Yukarı

Chairman’s Statement

Our goal is to carry Koç Group ever forward by capitalizing on it's existing strengths, accurately reading the spirit of the time and turning change into opportunity.

Mustafa V. Koç
Chairman of the Board

Koç Holding’s esteemed investors and shareholders, valued business partners and employees,

The crisis that erupted five years ago and has since destabilized the world is continuing, albeit changing its form as it goes. What started out as a financial crisis developed into national debt crises, which paved the way for economic stagnation accompanied by rising unemployment and social conflicts.

The most significant development concerning the global economy in 2013 was probably Fed Chairman Ben Bernanke’s 22 May announcement that he would start tapering bond purchases if stable economic growth were achieved in the US. In this event, developing countries experienced international capital outflows, bond rates rose and national currencies lost value. The Fed took its first step in this direction in December.

Accordingly, we see that investors are redefining their positions in global financial markets. The appeal of developing countries, which had attracted significant foreign investment, waned and investors shifted their attention back to countries they had previously turned away from.

Turkey, which had attracted hefty foreign portfolio investment under conditions of abundant, cheap global liquidity, was significantly affected by this new reality. Therefore, we can look at 2013 as consisting of two, distinct periods each with its own macroeconomic characteristics. The period preceding the Fed’s May announcement was quite favorable; the period beginning in June was marked by operational uncertainty.

Casting an eye over our sectors of operation, we see that this situation affected virtually each of them in a different way. However, overall as a Group, we managed to have a successful year in 2013.

A robust structure based on sustainability

Koç Holding has been successful for 88 years because it accurately reads the spirit of the times, takes prompt action and adapts accordingly. For a long time, we have read sustainability as one of the important features of the spirit of our times. Sustainable companies and brands can be created only through a holistic, long-term strategic perspective.

We believe that our Companies can be competitive by focusing on long-term strategies and protecting the interests of all stakeholders while managing risks effectively and shaping strategies according to sustainable growth targets.

Within our framework of sustainable growth strategies, alongside financial robustness, we take into consideration such elements as lasting satisfaction of customers, employees and all stakeholders, brand value, technological strength, and social investments as a whole.

Taking a long-term, strategic view, the investments our companies make in new products, brands and R&D are continuing apace, and the awards they receive at home and abroad are very gratifying.

We compete against ourselves by raising the bar ever higher. Strong financial statements, sound cash flow and effective risk management capable of supporting this high level of performance are indispensable components of a sustainable business model. Moreover, a sturdy shareholder structure and solid management team are essential for a robust financial structure.

Therefore, a sustainable business model requires an appropriate corporate infrastructure, a clear and correct set of corporate values and policies, and full integration of the transparency, equality, accountability and responsibility that are needed for sound corporate governance.

The Koç Group has been growing in size and strength for 88 years. Throughout this time, it has contributed great value to society. We owe this success to continually searching out best practices globally, effectively integrating them into Group practices at every level, from production to marketing, and devising strategies that serve to create even better practices.

This management approach has transformed a small company into a holding that is leader in its sectors of operation - energy, automotive, banking, consumer durables, tourism, food, retail and defense - and it creates enormous value for the country’s economy. As an exemplary Turkish company at home and abroad, Koç Group has become an important ambassador of Turkey’s values to the rest of the world.

One of the international financial markets’ most trusted addresses in Turkey

We are proud that Koç Holding is one of the international financial markets’ most trusted addresses in Turkey. In 2013, S&P and Moody’s assigned Koç Holding their investment grade

long-term corporate credit rating, the first time a Turkish holding company has ever received this status.

As Koç Holding, we demonstrated the value we create for our shareholders through our share’s relatively strong performance, institutional investors’ steadily growing long-term investments, and our low discount to the net asset value.

While the average value of the Borsa Istanbul’s 30 Index increased by 23% over the preceding year, Koç Holding’s average market value rose by 39%. Koç Holding’s average volume of free float shares held by foreign investors was 78%, above Borsa Istanbul average. While Turkish holding companies traded at a mean discount of 34% compared to the value of their net assets, Koç Holding traded at only 3%.

Leader in social investments and strategic philanthropy

Acting upon the “I live and prosper with my country” philosophy of our founder, Vehbi Koç, Koç Holding has become the leader in private-sector social investments and strategic philanthropy in Turkey. Social responsibility - the spirit of the time - is the backbone of sustainability.

Koç Holding takes a two-pronged, long-term strategic approach to social investments. The first involves the investments it carries out through the Vehbi Koç Foundation. One of the largest foundations in Europe in terms of resource allocations, the Vehbi Koç Foundation expresses our sense of responsibility towards Turkey and Turkish society. The second involves our social responsibility projects, the dimensions of which are nearly as great as those of an NGO. We take pride in the lasting solutions we have created for Turkey through projects such as: A Crucial Matter for the Country and the For My Country projects, implemented through the efforts of our employees and dealers.

As in past years, I extend my thanks and appreciation to our shareholders, customers, dealers, business partners, unions, managers and employees, all of whom have made our economic and social achievements sustainable.

Sincerely,

Mustafa V. Koç
Chairman of the Board