TEXT-Official disclosure of Dogan for the notice from Tax Office

MATERIAL EVENTS DISCLOSURE FORM REGARDING INTERNAL INFORMATION

COMPANY NAME : Doğan Yayın Holding A.Ş.
ADDRESS : Hürriyet Medya Towers 34212 Güneşli-ISTANBUL
TELEPHONE / FAX : 0 212 677 0000 / 0 212 677 0801
TELEPHONE / FAX NUMBERS
OF SHAREHOLDER
RELATIONS DEPARTMENT : 0 212 677 0556 / 0 212 677 0801
DATE : 18 February 2009
DOCUMENT NO. : DYH-2009/16
SUBJECT : Notice served upon our Company by the Halkalı Tax Office on 17
February 2009.

TO THE ISTANBUL STOCK EXCHANGE

Material Event to be Disclosed

Notice served upon our Company by the Halkalı Tax Office on 17 February 2009.

Based on “Tax Audit Reports”, dated 16 January 2009 and 30 January 2009, respectively, sent to our Company by the Halkalı Tax Office with regard to the financial years of 01 April 2003 – 31 March 2004, 01 April 2004 -31 December 2004, 2005 and 2006, we were served by the Halkalı Tax Office a notice of
“delinquent tax” in the amount of TL 132.921.473, a notice of “fine for tax loss” in the amount of TL 693.179.004, and a notice of “fine for procedural non-compliance” in the amount of TL 165.000 yesterday (on 17 February 2009) at 17:30 p.m. following the close of the second session of the Istanbul Stock
Exchange.

In the subject Tax Audit Reports, it is claimed, in brief:

1- that the shares of our Company in its subsidiary Doğan TV Holding A.Ş., corresponding to 25% of the total capital of Doğan TV Holding A.Ş., were sold to Dreiundvierzigste Media Vermögengsverwaltungsgesellschaft mbH (DMV), a company wholly owned by Axel Springer AG, in 2006, despite the fact that the subject sale was legally completed in 2007, that our Company is not eligible to benefit from “tax exemption on proceeds from shareholding sales” in terms of the said sale, as provided for in Article 5/1-e of the Corporate Income Tax Law, because the subject sale was not reflected in our Company’s accounting records for 2006;

2- that the financing costs (foreign exchange differences and interest expenses) associated with the acquisition of shareholdings may not be recorded as expense,

3- that the loss arising from the sale of the subject shareholding may not (Doğan Raks Satış Pazarlama ve Dağıtım A.Ş.) may not be deducted from our corporate revenues,

4- that Provisional Article 10 of Value Added Tax (“VAT”) Law No. 3065, referring directly to Corporate Income Tax Law No. 5422 (“CITL”), does not permit the application of VAT exemption to the sale of shareholdings and, for that reason, VAT has to be imposed on the sale of the subject shareholding that has to be treated as shareholding, despite being represented by share certificates under VAT Law, and that does not meet the criteria for exemption specified under both Provisional Article 28 of CITL 5422 and Provisional Article 10 of VAT Law [see the Material Events Disclosure we submitted to
the Istanbul Stock Exchange (“ISE”) on 19 April 2005]; and

5- that the proceeds from the sale of the shareholding (ANS Uluslararası Yapım Yayın Reklamcılık A.Ş.) are not eligible to benefit from tax exemption on proceeds from shareholding sales as described under Article 8/12 of CITL No. 5422.

With regard to the first claim [that the sale of Doğan TV Holding A.Ş. shares was completed in 2006], the delinquent tax amount levied is TL. 115.299.694, the “fine for tax loss” calculated by multiplying the delinquent tax amount by 3 is TL. 345.899.081 and the “fine for tax loss” levied additionally in the amount of TL. 311.308.206 calculated by multiplying by 3 the provisional tax, the original of which could not beclaimed for the related set-off deadline had expired, all amounting to TL. 772.506.981.

With regard to the second claim [that the financing costs (foreign exchange differences and interest expenses) associated with the acquisition of shareholdings may not be recorded as expense], the tax amount and the fine for loss of tax levied are TL. 4.792.465 and TL 6.225.045, respectively, both totalling TL 11.017.510.

With regard to the third claim [that losses arising from the sale of shareholdings may not be deducted from corporate revenues], the “delinquent tax amount” levied is TL 2.096.143, the “fine for loss of tax” calculated by multiplying the delinquent tax amount by 3 is TL 6.288.429, and the “fine for tax loss” levied additionally in the amount of TL. 5.296.367 calculated by multiplying by 3 the provisional tax, the original of which could not be claimed for the related set-off deadline had expired, all amounting to TL. 13.680.939.

With regard to the fourth claim [that VAT should have been calculated on the shareholding despite they are represented by share certificates], the “delinquent tax” amount levied is TL. 3.497.297, and the “fine for tax loss” levied is TL. 3.497.297, both amounting to TL. 6.994.594.

With regard to the fifth claim [that our Company may not benefit from tax exemption on proceeds from shareholding sales], the “delinquent tax” amount levied is TL. 1.006.333, and the “fine for tax loss” levied is TL. 2.211.167, both amounting to TL. 3.217.500.

As a result, the total amount levied with regard to the first claim is TL. 772.506.981, which constitutes 93,5% of the grand total claimed, including the other tax amounts.

Our opinions about these claims contained in the mentioned Tax Audit Reports are as follows:

A- The Claim that Doğan TV Holding A.Ş. Shares were Sold to Axel Springer AG in 2006;

a. Our Company submitted a Material Event Disclosure to the ISE on 16 November 2006, stating that an agreement was reached for the sale of Doğan TV Holding A.Ş. shares to Axel Springer AG [DMV].

b. However, in the same Disclosure, it was clearly underlined that the agreement reached was a “conditional” one and could only take effect after the satisfaction of certain pre-conditions.

c. The said Disclosure read exactly: “The sale transaction (closure) will be executed only after the due diligence investigation being carried out by Axel Springer AG at Doğan TV and the necessary legal approvals are obtained.”

d. Also, the related “Share Transfer Agreement” states clearly that, following the satisfaction of all the said pre-conditions, the share transfer process will be completed only after the title to the shares is legally transferred to Axel Springer AG [DMV] and the consideration for the said transfer
of shares is paid to our Company’s bank account.

e. Pursuant to Article 416 of the Turkish Code of Commerce (“TCC”), registered share certificates may only be transferred through endorsement and delivery to the transferee of the share certificates [the share certificates of Doğan TV Holding A.Ş. are all registered]. No share transfer is binding upon the Company unless such transfer is recorded in the Company’s Share Register.

f. As pointed out above, the subject share transfer was completed by transferring (delivering) through endorsement the title to the share certificates to Axel Springer AG [DMV] on 02 January 2007 after the satisfaction of all the pre-conditions specified in the subject “Share Transfer Agreement”. The total consideration for the share transfer was paid to our Company’s bank accounts on the same date as the transfer (02 January 2007). Accordingly, after determining that all the pre-conditions specified in the subject “Share Transfer Agreement” were satisfied, we completed the share transfer process by signing a closing memorandum with Axel Springer AG [DMV] on 02 January 2007 again and by carrying out the “closing” transactions in accordance with the Share Transfer Agreement. All these transactions can always be verified against the records of Axel Springer AG [DMV].

g. The shares transferred to Axel Springer AG [DMV] were recorded in the Share Register of Doğan TV Holding A.Ş. on 02 January 2007.

For these reasons, despite the fact that the subject share transfer was completed in 2007, it is claimed in the Tax Audit Report that “the subject share transfer by Doğan TV Holding A.Ş. was completed in 2006”. This claim is clearly unlawful.

B- Financing Costs of Shareholding Acquisition Non-allowable;

a. The Ministry of Finance has issued several tax opinions stating that financing costs regarding the acquisition of shareholdings may be recorded as expense. For that reason, we assume that the Ministry’s said opinion in this respect has gained stability.

b. Similarly, there are tax court rulings allowing the recording of financing costs regarding the acquisition of shareholdings as expense.

c. Moreover, there are many books, journals and articles authored by Tax Law Experts, suggesting that it is possible to record financing costs regarding the acquisition of shareholdings as expense under the applicable financial legislation.

d. Article 5 of Corporate Income Tax Law No. 5520 clearly allows tax payers to record their financing costs regarding the acquisition of shareholdings as expense.

e. Despite the fact that there are positive foreign exchange differences recorded in relation to the loans claimed to be associated with the acquisition of the subject shareholding in the financial year running from 01 April 2003 to 31 March 2004, the Tax Audit Reports take into account only the interest expenses and the negative foreign exchange differences recorded in other financial years and disregard the said positive foreign exchange differences. Therefore, the tax assessed on the basis of this claim has no grounds.

C- Calculation of VAT on the Sale of Shares Represented by Share Certificates;

a. Considering generally accepted and customary practices, this is the first time we see a Tax Audit Report claiming that VAT should be calculated on the sale of shares represented by share certificates;

b. Such interpretations claiming that VAT must be calculated on the sale of shares represented by share certificates in this country, which boasts a deep-rooted tradition of institutionalization and a well-developed capital market, will never serve the interest of this country, especially at a time
when more foreign investment and finance are needed.

c. It is widely known that international corporations have been making remarkable investments in our country over the last five years, mostly by acquiring shareholdings in local businesses. If the claims contained in the subject Tax Audit Report is found acceptable, then a tax base difference
and a penalty for tax loss will have to be imposed on each one of many natural and legal persons who have sold their shareholdings in the last five years.

We are of the opinion that our Company’s accounting practices, which are criticized in the subject Tax Audit Reports, are compliant with all the related statutory regulations as well as with the Finance Ministry’s communiqués, circulars and tax opinions; for this reason, we will use all our legal rights against the claims contained in the subject Tax Audit Reports.

We hereby confirm that our explanations above are compliant with the requirements contained in the CMB’s Communiqué Serial VIII, No. 54 and fully reflect all the information we received in this regard, that the information given herein reflects our records and documents truly, that we made all reasonable efforts to obtain correct and full information on this matter and that we accept responsibility for all the information contained herein.

Sincerely yours,

D. Ali YILMAZ          Soner GEDİK
Coordinator                Board Member