Koç Holding. TURKEY S LEADING INVESTMENT HOLDING COMPANY creating one common legacy for 89 years

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1 Koç Holding TURKEY S LEADING INVESTMENT HOLDING COMPANY creating one common legacy for 89 years Investor Presentation May 2015

2 A Leading Investment Holding Company KOÇ HOLDING: TURKEY S LEADING INVESTMENT HOLDING COMPANY Koç Group is Turkey s largest industrial and services group in terms of revenues, exports, employees, taxes paid and market capitalization on the Borsa İstanbul. PROFITABLE AND HIGH GROWTH MODEL, FOCUSING ON SUSTAINABILITY Following an average annual growth rate of 13% in consolidated profit in US$ terms between , Koç Holding ranks among the world s top 350 companies*. PIONEER IN ITS SECTORS Koç Holding has leading positions with strong competitive advantages in various sectors, such as energy, automotive, consumer durables and finance, which offer strong long-term growth potential. * Fortune report 2

3 Koç Group History Expanding the areas of activity 1960s 1970s 1990s 2000s 1970 First public offering 1963 Establishment of Koç Holding A.Ş. International partnerships 1940s First industrial ventures 1994 Vehbi Koç receives UN World Population Planning Award Koç Group grows in banking 1987 Vehbi Koç is Businessman of the Year (Int l Chamber of Commerce) 1984 Second generation of Koç Family takes over Growth and exports 1938 The first joint stock company: Koç Ticaret A.Ş Official foundation of Koç Group Today A new vision for the new millennium Turkey's largest industrial and services group Proactive disposals 2006 Koç Holding signs the UN Global Compact Acquisition of Tüpraş, Yapı Kredi Bank & Tansaş 2003 Third generation of Koç Family takes the reins 2001 Financial services consolidated under one roof 1996 The end of an extraordinary life; Vehbi Koç passes away Koç Holding's foremost objective is to continue to create higher added value for all its stakeholders and manage all its activities according to international standards of corporate governance, customer satisfaction, social responsibility and environmental protection principles. Koç Group carries on the journey which began in 1926, according to a growth strategy rooted in efficiency and productivity. 3

4 Strong Beneficiary of the Growth Potential in Turkey We have the right size to benefit from economies of scale We continuously out-perform the growth rates in Turkey 17 Combined Revenues / GDP* 8% Total Exports / Turkey s Exports* 9% 9 7 Total Market Cap. on Borsa İstanbul* 17% GDP Growth % (CAGR) Koç Growth % (Revenues Constant Prices - CAGR) * As of year-end

5 One of the Few Companies in Turkey with Investment Grade Ratings* Outlook* Moody s Baa3 Positive S&P BBB- Stable Moody s Our Baa3 ratings are based on Koç Holding s strong financial profile and investments in a balanced portfolio of mature and high-growth companies, which enable Koç to diversify its dividend income. We have also assigned a positive outlook to Koç Holding s investment-grade ratings to reflects its strong business operating environment and the leading domestic positions of many of its investments within their respective industries. * S&P granted our initial rating on March 2013 and Moody s on April In 2014, both agencies maintained their investment grade rating as well as their outlook on Koç Holding despite their downgrade of the rating outlook on Turkey from stable to negative. This reflects the view of both rating agencies that Koç Holding displays significant resilience even in an environment of heightened political uncertainty and slower economic growth. In April 2015, S&P kept our local currency and foreign currency credit ratings unchanged at BBB- long-term and A-3 short-term with a stable outlook. Currently, Koç Holding is the only Turkish company assigned with positive outlook by Moody s. 5

6 Best Positioned to Benefit once the Economy Normalizes Maturing democracy with a functioning market economy Strategic location at the crossroads of continents, cultures and economies Favorable demographics: 76.7 mn people; Median age at 29.7 vs in EU Unsaturated domestic market as most of the key sectors are relatively underpenetrated Largest Industrial Group in Turkey 5 of the top 10 industrial enterprises in Turkey are Koç Group companies* #1 Tüpraş #2 Ford Otosan #5 Arçelik #6 Tofaş #10 Aygaz Largest Exporters in Turkey 4 of the top 10 exporters in the Turkish Exporters Assembly ranking are Koç Group companies** #1 Tüpraş #2 Ford Otosan #5 Tofaş #6 Arçelik Turkey s Largest Intellectual Property Rights Portfolio with more than: Largest R&D Investments in Turkey 7,100 Trademarks 3,000 patent families 6,600 patents 700 industrial designs 4,200 Internet domain names 4 Koç Group companies ranked in the top 10 on the Turkish Patent Institute s list of the Highest # of Patent Applications #1 Arçelik #2 Ford Otosan #6 Tofaş #9 TürkTraktör *In Istanbul Chamber of Commerce ranking (2013 report), **In the Turkish Exporters Assembly ranking (2013 report) 6

7 Strong, Stable and Supportive Shareholder Koç Family has its own internal governance and investment vehicle, which provides stability and consistency Koç Family mainly assumes Board level responsibility Business run by highly experienced professional management Sustainability is key as the majority of Koç Family s wealth is invested in Koç Group Temel Ticaret* 42.6% Free Float 22.4% Koç Family Members 25.8% Koç Pension Fund 2.0% Vehbi Koç Foundation 7.2% *99.3% family-owned investment vehicle 7

8 Leadership Positions in Strategic and Lucrative Business Lines Energy Automotive Automotive Consumer Durables Finance Main Companies Tüpraş* / Opet / Aygaz* / Entek Domestic Market Position Market Share Sole petroleum refiner in Turkey #1 in LPG distribution 29% #2 in petroleum products distribution 19% Main companies Ford Otosan* / Tofaş* / TürkTraktör* / Otokar* / Otokoç International Alliances Ford Motor Co. / Fiat Auto S.P.A. Case New Holland Domestic Market Position Market Share #1 in total automotive 23%** #3 in passenger cars 14%** #1 in commercial vehicles 49%** #1 in farm tractors 49% #1 in automotive retailing #1 in car rental #2 in operational car leasing Main Companies Arçelik* International Alliances LG Electronics (Air conditioner manufacturing) Domestic Market Position Market Share #1 in white goods c. 50% #1 in TVs 22% #1 in air conditioners 52% Main Companies Yapı Kredi Bankası* International Alliances UniCredit Domestic Market Position Market Share #4 in total banking assets among private banks #1 in credit cards 21% (outstanding volume) #1 in leasing 18% #1 in factoring 15% #2 in mutual funds -18% Other Lines of Business Main Companies Tat Gıda* (Food) / Koçtaş (DIY Retailing) / Marmaris Altınyunus* (Tourism) / Koç Sistem (IT) / Setur (Duty Free) * Listed companies ** As of year-end

9 Large Distribution Networks & Large Customer Database in Low Penetrated Sectors with Strong Growth Potential Large customer database Large customer database with around 44 million (approximately 15 mn CRM card holders with data sharing permission) in different business segments together with strong CRM capabilities, enabling efficient up & cross-selling Penetration Levels Final Energy Consumption per Head TOE Motorization rate per 000 White Goods Penetration % Loans + Deposits / GDP % EU Turkey EU27/EFTA Turkey EU Turkey EU-27 Turkey Source : Eurostat 2012 Source : OICA 2014 Data refers to 2012 motorization rates Source : Euromonitor 2009 Source: European Central Bank, BRSA, CBRT, Turkstat Note: Expected 2014 GDP used for Hungary, Poland and EU17 penetration data. Loan data based on 2014 actual figures. (1) Excluding lending to credit institutions (2) Including housing loans, consumer lending and other household lending (including CC, excluding SMEs) 9

10 Investment Focus on Sectoral Diversification to be Resilient to Different Risk Profiles (mn) TL895* TL2,435** TL32, Dividends Net income NAV *** Finance Automotive (PC & CV Mfg) Automotive (Other) Refining Oil&Gas Distribution Consumer Durables Other Key Risks & Sensitivites Domestic credit and interest rate risk, regulation Turkey and Europe automotive demand (driven by economic growth and interest rates) Risks on agricultural sector; demand by defense industry; macro risks Regional crack spreads Oil & LPG prices Regulation Limited growth potential in cylinder market Turkey and global consumer durables demand (driven by economic growth) Macro risks Key Strengths Strong growth potential, esp. for large banks Profitability ROATE: 12.0% High CAR (2014 CAR: 15.0%) Solid asset quality (2014 NPL: 3.4%) Higher penetration potential in Turkish market Secured export contracts (take-or-pay, cost plus and investment recovery) Strong positioning in JV universe Leading positions & brand names Strong R&D in manufacturing Strong track record Wide distribution/sales/service networks Sole refinery in Turkey Demand insensitive to GDP fluctuations Increased profitability with commencement of RUP Low sensitivity to GDP fluctuations Leading positions & brand names Wide-spread geographic diversification (Exports to over 100 countries) Low-cost manufacturing Solid domestic market positions Leading positions via diversified businesses Turnaround potential Inorganic growth opportunities * Dividends and Net Income as of 2014FY, NAV 2014 year end, Tüpraş dividend share through EYAŞ is included ** Net income is adjusted for one off items (Fair value gain of KH s asset exchange transaction & Tat s gain on sale of Maret segment & effects of tax settlement process on Tüpraş, Aygaz and Opet) 10 *** Includes Koç Holding net cash and other assets

11 Balanced Portfolio Between Defensive & Growth Assets Wealth preservation Tüpraş Otokar Aygaz Opet Tofaş Ford Otosan Türk Traktör Bank on growth Yapı Kredi 55% 45% Arçelik Otokoç Entek Koçtaş Tat, Düzey Demir Export KoçFinansman Setur KoçSistem Marinas Divan Higher dividends Growth = ~ 1.5x GDP Dividend payout = 2/3 of net income Higher growth Share in NAV 11

12 Further Diversification via Geographic Coverage: International Sales Continues To Grow Combined International Sales (US$ billion) regional breakdown and percentages 14% CAGR % 25.2% 22.1% 29.3% 27.6% 27.6% $0.6b $0.7b 6% 4% $0.1b $0.3b 1% 1% $6.5b $11.3b 68% 61% $0.7b $2.0b 7% 11% $1.7b $4.2b 18% 23% $0.1b $0.1b 1% 1% XX% Share of international sales Including Tüpraş, 52% of combined sales (US$33 billion) not sensitive to domestic economy Geographic Diversification Reduces Country-specific Risks 12

13 Resilient & Improving Performance Despite Volatile Domestic Market Turkey GDP Growth (%) Source: TurkStat Net Profit attributable to Equity Holders of the Parent (TL billion) * -4.8 CAGR: 14% Holding Dividend Collection (TL million) (*) Koc Holding s forecast 1,500 1, CAGR: 31%

14 High Resilience Against Risks Strong B/S & Cash Position Our net cash position enables us to be proactive in new M&As Our combined net financial debt remains at 2.7 times EBITDA* Koç Holding Stand-Alone Net Cash Position Consolidated Net Debt / Cash Excl. Finance Q15 Total Debt: ~US$ 0.76bn Total Cash: ~US$ 1.43 bn ~US$ -3.3bn ~US$ -4.0bn Net Cash: ~US$ 674mn (*) When adjusted for investment loans of ongoing projects (those that are not yet generating full year EBITDA), combined NFD / EBITDA multiplier decreases to 1,6x as of 31 March

15 Holding EYAS Tüpraş(**) Aygaz Ford Otosan Tofaş(**) Otokar Türk Traktör Arçelik Major Portfolio Companies Have Strong Current Ratios Group s(*) Current Ratio 31 December 2014 Total Current Assets: TL35.6 bn Total Current Liabilities: TL27.8 bn Current Ratio : 1.3 6,816 8,472 Current Assets (TL mn) 3, ,958 3, ,319 8,362 2,972 2,932 4,431 Current Liabilities (TL mn) Average Current Ratio: (*) Combined figures excluding Finance, including Koç Holding stand-alone. (**) Stand-alone figures. 15

16 Average Duration of Financial Debt is Lengthened by ~17 Months 30 September December 2014 Combined Financial Debt Average duration: ~22 months Combined Financial Debt Average duration: ~39 months 1. Eurobond Transactions: Koç Holding - US$ 750 mn, 7 yrs in April 13 (3.5% p.a. - coupon rate) Tüpraş - US$ 700 mn, 5.5 yrs in November 12 (4.125% p.a. - coupon rate) Arçelik - US$ 500 mn, 10 yrs in April 13 (5% p.a. - coupon rate) - EUR 350 mn, 7 yrs in September 14 (3.875% p.a. - coupon rate) 2. Selected Capital Expenditure Financing: Tüpraş - US$ 2.1 bn RUP financing loan: US$350 mn, 7 yrs (amortizing) ; US$ 1.7 bn, 12 yrs (amortizing) (US$ 1.7 bn already withdrawn as of 31 December 2013) Ford Otosan - EUR 190mn, 8 yrs (amortizing) EIB loan, - EUR 240 mn, 4 yrs (amortizing) international commercial banks & 5 yrs EBRD Arçelik - EUR 100 mn, 7 yrs (amortizing) EIB loan Tofaş EUR 250 mn, 7 yrs (amortizing) international commercial banks & EUR55 mn, 6 yrs (amortizing) EIB loan 16

17 FX Position Koç Holding Stand-Alone FX Position 2014 US$ + 72mn 1Q15 US$ +70mn Koç Holding Consolidated FX Position FX Position Weighted by Effective Ownership Q Q15 US$ -3.3bn US$ -3.0bn* US$ -1.5bn US$ -1.2bn * The natural hedging mechanisms due to FX linked pricing of Tüpraş inventory account for ~US$1.0bn. Remaining US$ 2 billion short FX position comes mainly from Tüpraş RUP financing loans. Tüpraş applies cash flow hedge accounting for these investment loans under the related framework of IFRS. 17

18 - - 2% 2% 3% -15% 0% 6% 2% Tofaş (*) Holding EYAS Tüpraş(*) Aygaz Ford Otosan Otokar Türk Traktör Arçelik Adjusted Net FX Position / Equity Ratio Meets Policy Limits for Major Portfolio Companies 31 December 2014 Group s Adjusted Net FX Position US$259 mn Group s Adj. Net FX Position/Equity 2.3% 31 December 2014 Net FX Position (US$ mn) (Reported) ,903 Net FX Position (US$ mn) (Adjusted) FX position / Equity (%): (Adjusted) (*) Stand-alone figures. 18

19 Active Player in M&As and Privatizations Opportunistic M&A strategy to consolidate leadership positions and reach optimal portfolio diversification Acquisitions ahead of 2008 Koç Holding Share: US$ 6.6 billion 51% for US$ 4,140mn Consolidated as of January 2006 Through privatization Turkey s sole refining company and largest industrial company 57.4% for US$ 1,421mn (additional US$464mn worth of shares collected from the market) Legal merger as of October 2006 Turkey s 4 th largest private bank Merged with Koçbank Acquired in August 2005; merged with Migros Proactively divested in May

20 Profitable Disposals Divested Companies Sector Held Since Buyer Closing Date IT 2000 Vodafone 30 November 2011 Auto Supplies 1963 Continental A.G. 28 August 2008 Insurance 1974 Allianz SE 21 July 2008 Heating & Ventilation 2003 (spin-off of Demirdöküm) Ada Metal 26 June 2008 Retailing 1975 BC Partners 30 May 2008 Heating and Cooling Appliances 1955 Vaillant Group 5 October 2007 Industrial Gas Manufacturing 1987 Linde 17 July 2007 Iron Casting 1973 Componenta Corporation 12 December 2006 Insulation Materials 1965 St.Gobain Isover & Alamana Ind. 29 November

21 Focus on Large Investments with High Returns Ongoing investments to increase efficiency Opportunistic M&A activities in core business lines Combined Investments TL bn New manufacturing and R&D projects for export markets with our JV partners Automotive Opportunistic buyouts in international markets as a consolidator Energy Focus on higher ROI generating businesses Enhancing shareholder value Consumer Durables Opportunities in different fields including electricity generation and renewable energy Finance Organic and inorganic growth opportunities in the Turkish market 21

22 Disciplined Investment Strategy Consolidate leading positions to benefit the most from the growth potential Exploit new growth opportunities (Privatizations, secondary M&A market as well as greenfield investments) Only consider very opportunistic plays 22

23 Systematic Investment Evaluation Strategy Standardized investment evaluation process for investments that require Holding Evaluation Treating all investments on the same ground based on standard metrics and methods, facilitating better informed decisions Main Investment Criteria IRR Criteria: risk adjusted cost of capital applied to calculate IRR threshold in different projects Size Threshold: do not invest in assets in new sectors, unless they are big enough to move the needle at portfolio level Strategic fit, potential synergies & turnaround Scope Portfolio company investments exceeding predetermined thresholds Holding level investment decisions (e.g., acquisitions) Evaluation Body Investment Committee: CEO, CFO, Sponsoring Business Unit President, Audit President, Chief Legal Counsel Divestitures 23

24 % 50.3% 50.2% 58.5% 55.4% 55.9% 72.8% 76.0% 79.4% 78.4% 80.9% Proactive Investor Relations Management We endeavor to maximize the value we create for our shareholders Executive compensation based on economic profit and share performance Proactive investor relations management Cash dividend payout Strong share performance Strong relative stock performance Consistently low levels of NAV discount Sustainability via institutional investor base Koç Holding Peer Group Stock performance (TL) Koç Holding BIST30 BIST100 BIST Holding % -39% % 29% 26% 24% % -42% % -16% -13% -7% % 58% 53% 55% % -45% * Peer Group: Sabancı Holding, Dogan Holding, Yazıcılar Holding 24

25 Main Goal: Maximizing Shareholder Value One of the few Turkish Companies which Links Executive Compensation to Share Performance Shareholder Value Economic Profit Market Cap L-T Strategic Targets to Maximize Future Shareholder Value Aggressive Growth Sustainable Profitability Executive Effectiveness Asset Efficiency Customer Satisfaction Employee Dev.&Satis. Technology Development Other Strategic Targets Performance Culture (Remuneration strongly linked to performance) 25

26 Leading Positions in R&D and Technology Investments Turkey s largest intellectual property portfolio with more than: 7,100 trademarks 3,000 patent families 6,600 patents 700 industrial design registrations 4,200 Internet domain names Koç Holding ranked 614 th on the European Commission s global study of R&D expenditures, making it the highest ranking Turkish company on the list. 4 Koç Group companies ranked in the top 10 on the Turkish Patent Institute s list of «the Most Patent Applications» #1 Arçelik #2 Ford Otosan #6 Tofaş #9 TürkTraktör Koç Group R&D investment expenditure of TL 918 million in 2014 constitutes nearly 10% of total private sector R&D spending expenditure in Turkey. Koç Group Total R&D Investments TLmn 918 Koç Group Patent Applications by Year 563 Total R&D Personnel of Koç Group Companies 4, ,

27 Leading Corporate Citizen Vehbi Koç Foundation : Institutionalization for social development Established in 1969 as Turkey s first private foundation; to make philanthropic endowments for the public good to create sustainable and replicable projects and programs in education, healthcare, culture and arts Assets: TL 3.3 billion* Education Healthcare Culture & Arts The Koç School (1988) Koç University (1993) Koç Primary Schools ( ): In celebration of the 75 th anniversary of the Republic, the Foundation built 13 elementary schools across the country. This project was extended to 17 schools with the addition of four more schools between 2006 and *Market value as of Semahat Arsel Nursing Education and Research Center (SANERC, 1992) VKV American Hospital (1995) Koç University School of Nursing (1999) Koç University School of Medicine (2010) Koç University Hospital (2014) Sadberk Hanım Museum (1980) Turkey s first private museum Vehbi Koç Ankara Studies Research Center (VEKAM, 1994) Suna-İnan Kıraç Research Institute for Mediterranean Civilizations (AKMED,1996) Antalya Kaleiçi Museum (2000) Koç University Research Center for Anatolian Civilizations (ANAMED, 2005) TANAS Art Gallery, Berlin ( ) ARTER (2010) VKV Ford Otosan Gölcük Culture and Community Center (2011) Further information can be obtained from

28 Corporate Solutions for Social Advancement Our projects commonalities are unity, synergy and leadership established through our companies, employees and dealers For My Country project Grassroots initiative organized annually since 2006, to spread social responsibility efforts through the workforce and distribution network 1,084,000 tree saplings were planted in 7 For My Country forests 18,000 children embraced environmental awareness 83,579 units of blood were donated Through the Right Approach To Disability training programmes held in our 34 companies, we raised awareness in 103,482 individuals. Vocational Education: A Crucial Matter for the Nation Supporting vocational education 7-year project developed to raise awareness and create a model for improving the quality of vocational education 8,118 students in 81 provinces and 264 schools have been provided with active scholarships. Coaching support for students was provided by 579 Koç Group employees in 76 provinces One of the first Turkish companies to sign the UN Global Compact which confirms Koç Group s commitment to Corporate Citizenship Koç Family was honored with the Carnegie Medal of Philanthropy for their exceptional and sustained philanthropic contributions to the society Koç Holding is sponsoring the Biennial, a project of the Istanbul Culture and Art Foundation, between , aiming to raise awareness of modern art in Turkey Further information can be obtained in our Corporate Social Responsibility Report available on

29 Commitment to the Environment Koç Group endeavors to preserve national and natural resources in the most efficient way and minimize or recycle waste at the source Koç Group companies invested TL220 million in 2013 to reduce environmental impact of their operations Koç Group provided more than 78,723 man-hours of training to its employees and suppliers in 2012 With its efficiency projects, Koç Group made 3.06 million GJ savings in energy consumption and provided over 30% of the water consumption from recycled sources. Around 1,500,000 saplings were planted for the environment by Koç Group companies between 2008 and 2012 Further information can be obtained from our Corporate Social Responsibility Report available on

30 Key Takeaways : Value Propositions Largest investment Robust top-line growth holding company in Leading positions in enabling the benefits of Turkey sectors with strong economies of scale Best proxy to growth potential Well-proven track record in the Turkish Strong commitment portfolio restructuring Economy to Corporate including M&As and Governance, proactive disposals Corporate Social Responsibility and Superior and sustainable Sustainability improvement in operational performance Focus on high High resilience against margin revenue volatility and risks streams and Solid B/S structure shareholder with strong liquidity value 30

31 Operational Excellence and Leadership in Core Business Segments Slide # Energy Sector Automotive Sector Consumer Durables Sector Finance Sector Strongest Player in the Turkish Energy Sector Undisputable Leaders of Turkish Automotive Industry Strong Global Network Focus on Lucrative Business Lines 31

32 Why Energy Sector? High growth potential Strong demand dynamics Final Energy Consumption per Head Toe EU Turkey Among the fastest growing energy markets in the world parallel to its economic growth Growing domestic oil demand coupled with insufficient diesel capacity Offers a wide range of opportunities in electricity generation based on all known energy sources Source : Eurostat 2012 Energy corridor in the region Liberalizing market Strategically located between Asia and Europe Hub for international oil and gas pipelines; In operation: BTC & Kirkuk-Ceyhan In progress: TANAP Planned: Turkish Stream Future projects: Samsun-Ceyhan Well-organized and structured legal framework Energy Market Regulatory Authority operating as an independent market regulator Government incentives for renewable energy Plans to increase Turkey s energy system interconnection capacity with Union for the Coordination of Transmission of Electricity grid to have a common energy market with the EU 32

33 TÜPRAŞ Turkey s Sole Refining Company 4 refineries with 28.1 MT total capacity One of the most complex refineries in the Mediterranean with Nelson Complexity of 7.25 (2015 expectation: 9.5) 7 th largest refinery in Europe and 28 th largest in the world Among the most profitable refineries in Europe and the U.S. : Operational flexibility Optimum production and sales policy Energy efficiency programs ~70% of Turkey s total storage capacity Provides ~60% of domestic fuel demand Integrated refining company with downstream operations Well-positioned refineries Diversified supply base (FY14) Shift to higher margin products Iraq : 5.7 MT 2012 White Product Yield: 70.3% 2014 White Product Yield: 72.2% İzmir 11 MT NC: 7.66 İzmit 11 MT NC: 7.78 Kırıkkale 5 MT NC: 6.32 Batman 1.1. MT NC: 1.83 Iran : 5.3 MT Turkey : 2.4 MT S. Arabia : 1.9 MT Kazakhstan : 1.6 MT Russia : 0.6 MT 8% 29% 41% 22% Heavy distillate Middle distillate 46% Light distillate Other 6% 27% 22% 33

34 Residuum Upgrade Project (RUP) of Tüpraş RUP is completed and will be full operational in 2Q15 with positive impacts in 2015 onwards Not only will RUP have a US$ 1 bn positive impact on the Turkish C/A balance, but also will bring significant improvement for Tüpraş in terms of Nelson complexity, capacity utiziation, white product yield and hence profitability. White Product Yield CUR Improve white product yield to 80-85% (2014: 72.2%) Izmit refinery s capacity to produce light and medium products compliant with Euro 5 standards, will increase by 3.5MT Attain full capacity utilization (2014: 74.9%, 2015E: 95%) Nelson Complexity Make İzmit refinery the most complex refinery in Mediterranean and one of the most complex refineries globally The Nelson Complexity of İzmit refinery will rise to 14.5 from 7.78 Increase in Profitability Increase in Free Cash Flow Raise annual EBITDA of Tüpraş by c. US$550 mn Despite lower oil prices, wide fuel oil / diesel price cracks mean that profit expectations have not changed significantly No major capex after RUP (US$3 bn investment) 34

35 AYGAZ Turkey s Undisputable Market Leader in LPG for more than 50 years Generic brand in Turkey for LPG with 29% market share in total LPG market 43% market share in cyclinder LPG 24% market share in autogas Fully integrated LPG services Serves 100,000 homes with cylinder LPG everyday More than 1 million vehicles use Aygaz autogas daily Synergies with Koç Group energy companies Strong brand recognition Leading LPG distributor of Turkey (2 nd largest LPG market in Europe) Turkey makes up 11% of the world autogas market, ranked 1 st in the world in the number of vehicles which uses autogas Strong distribution network High logistics competency 2,196 cylinder LPG dealers 1,631 auto-gas stations as of YE14 Largest fleet operator Reduces costs Provides flexibility in sourcing and inventory management Over 1 MT filling capacity Direct import to 5 different locations 35

36 Fastest growing player of its sector while maintaining profitability Unrivaled leader in customer satisfaction in its sector for 9 consecutive years OPET Turkey s Fastest Growing Fuel Distribution Company Retail and wholesale activities in fuel distribution Production and marketing of lubricants Aviation fuel distribution: JV with Turkish Airlines International trade of petroleum products 1,224 1, Strong distribution network & market share 2 nd in white products in Turkey with 19%* market share Station Numbers White Products Market Share** - % 1,325 1,356 1, Highest customer & station satisfaction Turkey s highest storage capacity in the fuel distribution sector Sunpet Opet * White products market share is based on EMRA (Energy Market Regulatory Board ) data **White products market share is based on PETDER (Turkish Oil Industry Association) data Petrol Ofisi OPET Shell 36

37 Automotive Sector A Global Manufacturing and Distribution Hub Dynamic market with high growth potential Well-supplied manufacturing hub Motorization Rate per th largest labor force in EU Over 25.3 million young and well-educated professionals High growth in labor productivity EU27/EFTA Source : OICA 2014 Data refers to 2012 motorization rates Turkey Strong local supply base Low-cost base Attractive distribution hub for global brands Strong domestic deamd Turkish automotive market : New plato of ~ 850k annual sales 6 th largest economy in Europe (17 th in the world) 76.7 million people (42% under the age of 25) Efficient and cost-effective outlet to multiple markets with over 1.5 billion customers Rapid household formation and urbanization ( 000) Auto market average

38 Koç Group in the Automotive Sector Almost half of the Turkish manufacturing and export of motor vehicles are realized by Koç Companies Present in high growth segments both in Turkey & in EU Opportunities in new segments such as HCVs Highest quality and Largest distribution network safety of production Highly skilled and experienced workforce among the Strong R&D focus JV partners global Long-standing JV partnerships manufacturing hubs Ongoing investments for further scale & efficiency High profitability vis-a-vis global peers Spread of best practices and synergies among Group companies Benefits of large scale procurement contracts via JV partners Increasing penetration levels in the domestic market with lower interest rates & longer maturities Undisputable leader in Turkey As of year-end 2014 Motor Vehicle Production Domestic Motor Vehicle Sales Motor Vehicle Exports 60% Others 77% Others 63% Others 40% 23% 37% Koç Koç Koç 38

39 FORD OTOSAN Turkey s Largest Installed Production Capacity 50-50% JV with Ford Ford s center of excellence for heavy trucks and heavy duty diesel powertrains Export champion of Turkish Automotive Industry (62% of Turkey s CV exports) Strong distribution network Largest R&D staff in the Turkish automotive sector Highest Ford market share in commercial vehicles in Europe Largest production capacity in Turkey (415k) The only Ford production center globally for Custom and Courier Models Lead manufacturing plant of Ford Transit globally Technology licensing agreements delivering royalty fees with strong growth potential Large scale export program Capacity utilization Leader of Ford Production System (FPS) implementations in Ford of Europe (FPS is a continuously improving, lean, flexible and disciplined common global production system that encompasses a set of principles and processes to drive a lean manufacturing environment ) Strong market share (as of year-end 2014) Revenues $3.7bn 57% 43% $5.1bn 56% 44% $6.3bn 56% 44% $5.5bn 61% 39% $6.0bn 63% 37% $5.5bn 64% 36% Domestic Exports Capacity utilization rate 74% 90% 83% 86% 54% 59% * Market Share Rank Total Automotive 11.6% 3 PC 6.3% 6 LCV 27.5% 2 Heavy Truck 21.8% 2 *Capacity utilization rate is calculated on a capacity of 320k prior to 2014, of 400k in 2014 (Kocaeli plant). 39

40 FORD OTOSAN Major Investment Plan is Completed US$ 1.4bn investment of Ford Otosan is finalized with its capacity increase & complete new product portfolio Ford Otosan expects in 2015 Market share gains in the domestic market Rising exports on EU recovery and new product portfolio Increasing margins on Better pricing on new models Rising CUR (2015E CUR: 70% vs. 59% in 2014) Cost efficiencies Surging FCF with major capex period left behind Investments of Ford Otosan US$ mn E Investment of Ford Otosan Capex Period Old Capacity New Capacity Total Investment > US$1 bn in tangible assets k 415k New Transit production start: Mar'14 210k 160k US$850 mn Custom production start: Oct'12-130k Courier EUR370 mn production start: May'14-110k Cargo US$75 mn 2015E 10k 15k Transit Connect 110k

41 TOFAŞ Defensive Portfolio via Take-or-pay Contracts 50-50% JV with Fiat The only domestic manufacturer and exporter of both PCs & LCVs Extensive dealer and after-sales network Owns the full intellectual and industrial property rights for MiniCargo and New Doblo Consumer financing activities through its fully owned subsidiary, Koç Fiat Kredi Solid profitability, secured via take-or-pay agreements 2015 onwards: Introduction of new PC models Among Fiat s 3 main R&D centers globally Take-or-pay contracts covering nearly 75%* of production capacity * As of 2015 Light commercial market leader in Turkey Turkey s 3 rd largest auto exporter Large & flexible production capacity Strong market share (as of year-end 2014) Revenues % 77% 100% Market Share Rank $4.3bn $4.4bn 63% 64% 61% 56% % $3.8bn $3.3bn $3.7bn Total Automotive 11.4% % 54% 54% 65% 60% 59% % PC 7.3% 4 40% 46% 46% % 45% 41% 0 0% LCV + MCV 27.5% Domestic Exports Capacity CUR 41

42 TOFAŞ Investing in New Models Tofaş entered a new investment phase in 2014 Adaptation of New Doblo* is complete in 4Q14 US$1.04 bn investment to produce 1.3mn units of PCs: PC Compact Sedan: 580k units in 2H , 1/3 intended for exports PC SW & HB: 700k units for 2H , mostly intended for exports Investment of Tofaş Capex Period Total Investment US$1.4 bn PC Sedan US$520 mn will be complete in 4Q15 PC- SW & Hatchback US$520 mn will be complete in 2016 New Doblo US$360 mn completed in 4Q14 The contracts for export projects retain cost-plus and take-or-pay clauses. Competitive advantages of the new investment Higher CUR 2016 onwards (Capacity: 400k) Rising margins on new models Export hub for more strategically important products for Fiat Increase its exposure in the PC segment in Turkey More export oriented Enter new markets Excellence in R&D and technology update * New Doblo exports to US & Canada has started in 4Q

43 Other Automotive Companies TÜRK TRAKTÖR Turkey s Largest Farm Tractor Manufacturer 50-50% JV with Case New Holland Utilising flexible manufacturing system in tractors, providing a high degree of flexibility Strong dealership network and reputable brand image Global engineering and production hub for NHTD & Case IHJX tractors Rising production capacity on its new Adapazarı plant (since 2H14) Undisputable market leader with c. 50% share Profitability level among the highest in the industry in the world OTOKAR Largest Private Sector Defense Company in Turkey Manufacturer of : Minibuses and buses (2 out of 5 buses sold in Turkey were Otokar branded) 4x4 tactical vehicles and light-armored vehicles for the defense industry Trailers and semi-trailers for the transportation and logistic sector Significant emphasis on R&D: 91% sales stemmed from Otokar designed vehicles in 2014, Otokar has 157 owned patents and industrial designs Strong Potential: Higher demand in Turkish defense industry due to ongoing localization Increasing demand in key export markets; e.g. MENA, CIS, EE regions Leader in the 25+ passenger bus market Prime contractor for Turkey s first national tank project, ALTAY Designer of TULPAR, Turkey s first original tracked armored vehicle 43

44 Consumer Durables Sector Low Penetration Levels and Strong Margins Underpenetrated segments and renewals drive growth White Goods Penetration % Strong value proposition Strong R&D focus and innovative products Efficient and cost-effective outlet to multiple markets with over 1.5 billion customers EU Source : Euromonitor, Arçelik Turkey Competitive labor cost Strong supply base Favorable demographic dynamics Construction growth is a strong driver Occupancy permits (flats) Projected as the fastest growing economy in OECD between with 6.7% p.a. growth rate Rapid new household formation and urbanization Annual number of marriages : ~650, Source : Turkish Statistical Institute 44

45 ARÇELİK Provides Products and Services to Over 100 Countries Worldwide Privileged position in Turkey with superior exclusive dealer network (Extensive sales & after-sales network in Turkey) Highest level of brand recognition in Turkey 2 nd largest appliances company in Europe (Beko brand); gaining further market share with potential to improve pricing and margins Increasing penetration in international markets via new low-cost manufacturing centers & extended distribution network Manufacturing in low cost centers : Turkey, Romania, Russia, China & South Africa Turkey s market leader in white goods (50%), TVs and air-conditioners U.K. s market leader in refrigerator, freezer & washing machine Market leader in Romania & South Africa The only Turkish company in international Top 200 WIPO list (World Intellectual Property Organization) for five consecutive years Large player in Europe & strong EM exposure Turkey Regional Breakdown of Revenue % Western Europe CIS & Eastern Europe Africa FY Middle East FY14 Other Global Manufacturing Hub (Production in 5 countries)* Turkey: Refrigerator, Cooking Appliances, Washing machines, Dishwasher, Tumble Dryer, Electronics (TVs), Compressor, Electric Motors South Africa: Refrigerator, Freezor, Oven, Tumble Dryer, Cooking Appliances Romania: Cooling (Refrigerator and chest freezer) Russia: Refrigerator and Washing machine China: Washing machine R&D and Innovation for sustainability 197 patents filed annually #1 in Turkey Focus on energy and water efficient products Winner of the Most Innovative Company award, from the Turkish Exporters Assembly * The investment for a production facility in Thailand will be completed by year-end

46 Why Finance Sector? Low Penetration Levels, Providing an Opportunity for Rapid Growth Loans + Deposits / GDP % (2014) 226 Branches per million inhabitants 434 Mortgage loans / GDP % (2014) EU-27 Turkey EU-27 Turkey Euro Area Poland Turkey Source: European Central Bank, BRSA, CBRT, Turkstat Note: Expected 2014 GDP used for Hungary, Poland and EU17 penetration data. Loan data based on 2014 actual figures. (1) Excluding lending to credit institutions (2) Including housing loans, consumer lending and other household lending (including CC, excluding SMEs) Fast Growing, Healthy and Profitable Banking Sector - Booming Middle Class & Increasing Bankable Population Asset Quality Household Liabilities to GDP (%) Capital Adequacy Ratio (%) Bank Return on Equity (%) NPL Ratio (%) GDP Growth (%) Turkey Euro Area Source : ECB, BRSA, BAT 46

47 YAPI KREDİ BANK Market share gains with sustainable profitability Accelerating Growth Strong Fundamentals Solid Profitability Resilient Asset Quality Strategic Guidelines Increasing «natural market share» to 10% Remixing loan book towards more profitable segments CAR >14% and Tier-1 >10% LDR within comfortable band Investing in growth while maintaining discipline in ordinary costs Increasing trend in quarterly net income In line with sector NPL ratio evolution Stable CoR vs YE13 9.5% 9.1% Market Share Gains 10.2% Loans 10.0% % CAR 15.0% CAR CT1 11.6% T1 11.1% 10.9% pp 44% Deposits Results 104% 97% Loan Composition 27% 27% 19% 14% 54% 59% Loan / Deposit Ratio Retail Cards Cost / Income Net Income ROATE 47% Below sector excl. Growth investments 43% +2pp 45% YKB Sector NPL Ratio 3.5% -10bps 3.4% +20bps 2.6% 2.8% % Corp/Comm 116% Sector 112% YKB 12.8% 1Q14 2Q14 3Q14 4Q14 YKB Sector 1.27% Cost of Risk 2013 Level 1.17% YKB Sector LDR (inc TL bonds), Cost/Income and RoATE ratios for sector based on BRSA monthly data as of Dec 14 NPL ratio for sector based on BRSA weekly data as of 2 Jan 15 RoATE indicates return on average tangible equity (excl TL 979 mln goodwill); Cost of Risk, cumulative = (Total Loan Loss Provisions-Collections)/Total Gross Loans

48 YAPI KREDİ BANK Targeting above-sector growth 2015 Expectations E Banking Sector Loan growth 18% 17% Deposit growth 10% 15% NIM -20bps flat CoR flat flat NPL +20bps +20bps Yapı Kredi Bank Loan growth > Sector > Sector Deposit growth Aligned with loan growth Aligned with loan growth Revenue growth Cost/Income NPL & CoR NIM growth > sector Fee growth at low double digit > Sector Better than sector evolution NIM growth better/in line with sector Fee growth in low double digits Improving cost/income Investments at a milder pace Better than sector evolution 48

49 Yapı Kredi Subsidiaries and Other Finance Companies YAPI KREDİ LEASING YAPI KREDİ FACTORING YAPI KREDİ ASSET MANAGEMENT Leader with 18% share Leader with 17% share 2 nd in the market with 18% share YAPI KREDİ INVEST 3 rd in in equity transaction volume with 7% share KOÇFİNANS Turkey s first consumer finance company with a loan portfolio of TL 2.3bn All market shares as of year-end

50 Table of Contents Page 1. 1Q15 Earnings Review & 2015 Macroeconomic Assumptions Shareholder Structures Disclaimer Contacts

51 Group s Overall Financial Performance TL million Energy Automotive Consumer Durables Finance Other 1Q15 Total Change Over 1Q14 Total Combined Revenues * 11,988 7,544 2,960 4,697 2,163 29,353-1% Combined Gross Profit , ,909 13% Combined Operating Profit ** ,583 8% Combined Profit Before Tax ,014-18% Combined Net Income ,282-13% Consolidated Net Income *** % * Before intra-group revenue eliminations ** Excluding FX gains/losses and credit finance income/charges on trade receivables and payables (Combined operating profit reported in 1Q15 financial report is TL 1,364 mn) *** Koç Holding s consolidated net income after the share of JV partners and non-controlling interests 51

52 Combined Revenues Combined Revenues TLmn Segmental Combined Revenues Breakdown % -1% 29,602 29,353 Automotive 26% Energy 41% Durables 10% 1Q14 1Q15 Other 7% Finance 16% Segment Contribution to Combined Revenues TLmn 15,866-24% 11,988 5, % 7,544 2,938 +1% 2,960 3, % 4,697 1, % 2,163 Energy Automotive Durables Finance Other 1Q14 1Q

53 Combined Operating Profit * Combined Operating Profit TLmn Segmental Combined Operating Profit Breakdown % 1,470 +8% 1,583 Energy 23% Automotive 31% Other -3% Durables 11% 1Q14 1Q15 Segment Contribution to Combined Operating Profit TLmn Finance 38% +19% +28% 608-5% % Energy Automotive Durables Finance Other Q14 1Q15 * Excluding FX gains/losses and credit finance income/charges on trade receivables and payables 53

54 Combined Net Income Combined Net Income TLmn Segmental Combined Net Income Breakdown % 1,476-13% 1,282 Automotive 38% Energy 15% Other -1% Durables 10% 1Q14 1Q15 Segment Contribution to Combined Net Income TLmn Finance 39% -65% +16% +25% % -302% Energy Automotive Durables Finance Other -17 1Q14 1Q

55 Consolidated Net Income Consolidated Net Income TLmn Segmental Consolidated Net Income Breakdown % % 459 Automotive 41% Energy 15% Other -4% Durables 11% 1Q14 1Q15 Segment Contribution to Consolidated Net Income TLmn Finance 36% -66% % % % -308% Energy Automotive Durables Finance Other -19 1Q14 1Q

56 Combined Exports & International Sales Combined Exports US$mn Combined International Sales US$mn 3,457-6% 4,217-13% 3,254 3,668 1Q14 1Q15 1Q14 1Q

57 Combined Investments Combined Investments TLmn Segmental Investments Breakdown % 1, % 1,615 Automotive 32% Energy 47% Durables 7% 1Q14 1Q15 Other 2% Finance 12% 57

58 Koç Holding Net Cash Position Koç Holding Stand-Alone Net Cash Position Total Debt: ~US$ 0.76 bn Total Cash: ~US$ 1.43 bn Net Cash: ~US$ 674mn Consolidated Net Debt / Cash Excl. Finance 2014 ~US$ -3.3bn 1Q15 ~US$ -4.0bn 58

59 FX Position Koç Holding Stand-Alone FX Position 2014 US$ + 72mn 1Q15 US$ +70mn Koç Holding Consolidated FX Position FX Position Weighted by Effective Ownership Q Q15 US$ -3.3bn US$ -3.0bn* US$ -1.5bn US$ -1.2bn * The natural hedging mechanisms due to FX linked pricing of Tüpraş inventory account for ~US$1.0bn. Remaining US$ 2 billion short FX position comes mainly from Tüpraş RUP financing loans. Tüpraş applies cash flow hedge accounting for these investment loans under the related framework of IFRS. 59

60 Consolidated Main Financial Indicators Mn* US$ Mn* TL Mn TL Mn Change Change 31.Mar Mar Mar Mar.2014 %, TL %, US$ Revenues 4,966 5,598 13,759 15,683 q -12 q -21 Gross Profit ,916 1,792 p 7 q -4 Operating Profit q -26 q -33 Profit Before Tax q -46 q -51 Taxes (net) p 36 p 22 Net Income Before Non-controlling Interest q -26 q -33 Non-controlling Interest q -36 q -43 Net Income After Non-controlling Interest q -18 q -26 Total Assets 23,282 25,251 65,910 ** 63,941 p 3 q -8 Total Equity 10,207 11,070 28,895 ** 29,301 q -1 q -12 Shareholders' Equity 7,118 7,720 20,150 20,348 q -1 q -12 ** * EUR and USD amounts presented above are translated from TL for convenience purposes only and do not form part of these consolidated financial statements. Balance sheet items have been converted at the official TL exchange rate announced by the Central Bank of Turkey at 31 March 2015 ( TL=1 EUR and TL =1 USD); income statement items have been converted using the average exchange rate for the three month period ended 31 March 2015 ( TL=1 EUR and TL=1 USD). ** As of 31 December

61 2014 & 2015 Main Macroeconomic Assumptions 2014 Koç Holding 2015 Koç Holding 2015 Government GDP (TL billion) 1,755 1,943 1,945 GDP ($ billion) Growth (GDP, %) Inflation (CPI, year-end, %) USD/TL (year-end) USD/TL (average) EUR/TL (year-end) Exports ($billion) Imports ($billion) C/A Balance (Ratio to GDP, %) Budget Balance (Ratio to GDP, %)

62 Shareholder Structures as of March 2015 Koç Holding Koç Family: 68.51% Free Float: 22.35% Vehbi Koç Foundation: 7.15% Koç Pension Fund: 1.99% Energy Automotive Consumer Durables Finance Other Tüpraş SPV share: 51.00% Free float: 49.00% KH share: 43.70% (*) SPV KH share : 77.00% Aygaz: 20.00% Opet: 3.00% Aygaz KH share: 40.68% Other Koç: 10.53% Liquid Pet. Co.: 24.52% Free float: 24.27% Opet Tüpraş: 40.00% Other Koç: 10.00% Öztürk Group: 50.00% Ford Otosan KH share: 38.46% Ford: 41.04% Other Koç: 2.58% Free float: 17.93% Tofaş KH share: 37.59% Fiat: 37.86% Other Koç: 0.27% Free float: 24.29% TürkTraktör KH share: 37.50% CNH Osterreich GMBH : 37.50% Free float: 24.95% Other: 0.05% Otokar KH share: 44.68% Ünver Hold.: 24.81% Other Koç: 3.29% Free float: 27.22% Arçelik KH share: 40.51% Other Koç: 16.73% Burla Group: 17.61% Free float: 25.15% Koç Financial Services KH share: 37.55% Other Koç: 12.45% Unicredit Bank Austria: 50.0% Yapı Kredi Bank KFS: 81.80% Free float: 18.20% KH share: 32.89% (*) Tat Gıda KH share: 43.65% Other Koç: 9.69% Partner: 5.26% Free float: 41.41% (*) Effective stake indirectly through subsidiaries 62

63 Disclaimer This presentation does contain forward-looking statements that reflect the Company management s current views with respect to certain future events based on the base-case assumptions. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially. Neither Koç Holding nor any of its directors, managers or employees nor any other person shall have any liability whatsoever for any loss arising from the use of this presentation. 63

64 For Further Questions, Please Contact : investorrelations@koc.com.tr Funda Güngör Akpınar, Coordinator Investor Relations fundag@koc.com.tr Gizem Bodur, Manager Investor Relations gizemb@koc.com.tr Neslihan Aycıl, Manager Investor Relations neslihana@koc.com.tr