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2 018 ANNUAL REPORT Table of Contents Zorlu Holding 2018 Annual Report Scan to view Zorlu Holding’s previous annual reports 2 Zorlu Group Overview 86 Textiles 6 Zorlu Group’s Milestones 104 Energy 8 Zorlu Holding 134 Real Estate 8 Zorlu Holding’s Shareholding Structure 148 Mining - Metallurgy 9 Zorlu Holding and Sustainability 156 Other Activities 10 Summary Financial Statements and 160 Human Resources Operational Indicators 172 Mehmet Zorlu Foundation 14 Zorlu Group’s Fields of Operation 178 Audit 28 Growth Strategies of Group Companies 182 Internal Control 30 Message from the Board of Directors 186 Additional Disclosures as per the 38 Board of Directors Legislation 40 CEO’s Assessment 198 Statements of Responsibility 46 Message from the Chairman of the 200 Consolidated Financial Statements Sustainability Committee and Independent Auditor’s Report 50 Senior Management 277 Contact Information 56 Consumer Electronics and Household Appliances 1 Zorlu Holding 2018 Annual Report Zorlu Group’s foundation was laid in 1953 Combining its with the establishment of a textile company in Babadağ, Denizli. Having started its deep-rooted operations as a family business, today Zorlu Group is a major conglomerate with over experience, 60 companies and approximately 30,000 employees. know-how, Zorlu Group, one of Turkey’s leading conglomerates, operates in: qualified and • Textiles, • Consumer Electronics & Household skilled human Appliances, • Energy, resources with • Real Estate, an intuitive • Mining-Metallurgy and • Other (Tourism, Factoring, Aviation) and strong Industries and continues to generate value- added for Turkey’s economy, accounting for management a significant portion of the country’s overall exports. structure, Zorlu Distinguishing themselves in their respective sectors with their capabilities, pioneering breakthroughs, institutional structure and Group is a performance, Zorlu Group companies are recognized for their strength in manufacturing highly reputed and services on a global scale. Combining its deep-rooted experience, know- conglomerate how, qualified and skilled human resources with an intuitive and strong management both in Turkey structure, Zorlu Group is a highly reputed conglomerate in Turkey and across the globe. and across the The Group focuses its activities on creating lasting value for all of its stakeholders and globe. increasing the value of its brand, which represents quality, trust and reputation. 2 Zorlu Holding 2018 Annual Report Zorlu Group’s Fields of Operation & Shareholding Structure Zorlu Family Zorlu Holding Consumer Other Activities Real Estate Electronics and Real Estate Mining - (Tourism, Textiles Energy (Levent 199 and Household (Zorlu Center) Metallurgy* Aviation, other) Appliances Factoring) * Meta Nikel Kobalt Madencilik Sanayi Ticaret AŞ’s shares are owned 50% each by Zorlu Holding AŞ and Vestel Elektronik Sanayi ve Ticaret AŞ. 3 A Success Story Zorlu Holding 2018 Annual Report Zorlu Group’s 1953 1960 Milestones Hacı Mehmet Zorlu lays the foundation The Group begins textile trade by of Zorlu Group by establishing Zorlu opening a store in Trabzon. Mensucat in Babadağ, Denizli. 1984 1976 1966 The company begins its first official Korteks Velvet Weaving Plant is Building on the know-how and export sales with Korteks products. established in Bursa. experience gained in Trabzon, the Group moves to Istanbul and begins contract manufacturing. 1989 1990 1993 Korteks Yarn Factory is established in Korteks Polyester Yarn Factory, Europe’s Zorlu Enerji is founded to meet the Bursa to meet the need for high-quality largest integrated polyester yarn energy and steam demands of Zorlu polyester yarn in the Turkish textile manufacturer and exporter, begins Group’s industrial enterprises. industry. production. 1999 1997 1994 Mehmet Zorlu Education, Health, Culture Vestel Beyaz Eşya is founded. Vestel is acquired by Zorlu Group and Solidarity Foundation is established. Denizbank is founded. Vestel begins production of household appliances. 2000 2001 2003 20% of Zorlu Enerji’s shares are offered Zorluteks becomes Europe’s largest Zorlu Group celebrates its 50th to the public and begin trading on and the world’s third largest cotton anniversary. Borsa Istanbul. household linen producer. Vestel City opens its doors. 2006 2004 Zorlu Real Estate Group is established. Borsa Istanbul. Zorlu Energy Group wins Jules Verne Travel & Event joins Zorlu Zorlu Group sells its stake in Denizbank natural gas distribution license tenders Group. to Dexia for USD 2.4 billion. 31.5% of and begins providing natural gas Vestel Beyaz Eşya’s shares are offered distribution services in Gaziantep and to the public and begin trading on Trakya regions. 2007 2008 2011 Zorlu Holding signs the UN Global Zorlu Enerji wins the privatization Vestel wins the first Smart Board tender Compact. Zorlu Group acquires a stake tender for ADÜAŞ, which includes launched as part of the Fatih Project. in Meta Madencilik Ltd. and begins nine power plants with a total installed operating in the mining-metallurgy capacity of 141 MW, with a bid of industry. USD 510 million. The construction of Zorlu Center, Turkey’s first five-function “mixed-use” project, begins. 6 Zorlu Holding 2018 Annual Report 2012 2013 2014 Zorlu Faktoring begins operations. Shopping mall and performance arts The installation of the Meta Nikel center at Zorlu Center open their doors. Kobalt Madencilik Gördes Facility Kızıldere II Geothermal Power Plant is completed and preparations are begins commercial operations. Jhimpir underway for commissioning. Turkey’s Wind Power Plant in Pakistan goes first domestic smartphone Venus is into operation. Vestel wins the second launched. A+ office project Levent 199 Smart Board tender worth TL 1 billion. enters into service. Dorad Natural Gas Combined Cycle Power Plant in Israel, in which Zorlu Enerji has a 25% stake, becomes operational. 2016 2015 Vestel Beyaz Eşya and Zorlu Enerji win the Industrial Excellence Award in Zorlu Holding signs the United Nations voluntarily join Borsa Istanbul’s (BIST) Europe. Zorluteks R&D Center enters Women’s Empowerment Principles, Sustainability Index for the November into service. Zorlu Family acquires full institutionalizing its support for the 2016 - October 2017 period. Sarıtepe- ownership of META. empowerment of women in society, Demirciler Wind Power Plants business and the economy. First phase of Alaşehir I Geothermal Power Plant commence commercial operations. is commissioned. Ramat Negev and Zorlu Center is named Europe’s Best Ashdod natural gas cogeneration Shopping Center by ICSC. Vestel Beyaz power plants in Israel, in which Zorlu Eşya wins the Industrial Excellence Enerji has a 42.15% stake, become Award 2016 in Turkey, advances to operational. Vestel Elektronik is the finals in Europe, and becomes the included in the BIST Sustainability first Turkish company in its sector to Index for the November 2015 - October 2016 period. The commissioning of the META Gördes Facility is completed and the first commercial Ni-Co Hydroxide intermediate product is exported. 2017 2018 The foundation of the new Vestel retail sales businesses. The first unit The new Vestel Beyaz Eşya washing Beyaz Eşya washing machine and of Kızıldere III Geothermal Power machine and dryer production plant dryer production plant is laid in July. Plant (99.5 MW) enters into service is completed and begins production At the TPM Awards organized by the in August. Zorlu Solar becomes the in the second quarter of 2018. Meta JIPM, Vestel Elektronik receives the exclusive authorized distributor of the Nikel Kobalt Madencilik earns the “R&D Center Certificate.” Vestel Special Award for TPM Achievement US-based First Solar in 26 countries. Elektronik purchases 50% of Meta Nikel in television manufacturing and Installation work begins for the Meta Kobalt Madencilik’s shares. The 65.5 Vestel Beyaz Eşya wins the Award Nikel Kobalt Facility R&D Center. MW second unit of Kızıldere III GPP for Excellence in Consistent TPM Zorluteks becomes the first home comes onstream. Rehabilitation work Commitment for its six production textile company in Turkey to receive to increase the installed capacity of facilities simultaneously. Vestel Beyaz the “Authorized Economic Operator İkizdere HPP from 18.6 MW to 24.94 Eşya is the first company in the Certificate.” Zorluteks Design Center MW is completed and the plant resumes industry to receive the Water Footprint is established. For the first time in the electricity generation. Zorluteks opens Verification in Turkey. Zorlu Enerji history of the industry, TAÇ Curtain a showroom in Munich, Germany. takes over the Osmangazi Electricity Arts Academy is established with the Zorluteks’s sustainable working Distribution Region in February and aim of training the curtain makers of conditions earn it the highest score from enters electricity distribution and the future. BSCI. 7 Zorlu Holding 2018 Annual Report Incorporating Zorlu Group companies under its umbrella, Zorlu Zorlu Holding AŞ (“Zorlu Holding”) is the main company that Holding represents Zorlu Group. Zorlu Group companies operating in the consumer electronics, household appliances, textiles, energy and mining-metallurgy sectors as well as Zorlu Yapı Yatırım AŞ, which owns Zorlu Center, operate under the roof of Zorlu Holding, which itself is controlled by the Zorlu Family. The Group’s real estate investments other than Zorlu Center are directly controlled by the Zorlu Family. The shares of Vestel Elektronik Sanayi ve Ticaret AŞ, Vestel Beyaz Eşya Sanayi