· CONTENTS DOĞUŞ OTOMOTIV IN BRIEF ABOUT DOĞUŞ OTOMOTIV 08 CHAIRMAN’S STATEMENT 10 CEO’S STATEMENT 12 CORPORATE PROFILE 14 FINANCIAL INDICATORS 15 …

CONTENTS

DOĞUŞ OTOMOTIV IN BRIEF

ABOUT DOĞUŞ OTOMOTIV08 CHAIRMAN’S STATEMENT10 CEO’S STATEMENT12 CORPORATE PROFILE14 FINANCIAL INDICATORS 15 STOCK PERFORMANCE 16 MILESTONES 18 BOARD OF DIRECTORS 21 EXECUTIVE BOARD22 TURKISH ECONOMY AND THE AUTOMOTIVE INDUSTRY 23 DOĞUŞ OTOMOTIV IN 2016 32 TRAFFIC IS LIFE!36 ULTIMATE CUSTOMER SATISFACTION38 CUSTOMER TOUCH POINTS40 ABOUT DOĞUŞ GROUP

01

41 OUR BRANDS

42 VOLKSWAGEN PASSENGER CARS 44 AUDI 46 SEAT 48 ŠKODA 50 BENTLEY & LAMBORGHINI 52 PORSCHE 54 VOLKSWAGEN COMMERCIAL VEHICLES 56 SCANIA 58 SCANIA ENGINES 60 THERMO KING 62 DOĞUŞ OTO 64 D-AUTO SUISSE 66 D-AUTO LLC 68 DOD70 vdf72 TÜVTÜRK 74 SPARE PARTS AND LOGISTICS 76 DOĞUŞ SIGORTA

02

77 CORPORATE GOVERNANCE

78 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 96 GENERAL INFORMATION 118 APPENDIX 1. DIVIDEND DISTRIBUTION PROPOSAL AND TABLE 119 APPENDIX 2. STATEMENT OF RESPONSIBILITY ON FINANCIAL REPORTS 120 APPENDIX 3. INDEPENDENT AUDITORS’ REPORT RELATED TO ANNUAL REPORT

03

ABOUT DOĞUŞ OTOMOTİV

Doğuş Otomotiv continued to maintain its position among Turkey’s leading automotive importers and the largest automotive distributors in 2016, the company’s 22nd year of operations. Doğuş Otomotiv prepares its business plans driven by the vision of “creative service beyond expectations”, and determines its corporate strategy with the goal of “operating with a focus on customer satisfaction”. Doğuş Otomotiv boasts the widest brand and service network in Turkey in its industry segment.

Net Sales (TL Million)

10%INCREASE

EBIT Margin

4%INCREASE

Sales (Unit) (Excluding heavy commercial vehicles)

8%INCREASE

Number of Employees (Person)

DOĞUŞ OTOMOTİV BOASTS TURKEY’S BROADEST BRAND AND SERVICE NETWORK IN ITS INDUSTRY.

TL 11,925 MILLION

DOĞUŞ OTOMOTİV SALES REVENUE OF TL 11,925 MILLION IN 2016.

2014 7,693

10,889

11,925

2015

2016

2014 154,301

199,226

206,896

2015

2016

2014 4.4

4.1

3.6

2015

2016

2014 2,245

2,494

2,708

2015

2016

4 DOĞUŞ OTOMOTİVANNUAL REPORT 2016

IN 2016, DOĞUŞ OTOMOTIV SUCCEEDED IN MAINTAINING ITS LEADING POSITION IN THE TURKISH AUTOMOTIVE INDUSTRY FOR THE FIFTH CONSECUTIVE YEAR.

RETAIL SALES (UNITS)

22,005


101,763


208,946


20,637


28,876

MARKET SHARE (%)

24.09%*

MARKET SHARE (%)

13.44%*

MARKET SHARE (%)

21%

MARKET SHARE (%)

2.73%*

MARKET SHARE (%)

3.81%*

*In Passenger Vehicle Segment *In Luxury Vehicle Segment

*In Passenger Vehicle Segment

*In Passenger Vehicle Segment

5DOĞUŞ OTOMOTİV IN BRIEF

21% MARKET SHARE TL 4,852 MILLION

DOĞUŞ OTOMOTIV CAPTURED 21% MARKET SHARE IN 2016.

DOĞUŞ OTOMOTIV’S SIZE OF ASSETS TOTALED TL 4,852 MILLION IN 2016.



79


32,772


827


2,050

MARKET SHARE (%)

MARKET SHARE (%)

0.01%*0.01%*

MARKET SHARE (%)

14.45%*

MARKET SHARE (%)

0.91%*

MARKET SHARE (%)

11.18%*

*In Luxury Vehicle Segment *In Luxury Vehicle Segment*In Light Commercial Vehicle Segment *In Luxury Vehicle Segment

*In Heavy Commercial Vehicle Segment

DOĞUŞ OTOMOTİV IN BRIEF

Doğuş Otomotiv continued to maintain its position among Turkey’s leading automotive

importers and the largest automotive distributors in

2016, the company’s 22nd year of operations. Doğuş Otomotiv

prepares its business plans driven by the vision of “creative

service beyond expectations”, and determines its corporate

strategy with the goal of “operating with a focus on

customer satisfaction”. Doğuş Otomotiv boasts the widest

brand and service network in Turkey in its industry segment.


CHAIRMAN’S STATEMENT

WE ARE STRUCTURED AS AN EFFICIENCY-ORIENTED AND LEARNING ORGANIZATION HAVING SOLD 1.7 MILLION VEHICLES ACROSS TURKEY.


Esteemed Stakeholders of Doğuş Otomotiv,

History recorded 2016 as a year when the global economy was tested with tough conditions. As a result of the long-term felt fragilities, the global economy only grew below its potential by 3.1%. The interest rate increase of the Fed, highly anticipated by all capital markets, was realized in the last month of the year.

Likewise, the announcement that the Fed will continue to increase interest rates in 2017 also showed that the strong position of the US dollar against the local currencies will continue in the coming period. The election of Donald Trump as the US president and the UK’s decision to exit from the EU through a referendum was the beginning of a new era for developed economies. OPEC member countries’ and Russia’s decision to tighten oil supply indicates to an upward trend in oil prices in the coming period.

The global automotive industry maintained its vitalityThe automotive sector, one of the few industries to maintain its vitality on a global scale, passed beyond 90 million in production fi gures as of 2016 yearend. Even though the Chinese market continued to be a center of attraction for all major brands, the recovery in the US and European markets has been an important source of motivation for the sector’s R&D activities and new launches. Albeit the global competition among major automotive brands continued in 2016 over products based on technology and design, the spread of protectionist economic policies in developed countries also led to sharper competition.

Turkey maintained its macro-economic disciplineIn addition to the economic developments that threatened rising economies globally, 2016 was a challenging year for Turkey, faced with a fragile political conjuncture. Despite Standard & Poor’s and Moody’s having downgraded our country’s credit ratings, Turkey did not compromise its budget discipline and achieved 2.4% growth according to the fi rst nine months of the year. Turkish automotive market showed strong performance with 1 million vehicles soldAs of 2016 yearend, the Turkish automotive market displayed strong performance, reaching a sales fi gure of 1 million vehicles, including the heavy commercial vehicles segment. The fact that Turkey has a strong consumption acceleration in terms of vehicle ownership ratio compared to the European market and that automotive continues to be seen as an investment tool in the public eye are determinants of the continued demand in the market. As one of the most experienced players in the Turkish automotive market, we will continue to pursue these dynamics closely and continue to improve our business performance in the coming period.

Doğuş Otomotiv will be on the forefront with competitive advantagesAs Doğuş Otomotiv, we anticipate that the volatility in foreign exchange rates, which started in the last quarter of 2016, will affect the key dynamics of the automotive market. We should expect a contraction in 2017 with the foreign exchange volatility affecting the sector in a multidimensional way, from operating expenses to fuel and spare part prices right along with an increased tax burden. Therefore, we are determined to maintain our success by using our key competitive advantages effectively.

Doğuş Otomotiv: An effi ciency-oriented and learning organizationAs a company, that not only distributes 12 prestigious brands owned by VW Group, but also manages overall the sales, aftersales services, used vehicle business and fi nancial services, Doğuş Otomotiv reached yet again industry-referenced successes in 2016.

Until today, we have sold 1.7 million vehicles across Turkey and are structured as an effi ciency-oriented and learning organization.

Thanks to the high standards we have achieved not only in sales numbers but also in every area we serve, we were able to lead the sector in terms of customer loyalty.

Our experienced team is our most important assuranceOur skilled and experienced team continued to take important duties in 2016 to ensure that our business processes were run in line with the shared targets of our three main pillars, namely our relations with manufacturers, our authorized dealer network, and our technological infrastructure. With our stable structure supported by solid foundations, as Doğuş Otomotiv we aim to succeed on running our business processes focused on effi ciency in the coming period.

Our success story will continue...We would like to extend our gratitude to all of our stakeholders for supporting Doğuş Otomotiv’s performance in 2016. As a company that plays an important role in the development of the Turkish automotive industry and raises its quality standards, we will continue our successful journey in the coming period.

Sincerely,

ChairmanAclan Acar


CEO’S STATEMENT

IN 2016, DOĞUŞ OTOMOTIV INCREASED ITS MARKET SHARE, MAINTAINING ITS LEADING POSITION IN THE TURKISH AUTOMOTIVE INDUSTRY FOR THE FIFTH CONSECUTIVE YEAR.


Esteemed Stakeholders,

The Turkish economy was able to record only 2.4 % growth for fi rst nine months of the year due to the challenging conditions in the global economy. However, despite the diffi culties, the Turkish automotive industry has achieved positive results in terms of production, exports and total market indicators. When we look at the passenger car market indicators in Turkey, the total retail market for passenger cars and light commercial vehicles, which sold 968,017 units in 2015, increased 1.6%, and sold 983,720 units in 2016. Passenger car sales, which amounted to 725,596 in 2015, increased by 4.3% to 756,938 in 2016 while light commercial vehicle sales that sold 242,421 in 2015 decreased by 6.5% in 2016 to 226,782 units. For Doğuş Otomotiv that carries out business in line with its goal of providing services beyond expectations with 22 years of experience and expertise 2016 was a year that we attained positive fi nancial and operational results. Doğuş Otomotiv increased its retail market share, excluding heavy commercial vehicles, from 20.6% to 21% with sales up from 199,226 to 206,896 units.

12 brands, all leaders in their segments, and nearly 80 models…Doğuş Otomotiv reached positive results with all of its brands in 2016. Volkswagen Commercial Vehicles recorded the highest sales fi gures ever in 2016 and captured the highest market share yet; while SEAT achieved the highest sales performance in its history with 20,637 units.

Škoda was named the most successful distributor among 103 countries in the annual “Best Distributor Award” event in the Aftersales Services category.

As of 2016 yearend, Volkswagen Passenger Cars has sold more than 100,000 retail vehicles, becoming the most preferred brand in Turkey for the fourth times. Audi, achieved signifi cant success in 2016, increasing its sales in the retail passenger car market by 8.51% year on year, and reaching the highest sales fi gure on record with 22,005. Porsche has reached a sales fi gure of 827 with the sales, marketing and aftersales services actions designed in line with the global digitalization strategy, and became one of the 2016 Gladiators in the “Outdoor Execution of the Year” category for the fi rst time in the ODD Sales and Communication Awards.

Spare Parts and Logistics Department made a difference with 99% parts availabilityOur Spare Parts and Logistics department, which carries out the spare parts imports, storage and delivery to authorized aftersales services for all brands under the roof of Doğuş Otomotiv, maintained its leadership in the industry with 99% parts availability as of 2016 yearend. The department imported 186,300 vehicles and delivered 211,000 vehicles to Authorized Dealers, in 2016.

Value and Care Center: A strong step toward peerless customer satisfactionThe Value and Care Center which operates under Doğuş Otomotiv, has continued to give a unique experience to our customers and has successfully contributed to business process of both the brands and the Authorized Dealers and Services as dialogue management, roadside assistance, call center and operational services in 2016. Doğuş Otomotiv Value and Care Center (DIM), has made us proud by winning top two prizes at the Contactcenterworld.com Awards for the high quality standards which it attained in a short time.

Our information technology infrastructure is our greatest support…As a company that carries out activities with dealers through a strong network infrastructure, we do not limit our contact with customers to the showrooms but fully meet customer expectations with the communication channels created in line with requirements of technology.

Award-winning HR projects Doğuş Otomotiv considers its skilled and experienced manpower as one of the most important components of its sustainable success performance. It has successfully carried out education activities for its authorized dealers’ personnel in 2016 with Drive Project, launched in 2014. The GO (Development School) Platform, an online social learning network developed with gamifi cation approach, has made us proud by winning four prizes at the internationally recognized Stevie and Brandon Hall Excellence Awards in 2016.

“Traffi c is Life!” celebrates its 12th years...The “Traffi c is Life!” Social Responsibility Platform that we have started to raise awareness about a safe traffi c culture in Turkey continued to engage our stakeholder groups with projects that made a difference in 2016.

I would like to extend my gratitude to all of our stakeholders for their support in 2016 toward the continued success of Doğuş Otomotiv, one of the most experienced actors in the Turkish automotive industry.

As Doğuş Otomotiv, we pursue our business processes on long-term targets. We will continue to follow closely the developments in automotive and its technologies, and will be offering innovative products and services to our customers.

Sincerely,

Emir Ali BilaloğluChief Executive Offi cer


CORPORATE PROFILEDoğuş Otomotiv continued to maintain its position among Turkey’s leading automotive importers and the largest automotive distributors in 2016, the company’s 22nd year of operations. Doğuş Otomotiv prepares its business plans driven by the vision of “creative service beyond expectations”, and determines its corporate strategy on the goal of “operating with a focus on customer satisfaction”. Doğuş Otomotiv boasts the widest brand and service network in Turkey in its industry segment.

Doğuş Otomotiv is the representative of 12 international brands, each the leader of its own segment, in the fi elds of passenger cars, light commercial vehicles, heavy vehicles, industrial and marine engines, and cooling systems. Doğuş Otomotiv offers private and corporate customers the Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Lamborghini, Bugatti, Porsche, Volkswagen Commercial Vehicles, and Scania brands as well as a wide array of more than 80 models by these brands. The company also competes in the industrial and marine engines market with the Scania Engines brand, and in the cooling systems market with Thermo King.

Doğuş Otomotiv adopts unconditional customer satisfaction as the number one priority in its services, and has one of the largest authorized dealer and aftersales service networks in Turkey. More than 500 meeting points across the country offer Doğuş Otomotiv’s customers seamless, widespread sales, aftersales, and spare parts services. The close business cooperation based on mutual trust with the Volkswagen Group led Doğuş Otomotiv to establishing D-Auto Suisse SA, a Porsche Authorized Dealer and Aftersales Service Center in Lausanne in 2009. Since then the Lausanne operation has grown with the addition of the Bentley brand, and used luxury car sales operation D-Occasion. Doğuş Otomotiv’s operations abroad also include the Erbil-based D-Auto LLC, a company founded in 2014 to distribute Volkswagen and Audi brands in Northern Iraq. Doğuş Otomotiv continues to grow as a leading company in the industry with new investments.

Doğuş Otomotiv is one of the most important players of the Turkish automotive industry with nearly 2,500 employees. The unwavering customer-satisfaction oriented dynamic service approach that the company has adopted since the very beginning has always made Doğuş Otomotiv one of the most liked and trusted brands in Turkey according to corporate reputation surveys. Since its initial public offering in 2004, Doğuş Otomotiv shares are traded at Borsa Istanbul (BIST) with the ticker symbol “DOAS. IS”.

Doğuş Otomotiv, which builds all of its business processes in line with its environmental and social responsibility approach, released its fi rst Corporate Sustainability Report in 2009, which also happened to be a fi rst in Turkey in this segment. Doğuş Otomotiv went on to undersign the UN Global Compact in 2010. Aiming to make a positive difference in the overall responsibility, awareness and perception in the community toward traffi c safety, the company has been carrying out social responsibility projects for 12 year without interruption since they were fi rst launched with the “Traffi c is Life!” slogan in 2004. The corporate responsibility platform “Traffi c is Life!” features various education-focused projects aimed at different age groups and carried out in cooperation with public institutions, and it has been recognized with numerous awards.

Doğuş Otomotiv is listed on the BIST Sustainability Index for the second time from November 2016 to October 2017.

Doğuş Otomotiv is a member of the Doğ uş Group that operates in the fi nancial services, automotive, construction, media, tourism and services, real estate, energy, and food & beverage industries.


Sales Units (Retail) 2016 2015 2014 Passenger Vehicles 174,124 167,584 130,300Volkswagen 101,763 107,401 84,646

Audi 22,005 20,279 17,809

Seat 20,637 16,911 12,697

ŠKODA 28,876 22,107 14,537

Bentley 9 19 21

Lamborghini 7 6 2

Porsche 827 861 588

Light Commercial Vehicles 32,772 31,642 24,001Volkswagen 32,772 31,642 24,001

Heavy Commercial Vehicles 2,060 3,856 3,039Scania 2,050 3,291 2,014

Krone 2 158 716

Meiller 8 407 309

TOTAL 208,956 203,082 157,340

DOAŞ Market Share (retail) 21,0% 20,6% 20,1%

Used Car Sales (DOD) 22,534 23,125 21,120

Financial Indicators 2016 2015 2014Net Sales (million TRY) 11,925 10,889 7,693

Operating Expenses (million TRY 727 662 537

OpEx/Sales(%) 6.1% 6.1% 7.0%

EBIT (million TRY) 426 447 336

EBIT (%) 3.6% 4.1% 4.4%

Gross Profi t (million TRY 1,153 1,109 873

Gross Profi t Margin (%) 9.7% 10.2% 11.3%

Net Profi t (million TRY 238 302 253

Net Margin (%) 2.0% 2.8% 3.3%

ROA 4.9% 7.6% 9.0%

ROE 21.3% 22.2% 20.5%

Net Financial Liabilities/Equity* 2.39 1.37 0.84

CapEx (million TRY)** 208 169 115

* Includes short-term loans, short-term portions of long-term loans, long-term loans, cash and equivalent.

** Includes tangible asset entries.


FINANCIAL INDICATORSNet Sales (TL million)

EBIT Margin (%)

Total Assets (TL million)

ROA (%)

Gross Profi t Margin (%)

Net Profi t (TL million)

Total Equity (TL million)

ROE (%)

Operating Expenses/Sales (%)

Net Profi t Margin (%)

Net Financial Debt*/Equity

CapEx (TL million)**

* Includes short-term loans, short term portions of long term loans, long term loans, cash and equivalent

** Includes intangible asset entries.

2014 7,693

10,889

11,925

2015

2016

2014 11.3

10.2

9.7

2015

2016

2014 7.0

6.1

6.1

2015

2016

2014 4.4

4.1

3.6

2015

2016

2014 253

302

238

2015

2016

2014 3.3

2.8

2.0

2015

2016

2014 2,827

3,980

4,852

2015

2016

2014 1,236

1,363

1,119

2015

2016

2014 0.84

1.37

2.39

2015

2016

2014 9.0

7.6

4.9

2015

2016

2014 20.5

22.2

21.3

2015

2016

2014 115

169

208

2015

2016


STOCK PERFORMANCE

PERCENTAGE OF FOREIGN OWNERSHIP (%)

EARNINGS PER SHARE

61%

64%

2014

2015

2016

52%

63%

24%

63%

PRICE/EARNINGS RATE

BIST Code: DOAS.IS

Reuters Code: DOAS.IS

Bloomberg Code: DOAS.TI

Number of stocks: 220,000,000

Initial public offering: 6/17/2004

Free fl oat rate: 34.5%

Stock Performance in 2016

TL USDShare price (31.12.2016): 8.78 (2.49)Lowest (01.12.2016): 8.27 (2.40)Highest (04.04.2016): 13.29 (4.71)Market Cap. (31.12.2016): 1,932 m (549 m)Daily average trading volume: 13.4 m TL (4.5 m)

DOAS*

BIST 100

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

00

20.0018.0016.0014.0012.0010.008.006.004.002.00-

BIST - 100 RelativeDOAS (TL)

In 2016, Doğuş Otomotiv share trade was represented by 10.9% capital loss on aggregate.

As of 31 December 2016. (Source: Reuters)

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16

*Within the scope of the Company’s Share Buy-Back Program initiated by the Board of Directors resolution, our Company bought back 22.000.000 of its publicly traded shares in 2016 in accordance with the CMB legislation for TL 220,274,251.16 in total.

The Percentage of Foreign Ownership in DOAS was realized as 24% in 2016.

In 2016, Earnings per Share was realized as 1.11.

In 2016, the Price/Earnings Rate was realized as 7.91.

2014 1.14

1.38

1.11

2015

2016

2014 10.45

8.00

7.91

2015

2016


1995 » Scania Industrial

and Marine Engines distributorship contract signed

2010 » UN Global

Compact Agreement

1996 » Porsche

distributorship agreement

» Customs duties on vehicles imported from the EU abolished

2011 » 12.6% Market share » Corporate

Governance Rating: 7.80 Point

» Doğuş Bilgi İşlem ve Teknoloji Hizmetleri A.Ş. established

1997 » ŠKODA

distributorship agreement and partnership with Yüce Auto

» SEAT distributorship agreement and partnership with Yüce Auto

2012 » 15.4% Market

share » The title of the

“Company With the Highest Increase in Corporate Governance Rating” (8.63 Point)

1998 » Used car

operations established

2013 » 17.8% Market share » Corporate Governance

Rating rose to 9.05 » Opening Krone Doğuş

Treyler Plant » Establishing Erbil

D-Auto LLC, Iraq

1994 » Distributorship

contract with Volkswagen AG

» Scania Distributorship agreement

» Volkswagen and Audi distributorship agreement

2008 » Thermo King distributorship agreement » Krone Doğuş Treyler Plant groundbreaking

ceremony

» Groundbreaking ceremony of Porsche dealership in Lausanne

» Opening Meiller Doğuş Damper Plant

» Thermo King letter of intent » Establishing Porsche Lausanne D-Auto Suisse SA auto

2009 » Doğuş Otomotiv 15th

anniversary » All brands located under the same

roof at Şekerpınar » Opening of Porsche Lausanne » Publishing Corporate Sustainability Report

MILESTONES


2003 » Krone

distributorship agreement

» Assembling operations

» Merger of automotive companies under Doğuş Otomotiv

2004 » Initial Public

Offering of Doğuş Otomotiv

» Doğuş Otomotiv corporate social responsibility Project

2005 » First dividend

paid

2014 » 20.1% market share » Offering fi nancial services in the

heavy commercial vehicle sector, Scania Finans becomes part of Volkswagen Doğuş Finans A.Ş.

» Corporate Governance Rating rose to 9.25

» Maintains leadership in total automotive market throughout the year

2015 » 20.6% Market share » VW Doğuş Finans AŞ acquired MAN

Finansman. » Corporate Governance Rating rose to 9.42 » Production partnership and distributorship

agreement with Krone came to an end » Meiller production came to an end (though

Meiller distributorship continues)

2016 » Corporate Governance

Rating rose to 9.51 » Lausanne Bentley

Showroom and D-Occasion operating used luxury car sales were incorporated with Doğuş Otomotiv in Switzerland

» Distributorship agreement with Meiller came to an end

2000 » Joint venture

on consumer fi nancing with Volkswagen Financial Services AG

2007 » 11.4% market share » Bugatti letter of intent » Porsche dealership contract

in Lausanne » Krone - Doğuş coproduction

agreement » Opening of OtoMotion » Oto-Fix Express Service

established » TÜVTÜRK established by the

cooperation of AKFEN and TÜV SÜD

» Lamborghini distributorship agreement » Meiller distributorship and coproduction

agreement » LeasePlan partnership for fl eet services

DOĞUŞ OTOMOTIV’S CORPORATE GOVERNANCE RATING ROSE TO 9.51 IN 2016.

2006 » Doğuş Otomotiv

acquired 100% of SEAT » Lamborghini letter of

intent » Bentley letter of intent » Volkswagen Marine

Engines agreement » Second dividend paid » Production agreement

with Krone


BOARD OF DIRECTORS

Aclan AcarChairman of the Board of DirectorsMr. Aclan Acar is a graduate of Ankara Faculty of Economics and Commercial Sciences, and holds a master’s degree in Banking and Insurance from the same university, and a master’s degree in Economics from Vanderbilt University in the United States. Mr. Aclan Acar began his career in 1974 at Halk Bank, and from 1978 to 1990 continued his banking career at the Central Bank of Turkey. After joining Doğuş Group in 1990, Mr. Aclan Acar initially held the position of Assistant General Manager at Garanti Bank, Responsible for Treasury and Financial Institutions. He served as the General Manager of Bank Ekspres from 1994 to 1996; Osmanlı Bank General Manager from 1996 to 2000; Tansaş Chairman of Board of Directors, from 2001 to 2005, and Garanti Sigorta A.Ş., and Garanti Emeklilik A.Ş. Chairman of the Board from 2002 to 2006. Since April 2000, he has been serving as a Member of the Board of Doğuş Holding, as well as Chairman of Doğuş Otomotiv Servis ve Ticaret A.Ş. and Doğuş Oto Pazarlama A.Ş. since February 2006. Mr. Aclan Acar is also a member of Doğuş Otomotiv Corporate Governance and Sustainability Committee, Early Risk Detection Committee, and Remuneration and Nomination Committee.

Osman Nezihi Alptürk Vice Chairman of the Board of DirectorsMr. Osman Nezihi Alptürk, who started his career as an analyst at Azot Sanayi A.Ş. after graduating from Ankara University Faculty of Political Sciences Department of Economics, worked for the Central Bank of Turkey as a researcher, manager and advisor to the chairman from 1976 to 1988. Starting in 1988, he provided consultancy services for companies as a Management Consultant. From 1991 until 1995, he served as the Assistant General Manager at Garanti Securities, where he carried out corporate fi nance, research and international marketing activities. From 1996 to 2000, he served as the Head of Budget Planning and Business Development at Doğuş Holding. During the same period, he also served as the Vice Chairman of the Board of Directors, and General Manager at Körfez Yatırım A.Ş. Since 1999, he has been serving Doğuş Holding A.Ş. fi rst as a member of the Executive Board, and later as a consultant. Mr. Osman Nezihi Alptürk has been serving as Vice Chairman of the Board of Directors at Doğuş Otomotiv, and Doğuş Oto since March 2016 and he is also a member of Doğuş Otomotiv’s Remuneration and Nomination Committee.

Hayrullah Murat AkaBoard Member Mr. Hayrullah Murat Aka completed his undergraduate studies in the Department of Business Administration at the Middle East Technical University (1984) and his graduate studies in the Department of Management at the Boğaziçi University (1987). In 2007, he completed the 172nd session of the Advanced Management Program at Harvard Business School. Having joined the Group in 1987, Mr. Hayrullah Murat Aka is currently a Board Member at Dogus Otomotiv and a Member of the Early Risk Detection Committee, additionally serving as a Board Member and Head of the Audit/Risk Committee at Dogus Oto Pazarlama, VDF Financing, Factoring, Insurance and Fleet Leasing Companies. Mr. Hayrullah Murat Aka is the Deputy Chairman of the Board of Doğuş Gayrimenkul Yatırım Ortaklığı, Doğuş Spor Yatırımları and Doğuş Sigorta Aracılık Hizmetleri A.Ş, and a Member of the Board of DGS Protection and Private Security Services Company.


Emir Ali BilaloğluBoard Member Mr. Emir Ali Bilaloğlu is a graduate of Die Technische Universität Berlin Engineering Faculty, and holds a master’s degree from the same school. Mr. Emir Ali Bilaloğlu chairs the Executive Board of Doğuş Otomotiv, and also serves as a Member of the Board in Doğuş Otomotiv Servis ve Ticaret A.Ş., Doğuş Oto Pazarlama A.Ş., Yüce Auto, DMS (Doğuş Customer Systems) and D-Auto Suisse SA. Mr. Emir Ali Bilaloğlu plays an active role both in the Steering Committee of the Automotive Distributors Association (ADA) of Turkey and, since 2008, in DEIK, a consultancy board on foreign economic relations.

Özlem Denizmen KocatepeBoard Member Mrs. Özlem Denizmen Kocatepe is a graduate of Cornell University, Department of Industrial Management, and holds a master’s degree from Sloan School of Management at MIT. Mrs. Özlem Denizmen Kocatepe also attended the “Infl uencing Techniques” program at Stanford, “Leadership” program at GE Crotonville Center, and the “Advanced Management” program at Harvard Business School. Since 2000, she has served in a number of positions in Strategy, Planning, Budgeting, Business Development and Investor Relations within Doğuş Group. Mrs. Özlem Denizmen Kocatepe is currently a Board Member of Doğuş Otomotiv. In the area of community service, Mrs. Özlem Denizmen Kocatepe is the founder of FODER - Financial Literacy Association; and “Para Durumu”, a social initiative focusing on personal fi nancing. Mrs. Özlem Denizmen Kocatepe started serving as a Board Member of Global Reporting Initiative (GRI) in 2014.

Gür ÇağdaşBoard Member Mr. Gür Çağdaş graduated from Istanbul University, Faculty of Political Sciences in 1983, and earned his master’s degree at Istanbul University School of Business Administration Institute of Business Economics in 1985. He started to work as an investment specialist at Eczacıbaşı Securities in 1986, and later founded Vakıfl ar Bank’s Securities Center in Istanbul in 1988 and managed this institution until 1990. He joined Doğuş Group in May 1990 and has served as the Head of the Capital Markets Group at the Birleşik Türk Körfez Bank, Assistant General Manager at Garanti Securities, and Garanti Yatırım ve Ticaret Bank, General Manager of Garanti Asset Management starting in June 1997. He was appointed the Vice Chairman of the Board of Directors, and later as Chairman of the same organization. Since 1 January 2016, Mr. Gür Çağdaş has served as Advisor to the President at Doğuş Holding, and Board Member at Doğuş Enerji Toptan Elektrik Tic. A.Ş., and Doğuş Sigorta Tic. A.Ş. He was the Chairman of the Turkish Institutional Investment Managers’ Association (TKYD) from February 2007 to 2014, and also represented Turkey at the European Fund and Asset Management Association (EFAMA). He is currently the Vice President of Corporate Governance Association of Turkey (TKYD).


Recep Yılmaz ArgüdenIndependent Board Member Graduating as an honor-roll student and receiving the President’s Recognition Award for student leadership from Boğaziçi University, Department of Industrial Engineering, Mr. Recep Yılmaz Argüden received his Ph. D in strategic analyses from the RAND Graduate School with General Distinction. Since 2012, Mr. Recep Yılmaz Argüden has been an Independent Board Member, Head of the Corporate Governance and Sustainability Committee, and the Early Risk Detection Committee, as well as a member of the Audit Committee at Doğ uş Otomotiv. Mr. Recep Yılmaz Argüden also serves as Chairman of the Boards of ARGE Consulting, and Rothschild - Turkey. He is the founder of the non-profi t Argüden Governance Academy. Mr. Recep Yılmaz Argüden has assumed international roles on the IFC Corporate Governance Group Advisory Board, and the BIAC Governance Committee representing the business world in the OECD countries. Mr. Recep Yılmaz Argüden was elected the Chair of the UN Global Compact Local Networks Advisory Group and became a member of the UN Global Compact Board of Directors. He was selected as one of the “100 Global Leaders of Tomorrow” by the World Economic Forum for his commitment to improve the quality of life.

Ferruh EkerIndependent Board MemberMr. Ferruh Eker is a graduate of Adana Academy of Commercial Sciences, and completed the 156th session of the Advanced Management Program at Harvard Business School. In 1979, Mr. Ferruh Eker served in the Garanti Bank Supervisory Commission and also in a number of different positions in the bank. After serving as the General Manager of Garanti Leasing and Garanti Faktoring, Mr. Ferruh Eker left Doğuş Group in 2004 and founded, as well as chaired, Turde Real Estate Development and Mining, Inc. Mr. Ferruh Eker rejoined Doğuş Group in March 2012, and is now serving as an Independent Board Member at Doğuş Otomotiv, and as the Head of the Audit Committee.

Emine Gülden ÖzgülIndependent Board MemberA graduate of METU Administrative Sciences Faculty, Department of Economics, Mrs. Emine Gülden Özgül served as the Coordinator of Central Operations at Ottoman Bank. From 2001 to 2008, Mrs. Emine Gülden Özgül was the Asst. General Manager at Oyakbank responsible for Operations, Project Management, and Quality. In 2008, when Oyakbank was acquired by ING Bank, Mrs. Emine Gülden Özgül maintained her position in the new entity. Experienced in the improvement of operational processes, effi ciency, and restructuring, Mrs. Emine Gülden Özgül has been an independent Board Member at Doğuş Otomotiv, and the Head of the Remuneration and Nomination Committee since March 2013.

BOARD OF DIRECTORS


EXECUTIVE BOARD

Emir Ali BilaloğluChief Executive Offi cer

Giovanni Gino BottaroExecutive Board Member

Kerem TalihExecutive Board Member

Vedat UygunExecutive Board Member

Ela KulunyarExecutive Board Member

Kerem Galip GüvenExecutive Board Member

Tolga SenyücelExecutive Board Member

İlhami EksinExecutive Board Member

Mustafa KarabayırExecutive Board Member

Anıl GürsoyExecutive Board Member


TURKISH ECONOMY AND THE AUTOMOTIVE INDUSTRY

As history recorded 2016 as a year of ongoing political and economic uncertainties, of social developments shaping the agenda, Turkish economy only grew 2.4% in the fi rst 9 months, staying below the targeted potential growth rate of 4.5%. While the greatest support for growth came from domestic demand, Turkish exports declined by 0.84% in 2016 down to $142.6 billion, and imports decreased by 4.17%, amounting to $198.6 billion. Due to the decline in oil prices, foreign trade defi cit decreased 11.10% in 2016.

Retail and light commercial vehicle sales in Turkey broke a new record of 1,983,720 units, increasing 1.6% in 2016 compared to the previous year. Passenger car sales rose 4.3% to 756,938 year on year while light commercial vehicle sales dropped 6.4% to 226,782.

In a year that also saw the highest levels in the total passenger car and light commercial vehicles market in Turkey, the automotive industry broke a new record with 1,486,000 units produced and 1,141,000 units exported in 2016.

The industry thus achieved record-breaking performance in 2016 over its historic record in 2015, increasing by 9% year on year on unit basis.

The Turkish automotive industry, which exported 77 out of every 100 vehicles produced, exceeded the threshold of 1 million units in exports for the fi rst time in 2016 and grew 15% compared to 2015.

Meanwhile heavy commercial vehicles sales dropped 45% to 18,343 year on year.

983,720SALES UNITS OF PASSENGER AND LIGHT COMMERCIAL VEHICLES IN TURKEY

“77 out of every 100 vehicles produced are exported”The Turkish automotive industry, which exported 77 out of every 100 vehicles produced, exceeded the threshold of 1 million units in exports for the fi rst time in 2016 and grew 15% compared to 2015.

Automotive Market Sales Units (Wholesale Units)

2016 2015 2014

Passenger Vehicles 765,467 726,477 582,117

Light Commercial Vehicles 228,446 245,027 179,919

Heavy Commercial Vehicles 18,343 33,652 31,061

TOTAL 1,012,256 1,005,156 793,097


DOĞUŞ OTOMOTİV IN 2016

Doğuş Otomotiv, which celebrated its 22nd anniversary in 2016, is the leading automotive importer and distributor in Turkey, serving customers with 12 international brands, nearly 80 models, sales, aftersales and spare parts services, nearly 2,500 employees and more than 500 service centers. Doğuş Otomotiv has again increased its market share in 2016, and maintained its position as the market leader in the Turkish automotive industry for the 5th consecutive year.

As signifi cant political and economic changes continued to affect the world, 2016 also became a year of hardships due to geopolitical reasons in our country. But despite these challenges, the automotive industry gained momentum brought about by the changes in SCT and foreign exchange rates.

The total retail market for passenger cars and light commercial vehicles in Turkey was 968,017 units in 2015, and amounted to 983,720 units in 2016 with an increase of 1.62% year on year. Passenger car sales, which totaled 725,596 units in 2015, increased by 4% to 756,938 units in 2016 while light commercial

vehicle sales of 242,421 units in 2015, decreased by 6.45% to 226,782 units in 2016.

In 2016, Doğuş Otomotiv increased its total retail sales of 206,896 units, excluding heavy commercial vehicles, up from 199,226 units of the previous year, and succeeded to and improved its retail market share from 20.6% to 21%.

Turkey’s leading automotive distributor Doğuş Otomotiv continued its growth trend in 2016 with the added value and competitive advantage that the brands bring, and to enable the world’s most valuable brands to perform successfully in Turkey, steadily strengthening with the vision of “creative service beyond expectations” and principle of “working with a focus on customer satisfaction”.

The vision of Human Resources in Doğuş Otomotiv is to become Turkey’s most preferred employer that makes employees feel valued and creates a common culture through innovative and sustainable human resources practices. The Human Resources policy shaped by this vision is to attract and retain employees that: are able to sustain high performance in the long

21%DOĞUŞ OTOMOTİV’S RETAIL MARKET SHARE

“Leading Automotive Distributor”Turkey’s leading automotive distributor Doğuş Otomotiv continued its growth in 2016 with the added value and competitive advantage that the brands provide, and to enable the world’s most valuable brands to perform successfully in Turkey.

DOĞUŞ OTOMOTİV INCREASED ITS MARKET SHARE IN 2016, AND MAINTAINED ITS LEADING POSITION IN THE TURKISH AUTOMOTIVE INDUSTRY FOR THE FIFTH CONSECUTIVE YEAR.


» 12 distributorships bringing together the world’s strongest automotive brands,

» A total vehicle park of more than 1,700,000 vehicles,

» Over 500 customer touch points, » Nearly 2,500 employees, » Close to 80 different models offered in a wide array of products,

» 208,956 units of retail vehicle sales (including heavy vehicles),

» 22,524 units of used vehicle sales.

SALES SUCCESSThe brands under Doğuş Otomotiv ended 2016 with great success, breaking sales records.

Volkswagen Passenger Cars, named Turkey’s most loved brand for the fourth consecutive year, completed 2016 with awards and selling over 100,000 retail vehicles in line with targets.

Volkswagen Passenger Cars reached 13.4% market share with 101,763 retail sales, thanks to successful product and communication strategies followed in 2016 with the support of new models in the retail passenger car market, which recorded 4.3% growth volume year on year, compared to the previous year, and fi nishing second in the passenger car market.

Apart from the new Tiguan, which was launched as the main model in May, the Allstar action series was offered in the Polo, Golf, Beetle and Scirocco models.

The Audi brand, imported to Turkey by Doğuş Otomotiv since 1994, achieved signifi cant success in 2016, increasing its sales by 8.51% in the retail passenger car market compared to the previous year and reaching the highest sales fi gure of its history with 22,005 units. With the renewed and growing model

term, system-focused, productivity based, eager to learn and develop, appreciative of customers, has the skills required by the dynamism of the company, and able to adopt the values of Doğuş Group, and to ensure that they use their potential in the most effi cient way, and to contribute to their professional and personal development.

The company that greatly values the importance of its employees’ personal and professional development has, for this purpose, included the gamifi cation approach, which has become an important tool in the organization’s training process in recent years. The idea for GO (Development School) Platform developed within this context aims to increase employees’ participation in activities before and after trainings, unlike the traditional education approach. The project started in early 2014, and after nearly one and a half years of work the platform was launched in April 2015 for the use of employees with a big launch event in the company, and in a very short time won 4 international awards in 2016.

With DRIVE (Doğuş Otomotiv’s Route is toward People and Education), a project launched in 2013 with the aim of making organizational structures more effective in the Human Resources area in the authorized dealers and aftersales service centers, the recruitment of white-collar employees for Authorized Dealers is performed by the central Human Resources department, which also develops processes such as promotions, and the performance management system. Several activities have been carried out throughout 2016 in this context.

Doğuş Otomotiv has reinforced its already strong position in the Turkish automotive industry in 2016 with:

range, Audi became the brand that increased its market share in the premium segment the most compared to the previous year.

The SEAT brand continued its steady growth of the past four years, reaching 20,637 units in the retail passenger car market in 2016, the highest sales fi gure ever, showing a performance well above the market with a 22% increase in sales year on year. With successful product, communication, sales and fl eet strategies followed in 2016 for the Leon, Ibiza, Ateca, Alhambra and Toledo models, SEAT increased its market share to 2.73%.

The SEAT brand also achieved the highest sales volume in its history in the Leon and Ibiza models as well, and increased its market share in their segments. Leon ranked second in the AHB segment and achieved a segment share of 13.11%, while Ibiza increased its share in the A0-HB segment to 4.72%. SEAT’s fi rst SUV, Ateca, which was added to the model range in November, closed the year with 188 units of sales.

ŠKODA once again achieved record sales in passenger cars and maintained its growth. Having closed 2015 with 22,107 units, ŠKODA increased its sales by 30,62% to 28,876 in 2016. Accordingly, the brand increased its market share to 3.81%, rising in the Turkish retail passenger car market from 13th to 11th place.

The Lamborghini brand reached its highest sales fi gure of recent years with 7 units, further strengthening its position in the high-end luxury segment market and taking its brand image to the top levels.



lead in the imported commercial vehicle market with a market share of 30.4%. For the fourth consecutive year, the Volkswagen brand won the title of the best-selling brand with total sales of passenger cars and commercial vehicles.

The Transporter model of Volkswagen Commercial Vehicle reached its highest market share in history with a market share of 48.2% in 2016, and reached 13,393 units in total. The Amarok model captured a market share of 17.6% with 3,643 units, while the Crafter took 6.3% market share with 3,605 units, and the Caddy 14.5% market share and 12,131 units, respectively.

In 2016, Volkswagen Commercial Vehicle’s powerful model Amarok was launched with an updated look. The new Amarok, with the 3-liter V6 engine, the most powerful engine in its class, technology and comfort advantages, was widely promoted with a 360° communications strategy.

Comfortline equipment, whose previous generation was very popular with the users, was offered with the Transporter in February. Transporter Comfortline has made a difference in its class with its high level of comfort and standard equipment features.

The Caddy Exclusive version of Caddy, the most desired Volkswagen Commercial Vehicle model, was introduced to the Turkish market in 2016, further strengthening its claim with its wealth of features. The special launch of the Caddy Exclusive model in Turkey was supported by an effective communication plan that refl ected positively on the increase of Caddy’s segment share.

The Caravelle Team model, inspired by the two-color design of the legendary Volkswagen T1, which was produced for the fi rst time 66 years ago and created its own class,

While the Bentley brand maintained its sustainable success in 2016, the Lamborghini brand reinforced its competitive position with the Huracan model. The Lamborghini brand reached its highest sales fi gure of recent years with 7 units, further strengthening its position in the high-end luxury segment market and taking its brand image to the top levels.

Porsche Turkey improved customer satisfaction in 2016 with its sales, marketing and aftersales services actions designed in line with its global digitalization strategy and its innovative support systems adapted to its product line-up, selling 827 units.

Porsche’s best-selling model in 2016 was Macan with 514 units. The Macan model increased its market share in the compact SUV segment by 19% compared to 2015. The Macan model was followed by Cayenne, which sold 232 units. The highest sales after the Cayenne model belonged to the 911 with 28 units. The 911 increased its market share in the premium sports car segment by 35%. In 2016, the 718 Boxster / Cayman models, which play an important role in the sports car segment with the 2.0-liter engine option, sold 27 units. And the Panamera model accounted for 26 units of the sales in 2016.

In 2016, Volkswagen Commercial Vehicle reached its highest sales fi gures and the highest market share ever. The Volkswagen Commercial Vehicle, which maintained its third place in the overall market, became the leader in imported commercial vehicle sales.

In 2016, the retail light commercial vehicle market shrank 6.5% compared to the previous year, with a total of 226,782 vehicles sold. Volkswagen Commercial Vehicle took 14.5% share of the light commercial vehicle market with 32,772 units sold and maintained its

was also introduced to the market in August 2016.

Scania proved its success by increasing its market share in 2016, as it does every year, with a technological and quality product range, suitable for any project. Scania Engines recorded signifi cant growth in 2016, now ranking fourth in the global Scania CV business, and also increased its marine engine sales in the Turkish market by 260%.

Thermo King, longtime market leader in the chiller unit industry, maintained its leading position with the sales results achieved in 2016.

Offering options on units in response to customer needs, and specialized cooling and heating solutions for different projects, Thermo King strengthened its cooperation with the leading cold chain and pharmaceutical transportation companies in Turkey, and reinforced its reliable standing in the industry.

AFTERSALES SERVICESDoğuş Otomotiv, building its business philosophy on customer satisfaction and carrying out all of its operations in line with its quality-focused service approach, continued to take innovative steps in 2016 to reach its goal of creating “fan customers” by bringing its service quality to the highest level to create unique customer experiences.

The Value and Care Center (DIM), created to offer sales and aftersales services to users of the brands distributed in Turkey by Doğuş Otomotiv, contacted 1.35 million customers throughout 2016, becoming the most active unit in its fi eld of expertise in the Turkish automotive industry.


With aftersales service campaigns aimed at Porsche’s car park, which grew 6% by the end of 2016, and Porsche Accessory-Boutique marketing activities, year on year, the accessory sales increased 10%, boutique sales 15%, and the number of work orders by 10.5% respectively. The customer loyalty rate for Authorized Aftersales Services was 79%, while the customer satisfaction survey score rose to 110.8 as a result of the customer-focused approach in the aftersales service centers.

Scania proved its success by increasing its market share in 2016, as it does every year, with a technological and quality product range, suitable for any project.

Car entries into the SEAT Authorized Aftersales Services rose to 74,000, corresponding to 19% increase compared to the previous year with the effects of the larger vehicle park, and aftersales service marketing activities. With the actions taken throughout the year, Authorized Aftersales Service loyalty rates reached 64%, and thanks to the brand’s customer-focused aftersales service concept, customer satisfaction scores rose to 101.5 for aftersales services.

In 2016, SEAT Turkey won the “Absolute Winner” award, the highest prize of all categories in the Top SEAT People competition organized by SEAT S.A. among all Authorized Dealers worldwide, while also winning the second prize globally in the aftersales service consultant category.

Volkswagen Passenger Cars Aftersales Services expanded its service network with the opening of Avek Çanakkale Authorized Aftersales Service in 2016, increasing the number of its Authorized Aftersales Service centers across Turkey to 76. Up from fourth to second place, Volkswagen After Sales Services took its success further at the International Aftersales Customer Satisfaction (IACS) survey commissioned by Volkswagen AG, and conducted annually throughout the world by an independent research institute to compare the aftersales services. Authorized services receive around 625,000 vehicles throughout the year and serve an average of 52,100 customers every month. In 2016, the spare parts and workmanship turnovers increased by 17% and 10%, respectively. Approximately 17,500 customers are served monthly with 209,000 vehicles entering the Volkswagen Commercial Vehicles Aftersales Services’ Authorized Service Centers. In 2016, the parts revenues increased by 7%, and the labor by 5%.

Audi After Sales Services has aimed to provide faster service by realizing many digital projects in line with customer satisfaction set as its focus. All the information written by the smart pen is instantly transmitted in digital environment to the service consultant, resulting in faster response to customers. Remote video training project was also implemented to increase the educational level and quality of service personnel in 2016.

The Audi brand also increased its vehicle park by 17% year on year, and attained 75% customer loyalty ratio as an exemplary fi gure across Europe while aftersales turnover rose by 14%.

SPARE PARTS AND LOGISTICSSpare Parts and Logistics carries out the importation, warehousing and distribution operations for vehicles and spare parts to Authorized Dealers of the world’s most prestigious brands including Volkswagen, Audi, SEAT, ŠKODA, Porsche, Bentley, Lamborghini, and Scania, as well as Scania Industrial and Marine Engines, Thermo King Mobile Temperature Control Systems, and their parts.

Spare Parts and Logistics imported 186,300 vehicles, and dispatched 211,000 vehicles to Authorized Dealers, ending the year with a total revenue of TL 832.4 million generated by the sales of spare parts and accessories.

AWARDSFor Doğuş Otomotiv and the distributed brands, 2016 was a year of many awards.

Doğuş Otomotiv ‘s GO Platform was awarded with 4 grand prizes by the world’s most prestigious institutions. The GO Development School, which is one of the fi rst gamifi cation-based digital training platforms in the world in its fi eld, won 1 gold Stevie in the “Best Training Site” category, and a bronze Stevie each in the “Best Corporate Training Software” and “Creative team” categories. The GO Platform also won Gold medal in the “Best Advance in Learning Technology Implementation” category at the Brandon Hall Excellence Awards, the most prestigious awards program in the industry.



Value Chain 2016

Import and Distribution

Retail

Replacement Parts and After Sales Services

Used Vehicles Sales

Finance

Other Investment

Doğuş Otomotiv

Independent Authorized

Dealers

Automotive Financing*

Insurance*

*Subsidiaries

**Representative Offi ces

D-AUTO SUISSE

D-AUTO LLC

Insurance*

TüvTürk*Tü Tü k*

Quick Fix to All Brands

Yüce Auto*

Spare Parts and Logistics

**



According to the evaluation conducted by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş. to measure the compliance level of its practices with the “Capital Markets Board Corporate Governance Principles, the Company raised its Corporate Governance Rating from 9.42 in 2015 to 9.51 in 2016. With this score, Doğuş Otomotiv won the “Company with the Highest Rating in the Board of Directors Category” award.

At the fi fth annual Call Center Customer Experience Summit and Quality League Award Ceremony organized by Telephone Doctor Turkey, DIM was recognized with the ‘Best Approach’ award among 33 companies in 2016, underlining the value of customers and service quality of the Center.

DIM also won fi rst prize in the ‘Best Customer Experience’ category at the eleventh annual Contactcenterworld.com Awards, considered the world’s most prestigious award in the customer relations management industry among 45 companies shortlisted in 34 categories, as well as the second prize in the ‘Best Call Center Design’ category.

Volkswagen Passenger Car was as successful in sales as it was in communications, and was voted the most liked car brand of the year for the fourth consecutive year in a survey conducted by the independent research company Mediacat Ipsos. Volkswagen Passenger Car was awarded fi rst prize in the “TV application of the year” category at the ODD Sales and Communication Awards organized

by the Association of Automotive Distributors for its communication campaign “A family with unique features”. Furthermore, the brand won the silver award for the Lovemark television campaign at the Effi e and Crystal Apple Awards in the automotive category; fi rst prize in the Turkish Customer’s Voice competition in the automotive category; Golden Spider and Gold Stevie awards in the automotive category for its renewed website, and Gold Stevie for the management of its Instagram and Facebook accounts.

Audi won the grand prize “Kıpkırmızı” at the Kırmızı Advertising Awards for its air bag campaign, as well as the best art direction, best illustration, and best car advertisement in media awards.

The magazine advertisement of Macan 2.0 featuring a hologram was an exclusive project that won the Bronze Apple in the “Best Media Application” category at the prestigious Crystal Apple advertising awards.

The launch event of the new 718 Cayman within the scope of summer venue sponsorship was recognized in the “Outdoor Application of the Year” category at the ODD Sales and Communication Awards, making Porsche Turkey one of the 2016 Gladiators for the fi rst time in its history.

Doğuş Oto Bursa won the Audi Twincup race with 74% successes rate while ŠKODA Turkey’s Best Authorized Dealer award also went to Doğuş Oto.

ŠKODA Turkey, which operates with 39 Authorized Dealers and 36 Authorized Aftersales Services was named the most successful distributor in the Aftersales Services Category among 103 countries at the “Best Distributor Awards” hosted by the manufacturer while the new Superb was awarded as the “‘Car of the Year in Turkey”’ by OGD.

Thermo King was named the best brand for the 12th time in the “‘Cooler Units”’ category according to reader votes at the “Best Brand” competition organized by Lastauto Omnibus, Trans Aktuell, and Fernfahrer magazines published in Germany, and included among the most prominent publications of the commercial vehicle industry.

D-AUTO SUISSE SAD-Auto Suisse SA, a subsidiary of Dogus Otomotiv, has continued its operations with Porsche since 2009, and the recently added Bentley and D-Occasion brands in the Swiss city of Lausanne located in Canton Vaud, which has a population of 750,000. By offering customers new and used vehicles, spare parts sales, and aftersales services, the company improves its service quality and reliability every year. D-Auto Suisse SA has succeeded to sell 306 new and 126 used vehicles in 2016.


DODDOD, a pioneering brand, maintained its leading position in its segment with customer experience enhancing new projects launched in digital channels in Turkey for the fi rst time in 2016. With an Authorized Reseller network supported by increased supply and diversifi ed inventory, the company continues to reinforce its position in the used car sector.

The increase in the number of partnering fl eet companies continued in 2016, and by further diversifying of the brands and models through new agreements, a wider range of vehicles could be supplied to Authorized Resellers in higher numbers. Vehicle purchases increased by 31% compared to 2015, while DOD’s vehicle sales in cash reached 928 units by growing 9% year on year, and total sales to Authorized Resellers amounted to 22,534 units.

TÜVTÜRKFor TÜVTÜRK, which contributes to the traffi c and vehicle safety with services in international standards as the only authorized and appointed organization to conduct periodic vehicle inspections in Turkey, 2016 was a very successful year. TÜVTÜRK, always prioritizing positive customer experience, achieved growth in all operational areas in 2016, and in periodic inspections in particular, increasing its turnover 9.5%, from TL 1,327,000,000 to TL 1,452,000,000. The operations of TÜVTÜRK Istanbul accounted for TL 242,000,000 of the total amount.

TÜVTÜRK, one of Turkey’s most effective Public and Private Sector Collaboration projects, has contributed nearly TL 5.2 billion to the public since its inception while this fi gure for 2016 alone amounted to TL 900 million.

In 2016, D-Auto Suisse SA invested CHF 4.5 Million in the opening of a new showroom, increasing its capacity of new vehicle exhibition by 40%, used vehicle exhibition by 300%, and its service capacity by 55%.

D-AUTO LLCD-Auto LLC, 100% owned by Doğuş Otomotiv, signed an exclusive general distributorship agreement for the Iraq territory with the Volkswagen and Audi brands in 2013, and launched its operations in the city of Erbil in July 2014. This was followed in December 2015 with the signing of the Iraq distribution agreement with Volkswagen Commercial Vehicles, adding another brand to the range.

D-Auto LLC provides its customers with the best quality service, combined with its knowledge and experience with 17 employees in an area of 7,500 m2.

D-Auto LLC has gained acclaim among Volkswagen and Audi users for its customer satisfaction oriented service approach. With the high quality offered in aftersales services and trained technical staff, D-Auto LLC became the customers’ preferred service point, and serviced 2,128 vehicles in 2016.

DOĞUŞ OTODogus Oto sells new and used vehicles, spare parts and accessories at six points in the Istanbul, Ankara and Bursa provinces, and also offers insurance, fi nancing and aftersales support services for the 7 brands (VW Passenger Cars, VW Commercial Vehicles, Audi, Porsche, SEAT, SKODA and DOD) it represents. Dogus Oto sustains its progress by continuously improving its service quality. 2016 has been a very successful year that saw Dogus Oto exceed its 2016 targets by selling 62,405 vehicles, and 251,295 service entries. Consequently, Doğuş Oto’s business volume and the number of customers contacted have also increased signifi cantly.

In 2016, periodic vehicle inspection of 8,194 vehicles was carried out, showing an increase of 1.3% compared to the previous year.

vdf AUTOMOTIVE FINANCEIn 2016, vdf delivered much higher performance and exceeded its targets by focusing on customer satisfaction with its products and services.

With a penetration rate of 37% among Volkswagen Group brands, vdf maintained its position in 2016 as the market leader among consumer fi nancing companies and banks in 2016 on the basis of “performing contracts”’ in consumer vehicle loans.

By granting 86,500 new loans as of 2016 yearend, vdf increased its total number of performing contracts to 160,800, and comfortably exceeded its targets with this record rise. vdf also increased its performing contracts by 19% in volume year on year, rising from TL 5.9 billion to TL 7 billion.

vdf Insurance functions as part of the VW Group’s Authorized Dealers and, in 2016, has added 10 more to its number of branches at dealers, reaching a total of 60. vdf Insurance Services added MAN Kasko to its branded accident insurance products that started with Volkswagen Kasko, and continued with SEAT, ŠKODA, DOD, Audi Kasko and Scania Kasko, making a difference in its sector with brand specifi c guarantees.

vdf Insurance maintained its position as the largest agency in 2016 in terms of total premium production and number of performing contracts, increasing its net premium production by 25% year on year, and rising from TL 300 Million to TL 374 Million. vdf Insurance also increased the number of its policies, reaching 311,500 insurance policies in 2016.


Aiming to keep up with the global digitalization process and the requirements of the times, the “Digital Retail” project, which was diligently carried out in pilot phase, was launched at Doğuş Oto Etimesgut in 2016.

In line with its marketing strategy to focus on the target audience, Volkswagen Commercial Vehicles continued its effective communication activities based on in-depth analyses of customer profi les and the media channels they use. Throughout the year, different projects were launched to promote the Volkswagen Commercial Vehicles brand, inform customers and introduce products on all communication channels from classic to new media.

Volkswagen Commercial Vehicles is a pioneer in the industry with more than 1 million followers on Facebook, customer-focused innovative and outstanding applications offered on various social media platforms such as Instagram and YouTube, and services to enhance customer satisfaction.

“Advanced Driving Pleasure” videos of all models were prepared for sharing on social and digital channels. In these videos, the technological and electronic systems in the vehicles are described in a “How It Works” format with the aim of

With customer satisfaction always at the forefront, vdf broke records in the number of loans and insurance policies, and better performance beyond targets with innovative products and services, and also added vdf fl eet to its operations to serve all segments of the automotive industry in 2016.

SOCIAL MEDIA: A STRATEGIC COMMUNICATION CHANNELAll brands under Doğuş Otomotiv use social media effectively.

Following the digital world closely, Volkswagen has offered 23 million users the opportunity to visit its new Passenger Cars website. The “MyVolkswagen” app offered for constant availability for fans was downloaded to 80 thousand users’ smartphones.

Social media channels that bring together powerful strategy and original contents with users have become the most followed accounts again this year. Volkswagen has the largest automotive Facebook page and leads in Turkey in terms of following, and has exceeded 4 million local followers. Volkswagen Passenger Cars has also been the most followed automotive brand in Instagram with its number of followers exceeding 260,000. Volkswagen Passenger Cars has also been very active on other channels to provide the right content for Volkswagen fans on Youtube, LinkedIn and Google Plus, achieving instant one-on-one communication through “Social CRM” applications.

communicating the product specifi cations to the users in the right format. The goal here was to increase the benefi ts and customer satisfaction of Volkswagen Commercial Vehicles models.

Social media channels such as Facebook, Twitter, Instagram, YouTube, and LinkedIn have been successfully used in Audi’s brand communications. Audi became one of the leading brands in the automotive industry in terms of average engagement fi gures on Facebook in the premium segment.

DOD, which has stood out with its innovative approach to social media, continued with active and visionary social media channel usage in 2016, as digital channels are preferred more and more for the brand’s national and local communications.

The success of ŠKODA was not limited to its sales performance, but also extended to the online world. ŠKODA Turkey sustained its fast rise on Facebook with 564,254 followers, and recorded stable growth on its website www.skoda.com.tr with 8,344,796 visitors.

SEAT’s new website design launched in 2016 aims at increasing customer benefi ts with its design, functionality and distinctive infrastructure. With the new website, the visitor numbers increased 56% year on year.



Doğuş Otomotiv took on a pioneering role in 2009 when it prepared its fi rst Corporate Sustainability Report in compliance with GRI’s Global Reporting Framework, with the report published regularly since then.

For 12 years now, the company has been carrying out the social responsibility activities that fi rst launched in 2004 with the slogan of “Traffi c is Life!” in order to raise the general responsibility, awareness and perception of traffi c in the society.

Doğuş Otomotiv strives to defi ne the future expectations and needs accurately, building on its fi nancial and operational successes across automotive value chain by offering the right products and services, and regards it as a top priority to develop business models and innovative solutions focused on creating sustainable business processes and common values.

With the “Traffi c is Life!” platform, which has been developing thousands of projects to reach all segments of the society since 2004 and adding value to social unity, the Company will continue to build on its successes, and creating value for its stakeholders, employees and the community.

The “Traffi c is Life!” platform

Television, newspaper, magazine, radio and digital channels were used to support the sales of Ibiza and Leon throughout the year. Communication of Ateca, the fi rst SUV of SEAT, effectively continued in the second half of 2016.

Scania has already outpaced its competitors and reached 180,000 users on Facebook with the account only opened in 2015, and also connected with its business partners on Instagram, LinkedIn and Google Plus platforms in 2016. Scania’s website also got a makeover in 2016, and the new design now offers better usability on an improved platform.

CORPORATE SUSTAINABILITY Doğuş Otomotiv continued its corporate sustainability endeavors at full speed in 2016 with the aim of managing the impact of its operations and bringing the solutions it creates to all its stakeholders, as well as working on transparency and accountability, the basic tenets of corporate sustainability.

The Company’s commitments regarding environmental, economic, social, and ethical factors that shape its strategic decisions support its sustainability vision.

Doğuş Otomotiv also believes fi rmly that in order to continue its existence in the future, it is as important to create social good for the people living in the regions where it conducts its operations as fi nancial success.

believes that the positive cultural transformation regarding traffi c safety will contribute positively toward all areas of life, leading to livable cities and a better future. Accordingly the platform carries out activities aimed at changing the behaviors and habits of individuals from all age groups about traffi c safety, raising awareness in the community, and building consciousness in different target segments.

The “Traffi c is Life!” platform was recognized with the “2016 Social Awareness Award” at the Business Summit organized by CSR Europe and Corporate Communications Association for its efforts, and also won in the Best Ambient and Urban Contribution categories at the prestigious Outdoor Advertising Awards.

The “Traffi c is Life!” platform, which bases its entire business model on a people-focused approach in order to create a livable future and leave a world with the culture of respect in traffi c for younger generations, will continue to invest in the community to ensure the sustainability of its work. As it has done in the past, the platform will always listen to the voice of the community while contributing to the environment in which it operates, seek solutions for the traffi c safety issue together with the community, and make its mark on the future.


TRAFFIC IS LIFE!

DOĞUŞ OTOMOTİV SHAPES THE FUTURE WITH A VIEW TO SUSTAINABILITY, AND CARRIES OUT ACTIVITIES WITH A RESPONSIBLE APPROACH TOWARD ITS STAKEHOLDERS AND THE COMMUNITY.

The “Traffi c is Life!” platform believes that the positive cultural transformation regarding traffi c safety will contribute positively toward all areas of life, leading to livable cities and a better future. Accordingly the platform carries out activities aimed at changing the behaviors and habits of individuals from all age groups about traffi c safety, raising awareness in the community, and building consciousness in different target segments.

The ‘Long Distance Traffi c Safety’ training launched with the aim of protecting the youth, which is the future of communities and the most important strength to ensure positive changes in traffi c culture, from traffi c accidents and informing them about traffi c safety has so far reached over 20,000 students in 18 universities. The long distance training, which was included in the “social elective courses” category recommended by the Higher Education Council (YÖK), became the fi rst corporate responsibility project to enter the university SCORM system with its traffi c safety content.

Doğuş Otomotiv shapes the future with a view to sustainability, and carries out activities with a responsible approach toward its stakeholders and the community. The Company has launched the “Traffi c is Life!” platform with the aim of creating a long-lasting positive cultural transformation in the community for traffi c safety, adding value to social development, and making its mark on the future.

Doğuş Otomotiv strives to defi ne the future expectations and needs accurately, building on its fi nancial and operational successes across automotive value chain by offering the right products and services, and regards it as a top priority to develop business models and innovative solutions focused on creating sustainable business processes and common values.

With the “Traffi c is Life!” platform, which has been developing thousands of projects to reach all segments of the society since 2004 and adding value to social unity, the Company will continue to build on its successes, and creating value for its stakeholders, employees and the community.

With the “Public Announcement Competition” that aims to make a mark on the future together with the youth, getting them involved in the road safety conversation, and encouraging them to think about and create for the traffi c safety issue, the “Traffi c is Life!” platform launched a widespread interactive contest about traffi c safety as a fi rst, and drew the attention of the public to traffi c safety. The competition, which was frequently covered by the national and local media, required participants to shoot a maximum 45-second video in short fi lm format using their own scripts about one key message used in the communications of Traffi c is Life; namely “Don’t Speed”, “Don’t Drive and Talk”, and “Fasten Your Seat Belt”. The owner of the winning project was offered the opportunity to re-shoot the video with Ömer Faruk Sorak, the acclaimed director of such fi lms as G.O.R.A., Vizontele, and 8 Saniye.


The public announcement fi lm “Safety is the Future”, shot on location in Şarköy and Hadımköy, and featuring actors Erdem Akakçe, Güven Hokna, and Deniz Özerman, was shown on 88 channels more than 10,000 times, becoming one of the most shown fi lms among all public announcements.

In addition to the “Long Distance Traffi c Safety Training” and “Public Announcement Competition”, fi eld activities are organized to reinforce the students’ knowledge and experiences. The “Traffi c is Life!” platform reaches the youth through educational panel sessions in universities across Turkey, virtual reality driving simulations, and social media activity booths. At the event organized at Bilkent University in February 2016, 160 students were trained for defensive driving techniques, while hundreds of students participated in safe driving simulations.

The platform also started a new project in 2016 to raise awareness about children’s safety in traffi c and in vehicles, and launched the ‘Child Safety in Traffi c’ initiative taking into consideration that the second most affected group from traffi c

The competition, which saw great interest, received 422 videos in total, and the shortlist of fi ve talents presented their projects to the jury consisting of director Ömer Faruk Sorak, Hürriyet daily newspaper writer Elif Ergu, producer Oğuz Peri, and Doğuş Otomotiv Corporate Communications Director Koray Bebekoğlu. After deliberations, the jury chose Korhan Topçu as the winner with his fi lm “Safety is the Future” about the trip of a family of 5 for conveying the main message most clearly and directly to the target audience.

The winner Korhan Topçu then shot the video again, this time with acclaimed director Ömer Faruk Sorak, and had the opportunity to be involved in the making of a professional fi lm, get the opinions of experts, and see his video on television as a public announcement. It was then decided to also re-shoot the fi lm by Zeynep Dilara Aksoy, the runner up who won the special jury award.

accidents is the 5-14 age group, and that the number of children hurt in accidents in our country is increasing.

As part of the “Child Safety in Traffi c” initiative, the “Child Safety in Vehicles” in Turkey study was conducted in late 2015 in Izmir, Istanbul, and Ankara to create a roadmap and determine the actions to be taken. For the study carried out in cooperation with the General Directorate of Security, 3,000 respondents were interviewed, and the results revealed once again the vital importance of child safety in traffi c for our country. The study showed that among the families with children in the three major provinces of Turkey, only 23% use child seats. Considering that psychological factors reduced the use of child seats, an advisory team was formed for the project. Professor Serpil Acar of Loughborough University and Professor Memiş Acar, who conduct important studies on pregnant women and child safety in vehicles, and acclaimed psychologist Professor Üstün Dökmen, known for his psychological counseling and guidance work, joined the advisory team for the “Traffi c is Life!” project.


TRAFFIC IS LIFE!

THE “TRAFFIC IS LIFE!” PLATFORM, WHICH BASES ITS ENTIRE BUSINESS MODEL ON A PEOPLE-FOCUSED APPROACH WILL CONTINUE TO INVEST IN THE COMMUNITY TO ENSURE THE SUSTAINABILITY OF ITS WORK.

The platform also collaborated with İtameks and Central Rent a Car, two private sector companies, to offer free child seats to families that rented cars at the İzmir Airport, emphasizing the importance of child safety in all areas that touch people. The “Traffi c is Life!” platform set up a booth at the Mother Infant and Child Fair on December 13-15 at the Istanbul Congress Center, and offered safe driving simulations and traffi c safety trainings, reaching 8,713 parents that visited the fair.

Doğuş Otomotiv, which continues to reach the children, young people and adults through sustainable projects, has decided to choose the 2017 “Traffi c is Life!” radio spot in a manner to once again get young people involved in the traffi c safety issue. The compositions that will be submitted for the 2017 “Traffi c is Life!” Jingle Competition will be evaluated by a jury, and the winning jingle will be recorded by the famous Turkish singer-songwriter Nil Karaibrahimgil together with the winner.

In order for the child seats to be embraced and internalized by children fi rst, a short animation featuring the child seat as a super hero was shown in children’s cinemas for a year. The animated fi lm that reached 584,995 children was also featured on social and digital media.

Professor Üstün Dökmen’s viral fi lm series where he talks about children’s psychology in traffi c reached the parents via social media, and was viewed over 1.5 million times. Social media infl uencers who are gaining more popularity in the recent years were also included in the communication activities of the “Child Safety in Traffi c” project, and the training with mom bloggers that Professor Dökmen moderated received more than 8 million views.

As a meaningful example of public and private sector cooperation, the “Child Safety in Traffi c” project collaborated with Kadıköy Municipality for local administration trainings, and content on mother-infant safety in vehicles was integrated into the “Pregnancy School” trainings.

The “Traffi c is Life!” platform was recognized with the “2016 Social Awareness Award” at the Business Summit organized by CSR Europe and Corporate Communications Association for its efforts, and also won in the Best Ambient and Urban Contribution categories at the prestigious Outdoor Advertising Awards.

The “Traffi c is Life!” platform, which bases its entire business model on a people-focused approach in order to create a livable future and leave a world with the culture of respect in traffi c for younger generations, will continue to invest in the community to ensure the sustainability of its work. As it has done in the past, the platform will always listen to the voice of the community while contributing to the environment in which it operates, seek solutions for the traffi c safety issue together with the community, and make its mark on the future.



ULTIMATE CUSTOMER SATISFACTION

DOĞUŞ OTOMOTİV AIMS AT DELIVERING ULTIMATE CUSTOMER SATISFACTION AS NUMBER ONE PRIORITY IN PROVIDING SERVICES, AND BOASTS ONE OF TURKEY’S BROADEST AUTHORIZED DEALER AND AFTERSALES SERVICE NETWORKS.

2016 Developments in Dealers – Sales Channels

» Authorized Aftersales Service Centers receive 625,000 vehicles annually, and serve 52,100 customers on average every month.

» In 2016, parts and workmanship turnovers rose 17% and 10%, respectively.

» Car entries into the SEAT Authorized Aftersales Services rose to 74,000 in 2016, corresponding to 19% increase compared to the previous year with the effects of the larger car park, and aftersales service marketing activities.

» ŠKODA Turkey, which operates with 39 Authorized Dealers and 36 Authorized Aftersales Services, was named the most successful distributor in the Aftersales Services Category among 103 countries at the annual “Best Distributor Awards”.

» 2016 was a very successful year that saw Dogus Oto exceed its 2016 targets by selling 62,405 vehicles, and 251,295 service entries.


VWAudi

ŠKODASEAT

PorscheScaniaThermo KingScania Marine and Ind. Engines


CUSTOMER TOUCH POINTS

DOĞUŞ OTOMOTİV IS THE PIONEER OF ITS INDUSTRY IN TERMS OF CUSTOMER LOYALTY, THANKS TO THE HIGH STANDARDS ACHIEVED IN EVERY SERVICE AREA.

“Innovative solutions in digital communication”Following the digital world closely, Volkswagen launched the new Passenger Cars website and has been visited 23 million times by the visitors in 2016.

“Solid Steps Regarding Online-Offl ine Integration”Aiming to keep up with the global digitalization process and the requirements of the times, the “Digital Retail” project, which was diligently carried out in pilot phase, was launched at Doğuş Oto Etimesgut in 2016.

» Lead Management » Online Service Appointment Booking

» Live Chat » Events / Lotteries » Customer Benefi ts

Web / Online Platform

» Lead Management

Digital Media

» Lead Management » Remarketing

Smart TV

» Responding to requests in 15 minutes

» Turkuaz Customer Screen Integration

Social Media


» Events / Lotteries » Customer Benefi ts » After Sales Services » Roadside Assistance » Appointments » SMS (Reminders, Congratulations, Permission)

Mobile

» Intelligent Fleet Management System

» Computer-driven Driver Training » Driver Coaching

Vehicle

» Customer Follow Up » Lead Management

Events / Sponsorships

» Roadside Assistance » Appointments » Social CRM » CRM Calls » Extended Warranty » Survey Calls » After offi ce hours Aftersales Service Calls

DİM

» Test Drives » Customer Follow Up » Dealer Satisfaction Calls » Digital Marketing Force

Authorized Dealers

» NVİ Matching and Locking » Unifi cation (with ID #) » Social Media Matching » ZUBIZU (Customer Behavior)

*3.7 million potential customers,

1.5 million active registered users

5.2 Million Unique Visitors*


ABOUT DOĞUŞ GROUP

DOĞUŞ GROUP, WITH OVER 330 COMPANIES AND MORE THAN 55,000 EMPLOYEES, SERVES ITS CUSTOMERS WITH ADVANCED TECHNOLOGIES, HIGHEST BRAND QUALITY AND A DYNAMIC HUMAN RESOURCE.

The Doğuş Group owes its success to a management approach centered on customer satisfaction and effi ciency. As a result of this approach, the Group continues to build strong partnerships with globally reputable brands, and represent Turkey across the world. The Doğuş Group currently partners and cooperates with some of the large global players including: BBVA (Banco Bilbao Vizcaya Argentaria, S.A.) in fi nance; Volkswagen AG and TÜVSÜD in automotive; Condé Nast (Vogue, GQ, Traveller) in media; Hyatt International Ltd. and HMS International Hotel GmbH (Maritim) in tourism; the Latsis Group , the Kiriacoulis Group and the Adriatic Croatia International (ACI) Group in marina and nautical operations; the international Azumi Group that holds under its roof brands such as Coya, Roka, Zuma and Oblix in food& beverage and entertainment; and the South Korean SK Group in e-commerce.

The Doğuş Group’s management approach also embodies a strong corporate citizenship awareness that the whole society does and will benefi t. In launching social responsibility projects, the Group

The Doğuş Group, founded in 1951, sets standards for a better living by being at the forefront of discoveries that shape modern life. Doğuş, which aspires to be a global house of best in class lifestyle brands that create aspiration, not only for customers but also employees, partners and even competitors, continues to work in all of its fi elds of operation with the aim of becoming a global player.

The Doğuş Group, active in eight core businesses including fi nancial services, automotive, construction, media, tourism and services, real estate, energy and entertainment, sustains its growth with new investments in the areas of technology, sports, and entertainment along with its current operations. With over 330 companies and more than 55,000 employees, the Group serves its customers with advanced technologies, highest brand quality and a dynamic human resource.

always aims to leave a mark on people’s life and make it much better. The Group’s social responsibility projects are managed with the objective to help the society to create a progressive future; a modern lifestyle.

The Group launches and carries out a variety of corporate social responsibility and sponsorship projects, particularly focused on culture and arts, sports and education. Aware of its responsibilities in all the areas it supports, Doğuş Group acts with the vision of leading the community by example, and contributes to the economy and employment through its investments.

As a pioneer of change in Turkey, the Doğuş Group capitalizes on its broad network of services, knowledge base and collaborations to attain its goals. The Doğuş Group, driven by its vision of becoming a global player that sets the standards and advances through explorations, continues to consider the partnership and investment opportunities that might be benefi cial for the nation’s economy.

OUR BRANDS


VOLKSWAGEN PASSENGER CARS CAPTURED 13.4% SHARE IN THE PASSENGER CARS MARKET, WHICH RECORDED 4.3% GROWTH IN VOLUME AGAINST THE PREVIOUS YEAR.

Volkswagen Passenger Cars captured 13.4% share in the passenger car market, which recorded 4.3% growth in volume against the previous year. In addition to the new Tiguan, the main model of which was launched in May, the action model Allstar series of Polo, Golf, The Beetle, and Scirocco models were also introduced in 2016. With the support of new models, and thanks to successful product and communication strategies followed in 2016, Volkswagen Passenger Cars reached the market share of 13.4% with 101.763 units in retail sales, and fi nished second in the passenger car market.

2016: Another Year of AwardsVolkswagen Passenger Cars was as successful in sales as it was in communications, and was voted the most liked car brand of the year for the fourth consecutive year in a survey conducted by the independent research company, Mediacat Ipsos. Volkswagen Passenger Car was awarded the fi rst prize in the “TV application of the year” category at the ODD Sales and Communication Awards organized by the Automotive Distributors’ Association for its communication campaign called “A family full of unique features”. Furthermore, the

brand won the silver award for the Lovemark television campaign at the Effi e and Crystal Apple Awards in the automotive category; ranked at the fi rst place in the Turkish Customers’ Voice Research in the automotive category; Golden Spider and Gold Stevie awards in the automotive category for its renewed website, and Gold Stevie for the management of its Instagram and Facebook accounts.

Performance of modelsVolkswagen’s Polo, Golf, Passat and The Beetle models completed 2016 as the leaders of their respective segments. Sales of the Polo model in the A0/HB segment increased by 27.4% compared to 2015 with a segment share of 19.4%. The share of the Golf model in the A/HB segment was 25.5%. The Passat model continued its leadership in 2016 with a 35.0% segment share. The Beetle model in the A Coupe segment is the leader with 44.6% segment share. The New Tiguan model, which has been in intense demand since its inception, has increased its sales by 75.0% in 2016, reaching a segment share of 13.2% at the end of the year. And the Jetta model, in the A/NB segment, where diesel engines are predominantly preferred, completed 2016 with a share of 4.8% with only petrol engines.

101,763VOLKSWAGEN PASSENGER CAR ONCE AGAIN SURPASSED 100,000 VEHICLES IN 2016.

VOLKSWAGEN PASSENGER CARS

43OUR BRANDS

Innovative solutions in digital communicationFollowing the digital world closely, Volkswagen launched the new Passenger Cars website and has been visited 23 million times by the visitors in 2016. The “MyVolkswagen” app offered to always be available for fans was downloaded to 80 thousand users’ smartphones.

Social media channels that bring together powerful strategy and original contents with users have become the most followed accounts again this year. Volkswagen has the largest automotive Facebook page and leads in Turkey in terms of following, and has exceeded 4 million local followers. Volkswagen Passenger Cars has also been the most followed automotive brand in Instagram with its number of followers exceeding 260,000. Volkswagen Passenger Cars has also been very active on other channels to provide the right content for Volkswagen fans on Youtube, LinkedIn and Google Plus, achieving instant one-on-one communication through “Social CRM” applications.

Aiming to keep up with the global digitalization process and the requirements of the times, the “Digital Retail” project, which was diligently carried out in pilot phase, was launched at Doğuş Oto Etimesgut in 2016.

Aftersales ServicesExpanding its service network with the opening of Avek Çanakkale Authorized Aftersales Service in 2016, Volkswagen Passenger Cars Aftersales Services increased the number of its Authorized Aftersales Service centers across Turkey to 75. Up from fourth to second place, Volkswagen After Sales Services took its success further at the International Aftersales Customer Satisfaction (IACS) survey commissioned by Volkswagen AG, and conducted annually throughout the world by an independent research institute to compare the aftersales services of all brands. Authorized services receive around 625,000 vehicles throughout the year and an average of 52,100 customers every month. In 2016, the spare parts and labor turnovers increased by 17% and 10%, respectively.

With its strategies aligned to Volkswagen’s global vision of being “the best selling, the most innovative automotive brand in the world”, Doğuş Otomotiv Volkswagen Passenger Cars once again surpassed 100,000 vehicles in 2016, selling 101,763 vehicles in retail and capturing a market share of 13.4% as it continues to be one of the leading brands in the automotive industry.

“A Family Full of Unique Features”Volkswagen Passenger Cars was awarded the fi rst prize in the “TV application of the year” category at the ODD Sales and Communication Awards organized by the Automotive Distributors’ Association for its communication campaign called “A family full of unique features”.


AUDI TURKEY IMPROVED ITS SALES FIGURES BY 8.5% YEAR ON YEAR. WITH DIGITALIZATION AT THE HEART OF ITS BUSINESS PROCESSES, AUDI TURKEY WAS GIVEN AS AN EXAMPLE BY AUDI AG TO OTHER MARKETS FOR ITS BENCHMARK PROJECTS.

Record sales in unitsDoğuş Otomotiv began importing Audi into Turkey in 1994, and in 2016, the brand’s outstanding success resulted its highest-ever sales fi gures with 22,005 units.Each the leader of its segment, A3 Sedan, A3 Sportback and A3 Cabriolet’s total sales in 2016 amounted to 11,500 units. While the sales of A4, A4 Avant and A4 Allroad exceeded 5,000 units, the total sales across the A5 family was 600 units, with 2,200 units of A6 sold throughout the year. The Q3 closed the year with 1,000 units sold, and Q5 with 750 units. Meanwhile, the sales of niche models such as S/RS, A4 allroad, A3 Cabriolet, and TT also rose signifi cantly in 2016, and achieved their highest sales fi gures to date.

Audi CityAudi City, where visitors obtain information and observe virtual Audi models in real-life dimensions, opened at Istinye Park, Istanbul following London, Beijing and Berlin, enabling the visitors to receive more personalized consultancy services on color, equipment and model choices from Audi experts. The design and operation model of Audi City, which Audi A.G. describes as the “showroom concept” of the

future, combines the present and future sales methods with the best features of virtual / digital world. Audi City provides the brand with technological infrastructure as a virtual showroom as well as a more personalized customer service and consultancy.

Digitalization in Business ProcessesWith digitalization at the heart of its business processes, Audi Turkey was given as an example by Audi AG to other markets for its benchmark projects. The smart pen project was launched in 2016, and all Authorized Aftersales Services began to use the pens. The information written by the smart pen is instantly transmitted in digital environment to the service consultant, resulting in faster response to customers. A self-service reception technology has been provided to enable Audi owners to carry out service transactions more rapidly and easily. With the self-service kiosks placed at the entrances of the Authorized Aftersales Services, Audi owners have been offered a tool to select the services they wish to get, open work orders and pay for the services.22,005

AUDI RECORDED ITS HIGHEST-EVER SALES FIGURES WITH 22,005 UNITS SOLD IN 2016.

AUDI

45OUR BRANDS

Marketing and launch activitiesAdvertising and communication activities aimed at increasing Audi’s brand recognition continued throughout the year, and tactical communication campaigns in parallel to sales targets were run. For the launch of Q2 in the last quarter of the year, 360° communication was targeted. In addition to advertising campaign and test drives with wide participation, the micro site “benitagle.com” was developed where the users “tagged” each other and posted their personal videos, elevating the Q2’s recognition to even higher levels. Audi won the grand prize “Kıpkırmızı” at the Kırmızı Advertising Awards for its air bag campaign, as well as the best art direction, best illustration, and best car advertisement in media awards. One of the other key issues was social media communication. Social media channels such as Facebook, Twitter, Instagram, YouTube, and LinkedIn have been successfully used in Audi’s brand communications. Audi brand became one of the leading brands in the automotive industry in terms of average engagement fi gures on Facebook in premium segment.

The Audi brand sold 22,005 sales units in 2016, growing its vehicle

park by 17% year on year, and attaining 75% customer loyalty ratio as an exemplary fi gure across Europe while aftersales turnover rose by 14%.

Aftersales servicesAudi Aftersales Services left behind the other brands in the Authorized Aftersales Service Satisfaction

Survey (DSS Service) conducted by Audi AG annually with the participation of Aftersales Service Managers and company owners (DSS Service), and confi rmed its success by ranking fi rst. This impressive result shows that communication and cooperation with business partners was maximized.


SEAT BROKE A NEW SALES RECORD BY REACHING THE HIGHEST SALES UNITS AND MARKET SHARE IN ITS HISTORY, INCREASING THE NUMBER OF PASSENGER CARS SOLD BY 22% COMPARED TO PREVIOUS YEAR.

Highest sales units and market share everSEAT continued its growth trend of the last four years, and reached its highest sales fi gures with 20,637 units in 2016, showing a much higher performance than the rest of the market with an increase of 22% in the number of units sold. SEAT also raised its market share to 2.73% with successful product, communication, sales, and fl eet strategies followed in 2016 with Leon, Ibiza, Ateca, Alhambra and Toledo models. SEAT increased its market share by reaching the highest number of sales in Leon and Ibiza models in its history.

Leon ranked second in the AHB segment, taking 13.11% segment share, and Ibiza raised its share in the A0-HB segment to 4.72%. Ateca, the fi rst SUV that SEAT included in the model range in November closed the year with 188 units sold.

Euroleague Basketball SponsorshipWithin the scope of the ongoing Turkish Airlines Euroleague and Eurocup sponsorships, SEAT effectively reached the basketball target group by being present in all communication channels from classic to new media. Sponsorship of Darüşşafaka Doğuş Basketball Team also continued throughout the year.

With the contribution of the communication activities as well as sponsorship communications in 2016, SEAT increased its brand awareness by 12% compared to the year 2015.

DigitalizationSEAT’s new website launched in 2016 aims at increasing customer benefi ts with its design, functionality and distinctive infrastructure. With the new website, the number of visitors increased by 56% year on year.

Television, newspaper, magazine, radio and digital channels were used to support the sales of Ibiza and Leon throughout the year. Communication of Ateca, the fi rst SUV of SEAT, effectively continued in the second half of 2016.

20,637SEAT REACHED ITS HIGHESTSALES FIGURES EVER WITH 20,637 UNITS IN 2016.

SEAT

47OUR BRANDS

After-Sales ServicesCar entries into the SEAT Authorized Services reached 74,000, corresponding to 19% increase compared to the previous year with the effects of the growing vehicle park and service marketing activities in 2016. With the ongoing actions throughout the year, SEAT Authorized Services loyalty rates reached 64% and the after sales services customer satisfaction survey score reached 101.6 points with SEAT’s customer satisfaction-oriented approach.

In 2016, SEAT Turkey won the “Absolute Winner” award, the highest prize of all categories in the Top SEAT People competition organized by SEAT S.A. among all Authorized Dealers worldwide, while also winning the second prize in the aftersales service consultant category.

The SEAT brand increased its passenger car sales 22% year on year, showing higher growth rate than the market, and broke a new sales record in the number of units sold. With the highest sales fi gures and biggest market share to date, the brand maintained its sustainable growth trend of the recent years

“Improved Brand Awareness”With the contribution of the communication activities as well as sponsorship communications in 2016, SEAT improved its brand awareness by 12% year on year, reaching 28 points.


ŠKODA TURKEY WAS NAMED THE MOST SUCCESSFUL DISTRIBUTOR IN THE AFTERSALES SERVICES CATEGORY AMONG 103 COUNTRIES AT THE “BEST DISTRIBUTOR AWARDS” HOSTED BY THE MANUFACTURER.

ŠKODA has crowned 2016 with awardsŠKODA continued its growth trend, and after record-breaking sales of 22,107 units in 2015, sold 28,876 passenger cars in 2016, marking an increase of 30.62% in sales. These fi gures refl ected on the brand’s position that rose from 13 to 11, with 3.81% market share.

2016ŠKODA increased its sales to 28,876 units in 2016 by boosting the sales approximately 30.6% year on year. Recording higher growth than the market average of 4.3%, ŠKODA had sold 22,107 units the previous year. Meanwhile ŠKODA’s global sales increased 6.8%, reaching a total of 1,127,000. ŠKODA Turkey stayed ahead of important markets such as Germany, Italy, France, Spain, Austria and Belgium, and maintained its seventh place among ŠKODA’s international markets.

Performance of modelsŠKODA Turkey sold 28,876 passenger cars in 2016. Octavia, the bestselling model of 2015, was again the most popular model

with a total of 12,854 deliveries, constituting 45% of overall sales, and increasing its sales 27% year on year. Superb, the second most sold model, similarly increased its share in overall sales to 27.6%, selling 7,872 units.

The success of ŠKODA Turkey was not limited to its sales performance, but also extended to online. ŠKODA Turkey sustained its fast rise on Facebook with 564,254 followers, and recorded stable growth on its website www.skoda.com.tr with 8,344,796 visitors.

What’s new in 2016 and 2017In 2016, products supporting ŠKODA’s 4x4 image were promoted. In addition to 4x4 versions of Octavia, Octavia Combi and Superb, Octavia RS and Octavia Combi RS models were also offered in 4x4 versions.

The completely renewed third generation of Superb, which successfully represents ŠKODA brand in the D segment, was launched in Turkey and received with great interest. Since 2016 was the fi rst full year that the

28,876ŠKODA INCREASED ITS SALES TO 28,876 UNITS IN 2016 BY BOOSTING THE SALES APPROXIMATELY 30.6% YEAR ON YEAR.

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new Superb was sold, it recorded increase in sales and share within the brand. The success of Superb was also supported by the ‘Car of the Year in Turkey’ award by the Turkish Automotive Journalists Association (OGD). Among the shortlisted seven candidates, ŠKODA Superb was voted the winner by 64 automotive journalists.

ŠKODA Turkey was named the most successful distributor in the Aftersales Services Category among 103 countries at the “Best Distributor Awards” hosted by the manufacturer.

The other important innovation for ŠKODA was Kodiaq launched in September 2016. Kodiaq developed on VW Group’s MQB platform of VW Group drew great attention as the fi rst large SUV model of the brand. Kodiaq, which marks the continuation of the change that started with Superb, is expected to be available for sale in March. Kodiaq, which will come in 5-seat and 7-seat versions, is expected to attract new customers to the ŠKODA brand in Turkey and around the globe.

Another important novelty of 2017 will be the launch of the global bestseller Octavia’s revamped model. The Sedan, Combi and RS versions will undergo major overhaul as part of the renovation. The sales of the new Octavia, which captured signifi cant sales fi gures in Turkey, is set to start in March. In July, the revamped versions of Rapid and Rapid Spaceback will be available in Turkey.

2017 market share target With the new products, ŠKODA continues to make great progress in the global arena and in Turkey, and aims to offer the fi rst true SUV model in 2017 for non-ŠKODA customers. Appealing to a broad audience from large families to users who prefer SUVs, Kodiaq will contribute positively to sales as part of the changing face of the brand.

Turkey has become one of the fastest countries to complete the Corporate Identity Transition that ŠKODA launched in 2013. This new concept, which includes quality activities to improve brand perception, is designed to

increase customer satisfaction completely from the customers’ showroom visits to purchasing and aftersales services. ŠKODA, which has succeeded in increasing sales fi gures every year in Turkey, will present the widest product range with the new SUV model to enter showrooms in 2017.

ŠKODA Turkey, which operates 37 Authorized Aftersales Services was named the most successful distributor in the Aftersales Services Category among 103 countries at the “Best Distributor Awards” hosted by the manufacturer while the new Superb was awarded as the “‘Car of the Year in Turkey”’ by OGD.


BENTAYGA, “THE WORLD’S FASTEST, MOST POWERFUL” SUV THAT DEBUTED GLOBALLY IN 2015 WAS LAUNCHED IN TURKEY IN 2016.

The most prestigious and luxurious models Bentley Motors was founded in 1919 by railroad engineer Walter Owen Bentley. Today, the brand pursues its operations under the umbrella of Volkswagen AG. Since the early 1910s, the British Bentley brand has gained recognition for manufacturing the most prestigious and luxurious car models in automobile history.

Automobili Lamborghini was founded in 1963 by Ferruccio Lamborghini. Production operations of the brand have been carried out of Bologna, Italy since its foundation. Following the acquisition of all Lamborghini shares by Audi AG in 1998, the brand shifted towards a rapid uptrend with its new models equipped with powerful and high-end technologies.

2016: Sustainable success In 2016, the Bentley brand maintained its sustainable success, while the Lamborghini brand solidifi ed its place as a competitor with the Huracan model.

Despite the diffi culties of the year we left behind, Bentley sold and delivered 14 units including 4 Bentayga, its new SUV. In addition, throughout the year Bentley also sold and delivered 2 GT Speeds, 2 GT V8, 2 GT V8S, 2 GT Convertibles and 2 Flying Spur.

In 2016, Lamborghini sold a total of 7 vehicles consisting of 4 Huracan and 3 Avendator models. A Huracan Spyder and an Avendator Roadster among these are convertible models offering performance and luxury together.

Keeping up brand communication Marketing investments for Bentley and Lamborghini continued in 2016. The highlights of these efforts are as follows:

» For the launch of Bentayga, the world’s fastest and most powerful SUV, a test drive event was organized for the media on April 18 – 20. The organization that involved a 500-km long drive kicked off at Munich Airport, Germany, and fi nished 21

BENTLEY SOLD 14, AND LAMBORGHINI SOLD 7 VEHICLES.

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in Kitzbuhel, Austria. The daily publications that attended the event covered the model extensively. The Bentayga Diesel’s global launch took place in Marbella on December 7 – 8.

» A private test drive and factory visit was organized for a group of Turkish journalists on December 14 – 15 by Automobili Lamborghini. Huracan and Avendator models were tested

during the event attended by automotive and lifestyle media, which later covered the models in their channels.

» -Sustainable communication efforts have been undertaken throughout the year in line with the global marketing plans of Bentley Motors and Automobili Lamborghini.


PORSCHE TURKEY CONTINUED TO IMPROVE CUSTOMER SATISFACTION IN THROUGH SALES, MARKETING AND AFTERSALES SERVICE ACTIONS DESIGNED IN LINE WITH THE GLOBAL DIGITALIZATION STRATEGY, AND INNOVATIVE SUPPORT SYSTEMS ADAPTED TO THE MODELS IN THE PRODUCT RANGE,

InvestmentsDoğuş Oto Kartal, a new showroom located on Istanbul’s Anatolian side, opened on August 15, raising the number of Porsche sales points to eight in Turkey.

Performance of modelsPorsche’s best-selling model in 2016 was again Macan with 514 units, increasing its market share in the compact SUV segment by 19% year on year. Macan was followed by Cayenne with 232 units, and 911, which sold 28 units, and increased its market share by 35% in the premium sports car segment. The 718 Boxster / Cayman models that play an important role in the sports car segment with the 2.0-liter engine option sold 27 units, and the Panamera model 26 units in 2016.

Communication activitiesAs advertising and digital marketing activities gained prominence throughout 2016, ads were placed in 45 magazines and 12 press events were held with the participation of 34 people. Adopting the language of the digital world in advertisement communications, different reader audiences were offered for the Macan 2.0 model presented with hologram technology, and the new 911 Carrera 4S model with the blippar app.

A year full of press launchesPorsche kicked off 2016 with the International Porsche Carrera 4/4S, Targa 4/4S and Turbo/S press launch event in Johannesburg, South Africa on January 26-27 January, and continued with the Porsche Ice Force 2016 Winter test drive press event in Levi, Finland on January 31 - February 2 with the participation of four members of the press. The new 2.0-liter engine 718 Boxter Technology Workshop press event was held in Marseille, France on February 23-24. Then came the test drives at the Porsche Driving Center for the new 911 press launch on March 14-15, followed by an event for female press members only on March 16-17, and fi nally another event on June 7-9, offering members of the press to experience all Porsche models on the track. The new Panamera’s world premier took place in Berlin on June 28.

As the PR activities continued at full speed in the second half of the year the events included: Cayenne & Macan GTS Romania press trip on July 10-13; 718 Cayman International press day on July 14-15 in Sweden; the new Panamera TV press tour on August 28-30 in Munich; and the new Panamera press launch on October 23-25 in Poland.

514PORSCHE’S BEST-SELLING MODEL IN 2016 WAS AGAIN MACAN WITH 514 UNITS,

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Experiential marketing strategy All Porsche models were tested by a total of 241 guests during the “‘Porsche on Track”’ driving events on March 26-27, June 12, and November 4-9 at the Porsche Driving Center.

Sponsorship projectsPorsche Driver’s Selection boutique products were promoted throughout the year at various sponsored events such as The Palm at the Four Seasons Hotel on May 17, and the Zubizu Summer Shopping at the Les Ottomans Hotel on June 7.

The new 718 Cayman launch was organized within the scope of the summer venue sponsorship from June 18 to August 28.

Porsche sponsored the Antonis Remos concerts on September 2-3 at Angelique in Bodrum Palmarina where Porsche 911 Carrera 4S was displayed.

A Porsche test drive event accompanied by a brunch was hosted on Sunday, September 25 at Kemer Country with the participation of members from the Porsche Club, and Young Businessmen Association of Turkey.

Porsche Golf Cup World Final took place in Mallorca on May 9-12 with the participation of the 2015 Porsche Golf Tournament winners, and later on the 2016 Porsche Golf Tournament was hosted on October 8-9.

Marketing activities of 2016 ended with the Porsche Club New Year’s party on December 23.

Communication awardsThe magazine advertisement of Macan 2.0 featuring a hologram was an exclusive project that won the Bronze Apple in the “Best Media Application” category at the prestigious Crystal Apple advertising awards.

The launch event of the new 718 Cayman within the scope of summer venue sponsorship was recognized in the “Outdoor Application of the Year” category at the ODD Sales and Communication Awards, making Porsche Turkey one of the 2016 Gladiators for the fi rst time in its history.

Embracing the digital worldThe Porsche Driver’s Selection boutique products as well as the Porsche original accessories were integrated to the Porsche online sales system, and offered to the consumers online.

In a world of ever increasing digitalization dominated by smart phones, the Porsche iOS app, was offered to Porsche users and fans in 2016. Porsche iOS app featuring Doğuş Technology offers Porsche customers detailed information on their vehicles and matching accessories, and provides non-Porsche customers with detailed information about the brand.

Records in aftersales servicesWith aftersales service campaigns aimed at Porsche’s car park, which grew 6% by the end of 2016, and Porsche Accessory-Boutique marketing activities, year on year accessory sales increased 10%, boutique sales 15%, and the number of work orders by 10.5% respectively. The customer loyalty rate for Authorized Aftersales Services was 79%, while the customer satisfaction survey score rose to 110.8 as a result of the customer-focused approach in the aftersales service centers.

Porsche Turkey continued to improve customer satisfaction in through sales, marketing and aftersales service actions designed in line with the global digitalization strategy, and innovative support systems adapted to the models in the product range, and sold a total of 827 vehicles in 2016.


IN 2016, VOLKSWAGEN COMMERCIAL VEHICLES REACHED THE HIGHEST SALES VOLUME AND MARKET SHARE IN ITS HISTORY AND MAINTAINED ITS LEADERSHIP IN IMPORTED COMMERCIAL VEHICLES SALES.

2016In 2016, the light commercial vehicle market shrank 6.5% compared to the previous year, and 226,782 units of vehicles were sold. Volkswagen Commercial Vehicles reached a 14.5% share in the light commercial vehicle market with 32,772 units of sales, and maintained its leadership with 30.4% market share in the imported commercial vehicle market. Volkswagen brand became the best-selling brand for the fourth time this year, with their total sales of passenger and commercial vehicles.

Transporter model reached its highest market share in history with a market share of 48.2% and 13,393 sales units in 2016. Amarok model reached 18.9% market share with 3,643 units sold, Crafter model achieved 6.3% market share with 3,605 units, while the Caddy had 17.6% market share with sales of 12,131 units.

New product launchesVolkswagen Commercial Vehicles launched its strong and powerful model Amarok with a new body in 2016. New Amarok, featuring 3-liter V6, the most powerful engine in its class, new technologies and comfort advantages, was widely presented by 360° communications strategy.

The Comfortline equipment, which was favorite in the previous Transporter generation, launched in February. Transporter Comfortline differentiates itself with the superior level of comfort and standard equipment features offered.

Caddy, the most desired model of Volkswagen Commercial Vehicles, differentiates itself by using high technology and superior equipment in Exclusive version. The New Caddy Exclusive which was developed especially for Turkey, has strengthened Caddy’s position in the competition with its high equipment level. The launch of the New Caddy Exclusive in 2016 was supported with effective communication activities that brought positive impact on the increase of the Caddy’s market share.

Caravelle Team model, draws inspiration from the bicolor design of the legendary Volkswagen T1 (which was produced 66 years ago and created its own class), has launched in August 2016.

13,393VOLKSWAGEN COMMERCIAL VEHICLES’ TRANSPORTER SALES REACHED 13,393 UNITS IN 2016.

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Brand communicationIn line with its target oriented marketing strategy, Volkswagen Commercial Vehicles continued its effective communication activities based on an in-depth analysis of the profi le and the media used by its customers. A variety of projects was executed in order to promote Volkswagen Commercial Vehicles brand, to inform the customers and to introduce the products to the customers.

Volkswagen Commercial Vehicles pioneers on social media platforms such as Facebook with over 1,000,000 followers, as well as Instagram and YouTube, through its customer-focused, innovative and attractive implementations and through the offerings on online channels based on reinforcing customer satisfaction.

In 2016, “Advanced Driving Pleasure” videos of all models were shot for social and digital media. In these videos, the technological and electronic systems of the Volkswagen Commercial Vehicles models are shown in “how it works” format with the aim of communicating the product specifi cations to the users. The goal is to increase the benefi ts and customer satisfaction from Volkswagen Commercial Vehicles models.

A brand new innovation released in 2016 is “Intelligent Turkuaz Screen” application for the Volkswagen Authorized Dealers and Aftersales Services. The objective is to analyze Volkswagen Commercial Vehicles users’ online and offl ine permitted data to provide the most appropriate offering. The Intelligent Turkuaz Screens process information according to specifi c algorithms within the system, display the results to sales or service consultants, thereby help to improve the quality of customer relations. With the support of visual effects, consultants response the customer faster and the time spent in the showroom effi ciently increases.

Onsite activities for CRM and Authorized DealersVolkswagen Commercial Vehicles has continued its approach to be one step ahead of the customer expectations in 2016. As a result of project of potential customers and external visits launched early 2011, the number of potential customer entries reached 272,000 by the end of 2016. A total of 75,000 customers have been visited actively and on one-to-one basis during 2016.

After-sales servicesThe number of Authorized Service points reached 76 after the opening of the Avek Çanakkale services in 2016. Authorized Services offer services to an average of 17,500 customers in a month with around 209,000 vehicles visiting service points in a year.

2017...In 2017, Volkswagen Commercial Vehicles will carry on its activities for the purpose of protecting its strong position in the light commercial vehicles market and its strong brand image in all customer-oriented areas such as the product, authorized dealers onsite activities, and after-sales services. A broad range of products, assurance provided by Doğuş Automotive and Volkswagen brands, authorized Dealers network spread across Turkey, and strong customer communication will be the major tools of Volkswagen Commercial Vehicles to attain its 2017 targets.


SCANIA INCREASED ITS MARKET SHARE TO 11.2% IN 2016 THROUGH SOLUTIONS SUITED FOR ALL KINDS OF PROJECTS AND CUSTOMER-FOCUSED ACTIVITIES, RECORDING ITS BEST RESULTS TO DATE.

Solutions focused on needsIn 2016, SCANIA continued to make its business partners feel that the brand stands by their side in every project and moment of need. Driven by the “Your business is our business” approach, Scania has always been there for its business partners during and after sales with all of its employees and authorized aftersales service organization. As Scania’s low fuel consumption reduces operating costs, its high levels of comfort offer users great ease. As a result, Scania has proudly proven itself as an innovative and trusted brand in the heavy vehicles market with its increasing market share.

AchievementsThrough the SESS (Scania Integrated Driving Systems) project, Scania vehicle owners were offered a smart fl eet management system, together with training and coaching services customized to their line of business in 2016. Scania vehicle owners are invited to the SESS Room at Dogus Otomotiv’s Sekerpınar facilities or the SESS Laboratories at fi ve of our Authorized Dealers to receive information on ensuring highest operational productivity and fuel effi ciency. This project is considered exemplary in the entire Scania organization worldwide, and offered to other markets as well.

In the global warranty inspection that Scania conducts annually in its distributors, Scania Turkey became the champion of 2016 with the lowest error rates.

Scania gets more digitalScania has already reached 180,000 users on Facebook with the account only opened in 2015, and also connected with its business partners on Instagram, LinkedIn and Google Plus platforms in 2016.

Scania’s website also got a makeover in 2016, and the new design now offers better usability on an improved platform.

2017Scania continues on its digitalization journey, with plans to launch new initiatives such as My Scania is Super Strong, My Scania on Mobile, GeoVabis, and Drivers’ League. The sales and aftersales service trainings will also move to the digital environment.

Scania aims at further strengthening relations with business partners through technological innovations, need-based solutions and customer focused activities.

180,000SCANIA HAS ALREADY REACHED 180,000 USERS ON FACEBOOK WITH THE ACCOUNT ONLY OPENED IN 2015

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SCANIA ENGINES ENJOYED SIGNIFICANT GROWTH IN 2016, NOW RANKING FOURTH IN THE GLOBAL SCANIA CV BUSINESS, AND ALSO INCREASED ITS MARINE ENGINE SALES IN THE TURKISH MARKET BY 260%.

Another successful year for Scania EnginesScania Engines enjoyed signifi cant growth in 2016, now ranking fourth in the global Scania CV business, and also increased its marine engine sales in the Turkish market by 260%.

Order performance in 2016Scania Engines increased its market share with the sale of 231 engines in Turkey in 2016, ranking in the top four among Scania’s export markets.

Scania Engines increased power generation engine sales through collaborative projects with leading power generator companies in Turkey, improving its position in the market and confi rming its success in this fi eld.

Broad product rangeDoğuş Otomotiv offers power generation engines, marine engines, marine power generation engines and industrial engines under the Scania Engines brand.

With more and more diverse customers requiring marine engines and power generation engines, Scania Engines increased sales by 260% year on year.

Considering customer needs, Scania expanded the marine engines product range with the addition of the new V8 engines, and created a new engine range based on the 16.4-liter V8 truck engines. The performance of this engine range, which uses XPI fuel injection technology to deliver high-pressure fuel in shorter time, and generates more power, has reached the levels that Scania sought, thanks to the use of fi ltration technology.

Scania Engines will continue to broaden its product range in 2017 with the addition of natural gas operated engines, and engines with Tier III emission standards according to IMO regulations.

231SCANIA ENGINES INCREASED ITS MARKET SHARE WITH THE SALE OF 231 ENGINES IN TURKEY IN 2016.

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2017 TargetsScania Engines operates as a reliable solution partner to expand its product range, improve its quality, and increase its market share in this segment. The business partnership that started in 2013 with leading power generation companies in the power generators market will continue in 2017, as it did in 2016. Scania Engines, with its market domination and quality product range, aims to increase its sales fi gures further in 2017, and become the market leader.

Marketing activities to support salesIn addition to the high technology products offered to the market, Scania Engines is also a brand that keeps getting coverage on the media. Accordingly, Scania Engines, following the large fl eet sales in 2014, organized delivery ceremonies accompanied by the media to ensure one-to-one engagement with the customers.

“Broad Product Range” Doğuş Otomotiv offers power generation engines, marine engines, marine power generation engines and industrial engines under the Scania Engines brand.


THERMO KING SETS THE STANDARDS IN TRANSPORTATION FOR TURKEY’S LEADING COLD CHAIN AND PHARMACEUTICAL TRANSPORTERS BY ENSURING QUALITY AND RELIABILITY UNTIL THE PRODUCTS ARE DELIVERED TO THE END USER.

Sales performance in 2016Thermo King, longtime market leader in the diesel chiller unit industry, has maintained its leading position with the sales results achieved in 2016.

Offering options on units in response to customer needs, and specialized cooling and heating solutions for different projects, Thermo King sets the standards in transportation for Turkey’s leading cold chain and pharmaceutical transporters by ensuring quality and reliability until the products are delivered to the end user.

Thermo King is ranked among the top fi ve distributors that recorded maximum GDP qualifi ed and validated trailer sales in Europe in 2016. For the fi rst time in April 2016, the company began to issue ATP certifi cation for refrigerated trailers in Turkey.

The Latest Developments at Thermo KingThermo King continues to be the technology leader in the chiller industry. With the acquisition of CelTrack, the tracking service

provider, Thermo King will begin to offer remote tracking system as standards on the trailer units that will be launched in 2017.

The TracKing equipment, which places Thermo King one step ahead of its competitors, uses GPS technology to enable instant data follow-up in more than 80 countries. TracKing also enables remote access to the unit with its two-way communication feature.

Furthermore, with the Bluebox technology the driver will be able to check the unit using a smart phone while driving.

Strong authorized reseller and aftersales service organizationThermo King continuously strives to better serve its Authorized Resellers and Aftersales Service teams. With information on technological advancements delivered through service and sales trainings in 2016, the effectiveness of the Authorized Reseller and Aftersales Service network has been improved.

THERMO KING IS RANKED AMONG THE TOP FIVE DISTRIBUTORS THAT RECORDED MAXIMUM GDP MEDICINE CERTIFICATE HOLDER TRAILER SALES IN EUROPE IN 2016.

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Best brand for the 12th timeThermo King was named the best brand for the 12th time in the ‘’Cooler Units’’ category according to reader votes at the “‘Best Brand” competition organized by Lastauto Omnibus, Trans Aktuell, and Fernfahrer magazines published in Germany, and included among the most prominent publications of the commercial vehicle industry.

Marketing and communication activitiesThe marketing activities in 2016 included advertising campaigns and newsletters prepared for the trade media, as well as communication events to support Authorized Resellers and Services, and delivery ceremonies that provide an opportunity to communicate with the customers.

Thermo King has maintained its market share in the cold chain transportation, and successfully continued to offer solutions for various projects in 2016.

“Best Brand” Thermo King was named the best brand for the 12th time in the ‘’Cooler Units’’ category according to reader votes at the “‘Best Brand” competition organized by Lastauto Omnibus, Trans Aktuell, and Fernfahrer magazines published in Germany.


IN 2016, WE RESPONDED AND ADAPTED TO THE RAPIDLY CHANGING CONDITIONS EQUALLY AS FAST. WITH A MEASURABLE AND ACCOUNTABLE MANAGEMENT MODEL, DOĞUŞ OTO CONTINUES TO SET AN EXAMPLE TO THE ENTIRE DEALER NETWORK.

About Doğuş OtoDoğuş Oto sells new and used vehicles, spare parts and accessories at six points in the Istanbul, Ankara and Bursa provinces, and also offers insurance, fi nancing and aftersales support services for the 7 brands (VW Passenger Cars, VW Commercial Vehicles, Audi, Porsche, SEAT, SKODA and DOD) it represents. Doğuş Oto sustains its progress by continuously improving its service quality.

Exceeding targets2016 has been a very successful year in terms of sales and aftersales service volumes. Doğuş Oto sold 62,394 new and 2,407 used vehicles.

Closer to the customer through new investmentsThe facility in Kartal where Volkswagen, Audi and Porsche brands are represented launched operation while the Audi showroom and aftersales service center in Maslak were completely renovated. ŠKODA sales also started in Maslak, Istanbul. The Volkswagen showrooms and aftersales service centers in

Esenyurt and Etimesgut were completely renovated in line with the new concept. The Volkswagen showroom in Etimesgut, Ankara launched renovation works to adapt to the digital showroom concept. Furthermore, Audi City Istanbul opened to offer visitors the opportunity to obtain information on every aspect of the Audi world, and examine the virtual versions of Audi models in real life dimensions.

Joint projects with group companiesThe showrooms were used to exhibit the artworks as part of the “A Place for Art” project that Doğuş Group developed to support university students. “The Luckiest Campaign of the Year 11.11”, which broke N11’s sales records, resulted in 10 vehicles being sold within a few minutes.

More customers were reached through the projects developed jointly with Zubizu. Doğuş Oto Bursa won the fi rst place with 74% success rate at the Audi Twincup competition. Doğuş Oto won the Best Authorized Seller Award of ŠKODA Turkey.62,394

DOĞUŞ OTO EXCEEDED ITS TARGETS BY SELLING 62,394 VEHICLES.

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Marketing activitiesDoğuş Oto’s ongoing dynamic and mutual relationship with its customers, as well as its philosophy of service excellence and effi cient working approach, motivate the company to fulfi ll its responsibilities. In all the marketing activities conducted throughout 2016, the objective has always been raising Doğuş Oto’s brand awareness, and supporting vehicle entries and sales, and improving customer loyalty and satisfaction through customer focused communication.

In addition to the events and activities aimed at brand positioning, determining marketing

strategies, and customer relations management to understand customers better, a Net Promoter Score (NPS) survey was conducted for in-depth analysis of the extent that customers would recommend Doğuş Oto, and their reasons for why they would or would not recommend Doğuş Oto. The survey has helped to identify the development areas within the organization, and measure customer loyalty.

Doğuş Oto believes that all of its endeavors are based on understanding people, and aims to carry out activities to achieve further engagement with its customers.

“Efficient Working Approach” Doğuş Oto’s ongoing dynamic and mutual relationship with its customers, as well as its philosophy of service excellence and effi cient working approach, motivate the company to fulfi ll its responsibilities.


D-AUTO SUISSE SA HAS EXPANDED ITS NEW VEHICLE SHOWROOM CAPACITY 40%, USED VEHICLE SHOWROOM CAPACITY 300%, AND SERVICE CAPACITY 55% IN 2016.

Continuous growth in high-end market with two new additions to portfolio The company aims at increasing the market share with the addition of Bentley and D-Occasion with plans to keep on presenting an excellent retail experience to customers by continuously investing in process and service quality in spite of increasing business volume.

About DASSAD-Auto Suisse SA, a subsidiary of Doğuş Otomotiv, has continued its operations with Porsche since 2009, and the recently added Bentley and D-Occasion brands in the Swiss city of Lausanne located in Canton Vaud, which has a population of 750,000. By offering customers new and used vehicles, spare parts sales, and aftersales services, the company improves its service quality and reliability every year.

Sales successesD-Auto Suisse succeeded in selling 306 new and 126 used vehicles in 2016. The sales of 157 Macan units supported its penetration into the customer segments that did not own a Porsche before.

D-Auto Suisse SA invested CHF 4.5 Million in the opening of a new, 6,300-sqm showroom in Lausanne. This investment increased its capacity of new vehicle exhibition from 12 to 17, used vehicle exhibition from 10 to 40, and its number of lifts from 9 to 14. With the launch of Bentley operations and the newly created used vehicle dealer D-Occasion, additional turnover of CHF 13 million is anticipated.

D-Auto Suisse aims to offer the best customer experience possible with its new investment together with the recently hired 10 new employees in 2017.

306D-AUTO SUISSE SUCCEEDED IN SELLING 306 NEW AND 126 USED VEHICLES IN 2016.

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Marketing activitiesNumerous marketing activities were carried out in line with the objective of increasing brand recognition, announcing campaigns and attracting new customers throughout the year. Introducing ports car models of Porsche to Macan customers as a key objective was also accomplished.

Formal opening of Bentley showroom took place in December. The aim of this opening, which 150 guests attended, was to introduce the company to existing and potential Bentley customers.

As of 2016 yearend, the number of registered customers in the D-Auto Suisse database has reached 7,700. As it always has been, our plan will be to increase our market share in the high-end market segment.

With CHF 4.5 million invested in 2016, D-Auto Suisse SA has expanded its new vehicle showroom capacity 40%, used vehicle showroom capacity 300%, and service capacity 55%. The target is to increase the penetration ratio in the high-end market segment by focusing on process quality and customer loyalty.

“Showroom opening in Lausanne” D-Auto Suisse SA invested CHF 4.5 Million in the opening of a new, 6,300-sqm showroom in Lausanne. This investment increased its capacity of new vehicle exhibition from 12 to 17, used vehicle exhibition from 10 to 40, and its number of lifts from 9 to 14.


D-AUTO LLC PROVIDES ITS CUSTOMERS WITH THE BEST QUALITY SERVICE, COMBINED WITH ITS KNOWLEDGE AND EXPERIENCE IN AN AREA OF 7,500 M2 WITH 17 EMPLOYEES.

About D-Auto LLCD-Auto LLC, 100% owned by Doğuş Otomotiv, signed an exclusive general distributorship agreement for the Iraq territory with the Volkswagen and Audi brands in 2013, and launched its operations in the city of Erbil in July 2014. This was followed in December 2015 with the signing of the Iraq distribution agreement with Volkswagen Commercial Vehicles, adding another brand to the range.

D-Auto LLC provides its customers with the best quality service, combined with its knowledge and experience in an area of 7,500 m2 with 17 employees.

Activities in 20162016 was a year that saw further increase in economic stagnancy, and while the automotive industry was adversely affected the market shrank signifi cantly.

D-Auto LLC sold 55 new vehicles in 2016 with Audi’s Q7 became the brand’s most liked model while Volkswagen’s CC with its sporty build was the model that our customers favored the most.

D-Auto LLC has gained acclaim among Volkswagen and Audi users for its customer satisfaction oriented service approach. With the high quality offered in aftersales services and trained technical staff, D-Auto LLC became the customers’ preferred service point, and serviced 2,128 vehicles in 2016.

2017 targetsUnder current market conditions that point to further economic shrinkage, the minimum cost structure will be maintained, and brand promotion activities will be stressed to improve market shares. D-Auto LLC will strive to differentiate itself from its competitors through quality of service.

2,128D-AUTO LLC SERVICED 2,128 VEHICLES IN 2016.

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THE IMPLEMENTATION OF THE DOD AUTHORIZED RESELLER CONCEPT, UPDATED IN LINE WITH THE NEEDS OF CUSTOMERS, AND NEW TRENDS, BEGAN AT NEW RETAIL POINTS THAT OPENED IN 2016.

A new era at DODDOD, a pioneering brand, maintained its leading position in its segment with customer experience enhancing new projects launched in digital channels in Turkey for the fi rst time in 2016. With an Authorized Dealer network supported by increased supply and diversifi ed inventory, the company continues to reinforce its position in the used car sector.

DOD in 2016The increase in the number of partnering fl eet companies has continued in 2016, and further diversifying the brands and models through new agreements, a wider range of vehicles could be supplied to Authorized Resellers in higher numbers. Vehicle purchases increased by 31% compared to 2015, while DOD’s vehicle sales in cash reached 928 units by growing 9% year on year, and total sales to Authorized Resellers amounted to 22,534 units.

The cash purchase processes and the business model changes introduced in premium vehicle sales at DOD City Esenyurt and DOD Sekerpinar, the two DOD retail points, also continued in 2016. Since the launch of these retail points, the highest turnover, added value and retail sales units ever have been recorded in 2016.

Customer focused improvements at retailers and aftersales servicesThe implementation of the DOD Authorized Reseller concept, updated in line with the needs of customers, and new trends, began at new retail points that opened in 2016. System and procedure improvements were made to offer faster and higher quality service to customers, resulting in shorter vehicle purchase – sell periods, and leading to enhanced customer satisfaction beyond targets.

Regarding customer relations, the organizational changes at Authorized Resellers, and additions to the DOD support team positioned within DIM, have helped to reduce the fi nalization of customer requests 19 to 4 days.928

DOD’S VEHICLE SALES IN CASH REACHED 928 UNITS.

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69OUR BRANDS

Through the DOD Warranty Trainings that continued in 2016, DOD Warranty penetration levels reached 8%.

With the Tramer System integration with Turkuaz, which started in early 2016, damage registers of all vehicles in the DOD inventory will be automatically added to survey forms. This project slated for completion in the fi rst quarter of 2017 is expected to contribute positively to both business processes and customer satisfaction.

Digital InvestmentsThe used vehicles in the DOD inventory offered for sale are photographed 360° degrees at selected pilot Authorized Resellers, and uploading the images to DOD’s digital platforms has heralded in a new era by offering users a never before experienced inspection of the used vehicles. With this fi rst of its kind service in the Turkish used vehicle market, user experience on digital platforms has been

enhanced, offering users the chance to examine the vehicle thoroughly without physically seeing it. Within the fi rst quarter of 2017, all DOD Authorized Resellers will be included in the DOD 360 project, which is currently available in pilot locations, 360° photographs of all vehicles in the DOD inventory will be integrated into the system.

DOD mobile app has been made available in iOS and Android operating systems to improve the quality of services delivered to customers, and enable accessibility on all platforms. The customers can use the DOD mobile app to see all vehicles on their mobile devices, and as a difference from other used vehicle apps, they can also access loan information and survey reports.

Active and visionary social media channel usage also continued in 2016, as digital channels are preferred more and more for the brand’s national and local communications.

“DOD Mobile App” DOD mobile app has been made available in iOS and Android operating systems to improve the quality of services delivered to customers, and enable accessibility on all platforms.


IN 2016, VDF DELIVERED MUCH HIGHER PERFORMANCE AND EXCEEDED ITS TARGETS BY FOCUSING ON CUSTOMER SATISFACTION WITH ITS PRODUCTS AND SERVICES.

vdf AUTOMOTIVE FINANCE (VOLKSWAGEN DOĞUŞ FİNANSMANI A.Ş.)In 2016, vdf delivered much higher performance and exceeded its targets by focusing on customer satisfaction with its products and services.

With a penetration rate of 37% among Volkswagen Group brands, vdf maintained its position as the market leader among consumer fi nancing companies and banks in 2016 on the basis of ‘’performing contracts’’ in consumer vehicle loans.

By granting 86,500 new loans as of 2016 yearend, vdf increased its total number of loans to 160,800, and comfortably exceeded its

targets with this record rise. vdf also increased its performing contracts by 19% in volume year on year, rising from TL 5.9 billion to TL 7 billion.

In 2016, vdf Automotive Finance aimed to increase customer satisfaction and loyalty through sales, marketing and customer loyalty campaigns carried out jointly with the brands. The results of the customer survey conducted in 2016 indicate that customer satisfaction levels have increased compared to the previous year.

For 2017, vdf aims to expand its loan, insurance and service packages designed especially for the needs of its customers, and to serve them in every step of the automotive value chain.

160,800BY GRANTING 86,500 NEW LOANS AS OF 2016 YEAREND, VDF INCREASED ITS TOTAL NUMBER OF LOANS TO 160,800.

vdf

71OUR BRANDS

vdf SIGORTA VE ARACILIK HİZMETLERİ A.Ş.(vdf INSURANCE AND BROKERAGE SERVICES, INC.)vdf Insurance Services created maximum customer satisfaction in 2016, with its broad experience and product range, especially developed to meet the needs of its customers. Operating as the agent of 11 insurance companies, vdf Insurance Services serves individual and group customers in several branches including car insurance, extended warranty, and loan protection insurance.

vdf Insurance works functions as part of the VW Group’s Authorized Dealers and, in 2016, has added 10 more to its number of branches at dealers, reaching a total of 60. vdf Insurance Services added MAN Kasko to its branded accident insurance products that started with Volkswagen Kasko, and continued with SEAT, ŠKODA, DOD, Audi Kasko and Scania Kasko, making a difference in its industry with brand specifi c guarantees.

vdf Insurance maintained its position as the largest agency in 2016 in terms of total premium production and number of

performing contracts, increasing its net premium production by 25% year on year, and rising from TL 300 Million to TL 374 Million. vdf Insurance also increased the number of its contracts, reaching 311,500 contracts in 2016.

vdf FAKTORİNG HİZMETLERİ A.Ş. (VDF FACTORING SERVICES, INC.)Since its inception in May 2010, vdf Factoring Inc. has been offering factoring and fi nancing services to 125 customers across Turkey. vdf Factoring reached a transaction volume of TL 13 Billion, and a total asset value of TL 378 Million in 2016. Committed to the principle of continuous and stable growth, vdf Factoring aims to further increase its business volume in 2017.

With customer satisfaction always at the forefront, vdf Reached Record Figures In Number Of Loans Insurance Policies, Showed Better Performance Beyond Targets with innovative products and services, and also added vdf fl eet to its operations to serve all segments of automotive sector in 2016.

“Total Asset Value of TL 378 Million”” Since its inception in May 2010, vdf Factoring Inc. has been offering factoring and fi nancing services to 125 customers across Turkey. vdf Factoring reached a transaction volume of TL 13 Billion, and a total asset value of TL 378 Million in 2016.


ONE OF TÜVTÜRK’S PRIORITY OBJECTIVES IN 2016 WAS TO CAPITALIZE ON INNOVATIVE TECHNOLOGIES TO ENHANCE THE EASE AND SPEED OF ACQUIRING INSPECTION SERVICE FOR VEHICLE USERS.

2016In 2016, TÜVTÜRK achieved growth in operational areas, and periodic inspections in particular, increasing its turnover 9.5%, from TL 1,327,000,000 to TL 1,452,000,000. The operations of TÜVTÜRK Istanbul accounted for TL 242,000,000 of the total amount.

TÜVTÜRK, one of Turkey’s most effective Public and Private Sector Collaboration projects, has contributed nearly TL 5.2 billion to the public since its inception while this fi gure for 2016 alone was TL 900 million.

New investments, in view of past experiences and requests, and in line with the aim of providing the customers with easier, more comfortable and better service, continued at full speed in 2016. During the year, two new fi xed stations, 3 additional channels and 8 administrative building expansions were completed and put into service. Together with Antalya Korkuteli and Gaziantep Şehitkamil stations that opened in 2016, TÜVTÜRK now provides services at 204 fi xed, 77 mobile, 5 motorcycle and 13 mobile tractor stations in 81 cities across Turkey.

With works going on for developing new concept inspection stations that started with the Istanbul Dudullu station and continued in 2016, two more stations switched to this concept. Development and improvement of customer reception and waiting areas, café and prayer areas, and providing services focused on customer satisfaction and expectations continued to be among TÜVTÜRK’s priority targets.

Major Contribution to Road SafetyIn 2016, periodic vehicle inspection of 8,194,000 vehicles was carried out, showing an increase of 1.3% compared to the previous year. During these inspections, 33.5% of vehicles were identifi ed as major fault or unsafe. Of the 2,703,000 vehicles that returned for re-inspection, 98% were found to have been fi xed for defects and faults, and allowed to re-enter traffi c safely after successfully passing the re-inspection.

Exhaust Emission TestsIn 2016, 3,182,000 vehicles were carried out exhaust gas emission tests. This marked a 12.8% increase in units compared to the previous year, and the ratio of this service to periodic inspections was 39% showing a year on year increase of 4%.

TL 5.2 BILLIONTÜVTÜRK, HAS CONTRIBUTED NEARLY TL 5.2 BILLION TO THE PUBLIC SINCE ITS INCEPTION

TÜVTÜRK

73OUR BRANDS

Roadworthiness InspectionIn 2016, 31,000 roadworthiness inspections were conducted at 30 stations.

Customer Experience Always A PriorityOne of TÜVTÜRK’s priority objectives in 2016 was to capitalize on innovative technologies to enhance the ease and speed of acquiring inspection service for vehicle users. The online appointment system, which was renewed according to user needs and digital trends in 2015, continued to provide the best user experience to our customers with additional improvements and updates made in 2016. After the improvements have been integrated, all 202 stations started to offer services by appointment.

Center of Industrial Knowledge and Experience: Tüvtürk AcademyTÜVTÜRK Academy, founded in 2013 to improve the inspection process and quality at TÜVTÜRK, provided technical and qualifi cation training for more than 3,500 employees serving at 204 fi xed, 5 motorcycle, 77 mobile stations and 13 mobile tractor stations throughout Turkey. At TÜVTÜRK Academy in Şile, Istanbul, trainings are provided under three headings: Occupational Qualifi cation Training,

Technical Training, and Competence based Training and Development Programs.

TÜVTÜRK Academy is advancing toward becoming a training institution that will open its organization’s technical knowhow and experience to the transportation, logistics and automotive sectors. It also helps TÜVTÜRK to share its international knowhow, expertise and experiences with non-governmental organizations, trade associations, and related trade associations through its education program called the “Inspection Perspective in Vehicle Maintenance”.

TÜVTÜRK Academy is authorized by the Ministry of Transport, Maritime Affairs and Communications, and continued to offer SRC Dangerous Goods Transportation by Road Driver’s Professional Competence Certifi cate, and Dangerous Goods Safety Advisor certifi cates in 2015 at its own technical laboratories featuring the latest equipment and technical instructors.

TÜVTÜRK Academy also trains “Exhaust Emission Test Personnel”, who are qualifi ed to test exhaust emissions with the authority granted by the General Directorate of Environmental Management of

the Ministry of Environment and Urbanization. TÜVTÜRK Academy aims to contribute even more to road and vehicle safety by increasing the number of its training programs in 2017.

Traffi c Responsibility ActionUnder the coordination of the Ministry of Transport, Maritime Affairs and Communications, the Traffi c Responsibility Action was launched in 2010 to raise social awareness of road safety and personal responsibilities. While the “Bosom Buddies Action”, “Youth Action In Traffi c” and “Have a Good Lesson Mr. Driver” projects, aimed at different target groups, continue, two sub-projects (“Safe Vehicle Action” and “Responsible Citizen Action”) that were conducted from 2010 to 2013 were completed. In the last six years, this project reached more than one million people directly, and nearly 4.5 million people indirectly through communication activities. The Traffi c Responsibility Movement was awarded with 11 distinctions to date.

For TÜVTÜRK, 2016 was a productive year in terms of customer experience and operational growth as SERVICE QUALITY AND CONTRIBUTION TO ROAD SAFETY continued to be among the company’s most important targets.


THE SPARE PARTS AND LOGISTICS OPERATIONS COMBINE THE LATEST AND THE BEST SYNERGISTIC PRACTICES WITH STATE-OF-THE-ART TECHNOLOGY TO CONTINUOUSLY CREATE VALUE FOR DOĞUŞ OTOMOTİV’S MULTI-BRAND STRUCTURE.

About spare parts and logisticsSpare Parts and Logistics manages the importation, warehousing and distribution of vehicles and spare parts to Authorized Dealers of the world’s most prestigious brands such as Volkswagen, Audi, SEAT, ŠKODA, Porsche, Bentley, Lamborghini, and Scania, as well as Scania Industrial and Marine Engines, Thermo King Transport Temperature Control Systems.

Spare Parts and Logistics employs state-of-the-art technology combined with the best modern synergistic practices, creating unmatched levels of service for the global brands that Doğuş Otomotiv represents.

Prompt delivery of the right service for customersSpare Parts and Logistics uses advanced computer technologies and stock management systems, which can be easily adapted to various demands of customers, to run its operations smoothly. As a result, spare parts availability has risen to 99%. Effective pricing and price positioning policies, along

with the use of common parts up to 50%, create a signifi cant synergy in the Spare Parts and Logistics organization.

Spare Parts and Logistics has undertaken a new leap regarding its facilities by doubling installed capacity in 2013 to improve the quality of its service and ensure sustainability of the business volume for the next decade. With the automation systems investments that started in 2014, error ratio has been minimized while gaining speed in warehousing operations and distribution of spare parts. A fi re prevention system in world standards, the UL-FM hydrant model was installed in vehicle warehousing and delivery areas in 2016.

As the “shipment from the port” project that Spare Parts and Logistics implemented as a part of its pioneering vision in vehicle logistics continued with increased capacity for vehicle stocking and importation at the ports, signifi cant improvements were achieved in client delivery times by working with more than one transportation company for vehicle deliveries from ports to Authorized Dealers.

186,300IN 2016, SPARE PARTS AND LOGISTICS IMPORTED 186,300 VEHICLES.

SPARE PARTS AND LOGISTICS

75OUR BRANDS

In 2014, Spare Parts and Logistics launched central structuring to include all Authorized Dealers as well, and took successful steps in managing and collecting waste, and as a result collected more waste batteries than the legally required amount in 2016.

Products and services For the effi cient supply of products and services to Authorized Dealers and Aftersales Services, and improved overall customer satisfaction, Spare Parts and Logistics offers the following services: » Operational management of vehicle imports and homologation for all brands,

» Warehousing imported vehicles supplied by VW, Audi, SEAT, ŠKODA, Porsche, Bentley, Lamborghini and Scania brands in the bonded and stock areas, and delivering them to the Authorized Dealers.

» Ordering, import, stock management and delivery to Authorized Dealers of the spare parts and accessories of VW, Audi, SEAT, ŠKODA, Porsche, Bentley, Lamborghini, Scania and Thermo King brands.

» Monitoring the qualitative and quantitative parts bonus criteria at Authorized Dealers, and how they are achieved.

» Fulfi lling the obligations of DOAS and Authorized Aftersales Services born of environmental legislation, and reducing our environmental impact as part of our corporate responsibility.

IMPROVING QUALITY FOCUSED BUSINESS APPROACHThe priority goals of Spare Parts and Logistics include: » Adopting the role of a strategy-setter in spare parts activities, creating a vision and sharing it with brand representatives, and thereby adding value to the group brands’ market share growth.

» Achieving operational excellence in the speed / quality / cost axis with employee participation.

» Pioneering digitalization investments to create effective e-trade chain management (Industry 4.0).

» Implementing projects with the aim of continuous improvements in spare parts management systems.

» Reducing delivery times and costs to support new vehicle sales, and thereby enabling the organization to operate with lower stock costs.

» Seeking new opportunities in accessories marketing to increase sales volume, are among the prioritized goals of Spare Parts and Logistics.

In 2016, Spare Parts and Logistics imported 186,300 vehicles, and dispatched 211,000 vehicles to authorized dealers, ending the year with a total revenue of TL 837.8 million generated by the sales of spare parts and accessories.


DOĞUŞ SİGORTA, WITH OVER 30 YEARS OF EXPERIENCE, PROVIDES ITS CLIENTS RELIABLE INSURANCE SERVICES THAT MAKE A DIFFERENCE.

An Experienced BrokerDoğuş Sigorta Aracılık Hizmetleri A.Ş. (Doğuş Insurance), a subsidiary of Doğuş Holding ve Doğuş Otomotiv, is an insurance brokerage company established on March 26, 1984. Considering the strong competition in the insurance market, our objective is to provide insurance for the assets and commitments of Doğuş Holding companies in the best possible way in terms of cost and operation. Doğuş Sigorta continued to carry out its activities throughout 2016 in line with the principle of always providing excellent insurance services for Group companies and their employees, as well as other customers.

» All the insurance transactions of the group companies, which operate in eight major industries including fi nance, automotive, construction, media, tourism and services, real estate, energy, and catering are pursued by Doğuş Insurance.

» Within the framework of the Doğuş Combined Insurance program, Doğuş Group companies have been offered signifi cant coverage and premium advantages in terms of risk assessment and pricing in policies issued in 2016.

» In line with the operations of Doğuş Group companies in various industries, the range of insurance products offered was increased and risk assessments were updated in all the activities performed throughout the year.

» Doğuş Insurance, with a team of 5, has increased its premium production in 2016 by 80% year on year to TL 59 million, and produced 25,000 policies with 15% increase.

Growth to Continue in 2017Through collaboration with Turkey’s leading insurance companies, Doğuş Insurance provides the fastest service in highest quality for its customers; and aims to continue its successful performance in 2017 with its experience, knowhow, and a wide product range for the insurance activities of the Doğuş Group.25,000

DOĞUŞ INSURANCE, PRODUCED 25,000 POLICIES WITH 15% INCREASE.

DOĞUŞ SİGORTA

CORPORATE GOVERNANCE


CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT“Doğuş Otomotiv Servis ve Ticaret Anonim Şirketi” (Doğuş Otomotiv Service and Trade Corporation) has applied the Corporate Governance Principles issued by the Capital Markets Board of Turkey in the fi scal year that ended on 31 December 2016 in accordance with the following explanations.

1. DECLARATION OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES In the fi scal year that ended on 31 December 2016, our company has adopted the principles of equality, transparency, accountability and liability in accordance with the Corporate Governance Communiqué (“Communiqué”) No: II-17.1 issued by the Capital Markets Board of Turkey on 3 January 2014, and published in the Offi cial Gazette No: 28871. According to the statement of the Capital Markets Board of Turkey in its bulletin no. 2015/01 dated 13 January 2015, the Company is listed among the BIST 2nd Group Companies. Following an evaluation of 401 criteria defi ned in the methodology prepared by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş., it has been determined that our Company has complied with the Communiqué to a great extent. The Company’s Corporate Governance Rating, which was 94.21 (9.42 out of 10) as of 15 December 2015 rose to 95.06 (9.51 out of 10) on 15 December 2016 as a result of the constant improvement efforts by our Company. The biggest contribution to the increase in our rating was received in the Board of Directors category and was awarded as the highest rated company in its category by the Corporate Governance Association of Turkey.

This outcome demonstrates that the risks that may threaten the Company have been largely identifi ed and are under control and that the rights of shareholders and stakeholders are justly protected. Furthermore, a high level of performance has been attained in terms of public disclosures and transparency. In this respect, the structure and working conditions of the Board of Directors comply with Corporate Governance Principles.

SUBCATEGORIES WEIGHT RATING

Shareholders 0.25 94.76

Public Disclosure and Transparency 0.25 96.67

Stakeholders 0.15 93.95

Board of Directors 0.35 94.61

TOTAL 1.00 9.51

The Corporate Governance Rating Report is available on the corporate website and can also be accessed via: http://www.dogusotomotiv.com.tr/en/investor-relations/investor-relations/corporate-governance/reports/kobirate-corporate-governance-compliance-rating-report

In General, the Company fully complies with all mandatory principles in the Communiqué as well as most of the non-mandatory principles, and continues to further improve its Corporate Governance efforts. No confl ict of interest has arisen due to the below listed issues, which are not yet implemented and remain outside the scope of principles currently applied.

Even though there are no provisions or applications in the Articles of Association concerning the issues mentioned below, the Turkish Commercial Code, the Capital Markets Law and relevant regulatory provisions are applied.

» General Assembly meetings are conducted open to the public as stated in the General Assembly Meeting calls. » Diligence is paid to the exercise of minority rights. Nonetheless, broadening the scope of rights and extending these rights to shareholders holding less than one-twentieth of the capital of the corporation are not included in the Articles of Association.

» Support mechanisms and models have been devised to ensure the employees’ and stakeholders’ participation in the management of the Company. Detailed information is provided in Article 4.2 (Participation of Stakeholders in Management).

79CORPORATE GOVERNANCE

Currently, there are two (2) female members serving on the Company’s Board of Directors. In line with the proposal of the Remuneration and Nomination Committee, formed by the Board of Directors of the Company in accordance with the Capital Market Board’s Corporate Governance Principles, the following article has been added to the Board of Directors Selection Criteria pursuant to the Board’s resolution no 2016/69 dated 9 December 2016: “When nominating candidates for the Board of Directors of Doğuş Otomotiv Servis ve Ticaret A.Ş. the most important factor is the contribution to be provided by the candidate to the company, the shareholders, the public and all stakeholders. Besides, the Company also aims to facilitate the prioritization of women in terms of Board Membership, and strengthen the position of women in decision-making processes. Accordingly, when a candidate is to be nominated for Board Membership, nomination of female members from among candidates with comparable qualifi cations in terms of knowledge, experience and competence will be prioritized. The Remuneration and Nomination Committee ensures that the Corporate Governance Principles issued by the Capital Markets Board are complied with regarding the exercise of this article both in term and also in ratio.”

Even though self-criticism and performance assessments are carried out on the Board of Directors, members are neither awarded nor discharged from their duties as a result of these evaluations. However, participation of the Board Members in the Board of Directors and Committee meetings, their contributions, and sharing of knowledge, knowhow and experience are taken into account, and the performance of the Board of Directors as a whole is assessed annually.

Pursuant to Article 4.6.5 of the Corporate Governance Principles, all remunerations as well as all benefi ts provided to Board Members and executives with administrative responsibilities are disclosed to the public as an aggregate sum through the Annual Report.

While our current management practices are in compliance with the Corporate Governance Principles, in the event that we have plans in the future to make any changes within the framework of the Corporate Governance Principles, our stakeholders will be duly informed.

As in 2016, the Corporate Governance Principles will continue to be internalized in the upcoming period taking into account the relevant requirements and developments in the regulations, and we will maintain our willing and resolute approach to creating solutions to areas that require compliance and improvement.

2. SHAREHOLDERS

2.1. Investor Relations DepartmentInvestor Relations Department in our Company is responsible for maintaining relations with shareholders, and composed of the following personnel:

Investor Relations Department Manager, and Corporate Governance and Sustainability Committee MemberHalide Müge YücelCapital Market Activities Level 3 License (207941)Corporate Governance Rating Expertise License (701487)

Investor Relations SpecialistBahar Efeoğlu AğarCapital Market Activities Level 3 License (211136)Corporate Governance Rating Expertise License (702008)

Investor Relations Contact Details:Phone: +90 (262) 676 90 58-59Fax: +90 (262) 676 90 96Email: [email protected]

Halide Müge Yücel was appointed as the Investor Relations Department Manager on 25 March 2016 and the related material event disclosure was made on the Public Disclosure Platform (PDP)

The Investor Relations Department is responsible for regularly disclosing information to shareholders and potential investors pertaining to the Company’s operations, its fi nancial standing, and strategies, and for answering requests for information, except for publicly undisclosed or confi dential information and trade secrets,


CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTin a manner that will not lead to information disparities. The Investor Relations Department forms a bridge between the Company and the existing and potential investors based on two-way communication and mutual trust.

The Investor Relations Department has responded to all queries and applications received from shareholders throughout 2016 in a timely manner and without any discrimination by phone, email or in one-on-one meetings. Of the total meetings with 244 investment fi rms in 2016, 152 were conducted one-on-one, 82 as a group, and 10 as conference calls. In addition to attending 15 investor conferences and 3 roadshows in Turkey and abroad, the Department has also held 1 analyst group meeting, and 3 teleconferences with multiple participants to inform a total of 101 analysts on our quarterly fi nancial results. Furthermore, several meetings were attended in Austin, Boston, Chicago, Dubai, Frankfurt, Istanbul, London, New York, Prague, Singapore, Stegersbach, Stockholm, Warsaw, and Zürs to provide information to corporate investors.

Following the appointment of the CFO/General Manager- - Financial Affairs in 2016, the Investor Relations Department was repositioned under the Financial Affairs Directorate where the Department will proactively carry out Investor Relations. The “Investor Relations Activities and Strategic Plan” of the year ahead is prepared by the Department and submitted for the approval of the Corporate Governance and Sustainability Committee, and the periodic “Investor Relations Activities Information Document” relating to current activities is presented to the Committee for review. An “Investor Relations Annual Report” is also prepared by the Department and presented to the Board of Directors once a year. Meanwhile the daily and weekly reports are consolidated and periodically presented by the CFO/General Manager - Financial Affairs to the Board of Directors.

2.2. Exercise of the Shareholders’ Right to Obtain InformationPreviously provided and continuously updated information and disclosures, which may affect the exercise of shareholders’ rights, are made available in English and Turkish for investors on the corporate website: www.dogusotomotiv.com.tr

Even though the right to request the appointment of a Private Auditor is not specifi cally regulated in the Articles of Association, Article 438 of the TCC stipulates, “each shareholder has the right to request from the General Assembly the appointment of a private auditor if necessary even when this is not part of the agenda, provided that the right to obtain and examine information has already been exercised with respect to the matter in question, and if the General Assembly agrees to this request, the company or each shareholder may apply to the Commercial Court with jurisdiction in the area of the Company’s headquarters within 30 days for a private auditor to be appointed.” However, there were no requests for the appointment of a private auditor during the reporting period. Company operations are periodically audited by an Independent Auditing Company appointed at the General Assembly.

2.3. General Assembly MeetingsThe Ordinary General Assembly convened on 25 March 2016 at 10:00 am at “Muallim Naci Caddesi No: 26, Bentley Istanbul Showroom, Ortaköy-Beşiktaş, Istanbul” to review the 2015 activities.

For the purpose of encouraging shareholders’ attendance, the meeting was held at the location of the Company’s headquarters as well as over the Electronic General Assembly System in a manner to minimize inequality among shareholders and the costs of their participation.

The call for the General Assembly Meeting, which was open to stakeholders and members of the media, was made in accordance with the Articles of Association, and as required by law, and the announcement along with the meeting agenda was published in the Turkish Trade Registry Gazette No: 9023 on 2 March 2016. The Company also presented the fi nancial statements, the annual report, audit reports, and the Board of Directors’ proposal for the distribution of profi t, as well as disclosures and statements required by Law and Corporate Governance Principles to the shareholders on the same date, all of which must be made available for the shareholders to review pursuant to Article 437 of the Turkish Commercial Code No. 6102.


At the Ordinary General Assembly, 15,148 shares were represented as principal, and 188,214,300 shares were represented in proxy, accounting for 188,229,448 out of the total 220,000,000 shares, corresponding to a total share capital of TL 220,000,000.

Along with the General Assembly Meeting announcement, the disclosure documents covering the General Assembly agenda items were also published on the corporate website. In this context, information on the total number of shares and voting rights showing the shareholder structure of the company, as well as information on whether or not there were any privileged shares in the Company’s capital were disclosed to the shareholders. Information about the management and operations of the Company and its subsidiaries, as well as procedures that may cause confl icts of interest, transactions conducted with related parties, collaterals, pledges, and mortgages were also included. In the drafting of the General Assembly agenda, the agenda items were phrased explicitly and in a manner not to cause different interpretations, taking utmost care not to use vague expressions such as “other” and “miscellaneous.”

At the Ordinary General Assembly on 25 March 2016, shareholders exercised their rights to direct questions as set out in relevant legislation, and these questions were answered immediately. Each agenda item was voted on separately, and the votes were counted and announced before the meeting ended. The meeting chairman, who presided over the General Assembly Meeting, ensured that the topics on the agenda were conveyed objectively and in detail in a clear and comprehensible manner, and provided the opportunity for the shareholders to express their opinions and raise questions on equal ground. The meeting chairman also made sure that all questions, which did not fall into trade secrets, raised by the shareholders during the meeting were answered directly at the General Assembly meeting. The questions posed and answers given during the meeting were recorded in the meeting minutes, and disclosed to the public on the corporate website. The shareholders did not put in any written requests to the Investor Relations Department regarding the addition of an item on the meeting agenda. General Meeting minutes are always open to shareholders on our website and can also be reviewed at the Company headquarters.

The agenda of the General Assembly meeting also included as a separate item the matter of whether or not to give permission to the shareholders with management control, Board Members, managers with administrative responsibilities, their spouses, and relatives by blood or marriage up to the second degree to conduct materially signifi cant transactions that may cause confl icts of interest with the Company or subsidiaries and/or conduct transactions on behalf of themselves or a third party in the same fi eld of activity as the Company or its subsidiaries, or become an unlimited shareholder in a business that operates in the same fi eld of activity as the Company or its subsidiaries. It was noted that no such transaction took place in the 2015 reporting period, and no information was communicated to the Board of Directors about persons who have the privilege to access Company information regarding their engagement in activities in the same fi eld as the Company.

Pursuant to the provisions of the CMB Communiqué No. II-17.1, the General Assembly was informed about common and continuous exchange of assets, services and obligations between the Company and related parties, and the collaterals, pledges and mortgages that were given in favor of third parties, with the details included in the Annual Report and the notes in the Consolidated Financial Statements. The same information can also be found on the corporate website: http://www.dogusotomotiv.com.tr/en/investor-relations/investor-relations/corporate-governance/subsidiaries-and-affi liates/transactions-with-related-partiesIn a separate agenda item, information was provided about the amount and the benefi ciaries of the donations and support extended in the reporting period. No changes were made to the Company’s Articles of Association in the reporting period.

2.4. Voting and Minority RightsAll of the Company shares are in bearer certifi cates, which do not grant any rights to the Company’s profi ts. The Articles of Association do not give any privileges concerning the exercise of the voting rights. Voting rights are exercised in the General Assembly in accordance with regulations on representation and voting manner. The CMB regulations on voting by proxy are fully upheld. All shareholders are provided with the opportunity to cast their votes equally, easily and appropriately. The disclosure documents of the General Assembly contain information on the structure of the Company’s shares, the voting rights granted by shares, and voting privileges. It is explicitly stated that one share gives one voting right and that no voting privileges have been granted to any shareholder groups. The Company does not have any cross ownership in another entity that would result in a controlling relationship.


There were no violations in the exercise of basic shareholder rights, such as the participation of minority shareholders in the General Assembly, proxy representation, and no imposition of an upper limit in the exercise of voting rights. Diligence is paid to the exercise of minority rights. There are no provisions in the Company’s Articles of Association regarding the representation of minority shares in the management or cumulative voting method.

2.5. Dividend Distribution Policy, Time and MethodOur Company’s dividend distribution policy has been determined in accordance with the framework of principles and procedures laid out in the Turkish Commercial Code, Capital Markets Law and other relevant regulations, and Article 24 entitled “Determination and Distribution of Dividend”, Article 25 entitled “Timing and Method of Dividend Distribution, Dividend Advances” and Article 26 entitled “Reserves” of the Articles of Association, taking into consideration the country’s economy and the condition of the industry and by maintaining a balance between our shareholders’ expectations and the needs of our Company.

The Articles of Association includes no privileges regarding profi t sharing. Dividend distribution is determined by the General Assembly, based upon the proposal by the Board of Directors prepared taking into consideration the following principles.

a) Dividend Distribution Rate:In compliance with the rate and amount determined by the Capital Markets Board and on the condition that there are no adverse circumstances in the country’s economy or the industry that might affect Company activities, a minimum of 50% of the distributable profi t, calculated in accordance with the Capital Markets regulations, is distributed. The Board of Directors may propose a different rate or amount to the General Assembly, following the assessment.

b) Method of Dividend Distribution:The dividend distribution is made in form of cash and/or bonus shares.

c) Timing of Dividend Distribution:The date of dividend distribution is determined by the Board of Directors following the General Assembly, based on the dates specifi ed in the regulation.

d) Dividend Advances:The General Assembly may authorize the Board of Directors for dividend advances. The Board of Directors may distribute dividend advances, based on the year and limits of the authorization granted, taking into consideration the country’s economy and the condition of the industry.

At the Ordinary General Assembly held on 25 March 2016, it was resolved to distribute a gross total of TL 300,000,000 in cash as dividend of 2015 profi ts.

2.6. Transfer of SharesThe Company’s Articles of Association contains no practices that complicate the transfer of shares by shareholders or provisions that restrict the transfer of shares, and the Company avoids practices that would complicate the free transfer of shares. The transfer of shares is conducted in accordance with the Capital Market Law, the Capital Market Regulations, and relevant provisions of the Turkish Commercial Code. The Company shares are not listed in international stock exchanges.

3. PUBLIC DISCLOSURE AND TRANSPARENCYThe Company’s Disclosure Policy specifi es how information and developments with respect to the Company’s past performance and future expectations, except for trade secrets, will be disclosed. Accordingly, the Company has informed the public in a fair, timely, accurate, complete, easily accessible, comprehensible, interpretable, and equal manner. Other than the pertinent provisions to the legislation, the Disclosure Policy also offers information

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT


about what will be disclosed to public, in which manner and frequency, using which channels, and the method to be followed in answering questions directed at the Company.

The principles of disclosing information about the future are also included in the Disclosure Policy. Any information that refers to the future in public disclosures is provided together with the rationale and statistical data on which the estimates are based. Such information does not contain exaggerated and groundless predictions or may not be misleading, and are prepared in a manner relevant to the Company’s fi nancial standing and operational results.

Material events containing internal or continuous information, circumstances and developments that might infl uence investment decisions of investors are disclosed to the public in accordance with the CMB Communiqué No. II-15.1, and relevant regulations, in a timely, complete, accurate, comprehensible, and suffi cient manner, free from any misrepresentations.

Pursuant to applicable regulations of the BIST and the CMB, material event disclosures are submitted to the Public Disclosure Platform bearing an electronic signature, and published on the corporate website under a separate heading. In 2016, the company made 72 material event disclosures.

Material Developments After the End of the Reporting TermAnnouncements and Material Event Disclosures from 31 December 2016 to 28 February 2017:

Latest announcements and material event disclosures made between the above-mentioned dates are detailed below:

5 January 2016 – List of Companies to be Assessed for BIST Sustainability IndexAccording to Article 5 of the BIST Sustainability Index Principal Rules, the companies to be assessed in 2017 have been determined; and the list of 63 companies consisting of those included in the BIST 50 Index plus volunteering companies listed on the BIST 100 has been published.

In the assessments to be conducted by Vigeo EIRIS, the public information of the companies as of 30 June 2017 will be taken into consideration, and the companies that pass the threshold values in the index selection criteria as a result of this assessment will be included in the BIST Sustainability Index for the November 2017 - October 2018 period.

30 January 2017 - Purchase of Property and EquipmentThe property with 37,361.72 sqm of surface area located in “Istanbul Province, Büyükçekmece Provincial District, Plot 1761, Lot 7, Esenyurt / Istanbul” and leased as the Company’s automotive showroom and aftersales service was bought in accordance with the value determined by the survey and expertise report issued by Terra Estate Appraisal Company from Doğuş Holding A.Ş. for the amount of TL 186,500,000.

20 February 2017- Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi - About Capital ReductionThe legal process that the Company had initiated in order to reduce the capital of Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi in which the Company has a 49% share, and whose activities had been suspended, from the total of TL 56,166,000 down to TL 234,000 by deducting TL 44,165,380.90 from retained losses and a cash reduction of TL 12,000,619.10 is ongoing.

There are no non-corporate shareholders in the Company. However, non-corporate shareholders, after elimination of indirect ownership, were disclosed in the public offering prospectus issued in 2004, and this information is periodically updated on the Public Disclosure Platform under the “General Information Form of the Company.”

3.1. Corporate WebsiteThe Company’s corporate website (www.dogusotomotiv.com.tr) is used as an active and effective platform for public disclosure, and the information therein is regularly updated. The information on the website is consistent with the statements made in accordance with applicable regulations. Our company’s user-friendly website was updated with a new look and better usability, and launched on 1 November 2016.

In addition to the mandatory information required by legislation to be disclosed, the corporate website also includes: trade registry information, the latest shareholding and management structure, the Board of Directors, the most up-to-date version of the Articles of Association together with the dates and issues of the Turkish Trade


Registry Gazettes in which these changes were published, material event disclosures, informative presentations for investors, fi nancial statements, annual reports, prospectus, General Assembly meeting agendas, lists of attendees, minutes of meetings, form for proxy voting, internal directives, Dividend Distribution Policy, Disclosure Policy, Remuneration and Severance Pay Policy, Share Buy-Back Policy, Grant and Aid Policy, Corporate Sustainability Policies, Human Resources Policy, the Company’s Code of Ethics, as well as information requests from the Company, questions and notifi cations and their answers under the Frequently Asked Questions heading.

The shareholding structure of the Company and the names of non-corporate shareholders with more than 5% shares after eliminating the effects of indirect and cross ownership were disclosed to public together with their privileges, share amounts, and percentages. This information is made available on the corporate website, and also offered in English for the benefi t of international investors.

As required by the relevant provisions of the Capital Market Law, fi nancial statements are disclosed on the Public Disclosure Platform simultaneously in Turkish and English. Disclosures in English are provided in a true, complete, direct, comprehensible, satisfactory manner and remain consistent with the Turkish version thereof as a summary, to the extent that the disclosure assists the benefi ciaries in making a decision.

3.2. Annual ReportThe Board of Directors has prepared the Annual Report in accordance with the Capital Market Law and CMB’s Corporate Governance Principles and in a way that would help the public to obtain complete and accurate information about the Company’s activities. The Annual Report is disclosed to public on the Public Disclosure Platform (PDP) along with fi nancial statements. The Annual Report is prepared in Turkish and in English and is disclosed to the public on the corporate website. The annual reports of the last fi ve years are also available to public on the website.

The annual reports include:

» Board Members’ and senior executives’ resumes, start dates and terms of their service » Information on the Company’s fi eld of operations and position in the industry » Information on the organization’s fi nancial resources, and the qualifi cation and amount of capital market instruments,

» Changes to the Articles of Association made during the reporting period and their reasons » Statement of Responsibility in the Financial Reports, » Corporate Governance Principles Compliance Report, » Independent Auditor’s Report regarding the Annual Report.

In addition to topics specifi ed in legislation and other sections of the Corporate Governance Principles, the Annual Reports also include:

» Information on the duties that Board members and executives assume outside the Company » Declarations of independence by the Independent Board Members, » The members of the committees formed under the Board of Directors, and the meeting frequency of these committees, the working principles including the activities carried out, and the Board of Directors’ assessment of the committees’ effectiveness

» The number of Board meetings during the year, and the attendance of the Board Members in the meetings, » Information regarding some legislative changes that may materially affect the Company’s operations » Information on legal actions brought against the Company and their possible consequences, » Information on social rights of employees, their vocational trainings, and corporate sustainability activities regarding the Company’s operations that have social and environmental consequences

» Links to the Corporate Sustainability Reports that include information on the Company’s performance within the scope of Corporate Sustainability Principles

» Information regarding the requirement that prior approval must be given by the General Assembly



to shareholders who have management control, members of the Board of Directors, managers with administrative responsibilities, and their spouses, relatives by blood or marriage up to second degree to conduct signifi cant transactions with the Company or its subsidiaries that may cause confl icts of interest, to compete or conduct such transactions, along with other topics related to the Company.

4. STAKEHOLDERS

4.1. Keeping Stakeholders InformedDoğuş Otomotiv Group’s stakeholders, namely the customers, shareholders, employees, subsidiaries and affi liates, Authorized Dealers and Aftersales Services, suppliers, OEMs, government and social milieu, are informed on topics that are relevant to them. The process of informing comprises presenting disclosures of material events made to the Public Disclosure Platform, the minutes of General Assemblies, Independent Auditor Reports and fi nancial statements, presentations made to individual and corporate investors, reports drawn up about the Company by third parties and Corporate Sustainability Reports, through press releases and publishing them on our corporate website. Furthermore, the annual Corporate Sustainability Report covers detailed explanation about all the stakeholder engagement platforms that involve individual stakeholder groups. The Company carries out stakeholder engagement activities to create dialogue platforms with stakeholders, which directly affect and are in turn directly affected by our operations, to provide benefi ts for all parties, understand their expectations using a clear and transparent communication strategy, and respond to these expectations.

As a routine operation, the company procedures are evaluated as instruments of daily workfl ow developed under the control of Process Management by taking into account the opinions of all related departments and brands, and by considering the company strategy. For this purpose, the employees are notifi ed through the dedicated intranet on the company-related issues they need to be informed of. In periodic management information meetings, highlights such as achievements, strategies and targets, and the company’s roadmap are shared transparently with employees. Furthermore, queries or requests received by phone are promptly taken into consideration, and necessary information is provided.

All fi nancial reports and information of the Company open to public are disclosed by Doğuş Otomotiv Investor Relations Department in an accurate, complete, fair, valid, and comprehensible manner.

In the event of protection/use of assets, ensuring the company’s safety, and detection/prevention of fraud, there are mechanisms in place to allow stakeholders to report these instances to the Early Risk Detection Committee or the Audit Committee.

4.2. Stakeholder Participation in ManagementWithin the Corporate Governance Principles framework, models for the participation of stakeholders in management are implemented while continuous enhancements are introduced.

Shareholders: Shareholders’ participation in management and protection of their rights are ensured within the framework of applicable laws and regulations.

Employees: In addition to involving employees in decision-making mechanisms to the extent of their authority and responsibilities, online platforms have been established on the intranet for them to share their requests, suggestions and opinions. The contributions that employees make as part of “The Suggestion and Award System” are reviewed by authorized teams and awarded when deemed necessary. The answers to the social, environmental and economic topics included in the employee satisfaction surveys to understand employee expectations are consolidated and published in the Corporate Sustainability Report, and regularly presented to senior management. The activities of the Corporate Responsibility Working Group, composed of delegates from all departments, are regularly shared with the Corporate Governance and Sustainability Committee reporting to the Board of Directors.

Customers: An independent fi rm regularly conducts customer satisfaction surveys. The customer requests received by Customer Relations and the results of customer surveys are evaluated by the responsible departments, and necessary updates are implemented. Furthermore, customers are informed of the Company’s strategies and plans at Authorized Dealer events organized throughout the year. In line with the philosophy of serving more effectively, effi ciently and with higher quality, holding regular meetings, which shape corporate policies and decisions, with stakeholders, and taking necessary actions according to the evaluation of results are part of the engagement process.


Meanwhile, other shareholders - who are not controlling shareholders that directly take part in management - participate in management via General Assemblies.

4.3. Human Resources Policy Doğuş Otomotiv, as a service company, derives its power from its human resources, which is accepted as a corporate value. Accordingly, in our Human Resources Policy, we emphasize the importance of attracting and working with employees who:

» Adopt the values of Doğuş Group (We sincerely solve, apply, and develop) » Have the competencies required by the dynamism of the company » Are well aware of the signifi cance of the customer » Are eager to learn and develop » Take effi ciency as a reference within the company » Employ a system-oriented approach, and » Sustain long – lasting high performance.

In line with the Human Resources Policy, we also strive to contribute to their professional and personal development, and assist them in realizing their full potential. In addition to the Human Resources Policy, we have also disclosed to the public “Our Employee and Quality Work Environment Policy” which covers our targets in the following topics: employee satisfaction, occupational health and safety, sustainable employment, equal rights for employees, open and transparent communication with employees, and establishing platforms to enable direct communication with senior management.

4.4. Code of Ethics and Corporate Sustainability Doğuş Otomotiv Code of Ethics An Ethics Working Group was established within the Company to prepare the Code of Ethics, which was completed and launched in 2012 after diligent studies and efforts.

Doğuş Otomotiv Code of Ethics provides detailed explanation of our ethical ways of doing business, and concerns not only the Company managers and employees, but also our suppliers and all the stakeholders we work with. Doğuş Otomotiv Code of Ethics is shared with all our stakeholders within the scope of our Corporate Sustainability Report and on the corporate website.

The trainings organized in order for the employees to fully understand our Code of Ethics are planned as one-on-one sessions using the Q&A method. During the reporting period 188 employees of Doğuş Otomotiv received a total of 376 man/hours of one-on-one Code of Ethics training. By the end of 2016, 81% of Doğuş Otomotiv employees have received one-on-one Code of Ethics training. Furthermore, 127 new hires that started within the same period were educated about Code of Ethics as part of the total 317.5 man/hours of e-orientation.

Informative activities to familiarize the Authorized Dealers and Aftersales Services with Doğuş Otomotiv Code of Ethics also continued. Accordingly, 20 Authorized Dealers and 3 suppliers included within the scope of the Corporate Sustainability Report, were instructed about the Code of Ethics in detail during info meetings.

Corporate Sustainability Corporate Sustainability refers to the methods we use in developing solutions for the social, economic and environmental issues in our industry, and our corporate behavior that encompasses all of our operations. » We believe in the importance of our employees’ contributions in ensuring our existence as a strong and trustworthy

corporation across all stages of the automotive value chain. » We value the reputation of the brands we manage in the eyes of our stakeholders, and ensure that this reputation

grows in parallel with our performance in all of our areas of responsibility. » We are aware that the right to safer, healthier, more environmentally friendly and more comfortable mobility is a part

of social welfare. » We ensure continuous development through dialogue platforms built on open communication, mutual respect, and

tolerant service with our employees, customers, Authorized Dealers and Aftersales Service Centers, and all other key stakeholders.



» We regularly question our key stakeholders’ expectations, and cooperate with them to respond to these expectations in the best way possible.

» As one of the most important representatives of the international trust and quality approach in our country, we strive to constantly raise our stakeholders’ awareness of and performance in this area.

» Through activities that younger generations will embrace and that will lead to changes in behavior, we draw attention to the vital importance of traffi c safety.

» We plan, establish, and implement policies to minimize the potential negative effects of our operations on the environment.

» We are well aware of the critical importance of our employees’ social, mental and professional contributions for the Doğuş Otomotiv Group, and consider their health and safety a top priority.

Our Corporate Sustainability activities are covered in greater detail in the General Information section under Article 4.13.4., Corporate Sustainability and Corporate Responsibility activities.

5. BOARD OF DIRECTORS

5.1. The Function of the Board of DirectorsThe Board of Directors has maintained the Company’s risk, growth and return balance at optimal levels by making strategic decisions, and managed and represented the Company by fi rst and foremost protecting the long-term interests of the Company through rational and prudent risk management. Driven by the Company’s vision and mission, the Board of Directors has coordinated the operations performed by the executive body, and at the same time overseen Company management’s performance monitoring how the Company’s operations and activities complied with the legislation, the Articles of Association, internal regulations and constituted policies. The Board is the highest authority in the Company for decision-making, strategy, and representation.

Corporate Vision, Mission and Strategic GoalsDoğuş Otomotiv continued its successful streak of the previous years in 2016, and despite the diffi cult market conditions, attained successful results in its current lines of businesses by staying mindful of its strategies. As such, for the coming periods we continue to aim for constant improvement in our cost management, creating “fan customers”, and being an effi cient company that grows sustainably for all our employees, business partners, customers and shareholders.

Our Vision:To provide innovative services beyond expectations.

Our Mission:Doğuş Otomotiv is a reliable automotive company operating on a customer-oriented basis, having an insight into its sector and the expectations of its shareholders, defi ning new expectations and aiming to satisfy them at the highest level, possessing creative manpower and using technology in the most optimal manner in this direction, aiming to offer an effi cient and profi table service throughout the automotive value chain.

Strategy:Our Company’s general and long, medium and short-term corporate strategies are based on the following goals:

BE SIZABLE – BE CLOSE – BE CREATIVE

BE SIZABLE: » As Doğuş Otomotiv, achieving systematic, effi cient and profi table expansion in its fi eld of activity, and growth in added

value in every aspect of the value chain in Turkey and international markets. » Ensuring career development of human resource for rapid and systematic evolution of this growth and its results.

BE CLOSE: » Acquiring an insight into the expectations of our stakeholders, and in particular our customers, and raising our relations

to the perfect level beyond expectations as rapidly as possible. » Establishing effective systems that will enable Doğuş Otomotiv to attain operational excellence in terms of effi ciency

and profi tability and as such, closely monitoring and analyzing the fi nancial and operational status of the company.

BE CREATIVE » Creating distinction and a competitive edge through constant innovations based on a participative approach to

product development, customer service and business concept. » Developing actions and methods that will render the business in a “leaner, faster, cheaper” manner with participation

and teamwork in process improvement.


Since its inception, Doğuş Otomotiv, in line with its strategic plans, has focused on strengthening its position in the industry, forming and expanding its Authorized Dealer and Service network, and improving recognition and image of the brands it represents in the domestic market. Following the Company’s initial public offering in 2004 as an importer and distributor of all the brands it embodies, the Company has evolved its strategy by focusing on the development and performance of its other core and automotive-related ancillary businesses from a local and global perspective.

We aim at being the fi rst institution to implement newly developed applications using innovation and technology, and creating synergy with our employees and other stakeholder’s based on our Company’s sustainable and stable growth strategy. Therefore, we see it as our priority to work on new projects to continuously increase the quality of our core and automotive-related ancillary businesses. Furthermore, based on the knowledge and experience we have accumulated for more than 20 years as well as the success we attained we intend to further expand our business activities by capturing new opportunities.

Knowing that the long-term success of Doğuş Otomotiv can only be sustained through the ultimate satisfaction of our stakeholders, we have built our strategy on four pillars:

One Step Beyond Customer Satisfaction: Turning Customers into Fans!

With uncompromising customer satisfaction-oriented dynamic and attentive service approach, our strategy is to make our customers feel they are valued, and offer high quality and creative service by showing attention at the highest level to all of their demands and needs.

» The Value and Care Centre (DIM) that supports our brands at every stage of the customer life cycle became operational in November 2014.

» In the upcoming period, we will work on being constantly connected and accessible for our customers through “Connectivity” and ensure the quick and creative solutions for their requests with each communication.

» With a virtual showroom concept that offers a digital experience for customers, the “Audi Cities” represent the future of the ongoing “store” culture; these life-size, virtual versions of all Audi models can be shown on giant LED screens.

Achieving Operational Excellence through Increase in Productivity!

Doğuş Otomotiv offers sales, service and spare parts services for 12 international brands at more than 510 customer touch points, and aims to continue its activities as Turkey’s leader in automotive imports and distribution by achieving optimum profi tability.

» Our internet-based and mobile device compatible software “Turkuaz”, already used by Doğuş Otomotiv and all its Authorized Dealers/Services, adds value to the automotive processes by including manufacturers and suppliers as well, and with constant software updates, it serves signifi cantly our targets for digitalization.

» In accordance with the efforts to achieve sustainable effi ciency in shipments from ports, and in light of the sales volume of our Company, the stockyard development project will soon to be launched.

» The aim is to identify development areas through continuous measurement of quality standards at all customer touchpoints, and to review the capacities of Authorized Dealers for the purpose of making revisions as well as implementing the required environmental and labor regulations to allow for a more productive ecosystem.

» The personnel infrastructure will be supported for more effi ciency according to the business volume in our Company and for more effective use of new technologies in our services.

» Investment opportunities will be continually assessed for new business areas, and the Company’s development plans will be reviewed.

» Within the scope of Lean Management practices, necessary programs will be implemented to ensure that our employees contribute to the effi ciency of business processes and savings-oriented process improvement programs will be launched.



Maintaining Strong Presence in the Automotive Market!

The company aims to maintain its strength in the market and achieve optimized profi tability in its operations. » The company aims to enable the international brands it represents to perform successfully in Turkey, and to grow with stability, benefi ting from those brands’ value and competitive advantage, with its vision of “creative service beyond expectations” and its principle of “customer-satisfaction oriented work”.

The First Condition of Creating a Happy Customer is Happy Employees!

The Company offers a common culture to more than two thousand valuable employees, engages in innovative and sustainable human resources practices, and carries out projects that improve customer satisfaction.

» Our company’s employer brand “Bir’iz” (Together) gives the message of “we act together, and leave our mark” » The “Development School-GO” platform reinforces the internal social communication skills of employees, and allows them to monitor their personal and professional development as well as their training.

» Coaching and mentoring programs are offered by the Company within the scope of “Talent Management”. » In accordance with the efforts of the “Equality at Work” platform, coaching and mentoring training is provided to women in the Company, and they are offered opportunities to get prepared for the next management level.

» With DRIVE (Doğuş Otomotiv’s Route Human Training, a project that aims to enhance human resources, both within the organization and also at more than 510 Authorized Dealers and Service Centers where 7,500 employees work, counseling support is provided.

5.2. The Principles of the Activities of the Board of DirectorsThe Board of Directors conducts its activities in a transparent, accountable, fair, and responsible manner. Separate individuals perform the duties of the Chairman of the Board of Directors and Chief Executive Offi cer.

The Board of Directors plays a leading role in maintaining effective communication with shareholders and resolving possible disputes. For this purpose, the Board of Directors works in close cooperation with the Investor Relations Department.

While performing its duties and responsibilities, the Board of Directors engages in a continuous and effective collaboration with executives. When deemed necessary, executives participate in the Board meetings. The responsibilities and duties of the Board members and executives are covered in the Articles 9,10,11,12 and 13 of the Articles of Association.

The Board Members of our Company are covered by an umbrella insurance, the “Directors and Offi cers Liability Insurance Policy” by Doğuş Holding A.Ş. as insurer for an amount of $25 million per annum against any damages resulting from their managerial misconduct that may have adverse fi nancial consequences to the company.

The Working Principles and Procedures of the Board of Directors include: » The administrative structure, duties, and responsibilities of the Board of Directors » The processes concerning the call for meetings of Board members, and preparation for meetings » Information on the frequency and planning of annual meetings » Method used to set the agenda for the meetings. » The process of sharing information and documents with the Board members regarding the topics on the agenda.

» Each member has the right to one vote, » The obligation of the Board members to share information among each other, and of executives to inform the Board of Directors.

» Duty distribution within the Board of Directors, and committees, » The performance evaluation of the Board of Directors and a number of other topics stated in the principles are adjudicated. In execution, this regulation is applied.


5.3. Structure of the Board of Directors The Company’s Board of Directors is made up of nine (9) people; one (1) chairman and eight (8) members. In this respect, the rule of having at least fi ve (5) members to set up a Board is complied with. This number is suffi cient for the Board to carry out effi cient and constructive work, and effectively form the committees and organize their activities. The Board of Directors has one (1) executive and eight (8) non-executive members. Most of the members are therefore in non-executive roles. On the other hand, three (3) members of the Board of Directors who are non-executive are also independent members, as required by the Corporate Governance Principles. The independent members have submitted to the Board of Directors their written declaration stating their independence within the framework of relevant legislation, Articles of Association and the criteria set forth in the Principles. Currently there are two (2) female members serving on the Board. The Board of Directors of the Company defi ned its policy on female members to serve on the Board further to the proposal of the Remuneration and Nomination Committee established according to the CMB Corporate Governance Principles.

The selection of Board Members in our company complies with the qualifi cations mentioned in Chapter IV of the CMB Corporate Governance Principles, and is carried out in accordance with the relevant articles of the Turkish Commercial Code.

The Board Members of our Company are Aclan Acar, Osman Nezihi Alptürk, Hayrullah Murat Aka, Emir Ali Bilaloğlu, Gür Çağdaş, Özlem Denizmen Kocatepe, Recep Yılmaz Argüden, Ferruh Eker, and Emine Gülden Özgül. The Chairman of the Board is Aclan Acar. The three independent members of the Board are Recep Yılmaz Argüden, Ferruh Eker and Emine Gülden Özgül. The members were elected to the Board of Directors to serve for two (2) years at the General Assembly meeting on 25 March 2016.

The resumes of the Board Members can be found on page 14 of this report.



Declarations of Independence by the Independent Board Members:


5.4. Procedures of Board of Directors MeetingThe Board of Directors convenes frequently enough to effectively fulfi ll its duties. The Articles of Association includes provisions on the number of meetings and quorum for Board meetings. Meeting days of the board are circulated to all members in advance. Board meeting dates are determined at the beginning of each year and announced to all participants. The Board of Directors convened 11 times in 2016, all of which were attended. In the absence of some members, they were duly informed and their opinions were taken in accordance with the general principles. Topics addressed in Board of Directors meetings are recorded as minutes of the meeting, and stored. Board Members have the right to declare different opinions on any subject, and to get their reservations recorded in the minutes. The Company’s strategic goals, operational results, and performance indicators are monitored regularly by the Board of Directors through monthly meetings.

Each member of the Board of Directors has the right to one vote, and none of the members has a right to veto. The Board of Directors meetings are held in compliance with the legislation and the relevant sections of the Articles of Association.

The attendance ratios of the Board members in the Board of Directors Meetings in 2016 are listed below:

Attendance Ratio*Aclan Acar 100%Osman Nezihi Alptürk 89%Hayrullah Murat Aka 82%Emir Ali Bilaloğlu 91%Gür Çağdaş 89%Özlem Denizmen Kocatepe 82%Recep Yılmaz Argüden 82%Ferruh Eker 100%Emine Gülden Özgül 100%

* Based on the meeting attendances after the General Assembly of 25 March 2016.

5.5. Committees Formed under the Board of DirectorsThe Board of Directors has formed the Audit Committee, the Corporate Governance and Sustainability Committee, the Early Risk Detection Committee and the Remuneration and Nomination Committee to fulfi ll its duties and responsibilities in a healthy manner. Separate Nomination and Remuneration Committees have not been established due to the structure of the Board of Directors, and their duties are fulfi lled by a single Remuneration and Nomination Committee.

The duties, working principles and members of the Committees have been determined by the Board of Directors, publicly disclosed through Board-approved written documents, and announced on the corporate website. All members of the Audit Committee are independent Board Members. At least the Committee Head of the Corporate Governance and Sustainability Committee, the Early Risk Detection Committee, and the Remuneration and Nomination Committee is an independent Board Member, and the Executive Committee Chair/CEO does not serve on any of these committees.

The Board of Directors has provided the Committees with all kinds of resources and support required to fulfi ll their duties. When deemed necessary, Committees may invite executives to the meetings to obtain their views. Committee reports were evaluated by the Board of Directors, and necessary actions were taken by our Company.

Furthermore, the Remuneration and Nomination Committee works with consultancy fi rms on two separate topics.



1. The consultancy services of ARGE Danışmanlık A.Ş. are procured for the assessment of the Board of Directors and improving its effi ciency. The said fi rm is not affi liated with our Company in terms of any equity relationship except for providing consultancy services. However, Recep Yılmaz Argüden, an Independent Board Member at our Company, serves as a Member on the Board of Directors at ARGE Danışmanlık A.Ş. For the consultancy we have received, we worked with Erkin Erimez, Ph. D., another offi cial in the same fi rm.

2. For the Executive Board Dynamics Assessment and Leadership Development Project, the consultancy services are procured from RB Yönetim Danışmanlığı A.Ş. (Odgers Berndtson). The said fi rm is not affi liated with our Company in terms of any equity or management relationship except for providing consultancy services.

AUDIT COMMITTEE

Ferruh Eker (Head of Committee – Independent Board Member) Recep Yılmaz Argüden

The Audit committee, consisting of Independent Board Members as defi ned by the CMB’s Corporate Governance observations concerning Principles, carries out its activities according to the Audit Committee Bylaws. The Audit Committee assists Board of Directors in the oversight of accounting, auditing, internal control system, and fi nancial reporting.

In this respect, the Audit Committee, on behalf of the Board of Directors, defi nes methods and criteria for the internal audit, the effectiveness and suffi ciency of internal control and risk management, the functioning of the accounting and reporting systems in accordance with the Capital Markets Law and the principles therein, the integrity of information, the confi dential assessment and resolution of complaints made to the Company regarding the internal control system, and the independent auditing and discretion in evaluation of notifi cations.

In addition to public disclosure of fi nancial information and to regular monitoring of independent auditing activities, the Audit Committee also reports its fi ndings as a result of its own duties and responsibilities, and evaluations to the Board of Directors.

The Audit Committee provides written information about its evaluations with regard to the veracity and accuracy of the annual and interim fi nancial statements to be disclosed to public, supported by the opinions of the Company’s responsible executives and independent auditors. Accordingly, four (4) written briefs were presented to the Board of Directors in 2016.

The Committee convened six (6) times in 2016, and also held one (1) joint meeting with the Early Risk Detection Committee. During the presentations by the Internal Audit Department, the Committee was informed about internal control, risk management, and governance processes as a result of audits, and the decisions reached were recorded in the minutes of the Committee meeting. In 2016, four (4) presentations were made to the Board of Directors by the Committee members about audit fi ndings that were noted as “high risk”.


CORPORATE GOVERNANCE AND SUSTAINABILITY COMMITTEERecep Yılmaz Argüden (Head of Committee – Independent Board Member) Aclan Acar Gür Çağdaş Hasan Hüsnü Güzelöz Halide Müge Yücel The Corporate Governance and Sustainability Committee identifi es whether or not Corporate Governance Principles are complied with, the reasons for why not, and confl icts of interest that may arise due to lack of compliance, and fulfi lls its duty for public disclosure with the Corporate Governance Compliance Report. The Committee also informs the Board of Directors on preventive/remedial measures for ensuring the implementation of sustainability principles, areas of opportunity and operational results. The Committee consists of fi ve (5) members, including the Head of the Committee, who is an Independent Board member and two (2) non-executive Board members, with the fourth member the Manager of the Investor Relations Department, and is an appointed member of the Corporate Governance and Sustainability Committee, pursuant to the CMB Communiqué No. II-17.1.

When the Corporate Governance and Sustainability Committee consists of two members, both of the members should be non-executive, whereas if there are more than two members, then the majority of the members should be non-executive. Currently, the Committee complies with the Corporate Governance Principles in terms of its formation. The Committee has convened four (4) times in 2016, and regularly reported its fi ndings and resolutions to the Board of Directors.

EARLY RISK DETECTION COMMITTEERecep Yılmaz Argüden (Head of Committee – Independent Board Member) Aclan Acar Hayrullah Murat Aka Hasan Hüsnü Güzelöz

The Early Risk Detection Committee consists of four (4) members, with the Head of the Committee an independent Board member. The Committee was severed from the Corporate Governance and Sustainability Committee as of April 2013, and its working principles were established. The Early Risk Detection Committee fulfi lls its duties and responsibilities in accordance with the legislation. The Committee, formed for early diagnosis of causes that threaten the Company’s existence, development and continuity, taking precautions/remedies for their prevention, and managing risks, is responsible to run and develop the system. The Committee held a total of fi ve (5) meetings in 2016, including one joint meeting with the Audit Committee, and presented regular reports to the Board of Directors to assess the risk situations, also sharing these reports with the auditor.

RISK MANAGEMENT AND INTERNAL CONTROL MECHANISMCorporate Risk Management, which we established to revise and assess methods of defi ning uncertainties in a timely and adequate manner and to take remedial measures in accordance with the objectives of our Company’s overall code of conduct, continues to evolve into a corporate culture that extends from top to bottom.

The Financial Control Department, operating under the General Directorate Responsible for Financial and Administrative Affairs as a consequence of the importance we attach to risks in the Company, was restructured in May 2015 as the Financial Control and Risk Management Department. By addressing the complementary nature of risk and control concepts together under the same roof, we maintain our goal of creating one single responsibility center and a common language. In line with this objective, a direct, comprehensive and integrated service is provided for the Early Risk Detection Committee as the command center for effective risk management, and full support is given to the supervisory duty of the Committee.

Our risk composition, considered on the basis of probabilities and possible effects of processes and scenarios, has



been redefi ned and expanded to include our growing sensitivity for health, safety, environment, business continuity, and sustainability in the recent years. Risk assessment and evaluation parameters, the use of common terminology, emergency response and crisis management approach, as well as all related reporting and shareholder information activities also continue to be reinforced accordingly.

The revisions we have made in accordance with our changing organization and our current environment are directed towards controlling and managing the risks following their analysis in accordance with the objective of the internal control system. Governing bodies, including relevant committees and executive management plan the necessary measures to be taken for assurance in accordance with our Company objectives, and address and monitor them through authorized channels.

REMUNERATION AND NOMINATION COMMITTEEEmine Gülden Özgül (Head of Committee – Independent Board Member) Aclan Acar Osman Nezihi Alptürk

Relevant executives and managers are invited for a meeting based on the topic, and asked to provide their opinions and input.

The Remuneration and Nomination Committee consists of three (3) members, with the Head and independent Board member. The Committee has convened three (3) times in 2016, and the issues identifi ed in the meeting, the actions taken, and the results obtained were presented to the Board of Directors.

In line with the guidance and efforts of the Committee in 2016, and parallel to the Female Members Policy of the Board of Directors as one of the nomination criteria for Board members, female candidates are prioritized among those with commensurate skills and experience. Furthermore, a study on the structure, function, strengths and development areas of the Board of Directors were analyzed under the coordination of an independent fi rm to assess the structure and productivity of the Board, and recommend changes that may be implemented in these areas. Accordingly, an e-survey drafted by the fi rm was conducted along with face-to-face interviews with the members, and the results were presented to the Board of Directors for review.

In addition to these activities, the Executive Board Dynamics Assessment and Leadership Development Project, which included identifi cation and assessment of, and recommendations on the Executive Board’s function, strengths and development areas as well as was carried out under the coordination of an independent fi rm. Accordingly the fi rm conducted survey, held face-to-face interviews and a workshop, the results of which will be duly presented to the Board of Directors.

Other committees formed by the Board of Directors and their members are listed below:

» Dealer Committee: Osman Cem Yurtbay, Emir Ali Bilaloğlu » Strategic Planning and Business Development: Özlem Denizmen Kocatepe, Emir Ali Bilaloğlu » Disciplinary Committee: Osman Nezihi Alptürk, Hasan Hüsnü Güzelöz, Emir Ali Bilaloğlu » Compliance Committee: Hasan Hüsnü Güzelöz, Hayrullah Murat Aka » Human Resources Committee: Aclan Acar, Emir Ali Bilaloğlu, Hasan Hüsnü Güzelöz

5.6. Financial Rights Provided to the Board of Directors and Managers with Administrative LiabilityThe remuneration principles for the Board of Directors and the managers with administrative liability have been put into writing, presented to the General Assembly for approval, and disclosed electronically to the general public. In remuneration of independent members of the Board of Directors, payment plans such as dividend, stock options or payment options based on the Company’s performance have not been considered. The remuneration of independent members of the Board of Directors has been set at a level to protect their independence.

Our company has not given loans or credit to any members of the Board of Directors or executives with administrative responsibilities, nor granted anyone any loan through a third party under the guise of personal loans, nor given securities on their behalf. Performance appraisals of the Board members have been conducted with the support of a professional organization using objective criteria.

In 2016, the total sum of fi nancial rights granted to our company’s managerial bodies and to managers with administrative liability, including their salaries and similar payments, health insurance and employer’s contribution of social security, was TL 56,709 thousand.


GENERAL INFORMATION

1. GENERAL COMPANY INFORMATION

The Annual Report covers the period from 1 January 2016 to 31 December 2016.

1.1. General Information on the Company

Company Title: Doğuş Otomotiv Servis ve Ticaret Anonim ŞirketiCompany Address: Maslak Mahallesi, Ahi Evran Cad. No: 4 İç Kapı No:13 (Doğuş Center Maslak) Sarıyer/İSTANBULHead Offi ce: Şekerpınar Mahallesi, Anadolu Caddesi, No: 22 41420 Çayırova / KOCAELİPhone: (0262) 676 9090Fax: (0262) 676 9096Website: www.dogusotomotiv.com.trDate of Establishment: 19.11.1999Trade Registry No: 429183 / 376765

1.2. Information on Capital Structure and Shareholding As of 31 December 2016, no changes occurred in the Company’s issued share capital. In the reporting period, neither a capital increase nor capital market instruments were issued by our Company. The merger of Doğuş Nakliyat A.Ş. with Doğuş Holding A.Ş. has led to a change in shareholding within the organization itself.

Shareholder’s Commercial TitleShare in the Capital (TL)

Share in the Capital (%)

Doğuş Holding A.Ş. 77,461,622 35.21

Doğuş Araştırma Geliştirme ve Müşavirlik Hizmetleri A.Ş. 66,638,086 30.29

Doğuş Sigorta Aracılık Hizmetleri A.Ş. 292 0.00

Publicly Traded Shares 75,900,000 34.50

Total 220,000,000 100

1.3. Privileged SharesIn the current shareholding structure of our Company, as of 31 December 2016 as described above, there are no privileged shares in our Company.

1.4. Governing Body, Senior Executives and Personnel In 2016, the average number of employees was 906 for blue collars and 1,802 for white collars.


1.4.1. Information on Senior Executives for the year 2016 and Duties of Board Members

Name Surname Position Starting Date Duration

Aclan Acar

Chairman of the Board of Directors, Head of Human Resources Committee, Corporate Governance and Sustainability Committee Member, Early Risk Detection Committee Member, Remuneration and Nomination Committee Member 25 March 2016 2 years

Osman Nezihi Alptürk

Vice Chairman of the Board of Directors, Remuneration and Nomination Committee Member 25 March 2016 2 years

Hayrullah Murat AkaBoard Member, Compliance Committee Member, Early Risk Detection Committee Member 25 March 2016 2 years

Emir Ali Bilaloğlu

Board Member, Dealer Committee Member, Strategic Planning and Business Development Committee Member, Disciplinary Committee Member, Human Resources Committee Member 25 March 2016 2 years

Gür ÇağdaşBoard Member, Corporate Governance and Sustainability Committee Member 25 March 2016 2 years

Özlem Denizmen KocatepeBoard Member, Strategic Planning and BusinessDevelopment Committee Member 25 March 2016 2 years

Recep Yılmaz Argüden

Board Member, Audit Committee Member, Head of Corporate Governance and Sustainability Committee, Head of Early Risk Detection Committee 25 March 2016 2 years

Ferruh Eker Board Member, Head of Audit Committee 25 March 2016 2 years

Emine Gülden ÖzgülBoard Member, Head of Remuneration and Nomination Committee 25 March 2016 2 years

* Furthermore, Mr. Cem Yurtbay has duties in the Dealer Committee, Mr. Hasan Hüsnü Güzelöz in the Committees of Corporate

Governance and Sustainability, Disciplinary, Compliance, and Human Resources, and Ms. Halide Müge Yücel in the Corporate

Governance and Sustainability Committee, respectively.

1.4.2. Employees Involved in the Management

Name Surname Position EducationEmir Ali Bilaloğlu Chief Executive Offi cer M.Sc. in Engineering Kerem Talih General Manager, Financial Affairs Economics

Giovanni Atilla Gino BottaroGeneral Manager, Audi, Bentley, Lamborghini and Bugatti Mechanical Engineering

İlhami Eksin

General Manager, Scania, Thermo King, DOD Heavy Vehicles, Scania Industrial and Marine Engines Economics

Anıl Gürsoy General Manager, DOD, SEAT and Porsche Business AdministrationKerem Güven General Manager, VW Commercial Vehicles Tourism & Hotel Management

Mustafa Karabayır General Manager, Spare Parts and LogisticsGeology Engineering / M. Sc. in Civil

EngineeringTolga Senyücel General Manager, ŠKODA Yüce Auto Business Administration / MBAVedat Uygun General Manager, VW Passenger Vehicles Mechanical Engineering / MBA

Ela KulunyarGeneral Manager (acting), Human Resources and Process Management Business Administration

Koray BebekoğluDirector, Strategic Marketing and Corporate Communications Mining Engineering / MBA

Yeşim Yalçın Maleri Director, Financial Affairs Economics


GENERAL INFORMATION

2. REMUNERATION OF THE BOARD MEMBERS AND SENIOR EXECUTIVES

In 2016, the total remuneration, including salaries, health insurance, employer’s contribution for social security and other benefi ts, of the board members and senior executives amounted to TL 56,709 thousand.

3. RESEARCH & DEVELOPMENT

The Company did not carry out any research & development activities in 2016.

4. MATERIAL DEVELOPMENTS REGARDING COMPANY OPERATIONS

4.1. Investments The Company invested TRY 208,200 in fi xed assets in 2016 including vehicle purchases, showroom renovations, and service equipment procurement. Also included in these investments is the ongoing construction of the showroom, parking lot and tower building in Kartal.

4.2. Internal Control and Internal Auditing ActivitiesThe internal control and internal auditing activities carried out within the Company aim to ensure the effective, reliable, and uninterrupted management of the company’s services and assets, and create a safe environment to maintain the integrity and consistency of information, allowing timely access and protection.

With internal control practices an integral part of our policies and procedures, our objective is to protect the rights of shareholders and interest holders, ensure that the Company’s fi nancial and non-fi nancial information are realistic and accessible, comply with legislation and the Articles of Association, and carry out operations effectively and effi ciently. Given that internal control is a living activity and its assessments provide an instant view of the system, our existing structure has been reinforced with the three lines of defense. The internal control system, conducted by the managers and employees, constitutes the primary defense line while the Financial Control and Risk Management activities, which were restructured under the General Directorate Responsible for Financial Affairs, create a second line of defense. Functioning directly at operational level, Financial Control and Risk Management acts in coordination with the other control units such as Internal Audit and Legal. Our third and fi nal line of defense is composed of our internal auditing activities.

The Internal Audit Department reports to the Audit Committee, and operates within the scope of regulations set out in accordance with international standards. The department regularly and systematically audits and reviews the Company processes and internal control activities according to a risk-based annual audit plan approved by the Board of Directors. Six (6) meetings with the Audit Committee and one (1) meeting with the Early Risk Detection Committee were conducted throughout 2016 to discuss and review the independent audit results and the regular audits, inspection and investigations carried out by the Internal Audit Department.

The Internal Audit Department, which takes care to comply with international standards of internal auditing activities, evaluated the development opportunities in 2016 by considering senior management expectations and similar industry practices as it has done since 2014 when quality assurance of internal audit activities was implemented. In this respect, steps were taken to audit Information Technologies as their weight in the audit plan has been increased. Furthermore, continuous auditing commenced in 2016, to contribute to the effectiveness and effi ciency of audits by providing daily, weekly and monthly reporting through the system and by developing audit methodology that can generate results over all data instead of sampling. The objective for 2017 is to increase the weight of continuous audits in the regular audits.


4.3. Information on Direct and Indirect Subsidiaries and Their Share Rates

Company Title Area of OperationPaid-in /

Issued CapitalCompany’s

Share in CapitalMonetary

Unit

Company’s Share in

Capital (%)Relation to

Company

DOĞUŞ HOLDİNG A.Ş. Holding Company 856,027,050,000 TRY 31,575,087,000 TRY TRY 3.69LONG TERM

SECURITY

VDF SİGORTA ARACILIK HİZMETLERİ A.Ş.

Insurance and Brokerage Services 2,000,000,000 TRY 40,000 TRY TRY 0.00

LONG TERM SECURITY

D-AUTO SUISSE SA

Vehicle Trading & AS Services – Lausanne / Switzerland 11,788,000,000 CHF 11,782,248,000 CHF CHF 99.95 SUBSIDIARY

DOGUS AUTO MISR FOR TRADING AND MANUFACTURING VEHICLES JSC

Vehicle Trading & AS Services – Egypt 72,000,000,000 EGP 71,950,000,000 EGP EGP 99.93 SUBSIDIARY

D-AUTO LIMITED LIABILITY COMPANY

Vehicle Trading & AS Services – Iraq 150,000,000,000 IQD 150,000,000,000 IQD IQD 100.00 SUBSIDIARY

DOĞUŞ OTO PAZARLAMA VE TİCARET A.Ş.

Vehicle Trading & AS Services 45,000,000,000 TRY 43,288,270,000 TRY TRY 96.20 SUBSIDIARY

DOĞUŞ BİLGİ İŞLEM VE TEKNOLOJİ HİZMETLERİ A.Ş.

IT Infrastructure & Software 9,750,000,000 TRY 4,485,000,000 TRY TRY 46.00 AFFILIATE

DOĞUŞ SİGORTA ARACILIK HİZMETLERİ A.Ş.

Insurance and Brokerage Services 1,265,000,000 TRY 531,232,000 TRY TRY 42.00 AFFILIATE

VDF SERVİS VE TİCARET A.Ş.Automotive Products & Services 5,100,000,000 TRY 1,924,230,000 TRY TRY 37.73 AFFILIATE

VOLKSWAGEN DOĞUŞ FİNANSMAN A.Ş.

Automotive Consumer Financing 180,000,000,000 TRY 86,399,987,000 TRY TRY 48.00 AFFILIATE

YÜCE AUTO MOTORLU ARAÇLAR TİCARET A.Ş.

ŠKODA Turkey Distributor 2,100,000,000 TRY 1,049,999,400 TRY TRY 50.00 AFFILIATE

MEİLLER DOĞUŞ DAMPER SANAYİ VE TİCARET LTD.ŞTİ. (*)

Tipper Manufacturing and Sales 56,400,000,000 TRY 27,636,000,000 TRY TRY 49.00

BUSINESS PARTNERSHIP

TÜVTURK GÜNEY TAŞIT MUAYENE İSTASYONLARI YAPIM VE İŞLETİM A.Ş.

Vehicle Inspection Stations 25,250,000,000 TRY 8,332,836,000 TRY TRY 33.00


TÜVTURK KUZEY TAŞIT MUAYENE İSTASYONLARI YAPIM VE İŞLETİM A.Ş.

Vehicle Inspection Stations 67,100,000,000 TRY 22,143,895,000 TRY TRY 33.00


* The sale of the Company’s production and administration facility has been concluded, and the brand distributorship agreement with

our Company has been terminated.

Detailed information about the transactions performed during the year pertaining to Company’s Direct and Indirect Subsidiaries is provided in the accompanying notes to the consolidated fi nancial statements for the year ending on December 31 in the “Note 28: Balances and Transactions with Related Parties” section.

4.4. Information on the Company’s Share Buy-Back Policy and ProgramIn the event that the Board of Directors of Doğuş Otomotiv resolves to buy-back its shares or accept them as pledge, all necessary public disclosures and announcements shall be made pursuant to “Communiqué No: II-22.1 on Buy-Backed Shares”, which was published in the Offi cial Gazette No. 28871 on 3 January 2014.

The Material Disclosure Statement related to the buy-back of the Company’s publicly traded shares was announced to the public in electronic environment on 27 July 2016 on the Public Disclosure Platform (PDP) at 09:36.

“At the company’s Board of Directors meeting that convened at 9.00 am on 27 July 2016, it has been unanimously resolved that:

1- Due to the ongoing developments in our country, and given that the shares of our Company have lost value as did other Publicly Traded Joint Stock Companies’ shares traded in Borsa Istanbul, and the capital markets have been adversely affected, and pursuant to the Board’s announcement on 21 July 2016, and further announcement on 25 July 2016, the Company’s publicly traded shares be bought back in order to relieve the adverse effects and to contribute to the resolution as a company,

100DOĞUŞ OTOMOTİVANNUAL REPORT 2016

2- The total amount of the shares to be bought back not to exceed TL 524.000.000, which is the total amount of the assets that can be subject to dividend distribution in the last annual fi nancial statements prepared in accordance with the Board regulations, and not to exceed 22.000.000 shares that correspond to 10% of the issued capital of the Company.”

Within the scope of the Company’s Share Buy-Back Program initiated by the Board of Directors resolution, our Company bought back 22.000.000 of its publicly traded shares in 2016 in accordance with the CMB legislation for TL 220,274,251.16 in total.

4.5. Information on the Private and Public Audits within the Fiscal PeriodThe Company and its Affi liates have not had any disputes that arose/were fi nalized regarding the private and public audits in 2016.

4.6. Information on the Legal Actions Brought Against The Company, Actions That May Affect The Financial State and Operations of the Company and Their Possible ConsequencesThere are no cases brought against the Company, neither are there any cases that may affect the fi nancial state and operations of the Company.

4.7. Information on the Administrative and Judicial Sanctions Imposed on the Company and its Governing Body Due To Noncompliance With The Legislative Provisions There were no administrative and judicial sanctions imposed on the governing body.

Various fi nes and judgments were rendered against our Company under the following articles of the Customs Law No. 4458.

» Fines applicable to actions that cause tax loss (Article: 234-238) » Fines related to irregularities (Article: 239-241)

Through negotiations and discounts for payments in cash, a total of TL 11,810 was paid in fi nes, and no sentences were referred to administrative rulings in 2016.

Pursuant to Law on Road Transport No. 4925, the Ministry of Transport, Maritime Affairs and Communications has rendered a fi ne in the amount of TL 1.900 on account of the four company-owned vehicles, which were sold and transferred, but their K2 Transportation Certifi cates were not cancelled; and the amount was paid in full.

4.8 Information on Materially Signifi cant Asset Acquisitions or SalesInformation on asset acquisitions or sales is provided in the accompanying notes of the consolidated fi nancial statements of the years ending on 31 December under “Note 12 – Property and Equipment ” and Note 13 – Intangible Assets”.

4.9 Information on Possible Confl icts of Interest with Service-Providing Companies During the January 1, 2016 - December 31, 2016 period, there were no confl icts of interest between our Company and other companies that provide investment consultancy, rating, and other services. Diligent efforts are made to prevent confl icts of interest in the contracts as well as intercompany activities to comply with the Company’s Code of Ethics.

4.10 Information on Some Legislative Changes that may Materially Affect the Company’s OperationsLaw on the Protection of Personal Data No. 6698, published in the Offi cial Gazette dated 7 April 2016 had an impact on the Company’s operations.

GENERAL INFORMATION


Pursuant to the CMB’s press release of 21 July 2016 regarding the “Share Buy-Back Program”, the Company has determined how the Share Buy-Back Program would be implemented.

The amendment on the “Special Consumption Tax” within the scope of Law No. 6745 dated 20 August 2016, and published in the Offi cial Gazette dated 7 September 2016, had an impact on the automotive sector and subsequently the Company’s activities.

Furthermore, the amendment on the “Special Consumption Tax” within the scope of Law No. 6761 dated 16 November 2016, and published in the Offi cial Gazette dated 24 November 2016, also had an impact on the automotive sector and subsequently the Company’s activities.

4.11. Information on Attaining the Targets Set in the Previous Terms and Fulfi lling General Assembly ResolutionsThere were no targets that our Company did not attain, nor any General Assembly resolutions not fulfi lled by our Company during the operating term.

4.12. Information on the Extraordinary General AssemblyThe Company did not convene an Extraordinary General Assembly in 2016.

4.13. Information on Relations with Customers and Suppliers

4.13.1. CRM – Customer Relations Management Unit A CRM - Customer Relations Management Unit was set up within the Company’s Strategic Marketing and Corporate Communications Department for the purpose of managing customer satisfaction, implementing leaner customer communication processes, elevating customer loyalty/profi tability, ensuring closer communication with customers, and monitoring and recording our relations with customers.

The key responsibilities of the CRM Unit include:

1. Taking all necessary steps to ensure that customer data are stored properly, kept up-to-date and in an accessible manner;

2. Ensuring that a customer-oriented working concept is adopted as a corporate culture across the entire organization;

3. Conducting and reporting of internal and external customer satisfaction surveys (CSS, CSI, DSS) to improve processes, measuring, evaluating and reporting results;

4. Performing, measuring and reporting optimized direct marketing activities (via email, SMS, MMS, direct mailing, and web) within the scope of permission-based marketing, in response to the demands of authorized dealers and brands,

5. Making the necessary infrastructure available to enable the brands to structure their marketing and sales operations to suit target audiences;

6. Designing and carrying out common projects with the brands, authorized dealers and services;7. Procuring social and digital media listening and reporting services, developing software to respond to

customer complaints received via the social media and convert them into sales opportunities;8. Enhancing the customer recognition, monitoring and information functions in the Turkuaz system used by all

brands and authorized dealers to make them more effective, leaner and more comprehensive based on the needs;

9. Designing, managing, and coordinating loyalty projects,10. Managing processes to obtain permission from customers for using their contact information and processing

such data;11. Coordinating the projects created by the Value and Care Center (DIM) for brands, subsidiaries, and third-party

companies ;12. Managing “CRM Scorecard” designed for the purpose of measuring the effect of CRM activities on the brand

performance.


The Customer Experience activities carried out in 2016 included:

For the purpose of monitoring the customer experience, the touch points and channels where the customers engage with the Volkswagen, Volkswagen Commercial Vehicles, Audi, SEAT, DOD brands in the customer journey from presale to sales and aftersales stages have been identifi ed, and processes have been mapped for every identifi ed step. This activity called the Customer Journey .Map will form the departure point for these brands’ improvement requirements, and be used to spread the best practices among various brands.

An independent survey company has conducted a CSS and interviewed 77,827 customers to monitor how satisfi ed they were with sales and services. In line with global trends, satisfaction surveys are changing from measuring customer processes into a structure of assessing and measuring the customer experience. Accordingly the questions are getting shorter and surveys are evolving into a system that focuses on obtaining the customers’ reviews of their experiences, and toward improving the services directly one on one. As digitalization reduces the need for phone calls and increases online surveys, the infrastructure preparations for technological advances were completed, and long-term pilot activities were carried out for online surveys. The data required for research were integrated into the system, and important steps were taken toward monitoring the data quality.

With mobile apps being used more and more, and loyalty platforms getting increasingly widespread, the brands of Doğuş Otomotiv began to be included in the Zubizu Mobile App. As special deals and promotions are defi ned for Zubizu customers, Doğuş Otomotiv benefi ts from the opportunity to reach prospects through the joint loyalty platform and also offers a wide range of privileges and advantages to its customers for other companies in different industries.

The different screens where customer information is viewed have been unifi ed in one visually enhanced screen with the big data management approach. During the development phase, all customer data stored in the Turkuaz system were evaluated, and a new screen featuring cleverly used colors and icons on a visually enhanced and lean interface was designed together with user experience experts to enable the sales consultants to easily access detailed information on customers. These screens were tested with pilot users for a couple of months, and after a number of enhancements wider implementation started. The same screens are also used in connection with the Turkuaz system to show personalized recommendations to fi rst time customers in topics they may be interested in or offer special discounts.

Aiming to create “Fan Customers” to increase the customers’ loyalty to our brands and/or Doğuş Otomotiv, certain criteria were defi ned, and customers that met these criteria were identifi ed. In order to further improve these customers’ satisfaction and reinforce their loyalty by assessing them at every touch point, the services are continuously enhanced.

In order to improve customer loyalty at service level, the big data on the Turkuaz system have been analyzed, and churning customers that are most likely to stop coming to the aftersales services have been identifi ed using statistical modeling. A new model developed with the special communication studies to such customers is currently in the testing phase.

We have also moved to a new system in procuring social media follow up and reporting services for the purpose of monitoring our customers’ experiences on social media, capture prospects that are interested in our vehicles, and observe the changes in our brands’ reputation on social media. This change has enabled us to monitor more key words, and also resulted in an increase in the captured views with exiting search words while the analysis and reporting capabilities were improved.

An SMS verifi cation system has been developed to validate the mobile phone numbers entered into the system and improve the quality of the data of over 5 million customers currently on the Turkuaz system. Furthermore the algorithm used to unify customers is being replaced by a more advanced algorithm that is able to assess the similarity rates. This change will greatly reduce the creation of duplicate customer registrations.

GENERAL INFORMATION


For the purpose of carrying out direct marketing activities more easily, faster and more secure, new software has been developed to send SMS and e-mails via Turkuaz. It has been made available for all the brands, authorized dealers and services, reducing the sending time which took up to 3 (three) days in the past to only one day, and ensuring data security by retaining the data within the Turkuaz system.

Within the scope of Law on the Protection of Personal Data published on April 7, 2016, necessary steps have been taken to process and protect customer data, and to share them with third parties whose services we procure on a limited basis. The system and reporting functions have been improved to operate according to customer permission, the inventory of CRM data has been generated, Turkuaz authorizations have been reorganized, and personal data of a private nature have been removed from the Turkuaz database.

The gift gas campaign that was launched in July 2015 in partnership with BP Petrolleri A.Ş., resulted in updating the vehicle and contact information of more than 100,000 customers. The BP campaign was terminated on 16 November 2016, and for the purpose of moving forward on the same platform with other group brands, we joined the Zubizu-Shell campaign that offers our customers the added value of “payment without leaving the vehicle.”

Aiming to build a modern operator system with functions similar to a Call Center to manage the increasing phone traffi c at the Authorized Dealers and monitor the call waiting and response times at personnel level, a new project was developed. Pilot phase continues to be initiated at companies and Authorized Dealers with the capabilities to implement the project. After observing the product and service quality of different suppliers, the ideal solution will be determined and the project will be more widely implemented in 2017.

203 enhancements have been carried out with the Turkuaz system in use at all our Authorized Dealers in order to make customer monitoring easier, increase customer satisfaction, and shorten the work processes of advisors.

4.13.2. Value and Care Center (DIM)Aiming to increase customer satisfaction in sales and after sales services in line with the vision of “Creating Fan Customers,” our Company has brought together the previously outsourced services such as dialog (care management), road assistance, and call center operations (surveys and bookings) under its own roof with a new quality concept. Named the Value and Care Center (DIM) to highlight how much the customers are valued and cared for, the unit was structured under the Strategic Marketing and Corporate Communications Department in November 2014, and set up at a separate location in Kavacık to deliver creative services beyond expectations, create positive customer experiences, and increase the number of fan customers by promoting value and inspiring trust.

In addition to lending support to all our brands at every customer lifecycle stage, DIM also continues to improve the quality and variety of its services through projects. The DIM operation that aims at bringing a service and quality standard to customer contact points makes it possible for brands and authorized dealers to follow consumer expectations and opinions transparently and in real time with the reporting functions it offers.

DIM is based on the idea that not only customers but also employees need to feel valued. To that end, an environment was created in which employees felt valued and important, showed initiative, and participated in decision-making.

DIM provides the following services:

1. Care Management (Dialogue): Managing demands (requests, complaints, suggestions, gratitude, etc.) concerning branded vehicles that Doğuş Otomotiv imports, authorized dealers and services, and meeting customer needs and expectations mean our customers receive the value and care they deserve. These demands are conveyed to DIM through various communication channels such as email, chat, fax, social media, and letters.

In 2016, DIM successfully responded to 133,041 dialog calls, which correspond to a 14% increase year on year while the average speed of answer (ASA) was 23 seconds.

Customer emails answered totaled 40,923 with average email response time 6 minutes. DIM also held a total of 28,403 chats, and replied to 60,700 notifi cations on social media (twitter and facebook).


As an important part of generating more valuable and comprehensive data for the brands that we and DIM serve, 110,514 calls were recorded, which marks a 49% increase in recording time of the incoming requests.

2. Roadside Assistance: Covers roadside assistance services offered for vehicles imported by Doğuş Otomotiv, VDF Insurance policyholders and VDF Fleet Renting vehicles’ users. The primary goal of roadside assistance services is to enable customers to continue with their journey. We aim to make customers feel safe against adverse situations that may arise on the road, and to reach them as quickly as possible to provide all-encompassing roadside assistance.

DIM responded to 315,814 calls for roadside assistance in 2016, seeing a 19% increase compared to the previous year while the average speed of answer (ASA) for these requests was recorded as 20 seconds.

The “emergency service” offered by DIM to its customers reached 25,065 in number with an increase of 13% year on year.

Meanwhile, the car towing services offered to customers by DIM decreased by 3% in 2016, and totaled 27,844.

During these operations, DIM provided its customers with 4,132 temporary vehicles.

The number of roadside assistance calls increased by 14% in 2016 on the previous year, totaling 125,382.

And fi nally, customer satisfaction with roadside assistance was rated at 93.13%.

3. Surveys: Calling customers to verify data and service quality with the aim of getting specifi c answers to scripted questions. The main goal is to enable our brands to maintain their current customers and proactively reach potential new customers. Calling customers and recording data are essential in terms of managing CRM operations accurately and effectively to maximize sales opportunities with new and loyal customers, and use potential and existing customers’ data properly. DIM conducted surveys with 412,185 respondents for 28 different projects in 2016.

4. Appointments: Involves planning and booking appointments for maintenance and repairs since authorized aftersales services are the initial contact with the customer after a vehicle is sold. This process is fundamentally built on attending to the customer’s needs and expectations. It also involves coordination with the relevant Authorized Service regarding workshop planning. In 2016, our dealer Şenyıldız began to book appointments via DIM. Throughout the year, the appointment line (Doğuş Oto and Şenyıldız) received 269,585 calls, with 106,849 resulting in bookings.

5. Used Vehicle Sales: Involves analyzing the requests received from DOD customers through the website, social media, and by phone about buying, selling and purchasing used vehicles, and their insurance and fi nancing conditions, presenting results to customers, and establishing contact between customers and authorized dealers. DOD calls increased by 69% year on year and reached 37,092 in 2016.

While the world average for Service Level as one of the key indicators for the call center industry is 75%, DIM’s score was 80% in 2016.

In the Secret Customer measurement conducted for VW Passenger Vehicles in Germany we scored 88.3 points with DIM. This is an important indicator of DIM’s service quality as documented by an independent study commissioned by VW AG.

NPS surveys that evaluate customer representatives, service quality and the impressions left on the customers revealed a score of 83.96 points in 2016.

GENERAL INFORMATION


The quality score of interviews conducted by customer representatives was 90.79 as determined by the quality measurement of DIM customer representatives.

DIM always considers service excellence a priority, and works on contract with towing companies operating in important and high-intensity areas, followed by quality measurements. In 2016, customer satisfaction surveys for services provided by the towing contractors of DIM resulted in 92.74 out of 100.

The DIM employers also contributed to this process with 315 suggestions in 2016, topping the list with the highest number of suggestions submitted within the entire organization.

DIM employees are offered a platform where they compete against each other on a monthly basis with the aim of offering a unique experience to their customers. The platform, named “Passion for the Road,” rewards the employer that creates the best experience for their customers. In 2016, 12 out of 72 candidates for unique customer experience received the “Passion for the Road” award.

6. New programs and applications:

DIM Rent A Car (RAC): Since 2015, DIM VW and Audi have been providing our authorized dealers with temporary car rental service to better serve our customers stranded on the road, allowing them to experience our upper segment VW Passat and Audi A4 vehicles.

DIM Technical Expert: The Technical Expert Support program has been introduced with the aim of elevating customer satisfaction and reducing service period by having a highly qualifi ed technical expert in-house. With this program, the customer representative taking a road assistance call decides on the course of action regarding specifi c issues by conferring with the Technical Assistance Expert, without having to fi rst talk with Emergency Service staff. The goal is to shorten the duration of calls with Emergency Service staff, increase effi ciency, and decrease wait periods for the customers. The program has resulted in a 19% increase in effi ciency.

D-Pedia Dictionary: A new web-based frequently asked questions part has been set up to allow customer representatives to answer customer questions in a timely manner and to record these questions and problems in corporate memory.

Online Performance System: The new software developed especially for DIM has been integrated into the performance system, informing customer representatives about assessment results (call quality, tests, etc.) simultaneously as they are measured.

Dialogue Mobile App: The fi rst phase of DIALOG mobile app developed to meet customer expectations and deliver a unique customer experience has been implemented. When the customer is stranded on the road, their location can be identifi ed through the app, and communicated to the emergency service / towing company for immediate action. The location of the emergency service and the tow truck can be also monitored by the customers on their smart phones. The app helps the customers to benefi t from road assistance services with one click.

Only in the second year after its launch, DIM was awarded with the ISO EN 15838 Customer Management System certifi cation, which is an international standard with industry requirements for Call Centers and earned by customer-oriented service providers; as well as ISO 10002 certifi cation in accordance with ISO 9001, a management approach that enables forming more useful and long-term relationships with customers and improves those relationships.

At the fi fth annual Call Center Customer Experience Summit and Quality League Award Ceremony organized by Telephone Doctor Turkey, DIM was recognized with the ‘Best Approach’ award among 33 companies in 2016.

DIM also won fi rst prize in the ‘Best Customer Experience’ category at the eleventh annual Contactcenterworld.com Awards, considered the world’s most prestigious award of the customer relations management industry among 45 companies shortlisted in 34 categories, as well as the second prize in the ‘Best Call Center Design’ category.


With the Positive Discrimination Project launched in 2016, DIM has implemented a new practice to provide faster service to people with disabilities, woman and +60 age group among the customers they serve, and to minimize their waiting times. Defi ning these customers in the system connected to DIM and the operator system enables them to be automatically taken to the front of the queue, with a sign appearing on the screen of the customer representatives about the customer’s special case (woman, disabled or +60). In this respect, a difference is made in the service both in terms of treating the customer and also in service time.

7. Project-Based Activities:a. Analyzing and reporting requests, complaints, and demands received from the fi eld, and implementing improvement projects;b. Giving regular feedback to aftersales service teams regarding emergency services, contributing to the efforts for compensating for shortages and maintaining standards;c. Carrying out brands’ customer relations projects [such as managing the Lead system, providing exclusive call center service for the VW Commercial Vehicles Premium project, Digiturk Portal, DMF leads, VW Shop, D-Gym, meeting periodical campaign demands (dost drive, etc.), and Scania Corporate operations];d. Updating customer data on project basis by calling customers of a specifi c brand or authorized dealer;e. Developing projects for brands by taking part in their annual planning process;f. Carrying out activities aimed at improving customer relations by observing customer experiences at authorized dealers that are open to improvement, and making results available to the whole organization;g. Carrying out training and motivation programs for emergency services and towing companies to improve processes and increase customer satisfaction.

DIM also manages the “CRM Scorecard”, a special project designed to measure the effects of CRM activities on brand performance.

Carrying out telemarketing work (sales of accessories, warranties, etc.).

4.13.3. Suppliers Our cooperation with the suppliers that we count among our primary stakeholders is based on an understanding of building open and productive relationships. This is how Doğuş Otomotiv develops long-lasting collaboration with all suppliers.

Doğuş Otomotiv’s transparent and close relationship more than 20 years with manufacturers of international brands, which the company has been representing as a distributor for many years, has been continuously growing since the Company took over the distributorship of Volkswagen and Audi brands in 1994. Today, Doğuş Otomotiv is the only distributor in the world to gather all the brands associated with the Volkswagen Group under one umbrella. In its dealings with all its social stakeholders, Doğuş Otomotiv is driven by its vision of providing “creative service beyond expectations” and, as a result of this approach, engages in long-term partnerships that keep growing over time. The company, as the holder of ISO 9001:2000 certifi cation by TÜV Germany, covering the Volkswagen, Audi and SEAT brands and the Logistics Center, regards customer satisfaction and quality as its most important values.

Doğuş Otomotiv acts with utmost diligence when selecting its suppliers. Those that meet the main selection criteria are audited on site. Based on the audit scores, the suppliers are then evaluated to determine whether or not they would be eligible to remain on the approved list. Those criteria also apply to companies yet to be included in the list.

The wide range of selection criteria include holding TSE, ISO 9001 Certifi cation / TSE Quality Certifi cation, manufacturer’s seal of approval, a current and industry-standardized Capacity Report by the Union of Chambers and Commodity Exchanges of Turkey, and not having any outstanding tax liabilities or debts to the Social Security Institution. Companies operating in the main services fi elds, including cleaning, food, printing, printed documentation, personnel transportation, security, and textiles are regularly audited for their compliance with the selection and evaluation criteria.

GENERAL INFORMATION


In 2011, a supplementary protocol to the existing agreements with our suppliers was drawn up to ensure that economic, environmental and social risks are predicted, and Doğuş Otomotiv’s corporate sustainability vision is espoused by our suppliers. Three of our suppliers were included as pilot in the Corporate Sustainability Report as part of a new program launched in 2015. This program, which has been expanded with the aim of supporting the efforts to promote sustainability and corporate responsibility among our suppliers that form a signifi cant link in our value chain, and raising awareness of their development areas by measuring their performance in social, environmental, ethical and economic responsibility areas, is planned to continue in 2017 to refl ect on the evaluation and audit processes as well. Doğuş Otomotiv also manages its supply chain very effectively. Our supply chain management is presented in detail in our Corporate Sustainability Report, published for the seventh time in 2016: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

4.13.4. Corporate Responsibility Activities

BIST SUSTAINABILITY INDEX

For the second consecutive year, Doğuş Otomotiv has been included in the BIST Sustainability Index, which is composed of companies with highest corporate sustainability performances whose shares are traded in the Borsa Istanbul, for the period from November 2016 to October 2017.

CORPORATE SUSTAINABILITYDoğuş Otomotiv is committed to being an exemplary corporate citizen both at home and in the world by generating ultimate sustainable and innovative solutions for its social and ecological stakeholders across the automotive value chain.

Our Corporate Sustainability strategy is to become an indispensable business partner for our stakeholders by focusing on continuous growth across the automotive value chain, and delivering outstanding performance with complete, timely, and accurate service. We evaluate, monitor, and manage our performance according to the priorities set in in line with our policies.

We at Doğuş Otomotiv have defi ned our understanding of Corporate Sustainability by considering the requirements of global standards, our priorities directly related to our fi eld of we use to determine the solutions we generate for the social, economic and environmental issues in our industry, and our organizational approach to all of our operations.

Doğuş Otomotiv has been releasing Corporate Sustainability Reports in compliance with the GRI (Global Reporting Initiative) since 2009. The corporate policies pertaining to the performance areas reported within this framework were studied by sub-committees composed of the Team members in 2010, and the policies prepared were presented to and approved by the Corporate Sustainability Steering Committee. Our policies are published within the scope of Corporate Sustainability Reports, and disclosed on our corporate website.

Understand and measure our

impacts

Manage our social and environmental

impacts

Engage our people and other

stakeholders

Develop sustainable plans

and set targets

Share and encourage best

practices

Mitigate risk and identify

opportunities


CORPORATE SUSTAINABILITY MANAGEMENTAt Doğuş Otomotiv, Corporate Sustainability management has been organized to carry out the principles of responsibility and accountability in all our business processes, to lead in areas related to sustainability, and to encourage guidance. We know that being a leader of sustainability at the level of the Board of Directors and the Executive Board is critically important for integrating sustainability management and related performances into the culture, processes, and business relations of our Company.

We approach sustainability management systematically to understand the risks related to our activities and manage them proactively. The inclusion of meticulously assessed risks and their careful management in the decisions we make regarding our business brings long-term value to all of our stakeholders.

The Doğuş Otomotiv Executive Board established a Corporate Governance and Sustainability Committee in 2015 with the aim of monitoring activities regarding sustainability, setting targets, and managing processes. The committee is responsible for the implementation of the corporate governance principles as well as carrying out management, consulting, and coordination work as may be required by relevant institutions and stakeholders in line with the social, environmental, economic, and ethical responsibilities of our company. The Corporate Sustainability Team comprising directors and personnel from all the departments at our company, presents regular reports to the Committee. Detailed information on Corporate Responsibility Management is published in the Doğuş Otomotiv Corporate Sustainability Report: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

STAKEHOLDER ENGAGEMENTAs Turkey’s leading automotive distributor, Doğ uş Otomotiv’s approach to corporate leadership, is based on its policy of taking stakeholder expectations into account in all decision-making processes and setting targets accordingly, and establishing continuous, transparent and regular communication with its stakeholders. Doğuş Otomotiv considers all platforms that bring the Company together with its stakeholders, where they can express their expectations, as a natural part of the business processes.

As an institution that inspires confi dence among the public with its size and standing, and embraces principles of corporate governance and ethics, Doğuş Otomotiv continues to succeed in all lines of business, sharing its earnings with the society and fulfi lling its responsibilities. The Company plays an active role in managing corporate communications and relations. Doğuş Otomotiv also presents information with a specifi c approach, and steers industry-related developments. Aiming to stand close to its stakeholders, Doğuş Otomotiv complies with the principles of high business moral and honest codes of conduct.

In terms of its business targets, strategic growth and social endeavors, Doğuş Otomotiv attaches great importance to being regarded as a company that values the views of its stakeholders, respects the protection of their best interests, identifi es and monitors their expectations, and offers creative services beyond expectations. In line with its pioneering position and leadership in the industry, Doğuş Otomotiv also plays an active role in the non-governmental institutions and industry-related trade organizations. Doğuş Otomotiv’s corporate communications and relations are based on integrity, transparency and openness to inform. The Company’s communication strategies and practices are managed and handled by the Strategic Marketing and Corporate Communications Department. All the information concerning the Company and its spokespersons that Doğuş Otomotiv shares with its stakeholders are prepared by the Strategic Marketing and Corporate Communications Department, using an accountable and transparent communication method based on the honesty principle.

Stakeholder Engagement StrategyThe Doğuş Otomotiv Stakeholder Engagement Strategy, focused on continuous and reciprocal communication, was determined by the Doğuş Otomotiv Corporate Sustainability Team through a number of workshops held in 2009. Every dialogue platform with key stakeholders is evaluated according to the feedback received. Doğuş Otomotiv Stakeholder Engagement Strategy is based on raising awareness of social, environmental, economic and ethical responsibility areas, maintaining continuous and open communication, feedback and improvement performances in the medium and long term. Detailed information on Doğuş Otomotiv’s stakeholder engagement process management is disclosed in the Sustainability section on the website and in the annual Corporate Sustainability Report: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

GENERAL INFORMATION


ENVIRONMENT SUSTAINABILITY The automotive industry’s ecosystem is undergoing a massive transformation due to the changing expectations of consumers, technological development at an overwhelming pace, globalization, new mergers & acquisitions, and partnerships. We are living in a new century when the way people approach mobility will also change rapidly. Multi-modal transportation systems are becoming more popular and smart vehicles that meet the environmental responsibility, safety and information needs of the consumers are in higher demand. Meanwhile, automotive companies are in intense competition to develop new business models that will help them in ensuring responsible growth. In this dynamic new age, Doğuş Otomotiv believes that the key to success for the next decade lies in customized mobility solutions, innovative sales techniques in retail industry, and inclusive partnerships and collaborations in line with global regulations and practices.

As a distributor within the automotive ecosystem, Doğuş Otomotiv increasingly builds on its environmental performance with the conviction that the companies that lead change are destined to become the companies of the future, and commits to:

» Reinforcing customer confi dence, » Making a difference within its sphere of infl uence through its network of Authorized Dealers and Aftersales Service Centers,

» Raising awareness of waste management and effi ciency, and » Using resources economically by regarding the ecological environment as a key stakeholder.

Doğuş Otomotiv is further committed to managing medium and long-term risks that may stem from climate change, and ensuring that the necessary improvements are made. Doğuş Otomotiv declares its Environmental Responsibility Policy, and performance in key areas annually in the Corporate Sustainability Report:http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

TRANSPARENCY AND ACCOUNTABILITYDoğuş Otomotiv has been openly reporting to the public on its social, economic, environmental and ethical performance in its fi elds of activity according to international standards since 2009. The Company evaluates stakeholder feedback on how these activities were performed every year, and duly sets targets for the coming year. Our explanations about the sanctions and penalties, if any, imposed on our Company due to incompliance with the regulations are also stated in the GRI Index presented in our Corporate Sustainability Report. Doğuş Otomotiv Corporate Sustainability Reports are available on our corporate website at: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

DOĞUŞ OTOMOTİV CODE OF ETHICSDoğuş Otomotiv published its Code of Ethics in 2012, describing its way of conducting business with all its stakeholders and aiming to create a perception about the future of our country and the world, spread this perception and deepen where necessary, and act with the vision of setting an example for the whole community beyond the industries. With the Doğuş Otomotiv Code of Ethics, which became the fi rst of its kind in Turkey not to be adopted from international sources but prepared according to global standards, our Company has pledged to uphold honest and ethical behavior in all its relationships with the employees, customers, business partners as well as competitors, and has documented this commitment. In this manner, the company has once again emphasized that one of its primary goals is to be an honest, trustworthy, and highly respected company, known for its unwavering commitment to ethical rules, while successfully continuing to operate under the current economic conditions and competitive environment, and remaining the leader of the industry. In 2016, we continued to share the Doğuş Otomotiv Code of Ethics with our suppliers, business partners, and all third parties. In 2016, necessary activities were carried out to complete the face-to-face Code of Ethics trainings for the employees of Doğuş Otomotiv, Doğuş Oto, and Doğuş Teknoloji. During the reporting period 188 employees of Doğuş Otomotiv received a total of 376 man/hours of one-on-one Code of Ethics training. Accordingly, 81% of Doğuş Otomotiv employees have received one-on-one Code of Ethics training by the end of 2016. Furthermore, 127 new hires that started within the same period were educated about Code of Ethics as part of the total 317.5 man/hours of e-orientation. The Doğ uş Otomotiv Code of Ethics includes all the Company’s commitments and policies on ethical matters, and is published openly on the corporate website at: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/governance-risk-management-ethics/ethics http://www.dogusotomotiv.com.tr/newdogusotomotiv_fi les/24022015_Dogus_Otomotiv_Code_of_Ethics.pdf


OUR PRIMARY STAKEHOLDER: OUR EMPLOYEESDoğuş Otomotiv believes that its greatest strength that would sustain the business and help the Company continue to provide strong, ethical and high-quality services in the future lies in its employees.

Doğuş Otomotiv is well aware that its employees, whom the company regards as its key stakeholder, can become indispensable contributions to both the society and the Company value by reinforcing the effective work processes with a sense of responsibility. With the policy published in the 2010 Corporate Sustainability Report, Doğuş Otomotiv has declared that its employees and the decent work environment provided for them are the pillars of its Corporate Sustainability approach.

The Company places employee satisfaction and loyalty at the top of its business goals, and believes that the main reason for the continuous increase in Corporate Sustainability performance is the employees’ efforts and the level of awareness attained.

The changing nature of the business world, with expectations and conditions diversifying, requires that the companies should not only manage the employees, but also collaborate with them, establish dialogue, and question their expectations and require the participations of the employees in all processes by ensuring them to submit the business processes related suggestions and feedbacks directly to the management. This is how a far more effi cient working environment can be created, a more innovative and competitive organization is built, and healthier relations are established with other stakeholders through the employees.

Equal RightsDoğuş Otomotiv states in its Code of Ethics under Article 3 on “Justice and Equality”: “We treat all of our stakeholders and each other justly, and avoid discrimination”. Doğuş Otomotiv applies the “Employees and Decent Work Environment Policy”, which stipulates that employees are protected regardless faith, language, race, color, gender, age, ethnic origin, disability, citizenship, or other social status protected by legal regulations.

Employee Benefi tsThe “Doğuş Otomotiv Basic Rights and Responsibilities Procedure” explicitly states that all Doğuş Otomotiv employees who all work fulltime have the same rights, and that each employee is a key stakeholder of the Company. Health and life insurance, meals and transportation services are social rights available to all the employees. Other benefi ts provided for Doğuş Otomotiv employees along with detailed information on the training opportunities are publicly announced each year in the Corporate Sustainability Report.

Communication with EmployeesEach Doğ uş Otomotiv employee can communicate directly with his/her superior any time. The executives and senior management also exchange information about the Company’s activities and operations at the quarterly Management Briefi ngs, which took place twice in 2016. All Doğ uş Otomotiv employees are welcome to attend the Communication Meetings that the Human Resources and Process Management Department organizes to provide detailed information on HR processes whenever policies change and also regularly at the end of the year. Furthermore, information about the Company is communicated to the employees via intranet and emails on a regular basis. The Doğ uş Otomotiv Suggestion System, which allows employees to submit their suggestions and opinions about the Company directly to the management, saw signifi cant increase of 44% in the number of suggestions that were implemented in 2016. Besides, every year many projects are generated by the employees within the organization to enhance business processes and to provide positive contribution to the Company’s performance. As an example of this communication, Birthday of Ideas at Doğuş Graduation Ceremony where the best projects of our employees were awarded with the attendance of senior management second time. During the ceremony, employees had the chance to present their implemented projects to senior management. The dialogue platforms that Doğ uş Otomotiv builds with its employees, the training programs, and all employee strategies and policies are addressed in detail in the annual Corporate Sustainability Report: http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports

GENERAL INFORMATION


DOĞUŞ OTOMOTİV AND THE COMMUNITY

“Traffi c is Life!”In line with its strategy of generating sustainable and innovative solutions, Doğuş Otomotiv regards it as a priority to launch corporate responsibility platforms, which will create social value and take product/service responsibility into account, as important as attaining successful fi nancial and operational results. Driven by the experiences accumulated in its line of business, the company is committed to introducing and carrying out sustainable initiatives, which include “Traffi c is Life!”, a special project launched in 2004.

With the “Traffi c is Life!” platform, our company pioneers innovations through various projects aimed at raising awareness of traffi c safety by reaching out to every segment of the society. In addition to radio and television communications to reach the entire community, the “Traffi c is Life!” Platform includes young people and children, who are the guarantee of the future, in the traffi c safety topic, and also organizes competitions on traffi c safety.

The ‘Traffi c is Life! Public Announcement Competition’ was launched in 2016 to get young people involved in the road safety conversation, encourage them to generate solutions about road safety and to improve their creativity. The competition required participants to shoot a maximum 45-second video in short fi lm format using their own scripts about one key message used in the communications of Traffi c is Life; namely “Don’t Speed”, “Don’t Drive and Talk”, and “Fasten Your Seat Belt”.

The competition, which saw great interest, received 422 videos in total, and the jury chose Korhan Topçu as the winner for his fi lm about the trip of a family of 5.

The winner Korhan Topçu then shot the video again, this time with acclaimed director Ömer Faruk Sorak, and had the opportunity to be involved in the making of a professional fi lm, get the opinions of experts, and see his video on television as a public announcement.

Traffi c is Life! also launched the “Child Safety in Traffi c” initiative taking into account that the second most affected group from traffi c accidents is children, with the aim of reaching families through social-digital media and fi eld activities. A study was conducted in Izmir, Istanbul, and Ankara in cooperation with the General Directorate of Security, and the results were shared in detail with the public revealing the 23% child seat usage ratio. The study results also showed that psychological factors reduced the use child seats, and led to acclaimed psychologist Professor Üstün Dökmen being involved in the project. Professor Serpil Acar of Loughborough University and Professor Memiş Acar joined the advisory team at “Traffi c is Life!” with their content on mother-child safety in the traffi c and the vehicle.

The platform, which continues to cooperate with public institutions, has reached an agreement to provide content for Kadikoy Municipality’s pregnancy schools. Over the course of three days, more than 2,500 participants at events such as Mother – Baby- Child Fairs were provided with information, and the winner of the simulation contest held at the booth won a child seat.

“Long Distance Traffi c Safety’ training that “Traffi c is Life!” has been providing continually since 2012 at universities has reached over 20,000 students in 18 universities. The platform, which reinforces theoretical trainings on traffi c safety with practical applications, launched the ‘Jingle Competition’ in addition to the Public Spot Competition at the end of 2016.

With the 2017 Jingle Competition, the aim is to reach the people in traffi c through radio with jingle suggestions from young people. Singer-songwriter Nil Karaibrahimgil, who is also in the Jingle Competition jury, will record the jingle together with the winner, and convey the ‘traffi c safety’ message across Turkey.

Vocational High Schools and Doğuş Otomotiv CooperationDoğ uş Otomotiv aims at contributing to education and employment through developing cooperation with vocational high schools, and our collaboration with these institutions continued in 2016, and the number of vocational schools that receive support rose to 7.

For the 2016-2017 academic year winter term, workshop internships were arranged at 21 Authorized Aftersales Services for a total of 146 students from 5 schools. And summer internships at 12 Authorized Aftersales Services were arranged for 50 students from two of these schools. In the 2016-2017 academic year, 176 students in total started their education in our classrooms in 7 schools. The students that graduated from our classrooms were employed by our Authorized Aftersales Services. Of the total 80 students that graduated in 2016, 27 started to work for our Authorized Aftersales Services. In 2016, the number of our graduates reached 434, while the number of current students was 365.


4.14. Grant and Aid While no changes were made to the Doğuş Otomotiv Grant and Aid Policy, which is available on the corporate website, at the General Assembly on 25 March 2016, it was resolved that a supplementary donation amount of TL 15,000,000 solely for 2016 be utilized for the construction of an elementary school, within the scope of the company’s community engagement policies and the ongoing aid campaigns in the aftermath of the mining disaster in Soma, Manisa. The grants made in 2016 are listed below:

DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş. AND SUBSIDIARIES Grant and Aids in 2016 Amount -TRYSOMA PRIMARY SCHOOL PROJECT (AFAD) 13,812,943KÜÇÜKYALI VOCATIONAL AND TECHNICAL ANATOLIAN HIGH SCHOOL DIRECTORATE 322,118TURK PETROL FOUNDATION 65,000SARIYER MUNICIPALITY SPORTS CLUB ASSOCIATION 30,000ŞİŞLİ TECHNICAL AND INDUSTRIAL VOCATIONAL HIGH SCHOOL 25,348TURKISH FOUNDATION FOR CHILDREN IN NEED OF PROTECTION 23,011AYHAN ŞAHENK FOUNDATION 18,204BURHANETTİN YILDIZ TECHNICAL AND INDUSTRIAL VOCATIONAL HIGH SCHOOL 15,415BESNİ VOCATIONAL AND TECHNICAL ANATOLIAN HIGH SCHOOL 13,646OTHER ASSOCIATIONS AND FOUNDATIONS 46,732TOTAL 14,372,417

4.15. Group of CompaniesThe Company, in its interactions with the parent company and its subsidiaries, did not engaged in any actions/transactions unjustly serving to the advantage of these companies in 2016. Therefore, our Company does not have any assessments for the compensation made for disadvantages and for the measures taken regarding the transactions made with the parent company and its subsidiaries, as required by Article 199 of the Turkish Commercial Code.

5. FINANCIAL PERFORMANCE5.1. Information on Doğuş Otomotiv Stock Reuters ticker symbol: DOAS.ISBloomberg ticker symbol: DOAS.TI

Doğuş Otomotiv’s initial public offering took place on 17 June 2004 and the Company’s shares are traded on Borsa Istanbul (BIST) with the “DOAS.IS” ticker.

GENERAL INFORMATION

* As reported on 31 December 2016. (Resource: Reuters)

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BIST - 100 RelatifDOAS (TL)

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5.2. Operational and Financial Indicators The equity of the Company is TL XXX, and the capital is secured and covered, without running into debt.

The Company presents a solid fi nancial standing, and does not plan to take further actions to improve its fi nancial structure.

The sales volume, revenue and net profi t increased by XX%, XX% and XX%, respectively year on year. The Company also succeeded to reduce its Operating Costs/Turnover ratio by XX%, as an indication of the importance that the Company attaches to maintaining a lean management and dynamic structure.

The fi nancial information below must be considered along with other fi nancial information included in the Consolidated Financial Statements and Notes as part of the interpretation and analysis regarding the fi nancial position and operations of the Company.

2016 2015 2014Consolidated Statements of Income Sales / Unit (Wholesale) 213,185 205,593 155,995

Sales (million TRY) 11,925 10,889 7,693

Gross Profi t (million TRY) 1,153 1,109 873

Operating Expenses (million TRY) 727 662 537

EBIT (million TRY) 426 447 336

Income from Investment Activities (million TRY) 23 47 20

Income from Investments Accounted by Equity Method (million TRY) 99 43 83

Net Financial Expenses (million TRY) 273 171 123

Net Profi t for the Period (million TRY) 238 302 253

Earnings Per Share 1.11 1.38 1.14

Price/Earnings Ratio (%) 7.91% 8.00% 10.45%

Gross Profi t Margin (%) 9.7% 10.2% 11.3%

Operating Expenses/Sales (%) 6.1% 6.1% 7.0%

EBIT Margin (%) 3.6% 4.1% 4.4%

Net Profi t Margin (%) 2.0% 2.8% 3.3%

Consolidated Statements of Financial Position Total Assets (million TRY) 4,852 3,980 2,827

Net Financial Debt* (million TRY) 2,669 1,869 1,035

Total Equity (million TRY) 1,119 1,363 1,236

CapEx** (million TRY) 208 169 115

ROA (%) 4.9% 7.6% 9.0%

ROE (%) 21.3% 22.2% 20.5%

Net Financial Debt/Equity 2.39 1.37 0.84

* Short term loans, short-term portions of long-term loans, long-term loans, cash and equivalent have been taken into consideration.

** Tangible asset entries have been taken into consideration.


EXPECTATIONS FOR 2017

Total Automotive Market (Passenger Vehicles + Light Commercial Vehicles + Heavy Commercial Vehicles)835,000 - 855,000 units

Doğuş Otomotiv Sales Volume (including ŠKODA) 170,000 - 180,000 units

Capital Expenditures TL 325-340 million

Having completed 2016 as the leader of the automotive industry with 21.0% market share, our Company, in line with its long-term goals, aims to achieve the following in 2017: » Maintaining optimum profi tability and market share around 20% levels for long-lasting success; » In light of all the reassessed projects and marketing plans, following a cautious expenditure management structure; and

» Making necessary improvements and reinforcing operational effi ciency by constant monitoring of key performance indicators.

The investment expenditure plans for 2017 consist of the below titles: » Expenditures for headquarters, logistics, spare parts, training areas, and subsidiaries » Machinery and equipment investments » Investments in information technologies » The ongoing Offi ce Tower construction in Kartal » Investments in which we see great value creation potential (e.g. purchasing the property of the automotive showroom and aftersales service that we rented in Esenyurt/Istanbul)

Even though the company may make some scaled investments in retail projects in the short term, the aim will be mainly at carrying on with mobility, digitalization and service-focused activities. Furthermore, our Company will continue to maintain its competitive position in 2017 with new vehicle models of the international brands that we represent.

Risks pertaining to our 2017 expectations are as follows: » The impact of geopolitical risks on our country » The effects of foreign exchange fl uctuations on the Company’s operations » Probable impacts of the protective policies depending on the developments in global markets » Probable impacts of the constitutional amendments on markets in the short and medium term

The principles regarding the management of risks are explained in detail in the “6. Risks and Evaluation of the Board” section under the General Information heading of the Annual Report.

GENERAL INFORMATION


5.3 Dividend Distribution Proposal and Table Doğuş Otomotiv Board of Directors’ proposal of dividend distribution table for the 2016 operating term is presented in ANNEX 1.

6. RISKS AND EVALUATION OF THE BOARD

6.1 Risk Management Policy Our Company’s risk management policy was created within a framework confi gured by internal control and auditing activities where all the roles and responsibilities from the Board of Directors to the lowest level were determined, and the risk processes were planned and managed. Within the existing structure, the most fundamental issue we emphasized was for risk, as a common corporate culture, to be expressed as a shared language by all our stakeholders. It is essential that, in line with generally accepted references, the models and methods targeted to be made applicable at our Company have been designed for this purpose. Identifying the elements that might pose a threat for our organization, assets and stakeholders, taking measures, and improving the effectiveness of oversight will, as always, determine the direction of our efforts.

6.2 Early Risk Detection Committee ActivitiesThe Early Risk Detection Committee conducts activities for effective risk management by detecting early on the potential causes that may endanger the existence, development and continuation of the Company, and taking the necessary precautions. Most of the time, the interpretation of future scenarios and uncertainties, as the main theme of these activities, do not remain solely as absolute barriers due to the Committee’s strategic perspective and encouragement, and at our Company they are considered potential opportunities to lay the groundwork for systematic self-evaluation and new acquisitions. With a qualifi ed team and accurate information fl ow, the Committee provides assurance and supports the oversight role of the Board of Directors, and reviews the risk management systems at least once a year. The Committee presented to the Board of Directors within the year the assessment reports drawn up following meeting on the dates set according to working principles, and also shared them with the auditor.

6.3 Risk Factors and PracticesThe Company’s risk perspective, shaped according to its fi eld of operations, scale and business structure, continuously evolves and matures in line with international developments and examples of best practices. The fact that the risks involved in this process would not remain limited to fi nancial, operational and natural phenomena and would eventually require management with a much wider perspective and sustainability approach is a key issue that determines our corporate risk management actions. The course of the processes used in risk management is directed towards a strategic and proactive business model through the efforts we created on a holistic template by including the interrelations of risks.

FINANCIAL RISKS

Liquidity Risk The overall fi nancial standing of our company has been monitored in an environment where fi nancial sensitivities are carefully considered, and solutions generated to that end. Particularly, a reporting template based on the variations in commercial transactions is used to monitor risk management asset-liability cash fl ow.

The continuity of high quality lenders and relations, access to competitive rates, fi nancial instrument and diversity of services (loans, factoring capacity etc.), and the liquidity strength were included among the issues that were carefully considered, as has been the case in previous years. As a result, the management of payables and receivables was secured through both amount and maturity-planned cash movement controls, ensuring that funding requirements for growth and investment policies were balanced.

Exchange Rate RiskThe net FX position was monitored, again, on the basis of the company’s commercial transactions, and communicated regularly to the risk-related governing body as well as the Early Risk Detection Committee through monthly risk management reports. The effects of devaluation, parity and infl ation movements were analyzed, and necessary precautions were taken.


As a business whose intensive import transactions are constantly exposed to foreign exchange risks, forward exchange contracts were executed and planned cash has been partially kept in foreign currency to maintain the payments in check. Some additional measures were taken; among them pricing options to minimize the negative effects of currency volatility and model-based agreements that were reached with the manufacturing company according to product portfolio and action plan.

Interest RiskThe risk management of our Company is grouped into currencies, and strategic interest position is determined by also taking into account the effective maturities according to yield and costs of assets and liabilities.

For the circumstances where the loan amounts and interest rates are amended according to our scenario projections, measures are taken proactively according to the load that the cost increases would cause, and the suitable instrument/rate options are selected and implemented.

Receivables RiskWith joint factoring projects and cooperation, the receivable/payable risks between Doğuş Otomotiv and the authorized dealers and services have been minimized.

Product Cost/Price RiskImport planning and resource management are considered as a whole with the quantities and amount of stock in the bonded warehouses, in transit, loading or at the ports while the brands are monitored daily for their foreign exchange positions. The direct impact of the sudden movements in foreign exchange rates on both cost composition and the capacity of generating income are analyzed according to various scenarios. In studies carried out on working capital, cash fl ows, loan limit/risk projections, and the fi nancing of the working capital are planned accordingly to the lack of income in the scenario data. All of the summarized activities were included in the monthly risk management reports, and the relevant management levels were informed regularly during the year.

OPERATIONAL RISKS

Relations with SuppliersOur Company takes precautionary measures against risks such as supply discontinuity or interruption, possible delivery and quality problems, and the supplier’s fi nancial and technical incompetency. Some of these ongoing practices include monitoring supplier performance, an evaluation system based on minimum offer and bidding procedures, binding agreements and where necessary legal approval, letter of guarantee, and other similar instruments to ensure the provision of the service. The precautions taken for and the supervision of issues regarding Supply Chain Management and managing the suppliers’ social, environmental and economic risks are explained in detail within the scope of the Sustainability Report (http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/sustainability-at-dogus-otomotiv/sustainability-reports ).

Occupational Health and Safety (OHS) Certain OHS boards and an organizational structure have been formed to carry out/manage the OHS processes in the Company. Within the scope of OHS, risk analyses of our facilities and work environments, accident studies, civil defense trainings and drills are carried out. Furthermore, current detections and legal responsibilities are regularly reviewed at and followed by OHS board meetings every month. Trainings aimed at raising the personnel’s awareness are offered throughout the year with tests conducted under the supervision of experts to measure the knowledge levels. Detailed information on Doğuş Otomotiv and Doğuş Oto’ OHS activities is available in the Sustainability section on the corporate website (http://www.dogusotomotiv.com.tr/en/sustainability/corporate-sustainability/employees/occupational-health-and-safety/dogus-otomotivs-ohs-work ).

GENERAL INFORMATION


Business Continuity and Crisis ManagementAn action plan aimed at further improving the existing Business Continuity Plan was carried out by a working group composed of representatives from relevant departments, with the pilot phase currently running. The activity, which adopted key concepts that better aligned with the literature, is based on the principle of raising awareness, and was conducted in direct contact with task owners for applicability in real life, used as reference the relevant ISO standards and the action plan released by the Institute of Internal Auditors. As an important detail of this work, business continuity and disaster recovery are addressed as two different but complementary vital factors within the integrated structure.

The emergency action plans and crisis management scenarios developed to recover the processes that may potentially be interrupted as a result of destructive risks despite the Company’s proactive efforts are also taken into account. Generally accepted tools and consulting services were utilized in these plans and scenarios that aim to prevent loss of life, goods and information, meet the expectations of right holders, take the correct legal steps, and protect the organization’s reputation.

Information TechnologiesAn integrated information system (Turkuaz) is used to carry out the operations at our company. The processes that require intensive transactions, such as procurement, inventory management, sales and accounting, are generally performed through the applications provided on this system. The efforts related to resource planning, to the use of defi ned authorizations and access rights, to the training and certifi cations towards the use of professional equipment, to the follow-up on reference models and to taking action in accordance with auditing results are being conducted as a measure against potential risks. Furthermore, as part of the consultancy services led by Deloitte, and in partnership with Doğuş Teknoloji, we have consolidated all data pertaining to critical business processes, and completed the strategic work to achieve information security.

Decision Making Processes and PracticesAs a precaution against the violation of Company policies, and as part of our governance principles, the Code of Ethics, created in global standards and approved by the Company’s governing body, stated a way of doing business even beyond the regulations and directives at every stage of company operations. The code was adopted in a simple blueprint and with exemplifi ed narrative content, and was carefully prepared as a guide for all stakeholders. With regular internal trainings as well as reminders/notifi cations, awareness is maintained, and care is taken to make Code of Ethics easily accessible on various platforms.

7. MISCELLANEOUSAfter the operation term ended, there has not been any specifi c or signifi cant incident that may affect the rights of the partners, creditors and other relevant persons or institutions.

This report has been prepared in compliance with the provisions of the Turkish Commercial Code, the Capital Markets Law and relevant regulations, and has been signed and approved by the members of the Board of Directors pursuant to the Board resolution no. 2017/14 dated 28 February 2016.

The Statement of Responsibility by the Board members responsible for fi nancial reporting and the executive responsible for fi nancial reporting for the 2015 operating term is presented in ANNEX 2.

Further to the Board of Directors resolution no. 2017/14 dated 28 February 2016, it has been agreed to approve the Company’s Consolidated Financial Statements and its Notes for the fi scal year that ended on 31 December 2016 and prepared in compliance with Capital Markets Board standards, and to disclose the Independent Audit Report prepared and submitted by Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi with the Financial Statements and Notes on the Public Disclosure Platform (PDP).


APPENDIX 1. DIVIDEND DISTRIBUTION PROPOSAL AND TABLE


APPENDIX 2. STATEMENT OF RESPONSIBILITY ON FINANCIAL REPORTS


APPENDIX 3. INDEPENDENT AUDITORS’ REPORT RELATED TO ANNUAL REPORT




DOĞUŞ OTOMOTİV SERVİS VE TICARET A.Ş.

CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL

STATEMENTS FOR THE YEAR ENDED INDEPENDENT AUDITOR’S REPORT THEREON

(ORIGINALLY ISSUED IN TURKISH)


CONVENIENCE TRANSLATION INTO ENGLISH OFTHE CONSOLIDATED

FINANCIAL STATEMENTS FOR THE YEAR ENDED31 DECEMBER 2016 WITH

INDEPENDENT AUDITOR’S REPORTTHEREON

(Originally issued in Turkish)

28 February 2017 This report is consisted of 2 pages of independent auditor’s audit report and83 pages consolidated financial statements with accompanying notes.



DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

INDEX PAGE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION.......................................... 1-2

CONSOLIDATED PROFIT OR LOSS STATEMENTS .......................................................... 3

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME ................ 4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................................... 5

CONSOLIDATED STATEMENTS OF CASH FLOWS .......................................................... 6-7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...................................... 8-83

NOTE 1 ORGANISATION AND NATURE OF OPERATIONS............................................................................... 8-9 NOTE 2 BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

AND APPLIED ACCOUNTING POLICIES ............................................................................................... 9-32NOTE 3 JOINT VENTURES...................................................................................................................................... 33NOTE 4 OPERATING SEGMENTS .......................................................................................................................... 33-34NOTE 5 CASH AND CASH EQUIVALENTS........................................................................................................... 35NOTE 6 FINANCIAL INVESTMENTS..................................................................................................................... 35NOTE 7 BORROWINGS ............................................................................................................................................ 36-37NOTE 8 TRADE RECEIVABLES AND PAYABLES............................................................................................... 38-39NOTE 9 OTHER RECEIVABLES.............................................................................................................................. 39 NOTE 10 INVENTORIES ............................................................................................................................................ 40NOTE 11 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES....................................................................... 41-43NOTE 12 PROPERTY, PLANT AND EQUIPMENT .................................................................................................. 44-45NOTE 13 INTANGIBLE ASSETS ............................................................................................................................... 46NOTE 14 INVESTMENT PROPERTY ........................................................................................................................ 47NOTE 15 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES.................................................................... 48-51NOTE 16 EMPLOYEE BENEFITS .............................................................................................................................. 51NOTE 17 PREPAYMENTS / DEFERRED INCOME.................................................................................................. 52NOTE 18 OTHER CURRENT LIABILITIES .............................................................................................................. 52NOTE 19 EQUITY........................................................................................................................................................ 52-55NOTE 20 SALES AND COST OF SALES................................................................................................................... 55NOTE 21 MARKETING EXPENSES, GENERAL ADMINISTRATIVE EXPENSES............................................... 56NOTE 22 EXPENSES BY NATURE............................................................................................................................ 57NOTE 23 OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES................................................. 57NOTE 24 INVESTMENT ACTIVITY INCOME ......................................................................................................... 58NOTE 25 FINANCE EXPENSES................................................................................................................................. 58NOTE 26 TAX ASSET AND LIABILITIES.................................................................... ............................................ . 58-62NOTE 27 EARNINGS PER SHARE................................................................................ ............................................ . 62NOTE 28 BALANCES AND TRANSACTIONS WITH RELATED PARTIES.......................................................... 63-70NOTE 29 FINANCIAL INSTRUMENTS..................................................................................................................... 71-83NOTE 30 SUBSEQUENT EVENTS............................................................................................................................. 83


DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

INDEX PAGE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION.......................................... 1-2

CONSOLIDATED PROFIT OR LOSS STATEMENTS .......................................................... 3

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME ................ 4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................................... 5

CONSOLIDATED STATEMENTS OF CASH FLOWS .......................................................... 6-7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...................................... 8-83

NOTE 1 ORGANISATION AND NATURE OF OPERATIONS............................................................................... 8-9 NOTE 2 BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

AND APPLIED ACCOUNTING POLICIES ............................................................................................... 9-32NOTE 3 JOINT VENTURES...................................................................................................................................... 33NOTE 4 OPERATING SEGMENTS .......................................................................................................................... 33-34NOTE 5 CASH AND CASH EQUIVALENTS........................................................................................................... 35NOTE 6 FINANCIAL INVESTMENTS..................................................................................................................... 35NOTE 7 BORROWINGS ............................................................................................................................................ 36-37NOTE 8 TRADE RECEIVABLES AND PAYABLES............................................................................................... 38-39NOTE 9 OTHER RECEIVABLES.............................................................................................................................. 39 NOTE 10 INVENTORIES ............................................................................................................................................ 40NOTE 11 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES....................................................................... 41-43NOTE 12 PROPERTY, PLANT AND EQUIPMENT .................................................................................................. 44-45NOTE 13 INTANGIBLE ASSETS ............................................................................................................................... 46NOTE 14 INVESTMENT PROPERTY ........................................................................................................................ 47NOTE 15 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES.................................................................... 48-51NOTE 16 EMPLOYEE BENEFITS .............................................................................................................................. 51NOTE 17 PREPAYMENTS / DEFERRED INCOME.................................................................................................. 52NOTE 18 OTHER CURRENT LIABILITIES .............................................................................................................. 52NOTE 19 EQUITY........................................................................................................................................................ 52-55NOTE 20 SALES AND COST OF SALES................................................................................................................... 55NOTE 21 MARKETING EXPENSES, GENERAL ADMINISTRATIVE EXPENSES............................................... 56NOTE 22 EXPENSES BY NATURE............................................................................................................................ 57NOTE 23 OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES................................................. 57NOTE 24 INVESTMENT ACTIVITY INCOME ......................................................................................................... 58NOTE 25 FINANCE EXPENSES................................................................................................................................. 58NOTE 26 TAX ASSET AND LIABILITIES.................................................................... ............................................ . 58-62NOTE 27 EARNINGS PER SHARE................................................................................ ............................................ . 62NOTE 28 BALANCES AND TRANSACTIONS WITH RELATED PARTIES.......................................................... 63-70NOTE 29 FINANCIAL INSTRUMENTS..................................................................................................................... 71-83NOTE 30 SUBSEQUENT EVENTS............................................................................................................................. 83

128-129

130

131

132

133-134

135-210

135

135-159160160-161162162163-164165-166166167168-170171-172173174175-178178179179179-182182-183183184184185185185-189189190-197198-210210


DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

1

AuditedNotes 2016 2015

ASSETSCURRENT ASSETSCash and cash equivalents 5 89,098 71,870

Trade receivables 1,213,786 1,095,624

Trade receivables due from related parties 28.3 799,371 768,976

Trade receivables due from third parties 8.1 414,415 326,648

Other receivables 95,762 52,031

Other receivables due from related parties 28.4 22 1,639

Other receivables due from third parties 9 95,740 50,392

Inventories 10 1,650,960 1,214,122

Prepayments 17.1 21,955 19,198

Current tax assets 26 - 15,984

Other current assets 68,837 20,403

Total current assets 3,140,398 2,489,232

NON-CURRENT ASSETSFinancial investments 550,350 511,815

Available-for-sale financial assets 6 550,350 511,815

Other receivables 514 260

Other receivables due from third parties 514 260

Investments accounted for using equity method 11 305,986 239,010

Investment property 14 19,809 20,222

Property, plant and equipment 12 780,965 664,043

Intangible assets 13 26,226 20,848

Prepayments 17.2 20,121 28,811

Deferred tax asset 26 7,485 5,662

Total non-current assets 1,711,456 1,490,671TOTAL ASSETS 4,851,854 3,979,903

Accompanying notes are an integral part of these consolidated financial statements.


2

AuditedLIABILITIES Notes 2016 2015CURRENT LIABILITIESCurrent borrowings 7 2,446,084 1,619,581

Current portion of non-current borrowings 7 284,179 25,335

Trade payables 770,675 509,411

Trade payables to related parties 28.7 39,187 23,565

Trade payables to third parties 8.2 731,488 485,846

Employee benefit obligations 16,458 13,894

Deferred income 17.3 29,239 13,604Current tax liabilities 26 3,033 3,166Current provisions 67,976 54,983 Current provisions for employee benefits 15.1 6,166 5,193 Other current provisions 15.1 61,810 49,790Other current liabilities 18 67,602 64,061Total current liabilities 3,685,246 2,304,035NON-CURRENT LIABILITIESLong-term borrowings 7 28,172 296,208Deferred income 1,995 215Non-current provisions 14,856 13,937 Non-current provisions for employee benefits 16 14,856 13,937

Deferred tax liabilities 26 2,872 2,625

Total non-current liabilities 47,895 312,985

TOTAL LIABILITIES 3,733,141 2,617,020EQUITYEquity attributable to equity holders of the Company 1,114,091 1,358,516Issued capital 19 220,000 220,000Inflation adjustment on capital 19 23,115 23,115Treasury shares (-) 19 (220,274) -Accumulated other comprehensive income (loss) that will not be reclassified in profit or loss (7,636) (7,248)

Gains (losses) on revaluation and remeasurement (7,636) (7,248)Gains (losses) on remeasurements of defined benefit plans (7,636) (7,248)

Accumulated other comprehensive income (loss) that will be reclassified in profit or loss 475,472 436,923

Currency translation differences 19 5,808 6,033Gains (losses) on revaluation and reclassification 469,664 430,890

Gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets 19 469,664 430,890

Restricted reserves appropriated from profits 19 446,283 146,889Legal reserves 156,314 126,450Treasury share reserves 220,274 -Other restricted profit reserves 69,695 20,439

Retained earnings / (Accumulated losses) 19 (60,557) 235,916Profit for the period 237,688 302,921Non-controlling interests 19 4,622 4,367TOTAL EQUITY 1,118,713 1,362,883TOTAL EQUITY AND LIABILITIES 4,851,854 3,979,903




2

AuditedLIABILITIES Notes 2016 2015CURRENT LIABILITIESCurrent borrowings 7 2,446,084 1,619,581

Current portion of non-current borrowings 7 284,179 25,335

Trade payables 770,675 509,411

Trade payables to related parties 28.7 39,187 23,565

Trade payables to third parties 8.2 731,488 485,846

Employee benefit obligations 16,458 13,894

Deferred income 17.3 29,239 13,604Current tax liabilities 26 3,033 3,166Current provisions 67,976 54,983 Current provisions for employee benefits 15.1 6,166 5,193 Other current provisions 15.1 61,810 49,790Other current liabilities 18 67,602 64,061Total current liabilities 3,685,246 2,304,035NON-CURRENT LIABILITIESLong-term borrowings 7 28,172 296,208Deferred income 1,995 215Non-current provisions 14,856 13,937 Non-current provisions for employee benefits 16 14,856 13,937

Deferred tax liabilities 26 2,872 2,625

Total non-current liabilities 47,895 312,985

TOTAL LIABILITIES 3,733,141 2,617,020EQUITYEquity attributable to equity holders of the Company 1,114,091 1,358,516Issued capital 19 220,000 220,000Inflation adjustment on capital 19 23,115 23,115Treasury shares (-) 19 (220,274) -Accumulated other comprehensive income (loss) that will not be reclassified in profit or loss (7,636) (7,248)

Gains (losses) on revaluation and remeasurement (7,636) (7,248)Gains (losses) on remeasurements of defined benefit plans (7,636) (7,248)

Accumulated other comprehensive income (loss) that will be reclassified in profit or loss 475,472 436,923

Currency translation differences 19 5,808 6,033Gains (losses) on revaluation and reclassification 469,664 430,890

Gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets 19 469,664 430,890

Restricted reserves appropriated from profits 19 446,283 146,889Legal reserves 156,314 126,450Treasury share reserves 220,274 -Other restricted profit reserves 69,695 20,439

Retained earnings / (Accumulated losses) 19 (60,557) 235,916Profit for the period 237,688 302,921Non-controlling interests 19 4,622 4,367TOTAL EQUITY 1,118,713 1,362,883TOTAL EQUITY AND LIABILITIES 4,851,854 3,979,903



DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED PROFIT OR LOSS STATEMENTSFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

3

Audited

Notes 2016 2015Revenue 20 11,925,176 10,889,161Cost of sales 20 (10,772,300) (9,780,598)

GROSS PROFIT (LOSS) FROM COMMERCIAL OPERATIONS 1,152,876 1,108,563

GROSS PROFIT (LOSS) 1,152,876 1,108,563

General administrative expenses 21 (394,690) (310,269)

Marketing expenses 21 (415,575) (363,500)

Other income from operating activities 23.1 157,539 67,077

Other expenses from operating activities 23.2 (74,194) (55,303)

PROFIT (LOSS) FROM OPERATING ACTIVITIES 425,956 446,568

Investment activity income 24 23,024 46,875Share of profit (loss) from investments accounted for using equity method 11 98,849 43,434PROFIT (LOSS) BEFORE FINANCING INCOME (EXPENSE) 547,829 536,877

Finance costs 25 (272,697) (171,488)

PROFIT (LOSS) FROM CONTINUING OPERATIONS, BEFORE TAX 275,132 365,389

Tax (expense) income, continuing operations (37,189) (62,945)Current period tax (expense) income 26 (40,594) (61,976)

Deferred tax (expense) income 26 3,405 (969)

PROFIT (LOSS) FROM CONTINUING OPERATIONS 237,943 302,444

PROFIT (LOSS) 237,943 302,444

Profit (loss), attributable toNon-controlling interests 255 (477)Owners of parent 237,688 302,921

Basic earnings per shareBasic earnings(loss) per share from continuing operations 27 1.1098 1.3769

Diluted earnings per shareDiluted earnings(loss) per share from continuing operations 27 1.1098 1.3769


DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOMEFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

4


PROFIT (LOSS) 237,943 302,444

Other comprehensive income

Other comprehensive income that will not be reclassified to profit or loss (388) (1,611)Gains (losses) on remeasurements of defined benefit plans 16 (485) (2,014)Other comprehensive income that will not be reclassified to profit or loss, tax effect 97 403

Gains (losses) on remeasurements of defined benefit plans, tax effect 26 97 403

Other comprehensive income that will be reclassified to profit or loss 38,549 (24,286)Foreign currency translation differences (225) 3,591Gains (losses) on remeasuring and/or reclassification of available-for-sale-financial assets 38,535 (19,366)

Gains (losses) on remeasuring available-for-sale-financial assets 6 38,535 (19,366)Share of other comprehensive income of associates and joint ventures accounted for equity method that will be reclassified to profit or loss 11 2,165 (9,518)Other comprehensive income that will be reclassified toprofit or loss, tax effect (1,926) 1,007

Gains (losses) on remeasuring or reclassification on available-for-sale-financial assets, tax effect 26 (1,926) 1,007

OTHER COMPREHENSIVE INCOME (LOSS) 38,161 (25,897)

TOTAL COMPREHENSIVE INCOME (LOSS) 276,104 276,547

Total comprehensive income attributable toNon-controlling interests 255 (477)Owners of parent 275,849 277,024



DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOMEFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

4


PROFIT (LOSS) 237,943 302,444

Other comprehensive income

Other comprehensive income that will not be reclassified to profit or loss (388) (1,611)Gains (losses) on remeasurements of defined benefit plans 16 (485) (2,014)Other comprehensive income that will not be reclassified to profit or loss, tax effect 97 403

Gains (losses) on remeasurements of defined benefit plans, tax effect 26 97 403

Other comprehensive income that will be reclassified to profit or loss 38,549 (24,286)Foreign currency translation differences (225) 3,591Gains (losses) on remeasuring and/or reclassification of available-for-sale-financial assets 38,535 (19,366)

Gains (losses) on remeasuring available-for-sale-financial assets 6 38,535 (19,366)Share of other comprehensive income of associates and joint ventures accounted for equity method that will be reclassified to profit or loss 11 2,165 (9,518)Other comprehensive income that will be reclassified toprofit or loss, tax effect (1,926) 1,007

Gains (losses) on remeasuring or reclassification on available-for-sale-financial assets, tax effect 26 (1,926) 1,007

OTHER COMPREHENSIVE INCOME (LOSS) 38,161 (25,897)

TOTAL COMPREHENSIVE INCOME (LOSS) 276,104 276,547

Total comprehensive income attributable toNon-controlling interests 255 (477)Owners of parent 275,849 277,024



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DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

6

AuditedNotes

2016 2015A. CASH FLOWS FROM OPERATING ACTIVITIES: 122,069 (488,876)

Profit (loss) for the year 237,943 302,444

Adjustments for profit (loss) for the period reconciliation: 348,510 261,340 Adjustments for depreciation and amortization expense 12, 13, 14 65,811 49,584 Adjustments for (reversal of) impairment 889 189 Adjustments for (reversal of) impairment loss of receivables 8.1 48 132 Adjustments for (reversal of) impairment loss of inventories 10 841 57

Adjustments for provisions 97,818 80,541 Adjustments for provisions for employee benefits 15.1 4,693 3,356 Adjustments for (reversal of) lawsuit and/or penalty provision expenses 15.1 6,036 1,699 Adjustments for (reversal of) warranty provisions 15.1 87,089 75,486

Adjustments for dividend (income) expense 24 (9,259) (11,385) Adjustments for interest (income) and expense 267,100 161,987 Adjustments for interest income 23.1 (428) (1,718) Adjustments for interest expense 25 267,528 163,705

Adjustments for unrealized foreign exchange losses (gains) 1,576 (3,597)Adjustments for undistributed profits of investments accounted for using

equity method 11 (98,849) (43,434)

Adjustments for tax (income) expenses 26 37,189 62,945 Adjustments for losses (gains) on disposal of non-current assets (13,765) (9,551)

Adjustments for losses (gains) on disposal of property and equipment 24 (13,765) (9,551) Adjustments for losses (gains) from sale or changes in share of associates

joint ventures and financial investments - (25,939)

Changes in working capital (355,819) (912,086) Adjustments for decrease (increase) in trade receivables (109,946) (359,640) Decrease (increase) in due from related parties (30,394) (212,292) Decrease (increase) in due from third parties (79,552) (147,348)

Adjustments for decrease (increase) in inventories (437,680) (644,920) Adjustments for increase (decrease) in trade payables 261,130 152,093 Increase (decrease) in due to related parties 15,622 5,773 Increase (decrease) in due to third parties 245,508 146,320

Increase (decrease) in deferred income 15,635 6,304 Adjustments for other increase (decrease) in working capital (84,958) (65,923)

Cash flows from operations 230,634 (348,302) Interest received 428 1,718 Payments related with provisions for employee benefits (3,286) (2,620) Payments related with other provisions 15.1 (81,105) (75,550) Income taxes refund (paid) (24,654) (64,122) Other cash inflows (outflows) 8 52 -

B. CASH FLOWS FROM INVESTING ACTIVITIES (114,284) (21,430) Cash inflows by sale of shares or capital decrease of associates and/or joint ventures - 91,304 Cash outflows arising from purchase of shares or capital increase of associates and/or joint ventures 11 (1,380) (2,645) Cash inflow by proceeds from sales of property and equipment and intangible assets 68,589 34,088 Cash inflow by proceeds from sales of property and equipment 68,589 34,088

Cash outflow by acquisition of property and equipment and intangible assets (226,170) (184,938) Cash outflow by acquisition of property and equipment (206,334) (168,980) Cash outflow by acquisition of intangible assets 13 (19,836) (15,958)

Dividends received 44,677 40,761



6

AuditedNotes

2016 2015A. CASH FLOWS FROM OPERATING ACTIVITIES: 122,069 (488,876)

Profit (loss) for the year 237,943 302,444

Adjustments for profit (loss) for the period reconciliation: 348,510 261,340 Adjustments for depreciation and amortization expense 12, 13, 14 65,811 49,584 Adjustments for (reversal of) impairment 889 189 Adjustments for (reversal of) impairment loss of receivables 8.1 48 132 Adjustments for (reversal of) impairment loss of inventories 10 841 57

Adjustments for provisions 97,818 80,541 Adjustments for provisions for employee benefits 15.1 4,693 3,356 Adjustments for (reversal of) lawsuit and/or penalty provision expenses 15.1 6,036 1,699 Adjustments for (reversal of) warranty provisions 15.1 87,089 75,486

Adjustments for dividend (income) expense 24 (9,259) (11,385) Adjustments for interest (income) and expense 267,100 161,987 Adjustments for interest income 23.1 (428) (1,718) Adjustments for interest expense 25 267,528 163,705

Adjustments for unrealized foreign exchange losses (gains) 1,576 (3,597)Adjustments for undistributed profits of investments accounted for using

equity method 11 (98,849) (43,434)

Adjustments for tax (income) expenses 26 37,189 62,945 Adjustments for losses (gains) on disposal of non-current assets (13,765) (9,551)

Adjustments for losses (gains) on disposal of property and equipment 24 (13,765) (9,551) Adjustments for losses (gains) from sale or changes in share of associates

joint ventures and financial investments - (25,939)

Changes in working capital (355,819) (912,086) Adjustments for decrease (increase) in trade receivables (109,946) (359,640) Decrease (increase) in due from related parties (30,394) (212,292) Decrease (increase) in due from third parties (79,552) (147,348)

Adjustments for decrease (increase) in inventories (437,680) (644,920) Adjustments for increase (decrease) in trade payables 261,130 152,093 Increase (decrease) in due to related parties 15,622 5,773 Increase (decrease) in due to third parties 245,508 146,320

Increase (decrease) in deferred income 15,635 6,304 Adjustments for other increase (decrease) in working capital (84,958) (65,923)

Cash flows from operations 230,634 (348,302) Interest received 428 1,718 Payments related with provisions for employee benefits (3,286) (2,620) Payments related with other provisions 15.1 (81,105) (75,550) Income taxes refund (paid) (24,654) (64,122) Other cash inflows (outflows) 8 52 -

B. CASH FLOWS FROM INVESTING ACTIVITIES (114,284) (21,430) Cash inflows by sale of shares or capital decrease of associates and/or joint ventures - 91,304 Cash outflows arising from purchase of shares or capital increase of associates and/or joint ventures 11 (1,380) (2,645) Cash inflow by proceeds from sales of property and equipment and intangible assets 68,589 34,088 Cash inflow by proceeds from sales of property and equipment 68,589 34,088

Cash outflow by acquisition of property and equipment and intangible assets (226,170) (184,938) Cash outflow by acquisition of property and equipment (206,334) (168,980) Cash outflow by acquisition of intangible assets 13 (19,836) (15,958)

Dividends received 44,677 40,761



7

AuditedNotes

2016 2015C. CASH FLOWS FROM FINANCING ACTIVITIES 17,308 553,867

Payments to acquire entity's shares or other equity instruments 19 (220,274) - Proceeds from issuance of borrowings 2,327,248 1,841,085 Repayments of borrowings (1,563,539) (980,103) Dividends paid 19 (300,000) (150,000) Interest paid (224,078) (155,484) Other cash inflows (outflows) (2,049) (1,631)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS BEFOREEFFECT OF EXCHANGE RATE CHANGES (A+B+C) 25,093 43,561 D. EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASHEQUIVALENTS (7,865) (12,312)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) 17,228 31,249

E. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 5 71,870 40,621CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (A+B+C+D+E) 5 89,098 71,870


DOĞUŞ OTOMOTİV SERVİS VE TİCARET A.Ş.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER(Amounts expressed in thousands of TL unless otherwise indicated except share amounts.)

8

NOTE 1 – ORGANISATION AND NATURE OF OPERATIONS

Doğuş Otomotiv Servis ve Ticaret A.Ş. (“Doğuş Otomotiv” or the “Company”) was established on 24 November 1999 as a distributor of Volkswagen AG, and its activities include importing, marketing and selling automobiles and spare parts of Volkswagen Group brands (VW, Audi, Seat, Porsche, Bentley, Lamborghini, Bugatti and Scania), Scania Engines industrial and marine engine and, Thermoking climate control systems. The Company also operates in second car market across Turkey throughout its dealer network under the brand name “DOD”.

The shares of the Company have been publicly traded on Borsa İstanbul A.Ş. since 17 June 2004.

The Company’s subsidiaries as at 31 December 2016 are as follows:

• Doğuş Oto Pazarlama ve Ticaret A.Ş. (“Doğuş Oto Pazarlama”): Automobile dealer for group brands distributed by Doğuş Otomotiv and Yüce Auto Motorlu Araçlar Ticaret A.Ş.

• Doğuş Auto Misr for Trading and Manufacturing Vehicles Joint Stock Company (“Doğuş Auto Mısır JS”) has been founded to execute distribution and after sales services of commercial vehicles of Volkswagen brand (*).

• Doğuş Automotive Limited Liability Company (“Doğuş Auto Mısır LLC”) has been founded as the authorized dealer for brands distributed by Doğuş Auto Mısır JS (*).

• D-Auto Suisse SA (“Doğuş Auto Swiss”) has been founded in Lausanne, Switzerland as authorized dealer and service provider for Porsche and Bentley. Doğuş Auto Swiss has been established at 16 July 2007, and started its vehicle sales and after sales services operations on 10 March 2009.

• D-Auto Limited Liability Company (“Doğuş Auto Iraq”) has been founded in Iraq Erbil on 6 August 2013 to execute distribution services of Volkswagen and Audi brands.

(*) It has been decided for cessation of activities and liquidation of these subsidiaries, but the process of liquidation is still ongoing.

The Company and its subsidiaries (together referred to as the “Group”) operate in a single business segment.

The Company and Doğuş Oto Pazarlama are registered and operate in Turkey at the following address:

Maslak Mah. Ahi Evran Cad. No.4 İç Kapı No. 13

Sarıyer, İstanbul,Türkiye.

Doğuş Auto Mısır JS and Doğuş Auto Mısır LLC are registered in Egypt and located in the address below:

3/4 Anwar El - mofty St. Abbas El akkad St. Nasr CityCairo, Egypt.

Doğuş Auto Swiss is registered in Switzerland and located at the address below:

Avenue Gabriel-de-Rumine 37, c/o Lausanne.



8

NOTE 1 – ORGANISATION AND NATURE OF OPERATIONS

Doğuş Otomotiv Servis ve Ticaret A.Ş. (“Doğuş Otomotiv” or the “Company”) was established on 24 November 1999 as a distributor of Volkswagen AG, and its activities include importing, marketing and selling automobiles and spare parts of Volkswagen Group brands (VW, Audi, Seat, Porsche, Bentley, Lamborghini, Bugatti and Scania), Scania Engines industrial and marine engine and, Thermoking climate control systems. The Company also operates in second car market across Turkey throughout its dealer network under the brand name “DOD”.

The shares of the Company have been publicly traded on Borsa İstanbul A.Ş. since 17 June 2004.

The Company’s subsidiaries as at 31 December 2016 are as follows:

• Doğuş Oto Pazarlama ve Ticaret A.Ş. (“Doğuş Oto Pazarlama”): Automobile dealer for group brands distributed by Doğuş Otomotiv and Yüce Auto Motorlu Araçlar Ticaret A.Ş.

• Doğuş Auto Misr for Trading and Manufacturing Vehicles Joint Stock Company (“Doğuş Auto Mısır JS”) has been founded to execute distribution and after sales services of commercial vehicles of Volkswagen brand (*).

• Doğuş Automotive Limited Liability Company (“Doğuş Auto Mısır LLC”) has been founded as the authorized dealer for brands distributed by Doğuş Auto Mısır JS (*).

• D-Auto Suisse SA (“Doğuş Auto Swiss”) has been founded in Lausanne, Switzerland as authorized dealer and service provider for Porsche and Bentley. Doğuş Auto Swiss has been established at 16 July 2007, and started its vehicle sales and after sales services operations on 10 March 2009.

• D-Auto Limited Liability Company (“Doğuş Auto Iraq”) has been founded in Iraq Erbil on 6 August 2013 to execute distribution services of Volkswagen and Audi brands.


The Company and its subsidiaries (together referred to as the “Group”) operate in a single business segment.

The Company and Doğuş Oto Pazarlama are registered and operate in Turkey at the following address:

Maslak Mah. Ahi Evran Cad. No.4 İç Kapı No. 13

Sarıyer, İstanbul,Türkiye.

Doğuş Auto Mısır JS and Doğuş Auto Mısır LLC are registered in Egypt and located in the address below:

3/4 Anwar El - mofty St. Abbas El akkad St. Nasr CityCairo, Egypt.

Doğuş Auto Swiss is registered in Switzerland and located at the address below:

Avenue Gabriel-de-Rumine 37, c/o Lausanne.



9

NOTE 1 – ORGANISATION AND NATURE OF OPERATIONS (Continued)

Doğuş Auto Iraq is registered in Iraq and located at the address below:

Doktorlar Cad. Şirin Palas Otel Karşısı, Erbil/Iraq.

The average number of blue-collar employees of the Group for the year ended 31 December 2016 is 906(31 December 2015: 844) whereas the average number of white-collar employees of the Group for the year ended 31 December 2016 is 1,802 (31 December 2015: 1,650).

NOTE 2 – BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND APPLIED ACCOUNTING POLICIES

2.1 Basis of Presentation of Financial Statements

(i) Statement of Compliance to TAS

The accompanying consolidated financial statements are based in accordance with Turkish Accounting Standards (“TAS”) issued by Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”) as set out in the Communiqué serial II, No: 14.1 announcement of Capital Markets Board (“CMB”) dated 13 June 2013 related to “Capital Market Communiqué on Principles Regarding Financial Reporting” (“Communiqué”) which is published in official gazette, no 28676. TAS is composed of Turkish Accounting Standards, Turkish Financial Reporting Standards (“TFRS”), appendixes and interpretations. Additionally, the accompanying consolidated financial statements are presented in accordance with TAS taxonomy issued by POA on 2 June 2016 with the decision number 30.

(ii) Preparation and approval of financial statements

The consolidated financial statements of the Group as at 31 December 2016 have been approved by the Board of Directors on 28 February 2017. The legal authorities of the General Assembly of the Company have the right to modify the issued financial statements.

(iii) Correction on financial statements during hyperinflationary periods

With the resolution taken on 17 March 2005, the CMB has announced that, effective from 1 January 2005, the application of TAS 29 “Financial Reporting in Hyperinflationary Economies” issued by TASB is no longer required for companies operating in Turkey and accordingly effective from 1 January 2005, TAS 29 has not been applied in preparing the Group’s consolidated financial statements in accordance with CMB Financial Reporting Standards.

(iv) Basis of measurement

The consolidated financial statements have been prepared based on the historical cost, except for the available-for-sale financial assets which are measured at fair value.


10

NOTE 2 – BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND APPLIED ACCOUNTING POLICIES (Continued)

2.1 Basis of Presentation of Financial Statements (continued)

(v) Functional and Presentation Currency

Items included in the financial statements of subsidiaries, joint ventures and associates are presented in the functional currencies in their primary economic environments in which they maintain their operations. The consolidated financial statements are presented in TL, which is Doğuş Otomotiv’s functional and presentation currency.

The Company and its affiliates registered in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira (“TL”) in accordance with the Turkish Commercial Code, tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance. The affiliates in Egypt maintain their books of account and prepare their statutory financial statements in Egypt Pound (“EGP”) in accordance with the laws and regulations in force in Egypt; the affiliate in Switzerland maintains its books of account and prepares its statutory financial statements in Swiss Franc (“CHF”) in accordance with the laws and regulations in force in Switzerland and the affiliate in Iraq maintains its books of account and prepares its statutory financial statements in Iraqi Dinar (“IQD”) in accordance with the laws and regulations in force in Iraq.

(vi) Standards and interpretations issued but not yet effective

Standards issued by 31 December 2016 but not yet effective and not early adopted

Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, after the new standards and interpretations become in effect.

TFRS 9 – “Financial Instruments – Classification and measurement”

As amended in December 2012, the new standard is effective for annual periods beginning on or after 1 January 2018. Phase 1 of this new TFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities.

The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.



10



(v) Functional and Presentation Currency

Items included in the financial statements of subsidiaries, joint ventures and associates are presented in the functional currencies in their primary economic environments in which they maintain their operations. The consolidated financial statements are presented in TL, which is Doğuş Otomotiv’s functional and presentation currency.

The Company and its affiliates registered in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira (“TL”) in accordance with the Turkish Commercial Code, tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance. The affiliates in Egypt maintain their books of account and prepare their statutory financial statements in Egypt Pound (“EGP”) in accordance with the laws and regulations in force in Egypt; the affiliate in Switzerland maintains its books of account and prepares its statutory financial statements in Swiss Franc (“CHF”) in accordance with the laws and regulations in force in Switzerland and the affiliate in Iraq maintains its books of account and prepares its statutory financial statements in Iraqi Dinar (“IQD”) in accordance with the laws and regulations in force in Iraq.

(vi) Standards and interpretations issued but not yet effective

Standards issued by 31 December 2016 but not yet effective and not early adopted

Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, after the new standards and interpretations become in effect.

TFRS 9 – “Financial Instruments – Classification and measurement”

As amended in December 2012, the new standard is effective for annual periods beginning on or after 1 January 2018. Phase 1 of this new TFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities.

The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.



11



(vi) Standards and interpretations issued but not yet effective (continued)

Standards issued by 31 December 2016 but not yet effective and not early adopted (continued)

Standards issued but not yet effective and not early adopted (continued)

TFRS 15 Revenue from Contracts with Customers

The standard replaces existing TFRS guidance and introduces a new control-based revenue recognition model for contracts with customers. In the new standard, total consideration measured will be the amount to which the Company expects to be entitled, rather than fair value and new guidance have been introduced on separating goods and services in a contract and recognizing revenue over time. The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted under TFRS. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by POA

The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued to TFRS by the POA, thus they do not constitute part of TAS. Such standards, interpretations and amendments that are issued by the IASB but not yet issued by the POA are referred to as IFRS or IAS. The Group will make the necessary changes to its consolidated financial statements after the new standards and interpretations are issued and become effective under TAS.

IFRS 9 Financial Instruments – Hedge Accounting and amendments to TFRS 9, TFRS 7 and TAS 39 -IFRS 9 (2013)

In November 2013, the IASB issued a new version of IFRS 9, which includes the new hedge accounting requirements and some related amendments to IAS 39 and IFRS 7. Entities may make an accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 for all of their hedging transactions. Further, the new standard removes the 1 January 2015 effective date of IFRS 9. The new version of IFRS 9 issued after IFRS 9 (2013) introduces the mandatory effective date of 1 January 2018 for IFRS 9, with early adoption permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.


12




The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by POA (continued)

IFRS 9 Financial Instruments (2014)

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from TAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.

IFRS 16 LeasesOn 13 January 2016, IASB published the new leasing standard which will replace IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC 15 Operating Leases – Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and consequently change IAS 40 Investment Properties. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice. The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted provided that an entity also adopts IFRS 15-Revenue from Contracts with Customers. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.IFRIC 22 – Foreign Currency Transactions and Advance Consideration The amendments clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognizes a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The amendment is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.



12





IFRS 9 Financial Instruments (2014)

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from TAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is in the process of assessing the impact of the standard on the consolidated financial position or performance of the Group.

IFRS 16 LeasesOn 13 January 2016, IASB published the new leasing standard which will replace IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC 15 Operating Leases – Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and consequently change IAS 40 Investment Properties. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice. The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted provided that an entity also adopts IFRS 15-Revenue from Contracts with Customers. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.IFRIC 22 – Foreign Currency Transactions and Advance Consideration The amendments clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognizes a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The amendment is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.



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Amendments to IAS 7 Statement of Cash Flows – Disclosure Initiative

IAS 7 Statement of Cash Flows has been amended as part of the IASB’s broader disclosure initiative toimprove presentation and disclosure in financial statements. The amendments will require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. The amendments are effective for periods beginning on or after 1 January 2017, with earlier application permitted. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

Amendments to IAS 12 Income Taxes– Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify that the existence of a deductible temporary difference depends solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments are effective for annual periods beginning on or after 1 January 2017. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions

IFRS 2 Share-Based Payment has been amended by IASB to improving consistency and resolve some long-standing ambiguities in share-based payment accounting. The amendments cover three accounting areas: i) measurement of cash-settled share-based payments, ii) classification of share-based payments settled net of tax withholdings; and iii) accounting for modification of a share-based payment from cash-settled to equity-settled. Also, same approach has been adopted for the measurement of cash-settled share-based payments as equity-settled share-based payments. If certain conditions are met, share-based payments settled net of tax withholdings are accounted for as equity-settled share-based payments. The amendments are effective for periods beginning on or after 1 January 2018, with earlier application permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.


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IAS 40 – Transfers of Investment PropertyAmendments to IAS 40 - Transfers of Investment Property issued by IASB have been made to clarify uncertainty about that provide evidence of transfer of /from investment property to other asset groups. A change in management’s intentions for the use of property does not provide evidence of a change in intended use. Therefore, when an entity decides to dispose of an investment property without development, it continues to treat the property as an investment property until it is derecognized (eliminated from the statement of financial position) and does not reclassify it as inventory. Similarly, if an entity begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property and is not reclassified as owner-occupied property during the redevelopment. The amendment is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

Improvements to IFRSs

The IASB issued Annual Improvements to IFRSs - 2014–2016 Cycle. The amendments are effective as of 1 January 2018. Earlier application is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

Annual Improvements to IFRSs 2014-2016 Cycle

IFRS 1 “First Time Adoption of International Financial Reporting Standards”

IFRS 1 is amended to clarify that the deletion of short-term exemptions for first-time adopters related to disclosures for financial instruments, employee benefits and consolidated financial statements.

IFRS 12 “Disclosure of Interests in Other Entities”

The amendments clarify that the entity is not required to disclose summarized financial information for that subsidiary, joint venture or associate under the requirements of IFRS 12, when an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) is classified (or included in a disposal group that is classified) as held for sale in accordance with IFRS 12.

IAS 28 “Investments in Associates and Joint Ventures”

The amendment enable when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9.



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IAS 40 – Transfers of Investment PropertyAmendments to IAS 40 - Transfers of Investment Property issued by IASB have been made to clarify uncertainty about that provide evidence of transfer of /from investment property to other asset groups. A change in management’s intentions for the use of property does not provide evidence of a change in intended use. Therefore, when an entity decides to dispose of an investment property without development, it continues to treat the property as an investment property until it is derecognized (eliminated from the statement of financial position) and does not reclassify it as inventory. Similarly, if an entity begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property and is not reclassified as owner-occupied property during the redevelopment. The amendment is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Group is in the process of assessing the impact of the amendment on the consolidated financial position or performance of the Group.

Improvements to IFRSs

The IASB issued Annual Improvements to IFRSs - 2014–2016 Cycle. The amendments are effective as of 1 January 2018. Earlier application is permitted. The Group does not expect that these amendments will have significant impact on the consolidated financial position or performance of the Group.

Annual Improvements to IFRSs 2014-2016 Cycle

IFRS 1 “First Time Adoption of International Financial Reporting Standards”

IFRS 1 is amended to clarify that the deletion of short-term exemptions for first-time adopters related to disclosures for financial instruments, employee benefits and consolidated financial statements.

IFRS 12 “Disclosure of Interests in Other Entities”

The amendments clarify that the entity is not required to disclose summarized financial information for that subsidiary, joint venture or associate under the requirements of IFRS 12, when an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) is classified (or included in a disposal group that is classified) as held for sale in accordance with IFRS 12.

IAS 28 “Investments in Associates and Joint Ventures”

The amendment enable when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9.



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2.2 Basis of Consolidation

(i) Business Combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognized amount of any non-controlling interests in the acquiree; plus

• If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

• The net recognized amount (generally fair value) of the identifiable assets acquired and liabilitiesassumed.

When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognized in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. If necessary, adjustments regarding accounting policies are made on subsidiaries financial statements in order to equalize accounting policies applied by the Group.

For each business combination, the Group elects to measure any non-controlling interests in the acquireeither:

• At fair value; or

• At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.


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2.2 Basis of Consolidation (Continued)

(ii) Subsidiaries (Continued)

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit or loss.

Losses of subsidiaries belongs to non-controlling interest shall be attribute to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

The table below sets out all the subsidiaries included in the scope of consolidation and shows the Group’s share of control as at 31 December:

31 December 2016 31 December 2015Doğuş Oto Pazarlama 96.20% 96.20%Doğuş Auto Mısır JS (*) 99.97% 99.97%Doğuş Auto Mısır LLC (*) 98.97% 98.97%Doğuş Auto Swiss 99.95% 99.95%D-Auto Limited Liability Company 100.00% 100.00%


(iii) Joint Arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns. They are classified and accounted for as follows:

● Joint operation – When the Group has rights to the assets and obligations for the liabilities, relating to an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

● Joint venture – When the Group has rights only to the net assets of the arrangements, it accounts for its interest using the equity method.

The accompanying consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group.



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(ii) Subsidiaries (Continued)

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit or loss.

Losses of subsidiaries belongs to non-controlling interest shall be attribute to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

The table below sets out all the subsidiaries included in the scope of consolidation and shows the Group’s share of control as at 31 December:

31 December 2016 31 December 2015Doğuş Oto Pazarlama 96.20% 96.20%Doğuş Auto Mısır JS (*) 99.97% 99.97%Doğuş Auto Mısır LLC (*) 98.97% 98.97%Doğuş Auto Swiss 99.95% 99.95%D-Auto Limited Liability Company 100.00% 100.00%


(iii) Joint Arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns. They are classified and accounted for as follows:

● Joint operation – When the Group has rights to the assets and obligations for the liabilities, relating to an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

● Joint venture – When the Group has rights only to the net assets of the arrangements, it accounts for its interest using the equity method.

The accompanying consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group.



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(iii) Joint Arrangements (Continued)

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Joint ventures are recognized as investments measured through equity method. The table below sets out all joint ventures and the Group’s share of control as at 31 December.

31 December 2016 31 December 2015TÜVTURK Kuzey Taşıt Muayene İstasyonları

Yapım ve İşletim A.Ş. (“TÜVTURK Kuzey”) 33.33% 33.33%TÜVTURK Güney Taşıt Muayene İstasyonları

Yapım ve İşletim A.Ş. (“TÜVTURK Güney”) 33.33% 33.33%Meiller Doğuş Damper Sanayi ve Ticaret Ltd. Şti.

(“Meiller-Doğuş”) (*) 49.00% 49.00%

(*) Production and management buildings of Meiller Doğuş have been sold together with the existing fixtures and the distributor agreement between the Group and F. X. Meiller Fahrzeug- und Maschinenfabrik- GmbH & Co KG has been terminated as of 31 December 2016.

(iv) Associates

Associates are those enterprises in which the Group has significant influence, but does not have control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognized gains and losses of associates on an equity accounting basis, from the datethat significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to zero and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.


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(iv) Associates (Continued)

The table below sets out all the associates included in the scope of consolidation and shows the Group’s share of control as at 31 December:

31 December 2016 31 December 2015Yüce Auto Motorlu Araçlar Ticaret A.Ş. (“Yüce Auto”) (*) 50.00% 50.00%Doğuş Sigorta Aracılık Hizmetleri A.Ş. (“Doğuş Sigorta”) 42.00% 42.00%Volkswagen Doğuş Finansman A.Ş. (“VDF”) 48.00% 48.00%VDF Servis ve Ticaret A.Ş. (“VDF Servis”) 38.22% 38.22%Doğuş Bilgi İşlem ve Teknoloji Hizmetleri A.Ş. (“Doğuş Teknoloji”) 46.00% 46.00%

(*) Even though the Group has 50% interest in Yüce Auto (Distributor of Skoda), the Group only exercises a significant influence rather than control on the operations of Yüce Auto.

(v) Transactions Eliminated in Consolidation

Intragroup balances and transactions, and any unrealized income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. The carrying amount of Doğuş Otomotiv’s investment in each subsidiary and dividend income from these subsidiaries are eliminated from the related equity and profit or loss statement accounts.

2.3 Offsetting

Financial assets and financial liabilities should be offset and are reported net only when the entity has a legally enforceable right to offset, and it intends to settle the asset and the liability either simultaneously or on a net basis.



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(iv) Associates (Continued)

The table below sets out all the associates included in the scope of consolidation and shows the Group’s share of control as at 31 December:

31 December 2016 31 December 2015Yüce Auto Motorlu Araçlar Ticaret A.Ş. (“Yüce Auto”) (*) 50.00% 50.00%Doğuş Sigorta Aracılık Hizmetleri A.Ş. (“Doğuş Sigorta”) 42.00% 42.00%Volkswagen Doğuş Finansman A.Ş. (“VDF”) 48.00% 48.00%VDF Servis ve Ticaret A.Ş. (“VDF Servis”) 38.22% 38.22%Doğuş Bilgi İşlem ve Teknoloji Hizmetleri A.Ş. (“Doğuş Teknoloji”) 46.00% 46.00%

(*) Even though the Group has 50% interest in Yüce Auto (Distributor of Skoda), the Group only exercises a significant influence rather than control on the operations of Yüce Auto.

(v) Transactions Eliminated in Consolidation

Intragroup balances and transactions, and any unrealized income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. The carrying amount of Doğuş Otomotiv’s investment in each subsidiary and dividend income from these subsidiaries are eliminated from the related equity and profit or loss statement accounts.

2.3 Offsetting

Financial assets and financial liabilities should be offset and are reported net only when the entity has a legally enforceable right to offset, and it intends to settle the asset and the liability either simultaneously or on a net basis.



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2.4 Comparative Information

The Group has prepared the consolidated statement of financial position as at 31 December 2016comparatively with the consolidated statement of financial position as at 31 December 2015, and the consolidated profit or loss statement, the consolidated statement of other comprehensive income, the consolidated statements of cash flows and changes in equity for the year ended 31 December 2016comparative to the year ended 31 December 2015.

Reclassifications regarding the financial statements as of 31 December 2015;

• Income accruals amounting to TL 8,315 thousand have been reclassified from trade receivable due from related parties to other receivables due from third parties.

• Deferred income amounting to TL 215 thousand has been reclassified from other non-current liabilities to non-current deferred income.

• Rent expense, previously presented in marketing expense amounting to TL 9,194 thousand has been presented as general administrative expense.

• Gain on sale of property, plant and equipment, previously presented in other income from operating activities amounting to TL 9,551 thousand has been reclassified to investment activity income.

During the preparation of the consolidated statements of cash flows, reclassifications which are explained above were taken into consideration.

2.5 Accounting Estimates

The preparation of the consolidated financial statements requires to make judgments estimates and assumptions that affects the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ the estimations.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are reviewed and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is stated in the following:

Group’s tangible and intangible assets are depreciated and amortized in accordance with useful economic lives which is specified in Note 2.6 (Note 12 and 13).

The fair value of the available-for-sale financial assets that are not traded in an active market have been calculated by using references to the uncollusive market transactions, the fair values of the similar instruments and the discounted cash flow analysis (Note 6).

The Group assesses whether there is any impairment indicator in investment properties and compares carrying values of the investment property with the fair value determined in the valuation report obtained by a property appraiser company licensed by CMB (Note 14).


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2.5 Accounting Estimates (Continued)

The data in the discounted price list are used to calculate inventory impairment. If expected net realizable value is less than cost, the Group allocates provisions for inventory impairment (Note 10).

To calculate the provisions for legal claims, the probability of losing the case and the liabilities that would arise if the case is lost is evaluated by the Group’s Legal Counselor and by the Group management team taking into account the expert opinions. The management determines the amount of the provisions based on the best estimates (Note 15.1).

The warranties on automobiles sold by the Group are issued by the original equipment manufacturers (“OEM”). The Group acts as an intermediary between the customers and the OEM. The claims of customers from the Group are recognized as warranty expense. The Group recognizes the amount claimed from the OEM’s as warranty income and offset against warranty expense. The Group incurs the cost that is not paid by the manufactures. Accordingly, the Group recognizes the estimated liability for the difference between possible warranty claims of customers and possible warranty claims from the manufacturers based on historical service statistics (Note 15.1).

Deferred tax asset is recognized to the extent that taxable profit will be available against which the deductable temporary differences can be utilized. When taxable profit is probable, deferred tax assets is recognized for all temporary differences. For the year ended 31 December 2016, since the assumptions related to the Company’s future taxable profit generation are considered adequate, deferred tax asset is recognized (Note 26).

To calculate the employee benefit provision actuarial assumptions relating to turnover ratio, discount rate and salary increase are used. Calculation details are given in Employee Benefits (Note 16).

2.6 Significant Accounting Policies

Revenue recognition

Revenue from the sales of cars, spare parts and services in the course of ordinary activities is measuredat the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized on an accrual basis when persuasive evidence exists that goods are delivered and services are rendered, that the significant risks and rewards of ownership have been transferred to the buyer; recovery of the consideration is probable; there is no continuing management involvement with the goods; and the amount of revenue can be measured reliably. Significant risks and rewards are transferred to the buyer when the goods or ownership of goods passed to the buyer.

When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between nominal value and fair value of sales amount recognized at other income from operating activities.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost elements included in inventories comprise all costs of purchase and the other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is determined on actual costing basis for trade goods, moving weighted average basis for spare parts and other inventories. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses.



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2.5 Accounting Estimates (Continued)

The data in the discounted price list are used to calculate inventory impairment. If expected net realizable value is less than cost, the Group allocates provisions for inventory impairment (Note 10).

To calculate the provisions for legal claims, the probability of losing the case and the liabilities that would arise if the case is lost is evaluated by the Group’s Legal Counselor and by the Group management team taking into account the expert opinions. The management determines the amount of the provisions based on the best estimates (Note 15.1).

The warranties on automobiles sold by the Group are issued by the original equipment manufacturers (“OEM”). The Group acts as an intermediary between the customers and the OEM. The claims of customers from the Group are recognized as warranty expense. The Group recognizes the amount claimed from the OEM’s as warranty income and offset against warranty expense. The Group incurs the cost that is not paid by the manufactures. Accordingly, the Group recognizes the estimated liability for the difference between possible warranty claims of customers and possible warranty claims from the manufacturers based on historical service statistics (Note 15.1).

Deferred tax asset is recognized to the extent that taxable profit will be available against which the deductable temporary differences can be utilized. When taxable profit is probable, deferred tax assets is recognized for all temporary differences. For the year ended 31 December 2016, since the assumptions related to the Company’s future taxable profit generation are considered adequate, deferred tax asset is recognized (Note 26).

To calculate the employee benefit provision actuarial assumptions relating to turnover ratio, discount rate and salary increase are used. Calculation details are given in Employee Benefits (Note 16).

2.6 Significant Accounting Policies

Revenue recognition

Revenue from the sales of cars, spare parts and services in the course of ordinary activities is measuredat the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized on an accrual basis when persuasive evidence exists that goods are delivered and services are rendered, that the significant risks and rewards of ownership have been transferred to the buyer; recovery of the consideration is probable; there is no continuing management involvement with the goods; and the amount of revenue can be measured reliably. Significant risks and rewards are transferred to the buyer when the goods or ownership of goods passed to the buyer.

When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The difference between nominal value and fair value of sales amount recognized at other income from operating activities.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost elements included in inventories comprise all costs of purchase and the other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is determined on actual costing basis for trade goods, moving weighted average basis for spare parts and other inventories. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses.



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2.6 Significant Accounting Policies (Continued)

Property, plant and equipment

Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Building and land costs are recorded separately even if they are acquired together. Land is not depreciated.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognized within “Other Income from Operating Activities” or “Other Expense from Operating Activities” in profit or loss.

Subsequent expenditures

The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

Depreciation

The estimated useful lives of property and equipment for the current and comparative years are as follows:

Buildings 25-50 yearsLand improvements 4-50 yearsMachinery and equipment 5-15 yearsFurniture and fixtures 3-15 yearsMotor vehicles 4-5 years

Property and equipment are depreciated over the estimated useful lives of the related assets from the date of purchase or the date of setup on a straight line basis. Useful lives of property and equipment are reviewed at each reporting date and necessary adjustments are applied if necessary.


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Intangible assets

Intangible assets are consisted of rights and software programs. Intangible assets are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.


Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss incurred.

Amortization

The estimated useful lives of intangible assets for the current and comparative years are as follows:

Rights 15 yearsSoftware programs 3-5 years

Amortization is recognized in profit or loss on a straight line basis over the estimated useful lives of intangible assets from the date that they are available for use. The useful lives are reviewed at each reporting date and necessary adjustments are applied if necessary.

Investment properties

Investment properties, which are properties held to earn rent and/or for capital appreciation are measured initially at cost plus all direct transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. The Group, recognizes its investment properties from their carrying amount.

Investment properties are transferred from/to property, plant and equipment when their utilization purpose is changed. When investment properties are disposed, the difference between sales revenue and the carrying amount is charged to the consolidated income statement.

Depreciation is charged to investment properties excluding land, over their estimated useful lives, using the straight-line method. The useful lives of building that are owned by the Group is 50 years.



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Intangible assets

Intangible assets are consisted of rights and software programs. Intangible assets are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.


Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss incurred.

Amortization

The estimated useful lives of intangible assets for the current and comparative years are as follows:

Rights 15 yearsSoftware programs 3-5 years

Amortization is recognized in profit or loss on a straight line basis over the estimated useful lives of intangible assets from the date that they are available for use. The useful lives are reviewed at each reporting date and necessary adjustments are applied if necessary.

Investment properties

Investment properties, which are properties held to earn rent and/or for capital appreciation are measured initially at cost plus all direct transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. The Group, recognizes its investment properties from their carrying amount.

Investment properties are transferred from/to property, plant and equipment when their utilization purpose is changed. When investment properties are disposed, the difference between sales revenue and the carrying amount is charged to the consolidated income statement.

Depreciation is charged to investment properties excluding land, over their estimated useful lives, using the straight-line method. The useful lives of building that are owned by the Group is 50 years.



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Assets classified as held-for-sale

In compliance with TAS 31 “Shares in Joint Ventures” and TFRS 5 “Assets Classified as Held For Sale and Discontinuing Operations”, the interests in equity accounted investee which are classified as assets held for sale are accounted for in accordance with TFRS 5. Assets classified as held for sale is accounted for at the lower of its carrying amount (being the net amount of the assets and liabilities directly associated with them) and fair value less costs to sell.

Borrowing costs

In accordance with TAS 23 “Borrowing Costs (Revised)”, the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized by the Group as part of the cost of that asset, until the activities to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs are recognized in profit or loss within related period by using effective interest rate method expressed in TAS 39 “Financial Instruments: Recognition and Measurement”.

Financial instruments

i) Non-derivative financial assets

The Group initially recognizes loans and receivables and bank deposits on the date that they are originated. All other financial assets (including available-for-sale financial assets) are recognized initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a trading transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability.

The Group classifies non-derivative financial assets into the following categories: Loans and receivables and available-for-sale financial assets.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise of cash and cash equivalents, trade and other receivables.

Cash and cash equivalents

Cash and cash equivalents comprise of cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.


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Financial instruments (Continued)

i) Non-derivative financial assets (Continued)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments are recognized in other comprehensive income and presented in “Gain (losses) on remeasuring and/or reclassification of available for sale financial assets” in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss.

Available-for-sale financial assets comprise shares of Doğuş Holding A.Ş. (“Doğuş Holding”).

ii) Non-derivative financial liabilities

The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognized initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

The Group classifies non-derivative financial liabilities into financial, and other liabilities category. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Non-derivative financial liabilities comprise financial liabilities and trade payables.

iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

iv) Derivative financial instruments and hedge accounting

The Group holds derivative financial instruments to hedge its interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.



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i) Non-derivative financial assets (Continued)


Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments are recognized in other comprehensive income and presented in “Gain (losses) on remeasuring and/or reclassification of available for sale financial assets” in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss.

Available-for-sale financial assets comprise shares of Doğuş Holding A.Ş. (“Doğuş Holding”).

ii) Non-derivative financial liabilities

The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognized initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

The Group classifies non-derivative financial liabilities into financial, and other liabilities category. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. Non-derivative financial liabilities comprise financial liabilities and trade payables.

iii) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

iv) Derivative financial instruments and hedge accounting

The Group holds derivative financial instruments to hedge its interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.



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iv) Derivative financial instruments and hedge accounting (Continued)

On initial designation of the derivative as the hedging instrument, the Group documents the relationshipbetween the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125%. For cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

Derivatives are recognized initially at fair value. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity.

When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognized. In other cases, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss.

Separable embedded derivatives

Changes in the fair value of separated embedded derivatives are recognized immediately in profit or loss.


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Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognized immediately in profit or loss.

Impairment

Financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.


The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognized. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Trade receivables and provision for doubtful receivables

Trade receivables that are created by the way of providing goods or services by the Group directly to a debtor are carried at amortized cost. Trade receivables, net of unearned financial income, are measured at amortized cost, using the effective interest rate method. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant.



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Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognized immediately in profit or loss.

Impairment

Financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.


The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognized. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Trade receivables and provision for doubtful receivables

Trade receivables that are created by the way of providing goods or services by the Group directly to a debtor are carried at amortized cost. Trade receivables, net of unearned financial income, are measured at amortized cost, using the effective interest rate method. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant.



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Impairment (Continued)

Trade receivables and provision for doubtful receivables (Continued)

A credit risk provision for the trade receivables is recognized if there is objective evidence for the inability to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount of the receivable. The recoverable amount is the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception.

If the amount of the impairment subsequently decreases due to an event after the write-down, the release of the provision is credited to other income from operating activities.


Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in “Gain (losses) on revaluation and reclassification” in equity, to profit or loss and related to these instruments, impairment loss recognized previously in profit or loss cannot be cancelled through profit or loss.

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash generating unit (“CGU”) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. An impairment loss is recognized and carrying amount is reduced to recoverable amount if an asset’s or CGU’s carrying amount exceeds its recoverable amount.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.


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Foreign currency transactions

Transactions in foreign currencies are translated to TL at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to TL at the exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or loss.

Assets and liabilities of those Group entities with a different functional currency than the reporting currency of the Group are translated into the reporting currency of the Group at the rate of exchange ruling at the reporting date. The income and expenses of the Group entities are translated into the reporting currency at the average exchange rates for the period. These foreign currency differences are recognized in other comprehensive income, and presented in translation reserve in equity.

Earnings per share

Earnings per share disclosed in the consolidated income statement are determined by dividing net income by the weighted average number of shares outstanding during the period concerned. Parent company shares owned by the Group are not taken into consideration in the calculation of earnings per share.

In Turkey, companies can increase their share capital through a pro-rata distribution of shares (“bonus shares”) to existing shareholders from retained earnings and inflation adjustment. For the purpose of earnings per share computations, the weighted average number of shares in existence during the period has been adjusted in respect of bonus share issues without a corresponding change in resources, by giving them retroactive effect for the period.

Provisions, contingent assets and contingent liabilities

Provisions are recognized when the Group has a present legal or constructive obligation because of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Unless related criteria occur, the Group discloses the related issue in disclosures. Contingent assets are not recognized and solely disclosed until they are realized.

Change and errors in the accounting policies and estimates

Material changes in accounting policies or material errors are corrected; retrospectively by restating the prior period consolidated financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods.



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Foreign currency transactions

Transactions in foreign currencies are translated to TL at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to TL at the exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or loss.

Assets and liabilities of those Group entities with a different functional currency than the reporting currency of the Group are translated into the reporting currency of the Group at the rate of exchange ruling at the reporting date. The income and expenses of the Group entities are translated into the reporting currency at the average exchange rates for the period. These foreign currency differences are recognized in other comprehensive income, and presented in translation reserve in equity.

Earnings per share

Earnings per share disclosed in the consolidated income statement are determined by dividing net income by the weighted average number of shares outstanding during the period concerned. Parent company shares owned by the Group are not taken into consideration in the calculation of earnings per share.

In Turkey, companies can increase their share capital through a pro-rata distribution of shares (“bonus shares”) to existing shareholders from retained earnings and inflation adjustment. For the purpose of earnings per share computations, the weighted average number of shares in existence during the period has been adjusted in respect of bonus share issues without a corresponding change in resources, by giving them retroactive effect for the period.

Provisions, contingent assets and contingent liabilities

Provisions are recognized when the Group has a present legal or constructive obligation because of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Unless related criteria occur, the Group discloses the related issue in disclosures. Contingent assets are not recognized and solely disclosed until they are realized.

Change and errors in the accounting policies and estimates

Material changes in accounting policies or material errors are corrected; retrospectively by restating the prior period consolidated financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods.



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Leases

(i) Financial lease

Leases of property and equipment where the Group substantially assumes all the risks and rewards of ownership are classified as finance leases. Financial leases are included in the property and equipment at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments are charged by deducting accumulated depreciation and permanent impairment. Payables arising from financial leases are decreased when the principals are paid as well asthe interest payments are recognized in profit or loss statement.

(ii) Operational lease

Leases where a significant portion of the risks and rewards of ownership are retained by the leaser are classified as operating leases. Payments made under operating leases (net off any incentives received from the leaser) are charged to the consolidated profit or loss statement on a straight-line basis over the period of the lease.

(iii) Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. The following two criteria must be met for a “lease”:

• the fulfillment of the arrangement is dependent on the use of a specific asset or asset(s); and • the arrangement contains a right to use the asset(s).

At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other considerations required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that is impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Group’s incremental borrowing rate.

Related parties

Parties are considered related to the Group if;

(a) directly, or indirectly through one or more intermediaries, the party:

(i) controls, is controlled by, or is under common control with the Group (this includes parent, subsidiaries and fellow subsidiaries);(ii) has an interest in the Group that gives it significant influence over the Group; or

(iii) has joint control over the Group;


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Related parties (Continued)

(b) the party is an associate of the Group;

(c) the party is a joint venture in which the Group is a venturer;

(d) the party is member of the key management personnel of the Group and its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or (e);

(g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

A number of transactions are entered into with related parties in the normal course of business.

Segment reporting

Operating segments are reported in a manner consistent with the reporting provided to the chief operating decision maker. The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments. Board of Directors is determined as the chief operating decision maker of the Group.

Taxes on income

Taxes include current period income tax liabilities and deferred tax liabilities. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Effective tax rates are used for deferred tax calculation.

Most of temporary differences are derived from the timing differences in recognition of income and expenses between the consolidated financial statements that are prepared in accordance with the principals mentioned in Note 2 and statutory records.



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Related parties (Continued)

(b) the party is an associate of the Group;

(c) the party is a joint venture in which the Group is a venturer;

(d) the party is member of the key management personnel of the Group and its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or (e);

(g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

A number of transactions are entered into with related parties in the normal course of business.

Segment reporting

Operating segments are reported in a manner consistent with the reporting provided to the chief operating decision maker. The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments. Board of Directors is determined as the chief operating decision maker of the Group.

Taxes on income

Taxes include current period income tax liabilities and deferred tax liabilities. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Effective tax rates are used for deferred tax calculation.

Most of temporary differences are derived from the timing differences in recognition of income and expenses between the consolidated financial statements that are prepared in accordance with the principals mentioned in Note 2 and statutory records.



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Taxes on income (continued)

Deferred tax liabilities are recognized for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized.

When the deferred tax assets and deferred tax liabilities levied by the same taxation authority and there is a legally enforceable right to set off current tax assets against current tax liabilities, deferred tax assets and deferred tax liabilities are offset accordingly.

Transfer pricing regulations

Transfer pricing is disclosed in the 13th clause of the Corporate Tax Law under the heading “veiled shifting of profit” via transfer pricing. The application details are stated in the “general communiqué regarding veiled shifting of profits via transfer pricing” published on 18 November 2007. Veiled shifting of profits via transfer pricing will not be deducted from tax assessment for the purposes of corporate tax.

Tax exposure

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

The provisions concerning to the "thin capitalization" are stated in the Article 12 of new corporate tax law. According to the Article 12, if the borrowings obtained directly or indirectly from the shareholders of the companies or persons related to shareholders exceeds three times of the shareholders' equity of the company at any time during the related year, the exceeding portion of the borrowing will be treated as thin capital.

The financial borrowings were regarded as thin capitalization provided with;

• The borrowings obtained directly or indirectly from the shareholders of the companies or persons related to shareholders,

• Used for/in the entity,

• Borrowings exceeds three times of the shareholders' equity of the company at any time during the related year.

Employee benefits / Provision for employee termination benefits

In accordance with existing labor law in Turkey, the Group is required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire. Employee benefits are the estimation of the present value of future probable obligation of the Group arising from the retirement of the employees. It is computed and recognized in the financial statements considering the retirement pay cap and actuarial information


32



Cash flow

Cash flows during the period are classified and reported by operating, investing and financing activities in the cash flow statements.

Cash flows from operating activities represent the cash flows generated from the Group’s activities.

Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (capital expenditures and financial investments).

Cash flows arising from financial activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

Repurchase and resale transactions

Securities purchased under agreements to resell (“reverse repurchase agreements”) are classified under cash and cash equivalents in the consolidated financial statements. The difference between the purchase and resale price of these repurchase agreements is treated as interest income and accrued over the life of the reverse repurchase agreement.

Treasury Shares

Treasury shares is recognized under the equity in accordance with the Communique on Buy Backed Shares (II-22.1) announced by CMB and accounted as "Treasury shares" under the equity. Additionally, the Group classifies “Treasury share reserve” in the amount of the value of the reacquired shares under “Restricted reserves appropriated from profits” in accordance with the relevant communique.

Dividends

Dividend income is recognized by the Group at the date right to collect the dividend is realized. Dividend payables are recognized after the profit distribution approval in the General Assembly.

Subsequent events

Subsequent events comprised of events that occur between the reporting date and authorization for publication date both in favor of and against the Company. Subsequent events are divided in two:

• as of reporting date there are new evidences that related events exist, and

• evidence that the related events occurred after the reporting date (events that do not require correction subsequently).

As at reporting date, there is new evidence that related events exist or related events occurred subsequently and these events requires correction on consolidated financial statements, the Groupcorrects its consolidated financial statements in accordance with the new situation. If these subsequent events do not require consolidated financial statements to be corrected, the Group disclosures that issues in the footnotes.



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Cash flow

Cash flows during the period are classified and reported by operating, investing and financing activities in the cash flow statements.

Cash flows from operating activities represent the cash flows generated from the Group’s activities.

Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (capital expenditures and financial investments).

Cash flows arising from financial activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

Repurchase and resale transactions

Securities purchased under agreements to resell (“reverse repurchase agreements”) are classified under cash and cash equivalents in the consolidated financial statements. The difference between the purchase and resale price of these repurchase agreements is treated as interest income and accrued over the life of the reverse repurchase agreement.

Treasury Shares

Treasury shares is recognized under the equity in accordance with the Communique on Buy Backed Shares (II-22.1) announced by CMB and accounted as "Treasury shares" under the equity. Additionally, the Group classifies “Treasury share reserve” in the amount of the value of the reacquired shares under “Restricted reserves appropriated from profits” in accordance with the relevant communique.

Dividends

Dividend income is recognized by the Group at the date right to collect the dividend is realized. Dividend payables are recognized after the profit distribution approval in the General Assembly.

Subsequent events

Subsequent events comprised of events that occur between the reporting date and authorization for publication date both in favor of and against the Company. Subsequent events are divided in two:

• as of reporting date there are new evidences that related events exist, and

• evidence that the related events occurred after the reporting date (events that do not require correction subsequently).

As at reporting date, there is new evidence that related events exist or related events occurred subsequently and these events requires correction on consolidated financial statements, the Groupcorrects its consolidated financial statements in accordance with the new situation. If these subsequent events do not require consolidated financial statements to be corrected, the Group disclosures that issues in the footnotes.



33

NOTE 3 – JOINT VENTURES

The Group accounts for its interests in joint ventures indicated in Note 2.2 through equity method. Therefore, financial information regarding to aforementioned joint ventures are presented in Note 11 “Investments in Equity Accounted Investees”.

NOTE 4 – OPERATING SEGMENTS

Operating segments has been determined based on the reports reviewed by the steering committee that make strategic decisions.

Group management believes that risk and rewards of the Group is strictly related with the changes in automotive sector and determined the Group’s primary segments according to product types. Group’s operating activities include importing, marketing and selling passenger and commercial vehicles, spare parts of Volkswagen Group brands (VW, Audi, Seat, Porsche, Bentley, Lamborghini, Bugatti, Scania, Scania Engines industrial and marine engine and Thermoking climate control systems and used car operations in Turkey through its dealer network under the brand name “DOD”. Group’s operating segments are identified based on the product groups. Considering the nature of the products, operating segments are identified as passenger vehicles commercial vehicles and other segments. Other segments comprise used cars, spare parts and central office functions.

Segment assets and liabilities are not reported since the management reports do not include such information.

Accounting policies for certain types of transactions differ for management reporting from those used in preparation of the consolidated financial statements.

Warranty expenses and provision for legal matters have been included in the operating results when they are realized. Provisions for employee termination benefits expenses represent the undiscounted estimated future obligation of the Group arising from the retirement of the employees. Inventories are carried at cost. Depreciation and amortization which are not computed on a pro-rata basis are recognizedin profit or loss on a straight-line method over the estimated useful lives of tangible and intangible assets.

Segment information presented to the Group management for the years ended 31 December is as follows:

2016Passengersegment

Commercialsegment

Othersegments Total

Revenue from external customers 8,483,278 2,345,405 1,096,493 11,925,176Cost of sales (7,849,588) (2,139,219) (782,652) (10,771,459)Gross profit 633,690 206,186 313,841 1,153,717

General administration expenses (145,497) (30,704) (245,142) (421,343)Marketing expenses (225,394) (85,514) (96,438) (407,346)Other income from operating activities, net 78,180 9,984 (4,819) 83,345Operating income 340,979 99,952 (32,558) 408,373


34

NOTE 4 – OPERATING SEGMENTS (Continued)


Commercialsegment

Othersegments Total

Revenue from external customers 7,429,601 2,511,015 948,545 10,889,161Cost of sales (6,836,503) (2,277,474) (666,564) (9,780,541)Gross profit 593,098 233,541 281,981 1,108,620

General administration expenses (109,861) (25,073) (172,257) (307,191)Marketing expenses (216,995) (88,648) (64,978) (370,621)Other income from operating activities, net 5,248 650 5,879 11,777Operating income 271,490 120,470 50,625 442,585

The Group management assesses the performance of the operating segments based on the measure of operating income. The measurement basis excludes the effects of non-recurring expenses (i.e. restructuring expenses and one-offs) from the operating income. The measurement basis also excludes the share of profit of equity accounted investees. Finance income and costs are not allocated to segments, as this type of activity is driven by the central finance function of the Group.

The reconciliation of operating income to profit before tax is as follows:

2016 2015Operating profit for reportable segments 408,373 442,585Provision for legal exposures (3,794) 469Provision for employee termination benefits 8,296 3,636Provision for unused vacation (973) (617)Provision for diminution in value of inventories (841) (57)Warranty provision expense (8,229) (2,076)Depreciation and amortization 23,124 2,628Share of profit of equity accounted investees 98,849 43,434Income from investment activities, net 23,024 46,875Finance expense, net (272,697) (171,488)Other - -Profit before tax 275,132 365,389



34

NOTE 4 – OPERATING SEGMENTS (Continued)


Commercialsegment

Othersegments Total

Revenue from external customers 7,429,601 2,511,015 948,545 10,889,161Cost of sales (6,836,503) (2,277,474) (666,564) (9,780,541)Gross profit 593,098 233,541 281,981 1,108,620

General administration expenses (109,861) (25,073) (172,257) (307,191)Marketing expenses (216,995) (88,648) (64,978) (370,621)Other income from operating activities, net 5,248 650 5,879 11,777Operating income 271,490 120,470 50,625 442,585

The Group management assesses the performance of the operating segments based on the measure of operating income. The measurement basis excludes the effects of non-recurring expenses (i.e. restructuring expenses and one-offs) from the operating income. The measurement basis also excludes the share of profit of equity accounted investees. Finance income and costs are not allocated to segments, as this type of activity is driven by the central finance function of the Group.

The reconciliation of operating income to profit before tax is as follows:

2016 2015Operating profit for reportable segments 408,373 442,585Provision for legal exposures (3,794) 469Provision for employee termination benefits 8,296 3,636Provision for unused vacation (973) (617)Provision for diminution in value of inventories (841) (57)Warranty provision expense (8,229) (2,076)Depreciation and amortization 23,124 2,628Share of profit of equity accounted investees 98,849 43,434Income from investment activities, net 23,024 46,875Finance expense, net (272,697) (171,488)Other - -Profit before tax 275,132 365,389



35

NOTE 5 – CASH AND CASH EQUIVALENTS

As at 31 December, cash and cash equivalents comprise the following:

2016 2015Cash on hand 662 185Cash at banks 88,436 71,685- Demand deposits 33,080 25,833- Time deposits/reverse repo 19,000 12,416- Credit card receivables 36,356 33,436Total 89,098 71,870

As at 31 December 2016, average effective interest rate on TL denominated time deposits is 6.75% (31 December 2015: average effective interest rate 8.73%). As at 31 December 2016, maturity of time deposits is a day (31 December 2015: between 4-5 days).

There is no blocked deposit as at 31 December 2016 and 2015.

Foreign currency risk exposure of cash and cash equivalents are presented under Note 29.

Credit card receivables’ due date is less than three months.

NOTE 6 – FINANCIAL INVESTMENTS

As at 31 December, available-for-sale financial assets comprise of the following:

2016 2015Ownership interest (%)

Carrying amount

Ownership interest (%)

Carrying amount

Doğuş Holding A.Ş.(“Doğuş Holding”) 3.75 550,350 3.75 511,815

550,350 511,815

Since Doğuş Holding is not publicly traded, fair value of Doğuş Holding is determined by using current market information’s for publicly traded companies under Doğuş Holding governance. Fair value of Doğuş Holding is also determined by using other valuation methods such as nominal values, net carrying amount, acquisition price and discounted cash flows for non-public companies under Doğuş Holding governance. Discount rate is applied on net asset value of Doğuş Holding by taking discount rates into consideration which is applicable for valuation of publicly traded holding companies. The movements in available-for-sale financial assets within the period are as follows:

2016 2015Balance at 1 January 511,815 531,181Change in fair value of available-for-sale financial assets 38,535 (19,366)Balance at 31 December 550,350 511,815


36

NOTE 7 – BORROWINGS

As at 31 December, financial liabilities comprise the following:

2016 2015Interest rate Amount Interest rate Amount

Short-term bank borrowings:TL denominated interest

bearing borrowings 10.30%-14.55% 2,367,254 10.25% - 13.85% 1,592,545TL denominated non-interest

bearing borrowings (*) - 40,070 - 12,357CHF denominated borrowings 2.00%-2.20% 38,760 2.00%-3.25% 14,679Short-term bank liabilities: 2,446,084 1,619,581

Short-term portion oflong-term borrowings:

CHF denominated financelease liabilities - 4.50% 17

CHF denominated borrowings 3.43%–4.30% 2,124 3.43% - 4.30% 1,742TL denominated borrowings TRLIBOR+1.75% 6,864 TRLIBOR+1.75% 9,392TL denominated borrowings 11.20% - 11.85% 270,448 11.76%- 12.44% 6,343USD denominated borrowings LIBOR+1.95% 4,743 LIBOR+1.95% 7,841Short-term portion of

long-term liabilities: 284,179 25,335


Long-term bank borrowings:TL denominated borrowings TRLIBOR+1.75% 3,333 TRLIBOR+1.75% 10,000CHF denominated borrowings 3.43%–4.30% 24,839 3.43% – 4.30% 22,301TL denominated borrowings - - 11.76% - 12.44% 260,000USD denominated borrowings - - LIBOR+1.95% 3,907Total long-term

financial liabilities 28,172 296,208

(*) As at 31 December 2016, the Group has non-interest bearing TL denominated loans from various financial institutions amounting to TL 40,070 thousand, which have been obtained to pay value added taxes, custom taxes and special consumption taxes (31 December 2015: TL 12,357 thousand).



36

NOTE 7 – BORROWINGS

As at 31 December, financial liabilities comprise the following:


Short-term bank borrowings:TL denominated interest

bearing borrowings 10.30%-14.55% 2,367,254 10.25% - 13.85% 1,592,545TL denominated non-interest

bearing borrowings (*) - 40,070 - 12,357CHF denominated borrowings 2.00%-2.20% 38,760 2.00%-3.25% 14,679Short-term bank liabilities: 2,446,084 1,619,581

Short-term portion oflong-term borrowings:

CHF denominated financelease liabilities - 4.50% 17

CHF denominated borrowings 3.43%–4.30% 2,124 3.43% - 4.30% 1,742TL denominated borrowings TRLIBOR+1.75% 6,864 TRLIBOR+1.75% 9,392TL denominated borrowings 11.20% - 11.85% 270,448 11.76%- 12.44% 6,343USD denominated borrowings LIBOR+1.95% 4,743 LIBOR+1.95% 7,841Short-term portion of

long-term liabilities: 284,179 25,335


Long-term bank borrowings:TL denominated borrowings TRLIBOR+1.75% 3,333 TRLIBOR+1.75% 10,000CHF denominated borrowings 3.43%–4.30% 24,839 3.43% – 4.30% 22,301TL denominated borrowings - - 11.76% - 12.44% 260,000USD denominated borrowings - - LIBOR+1.95% 3,907Total long-term

financial liabilities 28,172 296,208

(*) As at 31 December 2016, the Group has non-interest bearing TL denominated loans from various financial institutions amounting to TL 40,070 thousand, which have been obtained to pay value added taxes, custom taxes and special consumption taxes (31 December 2015: TL 12,357 thousand).



37

NOTE 7 – BORROWINGS (Continued)

As at 31 December 2016, the repayment schedule of long-term bank borrowings including their short-term portions is as follows:

Payment period

Originalamount

(TLthousand)

Originalamount

(USDthousand)

Originalamount

(CHFthousand)

TLequivalent

2017 277,312 1,348 616 284,1792018 3,333 - 4,428 18,5902019 and onwards - - 2,781 9,582Total 280,645 1,348 7,825 312,351

As at 31 December 2015, the repayment schedule of long-term bank borrowings including their short-term portions is as follows:

Payment period

Originalamount

(TLthousand)

Originalamount

(USDthousand)

Originalamount

(CHFthousand)

TLequivalent

2016 15,735 2,697 595 25,3182017 266,667 1,343 4,830 284,7142018 and onwards 3,333 - 2,787 11,494Total 285,735 4,040 8,212 321,526

Foreign currency, interest and liquidity risk exposure of financial liabilities are presented under Note 29.


38

NOTE 8 – TRADE RECEIVABLES AND PAYABLES

8.1 Trade Receivables

As at 31 December, trade receivables due from third parties are consisted of the following:

2016 2015Trade receivables 415,907 328,144Allowance for doubtful receivables (-) (1,492) (1,496)Total 414,415 326,648

As at 31 December 2016, the Group charges 4% monthly interest to the dealers regarding overdue receivables (31 December 2015: 4%).

The movement of individually impaired receivables is as follows:

2016 2015Balance as at 1 January 1,496 1,364Additions 628 282Provisions released (-) (580) (150)Recoveries during the year (52) -Balance at 31 December 1,492 1,496

Guarantees received for trade receivables due from third parties

Significant portion of the other trade receivables due from third parties is comprised of receivables from the dealers. The Group’s management established an effective control system over the dealers and monitors the credit risk of the dealers arising from the transactions. The Group requests letters of guarantee for vehicle and spare parts sales from authorized dealers. TL 116,230 thousand of trade receivables due from third parties are covered via letters of guarantee (31 December 2015: TL 69,408 thousand).

As at 31 December 2016, overdue trade receivables due from third parties that are not impaired amount to TL 54 thousand (31 December 2015: TL 1,211 thousand). None of such overdue receivables are covered via guarantee letters (31 December 2015: TL 1,211 thousand).

As at 31 December 2016, trade receivables which has not been billed yet is amounting to TL 85,176thousand (31 December 2015: TL 33,273 thousand).

As at 31 December 2016, the Group’s average maturity of trade receivables due from third parties is 37days (31 December 2015: 41 days).

Foreign currency and credit risk exposure of trade receivables are presented under Note 29.



38

NOTE 8 – TRADE RECEIVABLES AND PAYABLES

8.1 Trade Receivables

As at 31 December, trade receivables due from third parties are consisted of the following:

2016 2015Trade receivables 415,907 328,144Allowance for doubtful receivables (-) (1,492) (1,496)Total 414,415 326,648

As at 31 December 2016, the Group charges 4% monthly interest to the dealers regarding overdue receivables (31 December 2015: 4%).

The movement of individually impaired receivables is as follows:

2016 2015Balance as at 1 January 1,496 1,364Additions 628 282Provisions released (-) (580) (150)Recoveries during the year (52) -Balance at 31 December 1,492 1,496

Guarantees received for trade receivables due from third parties

Significant portion of the other trade receivables due from third parties is comprised of receivables from the dealers. The Group’s management established an effective control system over the dealers and monitors the credit risk of the dealers arising from the transactions. The Group requests letters of guarantee for vehicle and spare parts sales from authorized dealers. TL 116,230 thousand of trade receivables due from third parties are covered via letters of guarantee (31 December 2015: TL 69,408 thousand).

As at 31 December 2016, overdue trade receivables due from third parties that are not impaired amount to TL 54 thousand (31 December 2015: TL 1,211 thousand). None of such overdue receivables are covered via guarantee letters (31 December 2015: TL 1,211 thousand).

As at 31 December 2016, trade receivables which has not been billed yet is amounting to TL 85,176thousand (31 December 2015: TL 33,273 thousand).

As at 31 December 2016, the Group’s average maturity of trade receivables due from third parties is 37days (31 December 2015: 41 days).

Foreign currency and credit risk exposure of trade receivables are presented under Note 29.



39

NOTE 8 – TRADE RECEIVABLES AND PAYABLES (Continued)

8.2 Trade Payables

As at 31 December, trade payables to third parties consist of the following:

2016 2015Payables to OEM companies 564,990 326,603Payables to dealers (*) 107,439 84,767Other trade payables 57,634 65,884Other expense accrual 1,425 8,592Total 731,488 485,846

OEM’s provide a credit option to the Group up to 1 year, which is free from interest for 10 days. The OEM’s charge the Group an interest of 1% per annum for trade payables not settled within 10 days (31 December 2015: 1.23% per annum).

(*) Group’s payables to dealers consisted of bonus payables paid on periodical basis.

Other trade payables include Group’s payables to service and material suppliers.

Foreign currency and liquidity risk exposure of trade payables are presented under Note 29.

NOTE 9 – OTHER RECEIVABLES

As at 31 December, other receivables comprise of the following:

2016 2015Warranty claims and price difference receivables (*) 78,338 35,901Receivables due to insurance claims 8,971 9,927Other 8,431 4,564Total 95,740 50,392

(*) Warranty claims comprise the amounts to be paid by the suppliers in regards to the portion of warranty expenses of the vehicles imported by the Group, OEM’s are responsible for. As at 31 December 2016, other receivables which has not been billed yet is amounting to TL 4,551 thousand (31 December 2015: TL 8,315 thousand).


40

NOTE 10 – INVENTORIES

As at 31 December, inventories comprise of the following:

2016 2015Goods in transit (*) 675,030 562,047 Merchandise stocks – vehicles 835,634 518,680Merchandise stocks – spare parts 145,046 137,304

1,655,710 1,218,031

Provision for diminution in the value of inventories (-) (4,750) (3,909)Total 1,650,960 1,214,122

(*) Goods in transit comprise of vehicles and spare parts, custom transactions of which have not been completed yet, but risks and rewards of which have been transferred to the Group.

The cost of inventories recognized as expense and included in cost of sales amounted to TL 10,679,455thousand for the year ended 31 December 2016 (31 December 2015: TL 9,692,876 thousand).

The Group has provided provision for damaged and slow-moving items in inventories. The current year stock provision is included in “cost of sales”. The movement of provision for diminution in the carrying value of inventories is provided below:

2016 2015Balance at 1 January 3,909 3,852Additions in the current period 841 57Balance at 31 December 4,750 3,909



40

NOTE 10 – INVENTORIES

As at 31 December, inventories comprise of the following:

2016 2015Goods in transit (*) 675,030 562,047 Merchandise stocks – vehicles 835,634 518,680Merchandise stocks – spare parts 145,046 137,304

1,655,710 1,218,031

Provision for diminution in the value of inventories (-) (4,750) (3,909)Total 1,650,960 1,214,122

(*) Goods in transit comprise of vehicles and spare parts, custom transactions of which have not been completed yet, but risks and rewards of which have been transferred to the Group.

The cost of inventories recognized as expense and included in cost of sales amounted to TL 10,679,455thousand for the year ended 31 December 2016 (31 December 2015: TL 9,692,876 thousand).

The Group has provided provision for damaged and slow-moving items in inventories. The current year stock provision is included in “cost of sales”. The movement of provision for diminution in the carrying value of inventories is provided below:

2016 2015Balance at 1 January 3,909 3,852Additions in the current period 841 57Balance at 31 December 4,750 3,909



41

NOTE 11 – INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

As at 31 December, investment in associates, joint ventures and the Group’s share of control are as follows:

2016 2015Ownership Carrying Ownership Carrying

% amount % amountAssociatesVDF 48 125,950 48 85,281Doğuş Sigorta 42 35,273 42 32,709Yüce Auto 50 21,919 50 17,298VDF Servis 38.22 47,546 38.22 32,852Doğuş Teknoloji 46 6,179 46 4,523Total 236,867 172,663Joint venturesTÜVTURK Kuzey – Güney 33.33 60,265 33.33 60,354Meiller-Doğuş (*) 49 8,854 49 5,993Total 69,119 66,347

Grand total 305,986 239,010

(*) Production and management buildings of Meiller Doğuş have been sold together with the existing fixtures and the distributor agreement between the Group and F. X. Meiller Fahrzeug- und Maschinenfabrik- GmbH & Co KG has been terminated as of 31 December 2016.

The movements in investments in associates and joint ventures during the periods are as follows:

2016 2015Balance at 1 January 239,010 251,701Shares in profits of associates and joint ventures, net 98,849 43,434Hedge reserve of joint ventures - reclassified to profit or loss - (8,414)Change in fair value of available-for-sale financial assets

held by associates 2,279 (1,162)Dividend income from associates (35,418) (29,376)Participation in capital increase of associatesand joint ventures 1,380 2,645Deferred tax effect in relation to change in fair value of

available-for-sale financial assets held by associates (114) 58Transfers to non-current assets held-for-sale - (19,876)Balance at 31 December 305,986 239,010


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44

NOTE 12 – PROPERTY, PLANT AND EQUIPMENT

The movements in property, plant and equipment and related accumulated depreciation for the year ended 31 December 2016 are as follows:

1January

Foreign31

Decembercurrency

translation2016 Additions Disposals Transfers difference 2016

Cost:Land 189,552 1,732 - 9,840 1,076 202,200Land improvements 18,791 469 (3,770) 1,461 - 16,951Buildings 238,904 4,009 - 103,474 9,544 355,931Machinery and equipments 48,288 18,961 (882) 119 1,973 68,459Motor vehicles 124,904 103,352 (73,349) - 2,385 157,292Furniture and fixtures 46,346 12,600 (792) 5,488 200 63,842Leasehold improvements 70,785 1,063 (2,815) 18,770 2,964 90,767Constructions in progress 88,519 66,014 - (139,152) 12 15,393

826,089 208,200 (81,608) - 18,154 970,835Accumulated depreciation:Land improvements (11,196) (535) 126 - - (11,605)Buildings (35,546) (5,580) - - (1,322) (42,448)Machinery and equipments (28,239) (5,021) 802 - (1,360) (33,818)Motor vehicles (29,310) (27,974) 22,366 - (404) (35,322)Furniture and fixtures (26,378) (6,625) 757 - (109) (32,355)Leasehold improvements (31,377) (5,205) 2,733 - (473) (34,322)

(162,046) (50,940) 26,784 - (3,668) (189,870)

Carrying amount 664,043 780,965

Total depreciation expense amounting to TL 50,940 thousand has been allocated to general administrative expenses in the consolidated profit or loss statement for the year ended 31 December 2016 (31 December 2015: TL 37,861 thousand).

As at 31 December 2016 there is a lien on land owned by the Group amounting to TL 70,000 thousand and on buildings amounting to USD 21,500 thousand equivalent to TL 75,663 thousand (31 December 2015: TL 70,000 thousand and USD 21,500 thousand equivalent to TL 62,513 thousand).

As at 31 December 2016, borrowing cost amounting to TL 29,828 thousand is capitalized on property,plant and equipments (31 December 2015: TL 28,096 thousand).



44

NOTE 12 – PROPERTY, PLANT AND EQUIPMENT


1January

Foreign31

Decembercurrency


Cost:Land 189,552 1,732 - 9,840 1,076 202,200Land improvements 18,791 469 (3,770) 1,461 - 16,951Buildings 238,904 4,009 - 103,474 9,544 355,931Machinery and equipments 48,288 18,961 (882) 119 1,973 68,459Motor vehicles 124,904 103,352 (73,349) - 2,385 157,292Furniture and fixtures 46,346 12,600 (792) 5,488 200 63,842Leasehold improvements 70,785 1,063 (2,815) 18,770 2,964 90,767Constructions in progress 88,519 66,014 - (139,152) 12 15,393

826,089 208,200 (81,608) - 18,154 970,835Accumulated depreciation:Land improvements (11,196) (535) 126 - - (11,605)Buildings (35,546) (5,580) - - (1,322) (42,448)Machinery and equipments (28,239) (5,021) 802 - (1,360) (33,818)Motor vehicles (29,310) (27,974) 22,366 - (404) (35,322)Furniture and fixtures (26,378) (6,625) 757 - (109) (32,355)Leasehold improvements (31,377) (5,205) 2,733 - (473) (34,322)

(162,046) (50,940) 26,784 - (3,668) (189,870)


Total depreciation expense amounting to TL 50,940 thousand has been allocated to general administrative expenses in the consolidated profit or loss statement for the year ended 31 December 2016 (31 December 2015: TL 37,861 thousand).

As at 31 December 2016 there is a lien on land owned by the Group amounting to TL 70,000 thousand and on buildings amounting to USD 21,500 thousand equivalent to TL 75,663 thousand (31 December 2015: TL 70,000 thousand and USD 21,500 thousand equivalent to TL 62,513 thousand).

As at 31 December 2016, borrowing cost amounting to TL 29,828 thousand is capitalized on property,plant and equipments (31 December 2015: TL 28,096 thousand).



45

NOTE 12 – PROPERTY, PLANT AND EQUIPMENT (Continued)


1January

Foreign31

Decembercurrency


Cost:Land 187,909 433 - - 1,210 189,552 Land improvements 14,933 88 - 3,770 - 18,791 Buildings 228,001 138 - 551 10,214 238,904 Machinery and equipments 40,401 4,675 (194) 1,644 1,762 48,288 Motor vehicles 77,352 83,575 (38,329) - 2,306 124,904 Furniture and fixtures 39,038 6,166 (525) 1,479 188 46,346 Leasehold improvements 57,814 1,107 - 9,143 2,721 70,785 Constructions in progress 32,863 72,798 (555) (16,587) - 88,519

678,311 168,980 (39,603) - 18,401 826,089 Accumulated depreciation:Land improvements (10,596) (600) - - - (11,196)Buildings (29,518) (4,919) - - (1,109) (35,546)Machinery and equipments (23,401) (3,653) 152 - (1,337) (28,239)Motor vehicles (23,738) (19,763) 14,462 - (271) (29,310)Furniture and fixtures (22,039) (4,766) 452 - (25) (26,378)Leasehold improvements (27,048) (4,160) - - (169) (31,377)

(136,340) (37,861) 15,066 - (2,911) (162,046)



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NOTE 13 – INTANGIBLE ASSETS

The movements in intangible assets and related accumulated amortization during the year ended 31 December 2016 are as follows:

1 January 2016 Additions Disposals 31 December 2016Cost:Rights and software 65,949 19,836 - 85,785

65,949 19,836 - 85,785Accumulated amortization:Rights and software (45,101) (14,458) - (59,559)

(45,101) (14,458) - (59,559)Carrying amount 20,848 26,226

Total amortization expense amounting to TL 14,458 thousand (31 December 2015: TL 11,309 thousand) for the year ended 31 December 2016 has been allocated to general administrative expenses in consolidated profit or loss statement.




(33,792) (11,309) - (45,101)Carrying amount 16,199 20,848



46

NOTE 13 – INTANGIBLE ASSETS




(45,101) (14,458) - (59,559)Carrying amount 20,848 26,226

Total amortization expense amounting to TL 14,458 thousand (31 December 2015: TL 11,309 thousand) for the year ended 31 December 2016 has been allocated to general administrative expenses in consolidated profit or loss statement.




(33,792) (11,309) - (45,101)Carrying amount 16,199 20,848



47

NOTE 14 – INVESTMENT PROPERTY

The movements in investment property and related accumulated depreciation for the year ended 31 December 2016 and 2015 are as follows:

1 January –31 December 2016

1 January –31 December 2015

Cost:1 January 20,670 20,670Additions from property and equipment - -31 December 20,670 20,670Accumulated depreciation1 January (448) (34)Depreciation for the period (413) (414)31 December (861) (448)Net book value as of 1 January 20,222 20,636Net book value as of 31 December 19,809 20,222

Investment property comprised of the building that is used by Doğuş Teknoloji. The Group decided to rent this building to Doğuş Teknoloji in October 2014 and a 10-year rent contract has been signed between the parties.

The Group assesses whether there is any impairment indicator in investment properties. If such indicator exists the Group compares fair values and carrying values of the investment properties on an individual asset basis and records identified impairment of the investment properties.

The fair value of the investment property has been determined by a CMB licensed property appraisercompany in October 2016. As of 31 December 2016, the fair value of the building amounts to TL 28,500thousand (Level 2).

The useful life of the building that is classified as investment property is 50 years. The Group has recognized TL 1,113 thousand rent income from the related investment property in 2016.


48

NOTE 15 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

15.1 Short-Term Provisions

The breakdown of short-term provisions related to employee benefits as at 31 December is presented below:

2016 2015Provision for unused vacation 6,166 5,193Total 6,166 5,193

The breakdown of other short-term provisions as at 31 December is presented below:

2016 2015Warranty provisions 43,843 35,617Legal provisions 17,967 14,173Total 61,810 49,790

The movements of provisions during the year are as follows:

Balance at 1 January

2016

Provision set during

the year

Provisions no longer required

Paid during the

year

Balance at 31 December

2016Legal provisions 14,173 6,142 (106) (2,242) 17,967

Warranty provisions 35,617 87,089 - (78,863) 43,843

Unused vacation liability provision 5,193 1,769 - (796) 6,166

Total 54,983 95,000 (106) (81,901) 67,976


2015


the year


Paid during the

year


2015Legal provisions 14,614 2,978 (1,279) (2,140) 14,173


Unused vacation liability provision 4,576 970 - (353) 5,193

Total 52,731 79,434 (1,279) (75,903) 54,983



48

NOTE 15 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

15.1 Short-Term Provisions

The breakdown of short-term provisions related to employee benefits as at 31 December is presented below:

2016 2015Provision for unused vacation 6,166 5,193Total 6,166 5,193

The breakdown of other short-term provisions as at 31 December is presented below:

2016 2015Warranty provisions 43,843 35,617Legal provisions 17,967 14,173Total 61,810 49,790

The movements of provisions during the year are as follows:


2016


the year


Paid during the

year


2016Legal provisions 14,173 6,142 (106) (2,242) 17,967


Unused vacation liability provision 5,193 1,769 - (796) 6,166

Total 54,983 95,000 (106) (81,901) 67,976


2015


the year


Paid during the

year


2015Legal provisions 14,614 2,978 (1,279) (2,140) 14,173


Unused vacation liability provision 4,576 970 - (353) 5,193

Total 52,731 79,434 (1,279) (75,903) 54,983



49

NOTE 15 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued)

15.2 Letter of Guarantees Given, Pledges and Mortgages

As at 31 December 2016, the Group’s position related to letters of guarantee given, pledges and mortgages (“GPM”) are as follows:

31 December 2016

Original balances

Total Full Full Full FullTL equivalent

(thousand) TL USD Euro CHF

A. Total amount of GPM given on behalf of own legal personality 1,622,787 134,991,247 21,500,000 375,995,455 5,000,000B. Total amount of GPM given in favor of partnerships which is consolidated 75,799 - - - 22,000,000C. Total amount of GPM given for assurance of third parties debts in order to conduct of usual business activities - - - - -

D. Total amount of other GPM - - - - -i. Total amount of GPM given in favor of parent company - - - - -ii. The amount of GPM given in favor of other group companies which B and C don’t comprise - - - - -

iii. The amount of GPM given in favor of 3rd parties which C doesn’t comprise - - - - -

Total GPM 1,698,586 134,991,247 21,500,000 375,995,455 27,000,000

Other GPMs given by the Group as at 31 December 2016 are equivalent to 0% of the Company’s equity (31 December 2015: 0%).

GPM amounting to TL 75,799 thousand (31 December 2015: TL 61,850 thousand) given in favor of companies which are consolidated is related to general loan agreements. As at 31 December 2016, GPM amounting TL 10,076 thousand of such GPMs have not been utilized (GPM amounting TL 23,128thousand were not utilized as at 31 December 2015).



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15.2 Letter of Guarantees Given, Pledges and Mortgages (Continued)

As at 31 December 2015, the Group’s position related to letters of guarantee given, pledges and mortgages (“GPM”) are as follows:

31 December 2015

Original balances

Total Full Full Full FullTL equivalent

(thousand) TL USD Euro CHF

A. Total amount of GPM given on behalf of own legal personality 1,284,432 132,923,327 31,500,000 328,952,690 5,000,000 B. Total amount of GPM given in favor of partnerships which is consolidated 61,850 400,000 - 3,675,000 17,000,000 C. Total amount of GPM given for assurance of third parties debts in order to conduct of usual business activities 3,648 - - 1,148,000 -

D. Total amount of other GPM - - - - -i. Total amount of GPM given in favor of parent company - - - - -ii. The amount of GPM given in favor of other group companies which B and C don’t comprise - - - - -

iii. The amount of GPM given in favor of 3rd parties which C doesn’t comprise - - - - -

Total GPM 1,349,930 133,323,327 31,500,000 333,775,690 22,000,000

15.3 Letter of Guarantees and Sureties Received

Letter of Guarantees Received2016 2015

Letter of guarantees received from fleet customers 88,891 85,925Letters of guarantees received fromfixed asset and service suppliers 51,442 65,926Letters of guarantees received from dealers 23,887 30,135

Total 164,220 181,986

As at 31 December 2016, TL 4,039 thousand out of the total of TL 164,220 thousand of the letters of guarantee received, were given by the Group’s related party Türkiye Garanti Bankası A.Ş. (“Garanti Bankası”) (31 December 2015: TL 7,125 thousand out of the total of TL 181,986 thousand).



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15.4 Operating Leases

2016 20152016 - 32,598 2017 39,859 18,824 2018 and onwards 76,816 53,053Total 116,675 104,475

The operational lease liability amounting to TL 17,527 thousand is related to operational lease contracts signed with Group’s related parties (31 December 2015: TL 21,484 thousand).

NOTE 16 – EMPLOYEE BENEFITS

The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. TFRS require actuarial valuation methods to be developed to estimate enterprises’ obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

2016 2015Inflation rate 7.00% 7.00%Discount rate 4.30% 4.30%Turnover rate to estimate the probability of retirement 9.36% 9.12%

The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. The liability cap amounting to TL 4,297 has been taken into consideration in calculating the provision (31 December 2015: TL 3,828). The movements in the provision for employee termination benefits for the years ended 31 December are as follows:

2016 2015Balance at 1 January 13,937 11,804Interest cost 1,516 1,016Current service cost 1,408 1,370 Actuarial losses 485 2,014Paid during the year (-) (2,490) (2,267)Balance at 31 December 14,856 13,937

The movements in employee termination benefits are recognized under personnel expenses in consolidated profit or loss statement and actuarial losses are recognized under other comprehensive income.


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NOTE 17 – PREPAYMENTS / DEFERRED INCOME

17.1 Short-Term Prepayments

As at 31 December, short-term prepayments comprise of the following:

2016 2015Prepaid expenses 18,303 15,749Advances given 3,652 3,449Total 21,955 19,198

17.2 Long-Term Prepayments

As at 31 December, long-term prepayments comprise of the following:

2016 2015Advances given for property and equipment purchases 14,684 28,090Prepaid expenses 5,437 721Total 20,121 28,811

17.3 Deferred Income

As at 31 December 2016 deferred income comprise of the advances received from customers amounting to TL 15,855 thousand (31 December 2015: TL 13,604 thousand), credit notes received from OEM amounting to TL 6,376 thousand and other deferred income amounting to TL 7,008 thousand.

NOTE 18 – OTHER CURRENT LIABILITIES

As at 31 December, other current liabilities comprise of the following:

2016 2015VAT payable 65,184 61,501Expense accruals 2,418 2,560Total 67,602 64,061

NOTE 19 – EQUITY

Issued Capital

As at 31 December 2016, the registered capital of the Company is TL 220,000 thousand (31 December 2015: TL 220,000 thousand). The paid-in share capital of the Company comprises of 220.000.000 units of registered shares with a nominal value of TL 1 each. There is no different type of share and no privilege given to specific shareholders. The Company’s registered authorized capital ceiling is TL 660,000 thousand.



52

NOTE 17 – PREPAYMENTS / DEFERRED INCOME

17.1 Short-Term Prepayments

As at 31 December, short-term prepayments comprise of the following:

2016 2015Prepaid expenses 18,303 15,749Advances given 3,652 3,449Total 21,955 19,198

17.2 Long-Term Prepayments

As at 31 December, long-term prepayments comprise of the following:

2016 2015Advances given for property and equipment purchases 14,684 28,090Prepaid expenses 5,437 721Total 20,121 28,811

17.3 Deferred Income

As at 31 December 2016 deferred income comprise of the advances received from customers amounting to TL 15,855 thousand (31 December 2015: TL 13,604 thousand), credit notes received from OEM amounting to TL 6,376 thousand and other deferred income amounting to TL 7,008 thousand.

NOTE 18 – OTHER CURRENT LIABILITIES

As at 31 December, other current liabilities comprise of the following:

2016 2015VAT payable 65,184 61,501Expense accruals 2,418 2,560Total 67,602 64,061

NOTE 19 – EQUITY

Issued Capital

As at 31 December 2016, the registered capital of the Company is TL 220,000 thousand (31 December 2015: TL 220,000 thousand). The paid-in share capital of the Company comprises of 220.000.000 units of registered shares with a nominal value of TL 1 each. There is no different type of share and no privilege given to specific shareholders. The Company’s registered authorized capital ceiling is TL 660,000 thousand.



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NOTE 19 – EQUITY (Continued)Issued Capital (Continued)As at 31 December, the composition of the Company’s shareholding structure is as follows:

2016 2015Shareholders TL Shareholding TL Shareholding

(%) (%)Doğuş Holding 77,462 35.21 77,462 35.21Publicly traded (*) 75,900 34.50 75,900 34.50Doğuş Araştırma Geliştirme

ve Müşavirlik A.Ş. 66,638 30.29 66,638 30.29Paid-in capital 220,000 100.00 220,000 100.00

Inflation adjustment difference 23,115 23,115Total 243,115 243,115

(*) As of 31 December 2016, the Group has reacquired 22,000,000 units of its own shares which is equivalent to 10% of its paid-in capital in accordance with communique of CMB.

Restricted reserves appropriated from profitsThe breakdown of restricted reserves is presented below:

2016 2015Legal reserves 156,314 126,450Treasury share reserves 220,274 -Special reserves 69,695 20,439Total 446,283 146,889

Under the Turkish Commercial Code, Turkish companies are required to set aside first and second level legal reserves out of their profits. First level legal reserves are set aside as up to 5% of the distributable income per the statutory accounts each year. The ceiling of the first level reserves is 20% of the paid-in share capital. In case of a profit distribution in accordance with CMB regulations, second level legal reserves are set aside by rate of 1/10 for all cash distribution exceeding 5% of the share capital. In case of a profit distribution in accordance with statutory records, second level legal reserves are set aside by rate of 1/11 for all cash distribution exceeding 5% of the share capital. First and second level legal reserves cannot be distributed until they exceed 50% of the capital, but the reserves can solely be used for offsetting the losses in case of running out of arbitrary reserves. As at 31 December 2016, the legal reserves of the Group amounted to TL 156,314 thousand (31 December 2015: TL 126,450 thousand).

The 75% portion of gains amounting to TL 19,981 thousand and TL 49,256 thousand arising from the sale of participation share on joint venture and associates on 6 September 2013 and 16 February 2015 respectively recognized in statutory financial statements has been reclassified as “special reserves”. As at 31 December 2016, the special reserves of the Group amounted to TL 69,695 thousand (31 December 2015: TL 20,439 thousand).


54

NOTE 19 – EQUITY (Continued)

Treasury sharesThe Group reacquired its own shares that are traded on Borsa Istanbul A.Ş in accordance with the Communique on Buy Backed Shares (II-22.1) announced by CMB. In this context, as of 31 December 2016, the Group reacquired its own 22,000,000 units of registered shares that are equivalent to 10% portion of its issued capital at an amount of TL 220,274 thousand and accounted as "Treasury shares" under the equity. Additionally, the Group classified “Treasury share reserve” in the amount of the value of the reacquired shares under “Restricted reserves appropriated from profits” in accordance with the relevant communique.

Gains (Losses) on remeasurements of defined benefit plans

According to the transition rules of TAS 19 (2011), accumulated actuarial losses on employee benefits are started to be recognized within these accounts by the beginning of 1 January 2012 in accordance with the announcement made by CMB regarding financial statements and disclosure templates stated at “Principles of Financial Reporting in Capital Market’’ which is dated 13 June 2013 and published in the Official Gazette numbered 28676 Series:II, No.14.1.

Retained earnings / (Accumulated losses)

Accumulated profits other than net current year profit and extraordinary reserves are classified under retained earnings. As at 31 December 2016, accumulated losses are TL 60,557 thousand (31 December 2015: TL 129,669 thousand retained earnings and TL 106,247 thousand extraordinary reserve).

2016

Extraordinary reserves

Profits/(loss)brought forward

Retained earnings/(accumulated

losses)Balance at 1 January 106,247 129,669 235,916Transfer of 2015 profit - 302,921 302,921Dividend payment - (300,000) (300,000)Transfer to legal reserves - (79,120) (79,120)Transfer to reserves related treasury shares (106,247) (114,027) (220,274)Balance at 31 December - (60,557) (60,557)

2015


Profits/(loss) brought forward


losses)Balance at 1 January 106,247 42,219 148,466Transfer of 2014 profit - 251,635 251,635Dividend payment - (150,000) (150,000)Transfer to legal reserves - (14,185) (14,185)Balance at 31 December 106,247 129,669 235,916

Gains (Losses) on remeasuring of available-for-sale financial assets

Available-for-sale financial assets are recognized in consolidated financial statements at their fair values. The valuation differences realized at the reporting date in carrying amount of the available-for-sale financial assets is recognized in “gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets” account under equity in the consolidated financial statements. As at 31 December 2016, gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets of the Group amounted to TL 469,664 thousand (31 December 2015: TL 430,890 thousand).



54


Treasury sharesThe Group reacquired its own shares that are traded on Borsa Istanbul A.Ş in accordance with the Communique on Buy Backed Shares (II-22.1) announced by CMB. In this context, as of 31 December 2016, the Group reacquired its own 22,000,000 units of registered shares that are equivalent to 10% portion of its issued capital at an amount of TL 220,274 thousand and accounted as "Treasury shares" under the equity. Additionally, the Group classified “Treasury share reserve” in the amount of the value of the reacquired shares under “Restricted reserves appropriated from profits” in accordance with the relevant communique.

Gains (Losses) on remeasurements of defined benefit plans

According to the transition rules of TAS 19 (2011), accumulated actuarial losses on employee benefits are started to be recognized within these accounts by the beginning of 1 January 2012 in accordance with the announcement made by CMB regarding financial statements and disclosure templates stated at “Principles of Financial Reporting in Capital Market’’ which is dated 13 June 2013 and published in the Official Gazette numbered 28676 Series:II, No.14.1.

Retained earnings / (Accumulated losses)

Accumulated profits other than net current year profit and extraordinary reserves are classified under retained earnings. As at 31 December 2016, accumulated losses are TL 60,557 thousand (31 December 2015: TL 129,669 thousand retained earnings and TL 106,247 thousand extraordinary reserve).

2016


Profits/(loss)brought forward


losses)Balance at 1 January 106,247 129,669 235,916Transfer of 2015 profit - 302,921 302,921Dividend payment - (300,000) (300,000)Transfer to legal reserves - (79,120) (79,120)Transfer to reserves related treasury shares (106,247) (114,027) (220,274)Balance at 31 December - (60,557) (60,557)

2015


Profits/(loss) brought forward


losses)Balance at 1 January 106,247 42,219 148,466Transfer of 2014 profit - 251,635 251,635Dividend payment - (150,000) (150,000)Transfer to legal reserves - (14,185) (14,185)Balance at 31 December 106,247 129,669 235,916

Gains (Losses) on remeasuring of available-for-sale financial assets

Available-for-sale financial assets are recognized in consolidated financial statements at their fair values. The valuation differences realized at the reporting date in carrying amount of the available-for-sale financial assets is recognized in “gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets” account under equity in the consolidated financial statements. As at 31 December 2016, gains (losses) on remeasuring and/or reclassification of available-for-sale financial assets of the Group amounted to TL 469,664 thousand (31 December 2015: TL 430,890 thousand).



55


Foreign currency translation differences

Foreign currency translation differences comprise the foreign currency exchange rate differences arising from the translation of the financial statements on foreign currencies from functional currency to the presentation currency of the Group. As at 31 December 2016, the foreign currency translation differences of the Group amounted to TL 5,808 thousand (31 December 2015: TL 6,033 thousand).

Dividend

Publicly traded companies shall perform dividend distribution in accordance with the Communique on Dividends II-19.1 of the Capital Market Board effective as of 1 February 2014.

Companies shall distribute their profits within the framework of the profit distribution policies to be determined by their general assemblies and in accordance with the provisions of the related regulation. Within the scope of this Communique, no minimum distribution rate has been determined. Companies shall pay dividends as set out in their profit distribution policies or their articles of association. Additionally, dividends can be paid via equal or different installments and companies can distribute dividend advances based on profits at interim financial statements.

In the General Assembly Meeting which was held on 25 March 2016, it was decided to distribute dividends to shareholders on the previous year’s distributable profit which is calculated by deducting legal reserves from period income. The Company shall pay an amount of TL 300,000 thousand in cash and has paid on 7 April 2016. Retain the remaining distributable profit amounted to TL 28,900 thousand as “legal reserve” within the Company.

Non-controlling interests

Equity in a subsidiary that is not attributable, directly or indirectly, to a parent is classified under the “non-controlling interests” in the consolidated financial statements. As at 31 December 2016 and 2015, the related amounts in the “non-controlling interests” in the consolidated financial statements are TL 4,622thousand and TL 4,367 thousand respectively. In addition, net profit or loss in a subsidiary that is not attributable, directly or indirectly, to a parent is also classified under the “non-controlling interests” in the consolidated profit or loss statement.

NOTE 20 – SALES AND COST OF SALES

For the years ended 31 December, gross profit comprise of the following:

2016 2015Vehicle sales 11,461,177 10,582,291Spare part sales 1,075,639 933,352Service sales 100,210 103,898Sales return (-) (27,307) (97,311)Sales discounts (-) (684,543) (633,069)Net sales 11,925,176 10,889,161

Cost of sales (10,772,300) (9,780,598)

Gross profit 1,152,876 1,108,563


56

NOTE 21 – MARKETING EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES

The breakdown of operating expenses for the years ended 31 December is presented below:

2016 2015General administration expenses 394,690 310,269Marketing expenses 415,575 363,500Total 810,265 673,769

21.1 Marketing Expenses

The breakdown of marketing expenses for the years ended 31 December is presented below:

2016 2015Distribution expenses 105,158 97,270Advertising expenses 98,034 91,926Warranty expenses, net 87,089 75,486Personnel expenses 79,406 65,142Support expenses 19,165 11,251Rent expense 15,483 12,156Customer service expenses 11,240 10,269Total 415,575 363,500

21.2 General Administrative Expenses

The breakdown of general administration expenses for the years ended 31 December is presented below:

2016 2015Personnel expenses 181,265 144,749Depreciation and amortization expenses 65,811 49,584Building expenses 29,237 23,748Maintenance expenses 17,282 12,399Rent expenses 16,399 16,167Donation expenses 14,373 3,581Consultancy expense 10,703 10,107Vehicle expenses 10,437 12,191Corporate governance expenses 9,800 9,298Traveling expenses 7,741 6,956Insurance expenses 6,939 5,373Litigation and indemnity expenses 5,636 1,169Taxes and duties 3,626 3,249Communication expenses 3,085 2,954Disallowable expenses 2,358 1,910Other 9,998 6,834Total 394,690 310,269



56

NOTE 21 – MARKETING EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES

The breakdown of operating expenses for the years ended 31 December is presented below:

2016 2015General administration expenses 394,690 310,269Marketing expenses 415,575 363,500Total 810,265 673,769

21.1 Marketing Expenses

The breakdown of marketing expenses for the years ended 31 December is presented below:

2016 2015Distribution expenses 105,158 97,270Advertising expenses 98,034 91,926Warranty expenses, net 87,089 75,486Personnel expenses 79,406 65,142Support expenses 19,165 11,251Rent expense 15,483 12,156Customer service expenses 11,240 10,269Total 415,575 363,500

21.2 General Administrative Expenses

The breakdown of general administration expenses for the years ended 31 December is presented below:

2016 2015Personnel expenses 181,265 144,749Depreciation and amortization expenses 65,811 49,584Building expenses 29,237 23,748Maintenance expenses 17,282 12,399Rent expenses 16,399 16,167Donation expenses 14,373 3,581Consultancy expense 10,703 10,107Vehicle expenses 10,437 12,191Corporate governance expenses 9,800 9,298Traveling expenses 7,741 6,956Insurance expenses 6,939 5,373Litigation and indemnity expenses 5,636 1,169Taxes and duties 3,626 3,249Communication expenses 3,085 2,954Disallowable expenses 2,358 1,910Other 9,998 6,834Total 394,690 310,269



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NOTE 22 – EXPENSES BY NATURE

The breakdown of the expenses by nature for the years ended 31 December is as follows:2016 2015

Cost of trade goods 10,679,455 9,692,876Personnel expenses 260,671 209,891Distribution expenses 105,158 97,270Advertisement and promotion expenses 98,034 91,926Service costs 92,845 87,721Warranty expenses, net 87,089 75,486Depreciation and amortization expenses 65,811 49,584Rent expenses 31,882 28,323Building expenses 29,237 23,748Maintenance expenses 17,282 12,399Consultancy expenses 10,703 10,107Vehicle expenses 10,437 12,191Travelling expenses 7,741 6,956Other 86,220 55,889Total 11,582,565 10,454,367

NOTE 23 – OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES

23.1 Other Income from Operating ActivitiesThe breakdown of other income from operating activities for the years ended 31 December is presented below:

2016 2015Foreign exchange gains other than financing activities, net 62,391 -Service income 37,385 28,428Commission income 25,646 20,018Insurance income 19,366 8,039Interest income 428 1,718Other 12,323 8,874Total 157,539 67,077

23.2 Other Expense from Operating ActivitiesThe breakdown of other expense from operating activities for the years ended 31 December is presented below:

2016 2015Insurance expenses 17,612 2,399After sales expenses 15,923 13,172Commission expense 13,780 9,989Service expenses 12,232 9,605Interest expense, net 5,149 3,183Destruction expenses 1,418 1,342Other foreign exchange losses other than financing activities, net - 12,926Other 8,080 2,687Total 74,194 55,303


58

NOTE 24 – INVESTMENT ACTIVITY INCOME

The breakdown of income from investment activities for the years ended 31 December is presented below:

2016 2015Gain on sale of property and equipment 13,765 9,551Dividend income 9,259 11,385Gain on sale of shares of associates and joint ventures - 25,939Total 23,024 46,875

NOTE 25 – FINANCE EXPENSES

The breakdown of finance costs for the years ended 31 December is as follows:

2016 2015Interest expense on borrowings 267,528 163,705Foreign exchange losses on borrowings, net 1,576 3,597Commission expenses on letters of guarantee 3,196 3,019Other 397 1,167Total 272,697 171,488

NOTE 26 – TAX ASSET AND LIABILITIES

Turkish tax legislation does not allow for the submission of tax returns over consolidated financial statements prepared by the parent company, which include its subsidiaries and affiliates. Accordingly tax considerations reflected in these consolidated financial statements have been calculated separately for each of the companies in the scope of the consolidation.

The Corporate Tax Law was amended by Law No.5520 dated 13 September 2006. Most of the articles of the new Corporate Tax Law in question, No.5520, have come into force effective from 1 January 2006. Corporation tax is payable at a rate of 20% (31 December 2015: 20%) on the total income of the Company and its subsidiaries registered in Turkey after adjusting for certain disallowable expenses, exempt income and investment and other allowances (e.g. research and development allowance). No further tax is payable unless the profit is distributed (except for withholding tax at the rate of 19.8%, calculated on an exemption amount if an investment allowance is granted in the scope of Income Tax Law temporary article 61).

As at 31 December 2016, enacted corporation tax rate is 22.8% for the subsidiary registered in Switzerland according to local tax law (31 December 2015: 22.8%). According to Swiss tax laws, losses can be carried forward for offsetting against future taxable income for up to 7 years.



58

NOTE 24 – INVESTMENT ACTIVITY INCOME

The breakdown of income from investment activities for the years ended 31 December is presented below:

2016 2015Gain on sale of property and equipment 13,765 9,551Dividend income 9,259 11,385Gain on sale of shares of associates and joint ventures - 25,939Total 23,024 46,875

NOTE 25 – FINANCE EXPENSES

The breakdown of finance costs for the years ended 31 December is as follows:

2016 2015Interest expense on borrowings 267,528 163,705Foreign exchange losses on borrowings, net 1,576 3,597Commission expenses on letters of guarantee 3,196 3,019Other 397 1,167Total 272,697 171,488

NOTE 26 – TAX ASSET AND LIABILITIES

Turkish tax legislation does not allow for the submission of tax returns over consolidated financial statements prepared by the parent company, which include its subsidiaries and affiliates. Accordingly tax considerations reflected in these consolidated financial statements have been calculated separately for each of the companies in the scope of the consolidation.

The Corporate Tax Law was amended by Law No.5520 dated 13 September 2006. Most of the articles of the new Corporate Tax Law in question, No.5520, have come into force effective from 1 January 2006. Corporation tax is payable at a rate of 20% (31 December 2015: 20%) on the total income of the Company and its subsidiaries registered in Turkey after adjusting for certain disallowable expenses, exempt income and investment and other allowances (e.g. research and development allowance). No further tax is payable unless the profit is distributed (except for withholding tax at the rate of 19.8%, calculated on an exemption amount if an investment allowance is granted in the scope of Income Tax Law temporary article 61).

As at 31 December 2016, enacted corporation tax rate is 22.8% for the subsidiary registered in Switzerland according to local tax law (31 December 2015: 22.8%). According to Swiss tax laws, losses can be carried forward for offsetting against future taxable income for up to 7 years.



59

NOTE 26 – TAX ASSET AND LIABILITIES (Continued)

As at 31 December 2016, enacted corporation tax rate is 15% for the subsidiary registered in Iraq according to local tax law (31 December 2015: 15%). According to Iraqi tax laws, losses can be carried forward for offsetting against future taxable income for up to 5 years.

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding tax at the rate of 15%. An increase in capital via issuing bonus shares is not considered as a profit distribution.

Corporations are required to pay advance corporation tax quarterly at the rate of 20% on their corporate income. Advance tax is declared by the 14th and paid by the 17th of the second month following each calendar quarter end. Advance tax paid during the year is offset against the annual corporation tax payable, which is calculated over the corporate tax return declared in the following year. If, despite offsetting, there remains an amount for advance tax amount paid, it may be refunded or offset against other liabilities to the government. Dividend income of a resident arising from the investments in another resident is not subject to corporate tax. (Except mutual funds participation certificate and dividend income from mutual fund)

Accordingly, income items complying with the abovementioned rules and included in accounting profit or loss are taken into account in corporate tax computation.

In determining the tax base, in addition to abovementioned exceptions, exceptions indicated in article 8 of Corporate Tax Law and article 40 of Income Tax Law are also taken into account.

There is no such application for the reconciliation of payable taxes with the tax authority. Corporate tax returns are submitted to the related tax office by the 25th day of the 4th month following the month when the accounting period ends.

Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue reassessments based on their findings.

Losses can be carried forward for offsetting against future taxable income for up to 5 years.

75% of the gains derived from the sale of preferential rights, usufruct shares and founding shares from investment equity and real property, which has remained in assets for more than two full years, are exempt from corporate tax. To be entitled to the exemption, the relevant gain is required to be held in a fund account and it must not be withdrawn from the entity for a period of 5 years. The cost of the sale has to be collected up until the end of the second calendar year following the year the sale was realized.

For the years ended 31 December, taxation charge comprise of the following:

2016 2015Current tax expense (40,594) (61,976)Deferred tax income / (expense) 3,405 (969)Total tax expense (37,189) (62,945)


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For the years ended 31 December, the tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the Group as follows:

2016 2015

Profit before tax 275,132 365,389

Income tax using the Company’s domestic tax rate (20%) (55,026) (20%) (73,078)Disallowable expenses (1%) (3,046) (1%) (3,915)Share of profit in equity accounted investees

exempt from deferred tax calculation 7% 19,770 2% 8,687Tax exempt income 1% 1,851 1% 2,277Exemption on the gain resulting from sale of associates - - 3% 9,851Tax exempt income resulting from sale of associates - - (2%) (5,645)Other (738) (1,122)Total tax expense (14%) (37,189) (17%) (62,945)

The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between their financial statements prepared in accordance with Turkish Financial Reporting Standards and their statutory financial statements. These temporary differences usually result in the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes. Tax rate is 20% for deferred tax assets and liabilities on temporary differences (31 December 2015: 20%).



60


For the years ended 31 December, the tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the Group as follows:

2016 2015

Profit before tax 275,132 365,389

Income tax using the Company’s domestic tax rate (20%) (55,026) (20%) (73,078)Disallowable expenses (1%) (3,046) (1%) (3,915)Share of profit in equity accounted investees

exempt from deferred tax calculation 7% 19,770 2% 8,687Tax exempt income 1% 1,851 1% 2,277Exemption on the gain resulting from sale of associates - - 3% 9,851Tax exempt income resulting from sale of associates - - (2%) (5,645)Other (738) (1,122)Total tax expense (14%) (37,189) (17%) (62,945)

The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between their financial statements prepared in accordance with Turkish Financial Reporting Standards and their statutory financial statements. These temporary differences usually result in the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes. Tax rate is 20% for deferred tax assets and liabilities on temporary differences (31 December 2015: 20%).



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Deferred taxes

As at 31 December, deferred tax assets and liabilities are attributable to the items detailed in the table below:

Deferred tax Deferred tax Net deferred tax

asset Liabilities asset/(liabilities)31

December2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015

Fair value change of available-

for-sale financial assets - - (21,012) (19,086) (21,012) (19,086)

Land - - (1,270) (1,270) (1,270) (1,270)

Carry forward tax losses 7,485 5,577 - - 7,485 5,577

Other tangible and

intangible assets 1,848 2,546 - - 1,848 2,546

Warranty provision, net 8,769 7,123 - - 8,769 7,123

Legal provision 3,594 2,834 - - 3,594 2,834

Provision for diminution

in value of inventories 950 782 - - 950 782

Employee termination benefit 2,972 2,787 - - 2,972 2,787

Unused vacation liability 1,234 1,039 - - 1,234 1,039

Other 43 705 - - 43 705

Total deferred tax

asset/(liabilities) 26,895 23,393 (22,282) (20,356) 4,613 3,037

Net off tax (19,410) (17,731) 19,410 17,731 - -Total deferred

tax assets/(liabilities) 7,485 5,662 (2,872) (2,625) 4,613 3,037

Deferred income tax assets are recognized for tax losses carried forward to the extent that the realization of the related tax benefit through future taxable profits is considered highly probable by the Group management.

The movements in temporary differences as at 31 December 2016 are as follows:

1 January 2016

Recognized in the profit or

loss

Recognized in othercomprehensive

income 31 December 2016

Fair value change of available-for-sale financial assets (19,086) - (1,926) (21,012)

Land (1,270) - - (1,270)

Carry forward tax losses 5,577 1,908 - 7,485

Other tangible and intangible assets 2,546 (698) - 1,848

Warranty provision, net 7,123 1,646 - 8,769

Legal provision, net 2,834 760 - 3,594

Provision for diminution in value of inventories 782 168 - 950

Employee termination benefit 2,787 88 97 2,972

Unused vacation liability 1,039 195 - 1,234

Other 705 (662) - 43

3,037 3,405 (1,829) 4,613


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Deferred taxes (Continued)


1 January 2015


loss

Recognized in other comprehensive


Fair value change of available-for-sale financial assets (20,093) - 1,007 (19,086)

Land (1,270) - - (1,270)

Carry forward tax losses 6,030 (453) - 5,577


Warranty provision, net 6,708 415 - 7,123

Legal provision, net 2,922 (88) - 2,834



Unused vacation liability 916 123 - 1,039

Other 1,184 (479) - 705

2,596 (969) 1,410 3,037

As at 31 December 2016, current income tax liabilities amounting to TL 3,033 thousand (31 December 2015: TL 3,166 thousand) is comprised by tax provision for the year ended 31 December 2016.

As at 31 December 2015, current income tax assets amounting to TL 15,984 thousand is comprised of prepaid advance tax (31 December 2016: nil).

As at 31 December, financial losses carried forward comprise of the following:

2016 20152016 - 2,5902017 1,852 1,8522018 7,314 7,3142019 5,101 5,1012020 5,988 5,9882021 2,881 2,8812022 1,325 1,3252023 8,362 -Total financial losses carried forward 32,823 27,051

NOTE 27 – EARNINGS PER SHARE

Earnings per share is calculated by dividing net income attributable to equity holders of the Company for the period by the weighted average number of shares of the Company available during the period. For the years ended 31 December, earnings per share are calculated as follows:

2016 2015Net profit attributable to the equity holders of the Company 237,688 302,921Number of basic shares 214,173,982 220,000,000

Basic/diluted earnings per share (in full TL) 1.1098 1.3769



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Deferred taxes (Continued)


1 January 2015


loss

Recognized in other comprehensive


Fair value change of available-for-sale financial assets (20,093) - 1,007 (19,086)

Land (1,270) - - (1,270)

Carry forward tax losses 6,030 (453) - 5,577


Warranty provision, net 6,708 415 - 7,123

Legal provision, net 2,922 (88) - 2,834



Unused vacation liability 916 123 - 1,039

Other 1,184 (479) - 705

2,596 (969) 1,410 3,037

As at 31 December 2016, current income tax liabilities amounting to TL 3,033 thousand (31 December 2015: TL 3,166 thousand) is comprised by tax provision for the year ended 31 December 2016.

As at 31 December 2015, current income tax assets amounting to TL 15,984 thousand is comprised of prepaid advance tax (31 December 2016: nil).

As at 31 December, financial losses carried forward comprise of the following:

2016 20152016 - 2,5902017 1,852 1,8522018 7,314 7,3142019 5,101 5,1012020 5,988 5,9882021 2,881 2,8812022 1,325 1,3252023 8,362 -Total financial losses carried forward 32,823 27,051

NOTE 27 – EARNINGS PER SHARE

Earnings per share is calculated by dividing net income attributable to equity holders of the Company for the period by the weighted average number of shares of the Company available during the period. For the years ended 31 December, earnings per share are calculated as follows:

2016 2015Net profit attributable to the equity holders of the Company 237,688 302,921Number of basic shares 214,173,982 220,000,000

Basic/diluted earnings per share (in full TL) 1.1098 1.3769



63

NOTE 28 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES

28.1 Cash and Cash Equivalents

As at 31 December, Group’s cash balances at related party banks are as follows:

2016 2015Garanti Bankası – credit card receivables 16,920 21,631Garanti Bankası – demand deposits 21,752 15,376Garanti Bankası – time deposits 19,000 7,716Total 57,672 44,723

As at 31 December 2016, effective interest rate on TL denominated time deposits at Garanti Bankası is 6.75% (31 December 2015: 7.50%). As at 31 December 2016, maturity of time deposits is a day (31 December 2015: 4 day).

28.2 Financial Liabilities

As at 31 December 2016, Group’s financial borrowings used from related parties are as follows;

2016 2015Garanti Bankası 205,491 105,519Garanti Bank International NV. 18,088 11,751Total 223,579 117,270

As at 31 December 2016, effective interest rates on TL denominated financial borrowings at Garanti Bankası are between 13.20% and 14.50% (31 December 2015: 12.70%) and CHF denominated financial borrowing at Garanti Bank International NV. is 2.00% (31 December 2015: 2.00-3.25%)

28.3 Due from Related Parties

As at 31 December, receivables from and payables to related parties comprise the following:

29.3.1 Due from associates2016 2015

VDF 1,238 662Yüce Auto 887 4,733Doğuş Teknoloji 29 3,093Other 3 5Total 2,157 8,493


64

NOTE 28 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Continued)

28.3 Due from Related Parties (Continued)

28.3.2 Due from joint ventures2016 2015

Tüvtürk 7 1Total 7 1

28.3.3 Due from other related parties2016 2015

VDF Faktoring Hizmetleri A.Ş. (“VDF Faktoring”) 723,684 734,162Garanti Filo Yönetim Hizmetleri A.Ş. (“Garanti Filo Yönetim”) 55,395 25,100VDF Filo Kiralama A.Ş. 17,303 -VDF Sigorta Aracılık Hizmetleri A.Ş. 724 1,047Other 100 172Total 797,206 760,481

28.3.4 Due from shareholders2016 2015

Doğuş Holding 1 1Total 1 1

Grand Total 799,371 768,976

28.4 Other receivables from joint ventures

2016 2015Meiller-Doğuş 22 1,639

Total 22 1,639

As at 31 December 2016, the Group charges monthly 4% overdue interest to related parties (31 December 2015: 4% per month).



64


28.3 Due from Related Parties (Continued)

28.3.2 Due from joint ventures2016 2015

Tüvtürk 7 1Total 7 1

28.3.3 Due from other related parties2016 2015

VDF Faktoring Hizmetleri A.Ş. (“VDF Faktoring”) 723,684 734,162Garanti Filo Yönetim Hizmetleri A.Ş. (“Garanti Filo Yönetim”) 55,395 25,100VDF Filo Kiralama A.Ş. 17,303 -VDF Sigorta Aracılık Hizmetleri A.Ş. 724 1,047Other 100 172Total 797,206 760,481

28.3.4 Due from shareholders2016 2015

Doğuş Holding 1 1Total 1 1

Grand Total 799,371 768,976

28.4 Other receivables from joint ventures

2016 2015Meiller-Doğuş 22 1,639

Total 22 1,639

As at 31 December 2016, the Group charges monthly 4% overdue interest to related parties (31 December 2015: 4% per month).



65


28.5 Current prepayments due from related parties

28.5.1 Current prepaid expenses 2016 2015

Pozitif Arena Salon İşletmeleri A.Ş. 2,891 2,550Doğuş Spor Kompleksi Yatırım ve İşletme A.Ş. 324 -VDF Sigorta Aracılık Hizmetleri A.Ş. 184 77Doğuş Holding A.Ş 29 26Other 136 2Total 3,564 2,655

28.5.2 Advances given

2016 2015Antur Turizm A.Ş 434 1,080Total 434 1,080Grand total 3,998 3,735

28.6 Non-current prepayments due from related parties

28.6.1 Non-current prepayments

2016 2015Pozitif Arena Salon İşletmeleri A.Ş. 6 69Total 6 69

28.6.2 Advances given

2016 2015Doğuş İnşaat ve Ticaret A.Ş. - 5,227Total - 5,227Grand total 6 5,296


66


28.7 Due to Related Parties

28.7.1 Due to associates 2016 2015

Yüce Auto 28,254 14,010Volkswagen Doğuş Finansman 2,111 -Doğuş Teknoloji 3,725 537Total 34,090 14,547

28.7.2 Due to joint ventures2016 2015

Meiller-Doğuş - 29Tüvtürk - 1Total - 30

28.7.3 Due to other related parties2016 2015

Antur Turizm A.Ş. 1,193 2,469Doğuş İnşaat ve Ticaret A.Ş. 1,000 -Doğuş Enerji Toptan Elektrik Ticaret A.Ş. 596 577Doğuş Yayın Grubu A.Ş. 158 171VDF Sigorta Aracılık Hizmetleri A.Ş. 133 1,243Pozitif Arena Konser Salon İşletmeleri A.Ş. - 3,206Other 1,012 715Total 4,092 8,381

28.7.4 Due to shareholders2016 2015

Doğuş Holding 1,005 607Total 1,005 607Grand total 39,187 23,565

28.8 Short term deferred income from related parties2016 2015

Pozitif Arena Konser Salon İşletmeleri A.Ş. 63 63Total 63 63

28.9 Long term deferred income from related parties

2016 2015Pozitif Arena Konser Salon İşletmeleri A.Ş. 6 69Total 6 69



66


28.7 Due to Related Parties

28.7.1 Due to associates 2016 2015

Yüce Auto 28,254 14,010Volkswagen Doğuş Finansman 2,111 -Doğuş Teknoloji 3,725 537Total 34,090 14,547

28.7.2 Due to joint ventures2016 2015

Meiller-Doğuş - 29Tüvtürk - 1Total - 30

28.7.3 Due to other related parties2016 2015

Antur Turizm A.Ş. 1,193 2,469Doğuş İnşaat ve Ticaret A.Ş. 1,000 -Doğuş Enerji Toptan Elektrik Ticaret A.Ş. 596 577Doğuş Yayın Grubu A.Ş. 158 171VDF Sigorta Aracılık Hizmetleri A.Ş. 133 1,243Pozitif Arena Konser Salon İşletmeleri A.Ş. - 3,206Other 1,012 715Total 4,092 8,381

28.7.4 Due to shareholders2016 2015

Doğuş Holding 1,005 607Total 1,005 607Grand total 39,187 23,565

28.8 Short term deferred income from related parties2016 2015

Pozitif Arena Konser Salon İşletmeleri A.Ş. 63 63Total 63 63

28.9 Long term deferred income from related parties

2016 2015Pozitif Arena Konser Salon İşletmeleri A.Ş. 6 69Total 6 69



67

NOT 28 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Continued)

28.10 Related Party Transactions

Related party transactions for the years ended 31 December are as follows:

28.10.1 Associates

2016 2015Sales and other income generating transactions:Other income 26,885 21,947Sale of products and returns, net 10,308 7,765Sale of services, net 130 358Finance income 188 475Total 37,511 30,545

Purchases and expenses incurring transactions: 2016 2015Inventory purchase 250,674 112,611Incentives for consumer loans 73,137 30,177Other purchases 17,656 12,997Fixed asset purchases 17,210 12,950Services rendered 6,553 5,796Other expenses 1,053 111Total 366,283 174,642

28.10.2 Joint ventures2016 2015

Sales and other income generating transactions:Sale of products and returns, net 87 456Sale of service, net 25 28Other income - 27Finance income 147 19Total 259 530

Purchases and expense creating transactions: 2016 2015Inventory purchases 177 21,910Cost of sales - 376Services rendered 16 79Total 193 22,365


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28.10 Related Party Transactions (Continued)

28.10.3 Other related parties

a) Income generated from other related parties

2016

Sale of Sale ofOther income

Totalfrom operating

products services activitiesGaranti Filo Yönetim 113,335 1,572 - 114,907Garanti Finansal Kiralama A.Ş. 6,646 - - 6,646VDF Sigorta 175 12 8,100 8,287VDF Faktoring 72 2 - 74Other 15,713 102 496 16,311

135,941 1,688 8,596 146,225

2015


Totalfrom operating

products services activitiesGaranti Filo Yönetim 55,131 1,368 - 56,499VDF Sigorta 7 5 5,575 5,587VDF Faktoring - 2 - 2Other 2,918 100 797 3,815

58,056 1,475 6,372 65,903

b) Expenses arising from transactions with other related parties

2016

Other

TotalServicesrendered

Purchase offixedassets

Purchase ofinventory

Financeexpenses

Otherpurchases

expenses from

operating activities

Antur Turizm 40,032 - - - 123 104 40,259Doğuş Gayrimenkul Yatırım Ortaklığı 15,377 - - - - - 15,377Doğuş Enerji 5,301 - - - - - 5,301VDF Sigorta 96 - - - 1,465 4,043 5,604Doğuş İnşaat - 39,482 - - - - 39,482Other 6,764 275 1,196 33,346 - 8,149 49,730

67,570 39,757 1,196 33,346 1,588 12,296 155,753



68



28.10.3 Other related parties

a) Income generated from other related parties

2016


Totalfrom operating

products services activitiesGaranti Filo Yönetim 113,335 1,572 - 114,907Garanti Finansal Kiralama A.Ş. 6,646 - - 6,646VDF Sigorta 175 12 8,100 8,287VDF Faktoring 72 2 - 74Other 15,713 102 496 16,311

135,941 1,688 8,596 146,225

2015


Totalfrom operating

products services activitiesGaranti Filo Yönetim 55,131 1,368 - 56,499VDF Sigorta 7 5 5,575 5,587VDF Faktoring - 2 - 2Other 2,918 100 797 3,815

58,056 1,475 6,372 65,903

b) Expenses arising from transactions with other related parties

2016

Other




Financeexpenses

Otherpurchases

expenses from


Antur Turizm 40,032 - - - 123 104 40,259Doğuş Gayrimenkul Yatırım Ortaklığı 15,377 - - - - - 15,377Doğuş Enerji 5,301 - - - - - 5,301VDF Sigorta 96 - - - 1,465 4,043 5,604Doğuş İnşaat - 39,482 - - - - 39,482Other 6,764 275 1,196 33,346 - 8,149 49,730

67,570 39,757 1,196 33,346 1,588 12,296 155,753



69



28.10.3 Other related parties (Continued)

b) Expenses arising from transactions with other related parties (Continued)

2015

Other




Financeexpenses

Otherpurchases

expenses from


Antur Turizm 29,873 - - - - 7 29,880Doğuş Gayrimenkul Yatırım Ortaklığı 12,876 - - - - - 12,876Doğuş Enerji 4,910 - - - - - 4,910VDF Sigorta 4,058 - - - 717 462 5,237Doğuş İnşaat - 45,297 - - - - 45,297Other 2,376 541 349 9,517 11 8,492 21,286

54,093 45,838 349 9,517 728 8,961 119,486

28.10.4 Transactions with shareholders

a) Income generated from shareholders

2016Income from Other income

Sale of Sale of investing from operatingProducts services Activities activities Total

Doğuş Holding 27 24 11,022 - 11,07327 24 11,022 - 11,073

2015Income from Other income

Sale of Sale of investing from operatingproducts services activities activities Total

Doğuş Holding 257 27 11,385 - 11,669257 27 11,385 - 11,669


70



28.10.4 Transactions with shareholders (Continued)

b) Expenses arising from transactions with shareholders

2016Purchase

of Other expense

Services fixed from operating Financerendered assets activities expenses Total

Doğuş Holding 10,847 45 229 - 11,12110,847 45 229 - 11,121

2015Purchase

of Other expense


Doğuş Holding 8,911 28 3,633 9 12,5818,911 28 3,633 9 12,581

28.11 Key Management Personnel Compensation

2016 2015Salaries and other short-term employee benefits 56,709 41,419Total 56,709 41,419

The Group classifies members of the Board of Directors and senior executives who have administrative responsibilities as key management personnel, since they are responsible for the planning, management and control of the Group’s operations.

Remuneration of Board of Directors and executive management for the years ended 31 December 2016and 2015 includes salaries, health insurance and employer shares of Social Security Institution.



70



28.10.4 Transactions with shareholders (Continued)

b) Expenses arising from transactions with shareholders

2016Purchase

of Other expense


Doğuş Holding 10,847 45 229 - 11,12110,847 45 229 - 11,121

2015Purchase

of Other expense


Doğuş Holding 8,911 28 3,633 9 12,5818,911 28 3,633 9 12,581

28.11 Key Management Personnel Compensation

2016 2015Salaries and other short-term employee benefits 56,709 41,419Total 56,709 41,419

The Group classifies members of the Board of Directors and senior executives who have administrative responsibilities as key management personnel, since they are responsible for the planning, management and control of the Group’s operations.

Remuneration of Board of Directors and executive management for the years ended 31 December 2016and 2015 includes salaries, health insurance and employer shares of Social Security Institution.



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NOTE 29 – FINANCIAL INSTRUMENTS

Financial instruments and capital risk management

Financial risk factors

The Group’s objectives are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group’s capital structure includes payables including loans and respectively cash and cash equivalents, paid-in capital, reserves and retained earnings.

The board of directors monitors the return on capital and the level of dividends to ordinary shareholders.

The Group monitors its share capital by using financial liability to equity ratio. The ratio is calculated by dividing financial liabilities deducting to cash and cash equivalents to equity. Total of financial liabilities comprises entire current and non-current financial liabilities whereas total equity comprises each equity item on the statement of financial position.

The following table sets out the Group’s financial liability to equity ratio as at 31 December:

2016 2015Total financial liabilities 2,758,435 1,941,124Cash and cash equivalents (89,098) (71,870)Total financial liabilities, net 2,669,337 1,869,254Total equity 1,118,713 1,362,883Financial liabilities/equity ratio 2.39 1.37


72

NOTE 29 – FINANCIAL INSTRUMENTS (Continued)

Financial instruments and capital risk management (Continued)

Financial risk factors (Continued)

The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.

The risk management program is applied by the Company and its subsidiaries, joint ventures and associates in line with the policies set by the Board of Directors.

(a) Credit risk

The Group’s significant portions of receivables from dealers are collected through VDF Faktoring. The receivables from dealers through VDF Faktoring are collected when they are due and these are irrevocable transactions.

The credit risk arising from these transactions are followed by the management and these risks are limited for each debtor. These risks arising from relevant receivables are guaranteed with proper instruments (Note 8).

31 December 2016

ReceivablesBank

depositsDerivative

instruments OtherTrade receivables Other receivables

Related parties Other parties Related parties Other partiesExposure to maximum credit risk as at reporting date (A+B+C+D) (*) 799,371 414,415 22 96,254 88,436 - -

- Guaranteed portion of the maximum exposure - 116,230 - - - - -A. Net carrying amount of financial assets which are neither impaired nor overdue (**) 799,371 414,361 22 96,254 88,436 - -B. Net carrying amount of financial assets which are overdue but not impaired (***) - 54 - - - - -C. Net carrying amount of impaired assets - - - - - - -

- Past due (gross book value) - 1,492 - - - - - - Impairment (-) - (1,492) - - - - - - Guaranteed portion of net values (*) - - - - - - -

- Not past due (gross book value) - - - - - - - - Impairment (-) - - - - - - - - Guaranteed portion of net values (*) - 116,230 - - - - -D. Off financial statement items with credit risks (****) - - - - - - -



72




The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group.

The risk management program is applied by the Company and its subsidiaries, joint ventures and associates in line with the policies set by the Board of Directors.

(a) Credit risk

The Group’s significant portions of receivables from dealers are collected through VDF Faktoring. The receivables from dealers through VDF Faktoring are collected when they are due and these are irrevocable transactions.

The credit risk arising from these transactions are followed by the management and these risks are limited for each debtor. These risks arising from relevant receivables are guaranteed with proper instruments (Note 8).

31 December 2016

ReceivablesBank

depositsDerivative


Related parties Other parties Related parties Other partiesExposure to maximum credit risk as at reporting date (A+B+C+D) (*) 799,371 414,415 22 96,254 88,436 - -

- Guaranteed portion of the maximum exposure - 116,230 - - - - -A. Net carrying amount of financial assets which are neither impaired nor overdue (**) 799,371 414,361 22 96,254 88,436 - -B. Net carrying amount of financial assets which are overdue but not impaired (***) - 54 - - - - -C. Net carrying amount of impaired assets - - - - - - -

- Past due (gross book value) - 1,492 - - - - - - Impairment (-) - (1,492) - - - - - - Guaranteed portion of net values (*) - - - - - - -

- Not past due (gross book value) - - - - - - - - Impairment (-) - - - - - - - - Guaranteed portion of net values (*) - 116,230 - - - - -D. Off financial statement items with credit risks (****) - - - - - - -



73




(a) Credit risk (Continued)

31 December 2015

ReceivablesBank

depositsDerivative


Related parties Other parties Related parties Other partiesExposure to maximum credit risk as at reporting date (A+B+C+D) (*) 768,976 326,648 13,317 50,652 71,685 - -

- Guaranteed portion of the maximum exposure - 69,408 - - - - -A. Net carrying amount of financial assets which are neither impaired nor overdue (**) 768,976 325,437 1,639 50,652 71,685 - -B. Net carrying amount of financial assets which are overdue but not impaired (***) - 1,211 - - - - -C. Net carrying amount of impaired assets - - - - - - -

- Past due (gross book value) - 1,496 - - - - - - Impairment (-) - (1,496) - - - - - - Guaranteed portion of net values (*) - 1,211 - - - - -

- Not past due (gross book value) - - - - - - - - Impairment (-) - - - - - - - - Guaranteed portion of net values (*) - 68,197 - - - - -D. Off financial statement items with credit risks (****) - - 11,678 - - - -

(*) This area indicates the total of the figures placed in A, B, C and D lines. In determination of aforementioned figures, items increasing credit reliability such as guarantees received are not considered.

(**) As at 31 December 2016 and 31 December 2015, information regarding to credit quality of trade receivables which are not past due or not impaired and restructured are indicated in Note 8.

(***) As at 31 December 2016 and 31 December 2015, information regarding to aging of receivables which are past due but not impaired are indicated in the table of aging analysis of receivables which are past due but not impaired.

(****) As at 31 December 2016 and 31 December 2015, maximum level of credit risk born in relation to letter of guarantees given in favor of related parties are indicated.


74





Aging of past due receivables that are not impaired

As at 31 December, the aging of past due receivables that are not impaired are as follows:

31 December 2016Receivables

Depositson banks

Derivativeinstruments Other

Trade receivables Other receivablesPast due 1-30 days 1 - - - -Past due 1-3 months - - - - -Past due 3-12 months 53 - - - -Past due 1-5 years - - - - -More than 5 years - - - - -Portion of assets overdue secured by guarantee etc. - - - -


Depositson banks


Trade receivables Other receivablesPast due 1-30 days 1,205 - - - -Past due 1-3 months - - - - -Past due 3-12 months 6 - - - -Past due 1-5 years - - - - -More than 5 years - - - - -Portion of assets overdue secured by guarantee etc. 1,211 - - - -

(b) Liquidity risk

Liquidity risk management refers to capacity of holding adequate amount of cash and marketable securities, adequate credit lines and ability to close out market position.

Risk of funding current and potential requirements is mitigated by ensuring the availability of adequate number of creditworthy lending parties. The Group, in order to minimize liquidity risk, holds adequate cash and available line of credit (including factoring capacity). In this regard, as at 31 December 2016, the Group have lines of credit amounting to Euro 867,795 thousand, USD 536,167 thousand, CHF 5,000 thousand and TL 4,234,772 thousand (31 December 2015: lines of credit amounting to Euro 786,494 thousand, USD 456,000 thousand, CHF 5,000 thousand and TL 2,572,772 thousand). The utilized portions of the aforementioned total credit lines are disclosed in Note 7.

In addition, the Group has a non-cash credit line obtained from underwriting banks amounting to Euro 373,000 thousand and CHF 5,000 thousand equivalent to TL 1,401,020 thousand (31 December 2015: Euro 326,000 thousand, USD 10,000 thousand and CHF 5,000 thousand equivalent to TL 1,079,613thousand) that enables the Group to perform credit purchases from original equipment manufacturers with an option to pay in 12 months. The Group’s credit purchase limit based on the letters of guarantee given to the main foreign suppliers of which Euro 224,239 thousand and CHF 4,580 thousand equivalent to TL 847,683 thousand is not used as at 31 December 2016 (31 December 2015: Euro 231,258 thousand, USD 10,000 thousand and CHF 4,150 thousand equivalent to TL 776,070 thousand).



74





Aging of past due receivables that are not impaired

As at 31 December, the aging of past due receivables that are not impaired are as follows:


Depositson banks


Trade receivables Other receivablesPast due 1-30 days 1 - - - -Past due 1-3 months - - - - -Past due 3-12 months 53 - - - -Past due 1-5 years - - - - -More than 5 years - - - - -Portion of assets overdue secured by guarantee etc. - - - -


Depositson banks


Trade receivables Other receivablesPast due 1-30 days 1,205 - - - -Past due 1-3 months - - - - -Past due 3-12 months 6 - - - -Past due 1-5 years - - - - -More than 5 years - - - - -Portion of assets overdue secured by guarantee etc. 1,211 - - - -

(b) Liquidity risk

Liquidity risk management refers to capacity of holding adequate amount of cash and marketable securities, adequate credit lines and ability to close out market position.

Risk of funding current and potential requirements is mitigated by ensuring the availability of adequate number of creditworthy lending parties. The Group, in order to minimize liquidity risk, holds adequate cash and available line of credit (including factoring capacity). In this regard, as at 31 December 2016, the Group have lines of credit amounting to Euro 867,795 thousand, USD 536,167 thousand, CHF 5,000 thousand and TL 4,234,772 thousand (31 December 2015: lines of credit amounting to Euro 786,494 thousand, USD 456,000 thousand, CHF 5,000 thousand and TL 2,572,772 thousand). The utilized portions of the aforementioned total credit lines are disclosed in Note 7.

In addition, the Group has a non-cash credit line obtained from underwriting banks amounting to Euro 373,000 thousand and CHF 5,000 thousand equivalent to TL 1,401,020 thousand (31 December 2015: Euro 326,000 thousand, USD 10,000 thousand and CHF 5,000 thousand equivalent to TL 1,079,613thousand) that enables the Group to perform credit purchases from original equipment manufacturers with an option to pay in 12 months. The Group’s credit purchase limit based on the letters of guarantee given to the main foreign suppliers of which Euro 224,239 thousand and CHF 4,580 thousand equivalent to TL 847,683 thousand is not used as at 31 December 2016 (31 December 2015: Euro 231,258 thousand, USD 10,000 thousand and CHF 4,150 thousand equivalent to TL 776,070 thousand).



75




(b) Liquidity risk (Continued)

The below tables show the financial liabilities of the Group according to their remaining maturities as at 31 December:

31 December 2016Total

contractual

Contractual maturitiesCarrying

amountcash

outflowsLess than 3

months3-12

months1-5

years

More than 5 years

Non-derivative financialliabilities

Loans and borrowings 2,758,435 2,773,971 1,057,027 1,686,215 30,729 -Trade payables to related parties 39,187 39,187 39,187 - - -Trade payables to third parties 731,488 731,488 243,489 487,999 - -Other current liabilities (*) 2,418 2,418 2,418 - - -Total non-derivativefinancial liabilities 3,531,528 3,547,064 1,342,121 2,174,214 30,729 -

31 December 2015Total

contractual

Contractual maturitiesCarrying

amountcash

outflowsLess than 3 months

3-12 months

1-5 years

More than 5 years

Non-derivative financialliabilities

Loans and borrowings 1,941,107 1,980,876 82,057 1,584,987 313,832 -Finance lease liabilities 17 60 60 - - -Trade payables to related parties 23,565 23,565 23,565 - - -Trade payables to third parties 485,846 485,846 186,432 299,414 - -Other current liabilities (*) 2,560 2,560 2,560 - - -Total non-derivativefinancial liabilities 2,453,095 2,492,907 294,674 1,884,401 313,832 -

(*) Non-financial items such as VAT payable, taxes, withholdings payable and advances taken are excluded from other current liabilities.


76




(c) Currency risk

The Group is exposed to foreign exchange risk through the impact of rate changes on the translation of foreign currency denominated payables to original equipment manufacturers and borrowings from financial institutions. This risk is monitored by the board of directors through periodic meetings. The Group’s foreign currency position is managed through taking limited positions within limits recommended by executive board and approved by board of directors as well using derivative instruments where necessary.

To minimize the risk arising from foreign currency denominated balance sheet items, the Group utilizes derivative instruments as well as keeping part of its idle cash in foreign currencies. In addition, translation of cost of goods-in-transit until completion of the customs transactions, in accordance with the customs law provides a natural hedge.

Currency sensitivity analysis31 December 2016

Profit/lossAppreciation of foreign currency Depreciation of foreign currency

Assumption of devaluation/appreciation by 10% of USD against TL 1- Net USD asset/liability (533) 533 2- USD risk averse portion (-)3- Net USD effect (1+2) (533) 533Assumption of devaluation/appreciation by 10% of EUR against TL 4- Net Euro asset/liability 19,163 (19,163) 5- Euro risk averse portion (-)6- Net Euro effect (4+5) 19,163 (19,163)TOTAL (3+6) 18,630 (18,630)



Assumption of devaluation/appreciation by 10% of USD against TL 1- Net USD asset/liability (1,233) 1,233 2- USD risk averse portion (-) (1,233) 1,2333- Net USD effect (1+2)Assumption of devaluation/appreciation by 10% of EUR against TL 4- Net Euro asset/liability 25,956 (25,956) 5- Euro risk averse portion (-)6- Net Euro effect (4+5) 25,956 (25,956)TOTAL (3+6) 24,723 (24,723)

Foreign exchange rates for USD, Euro and Swiss Franc as at 31 December are as follows:

31 December 2016 31 December 2015USD 3.5192 2.9076EUR 3.7099 3.1776CHF 3.4454 2.9278



76




(c) Currency risk

The Group is exposed to foreign exchange risk through the impact of rate changes on the translation of foreign currency denominated payables to original equipment manufacturers and borrowings from financial institutions. This risk is monitored by the board of directors through periodic meetings. The Group’s foreign currency position is managed through taking limited positions within limits recommended by executive board and approved by board of directors as well using derivative instruments where necessary.

To minimize the risk arising from foreign currency denominated balance sheet items, the Group utilizes derivative instruments as well as keeping part of its idle cash in foreign currencies. In addition, translation of cost of goods-in-transit until completion of the customs transactions, in accordance with the customs law provides a natural hedge.



Assumption of devaluation/appreciation by 10% of USD against TL 1- Net USD asset/liability (533) 533 2- USD risk averse portion (-)3- Net USD effect (1+2) (533) 533Assumption of devaluation/appreciation by 10% of EUR against TL 4- Net Euro asset/liability 19,163 (19,163) 5- Euro risk averse portion (-)6- Net Euro effect (4+5) 19,163 (19,163)TOTAL (3+6) 18,630 (18,630)



Assumption of devaluation/appreciation by 10% of USD against TL 1- Net USD asset/liability (1,233) 1,233 2- USD risk averse portion (-) (1,233) 1,2333- Net USD effect (1+2)Assumption of devaluation/appreciation by 10% of EUR against TL 4- Net Euro asset/liability 25,956 (25,956) 5- Euro risk averse portion (-)6- Net Euro effect (4+5) 25,956 (25,956)TOTAL (3+6) 24,723 (24,723)

Foreign exchange rates for USD, Euro and Swiss Franc as at 31 December are as follows:

31 December 2016 31 December 2015USD 3.5192 2.9076EUR 3.7099 3.1776CHF 3.4454 2.9278



77




(c) Currency risk (Continued)

As at 31 December 2016, net position of the Group is resulted from foreign currency assets and liabilities as shown below:

31 December 2016Original balances

Total

TL equivalentUSD

(thousand)Euro

(thousand)CHF

(thousand)Other

(thousand)Assets:

Trade receivables 5,761 67 435 1,135 -Monetary financial assets 9,754 355 1,121 1,251 62Other monetary assets 752,438 208 202,449 186 -

Total assets 767,953 630 204,005 2,572 62

Trade payables 567,668 341 152,233 492 1Financial liabilities 45,627 1,348 - 11,866 -Other monetary liabilities 5,280 25 116 1,382 -

Current liabilities 618,575 1,714 152,349 13,740 1

Financial liabilities 24,838 - - 7,209 -

Non-current liabilities 24,838 - - 7,209 -

Total liabilities 643,413 1,714 152,349 20,949 1

Net foreign currency liability position of derivative financial liabilities off statement of financial position - - - - -

Net foreign currency (liability)/asset position 124,540 (1,084) 51,656 (18,377) 61Monetary items net foreign(liability)/asset positionSureties and letters of guarantee taken

22,329 372 5,666 - -

Sureties and letters of guarantee given 1,563,595 21,500 375,995 27,000 -

Import 10,779,608 - 2,905,633 - -


78







Total

TL equivalentUSD

(thousand)Euro

(thousand)CHF

(thousand)Other

(thousand)Assets:

Trade receivables 6,553 - 283 1,931 -Monetary financial assets 2.927 176 200 602 7Other monetary assets 607,882 154 186,804 4,729 -

Total assets 617.362 330 187,287 7,262 7

Trade payables 337,139 530 105,404 154 50Financial liabilities 9,584 2,697 - 595 -

Current liabilities 346.723 3,227 105,404 749 50

Financial liabilities 26,209 1,344 - 7,617 -

Non-current liabilities 26.209 1,344 - 7,617 -

Total liabilities 372.932 4,571 105,404 8,366 50


Net foreign currency (liability)/asset position 244.430 (4,241) 81,883 (1,104) (43)Monetary items net foreign(liability)/asset positionSureties and letters of guarantee taken 19,807 462 5,810 - -


Import 9,324,560 - 2,934,466 - -

As at 31 December 2016, goods-in-transit of the Group amount to Euro 181,953 thousand equivalent to TL 675,030 thousand (31 December 2015: Euro 176,878 thousand equivalent to TL 562,047 thousand).



78







Total

TL equivalentUSD

(thousand)Euro

(thousand)CHF

(thousand)Other

(thousand)Assets:

Trade receivables 6,553 - 283 1,931 -Monetary financial assets 2.927 176 200 602 7Other monetary assets 607,882 154 186,804 4,729 -

Total assets 617.362 330 187,287 7,262 7

Trade payables 337,139 530 105,404 154 50Financial liabilities 9,584 2,697 - 595 -

Current liabilities 346.723 3,227 105,404 749 50

Financial liabilities 26,209 1,344 - 7,617 -

Non-current liabilities 26.209 1,344 - 7,617 -

Total liabilities 372.932 4,571 105,404 8,366 50


Net foreign currency (liability)/asset position 244.430 (4,241) 81,883 (1,104) (43)Monetary items net foreign(liability)/asset positionSureties and letters of guarantee taken 19,807 462 5,810 - -


Import 9,324,560 - 2,934,466 - -

As at 31 December 2016, goods-in-transit of the Group amount to Euro 181,953 thousand equivalent to TL 675,030 thousand (31 December 2015: Euro 176,878 thousand equivalent to TL 562,047 thousand).



79




(d) Market risk

The Group is exposed to market risk through holding shares of Doğuş Holding.

Even though the shares of Doğuş Holding are not quoted in the capital market, fair value of the Doğuş Holding’s shares is determined by using market information of publicly held Doğuş Holding group companies and other valuation methodologies are used for remaining Doğuş Holding group companies. Therefore, value of Doğuş Holding recognized in the financial statements is affected by price fluctuations in the shares of publicly held Doğuş Holding group companies.

Under the assumption of 10% increase/decrease in share prices as at 31 December 2016, all other variables held constant, the Group’s equity would have been increased/decreased by TL 13,114 thousand (31 December 2015: TL 14,139 thousand).

(e) Interest rate risk

At 31 December 2016, if market interest rates on USD denominated borrowings at variable rates were higher/lower by 100 basis (1%) point where all other variables held constant, higher/lower interest expense on borrowings at variable rates would cause net income for the period to be lower/higher by TL 4 thousand (31 December 2015: TL 10 thousand). At 31 December 2016, if market interest rates on TL denominated borrowings at variable rates were higher/lower by 100 basis (1%) point where all other variables held constant, higher/lower interest expense on borrowings at variable rates would cause net income for the period to be lower/higher by TL 18 thousand (31 December 2015: TL 118 thousand). Interest rate table is as follows:

31 December 2016 Interest rate tableCurrent period Previous period

Financial instruments with floating interest rates

Financial liabilities USD 4 10Financial liabilities TL 18 118

(f) Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date except involuntary liquidation or distress sale. When available, the quoted price in an active market provide the best estimate of its fair value.

If a quoted market price is not available, the Group using available market information and appropriate valuation methodologies estimates the fair value of the instrument. However, judgment is necessarily required to interpret market data to develop the estimated fair value. Accordingly, the estimates made are not necessarily indicative of the amounts that could be realized in current market exchange.


80




(f) Fair value (Continued)

Financial assets

The principles used in determining the fair values of financial assets and liabilities are as follows:

Cash and cash equivalents are presented on cost basis and are assumed to reflect their fair values as they are liquid and classified as current assets.

Trade receivables are presented netted off related doubtful portion of the receivable and are assumed to reflect their fair value.

Since Doğuş Holding is not a publicly traded, fair value of Doğuş Holding is determined by using current market information’s for publicly traded companies under Doğuş Holding governance. Fair value of Doğuş Holding is also determined by using other valuation methods for non-public companies under Doğuş Holding governance. Therefore Doğuş Holding presented under financial assets is assumed to reflect its fair value.

Financial liabilities

Short-term TL denominated bank borrowings are assumed to converge to its fair value, as the payment dates get closer to the balance sheet date. Floating rate long-term borrowings denominated in foreign currency and TL are assumed to reflect their fair value.

Since trade payables are short-term and foreign currency denominated, they are assumed to reflect their fair values. Estimated fair value of financial instruments is determined by the Group using the existing market information or appropriate valuation methods, if possible.

However, market value may not reflect the fair value as contentment is used in finding out the expected fair value. Therefore, except for mentioned assumptions, inputs for the financial asset or liabilities which are not based on observable market data (unobservable inputs) and the Group utilize for their contentment regarding fair value analysis, are considered as level 3 in relation to valuation method for comparable fair value analysis of long-term financial liabilities under the classifications defined.



80





Financial assets

The principles used in determining the fair values of financial assets and liabilities are as follows:

Cash and cash equivalents are presented on cost basis and are assumed to reflect their fair values as they are liquid and classified as current assets.

Trade receivables are presented netted off related doubtful portion of the receivable and are assumed to reflect their fair value.

Since Doğuş Holding is not a publicly traded, fair value of Doğuş Holding is determined by using current market information’s for publicly traded companies under Doğuş Holding governance. Fair value of Doğuş Holding is also determined by using other valuation methods for non-public companies under Doğuş Holding governance. Therefore Doğuş Holding presented under financial assets is assumed to reflect its fair value.

Financial liabilities

Short-term TL denominated bank borrowings are assumed to converge to its fair value, as the payment dates get closer to the balance sheet date. Floating rate long-term borrowings denominated in foreign currency and TL are assumed to reflect their fair value.

Since trade payables are short-term and foreign currency denominated, they are assumed to reflect their fair values. Estimated fair value of financial instruments is determined by the Group using the existing market information or appropriate valuation methods, if possible.

However, market value may not reflect the fair value as contentment is used in finding out the expected fair value. Therefore, except for mentioned assumptions, inputs for the financial asset or liabilities which are not based on observable market data (unobservable inputs) and the Group utilize for their contentment regarding fair value analysis, are considered as level 3 in relation to valuation method for comparable fair value analysis of long-term financial liabilities under the classifications defined.


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83





Classification regarding fair value measurement

“TFRS 7 – Financial Instruments: Disclosure” requires the companies to disclose the classification and hierarchy of the data used in determining the fair values of the financial instruments. The basis for the hierarchy is dependent on whether the data used in fair value calculation is observable or not. Observable inputs mean that the Group using market inputs derived from independent sources and unobservable inputs mean that the Group using market expectation and assumptions. This distinction leads to classifications presented as below:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets and liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset or liability that are not based on observable market. (unobservable inputs).

Classification requires use observable market inputs where available. In this respect, fair value classifications of financial assets which are valued with their fair values are as follows:

2016Level 1 Level 2 Level 3 Total

Financial assets:Available-for-sale financial assets (Note 6) - 550,350 - 550,350Total financial assets - 550,350 - 550,350

2015Level 1 Level 2 Level 3 Total

Financial assets:Available-for-sale financial assets (Note 6) - 511,815 - 511,815Total financial assets - 511,815 - 511,815

NOTE 30 – SUBSEQUENT EVENTS

The Group has acquired its rented real estate which is located in Esenyurt/İstanbul from Doğuş Holding A.Ş. for TL 186,500 thousand in line with the price determined with real estate value assessment report.

The legal process for the capital decrease of Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi, which the Group has 49% share and their operations have been suspended has started.

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· CONTENTS DOĞUŞ OTOMOTIV IN BRIEF ABOUT DOĞUŞ OTOMOTIV 08 CHAIRMAN’S STATEMENT 10 CEO’S STATEMENT 12 CORPORATE PROFILE 14 FINANCIAL INDICATORS 15 …