and the Department of European Law of the University of Luxemburg in She worked at the Wildgen Law Office from 2003 to 2006 and as a lawyer at the Loyens Loyeff Law Office from 2006 to 2009 and finally as the Manager of the Law Department of the Equity Trust company in Eren is presently working as a lawyer in the Oaktree Capital Management Company. In addition to her native French, Eren speaks English and Turkish. Hatice Figen Eren s nomination was accepted at the Board meeting of Alarko Carrier Industry and Trade Co. held on and Eren qualifies as independent director according to the Capital Markets Board s Communiqué Numbered II Mehmet DÖNMEZ Independent Member of the Board Dönmez was born in Kayseri in He graduated from the Ankara Academy of Economics and Administrative Sciences in Her worked at the Accounting Department of the Imar Ltd. Co. Ankara from 1964 to After holding different posts at the Alarko Group of Companies where he started working in 1966, he retired at while he was holding the post of Group Coordinator and Deputy General Manager at the Ankara Alarko Carrier Industry and Trade Company. He served as member of the Board of the same company for one year. Mehmet Dönmez s nomination was accepted at the Board meeting of Alarko Carrier Industry and Trade Co. held on and Dönmez qualifies as independent director according to the CMB s Communiqué Numbered II

9 AGENDA OF THE ANNUAL GENERAL ASSEMBLY MEETING OF 27 MARCH Opening and moment of silence. Deliberations and decision on the election of the Presiding Committee. Deliberations and decision to authorize the Presiding Committee to sign the minutes of the General Assembly Meeting. Reading and deliberation of the Annual Report of the Board of Directors,Auditor s Report and Independent Auditor s Report for the year Reading, discussion and approval of the Statements of Balance Sheet and Income Statement of Deliberations and resolution for the acquittal of the Members of the Board of Directors for the activities in year Presenting information on the guarantees, pledges and mortgages lodged by the company in favor of third parties. Presentation of information regarding the remuneration principles for members of the Board of Directors and top executives managers. Deliberations and resolution on presentation and approval of profit distribution policy of the company. Deliberations and resolution on the proposal of the Board of Directors for the profit distribution of the year Deliberations and decision on the determination of the salaries of the Board of Directors. Deliberations and resolution regarding vesting the powers set out in articles 395 and 396 of the Turkish Commercial Code to the members of the Board of Directors. Presenting information to General Assembly on procedures indicated in articles of the Corporate Governance Principles in the annex of the Communiqué Numbered II-17.1 of the Capital Market Board. Deliberations and resolution on the election of auditors as of the Turkish Commercial Code. Deliberations and decision concerning the signing of a contract for the auditing of the company s accounts by an Independent Auditing Company selected by the Board of Directors in accordance with the Capital Markets Regulations and approval of the draft of the contract. 7

10 GENERAL ORGANIZATION BOARD OF DIRECTORS EXECUTIVE VICE PRESIDENT SENIOR VICE PRESIDENT INDUSTRY AND TRADE VICE PRESIDENT BSS DISTR. VICE PRESIDENT AFTER MARKETS VICE PRESIDENT RLC&HEATING DISTR. FINANCE MANAGER SALES MANAGER İSTANBUL SYSTEM SALES TOTALINE MANAGER AFTER MARKETS SALES MANAGER ANKARA DEALER SALES SALES MANAGER EUROPEAN SIDE İSTANBUL SYSTEM SALES SUPERVISION MANAGER AFTER MARKETS SALES MANAGER İSTANBUL DEALER SALES ACCOUNTING MANAGER SALES MANAGER ANKARA SYSTEM SALES SUPERVISION & MAINTANENCE SALES MANAGER AFTER MARKETS SALES MANAGER İZMİR DEALER SALES SALES MANAGER BMS İSTANBUL SYSTEM SALES SERVICE MANAGER AFTER MARKETS TECHNICAL MANAGER DEALER SALES BUSINESS DEVELOPMENT & CONTROL MANAGER ANKARA DEALER SALES STOCK MANAGEMENT MANAGER 8

11 VICE PRESIDENT FACTORIES VICE PRESIDENT MARKETING AND SUPPORT CARRIER INTEGRATION MANAGER PRODUCT MANAGEMENT DIVISION MANAGER MARKETING AND SUPPORT TREASURY MANAGER IMPORT AND REPRESENTATION MANAGER MARKETING AND SUPPORT ANKARA, İZMİR, ANTALYA, ADANA OFFICE MANAGERS ADVERTISING AND PUBLIC RELATIONS MANAGER MARKETING AND SUPPORT HUMAN RESOURCES MANAGER TRAINING DOCUMENTATION MANAGER MARKETING AND SUPPORT CUSTOMER RELATIONSHIP SPECIALIST TRAINING UNIT 9

12 BOARD OF DIRECTORS ANNUAL REPORT Distinguished Shareholders, We hereby present the Annual Statement of Financial Position, Statement of Comprehensive Income and other financial statements which reflect the results of our company s activities in 2013 to your evaluation and criticisms. 1) This Annual Report covers the period between ) The terms of office of the members and auditors of the Board of Directors for the year 2013 are given in the table on page 4. The financial statements which show the operational results obtained by Alarko Carrier Sanayi ve Ticaret A.Ş. in 2013 were audited independently by Denge Bağımsız Denetim Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of MAZARS). 3) The Board has convened 14 times in the year mostly by way of correspondence as the foreign Board members reside abroad. All members have attended to the meetings held during the period. Decisions of the Board of Directors were taken unanimously. Therefore, there is no record of dissenting votes. 4) The company s registered capital ceiling in 2013 was TL ) The issued capital of our Company is TL Profit before tax of the Company for the period 2013 is TL ) Rate of attendance to the Ordinary General Assembly Meeting of our Company held on was 85,78%. Our shareholders holding more than 10% of the Company s capital are Alarko Holding A.Ş. (42,028984%) and Carrier HVACR Investments B.V. (42,028984%). In the 2013 account period there has been no difference in capital and shareholdership structure. In the last three years of activity a cash dividend of 21 % was paid in 2010, a cash dividend of 74,92% was paid in 2011 and a cash dividend of 58% was paid in The proposal for the distribution of the profits for 2013 presented to the General Assembly by the Board of Directors for approval is attached on page 22. The value of our Company s share certificate of TL 1 nominal value quoted at the İstanbul Stock Exchange (Borsa İstanbul) is TL 30,20 as of the issuing date of this report. 7) Our company has made no donations as of ) Our Company has no affiliates as of ) Information on the guarantees, pledges and mortgages lodged by our company in favor of third parties as of is given in footnote 14 of the financial statements. 10) There are no important lawsuits brought against the Company which could impinge on its financial situation or activities as of ) Shareholders who control the management, members of the Board of Directors, top executives and their spouses and blood and in-law relatives up to and including second kin have not executed any transaction which may lead to conflict of interest with the Company or its affiliates. Members of the Board have no transactions of their own or on behalf of others that could be within the scope of the noncompetition covenant. 12) There were no related party transactions or transaction of importance to be presented to the approval of the independent members of the Board in

13 GENERAL INFORMATION REGARDING OUR ACTIVITIES Our company whose main areas of activity are heating, ventilating, air conditioning and pumps, manufactures, markets and gives after-sales services for products within these areas. Sales of air handling units and roof-top air conditioners manufactured using the technology and brand name of Carrier both in the domestic and international markets was maintained in Especially the roof-top air conditioners whose sole manufacturer in the EMEA region is Carrier have a serious growth potential. The VAV (Variable Air Volume) fan option of the new generation roof-top air conditioning unit 48/50 UA/UH series offered to the market in 2012 will be on the market in January The project to increase the capacity of the existing apparatus conducted with the collaboration of Carrier EMEA and Alarko Carrier Engineering Department will be completed in two stages in 2014 and the new models will be offered to the market. A serious increase is foreseen in both domestic and export sales with the introduction of two models of 135 and 155 kw in April 2014 and 170 and 200 kw models in December 2014 to the product range. The existing 39HQ series air handling units are preferred in prestigious projects both at home and abroad. Procedures to produce air handling units for the middle segment so as to keep pace with increasing competition have been completed. Production of the middle segment 39SQ air handling units at the Alarko Carrier Gebze plant will begin as of January A more competitive version of the 39SQ series to be developed by the Alarko Carrier Engineering Department through 2014 is planned to be offered to the market at the end of Sales of air handling units aimed at the Middle East market began in 2011, continued and grew progressively due to prestigious projects obtained in this region. Training, visits and marketing activities conducted in cooperation with the Carrier offices in Qatar, Saudi Arabia, the United Arab Emirates and Kuwait will have serious positive effects on sales in future years. Thanks to the correct price-quality matching, we were able to maintain our leadership in the market in 2013 with Carrier brand fan-coils imported from Italy and Alarko brand fan-coils imported from China. We foresee an increase in our market share by using the products with high added value in our product range containing energy efficient fans in projects and work to be conducted on stock management. In 2013, Carrier maintained its leadership in the water-cooled chiller sector with its high efficiency equipment. A serious growth is being observed in the market especially in equipment with centrifugal compressors. In parallel with this development in the market our sales organization showed a performance beyond expectations by being proactive. The market will continue to grow in 2014 especially with Public-Private Partnership Hospital projects and our leadership in this product will be maintained. We are continuing to develop heating equipment in accordance with feedback from final consumers and market research results. Accordingly, our new Harmony-D model conventional combi boiler will be offered to the market in Our cooperation with Wolf in heating is continuing. In November 2013 we adopted the Wolf CGB 35/50 series to replace the Atag condensing combi boiler intended for the villa market. Moreover, a more ambitious position will be attained in the market with the MGK-2 condensing boiler series to be introduced to the market at the beginning of 2014 and system solutions that attain to 630 kw capacity with a single boiler, and to kw with cascade boilers. 11

14 While cooperation with Wolf is ongoing, R&D work on Alarko condensing combi boilers and wallhang boilers is also continuing. As a result, our standing in two different segments as a foreign and domestic brand in the developing condensing boiler market will be reinforced. Plans are being made to complete work to develop the Alarko wall-hang condensing boilers in the last quarter of 2014 and to offer the market the new condensing boiler that we have began to develop in two different base segments in cooperation with Radiant to replace the Seradens model in Our efforts with regard to burner development to comply with the BEP (Energy Performance in Buildings) Regulations were maintained in The ALF 12DM-T single stage natural gas fueled burner with damper motor was offered to the market in July ALF 180/M type medium and heavy oil burners will be offered to the market in the first quarter of Moreover, gradually in 2014, all our gas fueled modulated burners will be converted from pneumatic modulation to electronic modulation type which is easier to adjust, more modern and at the same time more economic. Air separators and sediment collectors, accessories of large capacity condensing boilers, were procured from outside markets and offered to the market in July We are continuing to procure and sell steel and cast iron boilers, floor type cast iron condensing boilers, boilers, radiator valves, expansion tanks, and towel radiators as supplementary apparatus for heating systems from domestic manufacturers under the Alarko brand and sales of Techem brand heat meters and heat cost allocation equipment and giving reading service by Alarko. The prototypes and tests of our frequency inverter circulation pumps with high energy efficiency which will be the first domestic produced fourth pursuant to the memorandum regarding circulation pumps published by the Ministry of Science, Industry and Technology have been completed. We are planning to go into mass production and present them to the market in the first quarter of An effective competition is being targeted in this segment. A comprehensive and detailed training program has been prepared for the Authorized Dealers and Services as well as the assembly workers and plumbers dealing with our new circulation pumps. Mini circulation pumps with the appropriate frequency inverters matching the memorandum for condensing boilers have been imported and offered to the market. This product range will be extended in Within the scope of the efficiency improvement project in submersible pumps the development of our 6060 was completed and offered to the market in the fourth quarter of 2013 and the equivalent low efficiency 6055 models with cast iron and bronze fans have been taken out of our product range. Revision of our other models will continue in Our Agricultural Loan Forms which will enable us to sell our submersible pumps as agricultural equipment on long-term loans with no interest have been renewed and sales contracts were signed with Agriculture Credit Cooperatives. An agreement has been signed with a domestic submersible pump motor manufacturing firm to enable us to offer a more competitive price to our distribution channel and production of an economic motor as an alternative to ours has begun. A competitive price has been attained with economic series motors to be used especially in conjunction with complete rustproof submersible pumps. With this product, we are targeting an increase in our submersible pump market share in Development work for our ALDF water booster with frequency inverter was started and applied on the inverter and body. Development work will continue in Our water pressurization selection program will be revised in connection with revisions made in 2013 and new products. Moreover, just like in 2013, we will continue to display our water pressurization systems for exports at fairs abroad, either directly or indirectly in

15 We will continue to be the technology leader in the individual and light commercial air conditioning market with environment friendly, high energy efficiency and best price/quality ratio products. The energy efficiency criteria, energy rating and performance of air conditioners up to 12 kw were redefined as of in accordance with the requirements of the environment friendly designs communiqué published in the Official Gazette in July 2013 and the inverter technology that we have been using for years has become obligatory in this market. Since the products we are selling are high energy efficiency products in accordance with our policy, our strategy and sales have been positively affected by this regulation that will enable us to attain an even stronger position in the market in As the minimum energy efficiency criteria brought by the new regulations will lead to an increase in prices, shrinkage in the number of split air conditioner sales is foreseen for However, as this shrinkage will occur in the air conditioners without inverters, we will continue to grow in the market of high energy efficiency products and products with inverters. We have a choice of 3 different systems in the Toshiba variable refrigerant flow (VRF) systems. The Toshiba VRF systems that have the highest efficiency rates in the market in part load have been even further improved with the higher efficiency and capacity new models SHRM-I that can heat and cool at the same time offered to the market in We will continue to satisfy all the project requirements of our business partners and all technology, energy saving and initial investment cost conscious users. We maintain our technology leadership in VRF systems. The SAP project initiated to increase efficiency by combining sales and after sales work processes under a single joint software, measure performance and eliminate activities that do not generate added value was also applied to new sections integrated to the organization. Integration with the Service Portal and ALVIMA intra-company software will be applied in The purchasing, engineering, export, human resources, finance and all the production units at the Gebze and Dudullu plants attained the Silver Level and were certified following the ACE (Achieving Competitive Excellence) inspection conducted in November Hence, the position and quality of Alarko Carrier among all other Carrier plants has been certified with the production and related units rising from Bronze level to Silver Level, thus, opening the way for new products to be manufactured at our plants. Production Activities Main Production Plant Our main Production Plant is a modern complex situated in the Gebze Industrial Zone and extends over an area of m² consisting of a closed area of m² for production, m² for offices, m² for the testing and Research and Development building, and social and training facilities. Air handling units, roof-top air handling units, heating and cooling batteries in the area of central air conditioning, gas fired conventional and condensing combi boilers, light and heavy oil and gas burners in the area of heating, and submersible pumps and motors, circulation pumps, water boosters in the area of water pressurizing are manufactured at this plant. The ACE (Achieving Competitive Excellence) project, which is used in all the regions of UTC to which Carrier is associated, is being implemented at our production plant. Our Testing and Research and Development Departments cooperate regularly with universities and TUBITAK (Turkish Institute for Scientific and Technical Research) to develop and improve products. Important improvements are also constantly made in our products with technology transfer from Carrier. 13

16 Radiator Production Plant Our panel radiator production plant is situated at the Istanbul Dudullu Organized Industrial Zone. The plant was modernized and its capacity was doubled by an expansion completed in The plant extending over a closed area of m² manufactures Alarko brand radiators for the domestic market and Carrier brand as well as various OEM brand radiators for exports. Trade And Marketing Activities Our company has an extensive and strong distribution and service network in Turkey. We have offices in İstanbul, Ankara, İzmir, Adana and Antalya. We also have 263 dealers and 243 aftersales service units over the country. Both our dealers and our service network have earned themselves a special place in the sector with their showrooms and well-trained personnel. Taking into consideration the market trends, we include imported products in addition to products manufactured at our plants to our product range. Our company gives customer focused service, offers product variety to our dealers and complete solutions to our clients. A separate distribution channel has been created for Toshiba air conditioners and solution partnership models for VRF are continuing. In addition to products manufactured at our own plants, our sales range includes supplementary products such as cooling groups, automatic control equipment, fan-coils, cooling towers, duct equipment, filters, cold room equipment, air conditioners for operating theaters, humidifiers, aspirators, fire dampers, garage ventilation fans, radiator valves, thermostatic valves, and heat cost allocation equipment procured by companies we cooperate with. On the other hand, building automation systems converting complex buildings such as large business centres, hotels, hospitals into intelligent buildings give us a serious competitive advantage over our competitors. Operating theatre air conditioners for hospitals and special solutions for telecommunications are also within our expertise area. In addition to central system boiler and burner solutions in heating, we offer combi radiator packages in individual heating thus offering a variety of choice for every customer profile. In the area of individual air conditioners, we offer our customers high quality and technology with Toshiba and Carrier products in the inverter category whose importance in the sector is growing rapidly. On the other hand, our Totaline spare parts markets have been offering spare parts and technical service equipment for heating, air-conditioning and pressurizing products to the whole sector since With headquarters in İstanbul, Totaline has 5 markets in İstanbul İkitelli, Ankara, İzmir and Antalya and an authorized dealer in Ankara and sales corners in İstanbul, Bursa, Antalya, Mersin and Urfa. Moreover, service being given within the scope of the Service Agreements for the heating and cooling equipments and systems in large facilities is developing rapidly. A new area we are working on is energy efficiency applications. Our company is one of the first in our sector to have obtained the authorization to supervise and give training in this area. We are cooperating with Alarko Carrier ACademi in training in our modern training centres and through the internet. Training includes technical subjects as well as subjects related to personal development. Alarko Carrier ACademi will continue to give training to our dealers and the engineers within our companies. The curriculum for the 1st grade in Air Conditioning Engineering Training has been prepared. Orientation training to new personnel is being given over the ACademi Platform in collaboration with HR. 14

17 Training of the dealers, sales points and service employees is conducted according to a curriculum entitled Basic and Periodic Training within a single framework under the coordination of the Training Unit. Basic Training in Cooling given to the services is partly complete and Basic Training in Heating is being prepared. Service delegation to service employees who have participated will be conducted in collaboration with the After Sales Unit with a test that will be given at the end of the Basic Training. The Periodical Product Overview training programs of the dealers and sales points is put together with the collaboration of the Product Management and the Training Unit and includes active sales arguments. These sales arguments will be endorsed by the participant thanks to sample cases illustrating how these sales arguments are used. Training given will support dealers and sales point employees in adopting Common Sales Policies. Video films on issues such as problem shooting and solving, parameter adjustment, starting operations, etc. to be used in the training of service employees who have not participated in the formal training or whenever deemed necessary are being prepared. Our company has executed numerous highly prestigious projects in the areas of heating, airconditioning, hygenic climatisation and building automation in 2013 just as it did in previous years. Research And Development Activities The ACE (Achieving Competitive Excellence) quality management system, implemented in all the areas of UTC of which Carrier is a subsidiary, is being implemented in our manufacturing plants. We are conducting joint efforts with universities and TUBITAK and our Test and R & D facilities to continuously improve and develop products. Moreover, important developments are being provided in our products with technology transfer from Carrier. The R & D Center application we made to benefit from the incentives and exemptions ensured within the scope of the Law Nr Regarding Supporting Activities of Research and Development which is published in the Official Gazette dated 12 March 2008 was examined by the Evaluation and Inspection Commission constituted within the scope of article 14 of the Implementation and Inspection Legislation Regarding Supporting Research and Development Activities with regard to this Law published in the Official Gazette Nr dated The Commission approved our application at its meeting of and gave our company the R & D Center Certificate. Information Regarding Social Responsibility Activities Our Company is ISO and OHSAS certified. These certificates proves that we have reached targets beyond the legal responsibilities in environmental management and occupational health and safety. The said certificates are renewed after regular reviews. No warnings or lawsuits were brought against the company for damage to the environment during this term or in previous years. Our Company was awarded with the Environment Prize by the Kocaeli Chamber of Industry as a result of a competition held in On the other hand, in 2005, we also obtained the SA 8000 Social Accountability Certificate for which only very few companies in the world are eligible. 15

18 In 2010, we obtained the BS EN Energy Management Systems standards certificate that determines the systems and procedures needed for an efficient energy management to reduce our energy cost and greenhouse emissions. Risk Management and Internal Control Mechanism The Board organized a risk management and internal control mechanism. All risks likely to be encountered are periodically reviewed by the Auditing Committee and Early Detection of Risk Committee consisting of the company s Board members. The Early Detection of Risk Committee took the decision to set up and develop an interior control mechanism and keep it up to date. Pursuant to this decision, the Auditing Group has been appointed to oversee the setting up of the internal control mechanism and supervise its operability. The Auditing Group supervises the internal control mechanism at predetermined periods in accordance with the approved annual plans and reports its views on matters determined to top management. Furthermore, the Auditing Committee and Early Detection of Risk Committee review related matters and advise the Board accordingly. The Auditing Committee and the Board determine the measures to be taken and instruction the managers of the company by way of the General Manager. An Early Detection of Risk Committee consisting of three members has been established to determine risks likely to be encountered and to make recommendations to the Board in order to set up an effective risk management system and their operation principles have been approved by the Board. The Early Detection of Risk Committee convened 6 times in 2013 and the report of meeting minutes was presented to the Board. ADDITIONAL INFORMATION REGARDING OUR ACTIVITIES 1) As there is no practice by the Company and the members of the Board of Directors against to the applicable laws and regulations, there is neither any administrative nor judicial litigation against the Company and the members of the Board of Directors. 2) No extraordinary general assembly was held during the year. 3) There have been no important legislation changes that could affect the company s activities within the term. 4) No case that could affect the rights of shareholders, creditors and other related persons and institutions has occurred as of the issuing date of this report. 5) Our Company does not possess any own share. 6) Objectives determined in previous terms have been attained and Board decisions have been carried out. 7) Internal audit was conducted 10 times and independent audit was conducted twice within the term and no adverse case was determined. Public auditing has been conducted whereas special auditing was not conducted in the year Public auditing is ongoing as of the report date. 8) Our company is not dominated directly or indirectly by a corporation. Therefore, it is not subject to the regulations of group of companies. 9) 7 special case announcements were made during the year. No additional explanation was requested. 10) As a result of developments in technology a modernization investment of TL was made in 2013 in the equipment used and the production lines of the existing plants in order to renew the machinery and equipment that have completed their technical or economic lives and maximize the quality and efficiency of our products and services. 16

19 PECUNIARY RIGHTS GIVEN TO BOARD MEMBERS AND TOP EXECUTIVES No pecuniary benefits such as honorariums, fees, premiums, bonuses are given to members of the Board of Directors except the independent members of the Board of Directors. The gross total of pecuniary benefits given to Independent Board members and top executives was TL (Gross) in There are no allowances, travel, accommodation and representation expenses and real and financial means, insurances and any similar collaterals given to the Members of the Board of Directors. INFORMATION RELATED TO EMPLOYEES Taking into consideration the economic balances of our country, we have tried to create a realistic balance between employees and employers and, within our possibilities, to bring solutions that will not weigh heavy upon our employees. A total of 599 people consisting of 371 white collar and 228 blue collar employees have worked in our Company during the period There were no disputes or labour movements during the period. The collective labor agreement between our company and Türk Metal Sendikası (Turkish Metal Union) and MESS (Turkish Employers Association of Metal Industries) and comprising the period between signed in Our Company s liability for severance pay for the financial period is TL and provision has been set aside for the whole sum. All employees are treated equally in term of training and promotion and training plans and strategies effectuated to develop their knowledge, skill and experience. Employees are given training regularly every year. Job descriptions are given to all employees. Performance and rewarding criteria are determined every year and executed following agreement with the employees. The necessary measuring and evaluation process is being done using the performance evaluation system and the results are taken into consideration during salary and career planning CHANGES MADE IN THE ARTICLES OF ASSOCIATION WITHIN THE TERM At the Board meeting dated the desicion was made unanimously to make amendments to articles (3), (6), (12), (13), (14), (19), (22), (23), (24), (27), (29), (30), (32), (33), (35), (37) and cancel articles (20), (21) and (38) of the Company s Articles of Association and include article (41) with heading Compliance with Corporate Governance Principles to the Articles of Association. The new and old versions of the said article have been announced under Investor Relations of our web-site. COMPANY S CAPITAL AND PARTNERSHIP STRUCTURE Share Amount Number of Shares Shareholders (TL) and Votes Share (%) Alarko Holding A.Ş , ,029 Carrier HVACR Investments B.V , ,029 Other (Free Float) , ,942 Total , ,00 There were no changes in the capital and partnership structure within in the financial term of

20 PROFIT DISTRIBUTION POLICY Our company distributes profits in accordance with Capital Markets Board Regulations, the Turkish Commercial Code, Tax Legislation and other applicable regulations as well as the articles concerning profit distribution in our company s Articles of Association taking into consideration the company s new investments and the liquidity status. Our Company s profit distribution policy figures in the attached Report on Compliance with Corporate Governance Principles and is announced to the public in the Company s web-site. The Company has no shares bearing divident concession. Profit distribution is carried out within the period set forth in applicable laws. In 2014 and the following years, decisions regarding profit distribution will be taken considering new investment and the liquidity level. Our Company distributed TL (Gross) profit in PRIMARY RATIOS According to our Company s 2013, our gross profit ratio is 24,67%.The ratio of the period s profit to the turnover is 9,31%, the ratio of the operating profit to the turnover is 11,35%. The current ratio as of 31 December 2013 was 5,85, the liquidity ratio was 4,36, the cash ratio was 2,02, and the financial leverage ratio 0,19. According to our Company s 2012, our gross profit ratio is 22,85%. The ratio of the period s profit to the turnover is 7,31%, the ratio of the operating profit to the turnover is 8,99%. The current ratio as of 31 December 2012 was 5,91, the liquidty ratio was 4,5, the cash ratio was 2,06 and the financial leverage ratio 0,18. Analysis of the basic ratios regarding the operating term of 2013 shows that our Company s net working capital is adequate, that it can pay all its short term liabilities in cash or with economic assets that can be turned to cash in a short period and that its operating activities are financed with its equities. The equity of the Company is TL and is of a level that can meet the company s depts. The Company s financial structure is adequate to pursue its activities, hence there are no measure considered in this respect. 18

21 INFORMATION REGARDING PRODUCTION AND SALES QUANTITIES Production figures of the last two years. Air Handling (Unit) C.U.R. (%) Steel Panel Radiator (Unit) C.U.R. (%) Water Booster (Unit) C.U.R. (%) Domestic Boilers (Unit) C.U.R. (%) Burner (Unit) C.U.R. (%) Circulator (Unit) C.U.R. (%) Submersible Pump (Unit) C.U.R. (%) Roof-top Units (Unit) C.U.R. (%) C.U.R. - Capacity Usage Rate Sales figures of the last two years. Air Handling (Unit) Fan Coil (Unit) Chiller (Unit) Unit Heaters (Unit) Domestic Boilers (Unit) Burner (Unit) Circulator (Unit) Submersible Pump (Unit) Split Air Conditioner (Unit) Steel Panel Radiator (Unit) Water Booster (Unit) Roof-top Units (Unit)

22 FINANCIAL HIGHLIGHTS (Thousand TL) Sales Net Profit Equity Total Asset Divident 2.268* 8.091* 6.264* * Market Capital Average Return on Equity 4% 20% 10% 11% Issued Capital (Thousand TL) * Amount of gross dividends. TREND OF SALES REVENUES (Thousand TL)

23 TREND OF NET PROFITS (Thousand TL) PRICE / EARNINGS RATIO 25,0 20,0 20,5 15,0 15,8 10,0 8,1 5,0 6,

24 PROPOSAL FOR PROFIT DISTRIBUTION Pursuant to the Capital Market Legislation, Company s Article of Association and other applicable laws, TL is the net profit for the period after setting aside TL for taxes from representing the profit before tax as in the financial statements for the year 2013 presented to the approval of the General Assembly. We propose; As no donation was made in 2013, to distribute TL (Gross) that corresponds to 29,02% of TL the net distributable profit for the period, to shareholders as dividend in cash, Not to set aside first order general legal reserves as the first order general legal reserves set aside in previous years has reached the legal ceiling, Setting aside TL out of the profit to be distributed as second order general legal reserve, Deducting the necessary amount out of the dividend subject to income tax, Transferring the remaining sum to extraordinary reserves, To start profit distribution on 30 May Board of Directors According to this and in accordance with the Capital Market Code, the Articles of the Association and other relevant laws, profit distribution is as follows; Profit before Tax TL Provision for Taxes First Order General Legal Reserves (Has reached the ceiling) TL Net Distributable Profit for the Period Net Distributable Profit for the Period Including Donations Dividends to Shareholders (Gross) TL TL TL Second Order General Legal Reserves TL Balance to be Transferred to Extraordinary Reserves Ratio of Dividends to Total Issued Capital TL ,60% Ratio of Dividends to Distributable Profit for the Period Including Donations 29,02% 22

25 REPORT ON COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES 23

26 REPORT ON COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES 1. Statement Of Compliance With Corporate Governance Principles Our Company has shown the necessary rigor for the application of the Corporate Governance Principles published by the Capital Markets Board. All the principles held compulsory in the Corporate Governance Communiqué have been applied by our Company. Many of the Corporate Governance Principles that are not compulsory have been applied, those not applicable have been explained. Explanations regarding the subject are given in their relevant sections. The Corporate Governance Committee is continuing its work. PART I SHAREHOLDERS 2. Unit in Charge of Relations with Shareholders The manager of the Unit in Charge of Relations with Shareholders is Ömer Çelik, Deputy Senior Vice President of Financing. For communications: Phone : Pbx Fax : address : omer.celik@alarko.com.tr During the term, the General Assembly of the Company was held, documents to be referred by the shareholders at the meeting were prepared and outcomes of the meeting were informed to the Istanbul Stock Exchange (BİST) and Capital Markets Board for publishing. Questions of 60 investors were answered during the year. 3. Exercise of Right to Obtain Information by the Shareholders Our Company is very particular about every shareholder s right to information. All information and disclosures that can affect access to shareholder s rights are updated and presented to shareholders under Investor Relations in our company s web-site. Questions of the shareholders commonly relate to investments, turnover, capital increase and dividend payments of the Company. Some 60 questions were asked within the year. Questions and answers given were communicated to the Board of Directors. The Company s Articles of Association contain no provision regarding appointment of an independent auditor. No request was made during the year for appointment of an independent auditor. 4. General Assembly Meetings The annual Ordinary General Assembly meeting of the company was held with a quorum of 85,78%. The meeting was attended by representatives of the media. 24

27 In addition to the methods dictated by the legislation, announcement of the Ordinary General Meeting is made at least 3 weeks prior to the meeting using all means of communications including electronic communications so as to ensure notifying as many shareholders as possible. Invitation to the meeting was made at the the Public Disclosure Platform (KAP), the web-site of the Company, the Turkish Trade Registry Gazette, and a newspaper with national circulation. The media, stakeholders and the top and middle level executives 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. The annual report, auditors report, financial statements, and due to the change of the articles of association in the agenda, the new and old versions of the Articles of Association together with the Board s decision, the meeting agenda and profit distribution proposal by the Board of Directors are presented to shareholders at the company s headquarters prior to the general assembly meeting. Moreover, this information can be found in the Investor Relations link of our Company s web-site. The profit distribution proposal is disclosed to the public on the Public Disclosure Platform (KAP) before the General Assembly. At the general assembly meetings, the shareholders exercise their right to ask questions and such questions are duly answered. No proposal was made other than by the major shareholders. The minutes of the Ordinary General Assembly are open to all shareholders at the company headquarters. Moreover, the minutes of the General Assembly and the List of Participants are disclosed to the public on the Public Disclosure Platform (KAP) and in the Investor Relations link in our company s web-site after the meeting. Our company has made no donations during the term. In case of making a donation, shareholders are informed about the donations made and aid given as a seperate agenda item in the general assembly. 5. Voting Rights and Minority Rights Voting rights bear no concession. Minority shares are not represented at the management. No cumulative voting is applicable. There are no participation or affiliate companies that have mutual participation relations with our company. 6. Profit Share Rights Our company has a profit distribution policy. This policy figures in our company s annual report, the report of compliance with Corporate Governance Principles and is announced to the public in the Company s web-site. Our Company s profit distribution policy is: Profit distribution is done within the framework of the Capital Markets Legislation, the Turkish Commercial Code, the Tax Legislation and other relevant legislations and the relevant article of our Articles of Association taking into consideration the company s new investments and liquidity situation. The amount of profit available for distribution will be determined taking into account the new investments to be made and liquidity status in 2014 and the following years. 25