FORD OTOMOTİV SANAYİ A.Ş.

ATTACHMENT OF BOARD OF DIRECTORS' RESOLUTION 2020 / 08

FORD OTOMOTİV SANAYİ A.Ş.

REPORT ON ASSOCIATED PARTY TRANSACTIONS WHICH

WERE PERFORMED IN 2019 AND PROJECTED

TO BE PERFORMED IN 2020

General Information

This report is created as per Article 10 of Communiqué Vol: II. 17.1 (Communiqué). Article 10

of Communiqué Vol: II. 17.1 requires that, the Board of Directors of the Company should create a report which includes the total amount of continuous transactions between the company quoted on Borsa Istanbul and the affiliated parties, in which

  1. the rate of purchases to cost of sales based on the final annual financial statements in purchasing transactions,
  2. the rate of sales to revenues based on the final annual financial statements in sales transactions

exceeds 10% and this report including the market comparisons for such transactions should be announced via KAP.

The purpose of this report is to disclose the terms of projected transactions in 2020 between Ford Otomotiv Sanayi A.Ş. (Company) and the associated parties as defined by Turkish Accounting Standards Article 24 (TAS 24) within the scope of CMB regulations to the extent that they are not commercial secrets and show that any such transaction does not have a negative effect on the Company as compared to the market conditions.

Detailed information is provided on transactions between Ford Otomotiv Sanayi A.Ş. (Company) and the associated parties in 2019 in footnote 26 of publicly‐disclosed financial tables for 2019 activities and this report only evaluates vehicle, production part, spare part, licence and service purchases from and sales to Ford Motor Company and vehicle and spare part sales to Otokoç Otomotiv Ticaret ve Sanayi A.Ş. which exceed 10% as compared to market conditions.

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It is estimated that the transactions of same qualifications will exceed the 10% limit as specified by the Communiqué in 2020 and the transactions will be performed based on the principles explained in this report.

Information on Ford Otomotiv Sanayi A.Ş.

Ford Otomotiv Sanayi A.Ş. is incorporated and domiciled in Turkey and manufactures, assembles and sells motor vehicles, primarily commercial vehicles, imports and sells passenger cars and manufactures, imports and sells spare parts of those vehicles.

The Company was established in 1959 and currently operates as a joint venture within the scope of the agreement signed in 1997 between Ford Group and the Koç Group of Companies. Ford Otomotiv Sanayi A.Ş. is listed on the Borsa Istanbul ("BIST") where 17.89% of its shares are currently quoted.

The capital of the company is 350,910,000 TL and the table on the shareholding structure is as follows.

Shareholding Structure

Share Group

Amount of

Percentage

Vote

Percentage

Share (TL)

of Share (%)

of Vote (%)

Koç Holding A.Ş.

B

134,953,357

38.46%

13,495,335,714

38.46%

Temel Ticaret ve Yatırım A.Ş.

B

2,355,885

0.67%

235,588,500

0.67%

Vehbi Koç Foundation

A

3,558,449

1.01%

355,844,870

1.01%

Koç Holding Pension and

A

3,259,202

0.93%

325,920,232

0.93%

Assistance Foundation

Ford Deutschland Holding

C

143,997,037

41.04%

14,399,703,676

41.04%

GmbH

Publicly Held

A

62,786,070

17.89%

6,278,607,009

17.89%

Total

350,910,000

100.00%

35,091,000,000

100.00%

Our company's financial summary data for 2017, 2018 and 2019 are listed below (thousands of TL).

31.12.2017

31.12.2018

31.12.2019

Total Assets

12,011,740

13,184,440

16,406,372

Equity

3,695,859

3,893,239

4,664,921

01.01.2017-31.12.2017

01.01.2018-31.12.2018

01.01.2019-31.12.2019

Revenue

25,341,290

33,292,030

39,209,019

Cost of Sales

22,704,095

29,833,459

35,193,802

Net Income

1,489,983

1,683,196

1,959,484

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Information on Ford Motor Company

Established in 1903 by Henry Ford, Ford Motor Company is one of the undisputed leaders and best-selling brands of the global automotive sector based in Dearborn, Michigan. The company manufactures and distributes automobiles across six continents and employs approximately 190,000 personnel in 66 centers worldwide. Ford Deutschland Holding GmbH, a subsidiary of Ford Motor Company, holds 41.04 % of shares of Ford Otomotiv Sanayi A.Ş. as explained on shareholding structure table.

Ford Motor Company's operations are mainly divided into two segments Automotive and Financial Services. Automotive operations are based on Ford America, Ford of Europe, Ford Asia - Pacific, Ford Middle East and Africa sub units. In addition the company provides vehicle financing insurance and leasing services through the Ford Motor Credit Company.

The company's automotive brands are Ford and Lincoln, and operating with about 11 thousand dealers all over the world. The company has sold about 5,4 million vehicles worldwide in 2019 and achieved a turnover of 156 billion USD. The Company generated a total of 5,3 USD billion pre-tax profit as a result of operations in 2019.

The company's shares are traded in the United States New York Stock Exchange.

Information on Otokoç Otomotiv Ticaret ve Sanayi A.Ş.

Otokoç, the first automotive industry investment of Koç Holding, was founded by Vehbi Koç in 1928.

The company operates in retail, fleet and 2nd hand sales and also provides maintenance services, short‐ and long‐term vehicle leasing services with 5 different brands as Avis, Budget, Otokoç, Birmot and Zipcar in 9 countries with approximately 2,170 employees.

Otokoç Otomotiv Ticaret ve Sanayi A.Ş. is the authorized dealer and service of the Company and purchases vehicles and spare parts from the company within the scope of a dealership agreement.

Otokoç Otomotiv Ticaret ve Sanayi A.Ş. is not publicly traded.

Information on Terms of the Transactions with Associated Parties and Comparisons with Market Conditions

Our companies' purchases exceeding 10% from 01.01.2019 to 31.12.2019 is from Ford Motor Company and sales exceeding 10% is to Ford Motor Company and Otokoç Otomotiv Ticaret ve Sanayi A.Ş. The table listing the sales/purchases is as follows:

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Information on Transactions Exceeding 10%

Associated Party

Amount of

Pricing/Profit

Transaction

Type of Transaction

(Name/Title)

(TL)

Distribution Method

Ford Motor Company

1,008,402,913

Vehicle Purchase

Net Profit Margin based on

Processing

Ford Motor Company

156,444,121

Spare Part Purchase

Net Profit Margin based on

Processing

Ford Motor Company

14,298,156,307

Purchase of Manufacturing

Net Profit Margin based on

Materials

Processing

Ford Motor Company

128,718,574

Service Purchase

Cost Plus Method

Ford Motor Company

111,769,847

License

Comparable Price Method

Total Purchases

15,703,491,763

Ford Motor Company

30,469,253,742

Vehicle Sales

Cost Plus Method

Ford Motor Company

169,326,971

Spare Part Sales

Cost Plus Method

Ford Motor Company

1,510,035,872

Sale of Manufacturing Materials

Cost Plus Method

Ford Motor Company

255,012,928

Service Sales

Cost Plus Method

Ford Motor Company

14,940,266

License

Comparable Price Method

Total Sales

32,418,569,780

Otokoç

1,408,412,354

Vehicle Sales

Comparable Price Method

Oto.Tic.San.A.Ş.

Otokoç

216,877,401

Spare Part Sales

Comparable Price Method

Oto.Tic.San.A.Ş.

Total Purchases

1,625,289,755

Transactions with Ford Motor Company

In 2019 our company purchased vehicles, spare parts, materials used directly for manufacturing and services at a total amount of 15,703,491,763 TL and made a net sales of 32,418,569,780 TL to Ford Motor Company.

The Company's manufacturing cooperation with the associated party is based on the "2003 Turkish Distributor Agreement" dated 30 June 2003. According to this agreement, our company is the sole distributor of Ford brand vehicles in Turkey.

In 2019 our company has made the purchase of vehicles in the following units:

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2019 VEHICLE IMPORTS

MODEL

# OF UNITS

Focus

6.506

Kuga

3.060

Ecosport

852

Fiesta

578

Ranger

549

Mondeo

180

Connect

147

Edge

27

C-Max

2

Galaxy

1

TOTAL

11.902

Our company's production material purchases from Ford Motor Co. are based on "The V36x Contract Manufacturing and Supply Agreement" dated 14 August 2008 and "The B460 Development, Manufacturing and Supply Agreement" dated 1 December 2011.

Our company's purchase of spare parts from Ford Motor Co. are based on "Agreement for the Supply of Service Parts" dated 14 July 2014.

Our Company is paying license fee to Ford Motor Company for the net sales of light and medium commercial vehicles ( Transit Custom, Transit Courier and Transit Series ) produced and distributed in Turkish market based on "1997 Technology And Manufacturing License Agreement" dated 1 January 1998 and "The B460 Development, Manufacturing and Supply Agreement" dated 1 December 2011.

Our company's vehicle sales to Ford Motor Company includes Transit, Transit Custom and Transit Courier models.

Our Company's Transit model sales are based on "The V36x Contract Manufacturing and Supply Agreement" dated 14 August 2008.

In 2019, our company has sold 116,780 Transit vehicles to Ford Motor Company.

Our Company's Transit Custom sales are based on "The V36x Contract Manufacturing and Supply Agreement" dated 14 August 2008.

In 2019 175,973 Transit Custom vehicles has been sold to Ford Motor Company.

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Our Company's Transit Courier sales are based on "The B460 Development, Manufacturing and Supply Agreement" dated 1 December 2011.

38,921 Transit Courier vehicles has been sold to Ford Motor Company in 2019.

Our company is selling Transit vehicle manufacturing materials to Ford North America locations based on "V363N Program Component Supply Agreement" dated 10 December 2012. Also Cargo truck manufacturing materials to Ford Brazil are sold based on "H534 Program Component Supply Agreement" dated 3 August 2010 and "The H566 Truck Component Supply Agreement" dated 6 August 2012. "The FMCSA Program Component Supply Agreement" dated 19 June 2018 governs the sales of Puma Engine components and other production parts to Ford South Africa. "Agreement for The Supply of Components" signed with Ford Sollers and dated 15 September 2015 regulates sales of Transit and Transit Custom production parts to Ford Sollers for the purpose of manufacturing Ford branded vehicles in Russia.

Our company's spare part sales to Ford Motor Company are based on the "Agreement for the Supply of Service Parts" dated 14 July 2014.

Our company's service sales to Ford Motor Company consists mainly of engineering services. Research and development operations which are also subject to service export is conducted with 1,058 employees in Sancaktepe R&D center, with 222 employees in R&D center in Kocaeli plant and with 109 employees in R&D center in İnönü plant, totally 1,389 employees as of 31 December 2019.

These sales are based on "Engineering Services Agreement" dated on 8 April 2013.

Engineering services sales to Jiangling Motors Corporation Ltd. (JMC) is based on "Engineering Services and Technical Assistance Contract for JMCH Stage 6 Ecotorq Project" dated 31 October 2018 and "Engineering Services and Technical Assistance Contract for JMC Branded JH476 Stage 6 Heavy Truck Project" dated 31 October 2018 and 11 November 2019.

Purchase of IT services from Ford Motor Company is based on "IT Services Agreement" dated 17 July 2017. Engineering services are purchased according to related program agreements.

Based on "V348 Transit Vehicles Series Technology Licensing Contract" signed with Jiangling Motors Corporation Ltd. (JMC) and dated 2 July 2008, licence fee is paid to our company over the net sales revenue of Transit model vehicles produced and sold in China with the technology support provided by Ford Otomotiv Sanayi A.Ş.

In addition, license revenue is obtained from the engine that JMC produces and uses in JH476 Roller Skate product based on "Ecotorq Engine Technology Licensing Contract" dated 22 April 2013 and from the chassis that JMC produces based on "Technology Licensing Contract For JMC Branded JH476 Heavy Truck Program"dated 25 July 2014.

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Our company sells heavy commercial vehicle and engine production parts to the People's Republic of China with the "Agreement of Ecotorq Program Product Supply Agreement" and "JH476 Heavy Truck Program Product Supply Agreement" dated 30 March 2017 signed with Jiangling Motors Corporation Ltd (JMC). Sales of Transit production parts to JMC is based on "Product Supply Agreement for Ford Otosan's Sales of V362C Components" and "Framework Agreement for the Supply of Components" dated 25 June 2015.

Transactions with Otokoç Otomotiv Ticaret ve Sanayi A.Ş.

Otokoç Otomotiv Ticaret ve Sanayi A.Ş. is the authorized dealer and service of the Company and purchases vehicles and spare parts from the company within the scope of a dealership agreement.

Our company has made total sales of 14,546 vehicles to Otokoç Otomotiv Ticaret ve Sanayi A.Ş. in 2019.

Sales prices are based on the market, inventory level, competitors and general economic conditions and they have exactly the same properties as the ones done with other dealers. Sales are made to Otokoç Otomotiv Ticaret ve Sanayi A.Ş. and other dealers over the recommended list price.

Result

It is estimated that the total amount of continuous transactions with Ford Motor Company and Otokoç Otomotiv Ticaret ve Sanayi A.Ş. in 2019 will be exceeding 10% of the total sales / cost of sales as listed in the publicly‐disclosed annual financial tables for 2020 the limit set forth by Capital Markets Board Communiqué II-17.1 the Corporate Governance, this report explains the terms, pricing methods and reasons for choosing such methods for the transactions with Ford Motor Company and Otokoç Otomotiv Ticaret ve Sanayi A.Ş. and evaluates the compatibility of them as per the market conditions.

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Ford Otomotiv Sanayi AS published this content on 19 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 February 2020 07:27:06 UTC