DOĞAN HOLDİNG ANNUAL REPORT 2017 page 04 page 32 page 106 ABOUT US OPERATIONS CORPORATE GOVERNANCE Doğan Holding in Brief Media Management Structure Financial Indicators Energy Internal Audit and Control Structure of Doğan Holding Retail Risk Management Message from the Chairwoman Industry Corporate Governance Principles Compliance Report Board of Directors Tourism Other Obligatory Disclosures Our Shareholding Structure Motor Vehicle and Real Estate Marketing Audit Committee Resolution Stock Performance Financial Services Corporate Governance Committee Resolution Board of Directors’ Statement of Responsibility for the Approval of the Reports Board of Directors’ Resolution on the Approval of the Reports page 14 page 74 page 141 MANAGEMENT’S SUSTAINABILITY DIVIDEND REVIEW Sustainable Growth and the Environment DISTRIBUTION Corporate Social Responsibility Message from the CEO Social Responsibility of Group Companies Dividend Distribution Policy and Activities Doğan Holding Executive Committee Dividend Distribution Proposal Occupational Health and Safety Doğan Holding Management Team Dividend Distribution Statement Highlights of 2017 Human Resources page 144 FINANCIAL INFORMATION Opinion Letter of the Independent Audit Company on the Annual Report Convenience of the Consolidated Financial Statements for the Period 1 January - 31 December 2017 into English and Independent Auditor’s Report MESSAGE FROM THE HONORARY CHAIRMAN AS A HOLDING, FOUNDED AND CONTINUING TO Esteemed Stakeholders of Doğan Holding, “ OPERATE IN THIS LAND, WE HAVE ALWAYS The world and Turkey passed through a series of tough challenges UPHELD THE VALUES OF OUR COUNTRY. WE in 2017. We experienced difficult times, as the terror problem became widespread, political uncertainty increased and economic WERE INSPIRED BY THESE VALUES WHEN expectations were not met in full. FORGING OUR OWN VALUES. Not all of these were the first challenges I had faced in my life. In my nearly 60 years in business, I went through numerous other rough patches with cumbersome conditions. In such periods, we ” always knew how to overcome these problems and found ways to grow. We lived up to these challenges and managed to expand in a healthy manner by confronting reality as it is, not compromising our values, and upholding our vision and most important of all our country's interests. This experience is one of the major reasons why we look ahead with hope at Doğan Group. Doğan Group companies are distinguished from their competitors with their unique characteristics in each sector. What makes us unique is our basic moral values, our effort to go beyond commercial values so as to contribute to our country in all our business lines, especially the media, and our unfaltering commitment to democracy. Cognizant of the new risks posed by the world economic order for our country, we have initiated the necessary change and transformation process. In due consideration of the upcoming risks of 2018, we focus on productivity, innovation and healthy growth in all of our business lines. As we progress in this direction, our transparent, fair and ethical management approach will be maintained with the same resolve. In all these processes, I enjoyed the bliss of experiencing the solidarity and power of our employees whom I see as part of my family, and of our shareholders and stakeholders who always showed us understanding and support. Hereby, I would like to extend my thanks and gratitude to our employees, shareholders and stakeholders and nation for their unfaltering support. Best regards, Aydın Doğan Doğan Holding Honorary Chairman 2 | ABOUT US WE CARE AND WE VALUE the right to life, health and safety, trust and appreciation, respect for honor, choices and serving PEOPLE. DOĞAN HOLDİNG ANNUAL REPORT 2017 | 3 DOĞAN HOLDİNG IN BRIEF Doğan Group has been adding significant value to the Turkish economy AN INNOVATIVE AND PIONEERING for nearly 60 years. The foundation of Doğan Holding was laid when Honorary ROLE-FROM THE MEDIA TO ENERGY, Chairman Aydın Doğan registered with the Mecidiyeköy Tax Office in 1959 INDUSTRY TO TOURISM... and established his first company in the automotive sector in 1961. Today, Doğan Group companies, with their innovative approach and forward- looking vision, play a pioneering role in a wide range of sectors, which include the media, energy and retail, as well as industry, motor vehicle and real estate marketing, tourism and financial services. Each boasting a flexible management structure, Group companies embrace a quality- and customer-focused management approach that is open to change. These companies The well-qualified and highly successfully couple this approach competent workforce of Doğan Group with the other integral components has been the key factor underlying of our corporate culture, namely, this success. The Group, together transparent communications and with its subsidiaries, run as joint effective teamwork. Doğan Holding and ventures, directly offers employment all Group companies put into practice to approximately 8,247 people and corporate and ethical values, which set is an important figure in national an example for other companies in the employment. business world. CONSOLIDATED REVENUES Aiming for global success in all its (TL MILLION) industrial and trading activities, Doğan Group keeps abreast of domestic and international developments in every business line in which it conducts +35% operations. With its high-quality products and services, the Group 2015 5,951 operates across a wide geographic region through strategic partnerships 2016 7,755 with leading multinational groups. 2017 10,478 4 | ABOUT US DOĞAN HOLDİNG ANNUAL REPORT 2017 | 5 FINANCIAL INDICATORS Doğan Holding posted successful financial and operational results in 2017. CONSOLIDATED FINANCIAL INDICATORS DOĞAN HOLDİNG'S TOTAL ASSETS Consolidated Statement of ROSE TO TL 9.3 BILLION. Financial Position Summary Restated Restated TL million Audited Previous Period Previous Period 31.12.2017 31.12.2016 31.12.2015 Total Assets 9,279 8,253 7,869 Current Assets 4,892 3,912 3,971 Non-current Assets 4,386 4,341 3,898 Short-term Liabilities 4,308 2,789 2,701 Long-term Liabilities 1,970 2,026 1,705 Shareholders’ Equity 3,000 3,438 3,463 Audited Consolidated Statement of Profit or Loss Summary TL million 31.12.2017 31.12.2016 31.12.2015 Revenue 10,478 7,755 5,951 Gross Profit 1,433 1,278 1,027 Operating Profit/(Loss) 353 258 260 EBITDA 611 483 347 REVENUE EBITDA Margin (%) 5.8% 6.2% 5.8% Net Profit/(Loss) Attributable -472 -219 -161 INCREASE to Equity Holders of the Parent Company 35% 6 | ABOUT US FINANCIAL INDICATORS Profitability Ratios (%) 2017 2016 2015 Gross Profit Margin 13.7 16.5 17.3 Operating Profit Margin 3.4 3.3 4.4 EBITDA Margin 5.8 6.2 5.8 Ratios (%) 2017 2016 2015 Current Ratio 1.14 1.40 1.47 Liquidity Ratio 1.00 1.24 1.33 Debt/Equity Ratio 2.09 1.40 1.27 SEGMENT ANALYSIS 2017 2016 (TL million) Net Sales EBITDA Net Sales EBITDA Publishing 1,151 83 1,100 86 EBITDA Broadcasting 1,122 45 1,091 131 Retail 802 26 676 25 INCREASE Energy 6,501 299 4,334 230 Other 902 158 553 10 26% Total 10,478 611 7,755 483 * Since the figures in the table are rounded, there may be negligible differences in sum totals and change rates. DOĞAN HOLDİNG ANNUAL REPORT 2017 | 7 STRUCTURE OF DOĞAN HOLDİNG Doğan Holding continues its activities with a sustainability strategy focused on creating value by assuming an innovative and pioneering role in all business lines-from the media to energy, retail to industry. MEDIA ENERGY PUBLISHING BROADCASTING FUEL OIL DISTRIBUTION, ELECTRICITY GENERATION SALES AND OTHER AND TRADE HÜRRİYET DOĞAN TV AYTEMİZ WIND GALATA DOĞAN GAZETECİLİK NATIONAL CHANNELS GAS PLUS ERBİL DIGITAL PLATFORM HYDRO DOĞAN BURDA BOYABAT PRODUCTION DOĞAN EGMONT RADIO ASLANCIK DOĞAN DAĞITIM ELECTRICITY TRADE DOĞAN HABER AJANSI DOEL (DHA) 8 | ABOUT US CONSOLIDATED REVENUES BY SEGMENT EBITDA BY SEGMENT 2017* OTHER RETAIL RETAIL 8% MEDIA 4% 8% 21% ENERGY ENERGY MEDIA OTHER 62% 49% 22% 26% * EBITDA by segment has been calculated by the Company. INDUSTRY AND FINANCIAL RETAIL TOURISM TRADE SERVICES MUSIC AND BOOKSTORE INDUSTRY MİLTA DORUK FAKTORİNG ÇELİK HALAT MARLIN DORUK FİNANSMAN D&R DİTAŞ NETA ÖNCÜ GSYO TRADE SUZUKI İLKE GLOKAL TREND DOĞAN DIŞ TİC. MİLPA DOĞAN HOLDİNG ANNUAL REPORT 2017 | 9 TURKEY’S COMMON VALUES: “ LET’S DISCOVER THEM AND WALK TOGETHER INTO THE FUTURE ” Y. BEGÜMHAN DOĞAN FARALYALI CHAIRWOMAN MESSAGE FROM THE CHAIRWOMAN Esteemed Shareholders, Business Partners we decided to exit the business segments From Business Values to and Employees, where we failed to achieve as much Common Values value added as we aimed, and put this The year 2017 was marked by critical decision to practice. As such, we brought Our Group does not conceive “values” only political, social and economic our consolidated total assets up to in the context of commercial values. We developments in Turkey and at a global TL 9.3 billion and total revenues to TL believe that a value-centered approach level. Foremost among these were social 10.5 billion, in a 35% increase over the is necessary in every field, in particular polarization, income inequality and prior year. Our investments in the last in the Turkish business community. We mass migration. As a result, the number three years increased the compound embody this belief into social responsibility of people who have been displaced annual growth rate of our consolidated activities. The common values movement from their homes reached 65 million revenues to 44%. In order to extend initiated by us in 2016 around the motto across the world. Huge gaps have these achievements to international “Let’s Discover Turkey’s ‘Common Values’ appeared in terms of income inequality. markets, we are keeping a close watch and Walk Together into the Future,” These aggravated problems have led to on new growth areas, important projects continued in 2017 as well.