Table of Contents Zorlu Holding 2017 Annual Report Scan to view Zorlu Holding’s previous annual reports 2 Zorlu Group Overview 80 Textiles 6 Zorlu Group’s Milestones 98 Energy 8 Zorlu Holding 126 Real Estate 8 Zorlu Holding’s Shareholding Structure 140 Mining - Metallurgy 9 Zorlu Holding and Sustainability 146 Other Activities 10 Summary Financial Statements and 150 Human Resources Operational Indicators 160 Mehmet Zorlu Foundation 14 Zorlu Group’s Fields of Operation 166 Audit and Internal Control 28 Growth Strategies of Group Companies 170 Additional Statements as per the 30 Message from the Board of Directors Legislation 38 Board of Directors 182 Independent Auditor’s Report on the 40 CEO’s Assessment Annual Report 46 Message from the Chairman of the 186 Consolidated Financial Statements and Sustainability Committee Independent Auditor’s Report 50 Senior Management 269 Contact Information 56 Consumer Electronics and Household Appliances 1 Zorlu Holding 2017 Annual Report Zorlu Group’s foundation was laid in 1953 Zorlu: A Reliable with the establishment of a textile company in Babadağ, Denizli. Having started its and Reputable operations as a family business, today Zorlu Group is a major conglomerate with over 60 companies and approximately 30,000 Brand in Turkey employees. and the World As of the end of 2017, Zorlu Group, one of the key groups of companies in Turkey, operates in the industries of: • Textiles, • Consumer Electronics & Household Appliances, • Energy, • Real Estate, • Mining-Metallurgy and • Other (Tourism, Factoring, Aviation) and continues to generate value-added for the country’s economy, with the Group accounting for a significant portion of the country’s overall exports. Distinguishing themselves with their capabilities, pioneering breakthroughs, institutional structure and performance, Zorlu Group companies are recognized for their strengths in manufacturing and services on a global scale. Combining its deep-rooted experience and know-how with qualified and skilled human resources and strong management structure, Zorlu Group is a highly reputed group of companies in Turkey and across the globe. The Group focuses its activities on increasing the value of its brand, which represents quality, trust and reputation, and creating long-lasting value for all of its stakeholders. 2 Zorlu Holding 2017 Annual Report Zorlu Group’s Fields of Operation & Shareholding Structure Zorlu Family Zorlu Holding Consumer Real Estate Mining - Electronics and Real Estate (Levent 199 and Textiles Energy Other Activities Metallurgy Household (Zorlu Center) other) Appliances 3 A success story Zorlu Holding 2017 Annual Report Zorlu Group’s 1953 1960 Milestones Hacı Mehmet Zorlu lays the foundation The Group being textile trade by of the Zorlu Group by establishing opening a store in Trabzon. Zorlu Mensucat in Babadağ, Denizli. 1999 1997 1994 Mehmet Zorlu Education, Health, Culture Vestel Beyaz Eşya is founded. Vestel is acquired by Zorlu Group. and Solidary 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. 2014 2013 2012 The installation of the Metal Nikel Shopping mall and performing arts Zorlu Factoring begins operations. Kobalt AŞ Gördes Facility is completed center at Zorlu Center open their doors. as of the end of 2014. Turkey’s Kızıldere II Geothermal Power Plant first domestic smartphone Venus is begins commercial operations. Jhimpir launched. A+ office project Levent 199 Wind Power Plant in Pakistan goes enters into service. The Dorad Natural into operation. Vestel wins the second Gas Combined Cycle Power Plant in Smart Board tender worth TL 1 billion. Israel, in which Zorlu Enerji has a 25% stake, becomes operational. 2015 2016 Zorlu Holding signs the United Nations Vestel Beyaz Eşya and Zorlu Enerji the title in Turkey, Vestel Beyaz Eşya is Women Empowerment Principles, voluntarily join the Borsa Istanbul’s proclaimed the winner, becoming the institutionalizing its support for (BIST) Sustainability Index for the first Turkish company in its sector to win empowering women in the society, N o v e m b e r 2016 - O c t o b e r 2017 p e r i o d. the award. Zorluteks R&D Center enters business, and the economy. First phase Sarıtepe-Demirciler Wind Power Plants into service. Zorlu Family acquires full of Alaşehir I Geothermal Power Plant commence commercial operations. ownership of META. is commissioned. The Ramat Negev Zorlu Center is named the Europe’s and Ashdod natural gas co-generation Best Shopping Center by ICSC. Having power plants in Israel, in which Zorlu Enerji has a 42.15% stake, become advanced to the finals of the Industrial operational. Vestel Elektronik is included Excellence Awards 2016 after winning in the BIST Sustainability 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. 6 Zorlu Holding 2017 Annual Report 1966 1976 1984 Building on the know-how and Korteks Velvet Weaving Plant is The company begins its first official experience gained in Trabzon, the established in Bursa. export sales with Korteks products. Group moves to Istanbul and begins contract manufacturing. 1993 1990 1989 Zorlu Enerji is founded to meet the Korteks Polyester Yarn Factory, Europe’s Korteks Yarn Factory is established in energy and steam needs of Zorlu largest integrated polyester yarn Bursa to meet the need for high-quality Group’s industrial enterprises. manufacturer and exporter, begins polyester yarn in the Turkish textile production. industry. 2004 2006 Jules Verne joins the Zorlu Group. Zorlu Real Estate Group is established. Borsa Istanbul. Zorlu Energy Group Zorlu Group sells its stake in Denizbank wins natural gas distribution license to Dexia for USD 2.4 billion. 31.5% of tenders for Gaziantep and Trakya Vestel Beyaz Eşya’ shares are offered regions and begins providing natural to the public and begin trading on gas distribution services in the said regions. 2011 2008 2007 Vestel wins the first Smart Board tender Zorlu Enerji wins the privatization Zorlu Holding signs the UN Global launched as part of the Fatih Project. tender for ADÜAŞ, which includes Compact. Zorlu Group acquires a stake nine power plants with a total installed in Meta Madencilik Ltd. and begins capacity of 141 MW, with a bid of operating in the mining-metallurgy USD 510 million. The construction of industry. Zorlu Center, Turkey’s first five-function “mixed-use” project begins. 2017 The foundation for the new washing Zorlu Enerji takes over the Osmangazi the Life without Disabilities Project, the machine and dryer production Electricity Distribution Region and Guide Dogs Association is provided plant, which is scheduled to become enters electricity distribution and retail with an office at Zorlu Center for operational in 2018, is laid in July. sales businesses. Phase I of Kızıldere free. Installation work begins for the At the TPM Awards organized by the III Geothermal Power Plant (99.5 MW) R&D Center of Meta Nickel-Cobalt JIPM, Vestel Elektronik receives the enters into service in August. Zorlu Facility. Zorluteks becomes the only Special Award for TPM in television Solar becomes the exclusive distributor Turkish home textile company with manufacturing while Vestel Beyaz of the solar PV panels manufactured the “Authorized Economic Operator Eşya wins the Award for Excellence by the U.S.-based First Solar in 26 Certificate”. Zorluteks Design Center in Consistent TPM Commitment for its countries. Zorlu Center receives the is established. For the first time in the six production facilities simultaneously. ICSC VIVA Best-of-the-Best Honor history of the industry, TAÇ Curtain Art Vestel Beyaz Eşya is the first company Award. Among all the shopping malls Academy is established with the aim in Turkey to receive the Water in Turkey, Zorlu Center is the first to of training the curtain makers of the Footprint Verification in the industry. offer electric taxi service. As part of future. 7 Zorlu Holding 2017 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 and energy 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 and its operations in the mining industry are directly controlled by the Zorlu Family. The shares of Vestel Elektronik Sanayi ve Ticaret AŞ, Vestel Beyaz Eşya Sanayi ve Ticaret AŞ and Zorlu Enerji Elektrik Üretim AŞ, as well as the corporate bonds of Korteks Mensucat Sanayi ve Ticaret AŞ, Zorlu Faktoring AŞ, Zorlu Enerji Elektrik Üretim AŞ and Zorlu Osmangazi Enerji ve Sanayi Ticaret AŞ trade on Borsa Istanbul (BIST). As of December 31, 2017, Zorlu Holding’s paid-in capital amounts to TL 3,325,000,000. Zorlu Holding’s Shareholding Structure Zorlu Zorlu Family 100% Holding 8 Zorlu Holding 2017 Annual Report Sustainability is the building block of Zorlu Holding’s Zorlu Holding corporate strategy. and Sustainability Focusing