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IMPORTANT NOTICE

THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QIBS (AS DEFINED BELOW) OR (2) PERSONS OTHER THAN US PERSONS (AS DEFINED IN REGULATION S UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT)) LOCATED OUTSIDE OF THE UNITED STATES

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached offering circular (the “Document”) following this page and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached Document. In accessing the attached Document, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from the Company or the Managers (as defined in the Document) as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER US JURISDICTION, AND THE NOTES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, US PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. PROSPECTIVE PURCHASERS THAT ARE QIBS ARE HEREBY NOTIFIED THAT THE SELLER OF THE NOTES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE US SECURITIES ACT PURSUANT TO RULE 144A.

THE ATTACHED DOCUMENT MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER AND, IN PARTICULAR, MAY NOT BE FORWARDED TO ANY US ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES.

Confirmation of your representation: In order to be eligible to view the attached Document or make an investment decision with respect to the securities being offered, prospective investors must be either (1) Qualified Institutional Buyers (“QIBs”) (within the meaning of Rule 144A (“Rule 144A”) under the Securities Act) or (2) a person other than a US person (as defined in Regulation S under the Securities Act) located outside the United States. This Document is being sent to you at your request, and by accepting the email and accessing this Document you shall be deemed to have represented to the Company and the Managers that (1) either (a) you and any customers you represent are QIBs or (b) you are a person other than a US person (as defined in Regulation S under the Securities Act) located outside the United States and you are purchasing the securities being offered in an offshore transaction (within the meaning of Regulation S under the Securities Act) and the electronic mail address that you gave us and to which this email has been delivered is not located in the United States, and (2) you consent to delivery of such Document by electronic transmission.

You are reminded that this Document has been delivered to you on the basis that you are a person into whose possession this Document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver or disclose the contents of this Document to any other person.

The materials relating to this offering of securities do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that this issuance of securities be made by a licensed broker or dealer, and the Managers or any affiliates of the Managers is a licensed broker or dealer in the relevant jurisdiction, this offering shall be deemed to be made by the Managers or such affiliates on behalf of the Company in such jurisdiction.

The attached Document may only be distributed to, and is only directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), (b) high net worth bodies corporate falling within Article 49(2) of the Order, and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this Document or any of its contents.

The attached Document has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Company or the Managers, any person who controls them or any director, officer, employee or agent of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Document distributed to you in electronic format and the hard copy version available to you on request from the Managers. OFFERING CIRCULAR

KOÇ HOLDI˙NG A.S¸. US$750,000,000 3.500 per cent. Notes due 2020 Koç Holding A.S¸., a joint stock company (the “Company”, “Koç Holding”or“Issuer”), is issuing US$750,000,000 3.500 per cent. Notes due 2020 (the “Notes”). The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities or “blue sky” laws of any state of the United States of America (“United States”or “US”), the United Kingdom or any other jurisdiction, and are being offered: (a) for sale in the United States (the “US Offering”) to qualified institutional buyers only (each a “QIB”) as defined in, and in reliance upon, Rule 144A under the Securities Act (“Rule 144A”) and (b) for sale to non-US persons (as defined in Regulation S under the Securities Act (“Regulation S”)) outside the United States (the “International Offering” and, with the US Offering, the “Offering”) in reliance upon Regulation S. Prospective purchasers that are QIBs are hereby notified that the seller of the Notes may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act pursuant to Rule 144A. Investors in the Notes will be deemed to have made or be required to make certain representations and warranties in connection with purchasing the Notes. For a description of certain restrictions on sale and transfer of investments in the Notes, see “Plan of Distribution”, “Selling Restrictions” and “Transfer Restrictions” herein. INVESTING IN THE NOTES INVOLVES RISKS. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER “RISK FACTORS” BEGINNING ON PAGE 10 OF THIS OFFERING CIRCULAR. Interest on the Notes will be paid in arrear on the 24th day of each April and October provided that if any such date is not a Business Day (as defined below), then such payment will be made on the next Business Day. Principal of the Notes is scheduled to be paid on 24 April 2020, but may be paid earlier under certain circumstances as further described herein. The Notes initially will be sold to investors at a price equal to 99.582 per cent. of the principal amount thereof. For a more detailed description of the Notes, see “Conditions of the Notes”. This Offering Circular (the “Offering Circular”) has been approved by the Central Bank of Ireland, as competent authority under Directive 2003/71/EC (the “Prospectus Directive”) as amended (which includes the amendments made by Directive 2010/73/EU to the extent that such amendments have been implemented in a relevant Member State of the European Economic Area. The Central Bank of Ireland only approves this Offering Circular as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on its regulated market (the “Main Securities Market”). Such approval only relates to Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC and/or which are to be offered to the public in any Member State of the European Economic Area. References in this Offering Circular to the Notes being “listed” (and all related references) will mean that the Notes have been admitted to the Official List and have been admitted to trading on the Main Securities Market. The Main Securities Market is a regulated market for the purposes of Directive 2004/39/EC. Application has been made to the Capital Markets Board of Turkey (the “CMB”) in its capacity as competent authority under Law No. 6362 of the Republic of Turkey (“Turkey”) relating to capital markets (the “Capital Markets Law”) for the issuance and sale of the Notes by the Company outside Turkey. The issuance of the Notes was approved by the CMB on 26 March 2013, and the issuance certificate relating to the Notes is expected to be approved by the CMB on or about 24 April 2013. Under current Turkish tax law, a local withholding tax at the rate of 0 per cent. applies to interest on the Notes. See “Taxation-Certain Turkish Tax Considerations”. The Notes are expected to be rated at issuance BBB- by Standard & Poor’s Credit Market Services Europe Limited (“S&P”) and Baa3 by Moody’s Deutschland GmbH (“Moody’s” and, together with S&P, the “Rating Agencies”). The Rating Agencies have also issued ratings in respect of the Turkish government. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. As of the date of this Offering Circular, each of the Rating Agencies is established in the European Union and is registered under Regulation (EU) No 1060/2009, as amended (the “CRA Regulation”). The Notes are being offered under Rule 144A and Regulation S by each of BNP Paribas, Citigroup Global Markets Limited, Deutsche Bank AG, London Branch, Merrill Lynch, Pierce, Fenner & Smith Incorporated (each, a “Joint Lead Manager”) and UniCredit Bank Austria AG (a “Co-Manager” and with the Joint Lead Managers, the “Managers”), subject to their acceptance and right to reject orders in whole or in part. The Notes will initially be represented by two global certificates in registered form (the “Global Certificates”), one of which will be issued in respect of the Notes (“Rule 144A Notes”) offered and sold in reliance on Rule 144A (the “Restricted Global Certificate”) and will be registered in the name of Cede & Co., as nominee for DTC, and the other of which will be issued in respect of the Notes (“Regulation S Notes”) offered and sold in reliance on Regulation S (the “Unrestricted Global Certificate”) and will be registered in the name of a nominee of a common depositary for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). It is expected that delivery of the Global Certificates will be made in immediately available funds on 24 April 2013 (i.e. the 4th Business Day following the date of pricing of the Notes (such date being referred to herein as the “Issue Date” and such settlement cycle being herein referred to as “T+4”). Joint Lead Managers BofA Merrill Lynch BNP PARIBAS Citigroup Deutsche Bank

Co-Manager UniCredit Bank Austria

The date of this Offering Circular is 19 April 2013. This Offering Circular constitutes a Prospectus for the purpose of Article 5 of the Prospectus Directive. This Offering Circular is to be read in conjunction with the Consolidated Financial Statements (as defined in “Presentation of Financial and Other Information—Financial Information—Financial statements of the Group”), which form part of this Offering Circular and are included herein.

This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Company and the Managers to subscribe for or purchase, any Notes (or beneficial interests therein). This Offering Circular is intended only to provide information to assist potential investors in deciding whether or not to subscribe for or purchase Notes (or beneficial interests therein) in accordance with the terms and conditions specified by the Managers. The Notes (and beneficial interests therein) may not be offered or sold, directly or indirectly, and this Offering Circular may not be circulated, in any jurisdiction except in accordance with legal requirements applicable to such jurisdiction.

The distribution or delivery of this Offering Circular and the offer or sale of the Notes (or beneficial interests therein) in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular may come are required by the Company and the Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of the Notes (or beneficial interests therein) and on the distribution or delivery of this Offering Circular and other offering material relating to the Notes, see “Selling Restrictions” and “Transfer Restrictions”.

No person has been authorised in connection with the offering of the Notes (or beneficial interests therein) to give any information or make any representation regarding the Group (as defined below), the Managers or the Notes other than as contained in this Offering Circular. Any such representation or information must not be relied upon as having been authorised by the Company or the Managers. The delivery of this Offering Circular at any time does not imply that there has been no change in the Group’s affairs or that the information contained in it is correct as of any time subsequent to its date or that any other information supplied in connection with the Offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same. This Offering Circular may only be used for the purpose for which it has been published. The Managers expressly do not undertake to review the financial condition or affairs of the Company during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. None of the Managers assumes any responsibility or liability for the accuracy or completeness of the information set forth in this Offering Circular. No Manager accepts any liability in relation to the information contained in this Offering Circular or any other information provided by the Company in connection with the offer or sale of the Notes or their distribution. Each person receiving the Offering Circular acknowledges that such person has not relied on any of the Managers in connection with its investigation of the accuracy of such information or its investment decision and each person must rely on its own assessment of the Company.

Neither this Offering Circular nor any other information supplied in connection with the offering of the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer or any of the Managers that any recipient of this Offering Circular or any other information supplied in connection with the offer or sale of the Notes should purchase the Notes. Each person contemplating making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Company and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors that may be relevant to it in connection with such investment. In particular, each potential investor should: • have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Circular or any applicable supplement; • have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; • have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal and interest payments is different from the potential investor’s currency; • understand thoroughly the terms of the Notes and be familiar with the behaviour of financial markets in which they participate; and • be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

-i- None of the Company, the Managers or any of their respective representatives is making any representation to any offeree or purchaser of the Notes (or beneficial interests therein) regarding the legality of any investment by such offeree or purchaser under applicable legal investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of an investment in the Notes.

GENERAL INFORMATION

The Notes have not been and will not be registered under the Securities Act or under the securities or “blue sky” laws of any state of the United States or any other US jurisdiction. Each investor, by purchasing a Note (or a beneficial interest therein), agrees that the Notes (or beneficial interests therein) may only be reoffered, resold, pledged or otherwise transferred only upon registration under the Securities Act or pursuant to the exemptions therefrom described under “Transfer Restrictions”. Each investor also will be deemed to have made certain representations and agreements as described therein. Any resale or other transfer, or attempted resale or other attempted transfer, that is not made in accordance with the transfer restrictions may subject the transferor and transferee to certain liabilities under applicable securities laws.

The offering of the Notes has been authorised by the CMB only for the purpose of the sale of the Notes outside of Turkey in accordance with Article 15(b) of Decree 32 on the Protection of the Value of the Turkish Currency (as amended from time to time, “Decree 32”), the Capital Markets Law No. 6362 and the Communiqué Serial II, No. 22 on the Principles on the Registration and Sale of Debt Instruments (the “Communiqué”). The Notes (or beneficial interests therein) have to be offered or sold outside of Turkey and the CMB has authorised the offering of the Notes; provided that, following the primary sale of the Notes, no transaction that may be deemed as a sale of the Notes (or beneficial interests therein) in Turkey by way of private placement or public offering may be engaged in. Pursuant to Article 15(d)(ii) of Decree 32, there is no restriction on the purchase or sale of the Notes (or beneficial interests therein) by residents of Turkey; provided that they purchase or sell such Notes (or beneficial interests) in the financial markets outside of Turkey and such sale and purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations and the purchase price is transferred through banks. As such, Turkish residents should use banks or licensed brokerage institutions when purchasing Notes (or beneficial interests therein) and transfer the purchase price through banks. The issuance certificate relating to the Notes is expected to be approved by the CMB on or about 24 April 2013. This Offering Circular is being provided on a confidential basis in the United States to a limited number of QIBs for informational use solely in connection with the consideration of the purchase of the Notes. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.

Notes offered and sold to QIBs in reliance upon Rule 144A will be represented by beneficial interests in one or more permanent global certificates in fully registered form without interest coupons. Notes offered and sold outside the United States to non-US persons pursuant to Regulation S will be represented by beneficial interests in one or more permanent global certificates in fully registered form without interest coupons. Except as described in this Offering Circular, beneficial interests in the Global Certificates will be represented through accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC, Euroclear and Clearstream, Luxembourg. Except as described in this Offering Circular, owners of beneficial interests in the Global Certificates will not be entitled to have the Notes registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered holders of the Notes under the Notes and the Agency Agreement.

An application has been made to admit the Notes to listing on the Official List and to have the Notes admitted to trading on the Main Securities Market, however, no assurance can be given that such application will be accepted.

In connection with the issue of the Notes, Citigroup Global Markets Limited (the “Stabilising Manager”) (or persons acting on behalf of the Stabilising Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail; however, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake any stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the Issue Date and 60 days after the date of the allotment of the Notes. Any stabilisation action or over-allotment must be conducted by the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules. Notwithstanding anything herein to the contrary, the Company may not (whether through over-allotment or otherwise) issue more Notes than have been approved by the CMB.

-ii- Other than authorisation by the CMB, the Notes have not been approved or disapproved by the US Securities and Exchange Commission (the “SEC”), any state securities commission or any other US, Turkish, Irish, United Kingdom or other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this Offering or the accuracy or adequacy of this Offering Circular. Any representation to the contrary may be a criminal offence.

The distribution of this Offering Circular and the offering of the Notes (and beneficial interests therein) in certain jurisdictions may be restricted by law. Persons that come into possession of this Offering Circular are required by the Company and the Managers to inform themselves about and to observe any such restrictions.

This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy the Notes (or any beneficial interest therein) in any jurisdiction to the extent that such offer or solicitation is unlawful. In particular, there are restrictions on the distribution of this Offering Circular and the offer and sale of the Notes (and beneficial interests therein) in the United States, Turkey, Ireland, the United Kingdom and numerous other jurisdictions.

In this Offering Circular, “Company”or“Koç Holding”or“Issuer” means Koç Holding A.S¸. on a stand alone basis, and “Group” means the Company and its consolidated subsidiaries and joint ventures. Unless otherwise noted, references to “management” are to the members of the Company’s board of directors and statements as to the Company’s beliefs, expectations, estimates and options are to those of the Company’s management.

RESPONSIBILITY STATEMENT

The Company accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge and belief of the Company (which has taken all reasonable care to ensure that such is the case), the information contained in this Offering Circular is in accordance with the facts and contains no omission likely to affect the import of such information.

The Company has extracted substantially all of the information contained in this Offering Circular concerning the Turkish market and its competitors from publicly available information, including press releases and filings made under various securities laws. Unless otherwise indicated, all data relating to the Turkish economy, including statistical data, has been obtained from the website of the Turkish Statistical Institute (Türkiye Istatistik Kurumu) (“TurkStat”) at www.turkstat.gov.tr, the website of the Central Bank of Turkey (Türkiye Cumhuriyet Merkez Bankası) (the “Central Bank”) at www.tcmb.gov.tr or the Turkish Treasury’s (T.C. Bas¸bakanlık Hazine Müstes¸arlıg˘ı) website at www.hazine.gov.tr. Data have been downloaded/observed on various different days and may be the result of calculations made by the Company, and therefore may not appear in the exact same form on such websites or elsewhere. Such websites do not, and should not, be deemed to be a part of, or to be incorporated into, this Offering Circular.

Where third-party information has been used in this Offering Circular, the source of such information has been identified. In the case of the presented statistical information, similar statistics may be obtainable from other sources, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source. Where information has been sourced from a third party, such publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Information regarding the Company’s shareholders (including ownership levels and agreements) in the “Business” and “Share Capital, Ownership and Related Party Transactions” sections has been based upon public filings and announcements by such parties. Such data (including from TurkStat and the Central Bank), while believed to be reliable and accurately extracted by the Company for the purposes of this Offering Circular, has not been independently verified by the Company or any other party and prospective investors should not place undue reliance upon such data included in this Offering Circular. As far as the Company is aware and able to ascertain from the information published by such third-party sources, this information has been accurately reproduced and no facts have been omitted that would render the reproduction of this information inaccurate or misleading.

- iii - NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED (THE “RSA”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE NEW HAMPSHIRE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE NEW HAMPSHIRE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

TURKISH TAX CONSIDERATIONS

The withholding tax rates on interest payments of bonds issued by Turkish legal entities outside of Turkey vary depending upon the original maturity of such bonds as specified under Decree No. 2010/1182 published on 29 December 2010 and Decree No. 2011/1854 published 29 June 2011 (together, the “Decrees”). According to the Decrees, the local withholding tax rate on interest payments is 0 per cent. for notes with an initial maturity of five years and more. See “Taxation—Certain Turkish Tax Considerations”.

AVAILABLE INFORMATION

THE COMPANY HAS AGREED THAT, FOR SO LONG AS ANY NOTES ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144(a)(3) UNDER THE SECURITIES ACT, IT WILL, DURING ANY PERIOD IN WHICH IT IS NEITHER SUBJECT TO AND IN COMPLIANCE WITH SECTION 13 OR 15(D) OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”), NOR EXEMPT FROM REPORTING PURSUANT TO RULE 12g3-2(b) THEREUNDER, FURNISH UPON REQUEST TO ANY HOLDER OR BENEFICIAL OWNER OF NOTES, OR ANY PROSPECTIVE PURCHASER DESIGNATED BY ANY SUCH HOLDER OR BENEFICIAL OWNER, THE INFORMATION SPECIFIED IN, AND MEETING THE REQUIREMENTS OF, RULE 144A(d)(4) UNDER THE SECURITIES ACT.

-iv- CONTENTS

Page OVERVIEW OF THE GROUP ...... 1 RISK FACTORS ...... 10 SUMMARY FINANCIAL INFORMATION ...... 36 OVERVIEW OF THE NOTES ...... 40 PRESENTATION OF FINANCIAL AND OTHER INFORMATION ...... 43 FORWARD-LOOKING STATEMENTS ...... 47 USE OF PROCEEDS ...... 49 EXCHANGE RATES ...... 50 CAPITALISATION OF THE GROUP ...... 51 SELECTED FINANCIAL INFORMATION ...... 52 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 57 BUSINESS ...... 105 MANAGEMENT ...... 173 SHARE CAPITAL, OWNERSHIP AND RELATED PARTY TRANSACTIONS ...... 180 CONDITIONS OF THE NOTES ...... 181 THE GLOBAL CERTIFICATES ...... 192 BOOK-ENTRY CLEARANCE SYSTEMS ...... 194 TAXATION ...... 196 PLAN OF DISTRIBUTION ...... 200 SELLING RESTRICTIONS ...... 202 TRANSFER RESTRICTIONS ...... 204 ENFORCEMENT OF JUDGMENTS AND SERVICE OF PROCESS ...... 207 LEGAL MATTERS ...... 209 OTHER GENERAL INFORMATION ...... 210 INDEX OF DEFINED TERMS ...... 212 ANNEX A: SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IFRS AND CMB FINANCIAL REPORTING STANDARDS ...... A-1 ANNEX B: SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IFRS AND BRSA ACCOUNTING PRINCIPLES ...... B-1 INDEX TO FINANCIAL STATEMENTS ...... F-1 OVERVIEW OF THE GROUP

Koç Holding is a diversified holding company and the parent company of the Koç group of companies, the largest conglomerate in Turkey in terms of revenues, exports, employees and market capitalisation on the Borsa I˙stanbul (formerly, the Istanbul Stock Exchange) in 2012.

As of 31 December 2012, the market capitalisation of Koç Holding was USD 13,210 million.

Koç Holding has been listed on the Borsa I˙stanbul since January 1986. The Group ranked 222nd in the Fortune 500 in 2012 (based on 2011 consolidated revenues) and had consolidated revenues of USD 47,327 million in 2012. As of 31 December 2012, the Group’s combined revenues (the sum total of the revenues of the Company’s subsidiaries and joint ventures) were as high as 9 per cent. of Turkey’s GDP, its combined exports represented 10 per cent. of Turkey’s total exports and its share in the total market capitalisation of the Borsa˙ Istanbul was 16 per cent.. The Group owns companies with operations in 34 countries and employed 82,158 employees as of 31 December 2012, 73,869 of whom were in Turkey and 8,289 of whom were in other countries. The Group has leading positions in each of its five main business segments: energy, automotive, consumer durables, finance, and other. For the year ended 31 December 2012, the Group had consolidated revenue of TL 84,833 million (USD 47,327 million), consolidated EBITDA of TL 5,613 million (USD 3,132 million) and consolidated net income of TL 2,315 million (USD 1,291 million) (after non-controlling interest). As of 31 December 2012, the Group had consolidated total assets of TL 109,067 million (USD 61,184 million).

Koç Holding focuses on those sectors with low levels of penetration and secures competitive advantage via large distribution networks, economies of scale and customer relationship management (“CRM”) applications. The Company has been one of the main beneficiaries of the new operating environment in Turkey vis-à-vis privatisations and disposals, restructuring its portfolio to maximise returns. In line with the increasing level of foreign direct investment and privatisations in the Turkish market during the last decade, Koç Holding made significant acquisitions such as Tüpras¸ (acquired in 2006) in the energy sector and Yapı Kredi (acquired in 2005) in the banking sector. Between 2006 and 2008, Koç Holding adopted a proactive disposal policy to divest those companies such as Migros, Demirdöküm, Döktas¸ and I˙zocam which no longer fit into its portfolio, either in terms of growth or profitability prospects. All of these companies were disposed in line with announced time periods and mostly ahead of the 2008 financial crisis.

Each of the Group’s segments is described below.

Energy In the Energy Segment, the Group owns the only oil refiner in Turkey (Tüpras¸), the leading LPG distribution company (Aygaz), the fastest growing oil distribution company (Opet) and a power-generation company (AES Entek). Tüpras¸ is the seventh largest oil refinery company in Europe (as measured by refinery capacity according to the Oil & Gas Journal in 2012) and Turkey’s largest industrial company in 2011 as measured by sales from production (according to the˙ Istanbul Chamber of Industry). Tüpras¸’s principal assets are four oil refineries located at I˙zmit, I˙zmir, Kırıkkale and Batman in Turkey. The annual total design refining capacity of the four refineries was 28.1 million MT as of 31 December 2012. Tüpras¸’s refineries produce a full range of refined petroleum products including diesel (also referred to as gas oil), fuel oils, jet fuel, gasoline, asphalt, LPG, naphtha and lubricant base stocks. Tüpras¸ also imports and resells certain petroleum products and engages in the distribution, retailing and marine transportation of crude oil and refined products. As of 31 December 2012, 77 per cent. of Tüpras¸’s sales (by volume) were domestic, with exports accounting for the remainder. Opet is the second largest oil distribution company in Turkey and currently ranks second with 18.5 per cent. (according to the Turkish Petroleum Industry Association (“Petder”)) of the white products (meaning refined products having greater economic value than crude oil) market. It has 1,325 gas stations nationwide. Aygaz is the Group’s first energy company and since its establishment, it has been the leader of the LPG sector in Turkey. Aygaz sells and distributes LPG and also manufactures LPG products, both domestically and internationally. It has a market share of 29 per cent. in Turkey, (according to the Energy Markets Regulatory Authority (“EMRA”)). Aygaz is ranked 10th in the Istanbul Chamber of Industry’s “Turkey’s Top 500 Industrial Enterprises 2011” ranking. Aygaz serves customers in 81 provinces through 2,290 cylinder gas dealers and 1,491 autogas stations. AES Entek, the Group’s power generation company, operates two natural gas and three hydroelectric power plants and has a combined capacity of 364 MW which accounts for 1.6 per cent. of Turkey’s private sector installed capacity.

-1- For the year ended 31 December 2012, the Group’s Energy Segment had total assets of TL 23,177 million, total revenue of TL 53,486 million and EBITDA of TL 1,661 million accounting for 21 per cent., 63 per cent. and 30 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

Automotive The Group’s principal automotive companies, Ford Otosan and Tofas¸, lead the Turkish automotive industry, accounting for 50 per cent. of total Turkish automotive production, 47 per cent. of automotive exports and 27 per cent. of total automotive sales in Turkey in 2012 (according to the Automotive Manufacturers’ Association and company data). Ford Otosan, a joint venture with Ford Motor Company (“Ford”), offers a wide range of products in the Turkish market and Tofas¸, a joint venture with Fiat Group Automobiles S.p.A. (“Fiat”), is the only automotive company in Turkey that manufactures both passenger and commercial vehicles. Other companies that comprise the Group’s Automotive Segment include TürkTraktör which produces over half of all tractors sold in Turkey in 2012 (according to TurkStat), Otokar, Turkey’s largest private sector defence industry company and market leader in the Turkish bus market (according to TAI˙D-Turkish Heavy Commercial Vehicles Association and company data) and Otokoç, an automotive retailing and car rental company.

For the year ended 31 December 2012, the Group’s Automotive Segment had total assets of TL 6,002 million, total revenue of TL 10,139 million and EBITDA of TL 1,038 million accounting for 6 per cent., 12 per cent. and 18 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

Consumer Durables The largest company of the Group’s Consumer Durables Segment is Arçelik, a leading producer of white goods and consumer electronics, including its consolidated subsidiaries. Arçelik is the third largest white goods company in Europe (by unit volumes) and has strong market positions in Turkey, Europe, the Middle East, Commonwealth of Independent States (“CIS”) countries and Africa, which in aggregate accounted for approximately 98 per cent. of its revenues in 2012. Arçelik has manufacturing centres not only in Turkey, but also in Romania, Russia, China and South Africa. Brands owned by Arçelik include the Arçelik brand, Beko, Arctic and Defy, among others. Arçelik focuses on innovation and customer appeal in its product lines and places a particular emphasis on environmentally friendly and energy efficient technology. The other company in the Consumer Durables Segment, Arçelik LG Klima, the first and largest air-conditioner manufacturer in Turkey, is a joint venture company with LG Electronics.

For the year ended 31 December 2012, the Group’s Consumer Durables Segment had total assets of TL 9,105 million, revenue of TL 10,665 million and EBITDA of TL 1,052 million accounting for 8 per cent., 12 per cent. and 19 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

Finance The Group’s Finance Segment mainly consists of Yapı Kredi, a joint venture with Unicredit, the fourth largest private bank in Turkey by total assets with an 8.9 per cent. market share as of year-end 2012 (according to the Banking Regulation and Supervision Agency (“BRSA”) statistics). Yapı Kredi is a full service bank providing credit cards, consumer banking, retail banking (including SME banking), corporate and commercial banking, private banking and asset management services to approximately 6.5 million customers through 928 branches located in more than 70 cities. As of 31 December 2012, the Bank held leading market positions in Turkey in credit cards (19.4 per cent. market share in outstanding volume and 19.3 per cent. market share in credit card acquiring volume, according to data from the Interbank Card Centre), leasing (17.2 per cent. market share according to the Turkish Leasing Association) and factoring (15.0 per cent. market share according to the Turkish Factoring Association).

For the year ended 31 December 2012, the Group’s Finance Segment had total assets of TL 67,118 million, revenue of TL 7,331 million and EBITDA of TL 1,623 million accounting for 62 per cent., 9 per cent. and 29 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

Other The Group’s Other Segment includes Tat Konserve (one of the largest food companies in Turkey), Koçtas¸(a market leader in Turkey’s home improvement/DIY sector) and other smaller scale companies such as Setur (tourism), Divan (hotel management and food and beverage) and RMK Marine (ship and yacht construction, repair and maintenance).

-2- For the year ended 31 December 2012, the Group’s Other Segment had total assets of TL 3,641 million, revenue of TL 4,479 million and EBITDA of TL 143 million accounting for 3 per cent., 5 per cent. and 3 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

The following table sets forth revenue, EBITDA and additional information for each of the Group’s segments for the year ended 31 December 2012.

%of consolidated % share of Segment total Segment consolidated revenues revenues EBITDA EBITDA (in thousands of TL, except percentages) Energy ...... 53,485,826 63.0% 1,661,337 29.6% Automotive ...... 10,139,250 12.0% 1,038,344 18.5% Consumer Durables ...... 10,664,968 12.6% 1,051,748 18.7% Finance ...... 7,331,222 8.6% 1,623,237 28.9% Other ...... 4,478,719 5.3% 142,637 2.5%

For further information on the Group’s principal operating companies, including the Group’s total voting rights, effective ownership interest and consolidation percentage applied in the preparation of the Group’s consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview”.

History and Development The Group was founded in Ankara, Turkey in 1926. Following the post-war period and in line with the industrialisation of Turkey, in the late 1940s, the Group entered the manufacturing sector through joint ventures and licence agreements to gain know-how and technology, ultimately producing light bulbs, automobiles and refrigerators, amongst other products. The Company was incorporated in 1963 as the holding company for the Group. The Company made inroads into the banking sector in 1992 by acquiring all of the remaining shares of Koç-American Bank which had been established as a joint venture with the American Express Company in 1986. The bank was merged with Yapı Kredi in 2006 to create one of Turkey’s largest retail banking franchises. In the same year, the Group completed the acquisition of Tüpras¸. Since 2006, the Group has focused mostly on growth in the energy, automotive, consumer durables and finance sectors.

Strengths Koç Holding is the largest holding company in Turkey with over 85 years of experience since the establishment of the Group in 1926. Below is a summary of the Company’s key strengths:

Leading positions in under-penetrated markets with strong growth potential The Group has strong and leading market positions in Turkey in every business it operates as shown in the table below. The Group is the largest player in Turkey’s energy sector through Tüpras¸, Turkey’s sole refiner, meeting approximately 60 per cent. of the domestic demand excluding industrial products; Aygaz, the leading LPG distribution company, leading the domestic LPG industry with 29 per cent. market share in terms of total sales volume, and Opet, the second largest oil distribution company with a market share of 18.5 per cent. in Turkey in terms of white products sales volume.

In the Automotive Segment, the Group accounts for half of the automotive manufacturing and exports in Turkey and represents approximately one-third of the total automotive sales. Both the first and second largest automotive companies in Turkey (based on sales), Ford Otosan and Tofas¸, are members of the Group. In the farm tractor business, TürkTraktör leads the market with a 50 per cent. market share (based on traffic registration units).

In the Consumer Durables Segment, the Company owns Arçelik, which is a leading producer of white goods and consumer electronics, with over 50 per cent. market share in 2012 in Turkey’s white goods market (based on wholesale units).

In the Finance Segment, Yapı Kredi is the fourth largest player amongst the privately owned banks in Turkey (based on total assets) with a leading position in credit cards (with a 19 per cent. market-leading share), leasing and factoring.

-3- The following table sets forth the market position and market share of the main Group companies, as of 31 December 2012.

Industry Company Market position Market share ENERGY Refinery Tüpras¸ Leader Turkey’s sole oil refinery Fuel Distribution Opet 2nd 19 per cent.(1) LPG Distribution Aygaz, Mogaz Leader 29 per cent.(2)

AUTOMOTIVE Automotive Ford Otosan / Tofas¸/ Leader 27 per cent.(3) Otokar Passenger Cars Leader 17 per cent.(3) Commercial Vehicles Leader 49 per cent.(3) Farm Tractors TürkTraktör Leader 50 per cent.(4)

CONSUMER DURABLES White Goods & Consumer Arçelik Leader over 50 per cent.(5) Electronics Air Conditioners Arçelik LG Klima Leader (6)

FINANCE Banking Yapı Kredi Bankası 4th(7) 9 per cent. Leader(7) 19 per cent.(8) Leasing Yapı Kredi Leasing Leader 17 per cent.(9) B-Type Investment Trust Yapı Kredi Yatırım 2nd 11 per cent.(10) Ortaklıg˘ı Pension Funds Yapı Kredi Emeklilik 3rd 17 per cent.(11) Factoring Yapı Kredi Faktoring Leader 15 per cent.(12) Brokerage Yapı Kredi Yatırım2nd 7 per cent.(13) Asset Management Yapı Kredi Portföy 2nd 18 per cent.(14) Yönetimi

OTHER LINES OF BUSINESS Food Production Tat Konserve Leader (15) DIY Retailing Koçtas¸ Leader(16)

(1) Based on sales volume of white products, according to Petder data (2) Based on sales volume, according to EMRA (3) Based on domestic sales volume, according to the Automotive Manufacturers’ Association and company data (4) Based on traffic registration units, according to TurkStat (5) Based on wholesale units, according to TURKBESD (6) Based on sales units according to GfK data (7) Based on private sector asset size as of 31 December 2012, according to BRSA statistics (8) Based on credit card outstanding volume as of 31 December 2012, according to the Interbank Card Centre data (9) According to the Turkish Leasing Association (10) According to company data (11) Based on private pension fund size, according to data from the Pension Monitoring Centre (12) Based on total transactions in 2012 (13) Based on the equity market, according to Borsa˙ Istanbul Data Publications (14) Based on data from CMB

-4- (15) Based on revenue of tomato paste, tomato products, premium pasta, ketchup and daily fresh milk, according to Nielsen Retailing Measurement Reports (16) Based on total store area, according to market intelligence gathered from public sources by Koçtas¸

In each of these sectors, levels of market penetration had been quite low given weaker economic fundamentals in Turkey. However, the transformation in the economy and the operating environment in recent years, which has been reflected in lower interest rates, lower inflation, increased financing sources, higher levels of foreign direct investment and increased consumer confidence, have led to increasing levels of market penetration in each of these sectors. By securing leading positions in these sectors, the Company believes it will benefit from any growth potential and plans to continue to consolidate and strengthen its competitive positions.

Consumer Energy Automotive Durables Finance Car Ownership Per capita per ‘000 (Loans + energy (passenger White Goods Deposits) / consumption—Toe cars) Penetration GDP (%) EU* ...... 3.5 473 92 380 Turkey** ...... 1.4 106 70 107 * Eurostat (2009-2010), Euromonitor, ECB; **Eurostat, TurkStat, Company Data, BRSA

Optimum portfolio diversification The Company believes the mix of its assets is optimised to maintain strong cash flows (and thus dividends to the Company) and diversification among sectoral and geographical risks. The Company has a balanced portfolio of defensive and growth assets. Approximately half of the Company’s assets such as Tüpras¸, Ford Otosan, Aygaz, Tofas¸ and TürkTraktör are classified as wealth preservation, targeting growth in line with economic activity but offering strong cash flow and high dividend potential, while the other half of its assets such as Yapı Kredi, Arçelik and AES Entek have the potential to outperform overall levels of GDP growth in Turkey, but with lower dividend potential.

The Company seeks to ensure that profits are diversified across sectors, with the effect that the cyclical nature of certain sectors and other sector-specific sensitivities are balanced out among different business segments. The share of Finance, Automotive, Energy and Consumer Durables Segments are 29 per cent., 19 per cent., 30 per cent. and 19 per cent., respectively in EBITDA as of year-end 2012.

Geographically, the Group has been increasing its global reach while diversifying the composition of different regions within its coverage through international sales. As of 2011, 4 out of 10 of the largest Turkish exporters are members of the Group (according to the Turkish Exporters’ Assembly) and the members of the Group account for approximately 10 per cent. of Turkey’s total exports. Despite the global financial turmoil, Group’s consolidated international gross revenues increased from USD 10.6 billion to USD 13.3 billion between 2008 and 2012. Emerging economies such as Russia and South Africa as well as other Asian and Eastern European countries had a positive effect on the Group’s results in recent years because of the relatively high rates of economic growth in those areas.

Value-creating holding structure and strong management The Company has adopted a management structure for its portfolio companies modelled on international public company standards. The Company works closely with its portfolio companies to devise an annual plan and budget. It seeks to add strong value to its portfolio companies via many tools and provides support to these companies through including know-how transfer and implementation of best practices, financial and risk management policies, human resource policies, legal counsel and policies as well as public relations and other platforms for co-operation. For example, in human resources, the Company provides platforms such as Koç@insan, KoçKariyerim and Koç Academy to enable Group employees to have access to an open communications platform in human resources policies, educational programmes as well as career development and Group-wide employment via a single interface. The Company also offers programmes such as Leadership Potential Assessment Process and Leader Development Trainings to prepare the future top managers of the Group. Also, in risk management, the Company employs sophisticated risk modelling and shares risk management best practices across the Group. The Company uses risk-based capital allocation and employs early warning systems and inter-sectoral coordination among its diversified portfolio. As the Company provides legal

-5- advice to the Group if necessary, it also uses various systems developed against potential legal risks such as its intellectual property right management programme, legal compliance test (HUY) and contract monitoring system (LERIMAN). Additionally, Group-wide procurement enables the members of the Group to leverage the greater bargaining power of the Group. The Company owns a central purchasing company, Zer Merkezi Hizmetler, to provide marketing services, supplies and logistics to the Group.

The Company believes that its value-added management is reflected through valuations with much smaller discounts to its NAV compared to peer holding companies or even with premiums to its NAV. Since the beginning of 2013 (as of 12 April 2013) Koç Holding has been trading with a very small discount (0.4 per cent.) on average compared to its NAV. At the same period in 2013, the peer Group’s (Sabancı Holding, Yazıcılar Holding and Dog˘an Holding) average NAV discount has been 35 per cent. (according to statistics provided by Burgan Securities and company data).

Although the Company is a family-owned holding company, the family mainly assumes board level responsibility and all day-to-day operations in the Company are managed by highly experienced management with valuable experience in their respective fields. Executive compensation is directly linked to a performance analysis of management and the business which is based on the evaluation of different factors such as economic profit, relative share performance and sustainability issues such as investments in IT and R&D, customer and dealer satisfaction and employee engagement.

Strong and supportive shareholder with world class governance Koç Holding is a family owned company with a focus on sustainability. The Koç family has a consistent and long history of acting in unison and no member has sufficient shareholding to be able to individually transfer control to a third party. The Koç family owns its own internal governance and investment vehicle, which provides stability and sustainability.

As a sign of its commitment to the highest standards of governance, the Company was one of the first Turkish conglomerates to participate in the UN Global Compact. Both the Company and also 90 per cent. of the Group companies (in terms of NAV) are publicly-listed companies, bringing further transparency to its operations.

The Company was one of the first companies in Turkey with independent members on its Board of Directors and separate Chief Executive Officer and Chairman roles. None of the Company’s Board members participate in daily execution and there are well-functioning and separate committees for corporate governance, risk management, nomination and remuneration as well as audit.

Control of Group companies, either alone or on a joint basis Koç Holding has either joint ventures or controlling rights (directly and indirectly) and has board control (jointly control in the case of joint ventures) in each of its Group companies. The Company exercises control (directly or indirectly) over its Group companies over dividend streams, financial policies, investment decisions and performance targets with focus on profitable and sustainable revenue streams.

-6- Opet was the fastest growing oil distribution company (according to Petder), with 1,325 stations as of 31 December 2012. While Tüpras¸ and Opet have the highest storage capacity in petroleum products (owning more than half of the storage capacity for refined petroleum products in Turkey, according to EMRA), Aygaz has the largest storage capacity in LPG (according to EMRA).

The Group differentiates itself across its businesses not only by reaching out to its customer base via its large distribution network, but also by providing high quality service in all phases of a sale, especially in its after-sales services, which has been one of the key drivers of its success despite increasing competition in the Turkish market, especially in consumer-driven sectors after the enactment of the EU Customs Union in 1996.

The Group takes advantage of economies of scale with the Group’s combined total sales amounting to 9 per cent. of Turkey’s GDP, exports as high as 10 per cent. of Turkey’s total exports and market shares as high as 50 per cent.-and-over in various sectors.

Leveraging cross-segment customer data The Group collects data from over 16 million customers (of which over 10 million have granted data-sharing permissions) and analyses this data for efficient up-selling and cross-selling. The Group is also able to analyse customer data to monitor and capitalise on various trends across its business, so that it may react to these trends ahead of its competitors.

Partner of top international companies The Company has long-standing joint venture partnerships with prominent international companies. The Group’s international partners include global names such as Ford and Fiat in the automotive segment, LG Electronics Inc. (“LG Electronics”) in the Consumer Durables Segment, UniCredit S.p.A. (“Unicredit”) in the Finance Segment, AES Corporation (“AES”) in the Energy Segment and B&Q Plc. (“B&Q”) in the Other Segment. Many of these companies have been partnering with the Company for decades and in all cases, the joint venture partnerships are on equal ownership terms. All major business decisions are taken as a result of agreement between the partners, and the Company has not experienced any unresolvable disputes with joint venture partners historically.

Proven track record in consistently outperforming growth rates in Turkey The Group has been in the Turkish market for over 85 years. Throughout its history, the Group was able to continuously outperform the GDP growth rates in Turkey. From 1980 to 2012, in each five year period, the Group outperformed the growth rates of the Turkish economy, mostly by doubling or tripling the growth rates in real terms. In line with its track-record, the Group aims to continuously outperform Turkey’s potential and benefit from its leading positions and extensive distribution channels.

1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 2010-2012 (%, CAGR) Real GDP Growth ...... 5 6 3 4 5 3 5 Group Revenue Growth* ...... 15 17 5 6 11 9 16 * Constant Prices

Strategy The Company’s strategic goal is to continue to be one of the largest and most successful corporate groups not only in Turkey but also in the region and to work towards duplicating its success in Turkey on a global scale. The Company’s key strategies to achieve its goals include the following:

Continue to operate in those sectors where the Group can create a differential competitive advantage and realise profitable and sustainable revenue streams. The Group plans to combine its strong and flexible management philosophy and international partnerships with its competitive advantages to pursue long-term strategies. The Group’s current leading positions across its sectors are examples of the competitive advantage it creates in the businesses it operates. See “—Strengths—Leading positions in under-penetrated markets with strong growth potential”.

-7- Focus on high growth and/or high margin business lines. In the sectors in which it operates through its portfolio companies, the Company will focus on investing in those business lines which offer either strong growth and turn-around potential or strong cash flows and/or a strong internal rate of return with high margins. For example, in the Finance Segment, Yapı Kredi is the market leader in the high-margin credit card market. Across almost all of the Group’s sectors, the penetration levels in Turkey are significantly lower compared to developed markets and offer strong potential of growth on the back of the positive developments in the Turkish economy. The Company believes it can benefit such growth potential by securing leadership positions and establishing a strong sales network and customer database in these sectors.

Focus on strong and sustainable profitability The Company will continue to make investments to increase its productivity and improve the level of profitability. In sectors such as energy, the Company focuses on profit enhancement programmes and upgrade systems such as Tüpras¸’s Residuum Upgrading Project (the “RUP”) to improve the level of complexity and productivity on a constant basis. In its consumer-focused businesses, the Company aims to improve per customer profitability via the application of CRM applications. For example, Yapı Kredi addresses specific customer needs through a segment-based service model, optimising costs to improve competitiveness and maintain effective cost and risk management.

With the long-standing and largest customer database in its respective sectors, as well as the employment of alternative distribution channels such as by promoting its points reward programme, the Group will continue to employ the most advanced CRM techniques so that it can improve its up- and cross-selling and reduce its cost base, increasing per customer profitability. Tanı Pazarlama ve˙ Iletis¸im Hizmetleri A.S¸. is the Group’s CRM company which collects over 16 million customer data from various sectors. Of the total data collected, approximately 11.5 million has data-sharing agreements.

Global expansion to build on expertise learned in existing markets. The Group will continue to seek inorganic growth opportunities in international markets in those sectors where it already has strong expertise such as Arçelik’s acquisition of South African white goods maker Defy. The Group has been increasing the share of its international revenues in those promising economies in its exports. The Group’s focus on further diversification geographically will continue in the future in those sectors where it already has expertise. During the 5 year period from 2007 to 2012, within total international revenues, while the share of Europe decreased from 77 per cent. to 56 per cent., the share of Asia increased from 12 per cent. to 20 per cent., Africa increased from 7 per cent. to 16 per cent. and America increased from 4 per cent. to 9 per cent. (with a 2 pp increase in North America and a 3 pp increase in South America).

Focus on strong portfolio management through mergers & acquisitions, greenfield investments, partnerships and proactive disposals which offer long-term value creation. The Company has a strong track-record in adopting successful investment, acquisition and divestment programmes. For example, the most recent large-scale acquisitions of Tüpras¸ and Yapı Kredi had enabled the Company to further diversify its asset mix and become leading players in strategic and high-margin business lines. With the advantage of not being dependent on opportunities within one sector only, the Company will continue to analyze different opportunities against its strict investment evaluation criteria across different sectors and geographies, prioritising opportunities with the highest returns and strongest potential of growth.

The Company also has long-standing partnerships in its portfolio. The Company will focus on growing as a product development and manufacturing hub in its international partnerships, becoming a technology provider for global partners. The Company’s growing position as a manufacturing hub in the automotive industry for its global partners Ford and Fiat are such examples. The recent partnership with AES to form the AES Entek joint venture in power generation in 2010 is another example of value-creating partnerships.

Derive maximum benefits from growth potential and economies of scale by being the market leader or a leading player in every business of operation. The Group will continue to consolidate its leadership positions in sectors with high growth potential and low saturation and take advantage of the economies of scale that can be created as a market leader across various segments.

-8- Provide superior and long-standing customer satisfaction. The Company places utmost importance to customer satisfaction. Accordingly, it is one of the Company’s main priorities to continuously invest in technology and development, innovation, loyalty and service quality across all of the sectors it operates.

Capitalise on brand strengths and technological competence and continuously focus on new technology and service offerings. With the highest R&D expenditure in Turkey, the Group will continue to combine innovation with an extensive product range and enhance its competitiveness by continuing to strengthen its strong brands and offering customers outstanding service.

Minimise sector and geographic risks though a diversified portfolio structure. The Company will continue to focus on strict risk management, focusing on maintaining a robust balance sheet and a balanced portfolio structure as well as efficiency and sustainable profitability.

-9- RISK FACTORS

An investment in the Notes involves certain risks. Prior to making an investment decision, prospective purchasers of the Notes should carefully read the entire Offering Circular. In addition to the other information in this Offering Circular, prospective investors should carefully consider the following risks relating to the Group and the Notes before making an investment in the Notes. If any of the following risks actually occur, the Group’s business, financial condition, results of operations, cash flows, liquidity and prospects may be materially and adversely affected, and the Issuer’s ability to make payments under the Notes and/or the market price of the Notes may be adversely affected. In addition, factors that are material for the purpose of assessing the market risks associated with the Notes are also described below. The Company believes that the factors described below represent the principal risks inherent in investing in the Notes, but the Company does not represent that the statements below regarding the risks of holding any Notes are exhaustive. For purposes of this section, the indication that a risk, uncertainty or problem may or will have a “material adverse effect “ on the Group or that the Group may experience a “material adverse effect” means that the risk, uncertainty or problem could have a material adverse effect on the Group’s business, financial condition, results of operations, cash flows, liquidity and prospects, or the ability of the Issuer to make payments under the Notes and/or the market price of the Notes, except as otherwise indicated or as the context may otherwise require. You should view similar expressions in this section as having a similar meaning.

This Offering Circular contains forward-looking statements that involve risks and uncertainties. See “Forward- Looking Statements.” The Group’s actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing the Issuer described below and elsewhere in this Offering Circular.

Risks Relating to the Businesses of the Group The Group’s business, results of operations, financial condition and prospects are affected by domestic economic conditions The majority of the Group’s assets and operations are located in Turkey, and a majority of the Group’s revenues are generated in Turkey, Accordingly, national economic conditions have a direct impact on the Group. For the year ended 31 December 2012, 70.2 per cent. of the Group’s Energy, Consumer Durables, Automotive and Other Segments’ (the “Non-Finance Segments”) consolidated gross revenues were generated in Turkey.

The global financial crisis and related economic slowdown have affected the Turkish economy and economies that include the principal external markets for Turkish goods and services. Turkey’s GDP declined by 4.8 per cent. in 2009 as a result of the global economic slowdown, and during this period Turkey suffered reduced domestic consumption and investment and a sharp decline in exports, which led to an increase in unemployment levels.

According to official statistics released by TurkStat, the unemployment rate in Turkey was 10.1 per cent. in December 2012, significantly lower than its peak of 16.1 per cent. in February 2009. However, there can be no assurance that the unemployment rate will improve, or that it will not increase in the future. Continuing high levels of unemployment may affect demand for some of the Group’s products, which could have a material adverse effect on its business, financial condition, results of operations and prospects. Following the implementation of fiscal and monetary measures during 2009, the Turkish economy began to recover in the fourth quarter of 2009. According to TurkStat, Turkey’s GDP grew by 8.8 per cent. in 2011 and 2.2 per cent. in 2012 (at constant prices). Turkey’s growth is expected to accelerate in 2013 on the back of lower interest rates and rebound in consumer confidence. However, continuing volatility in the EU could put a constraint on Turkey’s growth in 2013.

In October 2012, the Turkish Government announced a three-year medium-term economic programme from 2013 to 2015. Under this medium-term projected economic programme, the Turkish Government set growth targets of 4.0 per cent. for 2013, 5.0 per cent. for 2014 and 5.0 per cent. for 2015, as well as a gradual decrease in the net public debt to GDP ratio (according to the Republic of Turkey’s Ministry of Development). However, there can be no assurance that the Turkish Government will continue to implement its current and proposed economic and fiscal policies successfully. Even if the Turkish Government continues to implement these policies successfully, there can be no assurance that the strong economic growth achieved in recent years will continue in light of potential external and internal shocks, including the Central Bank’s efforts to curtail inflation and the current account deficit and macroeconomic and political factors, such as oil price rises and terrorist activity. Although EU-defined Turkish

-10- Government debt levels decreased considerably from 77.9 per cent. of GDP in 2001 to 36.1 per cent. of GDP in 2012, one or more such developments within the wider Turkish economic or political system could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. There is no assurance that Turkey will continue its current fiscal policy and remain economically stable.

The Group’s businesses may also be materially adversely affected by changes in national economic conditions, including inflation, interest rates, availability of credit and the capital markets, consumer spending rates, energy availability and costs and the effects of governmental initiatives to manage economic conditions. Any such changes could materially adversely affect the demand for the Group’s products in the domestic market, or the cost and availability of raw materials, thereby causing a material adverse effect on the Group.

The Group’s business, results of operations, financial condition and prospects are affected by global economic conditions While the majority of the Group’s assets and operations are located in Turkey, and a majority of the Group’s revenues are generated in Turkey, regional and global economic conditions may also directly impact the Group. For the year ended 31 December 2012, 29.8 per cent. of the Group’s Non-Finance Segments’ consolidated gross revenues were generated outside of Turkey.

The Group’s businesses may be materially adversely affected by changes in global or regional economic conditions, including inflation, interest rates, availability of credit and the capital markets, consumer spending rates, energy availability and costs, raw material costs and the effects of governmental initiatives to manage economic conditions. Any such changes could materially adversely affect the demand for the Group’s products both in domestic and export markets, or the cost and availability of raw materials, thereby causing a material adverse effect on the Group.

The ongoing global economic uncertainty has had a relatively less severe impact on the Turkish economy despite difficulties in the principal external markets for Turkish goods and services. Further prolonged global economic downturns or a failure to recover may have a negative effect on the business, financial condition and/or results of operations of the Group. Factors such as levels of unemployment, inflation rates, consumer and business confidence and spending as well as the availability of credit have been significantly negatively affected by the global economic uncertainty. Continued global economic uncertainty, any contraction or stagnation of the global economy and any further tightening in global credit conditions could adversely impact the Group’s business and operating results and could, among other things: • negatively impact global and local demand for the Group’s principal products and services, especially for autos and consumer durables, or lower market prices for the Group’s principal products and services, which could result in a reduction of the Group’s revenues, operating income and cash flows; • result in increased borrowing costs and reduced, or no, access to the capital markets due to unfavourable market conditions and increased competition for deposits in the Group’s Finance Segment; • negatively impact the operations of the Group’s Finance Segment due to deteriorating credit conditions, reduced liquidity, increasing deposit costs and an increase in the perceived risk of the financial stability of the Group’s Finance Segment businesses; • make it more difficult or costly for the Group to obtain financing for the Group’s operations and investments or to refinance the Group’s debt in the future; • impair the financial condition of some of the Group’s customers, suppliers and contractual counterparties, thereby increasing customer bad debt, non-performance by suppliers or counterparties, increasing impairments on assets and/or collateral, as well as increasing levels of non-performing loans and amounts of loan impairment charges; and • decrease the value of certain of the Group’s investments.

If any of the above events occur it could have a material adverse effect on the Group’s business, results of operations, financial condition and prospects.

The Group’s international operations and exports expose it to political and economic risks in foreign countries The Group’s Non-Finance Segments’ gross revenues from outside of Turkey accounted for 29.8 per cent. of the Group’s Non-Finance Segments’ consolidated gross revenue for the year ended 31 December 2012, of which Europe accounted for 53 per cent., Asia accounted for 20 per cent., Africa accounted for 20 per cent., and

-11- Americas accounted for 6 per cent. The Group’s international activities expose it to risks associated with operating internationally including, for example, the effect of import restrictions and tariffs, as well as other trade protection measures and import or export licensing requirements.

The Group’s future financial performance will depend on economic, political and social conditions in the Group’s principal international markets (Europe, Asia and Africa). Other risks associated with the Group’s international activities include: • lower global demand for automobiles, consumer durables and other products and services manufactured and/or distributed and sold by the Group outside of Turkey, which could result in a reduction of the Group’s sales, operating income and cash flows; • changes in foreign currency exchange rates and inflation in the countries in which the Group operates; • exchange controls; • changes in a specific country’s or region’s political, economic or social conditions, particularly in developing markets; • adverse consequences deriving from changes in foreign regulatory requirements, including environmental rules and regulations; • difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex international laws, treaties, and regulations; • adverse consequences from changes in tax laws; and • distribution costs, disruptions in shipping or reduced availability of freight transportation.

While the Group attempts to manage certain of these risks through risk management programmes, these strategies cannot and do not fully eliminate these risks. An occurrence of any of these events may negatively impact the Group’s ability to transact business in certain existing or new markets and have a material adverse effect on the Group.

The business strategies of the Group include substantial capital and long-term investments, which require significant financing The Group’s business strategies include substantial capital investment, which the Group may finance through additional debt and/or equity financing. Many of the Group’s businesses, including its Energy, Automotive and Consumer Durables Segments, are capital intensive and the continued funding of construction, renovation and maintenance projects is critical to the ongoing success of these segments. For example, implementation of the RUP at Tüpras¸’s I˙zmit Refinery in the Group’s Energy Segment is a key strategy of the Group (for which financing is now complete). See “Business—Operations-Energy Segment—Group’s Energy Strategy”. Ford Otosan is also currently engaged in renewing existing products, adding new products and increasing its production capacity. Part of the funding will come from Ford Otosan’s internal cash generation and the remainder from additional financing. Ford Otosan has already obtained EUR 150 million through an EBRD term loan facility in 2010 and EUR 190 million through EIB term loan facilities in 2012. See “Business— Operations—Automotive Segment—Production Facilities and Properties”.

The Group’s access to debt in amounts adequate to finance these activities could be impaired by factors that affect the Group or these segments in particular or the industries or geographies in which they operate. As of 31 December 2012, the Group had a total of TL 26,822 million of consolidated financial liabilities, of which TL 22,449 million was bank borrowings and TL 4,157 million was debt securities in issue. As of 31 December 2012, the Group’s total foreign currency denominated bank borrowings and debt securities in issue constituted approximately 73 per cent. of its consolidated financial liabilities. As of 31 December 2012, the Group’s Non- Finance Segments had a total of TL 12,940 million of consolidated financial liabilities, of which TL 11.375 million was bank borrowings and TL 1,349 million was debt securities in issue. As of 31 December 2012, the Group’s Non-Finance Segments’ total foreign currency denominated financial liabilities constituted 74 per cent. of its consolidated financial liabilities.

The Group may have difficulties refinancing or extending this funding, and such funding may become more difficult and/or costly to obtain. If the Group is unable to access additional capital on terms acceptable to the Group, the Group may not be able to fully implement the Group’s business strategy, which may limit the future growth and development of the Group’s business. If the Group’s need for capital arises because of losses, the occurrence of these losses may make it more difficult for the Group to raise additional capital to fund the Group’s expansion projects.

-12- The Group also relies on certain material contracts, including export contracts which include clauses such as cost plus (as in the case of Ford Otosan and Tofas¸) and take-or-pay (as in the case of Tofas¸), to allocate capital expenditure, and if the Group is unable to renew these contracts on the same terms or at all, this could materially adversely affect the Group’s business, financial condition, results of operations and prospects

If the Group is unable to complete capital projects at the expected cost and in a timely manner, the Group’s business, financial condition and results of operations could be materially and adversely affected. Delays or cost increases related to capital spending programmes and the construction of new manufacturing or other facilities or improvements and repairs to the Group’s existing facilities, could materially adversely affect the Group’s profitability and competitiveness in the future.

Delays in making required changes or planned upgrades to the Group’s refineries, manufacturing plants or other facilities also could affect its ability to supply certain products that it produces at profitable prices or volumes. Such delays or cost increases may arise as a result of unpredictable factors, many of which are beyond the Group’s control, including: • denial of or delay in receiving requisite regulatory approvals and/or permits; • unplanned increases in the cost of construction materials or labour; • disruptions in transportation of components or construction materials; • adverse weather conditions, natural disasters or other events (such as equipment malfunctions, explosions, fires or spills) affecting the Group’s refineries or manufacturing facilities, or those of vendors or suppliers; • shortages of sufficiently skilled labour, or labour disagreements resulting in unplanned labour unrest; • market-related increases in a project’s debt or equity financing costs; and • non-performance by, or disputes with, vendors, suppliers, contractors or subcontractors.

Any one or more of these factors could have a significant adverse impact on the timing, cost or achievability of the Group’s ongoing capital projects, which in turn could materially adversely affect the Group’s business, financial condition, results of operations and prospects.

The Group may be unable to complete or integrate the Group’s past or prospective acquisitions, joint ventures and strategic alliances successfully, which could adversely affect the Group’s business, results of operations and financial condition The Group conducts a substantial portion of its operations through joint ventures, including in the Energy Segment through Opet and AES Entek, in the Automotive Segment through Ford Otosan, Tofas¸ and TürkTraktör, in the Consumer Durables Segment through Arçelik LG Klima, in the Finance Segment through Yapı Kredi and in the Other Segment through Koçtas¸. The Group has in the past acquired, and may in the future acquire, additional businesses in Turkey or elsewhere or enter into further joint ventures or strategic alliances. For example, in 2011, Arçelik completed the acquisition of Defy, South Africa’s leading white goods brand, for consideration of USD 272 million. The Group is unable to predict whether or when any additional acquisitions, joint ventures or strategic alliances will occur, or the likelihood of a material transaction being completed on favourable terms and conditions to the Group. The Group’s ability to continue to expand successfully through acquisitions, joint ventures or strategic alliances depends on many factors, including the availability of potential targets, and the Group’s ability to identify acquisitions and negotiate, finance and close transactions. Even if the Group completes future acquisitions, joint ventures or strategic alliances, these transactions involve risks, including the following: • failure of the acquired business, joint ventures or alliance to achieve expected results; • inability to successfully integrate the operations, services and products of any acquired company, or to achieve expected synergies and/or economies of scale; • unanticipated liabilities; • failure to effectively plan or manage any acquisition, joint venture or strategic alliance; • antitrust considerations and other regulatory requirements; • diversion of attention of the Group’s management; and • possible inability to retain or hire key personnel for the acquired businesses.

-13- If the Group is unable to integrate or manage acquired businesses, joint ventures or strategic alliances successfully, the Group may not realise anticipated cost savings, revenue growth and levels of integration, which may have a material adverse effect on the Group.

Any erosion of the Group’s reputation or the reputation of one or more of its major brands or brands with which it has a relationship could have a material adverse impact on the Group The reputation of the Group and its brands is critical to the maintenance of effective relationships with key stakeholders and other constituencies, such as customers and suppliers. In a number of segments the Group’s financial success is dependent on the success of its brands to a certain extent, such as Arçelik, Beko, Aygaz, Opet, Yapı Kredi which have domestic and/or international recognition as a result of the significant investment that the Group has made in its brands (whether owned or licensed) and products over many years. The success of these brands can suffer if the Group’s marketing plans or product initiatives do not have the desired impact on a brands’ image or its ability to attract consumers. Costs associated with brand improvements can be significant and can have an adverse impact on the Group’s results if they do not produce the desired outcomes. The Group’s results could also be negatively impacted if one of its brands or brands with which it has a relationship, such as Ford or Fiat, suffers substantial damage to its reputation due to a significant product recall, product-related litigation, allegations of product tampering, or the distribution and sale of counterfeit products. In addition, given the association of individual products with brands, an issue with one of its products could negatively affect the reputation of other products produced under the same brand, which could have an adverse impact on the Group’s results of operations and financial condition.

In highly competitive consumer-focused industries, it is critical to maintain and develop a positive image across all brands and to do so, it is critical to maintain and increase customers’ confidence by providing safe, high- quality products that meet customer demands. If the Group is unable to effectively maintain and develop its brands, the Group’s sale prices, revenues and profits may not increase or may decrease, adversely affecting the Group’s business, financial condition and results of operations.

The Group also devotes significant resources to programmes designed to protect and preserve its reputation, such as social responsibility and environmental sustainability. If the Group is unable to effectively manage real or perceived issues, including concerns about safety, quality, efficiency, or similar matters, these issues could negatively impact the Group, its brands or its products and its ability to operate could be impaired and its results could suffer.

The Group operates in a number of highly regulated industries, and changes to applicable laws or regulations, the interpretation or enforcement of such laws or regulations or the failure to comply with such laws or regulations could have an adverse impact on the Group’s business, financial condition and results of operations The Group’s businesses in the Energy Segment are mostly regulated by EMRA, a public entity, related to Turkey’s Ministry of Energy and Natural Resources. Continued operations of Tüpras¸, Opet, Aygaz and AES Entek depend upon ownership of relevant licences granted by EMRA. The Group’s Energy Segment is subject to several key regulatory requirements, including potential price ceilings set by EMRA for purchases and sales of refined products; the satisfaction of Turkish standards (as adopted by the Turkish Standards Institution), which are mostly similar to European standards (as adopted by one of three European Standardisation Organisations), on all products sold domestically by the Energy Segment; and the payment of excise duty on domestically sold products.

The Group’s manufacturing plants and facilities in its Automotive and Consumer Durables Segments are subject to national, regional and local regulatory controls. In addition, both the marketability of the Group’s products and the profitability of its business will to a certain degree depend on the ability of the Group to comply on an ongoing basis with government regulations applicable to its products in such markets. In the Automotive Segment, regulations and standards relating to emission controls, fuel economy, safety and recalls are applicable to motor vehicles, engines and equipment manufactured for sale in the EU, various countries in Asia, the United States and elsewhere. Compliance with new emission control standards will present significant technological challenges to the Automotive Segment of the Group and will likely require significant expenditures. There can be no assurance that the Group’s Automotive Segment will be able to develop the necessary technology in time or in a commercially feasible manner.

The Finance Segment is subject to a number of banking and other regulations designed to maintain the safety and financial soundness of banks, ensure their compliance with economic and other obligations, and limit their

-14- exposure to risk. These regulations include Turkish laws and regulations (and in particular those of the BRSA and the Central Bank), as well as laws and regulations of certain other countries where the Group operates. Banking laws and regulations in Turkey and the manner in which those laws and regulations are applied to the operations of financial institutions are still evolving. Furthermore, as a result of the recent global economic crisis, policy makers in Turkey, the EU and other jurisdictions have enacted or proposed various new laws and regulations and there is uncertainty as to what impact these changes may have. New regulations may be implemented rapidly, without substantial consultation with the industry, which may not allow sufficient time for the Bank to adjust its strategy to deal with such changes. New regulations may increase the Bank’s cost of doing business or limit its activities. Turkish banking regulations have rapidly changed in the second half of 2011 and 2012 in response to Turkey’s robust domestic growth, driven by higher local demand, which widened the current account deficit and strengthened capital inflows. As some of the new banking regulations have only recently been adopted, the manner in which those regulations are applied to the operations of financial institutions is still evolving. In the future, laws or regulations might be adopted, enforced or interpreted in a manner that could have an adverse effect on the Group’s business, financial condition, cash flows and results of operations. In addition, a breach of regulatory guidelines could expose it to potential liabilities or sanctions. Changes in these regulations may have an indirect material effect on the Group’s business and operations. Moreover, any failure to adopt adequate responses to such changes in the regulatory framework may have an adverse effect on Yapı Kredi’s and indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

A failure to satisfy applicable regulations could subject the Group to penalties or fines. Additionally, if any applicable regulations should change, such regulations could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

As Koç Holding is a holding company and depends on the results of its operating subsidiaries and joint ventures, it may not have sufficient funds to make payments on the Notes if its subsidiaries and joint ventures are not able to make distributions to it Koç Holding conducts its business through its operating subsidiaries and joint ventures. Koç Holding’s ability to meet its financial obligations, including any payments under the Notes, is dependent upon the cash flow and earnings of its subsidiaries and joint ventures and the distribution or other transfer of such earnings to Koç Holding in the form of dividends, loans or other advances and payments. Some of Koç Holding’s subsidiaries and joint ventures are, or may in the future be, subject to loan agreements or indentures that prohibit or limit their transfer of funds to Koç Holding and/or require that any indebtedness of such subsidiaries or joint ventures to Koç Holding be subordinated to the indebtedness under such loan agreements. Koç Holding’s subsidiaries are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due under the Notes or to make any funds available therefor, whether in the form of loans, dividends or otherwise. Any right that Koç Holding may have to receive assets of any of its subsidiaries or joint ventures upon its liquidation and the consequent right of the holders of the Notes to benefit from the distribution of proceeds from those assets will be effectively subordinated to the claims of creditors of such subsidiaries and joint ventures (including tax authorities, employees, trade creditors and lenders to such subsidiaries and joint ventures).

The Group is dependent on its senior management and other personnel The Group is dependent upon its senior management to implement its strategy and the operation of its day-to-day business. In addition, business relationships of members of senior management are important to the conduct of the Group’s businesses. If members of the Group’s senior management were to leave, then the relationships that those managers have that have benefited the Group may not continue with the Group.

In addition, the Group’s continuing success depends, in part, upon its ability to continue to attract, retain and motivate qualified and experienced management, engineers and other technical and skilled personnel. Demand for engineers and other technical personnel has been and remains high worldwide while supply is limited, particularly in the case of skilled and experienced engineers. Any failure to recruit, train and/or retain qualified and experienced personnel or manage its personnel successfully could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

The interests of the Company’s principal shareholders may differ from the interests of the Noteholders Temel Ticaret Yatırım A.S¸. (“Temel”) which is controlled by the members of the Koç family controls Koç Holding. Consequently, Temel has the power, among other things, to elect all of the directors of Koç Holding, and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations and dispositions, and the timing and payment of any future dividends.

-15- In addition, Temel has, directly or indirectly, the power, among other things, to affect the legal and capital structure and day-to-day operations of Koç Holding, as well as the ability to elect and change Koç Holding’s management and to approve other changes to the Company’s operations. The interests of Temel could, in certain circumstances, conflict with those of the Noteholders, particularly if Koç Holding encounters financial difficulties or is unable to pay its debts when due. For example, Temel could vote to cause Koç Holding to incur additional indebtedness. Temel could also have an interest in Koç Holding pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investment, although such transactions might involve risks to Noteholders.

The Group’s risk management strategies and internal controls may leave it exposed to unidentified or unanticipated risks In the course of its business activities through its portfolio companies, the Group is exposed to a variety of risks, including credit risk, market risk, liquidity risk and operational risk. Although the Group invests substantial time and effort in risk management strategies and techniques, it may nevertheless fail to manage risk adequately in some circumstances. If circumstances arise that the Group has not identified or anticipated adequately, or if the security of its risk management systems is compromised, then the Group’s losses could be greater than expected, which could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Some of the Group’s methods of managing risk are based upon the use of historical market behaviour, which may not always accurately predict future risk exposure. If the Group’s measures to assess and mitigate risk prove insufficient, then the Group may experience material unexpected losses that could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

The Group is subject to a wide variety of operational risks and its insurance may not be sufficient to cover all potential losses arising from operating hazards The Group is subject to a wide variety of operational risks that are common to its business segments. The Group’s operations, including in particular its Energy Segment and its Automotive and Consumer Durables Segments are subject to various hazards including explosions, fires, toxic emissions, maritime hazards and natural catastrophes. Any of these risks could result in damage to or destruction of equipment, personal injury or death and property damage, suspension of operations or environmental damage. The Group also is susceptible to, among other things, fraud by employees or outsiders, unauthorised transactions by employees and other operational errors (including clerical or record keeping errors and errors resulting from faulty computer or telecommunications systems). Furthermore, the Group is subject to service interruptions from time to time for third party services such as telecommunications, which are beyond the Group’s control. Such interruptions may result in interruption to services or other adverse impacts on the Group’s customer service functions. While the Group maintains a system of controls designed to monitor and control operational risk, there can be no assurance that the Group will not suffer losses from such risks. Losses from the failure of the Group’s system of internal controls to discover and rectify such matters could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

While the Group maintains insurance coverage against some potential losses and liabilities, the Group does not have coverage for all risks. Tüpras¸, Aygaz, TürkTraktör and Otokar do not have business interruption insurance. Ford Otosan and Tofas¸ do not have product liability or recall coverage for local sales.

Furthermore, the Group may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates going forward. As a result of market conditions, premiums and deductibles for certain of the Group’s insurance policies also could increase substantially. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. The occurrence of losses or other liabilities that are not covered by the Group’s insurance policies or that exceed the Group’s insurance limits may result in significant unexpected additional costs to the Group and adversely affect the Group.

The Group is exposed to risks related to natural disasters that could adversely affect its business The Group could also be subject to interruptions in production or the loss of inventory as a result of catastrophic events such as fires, explosions or natural disasters, particularly in relation to its operations in Turkey, which are located in high-risk earthquake zones. Although the Group maintains insurance against property and product damage for natural disasters, there can be no assurance that this coverage will be sufficient.

-16- The Group may be subject to labour disputes from time to time that may adversely affect the Group The Group is exposed to the risk of labour disputes and other industrial actions to the extent allowed by legislation. A significant number of the Group’s employees within manufacturing facilities are represented by labour unions and are covered by collective bargaining agreements which are subject to periodic renegotiation. The Group may experience strikes, work stoppages or other industrial actions in the future. Under Turkish legislation, strikes are only allowed during the periodic renegotiation of collective labour agreements and work stoppages and other industrial actions may qualify as unlawful labour disruption should the conditions prescribed for by the legislation are not met and therefore be sanctioned by law. In addition, certain strategic industries such as banking and oil refining, among others, benefit from immunity from strikes and work stoppages. In addition, the Group may not conclude the collective labour negotiations on satisfactory terms, which may result in increase in the cost of labour or labour disturbances that could disrupt the Group’s operations which may have a material adverse effect on the Group’s business, financial condition or results of operations. For a description of labour- related matters, see “Business—Employees”.

Environmental, health and safety regulation may adversely affect the Group’s business The Group’s Energy, Automotive and Consumer Durables Segments often involve the use, handling, disposal and discharge of hazardous materials into the environment or the use of natural resources as part of the manufacturing or oil refining process. The Group is subject to increasingly stringent and complex laws and regulations relating to environmental protection in Turkey, and as relevant the EU and a variety of other jurisdictions, including laws and regulations governing emissions into the air, discharge into waterways, and the generation, storage, handling treatment and disposal of waste materials. Many of these laws provide for strict liability for damage to natural resources or threats to public health and safety, and some provide for joint and several strict liability for remediation of spills and releases of hazardous substances. The Group’s operations are also subject to extensive health and safety regulations. Non-compliance with applicable statutes or regulations could result in the suspension or revocation of any licence or registration at issue, as well as the imposition of civil fines and criminal penalties.

The Group is required to obtain permits from governmental authorities for many aspects of the Group’s operations, including oil refining. These laws, regulations and permits can often require the Group to purchase and install expensive pollution control equipment or to make operational changes to limit the actual or potential impacts of the Group’s operations to the environment and/or to the health of the Group’s employees. Violations of those laws and regulations or permit conditions may result in substantial fines or criminal sanctions, revocations of operating permits and/or shutdowns of the Group’s facilities.

The Group could be exposed to administrative and criminal sanctions, including warnings, fines and closure orders for non-compliance with these environmental regulations, which, among other things, limit or prohibit emissions or spills of toxic substances produced in connection with the Group’s operations. Waste disposal and emissions regulations may also require the Group to clean up or retrofit the Group’s production facilities or refineries at substantial cost and could result in substantial liabilities. Various Turkish and other environmental agencies inspect the Group, and may impose fines, restrictions on the Group’s operations or other sanctions in connection with these inspections. In addition, the Group is subject to environmental laws that require the Group to incur significant costs to cover damage that a project may cause to the environment. These additional costs may have a negative impact on the profitability of the projects the Group intends to implement or may make such projects economically unfeasible.

The Group has made and expects to make capital and operating expenditures on an ongoing basis to continue to ensure the Group’s compliance with environmental laws and regulations in Turkey as well as the EU and other jurisdictions, as applicable. In addition, due to the possibility of changes to environmental regulations and other unanticipated changes, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated. Under certain environmental laws, the Group can be held strictly liable for any and all consequences arising out of human exposure to hazardous substances or other environmental damage. Strict liability can render a party liable for environmental damage whether or not negligence or fault on the part of that party can be shown and, if imposed by way of fine or penalty, is generally not something for which insurance can be procured. The Group cannot assure that the Group’s costs of complying with current and future environmental and health and safety laws, and the Group’s liabilities arising from past or future releases of, or exposure to, hazardous substances will not materially and adversely affect the Group.

-17- Unfavourable outcomes in pending or future litigations or investigations and regulatory actions may negatively affect the Group The Group faces the risk of litigation and regulatory proceedings in the ordinary course of its businesses. Legal proceedings, including regulatory actions, may seek to recover very large indeterminate amounts or to limit the Group’s operations, and the possibility that they may arise and their magnitude may remain unknown for substantial periods of time. For example, legal proceedings, including regulatory actions, may result from antitrust scrutiny of market practices for anti-competitive conduct. A substantial legal liability or adverse regulatory outcome and the substantial cost to defend the litigation or regulatory proceedings may have an adverse effect on the Group’s business, operating results, financial condition, cash flows and reputation.

In July 2012, Tüpras¸ and Opet were notified that the Turkish Competition Board (the “Competition Board”) had opened an investigation alleging in general terms: (i) that Tüpras¸ had abused its dominant position in the Turkish refining market with respect to the prices it offered to distributors and (ii) that Tüpras¸ and Opet had improperly acted in concert with respect to sales of refined products to third party distributors in Turkey. In August 2012, Tüpras¸ and Opet filed written responses with the Competition Board in which it refuted these allegations. The investigation remains in its early stages and, based on the procedural timetable set out in the Law on the Protection of Competition, Law No. 4054 (the “Anti-Trust Law”), the Group believes that an initial report by the Competition Board will occur no earlier than July 2013 and no later than February 2014. The maximum penalties allowed under the relevant regulations related to the Anti-Trust Law with respect to the first allegation would be three per cent. of the annual revenue of Tüpras¸ and with respect to the second allegation would be four per cent. of the annual revenue of Tüpras¸ and Opet. Tüpras¸ and Opet management, respectively believe that their actions have at all times been in accordance with the Anti-Trust Law and accordingly believe that they have strong defences to these allegations. However, due to the early stage of the investigations, it is not possible to determine what conclusion will be reached by the Competition Board with respect to the allegations and the level of penalties, if any, that may be imposed. A decision by the Competition Board to impose penalties on Tüpras¸ and/or Opet could materially and adversely affect the Group’s business, financial condition and results of operations.

In addition, in November 2011 the Turkish Competition Board initiated an investigation against Yapı Kredi and 11 other banks operating in Turkey with respect to allegations of acting in concert regarding interest rates and fees on deposits and loans. On 8 March 2013, the Competition Board ruled that Yapı Kredi was to be fined TL 150 million (other banks were also fined, ranging from TL 10 to TL 213 million, with fines generally based upon net income) in connection with this investigation. Yapı Kredi’s management has indicated that it intends to explore options to object to this decision through proceedings in the administrative courts. While there is no precedent Turkish court decision approving the legal validity of any such claims by customers and there are not any resolved cases opened by any customers against Yapı Kredi in this respect, under articles 57 and 58 of the Law on the Protection of Competition customers may be able to bring claims against Yapı Kredi seeking damages. See also “Business—Legal Matters—Finance Segment—Competition Board Investigations”

As of 31 December 2012, the Group had an estimated TL137 million in consolidated provisions for lawsuits. If unfavourable decisions are rendered in one or more of these lawsuits, the Group could be required to pay substantial amounts. For some of these lawsuits, the Group has not established any provision in the Group’s financial statements, or the Group has established provisions for only part of the amounts in controversy, based on the judgment of management and counsel. An unfavourable outcome in the Group’s pending disputes may have a material adverse effect on the Group. See “Business—Legal Matters.”

The Group is subject to product liability claims, recalls and other legal claims that may be adverse to its results of operations Product quality significantly influences the consumers’ decisions to purchase many of the products manufactured by the Group’s Automotive and Consumer Durables Segments. Defects in component parts or assembly could require the Group to publicly undertake service actions or recall campaigns for products that it manufactures. Such actions or campaigns could require the Group to expend considerable resources in correcting these problems and could influence purchasing decisions of potential purchasers of the Group’s products, thereby negatively affecting the future sales and profitability of the Group.

The Group’s international white goods brand, Beko, has undertaken three ongoing recalls in Europe in recent years in relation to products manufactured before 2010. There can be no assurance that the Group will not suffer reputational damage as a result of these or future recalls and/or the adverse publicity associated with them.

-18- In particular, product recalls or product liability claims challenging the safety of its products may result in a decline in sales for a particular product, particularly if those claims or recalls cause customers to question the safety or reliability of its products. Under laws in many countries regulating consumer products, the Group may be forced to recall or repurchase some of its products under certain circumstances, and more restrictive laws and regulations may be adopted in the future. Any repurchase or recall of products could be costly and may damage its reputation. If it were required to remove, or voluntarily removed, any of its products from the market, the Group’s reputation could be tarnished and it might have large quantities of finished products that could not be sold. Accordingly, there can be no assurances that product recalls would not have a material adverse effect on the Group’s reputation, business, results of operations and financial condition.

In addition to service actions and product recalls, in the ordinary course of its business, the Group may be named as a defendant in lawsuits involving product liability claims. In such proceedings, plaintiffs may seek to recover large and sometimes unspecified amounts of damages and the matters may remain unresolved for several years. In the event that any of its products prove to be defective, the Group may need to recall and/or redesign such products. Any such matters could have a material adverse effect on its business, results of operations and financial condition if the Group is unable to successfully defend against or settle these matters or if the Group’s insurance coverage is insufficient to satisfy any judgments against the Group or settlements relating to these matters. The Group’s insurance policies may not provide coverage for certain, or any, claims against the Group or may not be sufficient to cover all possible liabilities. Additionally, the Group does not maintain product recall insurance. While to date such claims and recalls have not had a material adverse effect on the operations of the Group, no assurance can be given that future claims or recalls will not have a material adverse effect on the Group.

The Group may be unable to adequately protect its intellectual property rights and may be subject to intellectual property infringement claims, either of which may substantially harm its business If the Group is unable to protect its respective intellectual property, any infringement or misappropriation could materially harm the Group’s business. In addition, if the Group fails to ensure the relevance and attractiveness of its brands, including its trademarked products, and the enhancement of brand marketing, there is a risk that significant growth opportunities may not be realised. Any failure to protect the intellectual property owned or used by the Group or the reputation of its brands could have a material adverse effect on the Group’s business, financial condition and results of operations.

Acts of terrorism could severely disrupt the Group’s business Security threats require continuous oversight and control. Strategic infrastructure targets such as energy-related assets (which could include the Group’s refineries) may be at greater risk of future terrorist attacks than other targets. Acts of terrorism against the Group’s refineries and other facilities, pipelines, transportation, computer systems or employees could severely disrupt business and operations and cause severe harm to people. Although the Group maintains property damage insurance in case of acts of terrorism, there remains a risk that such acts could have a material adverse effect on the Group’s business, financial condition and results of operations.

The Group may suffer a failure or interruption in or breach of its information systems The Group relies heavily upon information systems to conduct its business and is increasingly dependent on its technology infrastructure for the effective operation of its business. Sophisticated information technology (“IT”) systems are vulnerable to a number of problems, such as software or hardware malfunctions, malicious hacking, physical damage to vital IT centres and computer virus infection. IT systems also need regular upgrading to meet the needs of changing business and regulatory requirements and to keep pace with the requirements of existing operations. Any failure, interruption or breach in security of the Group’s IT or information systems could result in failures or interruptions in its risk management, general ledger, or other important systems. If the Group’s IT or information systems failed, even for a short period of time, then it could be unable to serve some or all customers’ needs on a timely basis and could thus lose business. Likewise, a temporary shut-down of the Group’s information systems could result in costs that are required for information retrieval and verification. In addition, despite its investments in IT infrastructure, failure to update and develop the Group’s existing IT and information systems as effectively as its competitors may result in a loss of the competitive advantages that it believes its systems provide. Although the Group has developed business continuity plans, back-up systems and a disaster recovery centre, no assurance can be given that failures or interruptions will not occur or that the Group will be able to adequately address them if they do occur.

Accordingly, the occurrence of any failure, interruption or major disruption of the Group’s existing IT systems could have a material adverse effect on the Group’s business, financial condition and/ or results of operations.

-19- The Group conducts a substantial volume of its business through joint ventures, which poses a number of risks The Group conducts a substantial portion of its operations through joint ventures, such as in the Energy Segment through Opet and AES Entek, in the automotive segment through Ford Otosan, Tofas¸ and TürkTraktör, in the Consumer Durables Segment through Arçelik LG Klima, and in the Finance Segment through Yapı Kredi and the Other Segment through Koçtas¸.

The risk of failure or disagreement, particularly in arrangements that require the unanimous consent of all members with regard to major decisions, is inherent in any jointly-controlled entity. In such case, the Group’s only option in the event of irresolvable disagreement may be exit or buyout, which could have significant loss of income or incurrence of costs as a consequence. Additionally, there is a risk that a joint venture partner may become bankrupt or otherwise fail. The failure of a joint venture, consortium or equity holding, or irresolvable disagreement among its members, could cause the business arrangement to fail to meet its strategic objectives or to deliver expected benefits. Any such failure could harm the Group’s business, financial condition or results of operations.

The Group faces significant competition across many lines of its businesses, which may adversely affect the Group’s overall business, market share and profitability There is significant competition in many of the businesses that the Group operates. While some of the Group’s businesses, such as those conducted by the energy and banking segments, are largely focused on the domestic market, the markets for many of the Group’s other products, such as those produced by the Automotive and Consumer Durables Segments are global. There are a number of factors that influence the Group’s competitive position across its segments, including operating efficiency, actions of other competitors and price competition, as well as the availability, quality and cost of raw materials and other supplies, including energy, labour, logistics and technological innovations.

The Group’s ability to adequately respond to the changes in local and global markets and to maintain its competitiveness will be fundamental to its future success in existing and new markets and its market share. In some markets and for some products and services, the Group’s competitors have greater financial and marketing resources, larger customer bases and/or a greater breadth of product and service offerings than the Group. If the Group is unable to remain competitive, the Group’s market share for some of the Group’s products and services may be adversely affected. In addition, competitive pressures could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Automotive and Consumer Durables Segments In the Group’s Automotive and Consumer Durables Segments, the Group faces significant competition from manufacturers and distributors in the respective markets in which these segments operate. Competitive factors that affect competition include, pricing, product quality, design and features, the amount of time required for innovation and development, reliability, safety, efficiency/fuel economy, customer service and financing terms. In particular, there is significant pressure to reduce prices, especially in light of the current economic downturn and possible reductions in customer demand. In addition, competition is likely to further intensify due to continuing globalisation both in a number of important markets and in the worldwide automotive industry. The development of alternative distribution channels, such as the Internet, could also contribute to further competition and related pricing pressure in the Group’s Consumer Durables Segment. The Consumer Durables Segment’s ability to be an effective competitor depends on its relative success at competing on the basis of these characteristics. For more information see, “Business–Operations—Automotive Segment–Competition” and “Business–Operations—Consumer Durables Segment”.

Finance Segment The level of competition in the Turkish banking sector has significantly increased in the past several years as a result of a larger presence of state owned banks in the retail segment and foreign banks entering the Turkish market. According to the BRSA, as of 31 December 2012, the top seven banking groups in Turkey (including Yapı Kredi), three of which were state-controlled, held in the aggregate approximately 79.4 per cent. of total banking assets in Turkey. While state-controlled banks, such as Türkiye Halk Bankası (“Halkbank”), Türkiye Vakıflar Bankası T.A.O. (“VakıfBank”) and T.C. Ziraat Bankası (“Ziraat”), historically focused on government and government related projects, they are now increasingly focusing on the retail segment which is leading to increased pressure on margins. Furthermore, these state owned institutions may have access to payroll accounts

-20- of state employees and low cost deposits through State Economic Enterprises owned or administered by the Turkish government, which could result in a lower cost of funds that cannot be duplicated by the Group’s Finance Segment. Foreign banks such as BNP Paribas, BBVA, HSBC, ING, National Bank of Greece, and Sberbank have all acquired interests in Turkish banks. More entries into the Turkish market by foreign banks could further increase competition in the market and there can be no assurance that further competitive pressures will not result in increased margin compression, which may have a material adverse effect on the Group’s Finance Segment’s business, financial condition and/or results of operations and indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations. For more information see, “Business—Operations—Finance Segment”.

Energy Segment With respect to the Group’s Energy Segment, the oil refining business is a regional operation with competition occurring across national borders and although Tüpras¸ is currently the only oil refining company in Turkey, it faces competition from imported refined products, as there are no regulatory or tariff barriers on oil products imported into Turkey. Tüpras¸ competes in the highly competitive Mediterranean market. This market is impacted by events elsewhere, particularly the Black Sea region, the Middle East and North West Europe, with supply and demand balances in the region being the primary driver of the margins. Furthermore, competition is likely to increase with new refinery projects announced in Turkey and the Middle East. For example, the partnership between SOCAR Türkiye and Turcas Petrol A.S¸. was awarded a refining licence in Turkey in June 2010 and is planning to build a refinery with a capacity of 10 million tonnes. If Tüpras¸ is unable to successfully compete with the current and potentially increased supply of refined products in the Mediterranean market as a result of the partnership between SOCAR Türkiye and Turcas Petrol A.S¸., it would have a negative effect on refining margins and could materially adversely affect the Group’s Energy Segment’s business, financial condition and results of operations and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations. For more information see, “Business—Operations—Energy segment”.

The Group is subject to a number of risks associated with suppliers, including risks associated with disruptions in supply of raw materials (including crude oil), components and parts The Group’s Non-Finance Segments require raw materials, components and parts that are provided by third-party suppliers and are therefore affected by the price, quality, availability and speed of delivery of these raw materials, components and parts. The principal raw materials required by the Group are, crude oil in the Energy Segment; steel, aluminium, copper, platinum, plastic, rhodium and palladium in the Automotive Segment; and steel, plastic, aluminium and copper in the Consumer Durables Segment. Any interruption in the supply of raw materials, components and parts from any of the Group’s key suppliers could adversely affect the results of operations and financial condition of the Group’s Non-Finance Segments and indirectly the Group’s results of operations and financial condition. Increases in the prices for raw materials, components and parts may lead to higher production costs. This could, in turn, negatively impact the Non-Finance Segment’s profitability if they are unable to pass on the increased costs to customers or require suppliers to absorb the costs. Where alternative sources are not available, there can be no assurance that the Non-Finance Segments will be able to obtain additional supplies of necessary raw materials, components and parts in a timely and cost-effective manner. Furthermore, due to the increasingly competitive market environment, the Non-Finance Segments may be forced to increase efficiency by reducing supply chain costs, which may result in additional cost and pricing pressure on suppliers. Pricing pressure on suppliers, however, may adversely affect product quality.

An unfavourable change in any of the following could have a material adverse effect on the Non-Finance Segment’s business, financial condition and results of operations and indirectly the Group’s business, financial condition and results of operations: • its ability to identify and develop relationships with qualified suppliers; • the terms and conditions upon which it purchases products from its suppliers, including applicable exchange rates, transport costs and other costs, its suppliers’ willingness to extend credit to it to finance its purchases and other factors beyond its control; • the financial condition of its suppliers; • political instability in the countries in which its suppliers are located (including the Middle East for its crude oil supplies); • its suppliers’ non-compliance with applicable laws, trade restrictions and tariffs; or • its suppliers’ ability to manufacture and deliver outsourced products according to the Group’s standards of quality on a timely and efficient basis.

-21- If the Non-Finance Segments’ relationship with any of their key suppliers deteriorates due to the factors set out above, or for any other reason, it may not be able to quickly or effectively replace such supplier.

Importation of crude oil from Iran could subject Tüpras¸ to sanctions, which may have an adverse effect on its business, financial condition, results of operations and reputation Tüpras¸ purchases the largest proportion of its crude oil from Iran which is currently subject to international sanctions with respect to business dealings with Iran, including US extraterritorial sanctions that provide the US government with authority to impose sanctions on purchasers of crude oil from Iran unless the US government has issued an applicable exemption. Presently, Tüpras¸ benefits from an exemption from certain US sanctions relating to the purchase of crude oil from Iran, which the US government granted to Turkey on 11 June 2012 and extended on 7 December 2012 that is subject to renewal every six months. There can be no assurance that this exemption will be extended beyond June 2013 or that a renewal will not be conditional on further reductions of crude oil imports from Iran.

While Tüpras¸ is not presently a target of any sanctions, it may in the near future have to substantially decrease, or possibly even eliminate, the volume of crude oil it purchases from Iran in order to preserve the US exemption described above and mitigate the risk of designation under, among others, US extraterritorial sanctions. On 30 March 2012, Tüpras¸ publicly announced that it had decided to reduce the volume of its crude oil purchases and shipments from Iran by 20 per cent. See “Business—Operations-Energy Segment—Tüpras¸—Crude Supply— Extraterritorial sanctions relating to Iran” for further information. In 2012, 7.2 million tons, or 33 per cent. of total crude oil purchased by Tüpras¸ was from Iran, a 2.5 million tons or 26 per cent. decrease from 2011. Decreasing crude supply from Iran is likely to result in an increased need for working capital due to the longer credit terms offered for Iranian crude cargoes and could have a material adverse effect on the Tüpras¸’s business, financial condition and results of operations. In the event that Tüpras¸ is required to immediately eliminate crude oil purchases from Iran, it may need to locate on short notice suitable alternative crude oil for use in the processing and production of refined products and there is a risk that Tüpras¸ may be unable to procure alternative supplies of crude oil at competitive prices which could adversely affect the Tüpras¸’s operations.

Violations of European, US or other international sanctions, if they occur, could subject Tüpras¸ and the Group to penalties which could have a material adverse effect on Tüpras¸’s and the Group’s ability to obtain goods and services in the international markets or access the US or international capital or bank debt markets, or cause reputational damage which could have a material adverse effect on the Tüpras¸’s business, financial condition and results of operations and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations. In addition, violations of European, US or other international sanctions could result in an event of default under the Group’s various financing agreements.

A substantial or extended decline in refining margins would negatively impact the Group’s Energy Segment’s financial results The financial results of the Group’s Energy Segment are significantly affected by the margin between the prices at which Tüpras¸ sells refined products and the prices at which Tüpras¸ purchases crude oil and other feedstocks. The Group does not produce crude oil and purchases all of the crude oil Tüpras¸ refines principally from Iran, Iraq, Russia, Saudi Arabia, Kazakhstan and also domestically. Tüpras¸ primarily processes medium heavy and sour crudes, which offer a cost advantage over lighter sweeter crudes. Changes in the level of the light/heavy price differential could have an adverse effect on refining margins.

The price of the crude oil that Tüpras¸ refines and the price at which Tüpras¸ can sell its refined products may also fluctuate independently of each other due to a variety of factors beyond the Group’s control, including regional and global supply of, and demand for, crude oil, gasoline, diesel, and other feedstocks and refined products. Refining margins are also significantly impacted by additional refinery conversion capacity with any significant worldwide and regional refining capacity expansion potentially resulting in refining production capability exceeding demand, which would have an adverse effect on refining margins. Tüpras¸ purchases refinery feedstocks weeks before refining and selling the refined products. Price level changes during these weeks could have a significant positive or negative effect on the Tüpras¸’s financial results, and therefore, indirectly the Group’s financial results. Although an increase or decrease in the price of crude oil generally results in a corresponding increase or decrease in the price of the majority of refined products, changes in the prices of refined products generally lag behind upward and downward changes in crude oil prices. As a result, a rapid and significant increase or decrease in the market price for crude oil might have an adverse impact on refining margins. A decline in refining margins could have a material adverse effect on Tüpras¸’s business, financial condition and results of operations and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

-22- The Turkish Government which holds a “golden share” in Tüpras¸ may have interests that conflict with the Company The Turkish Government holds a Group C (preferential) share, or “golden share”, in Tüpras¸ that carries a right to appoint one director to Tüpras¸’s board of directors. Pursuant to Tüpras¸’s articles of association, any amendments to Tüpras¸’s articles of association affecting the quorums of its board of directors, the rights of the Group C (preferential) share, or accommodation of the needs of the Turkish Armed Forces; any decisions concerning a spin-off or merger or closure, sale, limitation of any kind or capacity decrease of more than 10 per cent. of any of Tüpras¸’s refineries that may restrict and/or hinder the accommodation of the needs of Turkish Armed Forces; and any decision relating to the liquidation of Tüpras¸ can only be taken with the affirmative vote of the Group C (preferential) share. While the Turkish Government has never previously exercised its veto rights pursuant to the Group C (preferential) share, if it were to exercise any such rights conferred to it as a result of it holding the golden share in Tüpras¸, it could have a material adverse effect on Tüpras¸’s business, results of operations or financial condition, and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

The Group’s Consumer Durables Segment is dependent on sales to retail chains and other large customers in its international markets, who may exercise pricing and other pressure on the Consumer Durables Segment In its export market, the Consumer Durables Segment sells to a sophisticated customer base of large trade customers that have significant leverage as buyers over their suppliers. Most of the Consumer Durables Segment’s products are sold through one to two year contracts that allow flexibility in pricing and volume terms, which facilitates the trade customers’ ability to change volume among suppliers. As the segment’s trade customers continue to become larger they may seek to use their position to improve their profitability by various means, including improved efficiency, lower pricing, and increased promotional programmes. As a result, volume growth and financial results of the Group’s Consumer Durables Segment could be negatively affected. The loss of or substantial decline in volume of sales to key retail customers, major buying groups or any other trade customers to which the Consumer Durables Segment sells a significant volume of products could adversely affect the Consumer Durable Segment’s financial performance, and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

In the Automotive and Consumer Durables Segments, the success of the Group depends on the Group’s ability to offer new, innovative and high quality products that meet consumer demand Meeting consumer demand with new and high quality products that are developed over increasingly shorter development cycles is critical to the success of the Group’s Automotive and Consumer Durables Segments. The ability of the Group’s Automotive and Consumer Durables Segments to meet consumer demand and thus retain and strengthen its position within its traditional market segments, as well as, expanding into new market segments is dependent on successful R&D of innovative products and services, efficiency of its distribution network and quality of its after-sales service. Production innovation and development are critical factors in improving margins and enabling net sales growth. Any inability to respond to consumer demand including, delays in bringing new products to market, the inability to achieve defined efficiency targets without suffering from quality losses and the lack of market acceptance of new models would adversely affect the business, financial condition, results of operations and cash flows of the Group’s Automotive and Consumer Durables Segments and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

In the Automotive and Consumer Durables Segments, the success of the Group depends on the Group’s ability to effectively market and distribute its products Products from the Automotive Segment are sold and serviced through a network of dealers and service centres across the Turkish market. Products from the Consumer Durables Segment are sold and serviced through a network of dealers, distributors and service centres across a number of markets in Turkey, the E.U., CIS/Eastern Europe and Africa. Any under-performance by such dealers or distributors could adversely affect the sales and results of operations of the Group’s Automotive and Consumer Durables Segments and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

There can be no assurance that the Group’s Automotive and Consumer Durables Segments will be able to maintain and develop sales techniques and distribution networks that effectively adapt to customer preferences or changes in the regulatory environment in the major markets in which they operate. The inability of the Group’s

-23- Automotive and Consumer Durables Segments to maintain well-developed sales techniques and distribution networks may result in decreased sales and market shares and may adversely affect the financial condition and results of operations of those segments and, indirectly, the Group’s.

The Group’s Non-Finance Segments are subject to credit risk in relation to its contractual counterparties and others The Group’s Non-Finance Segments are subject to inherent risks concerning the credit quality of contractual counterparties and others, which have affected and are expected to continue to affect, indirectly, the Group’s results of operations and financial condition. In the Automotive, Consumer Durables and Energy Segments, the Group is exposed to credit risk principally as a result of trade receivables, financial assets, derivative instruments and bank deposits. Changes in the credit quality of the counterparties and customers of those segments can negatively affect the value of the Group’s Automotive, Consumer Durables and Energy Segments’ assets, and lead to increased write downs of assets and provisions for impairment and other losses.

The Group’s Non-Finance Segments also have a portfolio of derivative financial instruments, including currency forwards, currency and interest rate swaps and options. As of 31 December 2012, the Group’s Non-Finance Segments’ total recognised derivative instruments had a notional value (i.e. the aggregate of buy and sell legs of the related derivative financial instruments) of TL2,758 million, and the total fair value of the Group’s Non- Finance Segments’ derivative instruments was TL12 million net liability. The Group’s Non-Finance Segments is exposed to credit risk with respect to the ability of its counterparties to meet their obligations under these derivative financial instruments. Exposure to any or all of these credit risks could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Fluctuations in interest rates could increase the cost of the Group’s debt and negatively affect the Group’s overall financial performance The Group’s financial expenses are affected by changes in interest rates, such as Turkish Lira Reference Interest Rate, or TRLIBOR, and the London Interbank Offered Rate, or LIBOR. The TRLIBOR has fluctuated significantly in the past in response to the expansion or contraction of the Turkish economy, inflation, Turkish government policies and other factors. Due to global economic crisis, LIBOR rates have also fluctuated in recent years. A significant increase in interest rates could have a material adverse effect on the Group’s financial expenses and negatively affect the Group’s overall financial performance.

Through Yapı Kredi, the Group is exposed to various risks relating to the Turkish banking system, regulatory, competitive and other factors, changing international guidelines for banking regulation and implementation in Turkey, licensing and money laundering and terrorist financing The Turkish banking system is subject to risks The Turkish financial sector has gone through major changes as a result of the financial liberalisation programme that started in the early 1980s and has experienced structural transformation of the sector. Since the 1980s, the Turkish banking sector has experienced a significant expansion and development in the number of banks, employment in the sector, diversification of services and technological infrastructure. The significant volatility in Turkish Lira and foreign exchange markets experienced in 1994, 1998 and in 2001, combined with the short foreign exchange positions held by many Turkish banks at those times, affected the profitability and liquidity of certain Turkish banks. In 2001, this resulted in the collapse of several banks. Following this crisis, the government made structural changes to the Turkish banking system to strengthen the private (i.e., non- governmental) banking sector and to allow it to compete more effectively against the state-controlled banks (HalkBank, VakıfBank and Ziraat). Notwithstanding such changes, the Turkish banking sector remains subject to volatility. If the general macro economic conditions in Turkey, and the Turkish banking sector in particular, were to suffer another crisis, there can be no assurance that this would not result in further bank failures, reduced liquidity and weaker public confidence in the Turkish banking system.

The profitability and profitability growth of Turkish banks, including the Bank, in recent periods may not be sustainable as a result of regulatory, competitive and other factors impacting the Turkish banking sector In December 2010, the Central Bank announced a policy of reducing interest rates while increasing Turkish Lira reserve requirements in order to enhance financial stability in Turkey. Since that time, the Central Bank has announced significant increases in bank reserve requirements for Turkish Lira and foreign currency deposits to address concerns that maturities of liabilities in the Turkish banking sector are shorter than those of assets, which in turn exposed the sector to liquidity and interest rate risk.

-24- Although the Group’s profit from the Finance Segment has risen in recent periods, the profitability of the Finance Segment may be negatively affected in the short term and possibly in the long term as a result of a number of factors that are generally impacting the Turkish banking sector. Such factors include increased competition, particularly as it impacts net interest income and the Central Bank and BRSA regulatory actions that seek to limit the growth of Turkish banks through various conventional and unconventional policy measures, including increased reserve requirements, increased general provisioning requirements and higher risk weighting for general purpose loans. Although the Group will seek to limit the impact of these factors on the Finance Segment through its strategy of focusing on profitable sectors and clients, rather than solely on overall growth, there is no assurance that the profitability or financial position (including capitalisation levels) of the Finance Segment will not be materially and adversely impacted as a result of such factors, which in turn could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

International guidelines for banking regulation and implementation in Turkey are subject to ongoing changes In June 2004, the Basel Committee on Banking Supervision (the “Basel Committee”) published a report entitled “International Convergence of Capital Measurement and Capital Standards: a Revised Framework,” which sets out a new capital adequacy framework (commonly referred to as “Basel II”) to replace the Basel Capital Accord issued in 1988. Basel II was implemented in Turkey in stages and was fully adopted during the second half of 2012. Yapı Kredi began reporting under Basel II on 31 July 2012 and the implementation of Basel II has had the effect of decreasing Yapı Kredi’s Tier 1 capital adequacy ratio. Yapı Kredi’s capital adequacy ratio as at 31 December 2012 was 16.3 per cent. at the bank level and 15.2 per cent. at the consolidated group level in accordance with Basel II requirements. After the closing of the sale of Yapı Kredi Sigorta A.S¸., further improvement is expected in the bank’s capital adequacy ratio. The Basel Committee has also adopted further revisions (“Basel III”). Recently, a draft regulation replacing the current BRSA Equities Regulation, a draft regulation amending the Regulation on the Measurement and Evaluation of Capital Adequacy of Banks and a draft regulation on the Capital Maintenance and Cyclical Capital Buffer were made available by the BRSA. The BRSA has requested comments on the draft regulations by March 2013, following which there will be further discussions regarding the proposed implementation date and the nature of the changes. The Group is not able to predict whether the adoption of any revisions under Basel III may have a material impact on the Turkish banking system or Yapı Kredi. Although an official timetable for the adoption of Basel III regulations in Turkey has not been announced by the BRSA, the regulations are expected to be implemented between 2015 and 2019 in accordance with the transition period provided for by the Basel Committee. If these or any other international guidelines are adopted in Turkey and Yapı Kredi is unable to maintain its capital adequacy ratios above the minimum levels for any reason, then this could have a material adverse effect on Yapı Kredi’s business, financial condition and/or results of operations and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Yapı Kredi is dependent on its banking and other licences The banking and other operations performed by Yapı Kredi and its subsidiaries require licences by the relevant authorities in each jurisdiction in which they operate. A large majority of the Group’s Finance Segment depends on Yapı Kredi’s Turkish banking licence from the BRSA. If Yapı Kredi loses its general banking licence, then it will be unable to perform any banking operations in Turkey. Although Yapı Kredi believes that it and its subsidiaries have the necessary licences for their banking and other operations and that each of Yapı Kredi and its subsidiaries are currently in compliance with their existing material licence and reporting obligations, there is no assurance that it will be able to maintain the necessary licences in the future. The loss of a licence, a breach of the terms of any licence or failure to obtain any further required licences in the future could have a material adverse effect on Yapı Kredi’s financial condition and/or results of operations and could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Yapı Kredi is subject to risks associated with money laundering and terrorist financing Yapı Kredi has implemented internal measures to prevent it from being used as a conduit for money laundering or terrorist financing and has adopted various policies and procedures, including internal control and “know- your-customer” procedures, aimed at preventing money laundering and terrorist financing. Yapı Kredi’s anti- money laundering policies and procedures are based upon, and Yapı Kredi believes that such policies and procedures are in compliance in all material respects with, applicable provisions of Turkish law and laws in other jurisdictions in which Yapı Kredi operates. However, such measures, procedures and compliance may not be effective in preventing third parties from using Yapı Kredi as a conduit for money laundering (including illegal cash operations) or terrorist financing without the Banks knowledge. If Yapı Kredi is associated with money

-25- laundering (including illegal cash operations) or terrorist financing, then the Bank could suffer serious damage to its reputation, including among the network of correspondent banks in foreign countries in the Bank which could affect its ability to maintain existing relationships, attract new business and provide services to its customers. The Bank could also could become subject to fines, sanctions and/or legal enforcement (including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with the Bank), which could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

The Group’s Finance Segment is subject to banking risks via Yapı Kredi Liquidity risk The Group’s Finance Segment is exposed to liquidity risk, arising out of mismatches between the maturities of the segment’s assets and liabilities. A significant portion of the Finance Segment’s funding base consists of short-term debt and customer deposits and the segment has a mix of short-, medium- and long-term assets in the form of retail, consumer and corporate loans, mortgages and credit cards, which may result in asset-liability maturity gaps and ultimately liquidity problems. In addition, the Group cannot assure that time and other deposits will continue to be available to the Finance Segment as a source of funding on terms favourable to it or at all. Withdrawals of customer deposits could lead to liquidity gaps that the Finance Segment would have to cover. In the event of liquidity gaps, access to other funding sources, such as Central Bank repos or the capital markets, may not be available, or may be available only at higher cost, and such funding sources may be less advantageous to Finance Segment in other respects. If the Finance Segment is unable to obtain sufficient new funding, it may be unable to continue growing its loan portfolio or to respond effectively to changes in business conditions and competitive pressures, which could have a material adverse effect on it, and indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Interest rate risk In the Group’s Finance Segment, assets have a longer maturity and re-price more slowly than liabilities, as a result of which the Group’s Finance Segment may benefit from a lag in the re-pricing of its assets compared to its liabilities in falling and low interest rate environments, as has been experienced in Turkey since 2008. However, in a rising interest rate environment, the Finance Segment may be adversely affected by the same re-pricing lag. This difference could result in an increase in interest expense relative to interest income, reducing margins and the Finance Segment’s interest, fee, commission and similar income. Furthermore, an increase in interest rates may reduce the demand for loans from the Finance Segment and its ability to originate loans. A decrease in the general level of interest rates may affect the Finance Segment through, among other things, increased prepayments on its loan portfolio and increased competition for deposits.

Credit risk In the Group’s Finance Segment, credit risk is inherent in a wide range of assets and products, including loans and advances to customers, securities holdings, due from other banks, derivative instruments, guarantees and letters of credit. Increased unemployment, rising inflation, reduced corporate liquidity and profitability, increased corporate insolvencies and the inability of individuals to service their personal debt might negatively affect the Finance Segment.

Group’s Finance Segment’s loan portfolio has expanded significantly in recent years, increasing the Finance Segment’s exposure to credit risk associated with lending, and Group’s Finance Segment’s loan portfolio includes a significant portion of unseasoned loans. The current level of provisions by Group’s Finance Segment may not be sufficient to cover future losses and Group’s Finance Segment may have to create significant additional provisions for possible credit losses in the future. In addition, there can be no assurance that Group Finance Segment’s will be able to correctly assess the creditworthiness of credit applicants, particularly since Group’ Finance Segment is not always able to confirm independently information provided by prospective clients. Any failure to manage the growth of the Group’s Finance Segment loan portfolio or the credit quality of its borrowers within prudent risk parameters or to monitor and regulate the adequacy of its provisioning levels could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Loans and advances may be concentrated among its largest borrowers and in certain industries As of 31 December 2012, Yapı Kredi’s loans and advances to its 20 largest borrowers or borrower groups amounted to 11.4 per cent. of its total loans and advances to customers and 7.2 per cent. of its total assets. Any

-26- impairment in the ability of one or more of these borrowers or borrower groups to service or repay their obligations to Yapı Kredi could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

A downturn in any of the major sectors Yapı Kredi has exposure through its balance sheet, may adversely affect the financial condition of the companies operating in such sectors and may result in, among other things, a decrease of funds that such corporate customers hold on deposit with Yapı Kredi, a default on their obligations owed to Yapı Kredi or a need for Yapı Kredi to increase its provisions in respect of such obligations. Similarly a downturn of any one or more of Yapı Kredi’s largest customers’ financial positions may have similar effects.

Risks related to trading activities As part of Yapı Kredi’s treasury operations, it trades various securities and derivatives, including debt, equity, fixed income, currencies and commodities and related derivatives, as both agent and principal, and it derives a portion of its non-interest income from profits earned in such trades. A significant portion of Yapı Kredi’s trading activities are related to customer transactions and management has put stringent measures in place that seek to limit its ultimate trading exposure.

However, Yapı Kredi may still be exposed to a number of risks related to changes in the value of such securities and derivatives, including the risk of unfavourable market price movements relative to its long or short positions, a decline in the market liquidity of the related instruments, volatility in market prices, interest rates or foreign currency exchange rates relating to these positions and the risk that the instruments with which Yapı Kredi chooses to hedge certain positions do not track the market value of those positions. If Yapı Kredi incurs any losses from these exposures, then it could reduce the Bank’s income or cause it to suffer losses, either of which could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Lower-than-expected returns on pension fund assets, changes in market conditions, changes in interest rates, changes in inflation rates, and adverse changes in other critical actuarial assumptions, may impact Yapı Kredi’s pension liabilities and consequently increase the Bank’s funding requirements, which could indirectly have a material adverse effect on the Group’s business, financial condition and/or results of operations.

Risks Relating to Turkey Economic instability in Turkey could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects Since the mid-1980s, the Turkish economy has undergone a transformation from a highly protected and regulated system to a more open market system. Although the Turkish economy has generally responded well to this transformation, it has continued to experience severe macroeconomic imbalances, including significant balance of payment deficits, substantial budget deficits, high rates of inflation, high rates of interest (which are real rates adjusted to remove the effects of inflation) and a considerable level of unemployment. As a result, Turkey entered into a stand-by agreement with the International Monetary Fund (the “IMF”) at the end of 1999, to stabilise its financial condition. However, liquidity crises in the banking sector in November 2000 and February 2001 triggered a severe economic crisis and led to increased interest rates on Turkish Government borrowings. These factors contributed to a decline of 5.7 per cent. in Turkey’s real GDP in 2001 compared to 2000. Following the almost 95 per cent. devaluation of the Turkish Lira on average in 2001, average inflation based on the Turkish wholesale price index rose to 61.6 per cent., and year-end inflation was 88.6 per cent. The combination of the significant depreciation of the Turkish Lira, high real interest rates and the high cost of bank restructurings caused the ratio of net public debt to GDP to increase from 43.1 per cent. at the end of 2000 to 66.4 per cent. at the end of 2001.

In 2001, Turkey implemented a macroeconomic programme, backed by a USD 21 billion stand-by agreement with the IMF. The goal of this programme was to bolster the Turkish economy and reduce its volatility in the short-term, as well as to achieve sustainable growth through fundamental structural reforms in the medium- to long-term. GDP grew by 6.2 per cent. in 2002, 5.3 per cent. in 2003, 9.4 per cent. in 2004, 8.4 per cent. in 2005, 6.9 per cent. in 2006, 4.7 per cent. in 2007 and 0.7 per cent. in 2008. The Turkish Government signed a three- year stand-by agreement with the IMF in 2005 which ended in 2008. The programme set macroeconomic targets such as an annual economic growth rate of 5 per cent. during the three-year period, decreasing the ratio of net public debt stock to GDP to 47.8 per cent. in 2008 and decreasing the Consumer Price Index (“CPI”) to 4 per cent. by the end of 2008 Although there were negotiations on the conditions of a new stand-by agreement between Turkey and the IMF in 2009, no such agreement was signed.

-27- In spite of its economic development since 2001, Turkey has experienced recent economic difficulties and remains vulnerable to both external and internal shocks, including escalating oil prices and terrorist activity, as well as potential domestic political uncertainty and changing investor sentiment. See “—Turkey’s high current account deficit may result in Turkish Government policies that negatively affect the Group’s business”. Turkey was also negatively affected by the global economic downturn, which resulted in a negative GDP growth rate of 4.8 per cent. in 2009. Following the decline in 2009, however, Turkey had a GDP growth rate of 9.2 per cent. in 2010 and 8.8 per cent. in 2011. Turkey’s GDP growth came down to 2.2 per cent. in 2012 as a result of deliberate policies by the authorities to rebalance the economy.

The current mid-term financial plan prepared by the Turkish Ministry of Development and published in the Official Gazette dated 9 October 2012 sets GDP growth targets of 4.0 per cent. for 2013 and 5.0 per cent. for 2014 and 2015. However, conditions for sustained growth remain fragile. Turkey remains vulnerable to both external and internal shocks, including liquidity problems, escalating oil prices, and domestic political uncertainty.

There can be no assurance that Turkey will be able to remain economically stable during any periods of renewed global economic weakness. In such circumstances, there can be no assurance that Turkey and the IMF will enter into a new agreement in relation to macroeconomic stabilisation policies and, even if agreed upon, there can be no assurance that any such agreement would help Turkey to remain economically stable during any current or future macroeconomic imbalances or that IMF support for Turkey would continue. Future negative developments in the Turkish economy could impair the Group’s business strategies and have a materially adverse effect on the Group’s business, financial condition and results of operations.

Turkey’s high current account deficit may result in Turkish Government policies that negatively affect the Group’s business In 2010, Turkey’s current account deficit widened significantly to USD 45.4 billion from USD 12.2 billion in 2009. Due to mainly strong growth of Turkish economy, the current account deficit widened further to USD 75.1 billion at the end of 2011. This rapid acceleration in the current account deficit has raised concerns regarding financial stability in Turkey, and the Central Bank, the BRSA, and the Ministry of Finance have initiated coordinated measures to lengthen the maturity of deposits, reduce short-term capital inflows and curb domestic demand. As of 31 December 2012, the current account deficit declined back to USD 46.9 billion.

Although Turkey’s growth dynamics mostly depend upon domestic demand (in 2012, 87 per cent. of Turkey’s GDP was made up of private sector’s consumption and investment expenditures), Turkey is also dependent upon trade with Europe. A significant decline in the economic growth of any of Turkey’s major trading partners, such as the EU, could have an adverse impact on Turkey’s balance of trade and adversely affect Turkey’s economic growth. Turkey has diversified its export markets in recent years, but the EU remains Turkey’s largest export market. A decline in demand for imports from the EU could have a material adverse effect on Turkish exports and Turkey’s economic growth and result in an increase in Turkey’s current account deficit. The Turkish Government has declared its intention to take additional measures to decrease the current account deficit, and in this regard it identified the high growth rate of loans as one of the target areas. Accordingly, the Central Bank has increased TL reserve requirements and reduced interest rates, which could in turn lead to inflationary pressures in the Turkish economy. Furthermore, certain actions taken by the Turkish Government to combat inflation could have negative effects on the Turkish economy. Moreover, failure to reduce the current account deficit could have a negative impact on Turkey’s sovereign credit ratings. This could in turn limit the Group’s access to credit markets and foreign financial markets and negatively impact its ability to comply with its obligations, including those under the Notes. There can be no assurance that government intervention designed to counteract inflationary pressure and reduce the current account deficit, but which may be harmful to the Group’s business, financial condition and results of operations, will not occur in the future.

Exchange rate risk and the Turkish Lira exchange rate could have a material adverse effect on the Group’s business, financial condition and results of operations The depreciation of the Turkish Lira against the U.S. dollar or other major currencies might adversely affect the financial condition of Turkey and, in turn, the Group’s business, financial condition and results of operations. Any significant depreciation of the Turkish Lira against the U.S. dollar or other major currencies might also have a negative effect on the Group’s ability to repay any debt denominated in currencies other than the Turkish Lira. As a result of the financial crises in November 2000 and February 2001, the Turkish Lira depreciated from TL 0.6718 per U.S. dollar at 31 December 2000 to TL 1.4396 per U.S. dollar at 31 December 2001 and then

-28- further depreciated to TL 1.6345 per U.S. dollar at 31 December 2002. As the Turkish Government began implementing economic and financial reforms, the value of the Turkish Lira increased to TL 1.3958 per U.S. dollar at 31 December 2003. The Turkish Lira further appreciated to TL 1.3421 per U.S. dollar at 31 December 2004 and was TL 1.3418 per U.S. dollar at 31 December 2005, TL 1.4056 per U.S. dollar at 29 December 2006 and TL 1.1647 per U.S. dollar at 31 December 2007. Due to the market volatility, the Turkish Lira depreciated to TL 1.5123 per U.S. dollar at 31 December 2008, TL 1.5057 per U.S. dollar at 31 December 2009, TL 1.5460 per U.S. dollar at 31 December 2010, TL 1.8889 per U.S. dollar at 31 December 2011 and TL 1.7826 per U.S. dollar at 31 December 2012.

The government has significant influence on the Turkish economy Traditionally, the government has exercised, and continues to exercise, significant influence over many aspects of the Turkish economy. The government is also directly involved in the Turkish economy through its ownership and administration of State Economic Enterprises (“SEEs”) which, despite the divestments undertaken in the government’s privatisation programme, continue to represent a significant portion of the Turkish economy. Any decisions taken by the government with respect to the SEEs may have an impact on the Turkish economy and thus may indirectly adversely affect the Group’s business, financial condition and results of operations.

Political developments in Turkey could have a material adverse effect on the Group’s business, financial condition and results of operations Turkey has been a parliamentary democracy since 1923. Unstable coalition governments have been common, and in the 89 years since establishing its parliamentary system, Turkey has had 61 governments, with political disagreements frequently resulting in early elections. Furthermore, the Turkish military establishment has historically played a significant role in Turkish government and politics, intervening in the political process, and although there has been a significant decline in the role of the military forces in Turkish politics since 2010 onwards, there can be no assurance that the Turkish military establishment will not intervene in the political process in the future.

On 12 September 2010, Turkish voters voted in support of a public referendum containing a number of changes to the constitution. The referendum contained articles which (i) change the composition and the structure of the Constitutional Court and the Supreme Court of Judges and Prosecutors, (ii) give civil servants the right of collective bargaining and (iii) provide for positive discrimination claims on behalf of children, the elderly and the disabled.

A general election was held on 12 June 2011 in which 24 political parties and independent candidates contested 550 seats in the Turkish parliament. The currently ruling Justice and Development Party (Adalet ve Kalkınma Partisi) (the “AKP”) received approximately 50 per cent. of the total votes, whereas the Republican People’s Party (Cumhuriyet Halk Partisi) (the “CHP”) and Nationalist Movement Party, (Milliyetçi Hareket Partisi) (the “MHP”) received 26 per cent. and 13 per cent. of the total votes, respectively. Additionally 35 independent members received approximately 6.5 per cent. of the total votes. Twenty-nine independent members of parliament joined the Peace and Democracy Party (Barıs¸ ve Demokrasi Partisi) (the “BDP”) following the elections. Any significant changes in the political environment, including changes that result in the failure of the government to devise or implement required or appropriate economic programmes, may adversely affect the stability of the Turkish economy and, in turn, the Group’s business, financial condition and results of operations.

Conflict, civil unrest and terrorism within Turkey or nearby countries could have a material adverse effect on the Group’s business, financial condition and results of operations Turkey is located in a region that has been subject to ongoing political and security concerns, especially in recent years. Historically, political uncertainty within Turkey and in certain neighbouring countries (such as Iran, Iraq, Georgia, Armenia and Syria) has been one of the potential risks associated with investment in Turkish securities. There have also been additional concerns about political stability in the Middle East and an increase in the risk of terrorist acts against the United States and its allies, including Turkey, since the 11 September 2001 terrorist attacks in the United States and the commencement of military action taken by the United States and its allies in March 2003. Increased incidents of violence, sectarian conflict and rebellions in nearby areas (such as Iraq) have also been reported. Recently, the level of unrest in the Middle East, North Africa and in Syria increased, including in areas bordering on Turkey, which, among other things, may lead to further risk of volatility in political conditions and financial markets. Moreover, tensions between Turkey and Syria have recently escalated and hostilities have broken out over a series of incidents, including mortar fire by Syrian forces into Turkey that

-29- has killed Turkish civilians. Such tensions and hostilities between Syria and Turkey may escalate further, which could have a material adverse effect on the Turkish economy and on the Group’s business, financial condition and results of operations.

Turkey experiences ongoing tensions with domestic terrorist and ethnic separatist groups, such as the PKK. In the past 10 years, these have resulted in a number of bombing incidents in several Turkish cities and regions, including in Istanbul, Antalya, Marmaris, Ankara, Mersin, Çes¸me and Kus¸adası, as well as attacks against the Turkish armed forces in the south-eastern part of Turkey. If additional attacks occur in the future, Turkey’s capital markets, levels of tourism and foreign investment, among other things, may suffer, which could have a material adverse effect on the Group’s business, financial condition and results of operations.

Since January 2011, there have been varying degrees of political instability and public protests within certain Middle Eastern and Northern African countries, including Bahrain, Egypt, Iran, Libya, Syria and Tunisia. As a result of the unrest in Syria, thousands of Syrian refugees have fled to Turkey and more can be expected to cross the Turkish-Syrian border if the unrest in Syria escalates. Although such instances of instability have not so far materially affected Turkey’s financial or political situation, there can be no assurance that such instability will not escalate in the future, that such instability will not spread to additional countries in the Middle East or North Africa, that governments in the Middle East and North Africa will be successful in maintaining domestic order and stability or that Turkey’s financial or political situation will not thereby be affected.

Changes in Turkish tax laws may have an adverse impact on the taxes applicable to the Group’s business. The Turkish government may implement changes to tax regimes that may affect the Group and its customers. These changes include changes in prevailing tax rates and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes.

Some of these changes may result in increases in Group’s tax payments, which could adversely affect profitability and increase the prices of its services, restrict its ability to do business in its existing and new markets and cause its financial results to suffer. There can be no assurance that the Group will be able to maintain its projected cash flow and profitability following increases in Turkish taxes applicable to the Group and its operations.

The market for Turkish securities is subject to a high degree of volatility due to developments and perceptions of risks in other countries In general, investing in the securities of issuers that have operations primarily in emerging markets like Turkey involves a higher degree of risk than investing in the securities of issuers with substantial operations in the United States, the member states of the EU or other similar jurisdictions. Summarised below are a number of risks relating to operating in Turkey and other emerging markets.

The market for securities issued by Turkish companies is influenced by economic and market conditions in Turkey, as well as, to varying degrees, by market conditions in both emerging market countries and more developed economies including those in the European Union and the United States. Although economic conditions differ in each country, the reaction of investors to developments in one country may cause capital markets in other countries to fluctuate. Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to the Turkish economy and resulted in considerable outflows of funds and declines in the amount of foreign investments in Turkey. Crises in other emerging market countries may diminish investor interest in securities of Turkish issuers, including the Company’s, which could adversely affect the market price of the Company’s securities.

Moreover, financial turmoil in any emerging market country tends to adversely affect the prices of equity and debt securities of all emerging market countries as investors move their money to more stable, developed markets. An increase in the perceived risks associated with investing in emerging economies could dampen capital flows to Turkey and adversely affect the Turkish economy. There can be no assurance that investors’ interest in Turkey will not be negatively affected by events in other emerging markets or the global economy in general. Exchange controls implemented by the Turkish Government could adversely affect the business, financial condition and results or operations of the Group.

Any claims against the Company under the Notes and the related transaction documents will be unsecured claims payable from, among other sources, the Company’s funds in Turkey. The ability of the Company to make any

-30- such payments from Turkey will depend, among other factors, upon the Turkish Government not having imposed any prohibitive foreign exchange controls, the Company’s ability to obtain US Dollars in Turkey and the Company’s ability to secure any applicable necessary approval from the relevant authority, which could be affected by changes in Turkish exchange controls. Any such restrictions or failure to obtain the necessary approval could affect the Company’s ability to make payment of interest and principal under the Notes.

Uncertainties relating to Turkey’s accession to the European Union may adversely affect the Turkish financial markets and result in greater volatility Turkey has been a candidate country for EU membership since the Helsinki European Council of December 1999. The EU resolved on 17 December 2004 to commence accession negotiations with Turkey and affirmed that Turkey’s candidacy will be judged by the same 35 criteria (or “Chapters”) applied to other candidates. These criteria require a range of political, legislative and economic reforms to be implemented. Among these legislative reforms are four new major laws: Turkish Commercial Code (the “TCC”), Turkish Code of Obligations (“TCO”), Turkish Code of Civil Procedures (the “CCP”) and the Capital Markets Law (the “CML”) which replaced previous TCC No. 6762 and the TCO No. 818, the CML No. 2499 and the CCP No. 1086, respectively (see “—Recent changes in Turkish legislation may have a significant impact on the Group’s business, financial condition and results of operations”).

Although Turkey has implemented various reforms and continued harmonisation efforts with the EU, the relationship between the EU and Turkey has at times been strained. During 2006, the EU issued several warnings in connection with Turkey’s undertakings under the additional protocol dated July 2005 relating to the Customs Union and to the recognition of the Republic of Cyprus. Following this, in December 2006, the EU decided that negotiations in eight Chapters should be suspended and that no Chapter would be closed until the EU has verified that Turkey has fulfilled its commitments relating to the additional protocol of July 2005.

On 10 October 2012, the European Commission (the “Commission”) released the 2012 Progress Report (the “Report”) assessing Turkey’s achievements towards accession into the EU over the prior twelve months. The Report noted the launch of an agenda to support the accession negotiations through increased cooperation in a number of areas of joint interest: political reforms, alignment with EU law, dialogue on foreign policy, visa, mobility and migration, trade, energy, and counter terrorism. However, it stated that there are growing concerns regarding Turkey’s lack of substantial progress towards fully meeting the political criteria and in particular the lack of progress with respect to fundamental rights. The Commission stressed that Turkey has not ensured full non-discriminatory implementation of its Customs Union obligations with the EU, nor of the Additional Protocol. The Report positively noted the participative work on a new constitution, the adoption of the law on the “Ombudsman institution”, and the improvements in the Turkish criminal justice system introduced through the third judicial reform package. The Commission also stated that progress was made in a number of areas, particularly in company law, science and research and Customs Union provisions. However, efforts need to continue towards further alignment in most fields. There can be no assurance that the EU will continue to maintain an open approach to Turkey’s EU membership that Turkey will be able to meet all the criteria applicable to becoming a member state or that Turkey will become a member state.

Recent changes in Turkish legislation may have a significant impact on the Group’s business, financial condition and results of operations Recently, four major pieces of legislation have been subject to substantial amendment, namely the TCO, the CCP, the TCC and the CML. Both the TCO and the TCC came into effect on 1 July 2012, whereas the CCP became effective on 1 October 2011 and the CML on 30 December 2012.

This legislation implements substantial changes to Turkish law and it is anticipated that new legislation will have a major impact on commercial life in Turkey and on the Group’s business, financial condition and results of operations. It is also possible that amendments will be made to the respective laws from time to time.

Turkish disclosure standards differ in certain significant respects from those in more developed markets, leading to a relatively limited amount of information being available The disclosure obligations applicable to Turkish companies differ in certain respects from those applicable to similar companies in the United States and the United Kingdom. There is also less publicly available information regarding Turkish companies than public companies in the United States, the United Kingdom and other more developed markets. As a result, investors might not have access to the same depth of disclosure relating to the Group as they would for investments in companies in the United States, the EU and other more-developed markets.

-31- Risks Related to the Notes US persons investing in the Notes may have indirect contact with countries sanctioned by the Office of Foreign Assets Control of the US Department of Treasury as a result of the Group’s business with countries on the sanctions list The Office of Foreign Assets Control of the US Department of Treasury (“OFAC”) administers regulations that restrict the ability of US persons to invest in, or otherwise engage in business with, certain countries, including Iran, Cuba, Myanmar, Syria, North Korea and Sudan (each, a “Restricted Country”), and specially designated nationals (together “Sanction Targets”). Because it is not US-based or US-owned, the Company is not prohibited from doing business in countries that are the subject of OFAC sanctions. In addition, because the Group is not a Sanction Target, OFAC regulations do not prohibit US persons from investing in, or otherwise engaging in business with the Group. However, to the extent that the Group invests in, or otherwise engages in business with, Sanction Targets, US persons investing in the Group may incur the risk of indirect contact with Sanction Targets. In addition, certain US state and local governments and colleges have restrictions on the investment of public funds or endowment funds, respectively, in companies with activities in certain countries that are the subject of US sanctions. The US Department of State and other US government entities, the United Nations, the European Union and member states therein and other governments also administer and enforce sanctions against Iran and certain other countries, persons and entities. While neither the Issuer nor any of its subsidiaries or joint ventures is currently the target of any such sanctions, if the Issuer is designated as a sanctions target, Noteholders could be unable to sell, transfer or otherwise deal in or receive distributions with respect to the Notes and the market price of the Notes could be adversely affected.

Investors may have difficulty enforcing foreign judgments against the Issuer or its management Majority of the Issuer’s directors and executive officers are residents of Turkey and all or a substantial portion of the assets of the Issuer and such persons are located in Turkey. As a result, it may be difficult for investors to effect service of process upon the Issuer or such persons outside Turkey, or to enforce judgments or arbitral awards obtained against such parties outside Turkey.

Under the Code Concerning Private International Law and Civil Procedures (Law No. 5718), a judgment of a court established in a country other than the Republic of Turkey may not be enforced in Turkish courts in certain circumstances. There is no treaty between Turkey and the United States or between Turkey and the United Kingdom providing for reciprocal enforcement of judgments. There is no de facto reciprocity between Turkey and the United States. Turkish courts have rendered at least one judgment in the past confirming de facto reciprocity between Turkey and the United Kingdom. However, since de facto reciprocity is decided by the relevant court on a case-by-case basis, there is uncertainty as to the enforceability of court judgments obtained in the United States or the United Kingdom by Turkish courts in the future. Moreover, there is uncertainty as to the ability of an investor to bring an original action in Turkey based on the US federal or any other non-Turkish securities laws.

The Conditions of the Notes are governed by English law and the terms are specified with reference to that law as in effect as of the date of this Offering Circular. Similarly, the enforcement rights of the Noteholders against the Issuer and its assets in Turkey assume the application of Turkish law as presently in effect. Any possible judicial decision or change to English or Turkish law or administrative practice after the date of this Offering Circular may impact the Notes.

An active trading market for the Notes may not develop The Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be liquid. In addition, liquidity may be limited if the Issuer makes large allocations to a limited number of investors. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of the Notes.

Application has been made to the Irish Stock Exchange (the “Irish Stock Exchange”) for the Notes to be admitted to the official list (the “Official List”) and trading on its regulated market (the “Main Securities Market”). There can be no assurance that either such listing or admission to trading will be obtained or, if such listing or admission to trading is obtained, that an active trading market will develop or be sustained. In addition, the liquidity of any market for the Notes will depend on the number of holders of the Notes, the interest of securities dealers in making a market in the Notes and other factors. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes.

-32- The trading price of the Notes may be volatile The market for the Notes will be influenced by economic and market conditions in Turkey and, to varying degrees, interest rates, currency exchange rates and inflation rates in other countries, such as the United States, the Member States of the EU and elsewhere. There can be no assurance that an active trading market for the Notes will develop, or, if one does develop, that events in Turkey or elsewhere will not cause market volatility or that such volatility will not adversely affect the liquidity or the price of the Notes or that economic and market conditions will not have any other adverse effect. If the Notes are traded after their initial issuance, they may trade at a discount to their offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions, the financial condition of the Group or other factors. Any such volatility could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects, as well as on the trading price of the Notes.

Transfer of the Notes will be subject to certain restrictions Although the Notes have been authorised by the CMB as debt securities to be offered outside Turkey, the Notes have not been and will not be registered under the Securities Act or any US state securities laws. Prospective investors may not offer or sell the Notes, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Similar restrictions will apply in other jurisdictions. Prospective investors should read the discussion under the heading “Transfer Restrictions” for further information about these transfer restrictions. It is the obligation of investors to ensure that their offers and sales of the Notes within the United States, Turkey and other countries comply with any applicable securities laws.

Redemption for taxation reasons—The Issuer will have the right to redeem the Notes upon the occurrence of certain changes requiring it to pay withholding taxes in excess of current levels, if any, applicable to interest or other payments on the Notes In the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Turkey or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions. In particular, the withholding tax rate on interest payments in respect of bonds issued by Turkish entities outside of Turkey varies depending on the original maturity of such bonds. Pursuant to Turkish law, with respect to bonds with a maturity of less than one year, the withholding tax rate on interest is 10 per cent., with respect to bonds with a maturity at least of one and less than three years, the withholding tax rate on interest is 7 per cent., with respect to bonds with a maturity of at least three and less than five years, the withholding tax rate on the interest is 3 per cent. and for bonds with a maturity of five years or more the withholding tax rate is 0 per cent. Accordingly, the withholding tax rate on interest on the Notes is 0 per cent.

Changes in respect of the credit ratings of the Notes may materially and adversely affect the trading price of the Notes and otherwise materially and adversely affect the Company Credit ratings affect the cost and other terms upon which the Company is able to obtain funding. As at 11 April 2013, the Company’s long-term domestic and foreign currency rating was BBB- from S&P. The Notes are expected to be rated BBB- by S&P and Baa3 by Moody’s. Each of Moody’s and S&P is established in the European Union and is registered under the CRA Regulation. In addition to the ratings on the Notes provided by Moody’s and S&P, one or more other independent credit rating agencies may assign credit ratings to the Notes. The ratings do not address the likelihood that the principal on the Notes will be prepaid, paid on an expected final payment date or paid on any particular date before the legal final maturity date of the Notes. Credit ratings assigned to the Notes do not necessarily mean that they are a suitable investment. The ratings of the Notes are not a recommendation to purchase, hold or sell the Notes by the rating organisation or any other person, and the ratings do not address or comment on the marketability of the Notes, the market price of the Notes or suitability for any particular investor. The ratings may not reflect the potential impact of the risks discussed herein, as well as any other factors that may affect the value of the Notes. The ratings are subject to revisions or withdrawal at any time by the assigning rating organisation and each rating should be evaluated independently from any other rating. Similar ratings on different types of notes do not necessarily mean the same thing.

There can be no assurance that the rating agencies will maintain the Company’s current ratings or outlooks, which could materially adversely affect the trading values of the Notes. The Issuer cannot be certain that a credit rating of the Notes will remain for any given period of time or that a credit rating will not be downgraded or

-33- withdrawn entirely by the relevant rating organisation if, in its judgment, circumstances in the future so warrant. The assigned ratings may be raised or lowered depending, among other factors, on the rating agencies’ respective assessment of the Company’s financial strength, as well as their assessment of Turkish sovereign or corporate risk generally. Neither the Issuer nor any of the Managers has any obligation to inform the Noteholders of any such revision, downgrade or withdrawal. Any adverse change in an applicable credit rating could have a material adverse effect on the trading price of the Notes.

In addition, credit ratings impact the interest rates paid by the Company on funds that are borrowed and the market’s perception of the Company’s financial strength. If the ratings on the Notes were reduced and the market were to perceive any such reduction as a deterioration of the Company’s financial strength, the Company’s cost of borrowing would likely increase and the Company’s results of operations could decrease, all of which could have a material adverse effect on the Company.

Claims of Noteholders under the Notes are effectively subordinated to those of certain other creditors and liabilities of the Issuer The Issuer’s obligations under the Notes will constitute unsecured and unsubordinated obligations. Accordingly, any claims against the Issuer under the Notes would be unsecured claims. The ability of the Issuer to pay such claims will depend upon, among other factors, its liquidity, overall financial strength and ability to generate cash flows and to receive cash flows from its direct and indirect subsidiaries and joint ventures. The Notes will rank equally with all of the Issuer’s other unsecured and unsubordinated indebtedness; however, the Notes will be effectively subordinated to the Issuer’s secured indebtedness, if any, to the extent of the value of the assets securing such transactions, and will be subject to certain preferential obligations under Turkish law, such as wages of employees. Generally, lenders and trade and other creditors of the Issuer’s subsidiaries and joint ventures are entitled to payment of their claims from the assets of such subsidiaries or joint ventures before these assets are made available for distribution to the Issuer, as direct or indirect shareholder. Moreover, the ability of the Issuer to make payments from Turkey will depend upon, among other factors, the Turkish Government not having imposed any restrictive foreign exchange controls, the Issuer’s ability to obtain US Dollars and the Issuer’s ability to secure any necessary approval that may be required as a result of the imposition of or any change to Turkish exchange controls.

The Notes are subject to exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in US Dollars. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than US Dollars. These include the risk that exchange rates may significantly change (including changes due to the depreciation of the US Dollar or appreciation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the US Dollar would decrease: (i) the Investor’s Currency-equivalent yield on the Notes; (ii) the Investor’s Currency-equivalent value of the principal payable on the Notes; and (iii) the Investor’s Currency-equivalent market value of the Notes.

Governments and monetary authorities may impose (as some have done in the past) exchange controls that could materially adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal at all. This could have a material adverse effect on the trading price of the Notes.

The Terms and Conditions of the Notes provide for decisions of majorities to bind all Noteholders The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. As a result, such binding decisions made by majorities of Noteholders may be adverse to the interests of potential investors.

Financial turmoil in emerging markets could cause the price of the Notes to suffer While in recent years Turkey has undergone significant political and economic reform, which has increased domestic political and economic stability and contributed to economic growth, Turkey is nonetheless considered by international investors to be an emerging market. In general, investing in the securities of issuers that have

-34- operations primarily in emerging markets like Turkey involve a higher degree of risk than investing in the securities of issuers with substantial operations in the United States, the countries of the European Union or similar jurisdictions. The market price of the Notes is influenced by economic and market conditions in Turkey and, to a varying degree, economic and market conditions in both emerging market countries and more developed economies including those in the European Union and the United States. Financial turmoil in Turkey and emerging markets in the past has adversely affected market prices in the world’s securities markets for companies that operate in developing economies. Even if the Turkish economy remains relatively stable, financial turmoil in these countries could materially adversely affect the market price of the Notes.

Payments on the Notes could be subject to EU withholding tax in certain circumstances Under EC Council Directive 2003/48/EC on the taxation of savings income (the “EU Savings Directive”), each Member State is required to provide to the tax authorities of other Member States details of payments of interest (and/or other similar income) paid by a person within its jurisdiction to (or for the benefit of) an individual or to certain other persons in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories have adopted similar measures to the EU Savings Directive.

The European Commission has proposed certain amendments to the EU Savings Directive, which may, if implemented, amend or broaden the scope of the requirements described above.

If a payment is made or collected through a Member State that has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the EU Savings Directive or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any law supplemented or complying with, or introduced in order to conform to such Directive, neither the Issuer nor any Paying and Transfer Agent (as defined in the Terms and Conditions of the Notes) nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Under the Terms and Conditions of the Notes, the Issuer has undertaken to maintain a Paying Agent in a Member State of the European Union that is not obliged to withhold or deduct tax pursuant to the EU Savings Directive or any law implementing or complying with, or introducing in order to conform to, such Directive.

Investors in the Notes must rely on DTC, Euroclear and Clearstream, Luxembourg procedures The Rule 144A Notes will be represented on issue by a Rule 144A Global Note that will be deposited with a custodian for DTC. The Regulation S Notes will be represented on issue by a Regulation S Global Note that will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the limited circumstances described in “The Global Certificates—6. Registration of Title”, owners of interests in the Notes will not be entitled to receive physical delivery of Certificates. DTC, Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of the beneficial interests in the Global Notes.

While the Notes are represented by the Global Notes, investors will be able to trade their beneficial interests only through DTC, Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants, as more fully described in “Book-Entry Clearance Systems”. While the Notes are represented by the Global Notes, the Issuer will discharge its payment obligation under the Notes by making payments through the relevant clearing systems. A holder of a beneficial interest in a Global Note must rely on the procedures of the relevant clearing system and its participants to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in either Global Note. Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant clearing system and its participants to appoint appropriate proxies.

-35- SUMMARY FINANCIAL INFORMATION

The following tables set forth financial data for the Group as at and for each of the years ended 31 December 2012, 2011 and 2010. The selected financial data has been extracted from the Consolidated Financial Statements without material adjustments and should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements included elsewhere in the Offering Circular. See “Presentation of Financial and Other Information”.

The Consolidated Financial Statements have been prepared in accordance with CMB Financial Reporting Standards. CMB Financial Reporting Standards differ in certain respects from IFRS. See Annex A: “Summary of Significant Differences between IFRS and CMB Financial Reporting Standards”.

This section should be read together with the information contained in “Presentation of Financial and Other Information”, “Use of Proceeds”, “Capitalisation of the Group”, “Selected Financial Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Consolidated Financial Statements and the respective notes thereto included elsewhere in this Offering Circular.

Year ended 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Revenue ...... 43,255,567 77,535,603 68,969,387 48,822,282 Interest, fee, commission and similar income ...... 4,071,257 7,297,729 5,973,720 4,990,154 Total revenue ...... 47,326,824 84,833,332 74,943,107 53,812,436 Cost of sales (-) ...... (38,782,258) (69,517,198) (60,829,381) (42,468,261) Interest, fee, commission and similar expenses (-) . . . (2,020,264) (3,621,323) (2,953,838) (2,152,528) Total costs ...... (40,802,522) (73,138,521) (63,783,219) (44,620,789) Gross profit non-finance ...... 4,473,309 8,018,405 8,140,006 6,354,021 Gross profit finance ...... 2,050,993 3,676,406 3,019,882 2,837,626 Gross profit ...... 6,524,302 11,694,811 11,159,888 9,191,647 Marketing, selling and distribution expenses (-) ..... (1,770,141) (3,172,978) (2,698,588) (2,198,669) General administrative expenses (-) ...... (1,863,472) (3,340,274) (2,981,145) (2,604,373) Research and development expenses (-) ...... (92,891) (166,507) (141,562) (123,864) Other income ...... 150,638 270,018 599,119 463,978 Other expense (-) ...... (457,926) (820,832) (447,773) (627,008) Operating profit ...... 2,490,510 4,464,238 5,489,939 4,101,711 Share of profit/(loss) of investments accounted for using the equity method ...... 4,963 8,896 7,210 3,163 Financial income ...... 1,279,606 2,293,693 2,403,540 1,919,901 Financial expense (-) ...... (1,254,856) (2,249,329) (3,193,221) (2,138,824) Profit before tax ...... 2,520,223 4,517,498 4,707,468 3,885,951 Tax expense ...... (231,962) (415,791) (857,115) (747,551) —Current income tax expense (-) ...... (504,718) (904,707) (796,303) (747,629) —Deferred tax income/(expense) ...... 272,756 488,916 (60,812) 78 Profit for the period ...... 2,288,261 4,101,707 3,850,353 3,138,400 Attributable to: Non-controlling interest ...... 996,835 1,786,827 1,725,884 1,403,921 Equity holders of the parent ...... 1,291,426 2,314,880 2,124,469 1,734,479

-36- Consolidated Balance Sheet Data:

As of 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) ASSETS Current Assets: Cash and cash equivalents ...... 5,875,813 10,474,225 6,796,244 9,937,525 Balances with central banks ...... 2,788,350 4,970,513 4,524,256 2,666,100 Financial assets ...... 521,098 928,909 1,223,670 1,957,543 Derivative financial instruments ...... 113,792 202,845 210,768 334,260 Trade receivables ...... 4,591,448 8,184,716 9,262,692 5,098,243 Receivables from finance sector operations ...... 12,922,430 23,035,524 18,278,713 15,298,856 Inventories ...... 3,734,421 6,656,979 6,790,072 4,193,098 Other current assets ...... 1,416,850 2,525,676 2,315,485 1,812,804 Assets held for sale ...... 14,300 25,491 6,160 356,755 Total current assets ...... 31,978,502 57,004,878 49,408,060 41,655,184 Non-current assets: Financial assets ...... 5,647,474 10,067,188 9,624,409 8,323,212 Investments accounted for using the equity method . . . 59,574 106,197 101,795 47,087 Derivative financial instruments ...... 34,570 61,625 167,588 33,721 Trade receivables ...... 87,529 156,030 119,724 91,259 Receivables from finance sector operations ...... 11,263,776 20,078,807 20,036,686 14,379,808 Investment properties ...... 52,601 93,766 90,755 79,820 Property, plant and equipment ...... 8,003,406 14,266,871 11,536,650 10,445,852 Intangible assets ...... 1,052,772 1,876,672 1,736,815 1,384,158 Goodwill ...... 2,150,254 3,833,043 3,761,648 3,526,351 Deferred tax assets ...... 207,908 370,616 409,214 351,226 Other non-current assets ...... 645,873 1,151,333 1,627,743 824,839 Total non-current assets ...... 29,205,737 52,062,148 49,213,027 39,487,333 Total assets ...... 61,184,239 109,067,026 98,621,087 81,142,517 LIABILITIES Current liabilities: Payables of finance sector operations ...... 19,778,055 35,256,360 33,898,224 26,789,839 Financial liabilities ...... 6,865,707 12,238,810 11,900,696 8,845,844 Derivative financial instruments ...... 109,554 195,291 227,624 104,680 Trade payables ...... 4,687,106 8,355,236 9,186,672 7,549,368 Other payables ...... 1,110,245 1,979,123 1,932,771 1,545,288 Current income tax liabilities ...... 115,013 205,022 210,909 209,867 Provisions for employee benefits ...... 54,836 97,751 87,208 76,296 Other current liabilities ...... 3,671,573 6,544,951 4,581,850 4,034,661 Liabilities held for sale ...... 2,232 3,979 5,517 124,184 Total current liabilities ...... 36,394,321 64,876,523 62,031,471 49,280,027 Non-current liabilities: Payables of finance sector operations ...... 436,982 778,963 956,795 534,770 Financial liabilities ...... 8,180,955 14,583,371 9,763,278 8,032,450 Derivative financial instruments ...... 266,570 475,187 325,666 332,599 Provisions for employee benefits ...... 492,481 877,897 791,701 788,857 Deferred tax liabilities ...... 253,653 452,161 819,108 665,161 Other non-current liabilities ...... 152,406 271,679 662,244 530,739 Total non-current liabilities ...... 9,783,047 17,439,258 13,318,792 10,884,576 Total liabilities ...... 46,177,368 82,315,781 75,350,263 60,164,603

-37- As of 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Equity: Paid-in share capital ...... 1,422,584 2,535,898 2,415,141 2,415,141 Adjustment to share capital ...... 542,628 967,288 967,288 967,288 Total share capital ...... 1,965,212 3,503,186 3,382,429 3,382,429 Share premium ...... 5,209 9,286 9,286 9,286 Revaluation funds ...... 134,031 238,923 (245,317) 19,803 Currency translation differences ...... 59,657 106,344 142,563 47,210 Restricted reserves ...... 1,310,632 2,336,332 2,309,638 2,291,920 Prior years’ income ...... 4,362,729 7,777,001 6,173,681 5,089,065 Profit for the period ...... 1,298,598 2,314,880 2,124,469 1,734,479 Equity holders of the parent ...... 9,136,068 16,285,952 13,896,749 12,574,192 Non-controlling interest ...... 5,870,803 10,465,293 9,374,075 8,403,722 Total equity ...... 15,006,871 26,751,245 23,270,824 20,977,914 Total liabilities and equity ...... 61,184,239 109,067,026 98,621,087 81,142,517

Consolidated Cash Flow Data:

Year ended 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Cash flows provided from/ (used in) operating activities ...... 1,901,101 3,407,726 (3,674,322) 2,096,107 Cash flows used in investing activities ...... (1,913,267) (3,429,533) (1,821,963) (449,418) Cash flows provided from financing activities ...... 2,233,217 4,003,043 1,671,818 138,653

Other Financial Data:

Year ended 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Consolidated EBITDA(*) ...... 3,131,635 5,613,455 6,524,990 5,066,201 Segment EBITDA(*) Energy ...... 926,827 1,661,337 2,807,542 1,669,016 Automotive ...... 579,271 1,038,344 999,511 777,188 Consumer durables ...... 586,749 1,051,748 887,979 838,739 Finance ...... 905,572 1,623,237 1,626,171 1,524,737 Other ...... 79,574 142,637 106,605 224,698 Net financial debt / (cash) position (Excluding Finance Segment) ...... 2,736,835 4,878,682 4,137,313 (1,450,891) Net financial debt/ EBITDA (Excluding Finance Segment) ...... 1.3 1.3 0.9 (0.4) Koç Holding stand-alone net (cash) position ...... (755,504) (1,346,761) (1,091,038) (1,232,945)

(*) Consolidated EBITDA is a non-IFRS performance measure which the Group defines as profit for the period before income tax expense, financial income, financial expense and depreciation and amortisation. Segment EBITDA for each of the segments is segment profit for the period before income tax expense, financial income, financial expense and depreciation and amortisation. EBITDA is not a measure of operating profit (loss), operating performance or liquidity under IFRS. EBITDA is used by the Group in measuring its segments’ operating performances and management believes that EBITDA is commonly reported and widely used by investors in comparing performance on a consistent basis without regard to depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or other non-operating factors. Accordingly, EBITDA has been disclosed in this Offering Circular to permit a more complete and comprehensive analysis of the Group’s results of operations relative to other companies. You should not, however, consider EBITDA in isolation or as a substitute for net profit from operations as determined by IFRS, or as an indicator of the Group’s operating performance or cash flows from operating activities as determined in accordance with IFRS. You should not use this non-GAAP measure as a substitute for the analysis provided in the Group’s income statements or

-38- cash flow statements. The EBITDA disclosed here may not be comparable to EBITDA disclosed by other companies as EBITDA is not uniformly defined. Therefore, the Group’s presentation of EBITDA may not be comparable to similarly titled measures of other companies. For additional information regarding the use of EBITDA see “Presentation of Financial and Other Information—Non-GAAP Measures of financial performance”.

For a reconciliation of consolidated EBITDA to consolidated profit for the period and segment EBITDA to segment operating profit, the Group’s Non-Finance Segments’ consolidated net financial debt position to the Group’s consolidated financial liabilities, financial assets and cash and cash equivalents as reported on the consolidated balance sheet and a break-down of net cash position on Koç Holding’s stand-alone balance sheet, see “Selected Financial Information.”

-39- OVERVIEW OF THE NOTES

The following is an overview of certain information relating to the offering of the Notes, including the principal provisions of the terms and conditions thereof. This overview is indicative only, does not purport to be complete and is qualified in its entirety by the more detailed information appearing elsewhere in this Offering Circular. See, in particular, “Conditions of the Notes”.

Issue: USD 750,000,000 principal amount of 3.500 per cent. Notes due 2020.

Interest and Interest Payment Dates: The Notes will bear interest from and including 24 April 2013 at the rate of 3.500 per cent. per annum, payable semi-annually in arrear on each of 24 April and 24 October in each year (each, an “Interest Payment Date”); provided that, as described in Condition 6.4, if any such date is not a Business Day (as defined in Condition 6.4), then such payment will be made on the next Business Day. The first payment (for the period from and including the Issue Date to but excluding 24 October 2013 and amounting to USD 17.50 per USD 1,000 principal amount of Notes) will be made on 24 October 2013.

Maturity Date: 24 April 2020.

Use of Proceeds: The net proceeds of the Offering will be used by the Company for general corporate purposes, including paying expenses relating to the issuance of the Notes.

Status: The Notes will be direct, unconditional and (subject to the provisions of Condition 3) unsecured obligations of the Company and (subject as provided above) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Company, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

Negative Pledge: The terms of the Notes contain a negative pledge provision binding on the Company as further described in Condition 4.1.

Taxation; Payment of Additional Amounts: All payments in respect of the Notes by or on behalf of the Company shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges (including related interest and penalties) of whatever nature (“Taxes”) imposed, assessed or levied by or on behalf of any Relevant Jurisdiction (as defined in Condition 8), unless such withholding or deduction of Taxes is required by law. In that event, the Company will (subject to certain exceptions) pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes in the absence of the withholding or deduction. Under current Turkish law, withholding tax at the rate of 0 per cent. applies on interest on notes with an initial maturity of five years and more. See “Taxation—Certain Turkish Tax Considerations”.

See “Conditions of the Notes—Condition 8”

-40- Redemption for Taxation Reasons: The Notes may be redeemed at the option of the Company in whole, but not in part, at any time (subject to certain conditions), at their principal amount (together with interest accrued to but excluding the date fixed for redemption) if:

(a) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction, or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective after 19 April 2013, on the next Interest Payment Date the Company would be required to pay additional amounts as provided or referred to in Condition 8.3, and

(b) the requirement cannot be avoided by the Company taking reasonable measures available to it.

Redemption at the Option of the Holders upon a Change of Control: If a Change of Control Put Event occurs (as defined in Condition 7.3), each Noteholder will have a right, at such Noteholder’s option, to require the Company to redeem in whole (but not in part) such Noteholder’s Notes at 100 per cent. of their principal amount together with interest accrued to the date of redemption, as further described in Condition 7.3.

Events of Default: The Notes will be subject to certain Events of Default including (among others) non-payment of principal for 3 Business Days, non-payment of interest for 7 Business Days, failure to perform or observe any of the other obligations in respect of the Notes, cross-acceleration and certain events related to bankruptcy and insolvency, all as further described in Condition 10. See “Conditions of the Notes—Condition 10”.

Form, Transfer and Denominations: Notes offered and sold in reliance upon Regulation S will be represented by beneficial interests in the Unrestricted Global Certificate in registered form, without interest coupons attached, which will be delivered to a common depositary for, and registered in the name of a common nominee of, Euroclear and Clearstream, Luxembourg. Notes offered and sold in reliance upon Rule 144A will be represented by beneficial interests in the Restricted Global Certificate(s), in registered form, without interest coupons attached, which will be deposited with the Custodian and registered in the name of Cede & Co. as nominee for DTC. Except in limited circumstances, certificates for the Notes will not be issued in exchange for beneficial interests in the Global Certificates. See “Conditions of the Notes— Condition 1”.

Interests in the Rule 144A Notes will be subject to certain restrictions on transfer. See “Transfer Restrictions”. Interests in the Global Certificates will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg, in the case of the Regulation S Notes, and by DTC and its direct and indirect participants, in the case of Rule 144A Notes. Notes will be issued in denominations of USD 200,000 and integral multiples of USD 1,000 in excess thereof.

-41- Governing Law: The Notes, the Agency Agreement and any non-contractual obligations arising out of or in connection with the Notes or the Agency Agreement, as the case may be, will be governed by, and construed in accordance with, English law.

Listing: Application has been made to the Irish Stock Exchange for the Notes to be admitted to listing on the Official List and to trading on the Main Securities Market; however, no assurance can be given that such applications will be accepted.

Selling Restrictions: The Notes have not been and will not be registered under the Securities Act or any state securities laws and beneficial interests therein may not be offered or sold within the United States or to, or for the account or benefit of, any US person (as defined in Regulation S under the Securities Act) except to QIBs in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A or otherwise pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The offer and sale of Notes (or beneficial interests therein) is also subject to restrictions in Turkey and the United Kingdom. See “Selling Restrictions”.

Risk Factors: For a discussion of certain risk factors relating to the Group, Turkey and the Notes that prospective investors should carefully consider prior to making an investment in the Notes, see “Risk Factors”.

Issue Price: 99.582 per cent. of the principal amount.

Per Annum Yield: 3.568 per cent.

Regulation S Notes Security Codes: ISIN: XS0922615819

Common Code: 092261581

Rule 144A Notes Security Codes: ISIN: US49989AAA79

CUSIP: 49989A AA7

Common Code: 092281213

Representation of Noteholders: There will be no trustee.

Expected Rating(s): BBB- by S&P, and Baa3 by Moody’s.

Fiscal Agent, Paying Agent, and Transfer Agent: Citibank, N.A., London Branch

Registrar: Citigroup Global Markets Deutschland AG

-42- PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Information Financial statements of the Group As the Company is listed on the Borsa˙ Istanbul (formerly, the Istanbul Stock Exchange), the Group’s annual and interim consolidated financial statements are required to be prepared in Turkish in accordance with the financial reporting standards published by the CMB (“CMB Financial Reporting Standards”). The Company also prepares convenience translations into English of its annual and interim financial statements.

The Consolidated Financial Statements (as defined below) have not been prepared in accordance with the international accounting standards adopted pursuant to the procedure of Article 3 of Regulation (EC) No 1606/2002. There may be material differences in the financial information had Regulation (EC) No 1606/2002 been applied to the historical financial information of the Group. For a description of significant differences between CMB Financial Reporting Standards and IFRS, see Annex A: “Summary of Significant Differences between IFRS and CMB Financial Reporting Standards”.

As more fully described in Note 2.1.1 to the 2012 Consolidated Financial Statements, CMB Financial Reporting Standards require Turkish companies to prepare their financial statements in accordance with International Financial Reporting Standards (“IFRS”) as endorsed by the European Union. If the European Union does not endorse a standard issued by the International Accounting Standards Board (“IASB”), and the Public Oversight of the Accounting and Auditing Standards Board (formerly the Turkish Accounting Standards Board) adopts the European Union’s position, such standard will not be applicable under CMB Financial Reporting Standards. Until the Public Oversight of the Accounting and Auditing Standards Board announces the adoption of the European Union’s position, IAS/IFRS issued by the IASB must be applied. Additionally, pursuant to an announcement by the CMB on 17 March 2005, effective 1 January 2005 the application of inflation accounting for Turkish companies is no longer required under CMB Financial Reporting Standards. Accordingly, IAS 29 “Financial Reporting in Hyperinflationary Economies” is no longer applied for Turkish companies for the accounting year commencing from 1 January 2005.

This Offering Circular includes convenience translations into English of the Group’s following consolidated financial statements: • the Group’s audited annual consolidated financial statements as at and for the year ended 31 December 2012, which include comparative financial information as at and for the year ended 31 December 2011 (the “2012 Consolidated Financial Statements”); • the Group’s audited annual consolidated financial statements as at and for the year ended 31 December 2011, which include comparative financial information as at and for the year ended 31 December 2010 (the “2011 Consolidated Financial Statements”); and • the Group’s audited annual consolidated financial statements as at and for the year ended 31 December 2010, which include comparative financial information as at and for the year ended 31 December 2009 (the “2010 Consolidated Financial Statements” and, together with the 2012 Consolidated Financial Statements and the 2011 Consolidated Financial Statements, the “Consolidated Financial Statements”).

Unless otherwise stated herein: • All financial information as of and for the year ended 31 December 2012 has been extracted from the 2012 Consolidated Financial Statements; • All financial information (other than “reclassified” information) as of and for the year ended 31 December 2011 has been extracted from the 2011 Consolidated Financial Statements; • All financial information (other than “reclassified” information) as of and for the year ended 31 December 2010 has been extracted from the 2010 Consolidated Financial Statements.

See Note 2.1.2 to the 2012 and 2011 Consolidated Financial Statements for an explanation of “Reclassified” information.

The Consolidated Financial Statements and audit reports thereon are direct and accurate translations from the Turkish language originals into English. In the event of an inconsistency between the original and translation, the Turkish language version will prevail.

-43- Güney Bag˘ımsız Denetim ve Serbest Muhasebeci Mali Müs¸avirlik A.S¸. (a member firm of Ernst & Young Global Limited) (“EY”) audited and issued auditor’s reports with respect to the Consolidated Financial Statements prepared in Turkish.

For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of joint ventures in the Group’s consolidated financial statements prepared in accordance with CMB Financial Reporting Standards. This change will materially impact the presentation of the Group’s financial results on a consolidated basis for all final reporting periods after 1 January 2013 once the compulsory application of IFRS 11 comes into effect. For a discussion on the effects of IFRS 11 on the Group’s consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Effect of IFRS 11-Joint Arrangements on the Group’s consolidated financial statements”.

Consolidated Financial Statements together with the respective notes thereto, are included in the Offering Circular beginning on page F-2.

Financial information of subsidiaries and joint ventures This Offering Circular also includes financial information for principal subsidiaries and joint ventures of the Group. Unless otherwise specified herein, all financial information in this Offering Circular has been prepared in accordance with CMB Financial Reporting Standards.

References to “BRSA financial data” in this Offering Circular are to financial data prepared in accordance with the “Regulation on the Principles and Procedures Regarding Banks’ Accounting Applications and Safeguarding of Documents” published in the Official Gazette No. 26333 dated 1 November 2006 by the BRSA and other regulations, circulars and communiqués in respect of accounting and financial reporting and pronouncements made by the BRSA (collectively, the “BRSA Principles”).

BRSA financial data is provided in this Offering Circular when similar information has not been prepared or may not be available in accordance with IFRS or for the purpose of comparison with similar data made publicly available by the BRSA regarding the competitors of Yapı Kredi. All financial information presented in this Offering Circular in accordance with BRSA Principles is indicated as such.

BRSA Principles differ from IFRS. As an example, the provisioning policy used in the preparation of the Bank’s IFRS Financial Statements differs from that used under BRSA Principles. For example, under BRSA Principles, provisioning is based on the length of the period of default, whereas under IFRS, provisioning is based on an evaluation made by management. For a discussion of the differences between BRSA Principles and IFRS, see “Annex B—Summary of Differences Between IFRS and BRSA Principles”.

Rounding Certain numerical figures set out in this Offering Circular, including financial data presented in thousands and millions and percentages, have been subject to rounding adjustments and, as a result, the totals of the data in this Offering Circular may vary slightly from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other data set out in this Offering Circular have been calculated using the numerical data in the Consolidated Financial Statements or the tabular presentation of other data (subject to rounding) contained in this Offering Circular, as applicable, and not using the numerical data in the narrative description thereof. Accordingly, in certain instances the sum of the numbers in a column or a row in tables contained in this Offering Circular may not conform exactly to the total figure given for that column or row. Some percentages in tables in this Offering Circular have also been rounded and accordingly the totals in these tables may not add up to 100 per cent.

Non-GAAP measures of financial performance To supplement the Consolidated Financial Statements, the Group uses certain ratios and measures included in this Offering Circular that would be considered a non-GAAP financial measure. A body of generally accepted accounting principles such as CMB Financial Reporting Standards or IFRS is commonly referred to as “GAAP”. A non-GAAP financial measure is defined as one that measures historical or future financial performance, financial position or cash flows but which excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. These non-GAAP financial measures are not a substitute for GAAP measures, for which management has responsibility.

-44- For the Group, these non-GAAP measures include consolidated and segment EBITDA.

Consolidated EBITDA is defined as profit for the period before income tax expense, financial income, financial expense and depreciation and amortisation. Segment EBITDA is defined as segment operating profit plus segment depreciation and amortisation.

For a reconciliation of the consolidated EBITDA to the consolidated profit for the period and segment EBITDA to the segment operating profit see “Selected financial information—Other Financial Data”.

The non-GAAP measures included in this Offering Circular are not in accordance with or an alternative to measures prepared in accordance with CMB Financial Reporting Standards and may be different from non- GAAP measures used by other companies. The Group’s management believes that this information, along with comparable CMB Financial Reporting Standards measures, is useful to investors because it provides a basis for measuring the operating performance in the years presented. These measures are used for internal management of the Group, along with the most directly comparable CMB Financial Reporting Standards financial measures, in evaluating operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with CMB Financial Reporting Standards. Non- GAAP financial measures as reported by the Group may not be comparable to similarly titled amounts reported by other companies.

The Group’s management believes that these non-GAAP measures, when considered in conjunction with CMB Financial Reporting Standards measures, enhance investors’ and management’s overall understanding of the Group’s current financial performance.

Other information Third-Party information regarding the Group’s markets and industries Statistical data and other information appearing in this Offering Circular relating to the oil and gas industry and certain economic data and forecasts have, unless otherwise stated, been extracted from the website of the Central Bank of Turkey, the Turkish Statistical Institute, the Turkish Petroleum Industry Association (“Petder”), Oil & Gas Journal, EMRA and Reuters, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source.

Statistical data and other information appearing in this Offering Circular relating to the automotive industry have, unless otherwise stated, been extracted from the website of the Turkish Automobile Manufacturers’ Association, the Turkish Statistical Institute and Turkish Heavy Commercial Vehicles Association, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source.

Statistical data and other information appearing in this Offering Circular relating to the consumer durables industry in Turkey have, unless otherwise stated, been extracted from the White Goods Manufacturers’ Association of Turkey (TURKBESD), the leading industry group in Turkey and internal company estimates; and relating to the consumer durables industries operating in countries other than Turkey have, unless otherwise stated, been extracted from GfK, a leading market research firm, and internal company estimates, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source.

Statistical data and other information appearing in this Offering Circular relating to the banking industry have, unless otherwise stated, been extracted from the website of the Central Bank of Turkey and the Turkish Statistical Institute, although the underlying assumptions and methodology, and consequently the resulting data, may vary from source to source.

The information described above has been accurately reproduced and, as far as the Group is aware and able to ascertain from the information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Where third party information has been used in this Offering Circular, the source of such information has been identified.

The Group’s estimates have been based on information obtained from the Company’s subsidiaries and joint ventures and their customers, suppliers, trade and business organisations and other contacts in the markets in which the Group operates. The Group believes these estimates to be accurate in all material respects as at the dates indicated. However, this information may prove to be inaccurate because of the method by which the Group obtained some of the data for these estimates or because this information cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other inherent limitations and uncertainties.

-45- This Offering Circular contains illustrations and charts derived from internal information of the Group which have not been independently verified unless specifically indicated. The information described above has been accurately reproduced and, as far as the Group is aware and is able to ascertain from the information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, the Group does not accept responsibility for the accuracy of such information.

Certain definitions As used herein and unless the context otherwise requires, (i) the “Group” refers to the Company and its consolidated subsidiaries and joint ventures, (ii) “Tüpras¸” refers to Türkiye Petrol Rafinerileri A.S¸. (“Tüpras¸”) and its consolidated subsidiaries and joint ventures, (iii) “Arçelik” refers to Arçelik A.S¸. and its consolidated subsidiaries and joint ventures, (iv) “Yapı Kredi”or“Bank” refers to Yapı ve Kredi Bankası A.S¸. and its consolidated subsidiaries and joint ventures, (v) “Ford Otosan” refers to Ford Otomotiv Sanayi A.S¸. and (vi) “Tofas¸” refers to Tofas¸ Türk Otomobil Fabrikası A.S¸. (“Tofas¸”) and its consolidated subsidiaries. However, references to the Group’s management refer to the management of the Company and references to Group belief or expectation statements refer to the beliefs or expectations of the management of the Company. References to the Group herein should not be read to imply that the Company controls any of its joint ventures.

Currency presentation and exchange rate information In this Offering Circular, all references to “Turkish Lira”, “Lira”or“TL” are to the lawful currency of Turkey; all references to “US dollars”, “US$”or“USD” are to the lawful currency of the United States of America; all references to “Euro”, “€”or“EUR” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time. Prospective investors should read the section entitled “Exchange Rates” for historical information regarding the exchange rates between the Turkish Lira and the U.S. dollar. For a discussion of the effects of fluctuating exchange rates on the Group, see “Risk Factors—Risks Relating to Turkey—Exchange rate risk and the Turkish Lira exchange rate could have a material adverse effect on the Group’s business, financial condition and results of operations”.

Unless otherwise indicated, all amounts in this Offering Circular are presented in thousands of Turkish Lira.

As shown in the table below, solely for the convenience of the reader, some amounts relating to “profit & loss and cash flow statement items” and “balance sheet items” included in this Offering Circular have been translated from Turkish Lira into US dollars using the average and period end buying rate, respectively, as reported by the Central Bank for the relevant period.

Period Average(1) Period end(2) 2012 ...... 1.7925 1.7826 2011 ...... 1.6700 1.8889 2010 ...... 1.5004 1.5460

(1) For each of the years 2010 to 2012, this represents the yearly averages of the monthly averages of the TL/USD dollar exchange rates determined by the Central Bank for the relevant period, which monthly averages were computed by calculating the average of the daily TL/USD dollar exchange rates on the business days of each month during the relevant period. (2) Represents the TL/USD dollar exchange rates for the purchase of US Dollars determined by the Central Bank for the last working day of the relevant period.

These translations should not be considered representations that any such amounts have been, could have been or could be converted into US dollars at that or at any other exchange rate. Such translations should not be construed as representations that the real amounts represent or have been or could be converted into US dollars as of that or any other date.

-46- FORWARD-LOOKING STATEMENTS

This Offering Circular contains statements that may be considered to be “forward looking statements” (as that term is defined in the US Private Securities Litigation Reform Act of 1995) relating to the Group’s financial position, results of operations, business strategies, plans and objectives of management for future operations (including development plans and objectives relating to the Group’s businesses). When used in this Offering Circular, the words “anticipates”, “estimates”, “expects”, “predicts”, “assumes”, “believes”, “supposes”, “intends”, “plans”, “aims”, “may”, “will”, “shall”, “could” and any similar expression or phrase generally identify forward looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward looking statements appear in a number of places throughout this Offering Circular, including (without limitation) under “Risk Factors”, “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and include, but are not limited to, statements regarding: • strategy and objectives; • trends affecting the Group’s results of operations and financial condition; • future developments in the markets in which the Group operates; • anticipated legal and regulatory changes in the markets in which the Group operates; and • the Group’s potential exposure to market risk and other risk factors.

Forward looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward looking statements. The Company has identified some of the risks inherent in these forward looking statements under “Risk Factors”. Important factors that could cause actual results to differ materially from those in these forward looking statements include, among others: • the effect of general economic conditions on the Group’s business, results of operations, financial condition and prospects; • political and economic risks associated with the Group’s international operations and exports; competition risks faced by the Group’s operating segments; • the effect of substantial or extended declines in refining margins in the Group’s Energy Segment; • pricing pressure from retail chain and other large customers on the Group’s Consumer Durables Segment; • risks associated with disruptions in supply of raw materials (including crude oil) from the Group’s suppliers; • risks of sanctions due to the Group’s importation of crude oil from Iran; • the Group’s ability to offer new, innovative and high quality products that meet consumer demand, to effectively market and distribute its products and to further strengthen its brands; • the risk of damage to the Group’s reputation or the reputation of one or more of the Group’s major brands; • the Group’s insurance may not be sufficient to cover all potential losses; • management strategies and internal controls of the Group may leave it exposed to unidentified or unanticipated risks; • credit risk in relation to the Group’s contractual counterparties and borrowers; • liquidity risks and the potential failure to obtain funds for the Group’s activities; • changes in interest rates; • risks in connection with the trading activities of the Group’s Finance Segment; • environmental and health and safety regulations; • changes to applicable laws or regulations, the interpretation or enforcement of such laws or regulations or the failure to comply with such laws or regulations; • risks relating to the Turkish banking industry; • risks associated with investigations or litigation, including product liability claims and associated product recalls; • the Group’s ability to protect its intellectual property rights;

-47- • risks relating to money laundering and terrorist financing; • risks associated with earthquakes or acts of terrorism; • the Group’s ability to successfully complete or integrate past or prospective acquisitions, joint ventures and strategic alliances; • the risks associated with the conduct of a substantial volume of the Group’s businesses through joint ventures; • the risk of labour disputes with the Group’s workforce; • risks associated with operating in Turkey; and • other factors discussed under “Risk Factors”.

Should one or more of these factors or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. There may be other risks, including some risks of which the Company is unaware, that could adversely affect the Group’s results or the accuracy of forward looking statements in this Offering Circular. Therefore, potential investors should not consider the factors discussed here or under “Risk Factors”to be a complete set of all potential risks or uncertainties of investing in the Notes.

Potential investors should not place undue reliance upon any forward looking statements. Except as required by applicable law, rule or regulation, the Company does not have any intention or obligation to update forward looking statements to reflect new information or future events or risks that may cause the forward looking events discussed in this Offering Circular not to occur or to occur in a manner different from what the Company currently expects.

-48- USE OF PROCEEDS

The net proceeds of the issue of Notes are expected to be approximately USD 743,915,000 after the deduction of underwriting fees and estimated expenses incurred in connection with the offering of the Notes. The net proceeds from the issuance of the Notes are expected to be used by the Company for general corporate purposes.

-49- EXCHANGE RATES

The table below sets forth, for the periods indicated, the period-end, average and high and low rates determined by the Central Bank of Turkey, in each case for the purchase of TL, all expressed in TL per US Dollar. The TL/US dollar exchange rate determined by the Central Bank on 10 April 2013 was TL 1.7830 to USD 1.00. The rates may differ from the actual rates used in the preparation of the Consolidated Financial Statements and other financial information appearing in this Offering Circular. The Issuer does not represent that the US dollar amounts referred to below could be or could have been converted into TL at any particular rate indicated or any other rate at all.

Period High Low Average(1) Period end(2) TL per USD 1.00 For the 3 months ended 31 March 2013 ...... 1.8187 1.7459 1.7802 1.8087 2012 ...... 1.8889 1.7340 1.7925 1.7826 2011 ...... 1.9065 1.4955 1.6700 1.8889 2010 ...... 1.5978 1.3884 1.5004 1.5460 2009 ...... 1.7958 1.4365 1.5471 1.5057 2008 ...... 1.6956 1.1449 1.2929 1.5123 2007 ...... 1.4498 1.1626 1.3015 1.1647

(1) For each of the years 2007 to 2012, this represents the yearly averages of the monthly averages of the TL/USD dollar exchange rates determined by the Central Bank for the relevant period, which monthly averages were computed by calculating the average of the daily TL/USD dollar exchange rates on the business days of each month during the relevant period. For the months (or periods) of 2013, this represents the monthly (or period) averages of the TL/USD dollar exchange rates determined by the Central Bank for such month (or period), which averages were computed in the same manner described above. (2) Represents the TL/USD dollar exchange rates for the purchase of US Dollars determined by the Central Bank for the last working day of the relevant period.

Fluctuations in the exchange rates between the Lira and US dollar in the past are not necessarily indicative of fluctuations that may occur in the future. No representation is made that Lira amounts referred to in this Offering Circular could have been or could be converted into US dollars at the above exchange rates or at any other rate.

-50- CAPITALISATION OF THE GROUP

The following table sets forth the short-term and long-term debt, equity and capitalisation of the Group as at 31 December 2012. This table should be read in conjunction with the Consolidated Financial Statements included elsewhere in this Offering Circular.

As of 31 December 2012 (TL thousands) Short-term financial liabilities ...... 12,238,810 Long-term financial liabilities ...... 14,583,371 Equity Paid-in share capital ...... 2,535,898 Adjustment to share capital ...... 967,288 Share premium ...... 9,286 Revaluation funds ...... 238,923 Currency translation differences ...... 106,344 Restricted reserves ...... 2,336,332 Prior years’ income ...... 7,777,001 Profit for the period ...... 2,314,880 Equity holders of the parent ...... 16,285,952 Non-controlling interest ...... 10,465,293 Total capitalisation ...... 53,573,426

-51- SELECTED FINANCIAL INFORMATION

This section should be read together with the information contained in “Presentation of Financial and Other Information”, “Use of Proceeds”, “Capitalisation of the Group”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Consolidated Financial Statements and the respective notes thereto included elsewhere in this Offering Circular.

Consolidated Income Statement Data: Year ended 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Revenue ...... 43,255,567 77,535,603 68,969,387 48,822,282 Interest, fee, commission and similar income ...... 4,071,257 7,297,729 5,973,720 4,990,154 Total revenue ...... 47,326,824 84,833,332 74,943,107 53,812,436 Cost of sales (-) ...... (38,782,258) (69,517,198) (60,829,381) (42,468,261) Interest, fee, commission and similar expenses (-) . . . (2,020,264) (3,621,323) (2,953,838) (2,152,528) Total costs ...... (40,802,522) (73,138,521) (63,783,219) (44,620,789) Gross profit non-finance ...... 4,473,309 8,018,405 8,140,006 6,354,021 Gross profit finance ...... 2,050,993 3,676,406 3,019,882 2,837,626 Gross profit ...... 6,524,302 11,694,811 11,159,888 9,191,647 Marketing, selling and distribution expenses (-) ..... (1,770,141) (3,172,978) (2,698,588) (2,198,669) General administrative expenses (-) ...... (1,863,472) (3,340,274) (2,981,145) (2,604,373) Research and development expenses (-) ...... (92,891) (166,507) (141,562) (123,864) Other income ...... 150,638 270,018 599,119 463,978 Other expense (-) ...... (457,926) (820,832) (447,773) (627,008) Operating profit ...... 2,490,510 4,464,238 5,489,939 4,101,711 Share of profit/(loss) of investments accounted for using the equity method ...... 4,963 8,896 7,210 3,163 Financial income ...... 1,279,606 2,293,693 2,403,540 1,919,901 Financial expense (-) ...... (1,254,856) (2,249,329) (3,193,221) (2,138,824) Profit before tax ...... 2,520,223 4,517,498 4,707,468 3,885,951 Tax expense ...... (231,962) (415,791) (857,115) (747,551) —Current income tax expense (-) ...... (504,718) (904,707) (796,303) (747,629) —Deferred tax income/(expense) ...... 272,756 488,916 (60,812) 78 Profit for the period ...... 2,288,261 4,101,707 3,850,353 3,138,400 Attributable to: Non-controlling interest ...... 996,835 1,786,827 1,725,884 1,403,921 Equity holders of the parent ...... 1,291,426 2,314,880 2,124,469 1,734,479

-52- Consolidated Balance Sheet Data: As of 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) ASSETS Current Assets: Cash and cash equivalents ...... 5,875,813 10,474,225 6,796,244 9,937,525 Balances with central banks ...... 2,788,350 4,970,513 4,524,256 2,666,100 Financial assets ...... 521,098 928,909 1,223,670 1,957,543 Derivative financial instruments ...... 113,792 202,845 210,768 334,260 Trade receivables ...... 4,591,448 8,184,716 9,262,692 5,098,243 Receivables from finance sector operations ...... 12,922,430 23,035,524 18,278,713 15,298,856 Inventories ...... 3,734,421 6,656,979 6,790,072 4,193,098 Other current assets ...... 1,416,850 2,525,676 2,315,485 1,812,804 Assets held for sale ...... 14,300 25,491 6,160 356,755 Total current assets ...... 31,978,502 57,004,878 49,408,060 41,655,184 Non-current assets: Financial assets ...... 5,647,474 10,067,188 9,624,409 8,323,212 Investments accounted for using the equity method . . . 59,574 106,197 101,795 47,087 Derivative financial instruments ...... 34,570 61,625 167,588 33,721 Trade receivables ...... 87,529 156,030 119,724 91,259 Receivables from finance sector operations ...... 11,263,776 20,078,807 20,036,686 14,379,808 Investment properties ...... 52,601 93,766 90,755 79,820 Property, plant and equipment ...... 8,003,406 14,266,871 11,536,650 10,445,852 Intangible assets ...... 1,052,772 1,876,672 1,736,815 1,384,158 Goodwill ...... 2,150,254 3,833,043 3,761,648 3,526,351 Deferred tax assets ...... 207,908 370,616 409,214 351,226 Other non-current assets ...... 645,873 1,151,333 1,627,743 824,839 Total non-current assets ...... 29,205,737 52,062,148 49,213,027 39,487,333 Total assets ...... 61,184,239 109,067,026 98,621,087 81,142,517 LIABILITIES Current liabilities: Payables of finance sector operations ...... 19,778,055 35,256,360 33,898,224 26,789,839 Financial liabilities ...... 6,865,707 12,238,810 11,900,696 8,845,844 Derivative financial instruments ...... 109,554 195,291 227,624 104,680 Trade payables ...... 4,687,106 8,355,236 9,186,672 7,549,368 Other payables ...... 1,110,245 1,979,123 1,932,771 1,545,288 Current income tax liabilities ...... 115,013 205,022 210,909 209,867 Provisions for employee benefits ...... 54,836 97,751 87,208 76,296 Other current liabilities ...... 3,671,573 6,544,951 4,581,850 4,034,661 Liabilities held for sale ...... 2,232 3,979 5,517 124,184 Total current liabilities ...... 36,394,321 64,876,523 62,031,471 49,280,027 Non-current liabilities: Payables of finance sector operations ...... 436,982 778,963 956,795 534,770 Financial liabilities ...... 8,180,955 14,583,371 9,763,278 8,032,450 Derivative financial instruments ...... 266,570 475,187 325,666 332,599 Provisions for employee benefits ...... 492,481 877,897 791,701 788,857 Deferred tax liabilities ...... 253,653 452,161 819,108 665,161 Other non-current liabilities ...... 152,406 271,679 662,244 530,739 Total non-current liabilities ...... 9,783,047 17,439,258 13,318,792 10,884,576 Total liabilities ...... 46,177,368 82,315,781 75,350,263 60,164,603

-53- As of 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Equity: Paid-in share capital ...... 1,422,584 2,535,898 2,415,141 2,415,141 Adjustment to share capital ...... 542,628 967,288 967,288 967,288 Total share capital ...... 1,965,212 3,503,186 3,382,429 3,382,429 Share premium ...... 5,209 9,286 9,286 9,286 Revaluation funds ...... 134,031 238,923 (245,317) 19,803 Currency translation differences ...... 59,657 106,344 142,563 47,210 Restricted reserves ...... 1,310,632 2,336,332 2,309,638 2,291,920 Prior years’ income ...... 4,362,729 7,777,001 6,173,681 5,089,065 Profit for the period ...... 1,298,598 2,314,880 2,124,469 1,734,479 Equity holders of the parent ...... 9,136,068 16,285,952 13,896,749 12,574,192 Non-controlling interest ...... 5,870,803 10,465,293 9,374,075 8,403,722 Total equity ...... 15,006,871 26,751,245 23,270,824 20,977,914 Total liabilities and equity ...... 61,184,239 109,067,026 98,621,087 81,142,517

Consolidated Cash Flow Data:

Other Financial Data:

(*) Consolidated EBITDA is a non-IFRS performance measure which the Group defines as profit for the period before income tax expense, financial income, financial expense and depreciation and amortisation. Segment EBITDA for each of the segments is segment operating profit plus depreciation and amortisation. EBITDA is not a measure of operating profit (loss), operating performance or liquidity under IFRS. EBITDA is used by the Group in measuring its segments’ operating performances and management believes that EBITDA is commonly reported and widely used by investors in comparing performance on a consistent basis without regard to depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or other non-operating factors. Accordingly, EBITDA has been disclosed in this Offering Circular to permit a more complete and comprehensive analysis of the Group’s results of operations relative to other companies. You should not, however, consider EBITDA in isolation or as a substitute for net profit from operations as determined by IFRS, or as an indicator of the Group’s operating performance or cash flows from operating activities as determined in accordance with IFRS. You should not use this non-GAAP measure as a substitute for the analysis provided in the Group’s income statements or cash flow statements. The EBITDA disclosed here may not be comparable to

-54- EBITDA disclosed by other companies as EBITDA is not uniformly defined. Therefore, the Group’s presentation of EBITDA may not be comparable to similarly titled measures of other companies. For additional information regarding the use of EBITDA see “Presentation of Financial and Other Information—Non-GAAP Measures of financial performance”. For a reconciliation of consolidated EBITDA to consolidated profit for the period and segment EBITDA to segment operating profit, the Group’s Non-Finance Segments’ consolidated net financial debt position to the Group’s consolidated financial liabilities, financial assets and cash and cash equivalents as reported on the consolidated balance sheet and a break-down of net cash position on Koç Holding’s stand-alone balance sheet, see below.

The following table sets forth a reconciliation of consolidated EBITDA to consolidated net profit for the period and segment EBITDA to segment operating profit for the period.

Year ended 31 December Reclassified 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Consolidated Profit for the period ...... 2,288,261 4,101,707 3,850,353 3,138,400 Add back: Income tax expenses ...... 231,962 415,791 857,115 747,551 Financial income/expense (net) ...... (24,750) (44,364) 789,681 218,923 Share of profit/loss of investments accounted for using the equity method ...... (4,963) (8,896) (7,210) (3,163) Depreciation and amortisation ...... 641,125 1,149,217 1,035,051 964,490 Consolidated EBITDA ...... 3,131,635 5,613,455 6,524,990 5,066,201 Energy Operating profit ...... 695,224 1,246,189 2,413,864 1,284,814 Add back: Depreciation and amortisation ...... 231,603 415,148 393,678 384,202 Segment EBITDA ...... 926,827 1,661,337 2,807,542 1,669,016 Automotive Operating profit ...... 435,073 779,869 773,698 563,968 Add back: Depreciation and amortisation ...... 144,198 258,475 225,813 213,220 Segment EBITDA ...... 579,271 1,038,344 999,511 777,188 Consumer Durables Operating profit ...... 438,438 785,900 665,306 641,381 Add back: Depreciation and amortisation ...... 148,311 265,848 222,673 197,358 Segment EBITDA ...... 586,749 1,051,748 887,979 838,739 Finance Operating profit ...... 838,867 1,503,669 1,517,780 1,429,611 Add back: Depreciation and amortisation ...... 66,705 119,568 108,391 95,126 Segment EBITDA ...... 905,572 1,623,237 1,626,171 1,524,737 Other Operating profit ...... 29,266 52,459 22,109 150,114 Add back: Depreciation and amortisation ...... 50,308 90,178 84,496 74,584 Segment EBITDA ...... 79,574 142,637 106,605 224,698

-55- The following table sets forth a reconciliation of the Group’s Non-Finance Segments’ consolidated net financial debt position to Group’s consolidated financial liabilities, financial asset and cash and cash equivalents as reported on the consolidated balance sheet.

Year ended 31 December 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Short-term financial liabilities ...... 6,865,707 12,238,810 11,900,696 8,845,844 Long-term financial liabilities ...... 8,180,955 14,583,371 9,763,278 8,032,450 Total financial liabilities ...... 15,046,662 26,822,181 21,663,974 16,878,294 Less: Financial liabilities of Finance Segment .... (8,038,967) (14,330,264) (12,164,613) (8,174,809) Add back: Inter-group elimination(1) ...... 251,561 448,433 390,920 511,463 Total financial liabilities (Excluding Finance Segment) ...... 7,259,256 12,940,350 9,890,281 9,214,948 Cash and cash equivalents ...... 5,875,813 10,474,225 6,796,244 9,937,525 Less: Cash and cash equivalents of Finance Segment ...... (2,838,061) (5,059,127) (2,918,198) (1,641,241) Add back: Inter-group elimination (2) ...... 1,471,822 2,623,668 1,821,470 2,334,796 Cash and cash equivalents (Excluding Finance Segment) ...... 4,509,574 8,038,766 5,699,516 10,631,080 Short-term financial assets ...... 521,098 928,909 1,223,670 1,957,543 Long-term financial assets ...... 5,647,474 10,067,188 9,624,409 8,323,212 Total financial assets ...... 6,168,572 10,996,097 10,848,079 10,280,755 Less: Financial assets of Finance Segment ...... (6,078,766) (10,836,008) (10,688,546) (10,112,174) Less: Equity securities of Non-Finance Segment ...... (76,959) (137,187) (106,081) (133,822) Total financial assets (Excluding Finance Segment) ...... 12,847 22,902 53,452 34,759 Total financial liabilities (Excluding Finance Segment) ...... 7,259,256 12,940,350 9,890,281 9,214,948 Less: Cash and cash equivalents (Excluding Finance Segment) ...... (4,509,574) (8,038,766) (5,699,516) (10,631,080) Less: Financial assets (Excluding Finance Segment) ...... (12,847) (22,902) (53,452) (34,759) Net financial debt/(cash) position (Excluding Finance Segment) ...... 2,736,835 4,878,682 4,137,313 (1,450,891)

(1) Companies operating in Group’s Non-Finance Segments had financial liabilities from Yapı Kredi, which were eliminated during the preparation of the Consolidated Financial Statements. (2) Companies operating in Group’s Non-Finance Segments had cash and cash equivalents held at Yapı Kredi, which were eliminated during the preparation of the Consolidated Financial Statements.

The following table sets forth the net cash position at Koç Holding stand-alone balance sheet. This cash is also included in the above consolidated net financial debt/position (Excluding Finance Segment) calculation.

Year ended 31 December 2012 2012 2011 2010 (USD thousands) (in thousands of Turkish Lira) Financial liabilities(1) ...... 76,517 136,400 288,712 354,924 Less: Cash and cash equivalents ...... (822,754) (1,466,641) (1,360,993) (1,571,155) Less: Financial assets(2) ...... (9,267) (16,520) (18,757) (16,714) Net (cash) position ...... (755,504) (1,346,761) (1,091,038) (1,232,945)

(1) Koç Holding has only USD 76 million financial liabilities as of 31 December 2012. The related balance has been paid in January 2013. (2) Excluding listed and unlisted equity securities classified as financial assets.

-56- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations of the Group covers the financial years ended 31 December 2012, 2011 and 2010. Unless otherwise specified, the financial information presented in this discussion has been derived from the Consolidated Financial Statements. This section should be read in conjunction with the Consolidated Financial Statements, the notes thereto and the other financial information included in this Offering Circular (including the section entitled “Presentation of Financial and Other Information”).

Certain information contained in the discussion and analysis set forth below and elsewhere in this Offering Circular includes “forward-looking statements”. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. See the section entitled “Forward-Looking Statements”.

Overview Koç Holding is a diversified holding company and the parent company of the Koç group of companies, the largest conglomerate in Turkey in terms of revenues, exports, employees and market capitalisation on the Borsa I˙stanbul (formerly, the Istanbul Stock Exchange) in 2012.

As of 31 December 2012, the market capitalisation of Koç Holding was USD 13,210 million.

Koç Holding has been listed on the Borsa I˙stanbul since January 1986. The Group ranked 222nd in the Fortune 500 in 2012 (based on 2011 consolidated revenues) and had consolidated revenues of USD 47,327 million in 2012. As of 31 December 2012, the Group’s combined revenues (the sum total of the revenues of the Company’s subsidiaries and joint ventures) was as high as 9 per cent. of Turkey’s GDP, its combined exports represented 10 per cent. of Turkey’s total exports and its share in the total market capitalisation of the Borsa˙ Istanbul was 16 per cent. The Group owns companies with operations in 34 countries and employed 82,158 employees as of 31 December 2012, 73,869 of whom were in Turkey and 8,289 of whom were in other countries. The Group has leading positions in each of its five main business segments: Energy, Automotive, Consumer Durables, Finance, and Other. For the year ended 31 December 2012, the Group had consolidated revenue of TL 84,833 million (USD 47,327 million), consolidated EBITDA of TL 5,613 million (USD 3,132 million) and consolidated net income of TL 2,315 million (USD 1,291 million) (after non-controlling interest). As of 31 December 2012, the Group had consolidated total assets of TL 109,067 million (USD 61,184 million).

Koç Holding focuses on those sectors with low levels of penetration and secures competitive advantage via large distribution networks, economies of scale and CRM applications. The Company has been one of the main beneficiaries of the new operating environment in Turkey vis-à-vis privatisations and disposals, restructuring its portfolio to maximise returns. In line with the increasing level of foreign direct investment and privatisations in the Turkish market during the last decade, Koç Holding made significant acquisitions such as Tüpras¸ (acquired in 2006) in the energy sector and Yapı Kredi (acquired in 2005) in the banking sector. Between 2006 and 2008, Koç Holding adopted a proactive disposal policy to divest those companies such as Migros, Demirdöküm, Döktas¸ and I˙zocam which no longer fit into its portfolio, either in terms of growth or profitability prospects. All of these companies were disposed in line with announced time periods and mostly ahead of the 2008 financial crisis.

Each of the Group’s segments is described below.

-57- volume) were domestic, with exports accounting for the remainder. Opet is the second largest oil distribution company in Turkey and currently ranks second with 18.5 per cent. of the white products market (according to Petder). It has 1,325 gas stations nationwide. Aygaz is the Group’s first energy company and since its establishment, it has been the leader of the LPG sector in Turkey. Aygaz sells and distributes LPG and also manufactures LPG products, both domestically and internationally. It has a market share of 29 per cent. in Turkey (according to EMRA). Aygaz is ranked 10th in the Istanbul Chamber of Industry’s “Turkey’s Top 500 Industrial Enterprises 2011” ranking. Aygaz serves customers in 81 provinces through 2,290 cylinder gas dealers and 1,491 autogas stations. AES Entek, the Group’s power generation company, operates two natural gas and three hydroelectric power plants and has a combined capacity of 364 MW which accounts for 1.6 per cent. of Turkey’s private sector installed capacity.

For the year ended 31 December 2012, the Group’s Energy Segment had total assets of TL 23,177 million, total revenue of TL 53,486 million and EBITDA of TL 1,661 million accounting for 21 per cent., 63 per cent. and 30 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

Automotive The Group’s principal automotive companies, Ford Otosan and Tofas¸, lead the Turkish automotive industry, accounting for 50 per cent. of total Turkish automotive production, 47 per cent. of automotive exports and 27 per cent. of total automotive sales in Turkey in 2012 (according to the Automotive Manufacturers’ Association and company data). Ford Otosan, a joint venture with Ford, offers a wide range of products in the Turkish market and Tofas¸, a joint venture with Fiat, is the only automotive company in Turkey that manufactures both passenger and commercial vehicles. Other companies that comprise the Group’s Automotive Segment include TürkTraktör which produces over half of all tractors sold in Turkey in 2012 (according to TurkStat), Otokar, Turkey’s largest private sector defence industry company and market leader in the Turkish bus market (according to TAI˙D- Turkish Heavy Commercial Vehicles Association and company data) and Otokoç, an automotive retailing and car rental company.

Consumer Durables The largest company of the Group’s Consumer Durables Segment is Arçelik, a leading producer of white goods and consumer electronics, including its consolidated subsidiaries. Arçelik is the third largest white goods company in Europe (by unit volumes, according to GfK) and has strong market positions in Turkey, Europe, the Middle East, CIS countries and Africa, which in aggregate accounted for approximately 98 per cent. of its revenues in 2012. Arçelik has manufacturing centres not only in Turkey, but also in Romania, Russia, China and South Africa. Brands owned by Arçelik include the Arçelik brand, Beko, Arctic and Defy, among others. Arçelik focuses on innovation and customer appeal in its product lines and places a particular emphasis on environmentally friendly and energy efficient technology. The other company in the Consumer Durables Segment, Arçelik LG Klima, the first and largest air-conditioner manufacturer in Turkey, is a joint venture company with LG Electronics.

Finance The Group’s Finance Segment mainly consists of Yapı Kredi, a joint venture with Unicredit, the fourth largest private bank in Turkey by total assets with an 8.9 per cent. market share as of year-end 2012 (according to BRSA statistics). Yapı Kredi is a full service bank providing credit cards, consumer banking, retail banking (including SME banking), corporate and commercial banking, private banking and asset management services to approximately 6.5 million customers through 928 branches located in more than 70 cities. As of 31 December 2012, the Bank held leading market positions in Turkey in credit cards (19.4 per cent. market share in outstanding volume and 19.3 per cent. market share in credit card acquiring volume, according to data from the Interbank Card Centre), leasing (17.2 per cent. market share according to the Turkish Leasing Association) and factoring (15.0 per cent. market share according to the Turkish Factoring Association).

-58- For the year ended 31 December 2012, the Group’s Finance Segment had total assets of TL 67,118 million, revenue of TL 7,331 million and EBITDA of TL 1,623 million accounting for 62 per cent., 9 per cent. and 29 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

For the year ended 31 December 2012, the Group’s Other Segment had total assets of TL 3,641 million, revenue of TL 4,479 million and EBITDA of TL 143 million accounting for 3 per cent., 5 per cent. and 3 per cent. of the Group’s consolidated assets, revenues and EBITDA, respectively.

-59- 2012 (% in Consolidated 2012 Amount) Total Voting Rights (direct and indirect) Net Income held by The (after non- Subsidiary/Joint Board Company Effective Consolidation Total controlling venture(1) Listed/Unlisted Control (%) Ownership (%) Percentage (%) Revenue(4) EBITDA(4) interest) Principal Operating Companies by Segment Energy Segment ...... 63.0 29.6 29.3 Tüpras¸...... Subsidiary Listed Majority 51.0 42.7 100.0 46.5 23.4 Aygaz ...... Subsidiary Listed Majority 51.2 40.7 100.0 6.3 2.9 Opet ...... JV Unlisted Jointly 50.0 17.6 50.0 8.5 2.1 Automotive Segment ...... 12.0 18.5 26.4 Ford Otosan ...... JV Listed Jointly 41.0 38.5 41.0 4.2 11.2 Tofas¸...... JV Listed Jointly 37.9 37.6 37.9 2.7 6.8 Otokar(2) ...... Subsidiary Listed Majority 47.6 44.9 100.0 0.9 1.5 TürkTraktör ...... JV Listed Jointly 37.5 37.5 37.5 0.9 4.3 Consumer Durables Segment ...... 12.6 18.7 8.7

-60- Arçelik ...... Subsidiary Listed Majority 51.9 40.5 100.0 12.3 8.4 Finance Segment ...... 8.6 28.9 33.7 Koç Financial Services ...... JV Listed (Yapı Kredi) Jointly 50.0 40.2 50.0 8.3 32.2 Other Segment(3) ...... 5.3 2.5 1.9 Tat...... Subsidiary Listed Majority 51.2 43.8 100.0 0.2 0.04 Koçtas¸...... JV Unlisted Jointly 50.0 42.6 50.0 0.5 0.5

(1) Joint ventures have been consolidated using the proportionate consolidation method in the Consolidated Financial Statements. See “Presentation of Financial and Other Information”. (2) Although the total ownership interest of Koç Holding is less than 50 per cent., Koç Holding exercises control over Otokar’s board given the dispersed nature of Otokar’s remaining voting rights (i.e. 30.5 per cent. listed on the Borsa˙ Istanbul). (3) For the purpose of segment information, Koç Holding’s stand-alone financial statements are included in the Other Segment’s results. (4) Excluding inter-segment eliminations.

Notes: Total voting rights (direct and indirect) held by the Company includes voting rights of Koç family members and Temel that are exercised by Koç Holding. For subsidiaries; ownerships of greater than 50 per cent. is generally required in order to have the majority of the board control. Otokar is an exception for this rule, as explained in note 2 above. For joint ventures; voting rights are based on the relevant joint venture agreement.

The consolidation percentage for subsidiaries is 100 per cent. The difference between the consolidation percentage and the effective ownership of the Company is presented as “non-controlling interest” in profit for the period and equity in the Group’s consolidated financial statements. The consolidation percentage for joint ventures is equal to the percentage of total direct and indirect voting rights held by the Company (JV rate). The difference between the consolidation percentage and the effective ownership of the Company is presented as “non-controlling interest” in profit for the period and equity in the Group’s consolidated financial statements. Recent Developments On 3 April 2013, Arçelik issued a Eurobond outside of Turkey with a principal amount of USD 500 million, with interest payable semi-annually at a rate per annum of 5 per cent. and with a maturity date of 3 April 2023.

On 26 March 2013, Yapı Kredi signed a share purchase agreement for the sale of its insurance and private pension subsidiaries to Allianz SE (“Allianz”) for TL 1,602 million. As part of the deal with Allianz, Yapı Kredi will sell its 93.94 per cent. stake in Yapı Kredi Sigorta to Allianz and will retain a 20 per cent. stake in Yapı Kredi Emeklilik. In addition to the share purchase agreement, Yapı Kredi has also signed an exclusive 15-year strategic distribution agreement (“Bancassurance Agreement”) with Allianz to provide customers in Turkey with non-life insurance, life insurance, and pension products via its alternative delivery channels and 928 branches.

On 22 January 2013, Yapı Kredi issued a Eurobond with a principal amount of USD 500 million, with interest payable semi-annually at a rate per annum of 4 per cent. and with a maturity date of 22 January 2020.

On 9 January 2013, Yapı Kredi exercised an early repayment option and repaid a subordinated loan amounting to USD 585 million that had been obtained from UniCredit Bank Austria AG on 22 February 2012, and obtained a new subordinated loan from UniCredit Bank Austria AG amounting to USD 585 million with a 10 year maturity, a 5.5 per cent. per annum fixed interest rate and a repayment option exercisable by the borrower after 5 years.

Significant Factors Affecting Results of Operations and Financial Condition of the Group Management believes that the following factors have been the key drivers affecting the Group’s business, results of operations and financial condition over the past three years.

General global economic conditions Macroeconomic factors that influence demand for the Group’s products and services include general economic conditions, the availability of financing, interest rates, the levels of inflation and unemployment, fluctuations in disposable income of consumers and fluctuations in energy and fuel prices among others. The Group’s individual businesses are subject to different cyclicalities and sensitivities with respect to different macroeconomic conditions. However, the Group’s strategy is to diversify between different sectors and geographies helps to mitigate against downturns in its overall portfolio.

Starting in late 2008, a steep downturn in the global economy, sparked by uncertainty in credit markets and deteriorating consumer confidence, adversely affected global demand for automobiles and consumer durables markets. Europe was one of the most adversely affected regions. Throughout those years, in order to minimise the impact of the global financial crisis, the Group continuously diversified its export base and despite adverse global conditions continued to increase its global reach. The Group’s consolidated international gross revenues increased from USD 10.6 billion to USD 13.3 billion between 2008 and 2012. Emerging economies such as Russia and South Africa as well as other Asian and Eastern European countries had a positive effect on the Group’s exports in recent years because of the relatively high rates of economic growth in those areas. The Group has been increasing the share of its international revenues in those emerging and high-growth potential economies, focusing on further diversification geographically. During the five year period from 2007 to 2012, within total international consolidated revenues, while the share of Europe decreased from 71 per cent. to 53 per cent., the share of Asia increased from 15 per cent. to 20 per cent., Africa increased from 8 per cent. to 20 per cent. and the Americas increased from 4 per cent. to 6 per cent.

In certain of its businesses, the Group was also able to benefit from weaker economic conditions. For example, despite a contracting white goods market in Western Europe, Arçelik’s sales to Western Europe performed strongly in 2012, resulting in significant market share gains in countries such as the U.K. and Germany. In Western Europe, the increasing demand for lower- to medium-priced products and the “search for value” triggered a shift from higher-priced brands to moderate and lower-priced brands and supported Arçelik’s performance. Arçelik also registered a significant increase in its sales to South Africa, after the acquisition of Defy, increasing the share of the South African market to 8.8 per cent. in its total sales, from about 2.7 per cent. for 2011. Accordingly, despite the global turmoil in 2012, Arçelik increased its international sales by 36.8 per cent. in TL terms.

-61- The Group was also able to mitigate a portion of the impact of the volatility in export markets and exchange rates through natural hedges, as in the case of the Energy Segment as global oil prices are quoted in U.S. dollars, and Tüpras¸ typically passes through the impact of fluctuations in the TL/ U.S. dollar exchange rate to domestic prices which are denominated in Turkish Lira. In addition, the Group has a number of export contracts which include clauses such as cost plus (the cases in Ford Otosan and Tofas¸), take-or-pay (as in the case of Tofas¸) and/or investment recoveries (as in the case of Ford Otosan). See “Business Operations—Automotive Segment—Ford Otosan and Business Operations—Automotive Segment—Tofas¸.” for more information.

Turkey’s economy The Group’s financial condition and results of operations are affected by the macroeconomic conditions generally prevailing in Turkey, especially in demand-driven segments. In the year ended 31 December 2012, domestic revenues amounted to TL 56,283 million, or 70.2 per cent. of the Group’s Non-Finance Segment’s consolidated gross revenues, and TL 52,359 million, or 73.7 per cent. of total consolidated gross revenues, and TL 38,114 million, or 74.9 per cent. of total consolidated gross revenues in the years ended 31 December 2011 and 2010, respectively. Macroeconomic factors that affect the financial condition and results of operations of the Group include growth or decline in GDP, exchange rates, inflation, interest rates and a number of demographic considerations. GDP growth generally affects the Group’s results of operations positively while a decline in GDP growth has a negative effect.

Lower interest rates generally have a positive impact on the Group’s financial results due to increasing consumer demand and higher affordability of financing for the customer base. While real interest rates in Turkey were as high as 30 per cent. a decade ago, during the last 10 years, they have reduced substantially to near zero, supporting the Group’s activities and financial results, especially in demand-driven segments.

The following table sets forth selected economic indicators for Turkey as at and for the years ended 31 December 2012, 2011 and 2010.

As at or for the year ended 31 December 2012 2011 2010 GDP (nominal, at current prices) (TL billions) ...... 1,416.8 1,297.7 1,098.8 GDP (nominal, at current prices) (USD billions) ...... 790.6 776.4 732.3 GDP growth (%) (real)(1) ...... 2.2 8.8 9.2 GDP per capita (USD) ...... 10,454 10,391 9,933 Unemployment (%) ...... 9.2 9.8 11.9 CPI(%)...... 6.2 10.5 6.4 Central Bank reference policy interest rate ...... 5.5 5.75 6.5 Refinancing rate of the Central Bank (%) ...... 5.5 12.5 8.8 Exports (USD billions) ...... 152.5 134.9 113.9 Imports (USD billions) ...... 236.5 240.8 185.5 Trade deficit (USD billions) ...... 84.0 105.9 71.7 Current account deficit (USD billions) ...... 46.9 75.1 45.5 Total gross gold and international currency reserves (in millions of U.S. dollars) . . 122.1 87.8 86.0 Deficit/surplus of consolidated budget (%)(2) ...... (2.0) (1.4) (3.6) Budget deficit (TL billions) ...... 28.8 17.8 40.1 Real effective exchange rate appreciation (depreciation) (%)(3) ...... 7.8 (12.9) 7.6

Source: Turkish Ministry of Finance, General Directorate of Public Accounts, for budget deficit Central Bank and Turkish Statistical Institute for all other data.

(1) Real GDP is an inflation-adjusted measure of gross domestic product that reflects the value of all goods and services produced in a given year, expressed in base-year prices. (2) Last 12 months deficit over last 12 months GDP. (3) Annual change in Central Bank’s year-end CPI-based REER index. Real effective exchange rate is the weighted geometric average of the prices in Turkey relative to the prices of its principal trade partners in international markets. An increase in the real effective exchange rate represents an appreciation of the TL in real terms, denoting a rise in the value of Turkish commodities in terms of foreign commodities.

The Turkish economy demonstrated strong growth following a deep financial crisis in 2000, supported by strict fiscal policies and structural reforms which led to increasing levels of FDI (from less than USD 1 billion in 2002 to around USD 13 billion on average between 2005-2012), declining inflation rates (from 68.5 per cent. in 2001

-62- to 6.2 per cent. in 2012), declining real interest rates (from a 30 per cent. level in 2002 to almost zero nominal levels in 2012). As the largest industrial and services group in Turkey with leading positions in each of the segments in which it operates and some of the largest distribution and customer databases in its respective sectors, the Group was able to benefit significantly from this new operating environment and expects to continue to benefit from the increasing penetration rates in a number of the products and services offered by the Group.

As was the case for many other economies around the world, Turkey was also impacted by the global turmoil in 2008 and 2009. However, the economic recovery has been relatively rapid and the recovery that began in Turkey in 2010 continued through 2011. Growth rates in Turkey slowed down in 2012, due to the Government’s and the Central Bank’s intentional policies targeting a slower but more sustainable growth path in Turkey that would limit the risk of overheating and/or increasing the current account deficit. In 2011, the GDP growth was as high as 8.8 per cent. but CPI in Turkey increased to 10.5 per cent. and the current account deficit widened to USD 75.1 billion from USD 45.5 billion in 2010. The measures to cool down the economy worked effectively and the CPI declined to 6.2 per cent. and current account deficit came down to USD 46.9 billion as of year-end 2012.

In the Group’s Energy Segment, Turkish growth dynamics have enabled Tüpras¸ to increase production of profitable products such as jet fuel and bitumen (the heaviest petroleum derivative) and have increased the domestic deficit of diesel, having a positive effect on price dynamics. While Tüpras¸ benefits from economic growth dynamics, since it is currently the only refinery in Turkey, the demand sensitivity in relation to downward trends in growth dynamics has been limited so far.

For the Group’s Automotive Segment, while the slow-down in the economy in 2012 led to a 10 per cent. contraction in automobile market sales compared to the prior year, 2011 and 2012 were still historic highs in terms of historical automotive sales in Turkey. In line with strong economic growth in Turkey, the Group’s Automotive Segment’s consolidated revenues increased by 28 per cent. in 2010 and 32 per cent. in 2011. However, the contraction and slow-down in the auto markets internally and externally, led to a 4 per cent. decline in the Automotive Segment revenues in 2012; however, measures such as take-or-pay agreements resulted in increasing operating margins (segment operating profit / segment total revenues) from 7.4 per cent. in 2011 to 7.7 per cent. in 2012.

The consumer durables market in Turkey is relatively more penetrated compared to the other segments the Group operates. Accordingly, the Group has been focusing on organic and inorganic growth opportunities in international markets. The Group’s Consumer Durables Segment increased its revenues by 4 per cent. and 23 per cent., respectively in 2010 and 2011. The domestic consumer durables market as a whole had a flat performance in 2012, but the Group’s Consumer Durables Segment was able to increase its domestic revenues by 12 per cent. in 2012 compared with 2011. As a result of continued focus on product development and innovation and together with its strong performance in international markets, the Group’s Consumer Durables Segment revenues increased by 24 per cent. in 2012.

2012 and 2011 were strong years for the Turkish banking sector with loans increasing by 34 per cent. and 30 per cent., respectively and deposits growing by 21 per cent. and 13 per cent., respectively, based on BRSA information. In 2012, the Central Bank of Turkey introduced some measures to slow-down the loan-growth with an attempt to avoid overheating in economic activity. Accordingly, loan growth in the Turkish banking sector slowed-down to 15 per cent. and deposit growth declined to 11 per cent., lower compared to the prior two years but still higher compared to many of its international peers. The Group’s Finance Segment increased its consolidated gross revenues by 22 per cent. in 2012 with 12 per cent. consolidated loan and advances to customers growth and 3 per cent. consolidated deposit growth, mainly focusing on relatively more profitable Turkish Lira denominated products.

Interest rates Overall, the interest rates to which the Group is subject depend on a variety of factors, including prevailing Turkish and international interest rates and risk assessments of the Group companies, the industries in which the Group operates and the Turkish economy made by potential lenders, potential purchasers of debt securities of the Group companies and the rating agencies that assess the Group companies and debt securities issued by the Group companies.

Among the consumer-driven sectors, while interest rate sensitivity is less in consumer durables due to the smaller-ticket items that are subject to sale, there has been a strong negative correlation between interest rates and automobile sales in Turkey in recent years. Of the total automobile sales, approximately 65 per cent. have

-63- been financed through car loans in Turkey in recent years. During the last decade, declining interest rates as well as lengthening maturities in car loans led to higher affordability of monthly instalments, increasing the demand for automobiles. Despite year-on-year volatility in interest rates due to the Central Bank’s monetary policy, the Turkish automobile market reached its record sale volumes during 2011 and 2012.

The Group’s Finance Segment is sensitive to interest rates mostly due to the nature of banking balance sheet structures in Turkey. In general, because the assets of the Group’s Finance Segment (principally loans and advances to customers and debt securities) have a longer maturity and are re-priced more slowly than the liabilities of the Finance Segment (principally deposits, bank borrowings and debt securities in issue), changes in short-term interest rates are generally reflected in the rates of interest paid by the Finance Segment on its liabilities before such changes can be reflected in the rates of interest earned by the Finance Segment on its assets. Therefore, when interest rates fall, as has occurred since 2008 in Turkey, the interest margin of the Finance Segment is positively affected, but when interest rates increase, the interest margin of the Finance Segment is generally negatively affected.

In the current stable and low interest rate environment which is leading to sustained compression of margins and intense competition, the Group’s Finance Segment is focusing on customer business, the allocation of loans to higher yielding segments, upward re-pricing, optimisation of deposit pricing, diversification of funding sources and service income generating segments. Yapı Kredi’s leading positions in rather high-margin, lucrative or fee and commission income generating business lines and/or products, such as credit cards, non-cash loans, leasing and factoring among others, help it to mitigate interest rate risks. The Group believes that in such an environment where there might be further pressure on interest margins, it will be more and more difficult for small and medium scale banks to survive, and expects a further wave of consolidation in the banking sector which would lead to both acquisition opportunities and also a more level playing field in the banking sector, which management believes would be beneficial for large banks such as Yapı Kredi.

Fluctuation in exchange rates of major foreign currencies Movements in currency exchange rates, principally between the US dollars and Turkish Lira, can impact significantly the Energy Segment’s results of operations.

A significant proportion of the Energy Segment’s purchases of crude oil and refined products are denominated in US dollars. In addition, the Energy Segment generally finances its capital expenditures through borrowings denominated in US dollars, as is the case in the RUP financing.

The Energy Segment mainly manages this foreign exchange risk by reflecting the effects of the changes in foreign currencies in its selling prices of petroleum products, which are accounted for in TL in the Group’s financial statements. Therefore, crude oil and refined product inventories provide a “natural hedge” for Energy Segment’s foreign exchange rate risk. In the process of maintaining an appropriate balance between US dollars assets and liabilities, the Energy Segment treats its crude oil and refined product inventories as US dollars denominated assets even though they are reported in TL for financial reporting purposes. For a discussion of the impact of this “natural hedge” on the Energy Segment’s profitability see “—Results of Operations—Year Ended 31 December 2012 Compared to Year Ended 31 December 2011—Major business segment results—Energy Segment “.

Although to a lesser extent compared to Energy Segment, the Group’s Finance, Automotive and Consumer Durables Segments are also exposed to foreign exchange rate risk.

The Group strives to naturally offset foreign exchange risk by matching foreign currency receivables with its foreign currency payables. The Group has sought to further mitigate the adverse impact of exchange rate fluctuations by using swaps, options and forward foreign exchange contracts to hedge their exposure to foreign currencies arising from raw material purchases and foreign currency balance sheet positions and to minimise the risk that the profit generated from certain transactions (e.g. export sales) will be affected by foreign exchange movements which occur after the price of the contract has been determined. The Group’s Finance Segment is also required to comply with foreign currency net short position limits set by the BRSA.

As part of its Enterprise Risk Management function, Koç Holding also has financial policies to monitor the foreign exchange exposure of the Group. For a discussion of Koç Holding’s related financial policies and consolidated foreign exchange position see “—Risks—Currency Risk”.

-64- For a sensitivity analysis on the impact of certain foreign exchange fluctuations on the Group’s pre-tax income, see Note 33(B) of the 2012 Consolidated Financial Statements.

Since February 2001, the Central Bank has adopted a floating exchange rate regime. Consequently, the monetary policy of the Central Bank does not include any commitment to the level of exchange rates. The Central Bank intervenes in the market via direct sales or purchases only when there is deemed excessive volatility in the market. See “Risk Factors—Risks Related to Turkey— Exchange rate risk and the Turkish Lira exchange rate could have a material adverse effect on the Group’s business, financial condition and results of operations “.

Changes in refining margins The Group’s Energy Segment’s results of operations are significantly dependent on Tüpras¸’s gross refining margins, the difference between the current market prices in US dollars of the refined petroleum products produced in the relevant period and the US dollars price of the crude oil and other feedstock purchased in order to produce such products. Tüpras¸ calculates its net refining margin by subtracting operating expenses from its gross refining margin. Refining margins are influenced by factors beyond Tüpras¸’s control, such as variations in demand for refined products and changes in refinery capacity, as well as crude oil differentials. See “Risk Factors—Risks Relating to the Businesses of the Group—A substantial or extended decline in refining margins would negatively impact the Group’s financial results.”

The following table sets forth Tüpras¸’s refining margins and the benchmark refining margin in the Mediterranean region for each of the years ended 31 December 2010, 2011 and 2012.

For the year ended 31 December USD/Barrel 2012 2011 2010 Tüpras¸ Net Refining Margin ...... 3.31 5.29 4.51 Tüpras¸ Gross Refining Margin (A) ...... 10.32 12.01 11.08 Mediterranean Benchmark (B)(1) ...... 4.21 1.17 2.89 Difference (A-B) ...... 6.09 10.84 8.19

(1) Source: Reuters

In 2009, benchmark refining margins in the Mediterranean region (which are calculated on a gross margin basis) fell to below USD 2 per barrel, mainly as a result of falling demand in a weak economic environment and a rise in product supply. In 2010, benchmark refining margins improved following the global economic recovery. In 2011, Mediterranean benchmark refining margins weakened to historic low levels, due to austerity measures implemented by several countries in the region as a result of the sovereign debt crisis. In 2012, benchmark refining margins in the Mediterranean region have increased due to global refinery closures (including in the Mediterranean region) which resulted in increased prices for refined products and the Mediterranean benchmark refining margins stood at USD 4.21. During the same time period, Tüpras¸ gross refining margins stood at over USD 10 per barrel on a continuous basis. Tüpras¸’s ability to create a premium to the benchmark refining margin for the Mediterranean region, which is based on a fixed crude oil input and fixed product yields were due to a number of factors: • the Turkish market has a deficit of certain domestically refined products, including diesel, jet fuel, LPG, naphtha and certain industrial products, leading to a domestic pricing dynamic based on import parity pricing; • Tüpras¸ has access to cheaper sources of crude oil (due to its refinery configurations which allow the use of heavier crudes) and is proximate to major suppliers (which reduces transport costs as compared to many competitors); • Tüpras¸ has well established infrastructure and facilities for crude oil and refined product importation, and benefits from price advantages of procuring crude oil and products in large quantities; • Tüpras¸ has implemented cost reduction measures, including energy efficiency programmes, which have improved its refining margins in recent periods; and • Tüpras¸’s refineries produced a higher value added range of refined products than those used in the benchmark calculation.

Procurement costs for raw materials and supplies, including crude oil The cost of raw materials and supplies, and in particular the cost of crude oil, accounts for a significant proportion of the Group’s consolidated cost of sales. The Group’s consolidated cost of raw materials and supplies

-65- increased by TL 16,674 million or 53.7 per cent., from TL 31,031 million in 2010 to TL 47,705 million in 2011, and increased further by TL 6,473 million or 13.6 per cent., from 2011 to TL 54,178 million in 2012. The ratio of cost of raw materials and supplies to the Group’s consolidated revenue from the sales of goods was 65 per cent. in 2010, 70 per cent. in 2011 and 71 per cent. in 2012.

The main raw materials required by the Group are, in the Energy Segment crude oil; in the Automotive Segment steel, aluminium, copper, platinum, plastic, rhodium and palladium; and in the Consumer Durables Segment steel, plastic, aluminium and copper.

Turkish tax and regulatory legislation The Group is subject to tax legislation in Turkey as well as regulatory legislation with respect to its business operations.

Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the Consolidated Financial Statements, have been calculated on a separate-entity basis. Under the Corporate Tax Law 5520, the applicable corporate tax rate has been 20 per cent. since 2006. Corporate tax is payable at a rate of 20 per cent. on the corporate tax base of the company after adjusting for certain disallowable expenses, exempt income, investment allowance and other additions and deductions.

Many of the Group companies operate in highly-regulated industries and regulatory changes can have an impact on business operations and results.

Tüpras¸ is regulated by EMRA, a public entity, related to Turkey’s Ministry of Energy and Natural Resource. EMRA monitors Turkish standards for refined petroleum products and promulgates regulations. For example, EMRA has issued regulations which require all diesel to contain at least 1 per cent biodiesel by 1 January 2014. The finance industry in Turkey is regulated by the BRSA. In order to support its monetary policy and avoid significant overheating in economic activity, the Central Bank of Turkey and BRSA sometimes introduce additional measures to control the growth of and/or maturities in the balance sheets of the Turkish banking system as well as to control the pricing of certain instruments to introduce a more level playing field in the Turkish banking system. While there are no additional regulatory authorities in the automotive and consumer durables sectors, the Government sometimes uses its fiscal policy and taxation tools in order to control the growth dynamics in these sectors.

Acquisitions, joint ventures and strategic alliances The Group has in the past and may in the future engage in acquisitions, joint ventures and strategic alliances. The Group has also been active in the M&A market. In November 2011, Arçelik acquired 100 per cent. of the shares of the Defy Group, the leading producer of white goods in South Africa and is currently looking into other strategic growth opportunities that would further develop its low-cost manufacturing base or distribution and product range.

Inorganic growth remains a key part of the Group’s strategy to increase market share and geographic coverage. It is continuously evaluating inorganic growth opportunities that are expected to emerge due to anticipated consolidation in the Group’s business segments, to complement its organic growth strategy. Specifically, the Group is targeting inorganic growth opportunities in its sectors that would enable Group companies to consolidate their leadership positions and also exploit new growth opportunities in new business areas through privatisations, the secondary M&A market and/or greenfield investments.

-66- Results of Operations The following tables set forth the operating results of each segment of the Group. This segment information was prepared on the basis of the information that senior management of the Company uses to evaluate their performance. The discussion and analysis of the results of operations on a segment basis does not include a discussion of the results of operations of the “Other” business segment, although the financial results of the Other segment are presented in the tables below.

The following table sets forth the operating results of each segment of the Group for the year ended 31 December 2012.

Inter Consumer segment 1 January – 31 December 2012 Energy Automotive durables Finance Other elimination Total (In thousands of Turkish Lira) External revenue ...... 53,312,206 9,836,498 10,503,228 7,297,729 3,883,671 — 84,833,332 Intersegment revenue .... 173,620 302,752 161,740 33,493 595,048 (1,266,653) — Total revenue ...... 53,485,826 10,139,250 10,664,968 7,331,222 4,478,719 (1,266,653) 84,833,332 Total costs ...... (50,900,621) (8,773,040) (7,577,670)(3,750,969)(3,452,905) 1,316,684 (73,138,521) Gross profit ...... 2,585,205 1,366,210 3,087,298 3,580,253 1,025,814 50,031 11,694,811 Operating expenses: Marketing, selling and distribution ...... (594,792) (363,844) (1,841,236) (66,436) (306,670) — (3,172,978) General administrative . . . (745,464) (190,125) (398,441)(1,442,366) (621,276) 57,398 (3,340,274) Research and development ...... (19,222) (72,188) (75,074) — (23) — (166,507) Other income/expenses (net) (*) ...... 20,462 39,816 13,353 (567,782) (45,386) (11,277) (550,814) Operating profit ...... 1,246,189 779,869 785,900 1,503,669 52,459 96,152 4,464,238 Income from associates . . . — — — 8,896 — — 8,896 Financial income/expenses (net) ...... 336,517 (52,502) (171,559) — 28,060 (96,152) 44,364 Profit before tax ...... 1,582,706 727,367 614,341 1,512,565 80,519 — 4,517,498 Operating profit ...... 1,246,189 779,869 785,900 1,503,669 52,459 96,152 4,464,238 Depreciation and amortisation ...... 415,148 258,475 265,848 119,568 90,178 — 1,149,217 EBITDA ...... 1,661,337 1,038,344 1,051,748 1,623,237 142,637 96,152 5,613,455

(*) Provision for loan impairment in the Finance Segment, amounting to TL 429,446 thousand, has been accounted for under “other expenses”.

-67- The following table sets forth the operating results of each segment of the Group for the year ended 31 December 2011.

Reclassified

Inter Consumer segment 1 January – 31 December 2011 Energy Automotive durables Finance Other elimination Total (in thousands of Turkish Lira) External revenue ...... 46,743,731 10,233,258 8,433,900 5,973,720 3,558,498 — 74,943,107 Intersegment revenue .... 239,312 170,373 153,585 26,454 593,505 (1,183,229) — Total revenue ...... 46,983,043 10,403,631 8,587,485 6,000,174 4,152,003 (1,183,229) 74,943,107 Total costs ...... (43,675,338) (9,028,735) (5,992,900) (3,077,474) (3,255,768) 1,246,996 (63,783,219) Gross profit ...... 3,307,705 1,374,896 2,594,585 2,922,700 896,235 63,767 11,159,888 Operating expenses: Marketing, selling and distribution ...... (513,747) (373,712) (1,503,024) (55,343) (252,762) — (2,698,588) General administrative . . . (672,864) (170,606) (349,240) (1,263,151) (570,963) 45,679 (2,981,145) Research and development ...... (13,588) (60,092) (67,873) — (9) — (141,562) Other income/expenses (net)(*) ...... 306,358 3,212 (9,142) (86,426) (50,392) (12,264) 151,346 Operating profit ...... 2,413,864 773,698 665,306 1,517,780 22,109 97,182 5,489,939 Income from associates ...... — — — 7,210 — — 7,210 Financial income/ expenses (net) ...... (794,888) 7,034 (43,965) — 139,320 (97,182) (789,681) Profit before tax ...... 1,618,976 780,732 621,341 1,524,990 161,429 — 4,707,468 Operating profit ...... 2,413,864 773,698 665,306 1,517,780 22,109 97,182 5,489,939 Depreciation and amortisation ...... 393,678 225,813 222,673 108,391 84,496 — 1,035,051 EBITDA ...... 2,807,542 999,511 887,979 1,626,171 106,605 97,182 6,524,990

(*) Gain on sale of Entek Elektrik Üretimi A.S¸. (currently named AES Entek) shares of Aygaz, a subsidiary of the Group, amounting to TL 194,629 thousand and Tüpras¸’s scrap items (platinum) sales income, amounting to TL39,482 thousand have been accounted for under “other income” in the Group’s Energy Segment. Penalties of TL 28,609 thousand issued by the Competition Authority to Ford Otosan and Tofas¸, joint ventures of the Group, have been accounted for under “Other expenses” in the Automotive Segment. Expenses incurred by Arçelik, a subsidiary of the Group, in 2011 amounting to TL 30,459 thousand, which arose from the voluntary recall of certain refrigerator models, a limited number of which had been sold between 2000 and 2006 in England and Ireland with expired warranties, have been accounted for under “other expenses” in the Consumer Durables Segment. Provision for loan impairment in the Finance Segment, amounting to TL 173,914 thousand, has been accounted for under “other expenses”.

-68- The following table sets forth the operating results of each segment of the Group for the year ended 31 December 2010.

Reclassified Inter Consumer segment 1 January – 31 December 2010 Energy Automotive durables Finance Other elimination Total (in thousands of Turkish Lira) External revenue ...... 31,411,542 7,766,786 6,834,305 4,990,154 2,809,649 — 53,812,436 Intersegment revenue ..... 178,216 90,681 200,426 46,641 464,750 (980,714) — Total revenue ...... 31,589,758 7,857,467 7,034,731 5,036,795 3,274,399 (980,714) 53,812,436 Total costs ...... (29,133,575) (6,831,302) (4,925,586) (2,230,993) (2,482,068) 982,735 (44,620,789) Gross profit ...... 2,456,183 1,026,165 2,109,145 2,805,802 792,331 2,021 9,191,647 Operating expenses: Marketing, selling and distribution ...... (463,635) (273,463) (1,192,457) (53,370) (215,744) — (2,198,669) General administrative .... (592,071) (158,856) (286,538) (1,166,385) (440,275) 39,752 (2,604,373) Research and development ...... (13,264) (47,104) (63,431) — (65) — (123,864) Other income/expenses (net)(*) ...... (102,399) 17,226 74,662 (156,436) 13,867 (9,950) (163,030) Operating profit ...... 1,284,814 563,968 641,381 1,429,611 150,114 31,823 4,101,711 Income from associates . . .———3,163 — — 3,163 Financial income/expenses (net) ...... (212,038) (5,692) 13,121 — 17,509 (31,823) (218,923) Profit before tax ...... 1,072,776 558,276 654,502 1,432,774 167,623 — 3,885,951 Operating profit ...... 1,284,814 563,968 641,381 1,429,611 150,114 31,823 4,101,711 Depreciation and amortisation ...... 384,202 213,220 197,358 95,126 74,584 — 964,490 EBITDA ...... 1,669,016 777,188 838,739 1,524,737 224,698 31,823 5,066,201

(*) Tax penalty provision expense amounting to TL 181,235 thousand of Tüpras¸, a subsidiary of the Group, which was calculated in accordance with “Law on Amendments of Restructuring of Several Types of Receivables and Social Security and General Health Insurance Law and Other Several Law and Executive Orders”, has been accounted for under “other expenses” in the Group’s Energy Segment. Gain on sale of factory buildings and annexes of Arçelik, a subsidiary of the Group, located in Topkapı, Istanbul, to Koç University amounting to TL 40,055 thousand has been accounted for under “other income” in the Consumer Durables Segment. Provision for loan impairment in the Finance Segment, amounting to TL 217,460 thousand, has been accounted for under “other expenses”.

-69- Year Ended 31 December 2012 Compared to Year Ended 31 December 2011 Consolidated Results The table below sets forth the Group’s consolidated income statement for the years ended 31 December 2012 and 2011.

Years ended 31 December Reclassified Variation 2012 2011 Variation % (in thousands of Turkish Lira, except percentages) Revenue ...... 77,535,603 68,969,387 8,566,216 12.4% Interest, fee, commission and similar income ...... 7,297,729 5,973,720 1,324,009 22.2% Total revenue ...... 84,833,332 74,943,107 9,890,225 13.2% Cost of sales (-) ...... (69,517,198) (60,829,381) (8,687,817) 14.3% Interest, fee, commission and similar expenses (-) ...... (3,621,323) (2,953,838) (667,485) 22.6% Total costs ...... (73,138,521) (63,783,219) (9,355,302) 14.7% Gross profit non-finance ...... 8,018,405 8,140,006 (121,601) -1.5% Gross profit finance ...... 3,676,406 3,019,882 656,524 21.7% Gross profit ...... 11,694,811 11,159,888 534,923 4.8% Marketing, selling and distribution expenses (-) ...... (3,172,978) (2,698,588) (474,390) 17.6% General administrative expenses (-) ...... (3,340,274) (2,981,145) (359,129) 12.0% Research and development expenses (-) ...... (166,507) (141,562) (24,945) 17.6% Other income ...... 270,018 599,119 (329,101) -54.9% Other expense (-) ...... (820,832) (447,773) (373,059) 83.3% Operating profit ...... 4,464,238 5,489,939 (1,025,701) -18.7% Share of profit/loss of investments accounted for using the equity method ...... 8,896 7,210 1,686 23.4% Financial income ...... 2,293,693 2,403,540 (109,847) -4.6% Financial expense (-) ...... (2,249,329) (3,193,221) 943,892 -29.6% Profit before tax ...... 4,517,498 4,707,468 (189,970) -4.0% Tax income/expense ...... (415,791) (857,115) 441,324 -51.5% - Current income tax expense (-) ...... (904,707) (796,303) (108,404) 13.6% - Deferred tax income/expense ...... 488,916 (60,812) 549,728 -904.0% Profit for the period ...... 4,101,707 3,850,353 251,354 6.5% Attributable to: Non-controlling interest ...... 1,786,827 1,725,884 60,943 3.5% Equity holders of the parent ...... 2,314,880 2,124,469 190,411 9.0%

Revenue Revenue includes the results of operations of all business segments excluding the Finance Segment. Total gross revenue of the Finance Segment is presented on the separate line item “Interest, fee, commission and similar income” on the consolidated statement of income.

The Group’s consolidated revenue increased by TL 8,566 million, or 12.4 per cent., from TL 68,969 million in 2011 to TL 77,536 million in 2012, primarily as a result of (1) an increase of 13.8 per cent. in the total revenues generated by the Group’s Energy Segment and (2) a 24.2 per cent. increase in the total revenues generated by the Consumer Durables Segment. Total revenues generated by the Automotive Segment decreased by 2.5 per cent. in 2012.

In 2012, the Group’s Energy Segment had the highest contribution to consolidated revenues by constituting 69 per cent. (2011: 68 per cent.) of the total amount. The Consumer Durables and Automotive Segments’ contributions were 14 per cent. (2011: 12 per cent.) and 13 per cent. (2011: 15 per cent.), respectively, in 2012.

-70- The table below sets forth the components of the Group’s consolidated revenue for the years ended 31 December 2012 and 2011.

Years ended 31 December Reclassified 2012 2011 Variation Variation% (in thousands of Turkish Lira, except percentages) Domestic revenue ...... 56,283,320 52,359,052 3,924,268 7.5% Foreign revenue ...... 23,851,635 18,719,300 5,132,335 27.4% Gross revenue ...... 80,134,955 71,078,352 9,056,603 12.7% Less: Discounts ...... (2,599,352) (2,108,965) (490,387) 23.3% Revenue ...... 77,535,603 68,969,387 8,566,216 12.4%

The share of foreign revenue in the Group’s total consolidated gross revenue increased from 26.3 per cent. in 2011 to 29.8 per cent. in 2012, mainly as a result of the increasing international exposure of the Group’s Consumer Durables and Energy Segments.

Interest, fee, commission and similar income Interest, fee, commission and similar income include the total gross revenue of the Group’s Finance Segment. The table below sets forth the components of the Group’s consolidated interest, fee, commission and similar income for the years ended 31 December 2012 and 2011.

Years ended 31 December 2012 2011 Variation Variation% (in thousands of Turkish Lira, except percentages) Interest income ...... 5,278,570 4,123,943 1,154,627 28.0% Fee and commission income ...... 1,240,560 1,288,476 (47,916) -3.7% Income from insurance business ...... 535,395 458,085 77,310 16.9% Other operating income ...... 243,204 103,216 139,988 135.6% Total ...... 7,297,729 5,973,720 1,324,009 22.2%

The Group’s consolidated interest, fee, commission and similar income increased by TL 1,324 million, or 22.2 per cent., from TL 5,974 million in 2011 to TL 7,298 million in 2012, primarily as a result of (1) a 28.0 per cent. increase in interest income and (2) an increase of TL 140 million in other operating income.

The increase in interest income was mainly attributable to the increase in outstanding loan volumes and change in loan mix with a greater proportion of high-yielding consumer and SME loans. The increase in other operating income was mainly attributable to the trading gain recorded in 2012 from the disposals of investment securities.

The TL 48 million decrease in fee and commission income was mainly driven by the new regulation on deferral of commission income, which took place starting from January 2012.

Cost of sales Cost of the sales includes costs of sales of all business segments, except for the Finance Segment. Costs of the Finance Segment are presented on the separate line item “Interest, fee, commission and similar expenses” on the consolidated statement of income.

The Group’s consolidated cost of sales increased by TL 8,688 million, or 14.3 per cent., from TL 60,829 million in 2011 to TL 69,517 million in 2012, primarily as a result of (1) an increase of 16.5 per cent. in the total cost of sales incurred by the Group’s Energy Segment, and (2) a 26.4 per cent. increase in the total costs of sales incurred by the Consumer Durables Segment. Total costs of sales incurred by Automotive Segment decreased by 2.8 per cent. in 2012, in line with the decrease in the Automotive Segment’s revenues.

In 2012, the Group’s Energy Segment represented the largest portion of cost of sales, constituting 73 per cent. of the total consolidated amount (2011: 72 per cent.). Total cost of sales incurred by the Automotive and Consumer Durables Segments in 2012 constituted 13 per cent. (2011: 15 per cent.) and 11 per cent. (2011: 10 per cent.) of the consolidated amount, respectively.

-71- 78 per cent. (2011: 78 per cent.) of the total cost of sales incurred in 2012 was comprised of the cost of raw materials and supplies and 16 per cent. (2011: 17 per cent.) was comprised of the cost of merchandise sold.

Interest, fee, commission and similar expenses Interest, fee, commission and similar expenses include the costs of the Finance Segment. The table below sets forth the components of the Group’s consolidated interest, fee, commission and similar expenses for the years ended 31 December 2012 and 2011.

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Interest expense ...... (2,918,537) (2,349,464) (569,073) 24.2% Fee and commission expense ...... (276,086) (224,963) (51,123) 22.7% Insurance business’ and other operating expenses ...... (426,700) (379,411) (47,289) 12.5% Total ...... (3,621,323) (2,953,838) (667,485) 22.6%

The Group’s consolidated interest, fee, commission and similar expenses increased by TL 667 million, or 22.6 per cent., from TL 2,954 million in 2011 to TL 3,621 million in 2012, primarily as a result of (1) an increase of TL 569 million in interest expense and (2) an increase of TL 51 million in fee and commission expense.

The increase in interest expense was mainly attributable to the increase in deposit and borrowing volumes during the year 2012.

Gross profit As a result of the foregoing, the Group’s consolidated gross profit increased by TL 535 million, or 4.8 per cent., from TL 11,160 million in 2011 to TL 11,695 million in 2012. The Group’s consolidated gross margin decreased to 13.8 per cent. in 2012 from 14.9 per cent. in 2011.

Operating expenses The table below sets forth the components of the Group’s consolidated operating expenses by type for the years ended 31 December 2012 and 2011.

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Marketing, selling and distribution expenses ...... (3,172,978) (2,698,588) (474,390) 17.6% General administrative expenses ...... (3,340,274) (2,981,145) (359,129) 12.0% Research and development expenses ...... (166,507) (141,562) (24,945) 17.6% Total ...... (6,679,759) (5,821,295) (858,464) 14.7%

The Group’s consolidated operating expenses increased by TL 858 million, or 14.7 per cent., from TL 5,821 million in 2011 to TL 6,680 million in 2012, primarily as a result of (1) an increase of 20.6 per cent. in the total operating expenses incurred by the Consumer Durables Segment, (2) a 14.4 per cent. increase in the total operating expenses incurred by the Finance Segment and (3) a 13.3 per cent. increase in the total operating expenses incurred by the Group’s Energy Segment. Total operating expenses of the Automotive Segment slightly increased by 3.6 per cent. in 2012.

In 2012, the Consumer Durables Segment represented the largest portion of operating expenses, constituting 35 per cent. of the total consolidated amount (2011: 33 per cent.). Operating expenses incurred by the Group’s Finance and Energy Segments in 2012 constituted 23 per cent. (2011: 23 per cent.) and 20 per cent. (2011: 21 per cent.) of the total consolidated amount, respectively.

The operating expense item that represented the largest portion in 2012 was “personnel expenses” by constituting 36 per cent. (2011: 36 per cent.) of the total consolidated amount. Total consolidated personnel expenses incurred in 2012 and classified under operating expenses amounted to TL 2,377 million and displayed an 11.9 per cent. increase compared to 2011.

-72- The second highest contributor in 2012 to operating expense items was transportation, distribution and storage expenses which contributed 12 per cent. (2011: 11 per cent.) of the total consolidated amount. Total consolidated transportation, distribution and storage expenses incurred in 2012 amounted to TL 834 million, 30.1 per cent. increase compared to 2011. The increase was mainly attributable to (1) increase in transportation and storage costs as a result of sales volume growth in export markets in the Consumer Durables Segment and (2) the increase in sales volumes and the temporary closure of the railway line between refineries which led to increased land transportation having higher costs compared to railway transportation for the Group’s Energy Segment.

Other income The Group’s consolidated other income decreased by TL 329 million, from TL 599 million in 2011 to TL 270 million in 2012, primarily as a result of a decrease of TL 264 million in the other income of the Group’s Energy Segment. The decrease in the other income of the Group’s Energy Segment stemmed mainly from the following one-off income items realised in 2011: (1) a TL 195 million gain of Aygaz on the sale of 49.62 per cent. of Entek shares and (2) a TL 39 million gain recognised from the disposal of platinum catalyst from the I˙zmit Refinery and I˙zmir Refinery of Tüpras¸ following catalyst changes in diesel desulphurisation units.

Other expense The Group’s consolidated other expense increased by TL 373 million, from TL 448 million in 2011 to TL 821 million in 2012, primarily as a result of an increase of TL 412 million in the other expense of the Finance Segment. The related increase in the other expense of the Finance Segment stemmed mainly from (1) a TL 256 million increase in provision expense for loan impairment, (2) a TL 99 million increase in other provision expenses including general provisions for lawsuits and other banking sector risks and (3) a TL 57 million increase in provision expense for the Pension Fund of Yapı Kredi.

Operating profit As a result of the foregoing, the Group’s consolidated operating profit decreased by TL 1,026 million, or 18.7 per cent., from TL 5,490 million in 2011 to TL 4,464 million in 2012. The Group’s consolidated operating margin decreased to 5.3 per cent. in 2012 from 7.3 per cent. in 2011.

Financial income/expenses (net) The Group’s consolidated financial income/expenses (net) increased by TL 834 million, from TL 790 million net financial expense in 2011 to TL 44 million net financial income in 2012, primarily as a result of the combined net effect of the following: (1) an increase of TL 1,131 million in net financial income of the Group’s Energy Segment, (2) an increase of TL 128 million in net financial expense of the Consumer Durables Segment and (3) a decrease of TL 111 million in net financial income of the Other Segment.

The Group’s Energy Segment recognised a net foreign exchange loss of TL 948 million in 2011, resulting from its short US dollar position without taking into account its “natural hedge” (i.e. its US dollar position excluding oil inventories that are accounted for in TL on the balance sheet but the selling prices of which are adjusted by Tüpras¸ taking into account foreign exchange rate movements between the US dollar and Turkish Lira) and the depreciation of TL against the US dollar by 22.8 per cent. in 2011. As a result of this “natural hedge” mechanism at the Group’s Energy Segment’s profitability, the financial impact of the related financial exchange loss in 2011 was offset by the inventory gain and favourable refinery margins recognised at gross profit level as a result of the foreign exchange linked pricing of Tüpras¸’s oil inventories. See “—Significant Factors Affecting Results of Operations and Financial Condition of the Group—Fluctuation in exchange rates of major foreign currencies.”

On the other hand, the Group’s Energy Segment recognised a net foreign exchange gain of TL 195 million in 2012, resulting from the appreciation of TL against USD by 5.9 per cent. in 2012.

In the Consumer Durables Segment, the increase in interest expense was the primary reason for the increase in net financial expense.

In the Other Segment, the foreign exchange gain recognised in 2011 due to the long USD position at Koç Holding stand-alone level was the primary reason for the decrease in net financial income.

-73- Profit before tax As a result of the foregoing, the Group’s consolidated profit before tax decreased by TL 190 million, or 4.0 per cent., from TL 4,707 million in 2011 to TL 4,517 million in 2012. The Group’s consolidated profit before tax margin decreased to 5.3 per cent. in 2012 from 6.3 per cent. in 2011.

Tax expense The table below sets forth the components of the Group’s consolidated tax expense for the years ended 31 December 2012 and 2011.

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Current income tax expense (-) ...... (904,707) (796,303) (108,404) 13.6% Deferred tax income/expense ...... 488,916 (60,812) 549,728 -904.0% Total ...... (415,791) (857,115) 441,324 -51.5%

The Group’s consolidated tax expense decreased by TL 441 million, or 51.5 per cent., from TL 857 million in 2011 to TL 416 million in 2012, primarily as a result of the deferred tax income associated with unused investment tax credits of the Energy and Automotive Segments.

As a result of the positive effect of the deferred tax income from unused investment tax credits of the Energy and Automotive Segments, the Group’s consolidated effective tax rate decreased from 18.2 per cent. in 2011 to 9.2 per cent. in 2012.

Profit for the period As a result of the foregoing, the Group’s consolidated profit for the period increased by TL 251 million, or 6.5 per cent., from TL 3,850 million in 2011 to TL 4,102 million in 2012.

The Group’s consolidated profit attributable to the equity holders of the parent increased by TL 190 million, or 9 per cent., from TL 2,124 million in 2011 to TL 2,315 million in 2012. Profit attributable to the equity holders of the parent comprises 56 per cent. (2011: 55 per cent.) of the total profit for the year ended 2012.

Major Business Segment Results Energy Segment

Years ended 31 December Reclassified 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Energy segment External revenue ...... 53,312,206 46,743,731 6,568,475 14.1% Intersegment revenue ...... 173,620 239,312 (65,692) -27.5% Total revenue ...... 53,485,826 46,983,043 6,502,783 13.8% Total costs ...... (50,900,621) (43,675,338) (7,225,283) 16.5% Gross profit ...... 2,585,205 3,307,705 (722,500) -21.8% Operating expenses: Marketing, selling and distribution ...... (594,792) (513,747) (81,045) 15.8% General administrative ...... (745,464) (672,864) (72,600) 10.8% Research and development ...... (19,222) (13,588) (5,634) 41.5% Other income/expenses (net) ...... 20,462 306,358 (285,896) -93.3% Operating profit ...... 1,246,189 2,413,864 (1,167,675) -48.4% Financial income/expenses ...... 336,517 (794,888) 1,131,405 -142.3% Profit before tax ...... 1,582,706 1,618,976 (36,270) -2.2% Operating profit ...... 1,246,189 2,413,864 (1,167,675) -48.4% Add back: Depreciation and amortisation ...... 415,148 393,678 21,470 5.5% EBITDA ...... 1,661,337 2,807,542 (1,146,205) -40.8%

-74- Total revenue Total revenue of the Group’s Energy Segment increased by TL 6,503 million, or 13.8 per cent., from TL 46,983 million in 2011 to TL 53,486 million in 2012, primarily as a result of an increase in sales volumes for nearly all refined products (with the exception of asphalt sales which declined 4.8 per cent. due to rainy weather conditions and normalisation of the market compared to the prior year when asphalt sales were abnormally high due to higher construction and road improvement works in a pre-election period). Sales volumes for the principal products of Tüpras¸ including low-sulphur diesel, gasoline and jet-fuel increased by 8.8 per cent., 9.7 per cent. and 13.3 per cent. respectively in 2012.

Total costs Total costs of the Group’s Energy Segment increased by TL 7,225 million, or 16.5 per cent., from TL 43,675 million in 2011 to TL 50,901 million in 2012, primarily as a result of (1) an increase in the costs of raw materials resulting from increases in sales volumes and (2) increased energy expenses arising from higher domestic natural gas prices.

Gross profit As a result of the foregoing, gross profit of the Group’s Energy Segment decreased by TL 723 million, or 21.8 per cent., from TL 3,308 million in 2011 to TL 2,585 million in 2012. The decrease in gross profit was mainly due to (1) a strong base year with the positive impact of inventory gains during a period of increasing crude oil prices in 2011 not being repeated in 2012, (2) a decrease in refining margins of Tüpras¸ which principally reflected lower light/heavy crude oil differentials and (3) increased energy expenses.

Tüpras¸’s refineries are able to process medium heavy crudes with high sulphur content. US sanctions on Iran (which exports medium and heavy crude) were principally responsible for reduced availability of heavy crudes in the Mediterranean region in 2012 which has resulted in increased heavy crude prices. This, together with price decreases in light and sweet crudes, has resulted in a much lower light/heavy differential in 2012 contributing to lower refinery margins for the Group.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Energy Segment increased by TL 81 million, or 15.8 per cent., from TL 514 million in 2011 to TL 595 million in 2012, primarily as a result of (1) increased sales volumes which resulted in increased delivery and storage costs and (2) the temporary closure of the railway line between the I˙zmit Refinery and the Kırıkkale Refinery which led to increased land transportation having higher costs compared to railway transportation for Tüpras¸.

General administrative expenses General administrative expenses of the Group’s Energy Segment increased by TL 73 million, or 10.8 per cent., from TL 673 million in 2011 to TL 745 million in 2012, primarily as a result of (1) an increase in headcount, mainly relating to the RUP project and (2) an increase in average salary levels.

Research and development expenses Research and development expenses of the Group’s Energy Segment increased by TL 6 million, or 41.5 per cent., from TL 14 million in 2011 to TL 19 million in 2012, principally as a result of increased headcount in research and development.

Other income/expenses (net) Other income (net) of the Group’s Energy Segment decreased by TL 286 million, from TL 306 million in 2011 to TL 20 million in 2012, primarily as a result of the following one-off income items realised in 2011: (1) a TL 195 million gain of Aygaz, recognised on the sale of 49.62 per cent. of Entek shares and (2) a TL 39 million gain of Tüpras¸ recognised from the disposal of platinum catalyst from the˙ Izmit Refinery and I˙zmir Refinery following catalyst changes in diesel desulphurisation units.

Operating profit As a result of the foregoing, operating profit of the Group’s Energy Segment decreased by TL 1,168 million, or 48.4 per cent., from TL 2,414 million in 2011 to TL 1,246 million in 2012.

-75- EBITDA The Group’s Energy Segment incurred TL 415 million of depreciation and amortisation in 2012, representing a 5.5 per cent. increase compared to 2011. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Energy Segment decreased by TL 1,146 million, or 40.8 per cent., from TL 2,808 million in 2011 to TL 1,661 million in 2012.

Financial income/expenses (net) Financial income/expenses (net) of the Group’s Energy Segment increased by TL 1,131 million, from TL 795 million net financial expense in 2011 to net financial income of TL 337 million in 2012, primarily as a result of the change in net foreign exchange gain/losses.

The Group’s Energy Segment recognised a net foreign exchange loss of TL 948 million in 2011, resulting from its short US dollar position before “natural hedge” (i.e. USD position excluding FX linked oil inventories that are accounted as TL on the balance sheet) and depreciation of TL against USD by 22.8 per cent. As a result of the “natural hedge” mechanism at the Group’s Energy Segment, the financial impact of the related foreign exchange loss in 2011 was offset by the inventory gain and favourable refinery margins recognised at gross profit level due to the foreign exchange linked pricing of Tüpras¸ oil inventories. See “—Significant Factors Affecting Results of Operations and Financial Condition of the Group—Fluctuation in exchange rates of major foreign currencies.”

On the other hand, the Group’s Energy Segment recognised a net foreign exchange gain of TL 195 million in 2012, resulting from the appreciation of TL against USD by 5.9 per cent.

Profit before tax As a result of the foregoing, profit before tax of the Group’s Energy Segment decreased by TL 36 million, or 2.2 per cent., from TL 1,619 million in 2011 to TL 1,583 million in 2012.

Automotive Segment

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Automotive segment External revenue ...... 9,836,498 10,233,258 (396,760) -3.9% Intersegment revenue ...... 302,752 170,373 132,379 77.7% Total revenue ...... 10,139,250 10,403,631 (264,381) -2.5% Total costs ...... (8,773,040) (9,028,735) 255,695 -2.8% Gross profit ...... 1,366,210 1,374,896 (8,686) -0.6% Operating expenses: Marketing, selling and distribution ...... (363,844) (373,712) 9,868 -2.6% General administrative ...... (190,125) (170,606) (19,519) 11.4% Research and development ...... (72,188) (60,092) (12,096) 20.1% Other income/expenses (net) ...... 39,816 3,212 36,604 1139.6% Operating profit ...... 779,869 773,698 6,171 0.8% Financial income/expenses ...... (52,502) 7,034 (59,536) -846.4% Profit before tax ...... 727,367 780,732 (53,365) -6.8% Operating profit ...... 779,869 773,698 6,171 0.8% Add back: Depreciation and amortisation ...... 258,475 225,813 32,662 14.5% EBITDA ...... 1,038,344 999,511 38,833 3.9%

Total revenue Total revenue of the Group’s Automotive Segment decreased by TL 264 million, or 2.5 per cent., from TL 10,404 million in 2011 to TL 10,139 million in 2012, principally as a result of (1) a decline in domestic auto sales volumes of Ford Otosan and Tofas¸ and (2) a decline in export performance of Tofas¸.

-76- The decline in domestic auto sales volumes of Ford Otosan and Tofas¸ was mainly attributable to the contraction in the Turkish general auto market by around 10 per cent. after a record high year for sales in 2011 as well as the aggressive competition in the domestic market. The decline in export performance of Tofas¸ was mainly due to the contraction in the European auto market. Sales volumes in the domestic market in 2011 and 2012 declined in all vehicle categories including passenger cars, light commercial vehicles and medium commercial vehicles. See “—Business—Operations—Automotive Segment.” for further information on the sales volumes of Ford Otosan and Tofas¸ by vehicle categories in 2012 and 2011.

Total costs Total costs of the Group’s Automotive Segment decreased by TL 256 million, or 2.8 per cent., from TL 9,029 million in 2011 to TL 8,773 million in 2012, principally as a result of the aforementioned decline in revenue performance compared to prior year.

Gross profit As a result of the foregoing, gross profit of the Group’s Automotive Segment decreased by TL 9 million, or 0.6 per cent., from TL 1,375 million in 2011 to TL 1,366 million in 2012.

The gross margin of the Automotive Segment increased to 13.5 per cent. in 2012 from 13.2 per cent. in 2011. Tofas¸’s export driven revenue decline was not reflected in gross profit as a result of its take or pay income, which was the main reason for the increase in the gross margin of the Automotive Segment in 2012.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Automotive Segment decreased by TL 10 million, or 2.6 per cent., from TL 374 million in 2011 to TL 364 million in 2012, principally as a result of decreasing warranty expenses of Ford Otosan and Tofas¸. On the other hand, marketing and advertising expenses were approximately equal to those in the prior year as the Group continued its marketing efforts in light of the aggressive competition in the domestic automotive market.

General administrative expenses General administrative expenses of the Group’s Automotive Segment increased by TL 19 million, or 11.4 per cent., from TL 171 million in 2011 to TL 190 million in 2012. The main reason for the increase in general administrative expenses was an increase in personnel expenses.

Research and development expenses Research and development expenses of the Group’s Automotive Segment increased by TL 12 million, or 20.1 per cent., from TL 60 million in 2011 to TL 72 million in 2012, principally as a result of the increase in depreciation and amortisation expenses resulting from the amortisation of capitalised product development costs. Total expenditure allocated to research and development in 2012 increased due to the allocation of more resources to research and development.

Other income/expenses (net) Other income (net) of the Group’s Automotive Segment increased by TL 37 million, from TL 3 million in 2011 to TL 40 million in 2012, principally as a result of the negative impact of fines imposed by the Competition Authority on Ford Otosan and Tofas¸ in 2011.

Operating profit As a result of the foregoing, operating profit of the Group’s Automotive Segment increased by TL 6 million, or 0.8 per cent., from TL 774 million in 2011 to TL 780 million in 2012. The operating margin of the Automotive Segment increased to 7.7 per cent. in 2012 from 7.4 per cent. in 2011.

EBITDA The Group’s Automotive Segment incurred TL 258 million of depreciation and amortisation in 2012, representing a 14.5 per cent. increase compared to 2011. The increase resulted primarily from capital expenditures in previous years. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Automotive Segment increased by TL 39 million, or 3.9 per cent., from TL 1,000 million in 2011 to TL 1,038 million in 2012.

-77- Financial income/expenses (net) Financial income/expenses (net) of the Group’s Automotive Segment unfavourably changed by TL 60 million from net financial income of TL 7 million in 2011 to net financial expense of TL 53 million in 2012, principally as a result of increasing interest expense due to an increase in financial indebtedness compared to the prior year. In addition, an increase in foreign exchange losses had a negative impact on the net financial income/expense balance of the Automotive Segment in 2012.

Profit before tax As a result of the foregoing, profit before tax of the Group’s Automotive Segment decreased by TL 53 million, or 6.8 per cent., from TL 781 million in 2011 to TL 727 million in 2012.

Consumer Durables Segment

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Consumer durables segment External revenue ...... 10,503,228 8,433,900 2,069,328 24.5% Intersegment revenue ...... 161,740 153,585 8,155 5.3% Total revenue ...... 10,664,968 8,587,485 2,077,483 24.2% Total costs ...... (7,577,670) (5,992,900) (1,584,770) 26.4% Gross profit ...... 3,087,298 2,594,585 492,713 19.0% Operating expenses: Marketing, selling and distribution ...... (1,841,236) (1,503,024) (338,212) 22.5% General administrative ...... (398,441) (349,240) (49,201) 14.1% Research and development ...... (75,074) (67,873) (7,201) 10.6% Other income/expenses (net) ...... 13,353 (9,142) 22,495 -246.1% Operating profit ...... 785,900 665,306 120,594 18.1% Financial income/expenses ...... (171,559) (43,965) (127,594) 290.2% Profit before tax ...... 614,341 621,341 (7,000) -1.1% Operating profit ...... 785,900 665,306 120,594 18.1% Add back: Depreciation and amortisation ...... 265,848 222,673 43,175 19.4% EBITDA ...... 1,051,748 887,979 163,769 18.4%

Total revenue Total revenue of the Group’s Consumer Durables Segment increased by TL 2,077 million, or 24.2 per cent., from TL 8,587 million in 2011 to TL 10,665 million in 2012, primarily as a result of (1) volume led growth of Arçelik, which reflected an increase in brand awareness of the company in Europe, (2) increased use of internet sales channels for purchases of white goods, (3) an increase in TV sales related to the Olympics and European Football Championship in the first half of 2012 and (4) the acquisition of Defy at the end of 2011.

Total costs Total costs of the Group’s Consumer Durables Segment increased by TL 1,585 million, or 26.4 per cent., from TL 5,993 million in 2011 to TL 7,578 million in 2012, principally as a result of (1) increasing cost of raw materials due to higher sales volumes both in domestic and foreign markets and (2) an increase in personnel expenses resulting from the acquisition of Defy at the end of 2011. In addition, the increasing share of TV sales, which carry a high cost of sales when compared to the segment’s other products, had an increasing impact on the cost of sales of the Consumer Durables Segment.

Gross profit As a result of the foregoing, gross profit of the Group’s Consumer Durables Segment increased by TL 493 million, or 19.0 per cent., from TL 2,595 million in 2011 to TL 3,087 million in 2012. The gross margin of the Consumer Durables Segment decreased to 28.9 per cent. in 2012 from 30.2 per cent. in 2011.

-78- The decrease in the gross profit margin was mainly due to the impact of sector-wide discount campaigns in consumer electronics, especially in Europe. Excess inventory that had been held to meet the demand for TVs driven by the Olympics and the European Football Championship, subsequently needed to be cleared through discount campaigns due to a sharp drop in demand across the sector. Additionally, the campaigns to promote energy efficient white goods in Turkey also caused minor declines in gross profit in that segment because of discounts offered in connection therewith.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Consumer Durables Segment increased by TL 338 million, or 22.5 per cent., from TL 1,503 million in 2011 to TL 1,841 million in 2012, primarily as a result of (1) increased expenses such as transportation and distribution expenses to support sales volume growth across the distant markets in which the Consumer Durables Segment operates, (2) increases in warranty and assembly expenses due to increased sales to households in Turkey, (3) an increase in advertising and promotion expenses due to increased marketing activities in international markets and (4) an increase in personnel expenses due to the acquisition of Defy at the end of 2011.

General administrative expenses General administrative expenses of the Group’s Consumer Durables Segment increased by TL 49 million, or 14.1 per cent., from TL 349 million in 2011 to TL 398 million in 2012, principally as a result of revenue growth in 2012 and an increase in personnel expenses mainly due to the increase in headcount that resulted from the acquisition of Defy.

Research and development expenses Research and development expenses of the Group’s Consumer Durables Segment increased by TL 7 million, or 10.6 per cent., from TL 68 million in 2011 to TL 75 million in 2012, principally as a result of the increase in depreciation and amortisation expenses resulting from amortisation of capitalised product development costs. Total expenditure allocated to research and development in 2012, including expenses as well as development costs capitalised, increased due to the allocation of more resources to research and development.

Other income/expenses (net) Other income/expenses (net) of the Group’s Consumer Durables Segment favourably changed by TL 22 million, from net other expense of TL 9 million in 2011 to net other income of TL 13 million in 2012 principally as a result of (1) Arçelik’s increasing income from government grants within the “Turquality” programme, which is a brand support incentive programme led by the Ministry of Economy of Turkey (2012: TL 42 million and 2011: TL 30 million) and (2) decreasing product recall expenses to rectify potential problems arising from a limited number of refrigerator models sold between the years 2000-2006 in England and Ireland with expired warranties (2012: TL 15 million and 2011: TL 30 million).

Operating profit As a result of the foregoing, operating profit of the Group’s Consumer Durables Segment increased by TL 121 million, or 18.1 per cent., from TL 665 million in 2011 to TL 786 million in 2012. The operating margin of the Consumer Durables Segment decreased to 7.4 per cent. in 2012 from 7.7 per cent. in 2011.

EBITDA The Group’s Consumer Durables Segment incurred TL 266 million of depreciation and amortisation in 2012, a 19.4 per cent. increase compared to 2011. The increase resulted primarily from capital expenditures of the previous years. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Consumer Durables Segment increased by TL 164 million, or 18.4 per cent., from TL 888 million in 2011 to TL 1,052 million in 2012.

Financial income/expenses (net) Financial expense (net) of the Group’s Consumer Durables Segment increased by TL 128 million, from TL 44 million in 2011 to TL 172 million in 2012, principally as a result of (1) increasing net interest expenses due to the corresponding increase in financial indebtedness of Arçelik needed to service the increasing working capital requirements and the full year effect of the financing used for the Defy acquisition in November 2011 and (2) the decrease in Arçelik’s net credit finance income compared to 2011.

-79- Profit before tax As a result of the foregoing, profit before tax of the Group’s Consumer Durables Segment decreased by TL 7 million, or 1.1 per cent., from TL 621 million in 2011 to TL 614 million in 2012.

Finance Segment

Years ended 31 December 2012 2011 Variation Variation % (in thousands of Turkish Lira, except percentages) Finance segment External revenue ...... 7,297,729 5,973,720 1,324,009 22.2% Intersegment revenue ...... 33,493 26,454 7,039 26.6% Total revenue ...... 7,331,222 6,000,174 1,331,048 22.2% Total costs ...... (3,750,969) (3,077,474) (673,495) 21.9% Gross profit ...... 3,580,253 2,922,700 657,553 22.5% Operating expenses: Marketing, selling and distribution ...... (66,436) (55,343) (11,093) 20.0% General administrative ...... (1,442,366) (1,263,151) (179,215) 14.2% Other income/expenses (net) ...... (567,782) (86,426) (481,356) 557.0% Operating profit ...... 1,503,669 1,517,780 (14,111) -0.9% Income from associates ...... 8,896 7,210 1,686 23.4% Profit before tax ...... 1,512,565 1,524,990 (12,425) -0.8% Operating profit ...... 1,503,669 1,517,780 (14,111) -0.9% Add back: Depreciation and amortisation ...... 119,568 108,391 11,177 10.3% EBITDA ...... 1,623,237 1,626,171 (2,934) -0.2%

Total revenue Total revenue of the Group’s Finance Segment increased by TL 1,331 million, or 22.2 per cent., from TL 6,000 million in 2011 to TL 7,331 million in 2012 primarily as a result of (1) a 28.0 per cent. increase in gross interest income and (2) an increase of TL 140 million in other operating income. The increase in gross interest income was mainly attributable to the increase in outstanding loan volumes and change in loan mix, with a greater proportion of high-yielding consumer and SME loans. The increase in other operating income was mainly attributable to the trading gain recorded in 2012 from the disposals of investment securities.

72 per cent. (2011: 69 per cent.) of the total revenue of the Group’s Finance Segment realised in 2012 was comprised of interest income and 17 per cent. (2011: 21 per cent.) was comprised of fee and commission income.

Total fee and commission income of the Group’s Finance Segment decreased by TL 48 million in 2012, mainly as a result of the new regulation on deferral of commission income, which took place starting from January 2012.

Total costs Total costs of the Group’s Finance Segment increased by TL 673 million, or 21.9 per cent., from TL 3,077 million in 2011 to TL 3,751 million in 2012, primarily as a result of a 23 per cent. increase in gross interest expense. The increase in gross interest expense was mainly attributable to the increase in outstanding volume of deposits.

81 per cent. (2011: 80 per cent.) of the total costs incurred by the Group’s Finance Segment in 2012 was comprised of interest expense and 7 per cent. (2011: 7 per cent.) was comprised of fee and commission expense.

Gross profit As a result of the foregoing, gross profit of the Group’s Finance Segment increased by TL 658 million, or 22.5 per cent., from TL 2,923 million in 2011 to TL 3,580 million in 2012 mainly as a result of (1) volume growth, (2) improvement in net interest margins and (3) the positive impact of the trading gain recorded from the disposals of investment securities.

-80- Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Finance Segment increased by TL 11 million, or 20.0 per cent., from TL 55 million in 2011 to TL 66 million in 2012, mainly to support the volume growth in major banking products.

General administrative expenses General administrative expenses of the Group’s Finance Segment, which include personnel costs, depreciation and amortisation and other operating expenses, increased by TL 179 million, or 14.2 per cent., from TL 1,263 million in 2011 to TL 1,442 million in 2012, primarily as a result of an increase in personnel costs.

56 per cent. (2011: 57 per cent.) of the total general administrative expenses incurred by the Group’s Finance Segment in 2012 was comprised of personnel costs.

Other income/expenses (net) Other expenses (net) of the Group’s Finance Segment increased by TL 481 million, from TL 86 million in 2011 to TL 568 million in 2012, primarily as a result of (1) a TL 256 million increase in provision expenses for loan impairment, (2) a TL 99 million increase in other provision expenses including general provisions for lawsuits and other banking sector risks and (3) a TL 57 million increase in provision expense for the Pension Fund of Yapı Kredi.

The increase in provision expenses for loan impairment was mainly attributable to an increase of non-performing loans in certain lending segments, such as general purpose loans, credit cards and SME loans.

Operating profit As a result of the foregoing, operating profit of the Group’s Finance Segment decreased by TL 14 million, or 0.9 per cent., from TL 1,518 million in 2011 to TL 1,504 million in 2012.

EBITDA The Group’s Finance Segment incurred TL 120 million of depreciation and amortisation in 2012, 10.3 per cent. increase compared to a year earlier. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Finance Segment decreased by TL 3 million, or 0.2 per cent., from TL 1,626 million in 2011 to TL 1,623 million in 2012.

Income from associates Income from associates comprises the Finance Segment’s interest in Banque de Commerce and in Yapı Kredi Koray Gayrimenkul Yatırım Ortaklıg˘ı A.S¸. The Finance Segment’s share of profits from these investments increased by TL 2 million, or 23.4 per cent., from TL 7 million in 2011 to TL 9 million in 2012.

Profit before tax As a result of the foregoing, profit before tax of the Group’s Finance Segment decreased by TL 12 million, or 0.8 per cent., from TL 1,525 million in 2011 to TL 1,513 million in 2012.

-81- Year Ended 31 December 2011 Compared to Year Ended 31 December 2010 Consolidated Results The table below sets forth the Group’s consolidated income statement for the years ended 31 December 2011 and 2010.

Years ended 31 December Reclassified 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Revenue ...... 68,969,387 48,822,282 20,147,105 41.3% Interest, fee, commission and similar income ...... 5,973,720 4,990,154 983,566 19.7% Total revenue ...... 74,943,107 53,812,436 21,130,671 39.3% Cost of sales (-) ...... (60,829,381) (42,468,261) (18,361,120) 43.2% Interest, fee, commission and similar expenses (-) ..... (2,953,838) (2,152,528) (801,310) 37.2% Total costs ...... (63,783,219) (44,620,789) (19,162,430) 42.9% Gross profit non-finance ...... 8,140,006 6,354,021 1,785,985 28.1% Gross profit finance ...... 3,019,882 2,837,626 182,256 6.4% Gross profit ...... 11,159,888 9,191,647 1,968,241 21.4% Marketing, selling and distribution expenses (-) ...... (2,698,588) (2,198,669) (499,919) 22.7% General administrative expenses (-) ...... (2,981,145) (2,604,373) (376,772) 14.5% Research and development expenses (-) ...... (141,562) (123,864) (17,698) 14.3% Other income ...... 599,119 463,978 135,141 29.1% Other expense (-) ...... (447,773) (627,008) 179,235 -28.6% Operating profit ...... 5,489,939 4,101,711 1,388,228 33.8% Share of profit/loss of investments accounted for using the equity method ...... 7,210 3,163 4,047 127.9% Financial income ...... 2,403,540 1,919,901 483,639 25.2% Financial expense (-) ...... (3,193,221) (2,138,824) (1,054,397) 49.3% Profit before tax ...... 4,707,468 3,885,951 821,517 21.1% Tax income/expense ...... (857,115) (747,551) (109,564) 14.7% —Current income tax expense (-) ...... (796,303) (747,629) (48,674) 6.5% —Deferred tax income/expense ...... (60,812) 78 (60,890) -78,064.1% Profit for the period ...... 3,850,353 3,138,400 711,953 22.7% Attributable to: Non-controlling interest ...... 1,725,884 1,403,921 321,963 22.9% Equity holders of the parent ...... 2,124,469 1,734,479 389,990 22.5%

Revenue Revenue includes the results of operations of all business segments excluding the Finance Segment. Total gross revenue of the Finance Segment is presented on the separate line item Interest, fee, commission and similar income on the consolidated statement of income.

The Group’s consolidated revenue increased by TL 20,147 million, or 41.3 per cent., from TL 48,822 million in 2010 to TL 68,969 million in 2011, primarily as a result of (1) an increase of 48.7 per cent. in the total revenue generated by the Group’s Energy Segment, (2) a 32.4 per cent. increase in the total revenue generated by the Automotive Segment and (3) a 22.1 per cent. increase in the total revenue generated by the Consumer Durables Segment. The TL’s depreciation against the US dollar and Euro also had a positive effect on TL based revenue due to US dollar linked pricing of the Group’s Energy Segment in the domestic market, and export revenues of the Group’s Energy, Automotive and Consumer Durables Segments, which are principally USD or Euro based.

In 2011, Energy had the highest contribution to consolidated revenue by constituting 68 per cent. (2010: 65 per cent.) of the total amount. The Automotive and Consumer Durables Segments’ contributions were 15 per cent. (2010: 16 per cent.) and 12 per cent. (2010: 14 per cent.), respectively, in 2011.

-82- The table below sets forth the components of the Group’s consolidated revenue for the years ended 31 December 2011 and 2010.

Years ended 31 December Reclassified 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Domestic revenue ...... 52,359,052 38,113,939 14,245,113 37.4% Foreign revenue ...... 18,719,300 12,797,849 5,921,451 46.3% Gross revenue ...... 71,078,352 50,911,788 20,166,564 39.6% Less: Discounts ...... (2,108,965) (2,089,506) (19,459) 0.9% Revenue ...... 68,969,387 48,822,282 20,147,105 41.3%

The share of foreign revenue in the Group’s total consolidated gross revenue increased from 25.1 per cent. in 2010 to 26.3 per cent. in 2011, mainly as a result of the increasing international exposure of the Energy, Consumer Durables and Automotive Segments.

Interest, fee, commission and similar income Interest, fee, commission and similar income includes the total gross revenue of the Group’s Finance Segment. The table below sets forth the components of the Group’s consolidated interest, fee, commission and similar income for the years ended 31 December 2011 and 2010.

Years ended 31 December 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Interest income ...... 4,123,943 3,418,065 705,878 20.7% Fee and commission income ...... 1,288,476 1,136,741 151,735 13.3% Income from insurance business ...... 458,085 353,625 104,460 29.5% Other operating income ...... 103,216 81,723 21,493 26.3% Total ...... 5,973,720 4,990,154 983,566 19.7%

The Group’s consolidated interest, fee, commission and similar income increased by TL 984 million, or 19.7 per cent., from TL 4,990 million in 2010 to TL 5,974 million in 2011, primarily as a result of (1) an increase of TL 706 million in interest income and (2) an increase of TL 152 million in fee and commission income.

Cost of sales Cost of sales includes costs of sales of all business segments, except for Finance Segment. Cost of Finance Segment is presented on the separate line item Interest, fee, commission and similar expenses on the consolidated statement of income.

The Group’s consolidated cost of sales increased by TL 18,361 million, or 43.2 per cent., from TL 42,468 million in 2010 to TL 60,829 million in 2011, primarily as a result of (1) an increase of 49.9 per cent. in the total cost of sales incurred by the Group’s Energy Segment, (2) a 32.2 per cent. increase in the total costs of sales incurred by the Automotive Segment and (3) a 21.7 per cent. increase in the total costs of sales incurred by the Consumer Durables Segment.

In 2011, the Group’s Energy Segment incurred the highest amount of cost of sales by constituting 72 per cent. of the total consolidated amount (2010: 69 per cent.). Total cost of sales incurred by the Automotive and Consumer Durables Segments in 2011 constituted 15 per cent. (2010: 16 per cent.) and 10 per cent. (2010: 12 per cent.) of the consolidated amount, respectively.

78 per cent. (2010: 73 per cent.) of the total cost of sales incurred in 2011 was comprised of the cost of raw materials and supplies and 17 per cent. (2010: 20 per cent.) was comprised of the cost of merchandise sold.

-83- Interest, fee, commission and similar expenses Interest, fee, commission and similar expenses include the costs of the Finance Segment. The table below sets forth the components of the Group’s consolidated interest, fee, commission and similar expenses for the years ended 31 December 2011 and 2010.

Years ended 31 December 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Interest expense ...... (2,349,464) (1,683,375) (666,089) 39.6% Fee and commission expense ...... (224,963) (173,604) (51,359) 29.6% Insurance business and other operating expenses ...... (379,411) (295,549) (83,862) 28.4% Total ...... (2,953,838) (2,152,528) (801,310) 37.2%

The Group’s consolidated interest, fee, commission and similar expenses increased by TL 801 million, or 37.2 per cent., from TL 2,153 million in 2010 to TL 2,954 million in 2011, primarily as a result of (1) an increase of TL 666 million in interest expense and (2) an increase of TL 51 million in fee and commission expense.

The increase in interest expense was mainly attributable to increases in average interest rates on deposits and increasing deposit volumes during the year 2011. The increase in fee and commissions expense was mainly attributable to an increase in credit/debit card expenses as a result of an increase in credit card volume.

Gross profit As a result of the foregoing, the Group’s consolidated gross profit increased by TL 1,968 million, or 21.4 per cent., from TL 9,192 million in 2010 to TL 11,160 million in 2011. The Group’s consolidated gross margin decreased to 14.9 per cent. in 2011 from 17.1 per cent. in 2010.

Operating expenses The table below sets forth the components of the Group’s consolidated operating expenses by type for the years ended 31 December 2011 and 2010.

Years ended 31 December 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Marketing, selling and distribution expenses ...... (2,698,588) (2,198,669) (499,919) 22.7% General administrative expenses ...... (2,981,145) (2,604,373) (376,772) 14.5% Research and development expenses ...... (141,562) (123,864) (17,698) 14.3% Total ...... (5,821,295) (4,926,906) (894,389) 18.2%

The Group’s consolidated operating expenses increased by TL 894 million, or 18.2 per cent., from TL 4,927 million in 2010 to TL 5,821 million in 2011, primarily as a result of (1) an increase of 24.5 per cent. in the total operating expenses incurred by the Consumer Durables Segment, (2) a 26.1 per cent. increase in the total operating expenses incurred by the Automotive Segment and (3) a 12.3 per cent. increase in the total expenses incurred by the Group’s Energy Segment.

In 2011, the Consumer Durables Segment incurred the highest amount of operating expenses by constituting 33 per cent. of the total consolidated amount (2010: 31 per cent.). Operating expenses incurred by the Group’s Finance and Energy Segments in 2011 constituted 23 per cent. (2010: 25 per cent.) and 21 per cent. (2010: 22 per cent.) of the consolidated amount, respectively.

The operating expense item that had the highest contribution in 2011 was “personnel expenses” by constituting 36 per cent. (2010: 37 per cent.) of total consolidated operating expenses. Total consolidated personnel expenses incurred in 2011 and classified under operating expenses amounted to TL 2,124 million and increased by 17.5 per cent. compared to 2010.

The second highest contribution in 2011 in terms of the operating expense items was “transportation, distribution and storage expenses which constituted 11 per cent. (2010: 10 per cent.) of the total consolidated amount. Total

-84- consolidated transportation, distribution and storage expenses incurred in 2011 amounted to 642 million TL and increased by 32.2 per cent. compared to 2010. The increase was mainly attributable to the increase in sales volumes in the Consumer Durables Segment.

Other income The Group’s consolidated other income increased by TL 135 million, from TL 464 million in 2010 to TL 599 million in 2011, primarily as a result of (1) an increase in other income of the Energy Segment stemming from a TL 195 million one-off gain realised on the sale of 49.62 per cent. of Entek shares in 2011 and (2) a decrease of TL 30 million in gain on sale of non-performing loans in the Finance Segment.

Other expense The Group’s consolidated other expense decreased by TL 179 million, from TL 627 million in 2010 to TL 448 million in 2011, primarily as a result of a decrease in other expense of the Group’s Energy Segment stemming mainly from a tax penalty provision expense of Tüpras¸ in 2010 amounting to TL 181 million.

Operating profit As a result of the foregoing, the Group’s consolidated operating profit increased by TL 1,388 million, or 33.8 per cent., from TL 4,102 million in 2010 to TL 5,490 million in 2011. The Group’s consolidated operating margin decreased to 7.3 per cent. in 2011 from 7.6 per cent. in 2010.

Financial income/expenses (net) The Group’s consolidated net financial expense increased by TL 571 million, from TL 219 million in 2010 to TL 790 million in 2011, primarily as a result of an increase of TL 583 million in net financial expense of the Group’s Energy Segment. The increase in net financial expense of the Energy Segment was principally the result of increased foreign exchange loss in 2011. The Group’s Energy Segment recognised a net foreign exchange loss of TL 249 million in 2010.

On the other hand, net foreign exchange loss incurred in 2011 was TL 948 million, resulting from a short USD position without taking into account the Energy Segment’s natural hedge (i.e. USD position excluding oil inventories that are accounted for in TL on the balance sheet) and the depreciation of TL against USD by 22.8 per cent. As a result of the natural hedge of the Energy Segment, the related foreign exchange loss in 2011 was offset by the inventory gain and favourable refinery margins recognised at gross profit level thanks to the foreign exchange linked pricing of oil inventories. See “—Significant Factors Affecting Results of Operations and Financial Condition of the Group—Fluctuation in exchange rates of major foreign currencies.”

Profit before tax As a result of the foregoing, the Group’s consolidated profit before tax increased by TL 822 million, or 21.1 per cent., from TL 3,886 million in 2010 to TL 4,707 million in 2011. The Group’s consolidated profit before tax margin decreased to 6.3 per cent. in 2011 from 7.2 per cent. in 2010.

Tax expense The table below sets forth the components of the Group’s consolidated tax expense for the years ended 31 December 2011 and 2010.

Years ended 31 December 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Current income tax expense ...... (796,303) (747,629) (48,674) 6.5% Deferred tax income/expense ...... (60,812) 78 (60,890) -78,064.1% Total ...... (857,115) (747,551) (109,564) 14.7%

The Group’s consolidated tax expense increased by TL 110 million, or 14.7 per cent., from TL 748 million in 2010 to TL 857 million in 2011, primarily as a result of the increase in the Group’s consolidated profit before tax by 21.1 per cent. in 2011 compared to 2010.

-85- The Group’s consolidated effective tax rate slightly decreased from 19.2 per cent. in 2010 to 18.2 per cent. in 2011.

Profit for the period As a result of the foregoing, the Group’s consolidated profit for the period increased by TL 712 million, or 22.7 per cent., from TL 3,138 million in 2010 to TL 3,850 million in 2011.

The Group’s consolidated profit attributable to the equity holders of the parent increased by TL 390 million, or 22.5 per cent., from TL 1,734 million in 2010 to TL 2,124 million in 2011. Profit attributable to the equity holders of the parent comprised 55 per cent. (2010: 55 per cent.) of the total profit for the year ended 2011.

Major Business Segment Results Energy Segment

Year ended 31 December Reclassified 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Energy segment External revenue ...... 46,743,731 31,411,542 15,332,189 48.8% Intersegment revenue ...... 239,312 178,216 61,096 34.3% Total revenue ...... 46,983,043 31,589,758 15,393,285 48.7% Total costs ...... (43,675,338) (29,133,575) (14,541,763) 49.9% Gross profit ...... 3,307,705 2,456,183 851,522 34.7% Operating expenses: Marketing, selling and distribution ...... (513,747) (463,635) (50,112) 10.8% General administrative ...... (672,864) (592,071) (80,793) 13.6% Research and development ...... (13,588) (13,264) (324) 2.4% Other income/expenses (net) ...... 306,358 (102,399) 408,757 -399.2% Operating profit ...... 2,413,864 1,284,814 1,129,050 87.9% Financial income/expenses ...... (794,888) (212,038) (582,850) 274.9% Profit before tax ...... 1,618,976 1,072,776 546,200 50.9% Operating profit ...... 2,413,864 1,284,814 1,129,050 87.9% Add back: Depreciation and amortisation ...... 393,678 384,202 9,476 2.5% EBITDA ...... 2,807,542 1,669,016 1,138,526 68.2%

Total revenue Total revenue of the Group’s Energy Segment increased by TL 15,393 million, or 48.7 per cent., from TL 31,590 million in 2010 to TL 46,983 million in 2011, primarily as a result (1) an increase in prices for refined products as a result of higher USD/TL parity and crude oil prices and (2) an increase in the sales volumes by 6.7 per cent. of refined products.

Total costs Total costs of the Group’s Energy Segment increased by TL 14,542 million, or 49.9 per cent., from TL 29,134 million in 2010 to TL 43,675 million in 2011, primarily as a result of an increase in the cost of raw materials resulting from the increase in sales volumes and increases in the prices of crude oil and imported refined products.

Gross profit As a result of the foregoing, gross profit of the Group’s Energy Segment increased by TL 852 million, or 34.7 per cent., from TL 2,456 million in 2010 to TL 3,308 million in 2011. The increase in gross profit was primarily due

-86- to (1) an increase in sales volumes, (2) an improvement in refining margins which reflected both wider light/ heavy crude differentials as a result of geopolitical events in Libya as well as cost savings initiatives and improvements in white product yield by increasing each refineries’ complexity (See “Business—Operations— Energy Segment—Refinery and Oil Distribution”: Tüpras¸ and Opet for further information) and (3) the beneficial effect of Tüpras¸’s inventory valuation method in a period of increasing crude oil and product prices.

The loss of Libyan crude in 2011 led to a shortage of light sweet crudes in the region leading to higher light sweet crude prices and, due to an increase in heavier Saudi oil production, a surplus of heavier crudes leading to lower heavy crude prices. As a result, light/heavy differentials for the year were much greater than usual which was advantageous for Tüpras¸ due to Tüpras¸’s ability to process heavier crudes resulting in an increase of the Tüpras¸’s refining margins in 2011.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Energy Segment increased by TL 50 million, or 10.8 per cent., from TL 464 million in 2010 to TL 514 million in 2011, primarily as a result of increased sales volumes, which resulted in increased delivery and storage costs.

General administrative expenses General administrative expenses of the Group’s Energy Segment increased by TL 81 million, or 13.6 per cent., from TL 592 million in 2010 to TL 673 million in 2011, primarily as a result of (1) increased headcount relating to RUP and (2) an increase in average salary levels.

Research and development expenses Research and development expenses of the Group’s Energy Segment increased slightly by TL 0.3 million, or 2.4 per cent., from TL 13 million in 2010 to TL 14 million in 2011.

Other income/expenses (net) Other income/expenses (net) of the Group’s Energy Segment increased by TL 409 million, from TL 102 million of net other expense in 2010 to TL 306 million of net other income in 2011, primarily as a result of the following one-off items: (1) a TL 195 million gain of Aygaz, recognised on the sale of 49.62 per cent. of Entek shares realised in 2011, (2) a TL 181 million tax penalty provision expense of Tüpras¸ booked in 2010 and (3) a TL 39 million gain of Tüpras¸ recognised in 2011 from the disposal of platinum catalyst from the˙ Izmit Refinery and I˙zmir Refinery following catalyst changes in diesel desulphurisation units.

Operating profit As a result of the foregoing, operating profit of the Group’s Energy Segment increased by TL 1,129 million, or 87.9 per cent., from TL 1,285 million in 2010 to TL 2,414 million in 2011.

EBITDA The Group’s Energy Segment incurred TL 394 million of depreciation and amortisation in 2011, representing a 2.5 per cent. increase compared to 2010. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Energy Segment increased by TL 1,139 million, or 68.2 per cent., from TL 1,669 million in 2010 to TL 2,808 million in 2011.

Financial income/expenses (net) Financial expenses (net) of the Group’s Energy Segment increased by TL 583 million, from TL 212 million in 2010 to TL 795 million in 2011, primarily as a result of (1) a TL 699 million increase in net foreign exchange losses and (2) a TL 61 million increase in net credit finance income.

The Group’s Energy Segment recognised a net foreign exchange loss of TL 249 million in 2010.

-87- inventories that are accounted for in TL on the balance sheet) and the depreciation of TL against USD by 22.8 per cent. As a result of the natural hedge of the Energy Segment, the related foreign exchange loss in 2011 was offset by the inventory gain and favourable refinery margins recognised at gross profit level thanks to the foreign exchange linked pricing of oil inventories. See “—Significant Factors Affecting Results of Operations and Financial Condition of the Group—Fluctuation in exchange rates of major foreign currencies.”

Profit before tax As a result of the foregoing, profit before tax of the Group’s Energy Segment increased by TL 546 million, or 50.9 per cent., from TL 1,073 million in 2010 to TL 1,619 million in 2011.

Automotive Segment

Years ended 31 December 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Automotive segment External revenue ...... 10,233,258 7,766,786 2,466,472 31.8% Intersegment revenue ...... 170,373 90,681 79,692 87.9% Total revenue ...... 10,403,631 7,857,467 2,546,164 32.4% Total costs ...... (9,028,735) (6,831,302) (2,197,433) 32.2% Gross profit ...... 1,374,896 1,026,165 348,731 34.0% Operating expenses: Marketing, selling and distribution ...... (373,712) (273,463) (100,249) 36.7% General administrative ...... (170,606) (158,856) (11,750) 7.4% Research and development ...... (60,092) (47,104) (12,988) 27.6% Other income/expenses (net) ...... 3,212 17,226 (14,014) -81.4% Operating profit ...... 773,698 563,968 209,730 37.2% Financial income/expenses ...... 7,034 (5,692) 12,726 -223.6% Profit before tax ...... 780,732 558,276 222,456 39.8% Operating profit ...... 773,698 563,968 209,730 37.2% Add back: Depreciation and amortisation ...... 225,813 213,220 12,593 5.9% EBITDA ...... 999,511 777,188 222,323 28.6%

Total revenue Total revenue of the Group’s Automotive Segment increased by TL 2,546 million, or 32.4 per cent., from TL 7,857 million in 2010 to TL 10,404 million in 2011, principally as a result of (1) strong domestic market sales growth and (2) higher domestic and foreign prices and the appreciation of Euro against TL which improved the impact of export sales.

All Automotive Segment companies positively contributed to the revenue growth in 2011 with Ford Otosan having the highest growth. Domestic revenue increased compared to 2010 on the back of higher domestic sales volumes of Ford Otosan, Tofas¸ and TürkTraktör, together with higher volumes in all businesses of Otokar especially in the bus and trailer segments. Export revenues increased as well in 2011, as a result of an increase in demand from Europe and the United States and higher TL based prices with higher foreign exchange rates.

Of the total TL 2,546 million increase in the total revenue of the Group’s Automotive Segment, 58 per cent. and 42 per cent. were generated from domestic and international revenue increases, respectively.

Total costs Total costs of the Group’s Automotive Segment increased by TL 2,197 million, or 32.2 per cent., from TL 6,831 million in 2010 to TL 9,029 million in 2011, principally as a result of increasing input costs due to the aforementioned sales volume growth both in domestic and foreign markets.

-88- Gross profit As a result of the foregoing, gross profit of the Group’s Automotive Segment increased by TL 349 million, or 34.0 per cent., from TL 1,026 million in 2010 to TL 1,375 million in 2011. The gross margin of the Automotive Segment slightly increased to 13.2 per cent. in 2011 from 13.1 per cent. in 2010.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Automotive Segment increased by TL 100 million, or 36.7 per cent., from TL 273 million in 2010 to TL 374 million in 2011, principally as a result of (1) increased expenses such as advertising, marketing and promotion as well as transportation and distribution expenses to support sales volume growth in the competitive domestic market and distant markets and (2) an increase in warranty expenses.

General administrative expenses General administrative expenses of the Group’s Automotive Segment increased by TL 12 million, or 7.4 per cent., from TL 159 million in 2010 to TL 171 million in 2011, principally as a result of an increase in personnel expenses.

Research and development expenses Research and development expenses of the Group’s Automotive Segment increased by TL 13 million, or 27.6 per cent., from TL 47 million in 2010 to TL 60 million in 2011, principally as a result of the increase in depreciation and amortisation expenses resulting from amortisation of capitalised product development costs. In addition, total expenditure allocated to research and development in 2011 increased due to the allocation of more resources to research and development compared to 2010.

Other income/expenses (net) Other income (net) of the Group’s Automotive Segment decreased by TL 14 million, or 81.4 per cent., from TL 17 million in 2010 to TL 3 million in 2011, principally as a result of the negative impact of the fines imposed by the Competition Authority on Ford Otosan and Tofas¸ in 2011. Those fines had a TL 29 million negative impact on the Automotive Segment’s other expense in 2011. This negative impact was partially offset by the following items: (1) a decreasing doubtful receivable provision balance at TürkTraktör and (2) Tofas¸’s gain from a real estate swap with the Istanbul Municipality.

Operating profit As a result of the foregoing, operating profit of the Group’s Automotive Segment increased by TL 210 million, or 37.2 per cent., from TL 564 million in 2010 to TL 774 million in 2011. The operating margin of the Automotive Segment increased to 7.4 per cent. in 2011 from 7.2 per cent. in 2010.

EBITDA The Group’s Automotive Segment incurred TL 226 million of depreciation and amortisation in 2011, representing a 5.9 per cent. increase compared to 2010. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Automotive Segment increased by TL 222 million, or 28.6 per cent., from TL 777 million in 2010 to TL 1,000 million in 2011.

Financial income/expenses (net) Financial income/expenses (net) of the Group’s Automotive Segment favourably changed by TL 13 million from net financial expense of TL 6 million in 2010 to net financial income of TL 7 million in 2011, principally as a result of (1) increasing net interest income of Tofas¸ and Ford Otosan due to their higher net cash positions in 2011 and (2) an increase in net credit finance income of Otokar in 2011.

Profit before tax As a result of the foregoing, profit before tax of the Group’s Automotive Segment increased by TL 222 million, or 39.8 per cent., from TL 558 million in 2010 to TL 781 million in 2011.

-89- Consumer Durables Segment

Years ended 31 December Reclassified 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) External revenue ...... 8,433,900 6,834,305 1,599,595 23.4% Intersegment revenue ...... 153,585 200,426 (46,841) -23.4% Total revenue ...... 8,587,485 7,034,731 1,552,754 22.1% Total costs ...... (5,992,900) (4,925,586) (1,067,314) 21.7% Gross profit ...... 2,594,585 2,109,145 485,440 23.0% Operating expenses: Marketing, selling and distribution ...... (1,503,024) (1,192,457) (310,567) 26.0% General administrative ...... (349,240) (286,538) (62,702) 21.9% Research and development ...... (67,873) (63,431) (4,442) 7.0% Other income/expenses (net) ...... (9,142) 74,662 (83,804) -112.2% Operating profit ...... 665,306 641,381 23,925 3.7% Financial income/expenses ...... (43,965) 13,121 (57,086) -435.1% Profit before tax ...... 621,341 654,502 (33,161) -5.1% Operating profit ...... 665,306 641,381 23,925 3.7% Add back: Depreciation and amortisation ...... 222,673 197,358 25,315 12.8% EBITDA ...... 887,979 838,739 49,240 5.9%

Total revenue Total revenue of the Group’s Consumer Durables Segment increased by TL 1,553 million, or 22.1 per cent., from TL 7,035 million in 2010 to TL 8,587 million in 2011, principally as a result of (1) on-going growth of European sales (reflecting both volume and product mix improvements), (2) significant growth in the Turkish white goods market in 2011 due to continued promotional efforts and strong economic conditions in Turkey which led to increased demand for high-end products, (3) growth in household numbers in Turkey driven by continued residential construction and (4) increases in certain of the average foreign exchange rates from 2010 to 2011 as the Euro and UK pound sterling appreciated against the Turkish Lira by 17 per cent. and 16 per cent., respectively.

In addition, the success of Arçelik’s Grundig branded flat screen TVs contributed to the increase in net sales, particularly in the second half of 2011.

Total costs Total costs of the Group’s Consumer Durables Segment increased by TL 1,067 million, or 21.7 per cent., from TL 4,926 million in 2010 to TL 5,993 million in 2011, principally as a result of increasing cost of raw materials (especially metals and plastic) due to higher sales volumes both in domestic and foreign markets.

Gross profit As a result of the foregoing, gross profit of the Group’s Consumer Durables Segment increased by TL 485 million, or 23.0 per cent., from TL 2,109 million in 2010 to TL 2,595 million in 2011. The gross margin of the Consumer Durables Segment increased to 30.2 per cent. in 2011 from 30.0 per cent. in 2010.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Consumer Durables Segment increased by TL 311 million, or 26.0 per cent., from TL 1,192 million in 2010 to TL 1,503 million in 2011, as a result of (1) an increasing trend in most expense categories to support volume-led growth, including advertising and promotion expenses to support additional channel penetration, (2) increases in transportation, distribution and storage expenses due to higher international sales volumes and (3) increases in warranty and assembly expenses due to higher sales to households in Turkey.

-90- General administrative expenses General administrative expenses of the Group’s Consumer Durables Segment increased by TL 63 million, or 21.9 per cent., from TL 287 million in 2010 to TL 349 million in 2011, principally as a result of higher costs of contractor services for the implementation of information systems projects in line with the increased technological requirements of Arçelik resulting from continued expansion.

Research and development expenses Research and development expenses of the Group’s Consumer Durables Segment increased by TL 4 million, or 7.0 per cent., from TL 63 million in 2010 to TL 68 million in 2011, principally as a result of the increase in depreciation and amortisation expenses resulting from amortisation of capitalised product development costs. Total expenditure allocated to research and development in 2011, including expenses as well as development costs capitalised, increased due to the allocation of more resources to research and development.

Other income/expenses (net) Other income/expenses (net) of the Group’s Consumer Durables Segment unfavorably changed by TL 84 million, or 112.2 per cent., from net other income of TL 75 million in 2010 to net other expense of TL 9 million in 2011, principally as a result of (1) the positive impact of a one-off gain amounting to TL 40 million generated in 2010 due to Arçelik’s sales of factory land, buildings and annexes located in Topkapı, Istanbul to Koç University, (2) Arçelik’s product recall expenses of TL 30 million incurred in 2011 to rectify potential problems arising from a limited number of refrigerator models sold between the years of 2000-2006 in England and Ireland with expired warranties and (3) a decrease in Arçelik’s income from government grants (2011: TL 30 million and 2010: TL 45 million).

Operating profit As a result of the foregoing, operating profit of the Group’s Consumer Durables Segment increased by TL 24 million, or 3.7 per cent., from TL 641 million in 2010 to TL 665 million in 2011. The operating margin of the Consumer Durables Segment decreased to 7.7 per cent. in 2011 from 9.1 per cent. in 2010.

EBITDA The Group’s Consumer Durables Segment incurred TL 223 million of depreciation and amortisation in 2011, representing a 12.8 per cent. increase compared to 2010. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Consumer Durables Segment increased by TL 49 million, or 5.9 per cent., from TL 839 million in 2010 to TL 888 million in 2011.

Financial income/expenses (net) Financial income/expenses (net) of the Group’s Consumer Durables Segment unfavourably changed by TL 57 million from net financial income of TL 13 million in 2010 to net financial expense of TL 44 million in 2011, principally as a result of decreasing credit finance income of Arçelik (2011: TL 60 million and 2010: TL 90 million).

Profit before tax As a result of the foregoing, profit before tax of the Group’s Consumer Durables Segment decreased by TL 33 million, or 5.1 per cent., from TL 655 million in 2010 to TL 621 million in 2011.

-91- Finance Segment

Years ended 31 December Reclassified 2011 2010 Variation Variation % (in thousands of Turkish Lira, except percentages) Finance segment External revenue ...... 5,973,720 4,990,154 983,566 19.7% Intersegment revenue ...... 26,454 46,641 (20,187) -43.3% Total revenue ...... 6,000,174 5,036,795 963,379 19.1% Total costs ...... (3,077,474) (2,230,993) (846,481) 37.9% Gross profit ...... 2,922,700 2,805,802 116,898 4.2% Operating expenses: Marketing, selling and distribution ...... (55,343) (53,370) (1,973) 3.7% General administrative ...... (1,263,151) (1,166,385) (96,766) 8.3% Other income/expenses (net) ...... (86,426) (156,436) 70,010 -44.8% Operating profit ...... 1,517,780 1,429,611 88,169 6.2% Income from associates ...... 7,210 3,163 4,047 127.9% Profit before tax ...... 1,524,990 1,432,774 92,216 6.4% Operating profit ...... 1,517,780 1,429,611 88,169 6.2% Add back: Depreciation and amortisation ...... 108,391 95,126 13,265 13.9% EBITDA ...... 1,626,171 1,524,737 101,434 6.7%

Total revenue Total revenue of the Group’s Finance Segment increased by TL 963 million, or 19.1 per cent., from TL 5,037 million in 2010 to TL 6,000 million in 2011, primarily as a result of (1) a 20 per cent. increase in interest income and (2) an increase of 13 per cent. in fee and commissions income.

The increase in interest income was mainly attributable to increases in average interest rates and increasing loan volumes during the year 2011. The increase in fee and commission income was mainly attributable to an increase in credit card volume and efficiency on customer management. This increase was mainly driven by loan volume growth and repricing of certain consumer loan fees, new product launches and strong performance of fee generating products such as, many others, bancassurance, trade finance and cash management, offset to some extent by lower caps on certain mutual fund and credit card fees, a decrease in assets under management and a decline in the revolving ratio on credit cards.

69 per cent. (2010: 69 per cent.) of the total revenue of the Group’s Finance Segment realised in 2011 was comprised of interest income and 21 per cent. (2010: 23 per cent.) was comprised of fee and commission income.

Total costs Total costs of the Group’s Finance Segment increased by TL 846 million, or 37.9 per cent., from TL 2,231 million in 2010 to TL 3,077 million in 2011, primarily as a result of (1) a 40 per cent. increase in interest expense and (2) an increase of 30 per cent. in fee and commission expense.

The increase in interest expense was mainly attributable to increases in average interest rates on deposits and increasing deposit volumes during the year 2011. The increase in fee and commission expense was mainly attributable to an increase in credit/debit card expenses as a result of an increase in credit card volume.

80 per cent. (2010: 79 per cent.) of the total costs incurred by the Group’s Finance Segment in 2011 was comprised of interest expense and 7 per cent. (2010: 8 per cent.) was comprised of fee and commission expense.

Gross profit As a result of the foregoing, gross profit of the Group’s Finance Segment increased by TL 117 million, or 4.2 per cent., from TL 2,806 million in 2010 to TL 2,923 million in 2011.

-92- Marketing, selling and distribution expenses Marketing, selling and distribution expenses of the Group’s Finance Segment increased slightly by TL 2 million, or 3.7 per cent., from TL 53 million in 2010 to TL 55 million in 2011.

General administrative expenses General administrative expenses of the Group’s Finance Segment, which include personnel costs, depreciation and amortisation and other operating expenses, increased by TL 97 million, or 8.3 per cent., from TL 1,166 million in 2010 to TL 1,263 million in 2011, primarily as a result of the increase in personnel costs.

57 per cent. (2010: 54 per cent.) of the total general administrative expenses incurred by the Group’s Finance Segment in 2011 was comprised of personnel costs.

Other income/expenses (net) Other expenses (net) of the Group’s Finance Segment decreased by TL 70 million, or 44.8 per cent., from TL 156 million in 2010 to TL 86 million in 2011, primarily as a result of (1) a TL 44 million decrease in provision expenses for loan impairment given strong economic conditions in Turkey and (2) a TL 30 million decrease in gain on sale of non-performing loans.

The decrease in provision expenses for loan impairment was mainly attributable to (1) lower non-performing loans inflows, (2) improved collections, (3) the sale of non-performing loans and (4) credit infrastructure improvements.

Operating profit As a result of the foregoing, operating profit of the Group’s Finance Segment increased by TL 88 million, or 6.2 per cent., from TL 1,430 million in 2010 to TL 1,518 million in 2011.

EBITDA The Group’s Finance Segment incurred TL 108 million of depreciation and amortisation in 2011, representing a 13.9 per cent. increase compared to a year earlier. As a result of the changes in operating profit and depreciation and amortisation, EBITDA of the Group’s Finance Segment increased by TL 101 million, or 6.7 per cent., from TL 1,525 million in 2010 to TL 1,626 million in 2011.

Income from associates Income from associates comprises the Finance Segment’s investments in Banque de Commerce and Yapı Kredi Koray Gayrimenkul Yatırım Ortaklıg˘ı A.S¸. The Finance Segment’s share of profits from these investments increased by TL 4 million, from TL 3 million in 2010 to TL 7 million in 2011.

Profit before tax As a result of the foregoing, profit before tax of the Group’s Finance Segment increased by TL 92 million, or 6.4 per cent., from TL 1,433 million in 2010 to TL 1,525 million in 2011.

Liquidity and Capital Resources Overview Historically, the Group’s principal uses of cash have been for capital expenditure, to fund its working capital requirements, to service its debt obligations and to pay dividends to shareholders. The Group has funded these requirements from cash flows from operating activities as well as from debt financing. The Group also intends to finance its future cash needs using a combination of cash flow from operating activities and borrowings. Borrowings may take the form of additional borrowings from banks and/or capital market debt financings.

-93- Cash Flows The following table sets forth the Group’s summary consolidated cash flow information for 2010, 2011 and 2012.

Years ended 31 December Reclassified 2012 2011 2010 (in thousands of Turkish Lira) Cash and cash equivalents at the beginning of the period ...... 6,359,381 9,708,655 7,790,312 Cash flow provided from / (used in): ...... Cash flow from operating activities ...... 3,407,726 (3,674,322) 2,096,107 Cash flow from investing activities ...... (3,429,533) (1,821,963) (449,418) Cash flow from financing activities ...... 4,003,043 1,671,818 138,653 Effects of foreign exchange rate changes on cash and cash equivalents ...... (236,831) 475,193 133,001 Net increase/(decrease) in cash and cash equivalents ...... 3,744,405 (3,349,274) 1,918,343 Cash and cash equivalents at the end of the period ...... 10,103,786 6,359,381 9,708,655

Cash flow provided from / (used in) operating activities The Group’s consolidated net cash flow provided from / (used in) operating activities include (1) net cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities, (2) net changes in the Group’s consolidated operating assets and liabilities and (3) income taxes paid.

Net cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities is calculated by adjusting profit before tax for the main non-cash items as well as profit and loss items that are related to investing and financing activities.

Operating assets and liabilities of the Group’s Finance Segment mainly includes reserve deposits with central banks, loans and deposits. Operating assets and liabilities of the Group’s Non-Finance Segments mainly include trade receivables, inventories and trade payables.

The Group’s consolidated net cash flow provided from operating activities in 2012 reflected (1) TL 5,633 million of net cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities, (2) TL 1,314 million of net cash used due to net changes in the Group’s consolidated operating assets and liabilities and (3) TL 911 million of income taxes paid.

The Group’s consolidated net cash flow used in operating activities in 2011 reflected (1) TL 6,900 million of net cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities, (2) TL 9,779 million of net cash used due to net changes in the Group’s consolidated operating assets and liabilities and (3) TL 795 million of income taxes paid.

The Group’s consolidated net cash flow provided from operating activities in 2010 reflected (1) TL 5,869 million of net cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities, (2) TL 3,091 million of net cash used due to net changes in the Group’s consolidated operating assets and liabilities and (3) TL 682 million of income taxes paid.

The increase in cash provided by operating activities before net changes in the Group’s consolidated operating assets and liabilities in 2011 compared to 2012 and 2010 principally reflects the consolidated operating profit performance in 2011.

The significant increase in net cash used due to net changes in the Group’s consolidated operating assets and liabilities in 2011 compared to 2012 and 2010 resulted mainly from the Energy Segment as a result of (1) an increase in trade receivables due to reduced use of non-recourse factoring transactions and (2) an increase in inventories resulting from higher crude oil prices and a decision to maintain higher inventory levels due to greater disruption risks. As a result of the net increase in the Energy Segment’s operating assets in 2011, the Group had net cash outflow from operating activities in 2011.

Cash flow used in investing activities The Group’s net cash flows used in investing activities mainly include (1) cash outflow for capital expenditures, (2) cash inflow from the sale of property, plant and equipment, (3) net cash inflow / outflow from the divestiture / acquisition of subsidiaries and joint ventures and (4) interest received by the Group’s Non-Finance Segments.

-94- The Group’s net cash flow used in investing activities in 2012 primarily reflected (1) TL 3,829 million of cash outflow for capital expenditures, (2) TL 336 million of cash inflow from the sale of property, plant and equipment, (3) TL 203 million of cash outflow from the acquisitions in Energy Segment and (4) TL 287 million of interest received by the Group’s Non-Finance Segments.

The Group’s net cash flow used in investing activities in 2011 primarily reflected (1) TL 2,223 million of cash outflow for capital expenditures, (2) TL 401 million of cash inflow from the sale of property, plant and equipment, (3) TL 502 million of cash outflow from the acquisition of Defy and TL 236 million of cash inflow from the sale of 49.62 per cent. of Entek Elektrik Üretimi A.S¸. (currently AES Entek) and divestiture of Koç.Net Haberles¸me Teknolojileri ve˙ Iletis¸im Hizmetleri A.S¸. and (4) TL 372 million of interest received by the Group’s Non-Finance Segments.

The Group’s net cash flow used in investing activities in 2010 primarily reflected (1) TL 1,246 million of cash outflow for capital expenditures, (2) TL 285 million of cash inflow from the sale of property, plant and equipment, (3) no cash flow from acquisitions or divestitures and (4) TL 531 million of interest received by the Group’s Non-Finance Segments.

The increase in the Group’s cash outflow for capital expenditures over the last three years was mainly attributable to Energy and Automotive Segments. For a discussion of the capital expenditures in Energy and Automotive Segments, see “—Capital Expenditures” below.

Cash flow provided from financing activities The Group’s net cash flow provided from financing activities mainly include (1) net proceeds from / (payments for) borrowings, (2) dividend payments and (3) interest paid by the Group’s Non-Finance Segments.

Net cash flow provided from financing activities in 2012 primarily reflected (1) TL 5,779 million of net proceeds from borrowings, (2) TL 1,337 million of dividend payments and (3) TL 535 million of interest paid by the Group’s Non-Finance Segments.

Net cash flow provided from financing activities in 2011 primarily reflected (1) TL 3,401 million of net proceeds from borrowings, (2) TL 1,351 million of dividend payments and (3) TL 390 million of interest paid by the Group’s Non-Finance Segments.

Net cash flow provided from financing activities in 2010 primarily reflected (1) TL1,678 million of net proceeds from borrowings, (2) TL 962 million of dividend payments and (3) TL 588 million of interest paid by the Group’s Non-Finance Segments.

For details of the Group’s Non-Finance Segments’ major loans and bond issues outstanding as of 31 December 2012, see “—Indebtedness—The Group Consolidated Level-Excluding the Group’s Finance Segment” below.

-95- Indebtedness and other financial liabilities—The Group consolidated level As of 31 December 2012, the Group had outstanding financial indebtedness consisting of (i) bank borrowings of TL 22,449 million, (ii) debt securities in issue of TL 4,157 million and (iii) factoring and financial leasing payables of TL 216 million. The following table sets forth additional information on the Group’s financial indebtedness as of 31 December 2012, 2011 and 2010.

31 December 2012 31 December 2011 31 December 2010 Non- Non- Non- Finance Finance Total Finance Finance Total Finance Finance Total (in thousands of Turkish Lira) Short-term financial liabilities: Bank borrowings .... 6,734,292 4,152,678 10,886,970 6,727,112 3,971,759 10,698,871 4,367,499 3,995,468 8,362,967 Debt securities in issue ...... 1,084,425 56,217 1,140,642 1,197,198 — 1,197,198 355,220 — 355,220 Factoring payables ...... — 207,750 207,750 — 729 729 — 124,400 124,400 Financial leasing payables ...... — 3,448 3,448 — 3,898 3,898 — 3,257 3,257 7,818,717 4,420,093 12,238,810 7,924,310 3,976,386 11,900,696 4,722,719 4,123,125 8,845,844 Long-term financial liabilities: Bank borrowings .... 4,788,025 6,774,324 11,562,349 3,174,071 5,515,965 8,690,036 2,524,416 4,578,764 7,103,180 Debt securities in issue ...... 1,723,522 1,292,405 3,015,927 1,066,232 — 1,066,232 927,674 — 927,674 Financial leasing payables ...... — 5,095 5,095 — 7,010 7,010 — 1,596 1,596 6,511,547 8,071,824 14,583,371 4,240,303 5,522,975 9,763,278 3,452,090 4,580,360 8,032,450 14,330,264 12,491,917 26,822,181 12,164,613 9,499,361 21,663,974 8,174,809 8,703,485 16,878,294

Of the total financial indebtedness of TL 26,822 million at 31 December 2012, 27 per cent. was denominated in TL, 42 per cent. was denominated in US Dollars and approximately 30 per cent. was denominated in Euros. As of 31 December 2012 the Group was not in breach of any of its financial covenants. The Group continues to assess opportunities to diversify its sources of financing. For a discussion of financing facilities recently entered into, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments”.

As of 31 December 2012, the Group also had payables of Finance Segment operations of TL 36,035 million. Of this amount, TL 35,364 million consisted of deposits from customers. Total deposit from customers amount to TL 35,851 million according to total contractual cash outflow, of which TL 34,861 million was short-term deposits of one year or less as of 31 December 2012. The following table sets forth additional information on the payables of Group’s Finance Segment’s operations, including deposits, as of 31 December 2012, 2011 and 2010.

31 December 2012 31 December 2011 31 December 2010 Short-term Long-term Total Short-term Long-term Total Short-term Long-term Total (in thousands of Turkish Lira) Deposits ..... 34,840,837 523,455 35,364,292 33,572,493 695,755 34,268,248 26,530,200 291,923 26,822,123 Insurance technical reserves .... 336,784 252,824 589,608 270,842 261,040 531,882 228,711 236,457 465,168 Other payables of insurance business . . . 78,739 2,684 81,423 54,889 — 54,889 30,928 6,390 37,318 35,256,360 778,963 36,035,323 33,898,224 956,795 34,855,019 26,789,839 534,770 27,324,609

-96- 31 December 2012 31 December 2011 31 December 2010 Deposits Demand Time Total Demand Time Total Demand Time Total (in thousands of Turkish Lira) TL deposits Saving deposits ..... 994,627 11,055,235 12,049,862 970,210 9,684,107 10,654,317 906,379 7,921,605 8,827,984 Commercial deposits ..... 1,848,881 5,359,285 7,208,166 1,577,547 4,396,340 5,973,887 1,357,091 4,225,557 5,582,648 Deposits from banks ...... 74,518 178,640 253,158 66,014 146,300 212,314 79,344 189,766 269,110 Funds deposited under repurchase agreements . . — 855,504 855,504 — 451,878 451,878 — 33,920 33,920 2,918,026 17,448,664 20,366,690 2,613,771 14,678,625 17,292,396 2,342,814 12,370,848 14,713,662 Foreign currency deposits Saving deposits ..... 1,260,562 5,436,357 6,696,919 1,293,615 5,071,281 6,364,896 983,601 3,770,979 4,754,580 Commercial deposits ..... 1,583,048 4,692,225 6,275,273 1,546,056 5,985,114 7,531,170 1,368,793 3,786,460 5,155,253 Deposits from banks ...... 83,069 388,415 471,484 23,356 549,424 572,780 17,169 634,630 651,799 Funds deposited under repurchase agreements . . — 1,553,926 1,553,926 — 2,507,006 2,507,006 — 1,546,829 1,546,829 2,926,679 12,070,923 14,997,602 2,863,027 14,112,825 16,975,852 2,369,563 9,738,898 12,108,461 35,364,292 34,268,248 26,822,123

The following table sets forth the undiscounted contractual cash flows of the consolidated financial liabilities of the Group as of 31 December 2012, 2011 and 2010.

Up to 3 months – 5 years Total contractual 5 years and 31 December 2012 Book value cash outflow 3 months 1 year 1-5 years over (in thousands of Turkish Lira) Financial liabilities: Financial liabilities ...... 26,822,181 29,457,310 4,046,515 9,030,314 11,403,104 4,977,377 Deposits ...... 35,364,292 35,850,665 33,253,239 1,608,052 515,668 473,706 Trade payables ...... 8,355,236 8,365,684 7,778,664 587,020 — — Derivative financial instruments: Cash inflows ...... — 27,584,161 9,489,777 6,460,109 10,814,002 820,273 Cash outflows ...... — (28,555,785) (9,483,792) (6,424,092) (11,685,402) (962,499)

Up to 3 months – 5 years Total contractual 5 years and 31 December 2011 Book value cash outflow 3 months 1 year 1-5 years over (in thousands of Turkish Lira) Financial liabilities: Financial liabilities ...... 21,663,974 22,841,653 4,223,502 8,549,301 8,861,912 1,206,938 Deposits ...... 34,268,248 35,065,345 31,936,354 2,375,592 680,884 72,515 Trade payables ...... 9,186,672 9,199,509 9,018,586 180,923 — — Derivative financial instruments: Cash inflows ...... — 25,478,732 7,669,981 3,660,338 13,385,214 763,199 Cash outflows ...... — (25,991,221) (7,662,152) (3,630,924) (13,869,059) (829,086)

-97- Up to 3 months – 5 years Total contractual 5 years and 31 December 2010 Book value cash outflow 3 months 1 year 1-5 years over (in thousands of Turkish Lira) Financial liabilities: Financial liabilities ...... 16,878,294 17,757,897 7,413,323 1,685,442 7,192,853 1,466,279 Deposits ...... 26,822,123 27,144,843 26,618,189 — 440,958 85.696 Trade payables ...... 7,549,368 7,554,839 7,020,713 534,126 — — Derivative financial instruments: Cash inflows ...... — 18,697,536 9,004,541 3,285,533 6,027,321 380,141 Cash outflows ...... — (19,530,928) (8,769,688) (3,485,369) (6,761,588) (514,283)

Indebtedness—The Group Consolidated Level—Excluding the Group’s Finance Segment Koç Holding closely monitors financial indebtedness at the Group’s Non-Finance Segments in order to have sustainable leverage levels both at each company level as well as at the consolidated level. As part of this monitoring policy, Koç Holding sets net financial debt / EBITDA limits for each major company operating in the Group’s Non-Finance Segments.

Net financial debt represents outstanding financial liabilities less cash and cash equivalents and financial assets (excluding listed and unlisted equity securities classified as financial assets) as of the calculation date.

The following table sets forth the Group’s Non-Finance Segments’ consolidated net financial debt /EBITDA as of 31 December 2012, 2011 and 2010.

2012 2011 2010 (in thousands of Turkish Lira) Financial liabilities(*) ...... 12,940,350 9,890,281 9,214,948 Less: Cash and cash equivalents(*) ...... (8,038,766) (5,699,516) (10,631,080) Less: Financial assets(*) ...... (22,902) (53,452) (34,759) Net financial debt/(cash) position (Excluding Finance Segment) .... 4,878,682 4,137,313 (1,450,891) EBITDA (Excluding Finance Segment) ...... 3,894,066 4,801,637 3,509,641 Net financial debt/EBITDA (Excluding Finance Segment) ...... 1.3 0.9 (0.4)

(*) For a reconciliation of the Group’s Non-Finance Segments’ consolidated financial liabilities, cash and cash equivalents and financial assets to the Group’s consolidated financial liabilities, cash and cash equivalents and financial assets as reported on the balance sheet see “Selected Financial Information—Other Financial Data”.

The following table sets forth the net cash position at Koç Holding’s stand-alone balance sheet as of 31 December 2012, 2011 and 2010. The following figures are also included in the above table that sets forth the Group’s Non-Finance Segments’ consolidated net financial debt / EBITDA.

2012 2011 2010 (in thousands of Turkish Lira) Financial liabilities(1) ...... 136,400 288,712 354,924 Less: Cash and cash equivalents ...... (1,466,641) (1,360,993) (1,571,155) Less: Financial assets(2) ...... (16,520) (18,757) (16,714) Net cash position ...... (1,346,761) (1,091,038) (1,232,945)

(1) Koç Holding has only USD 76.5 million financial liabilities as of 31 December 2012. The related balance was repaid in January 2013. (2) Excluding listed and unlisted equity securities classified as financial assets.

-98- The following table provides details of the Group’s Non-Finance Segments’ major loans and bond issues outstanding as of 31 December 2012, none of which has recourse to Koç Holding.

Financial Company Purpose Outstanding Balance Interest Rate Maturity Covenant EYAS¸ ...... Acquisition financing USD 590,700,000 LIBOR+2.80% 30-Jun-15 Yes Tüpras¸ ...... Capital expenditure financing(1) USD 630,909,081 LIBOR+1.75% 16-Oct-23 Yes (*) Tüpras¸ ...... Capital expenditure financing(1) USD 198,495,075 LIBOR+1.80% 16-Oct-23 Yes Tüpras¸ ...... Capital expenditure financing(1) USD 256,016,040 LIBOR+2.60% 15-Oct-18 Yes Tüpras¸ ...... Working capital financing(2) USD 700,000,000 4.13% 2-May-18 No Ford Otosan . . . Capital expenditure financing(3) EUR 90,000,000 1.47% 28-Dec-20 Yes Ford Otosan . . . Capital expenditure financing(3) EUR 100,000,000 2.06% 10-Aug-20 Yes Ford Otosan . . . Capital expenditure financing(3) EUR 128,571,429 EURIBOR+2.75% 9-Dec-15 Yes Tofas¸ ...... Capital expenditure financing EUR 118,592,624 (**) 7-Dec-15 Yes Tofas¸ ...... Capital expenditure financing EUR 288,422,650 (**) 15-Nov-17 Yes TL Arçelik ...... Capital expenditure financing TRL 250,000,000 LIBOR+0.75% 14-May-13 No Arçelik ...... Working capital financing EUR 100,000,000 EURIBOR+1.80% 14-May-13 No Arçelik ...... Working capital financing EUR 100,000,000 EURIBOR+2.50% 20-Oct-14 No TL Arçelik ...... Export financing TRL 250,000,000 LIBOR+1.50% 20-Mar-15 No TL Arçelik ...... Export financing TRL 400,000,000 LIBOR+1.75% 9-Apr-15 No Arçelik ...... Working capital financing EUR 100,000,000 EURIBOR+2.50% 25-Sep-17 Yes Arçelik ...... Capital expenditure financing EUR100,000,000 2.63% 28-Dec-19 Yes

(1) Refers to the drawn amounts of RUP financing loans of Tüpras¸. For a discussion of the RUP financing loans, see “—Capital Expenditures” below. (2) Refers to the Eurobond issue of Tüpras¸. (3) Refers to the new generation Transit and new small LCV investment financing loans of Ford Otosan. For a discussion of Ford Otosan’s new generation Transit and new small LCV investment financing loans, see “—Capital Expenditures” below. (*) USD 102,217,362 of the total amount has a fixed interest rate of 2.62 per cent. (**) The first loan of Tofas¸ refers to the outstanding balance of the loan package of EUR 350 million signed in 2006 in order to finance capital expenditures related with Mini Cargo Van project. This loan package has three tranches with interest rates ranging between “EURIBOR +0,30 per cent. and “EURIBOR +1.89 per cent.”. The second loan of Tofas¸ refers to the outstanding balance of the loan package of EUR 450 million signed in 2008 in order to finance capital expenditures related with Light Commercial Vehicle project. This loan package has four tranches with interest rates ranging between “EURIBOR + 0.15 per cent. and “EURIBOR + 1.24 per cent.”.

The financial covenants of the loans in the table above include customary covenants applicable to the relevant operating company of the Group, such as net debt to tangible net worth, current assets to current liabilities, interest cover ratio, net debt to EBITDA and debt to equity covenants.

Capital Expenditures The following table sets out the breakdown of the Group’s consolidated capital expenditures by business segments in 2012, 2011 and 2010.

2012 2011 2010 (in thousands of Turkish Lira) Energy ...... 2,076,891 946,052 390,007 Automotive ...... 941,852 602,759 357,418 Consumer Durables ...... 484,526 367,253 257,100 Finance ...... 159,563 126,096 120,597 Other ...... 166,221 190,376 120,524 3,829,053 2,232,536 1,245,646

-99- As set forth above, the largest portion of the Group’s consolidated capital expenditures during the last three years has been concentrated in Energy and Automotive Segments.

Energy Segment Tüpras¸ is implementing a significant investment (RUP) that management expects to increase the Tüpras¸’s competitiveness and profitability by increasing the Izmit Refinery’s higher-yielding white products production capacity and reducing its black product yield by 50 per cent., thereby increasing its Nelson Complexity Index to 14.5. The Nelson Complexity Index is a cost index that provides a relative measure of the construction costs of a refinery based on its crude and upgrading capacity. The RUP is expected to enable Tüpras¸ to utilise the excess black products produced by Tüpras¸’s other refineries, which will enable those refineries to run at increased capacity. “Black product” refer to any refined product having less economic value than crude oil, namely fuel oil and asphalt and any components of fuel oil.

The total capital expenditure requirement for the RUP is USD 2.7 billion of which USD 2.4 billion relates to the turnkey contract for the I˙zmit facility and USD 0.3 billion relates to interest and insurance payments. The RUP is expected to be commissioned and begin operations in November 2014. As of 31 December 2012, total capital expenditures on the RUP since 2008 amounted to USD 1.3 billion, the majority of which were realised in 2011 and 2012 (RUP capital expenditures in 2012: USD 791 million; in 2011: USD 421 million).

Regarding the financing of capital expenditures for RUP, Tüpras¸ signed three different loan agreements in 2011. The two tranches of the financing package; USD 1,111.8 million insured by the Spanish export credit Agency (CESCE) and USD 624.3 million insured by the Italian export credit agency (SACE) have a 12 year maturity, with no principal payments due in the first 4 years (interest accruals of related loans are added on their principal balances). The third tranche, USD 359 million, has a 7 year maturity, with no principal payments due in the first four years. As of 31 December 2012, the amount of loan utilised within the scope of the total loan package for insurance payments and capital expenditures is USD 1,085.4 million.

Automotive Segment In the Automotive Segment, Ford Otosan has commenced an approximately USD 1 billion capital expenditure programme for the period from 2011 to 2014 relating to the renewal of existing products, the addition of new products and increases in production capacity. Following the completion of the investments in 2014, Ford Otosan’s manufacturing capacity is expected to increase from 320,000 units to 400,000 units in the Kocaeli Plant (light and medium commercial vehicles) and from 10,000 to 15,000 units in the˙ Inönü Plant (trucks); in total from 330,000 to 415,000 units. Details of the projects are as follows: 1. The new generation Transit project is expected to have a total investment amount of USD 630 million. The project has two phases. As the first step, the production of the Tourneo Custom and Transit Custom models started on 23 July 2012 and the products were introduced to the market in October 2012. The Custom series is a brand new segment entry by Ford and Ford Otosan is the sole source of production for these models in the world. The second phase of the project, which is in progress, involves the production of the next generation of the existing Transit model. 2. The new small LCV investment (Transit Courier and Tourneo Courier) includes a total of EUR 205 million fixed asset procurement. As part of this investment, a new factory with 110,000 units annual capacity is being built next to the Kocaeli Plant. The construction of the new factory started on 19 March 2012. The new plant will have a covered area of 70,000 m2. Transit Courier and Tourneo Courier, which are expected to be launched in 2014. 3. The new Ford Cargo investment of USD 75 million involves the development of a more globally competitive product within the heavy truck Cargo family. Ford Otosan is responsible for product development, design, engineering and R&D; whereas the product is being manufactured in two plants: Ford Otosan’s I˙nönü plant and Ford’s Brazilian division. The first model was launched in January 2013.

Regarding the financing of Ford Otosan’s related projects: (1) a EUR 150 million loan agreement with the European Bank for Reconstruction and Development was signed in 2010 (5-year loan with no principal payments due in the first 2 years with an interest rate of EURIBOR + 2.75 per cent.) (2) EUR 190 million loan agreement was signed with European Investment Bank in 2012 (8-year loan with no principal payments due in the first 2 years. EUR 100 million in 3rd quarter with an interest rate of 2.06 per cent.; EUR 90 million in 4th quarter with an interest rate of 1.47 per cent.)

- 100 - Off balance sheet arrangements and contingent liabilities The main off-balance sheet arrangements of the Group’s Finance Segment include custody services provided and credit related commitments (e.g. letters of guarantee, letters of credit) extended to customers. The main off- balance sheet arrangements of the Group’s Non-Finance Segments include guarantees given for operating activities (e.g. import of crude oil by Tüpras¸, other foreign trade purposes) and letters of guarantee given in connection with certain bank borrowings.

Possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are treated as contingent liabilities. For information regarding certain contingent liabilities of the Group, see Note 32 to the Consolidated Financial Statements.

Risks Currency risk As a general Koç Holding financial policy, the Group companies are not allowed to carry any foreign exchange position which includes balance sheet positions, derivative financial instruments as well as commodities linked to a specific currency (i.e. oil inventories). This policy is closely monitored by Koç Holding as part of the Enterprise Risk Management function. Given the practical difficulties to carry “nil” FX position during the year, Group companies are allowed to keep foreign exchange positions within certain limits (i.e. +/(-) 10 per cent. of total equity). Derivative contracts such as swaps, options and forwards are also used as instruments for currency risk management for hedging purposes, when needed.

The following table sets forth the assets and liabilities denominated in foreign currency held by the Group before consolidation adjustments as of 31 December 2012, 2011 and 2010.

2012 2011 2010 (in thousands of Turkish Lira) Assets ...... 34,510,986 31,890,331 26,065,224 Liabilities ...... (42,966,093) (40,639,404) (30,550,152) Net balance sheet position ...... (8,455,107) (8,749,073) (4,484,928) Off-balance sheet derivative instruments net position ...... 2,613,518 3,121,175 64,686 Net foreign currency position ...... (5,841,589) (5,627,898) (4,420,242)

Of the total reported TL 5,842 million short position as of 31 December 2012, the Group views TL 3,050 million as being naturally hedged through Tüpras¸’s oil inventories (which are denominated in global markets in US dollars). Tüpras¸ manages its foreign currency risk resulting from its net financial liabilities and trade payables by reflecting the effects of the changes in foreign currencies in its selling prices of petroleum products, which are accounted for in TL on the financial statements. For a discussion of the natural hedge mechanism in the Energy Segment, see “—Significant Factors Affecting Results of Operations and Financial Condition of the Group— Fluctuation in exchange rates of major foreign currencies” and “—Results of Operations—Year Ended 31 December 2012 Compared to Year Ended 31 December 2011—Major Business Segment Results—Energy Segment”.

The remaining short foreign currency position as of 31 December 2012, after adjusting the aforementioned natural hedge mechanism of Tüpras¸, stems mainly from the RUP financing loan of Tüpras¸ and investment loans of Ford Otosan and Tofas¸, which remain unhedged as a result of the following: (1) FX linked EBITDA stream to be generated from these projects and (2) in the case of Tofas¸ and Ford Otosan, foreign exchange exposures for the related investment loans are mitigated either through take-or-pay agreements or contractual investment recovery mechanisms.

For sensitivity analysis on the impact of certain foreign exchange fluctuations on the Group’s consolidated pre- tax income, see Note 33(B) of the 2012 Consolidated Financial Statements.

Interest rate risk The Group is exposed to interest rate risk arising from the rate changes on interest-bearing liabilities and assets. The Group manages this risk by offsetting the residual repricing terms of interest-bearing assets and liabilities. When needed, derivative instruments (including interest rate swaps and options) are also entered into for hedging interest rate risk.

- 101 - Please refer to Note 33(B) of the 2012 Consolidated Financial Statements, for further information about the Group’s sensitivity to interest rates, including effective annual interest rates and repricing dates of financial assets and liabilities together with a breakdown of the amount of financial instruments held by the Group bearing fixed and floating rates.

Liquidity risk Liquidity risk comprises risks arising from the inability to fund an increase in assets, the inability to cover liabilities when due and operations performed in illiquid markets. In the framework of liquidity risk management, the Group is actively seeking to diversify its funding sources and aims to hold sufficient cash and cash equivalents. In order to meet cash needs the Group seeks to ensure that the level of cash and cash equivalent and total current assets does not fall below a predetermined portion of short term liabilities.

Please refer to Note 33(B) of the 2012 Consolidated Financial Statements for the year ended 31 December 2012, for further information about the contractual maturities of the Group’s financial liabilities and the redemption schedule of the Finance Segment’s credit related commitments.

Effect of IFRS 11- Joint Arrangements on the Group’s consolidated financial statements: According to IAS 31—Interests in Joint Ventures, which was effective until 1 January 2013, companies that prepared consolidated financial statements could apply the proportionate consolidation method or the equity method in accounting for their joint ventures.

Within this framework, the Group adopted the proportionate consolidation method as its accounting policy and the Group’s interests in joint ventures have been accounted for using the proportionate consolidation method. Under proportionate consolidation, joint ventures’ assets, liabilities, equity, income and expenses are consolidated by the total ownership interest of the Group. Intercompany transactions and balances with joint ventures are eliminated during the consolidation.

The principal joint ventures of the Group by business segments are:

- Energy Segment Opet, AES Entek - Automotive Segment: Ford Otosan, Tofas¸ and TürkTraktör - Consumer Durables Segment: Arçelik LG - Finance Segment Koç Financial Services - Other Segment Koçtas¸

IFRS 11 “Joint Arrangements” being effective as of 1 January 2013 requires the Group to account for its interests in joint ventures by only using the equity method. This change will have a significant impact on the Group’s consolidated financial statements.

Had the Group early adopted the relevant standard and accounted all their proportionally consolidated joint ventures by applying the equity method, the Group’s consolidated revenue and assets as of or for the year ended 31 December 2012 would have decreased by approximately 24 per cent. and 55 per cent., respectively.

On the other hand, equity holders of the parent and net profit for the period attributable to equity holders of the parent would have remained the same.

Critical Accounting Estimates and Judgments The preparation of consolidated financial statements requires the usage of estimations and assumptions which may affect the reported amounts of assets and liabilities as of the balance sheet date, disclosure of contingent assets and liabilities and reported amounts of income and expenses during the financial period. The accounting assessments, forecasts and assumptions are reviewed continuously considering the past experiences, other factors and the reasonable expectations about the future events under current conditions. Although the estimations and assumptions are based on the best estimates of the management’s existing incidents and operations, they may differ from the actual results.

- 102 - The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group’s results of operations, are summarised below:

Impairment test for intangible assets with indefinite useful lives and for goodwill The Group assesses intangible assets with indefinite useful lives and goodwill allocated to cash-generating units for impairment annually or more frequently if events or changes in circumstances indicate impairment.

Intangible assets with indefinite useful lives have been tested for impairment using the royalty relief method. For the impairment test of goodwill, the recoverable amount of each cash generating unit is determined by calculating the value in use or fair value less costs to sell calculations. Impairment tests performed are based on specific expectations and assumptions.

As detailed in Note 16 and Note 17 of the 2012 Consolidated Financial Statements, no impairment has been identified as of 31 December 2012 as a result of the impairment tests performed regarding intangible assets and goodwill by cash generating units, respectively.

Depreciation and amortisation Depreciation and amortisation are provided for investment properties, property, plant and equipment and intangible assets on a straight-line basis over their estimated useful lives. Related useful lives are specified in Notes 2.4.13, 2.4.14 and 2.4.15 of the 2012 Consolidated Financial Statements.

Impairment losses on loans and advances The methodology and assumptions used for estimating both the amount and timing of future cash flows from a portfolio of loans are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

A credit risk provision for loan impairment is recognised to provide for the Group’s estimate of credit losses as soon as the recovery of an exposure is identified as doubtful. Impairment and uncollectability are measured and recognised individually for loans and receivables that are individually significant, and measured and recognised on a portfolio basis for a group of similar loans and receivables that are not individually identified as impaired.

The provision for loan impairment also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. The amount of provision is estimated based upon the Group’s credit risk policy, the structure of the existing loan portfolio, historical patterns of losses in each component, the internal credit risk rating of the borrowers and the current economic climate in which the borrowers operate.

Deferred tax assets Deferred income tax assets are recorded to the extent that realisation of the related tax benefit is probable in the forthcoming years. The future taxable profits and the amount of tax benefits that are probable in the future are based on the Group’s business plans based on management expectations that are believed to be reasonable under the circumstances.

Government grants allowing reduced corporate tax payment are evaluated within the scope of IAS-12 Income Taxes and are recognised as deferred tax asset by the qualified tax advantage amount, to the extent it is highly probable that future taxable profits will be available against which the unused investment tax credits will be utilised.

Warranty provision In the Group’s Automotive Segment, warranty provision is calculated by considering the historical warranty expenses incurred to estimate the possible warranty expense per vehicle. Provision calculations are realistically performed and based on vehicle quantity, warranty period and historical claims. In the Group’s Consumer Durables Segment, warranty provision is calculated based on estimations using past statistical information on warranty services provided and returns of products.

- 103 - Fair value of derivatives Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed. To the extent practical, models use only observable data, however areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect reported fair values.

Provision for employment termination benefits To calculate the employee benefit provision, actuarial assumptions relating to turnover ratio, discount rate and salary increases are used. Related actuarial projections are specified in Note 22 of the 2012 Consolidated Financial Statements.

Pension fund Yapı Kredi determines the present value of funded benefit obligations in accordance with the “Law Regarding the Changes in social Insurance and General Health Insurance Law and Other Related Laws and Regulations” by using several critical actuarial assumptions, including the discount rate, mortality rate, and medical costs as disclosed in Note 22 of the 2012 Consolidated Financial Statements. This approach recognises the obligations of Yapı Kredi to make payments to Social Security Institution (“SSI”) in respect of the benefits which will be transferred to SSI rather than an obligation to make benefit payments to individuals.

- 104 - BUSINESS

As of 31 December 2012, the market capitalisation of Koç Holding was USD 13,210 million.

Koç Holding has been listed on the Borsa I˙stanbul since January 1986. The Group ranked 222nd in the Fortune 500 in 2012 (based on 2011 consolidated revenues) and had consolidated revenues of USD 47,327 million in 2012. As of 31 December 2012, the Group’s combined revenues (the sum total of the revenues of the Company’s subsidiaries and joint ventures) was as high as 9 per cent. of Turkey’s GDP, its combined exports represented 10 per cent. of Turkey’s total exports and its share in the total market capitalisation of the Borsa˙ Istanbul was 16 per cent.. The Group owns companies with operations in 34 countries and employed 82,158 employees as of 31 December 2012, 73,869 of whom were in Turkey and 8,289 of whom were in other countries. The Group has leading positions in each of its five main business segments: energy, automotive, consumer durables, finance, and other. For the year ended 31 December 2012, the Group had consolidated revenue of TL 84,833 million (USD 47,327 million), consolidated EBITDA of TL 5,613 million (USD 3,132 million) and consolidated net income of TL 2,315 million (USD 1,291 million) (after non-controlling interest). As of 31 December 2012, the Group had consolidated total assets of TL 109,067 million (USD 61,184 million).

Each of the Group’s segments is described below.

Energy In the Energy Segment, the Group owns the only oil refiner in Turkey (Tüpras¸), the leading LPG distribution company (Aygaz), the fastest growing oil distribution company (Opet) and a power-generation company (AES Entek). Tüpras¸ is the seventh largest oil refinery company in Europe (as measured by refinery capacity according to the Oil & Gas Journal in 2012) and Turkey’s largest industrial company in 2011 as measured by sales from production (according to the˙ Istanbul Chamber of Industry). Tüpras¸’s principal assets are four oil refineries located at I˙zmit, I˙zmir, Kırıkkale and Batman in Turkey. The annual total design refining capacity of the four refineries was 28.1 million MT as of 31 December 2012. Tüpras¸’s refineries produce a full range of refined petroleum products including diesel, fuel oils, jet fuel, gasoline, asphalt, LPG, naphtha and lubricant base stocks. Tüpras¸ also imports and resells certain petroleum products and engages in the distribution, retailing and marine transportation of crude oil and refined products. As of 31 December 2012, 77 per cent. of Tüpras¸’s sales (by volume) were domestic, with exports accounting for the remainder. Opet is the second largest oil distribution company in Turkey and currently ranks second with 18.5 per cent. of the white products market. It has 1,325 gas stations nationwide. Aygaz is the Group’s first energy company and since its establishment, it has been the leader of the LPG sector in Turkey. Aygaz sells and distributes LPG and also manufactures LPG products, both domestically and internationally. It has a market share of 29 per cent. in Turkey (according to EMRA). Aygaz is ranked 10th in the Istanbul Chamber of Industry’s “Turkey’s Top 500 Industrial Enterprises 2011” ranking. Aygaz serves customers in 81 provinces through 2,290 cylinder gas dealers and 1,491 autogas stations. AES Entek, the Group’s power generation company, operates two natural gas and three hydroelectric power plants and has a combined capacity of 364 MW which accounts for 1.6 per cent. of Turkey’s private sector installed capacity.

- 105 - Automotive The Group’s principal automotive companies, Ford Otosan and Tofas¸, lead the Turkish automotive industry, accounting for 50 per cent. of total Turkish automotive production, 47 per cent. of automotive exports and 27 per cent. of total automotive sales in Turkey in 2012 (according to the Automotive Manufacturers’ Association and company data). Ford Otosan, a joint venture with Ford, offers a wide range of products in the Turkish market and Tofas¸, a joint venture with Fiat, is the only automotive company in Turkey that manufactures both passenger and commercial vehicles. Other companies that comprise the Group’s Automotive Segment include TürkTraktör which produces over half of all tractors sold in Turkey in 2012 (according to TurkStat), Otokar, Turkey’s largest private sector defence industry company and market leader in the Turkish bus market (according to TAI˙D-Turkish Heavy Commercial Vehicles Association and company data) and Otokoç, an automotive retailing and car rental company.

Consumer Durables The largest company of the Group’s Consumer Durables Segment is Arçelik, a leading producer of white goods and consumer electronics, including its consolidated subsidiaries. Arçelik is the third largest white goods company in Europe (by unit volumes) and has strong market positions in Turkey, Europe, the Middle East, CIS countries and Africa, which in aggregate accounted for approximately 98 per cent. of its revenues in 2012. Arçelik has manufacturing centres not only in Turkey, but also in Romania, Russia, China and South Africa. Brands owned by Arçelik include the Arçelik brand, Beko, Arctic and Defy, among others. Arçelik focuses on innovation and customer appeal in its product lines and places a particular emphasis on environmentally friendly and energy efficient technology. The other company in the Consumer Durables Segment, Arçelik LG Klima, the first and largest air-conditioner manufacturer in Turkey, is a joint venture company with LG Electronics.

Finance The Group’s Finance Segment mainly consists of Yapı Kredi, a joint venture with Unicredit, the fourth largest private bank in Turkey by total assets with an 8.9 per cent. market share as of year-end 2012 (according to BRSA statistics). Yapı Kredi is a full service bank providing credit cards, consumer banking, retail banking (including SME banking), corporate and commercial banking, private banking and asset management services to approximately 6.5 million customers through 928 branches located in more than 70 cities. As of 31 December 2012, the Bank held leading market positions in Turkey in credit cards (19.4 per cent. market share in outstanding volume and 19.3 per cent. market share in credit card acquiring volume, according to data from the Interbank Card Centre), leasing (17.2 per cent. market share according to the Turkish Leasing Association) and factoring (15.0 per cent. market share according to the Turkish Factoring Association).

- 106 - The following table sets forth revenue, EBITDA and additional information for each of the Group’s segments for the year ended 31 December 2012.

%of % share of Segment consolidated Segment consolidated revenues total revenues EBITDA EBITDA (in thousands of TL, except percentages) Energy ...... 53,485,826 63.0% 1,661,337 29.6% Automotive ...... 10,139,250 12.0% 1,038,344 18.5% Consumer Durables ...... 10,664,968 12.6% 1,051,748 18.7% Finance ...... 7,331,222 8.6% 1,623,237 28.9% Other ...... 4,478,719 5.3% 142,637 2.5%

Strengths Koç Holding is the largest holding company in Turkey with over 85 years of experience since the establishment of the Group in 1926. Below is a summary of the Company’s key strengths:

- 107 - The following table sets forth the market position and market share of the main Group companies, as of 31 December 2012.

Industry Company Market position Market share ENERGY

Refinery Tüpras¸ Leader Turkey’s sole oil refinery Fuel Distribution Opet 2nd 19 per cent.(1) LPG Distribution Aygaz, Mogaz Leader 29 per cent.(2)

AUTOMOTIVE

Automotive Ford Otosan / Tofas¸ / Otokar Leader 27 per cent.(3) Passenger Cars Leader 17 per cent.(3) Commercial Vehicles Leader 49 per cent.(3) Farm Tractors TürkTraktör Leader 50 per cent.(4)

CONSUMER DURABLES

White Goods & Consumer Electronics Arçelik Leader over 50 per cent.(5) Air Conditioners Arçelik LG Klima Leader(6)

FINANCE

Banking Yapı Kredi Bankası 4th(7) 9 per cent. Leader(7) 19 per cent.(8) Leasing Yapı Kredi Leasing Leader 17 per cent.(9) B-Type Investment Trust Yapı Kredi Yatırım Ortaklıg˘ı 2nd 11 per cent.(10) Pension Funds Yapı Kredi Emeklilik 3rd 17 per cent.(11) Factoring Yapı Kredi Faktoring Leader 15 per cent.(12) Brokerage Yapı Kredi Yatırım2nd 7 per cent.(13) Asset Management Yapı Kredi Portföy Yönetimi 2nd 18 per cent.(14)

OTHER LINES OF BUSINESS

Food Production Tat Konserve Leader(15) DIY Retailing Koçtas¸ Leader(16)

- 108 - In each of these sectors, levels of market penetration had been quite low given weaker economic fundamentals in Turkey. However, the transformation in the economy and the operating environment in recent years, which has been reflected in lower interest rates, lower inflation, increased financing sources, higher levels of foreign direct investment and increased consumer confidence, have led to increasing levels of market penetration in each of these sectors. By securing leading positions in these sectors, the Company believes it will benefit from any growth potential and plans to continue to consolidate and strengthen its competitive positions.

* Eurostat (2009-2010), Euromonitor, ECB; **Eurostat, TurkStat, Company Data, BRSA

- 109 - The Company believes that its value-added management is reflected through valuations with much smaller discounts to its NAV compared to peer holding companies or even with premiums to its NAV. Since the beginning of 2013 (as of 12 April 2013) Koç Holding has been trading with a very small discount (0.4 per cent.) on average compared to its NAV. At the same period in 2013, the peer Group’s (Sabancı Holding, Yazıcılar Holding and Dog˘an Holding) average NAV discount has been 35 per cent. (according to statistics provided by Burgan Securities and company data).

Extensive distribution and after-sales network in its sectors and the largest storage capacity in the energy industry As of 31 December 2012, the Group had the largest distribution networks in Turkey both in automotive (with ~400 dealers) and consumer durables (with ~3,000 exclusive dealers) and also has the 5th largest branch network among the Turkish banks (928 branches located in more than 70 cities) (according to BAA). In energy, Aygaz has the largest distribution network with approximately 3,800 dealers (based on EMRA and company data) and Opet was the fastest growing oil distribution company (according to Petder), with 1,325 stations as of 31 December 2012. While Tüpras¸ and Opet have the highest storage capacity in petroleum products (owning more than half of the storage capacity for refined petroleum products in Turkey, according to EMRA), Aygaz has the largest storage capacity in LPG (according to EMRA).

- 110 - The Group takes advantage of economies of scale with the Group’s combined total sales amounting to 9 per cent. of Turkey’s GDP, exports as high as 10 per cent. of Turkey’s total exports and market shares as high as 50 per cent.-and-over in various sectors.

Partner of top international companies The Company has long-standing joint venture partnerships with prominent international companies. The Group’s international partners include global names such as Ford and Fiat in the automotive segment, LG Electronics in the Consumer Durables Segment, UniCredit in the Finance Segment, AES in the Energy Segment and B&Q in the Other Segment. Many of these companies have been partnering with the Company for decades and in all cases, the joint venture partnerships are on equal ownership terms. All major business decisions are taken as a result of agreement between the partners, and the Company has not experienced any unresolvable disputes with joint venture partners historically.

1980- 1985- 1990- 1995- 2000- 2005- 2010- 1985 1990 1995 2000 2005 2010 2012 (%, CAGR) Real GDP Growth ...... 5 6 3 4 5 3 5 Group Revenue Growth* ...... 15 17 5 6 11 9 16

* Constant Prices

Continue to operate in those sectors where the Group can create a differential competitive advantage and realise profitable and sustainable revenue streams. The Group plans to combine its strong and flexible management philosophy and international partnerships with its competitive advantages to pursue long-term strategies. The Group’s current leading positions across its sectors are examples of the competitive advantage it creates in the businesses it operates. (See Strengths—Leading positions in under-penetrated markets with strong growth potential)

Focus on high growth and/or high margin business lines. In the sectors in which it operates through its portfolio companies, the Company will focus on investing in those business lines which offer either strong growth and turn-around potential or strong cash flows and/or a strong internal rate of return with high margins. For example, in the Finance Segment, Yapı Kredi is the market leader in the high-margin credit card market. Across almost all of the Group’s sectors, the penetration levels in Turkey are significantly lower compared to developed markets and offer strong potential of growth on the back of the positive developments in the Turkish economy. The Company believes it can benefit such growth potential by securing leadership positions and establishing a strong sales network and customer database in these sectors.

- 111 - Focus on strong and sustainable profitability The Company will continue to make investments to increase its productivity and improve the level of profitability. In sectors such as energy, the Company focuses on profit enhancement programmes and upgrade systems such as Tüpras¸’s Residuum Upgrade Project to improve the level of complexity and productivity on a constant basis. In its consumer-focused businesses, the Company aims to improve per customer profitability via the application of CRM applications. For example, Yapı Kredi addresses specific customer needs through a segment-based service model, optimising costs to improve competitiveness and maintain effective cost and risk management.

Provide superior and long-standing customer satisfaction. The Company places utmost importance to customer satisfaction. Accordingly, it is one of the Company’s main priorities to continuously invest in technology and development, innovation, loyalty and service quality across all of the sectors it operates.

- 112 - Minimise sector and geographic risks though a diversified portfolio structure. The Company will continue to focus on strict risk management, focusing on maintaining a robust balance sheet and a balanced portfolio structure as well as efficiency and sustainable profitability.

Corporate Structure The following chart sets forth the principal operating subsidiaries and joint ventures as of 31 December 2012 in each of the Group’s segments and related shareholding information. In the chart, “KH share” represents the direct ownership interest of Koç Holding in the relevant entity.

Koç Family: 68.51% Free Float: 22.35% Vehbi Koç Foundation: 7.15% Koç Pension Fund: 1.99%

Koç Holding

Energy Automotive Consumer Durables Finance Other

EYA Ford Otosan Arçelik Koç Financial Services (KFS) Tat Konserve KH share: 75.00% KH share: 38.46% KH share: 40.51% KH share: 37.55% KH share: 43.65% Aygaz: 20.00% Ford: 41.04% Other Koç: 16.69% Other Koç: 12.45% Other Koç: 9.69% Opet: 3.00% Other Koç: 2.58% Burla Group: 17.61% Unicredit Bank Austria: 50.0% Partner: 5.26% Shell: 2.00% Free float: 17.93% Free float: 25.19% Free float: 41.41%

Tüpra Tofa Koçta EYA share: 51.00% KH share: 37.59% Arçelik LG Yapı Kredi Bank KH share: 37.1% Free float: 49.00% Fiat: 37.86% KH share: 5% KFS: 81.80% Other Koç: 12.9% ------Other Koç: 0.27% Other Koç: 45% Free float: 18.20% B&Q Group: 50.0% KH effective share: 42.67% Free float: 24.29% LG Electronics: 50% ------KH effective share: 32.89% Setur TürkTraktör KH share: 24.1% Opet KH share: 37.50% Other Koç: 75.9% Tüpra : 40.00% CNH Österreich GMBH: 37.50% Other Koç: 10.00% Free float: 24.93% Divan Öztürk Group: 50.00% Other: 0.07% Other Koç: 100%

Aygaz Otokar KH share: 40.68% KH share: 44.68% RMK Marine Other Koç: 10.53% Ünver Hold.: 24.81% KH share: 40.53% Liquid Pet. Co.: 24.52% Other Koç: 3.29% Other Koç: 59.47% Free Float: 24.27% Free float: 27.22%

AES Entek Otokoç KH share: 24.81% KH share: 96.32% Other Koç: 24.81% Other Koç: 3.68% AES: 49.62%

Ownership, Governance and Management Total Koç Holding ownership in subsidiaries and joint ventures consists of (1) its direct ownership, (2) ownership of Koç family and (3) indirect ownership through other Group companies. As at 31 December 2012, Koç Holding had majority control over all of its subsidiaries, except over Otokar, over which Koç Holding exercises control with a 47.6 per cent. ownership. Koç Holding also has equally shared control of its joint ventures. Each joint venture is governed by an agreement which requires mutual agreement by the partners in making all significant decisions and offers each partner in the joint venture a right of first refusal, in the event that the other partner decides to transfer its shares to third parties. For information regarding voting rights and effective ownership of principal subsidiaries and joint ventures, see the table of principal operating companies in “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview”.

The operations of all subsidiaries and joint ventures are overseen by Group Presidents, who report to the CEO of Koç Holding.

Operations of Koç Holding As of 31 December 2012, Koç Holding had 225 employees.

The main functions of Koç Holding, either as a centralized service provider, or through its board level representation, are to; • Manage the portfolio of companies; i.e., divest/hold/acquire decisions,

- 113 - • Approve strategic plans and annual budgets of subsidiaries and joint ventures, • Set performance targets of subsidiaries and joint ventures, measure their performances and determine the bonuses of top managers, • Perform financial and operational audits of subsidiaries and joint ventures, • Provide legal and tax counsel to subsidiaries and joint ventures, • Provide standards, systems, policies, tools and processes to subsidiaries and joint ventures in areas such as HR management, IT systems, risk management, IP management and corporate social responsibility, and • Monitor the performance of subsidiaries and joint ventures through monthly and quarterly reports and meetings.

The principal source of revenue for the Company is dividend income from subsidiaries and joint ventures. The following table sets forth dividends received by the Company from the Group’s principal operating companies and dividends paid over the past five years.

TL million 2008 2009 2010 2011 2012 (+) Dividend Received ...... 361 189 329 591 667 Ford Otosan ...... 167 152 154 200 223 Arçelik ...... 39 — 41 101 122 Tofas¸ ...... 34 14 49 94 94 TürkTraktör ...... 35 6 5 56 75 Aygaz ...... — 12 41 51 61 Otokar ...... 13 3 9 7 21 Migros ...... 54 — — — — Other ...... 19 1 32 81 72 (+) Tüpras¸ dividends(1) ...... 401 227 239 285 377 (-) Dividend Payments ...... (41) (72) (360) (604) (373)

(1) Koç Holding’s share, via EYAS¸

Through its board level representation, Koç Holding has substantial control over its subsidiaries’ and joint ventures’ dividend distribution decisions. Koç Holding generally maximises dividends of its subsidiaries and joint ventures, provided that they comply with the Company’s liquidity and leverage policies and have enough resources for their capital expenditure needs. The Company’s management believes that the total dividend income from subsidiaries and joint ventures going forward will be above the last five years’ average, mostly due to the additional dividend stream that will be collected from Tüpras¸, which previously had been used to repay the debt at the SPV level (the remaining debt of USD 590.7 million as of 31 December 2012 at EYAS, the SPV, which was established to acquire Tüpras¸ in 2005, is expected to be paid out completely by 2015).

Operations—Energy Segment Overview Following the acquisition of Tüpras¸, Turkey’s sole oil refinery, the Group has been committed to the energy sector and since then has continuously increased its investments in this sector. The Group is Turkey’s market leader in the refinery and LPG distribution sectors and has achieved rapid growth in the fuel distribution sector, and through a partnership with AES, a global power company, in its investments in power generation.

The Group’s main operating companies in the Energy Segment include Tüpras¸, Opet, Aygaz and AES Entek.

Refinery and Oil Distribution: Tüpras¸ and Opet Through Tüpras¸, the Group is the sole oil refiner in Turkey, and is the seventh largest oil refinery group in Europe (as measured by refinery capacity according to the Oil & Gas Journal in 2012). Tüpras¸ was the country’s largest industrial company in 2011 as measured by sales from production (according to the˙ Istanbul Chamber of Industry). Tüpras¸ is listed on the Borsa I˙stanbul and its market capitalization was USD 7,255 million as of 31 December 2012. Tüpras¸’s principal assets are four oil refineries located at˙ Izmit, I˙zmir, Kırıkkale and Batman in Turkey. The annual total design refining capacity of the four refineries was 28.1 million MT (based on design capacity) and average Nelson Complexity Index was 7.25 as of 31 December 2012. Tüpras¸’s refineries produce a full range of refined petroleum products including, diesel, fuel oils, jet fuel, gasoline, asphalt, LPG, naphtha and

- 114 - lubricant base stocks. Tüpras¸ transports crude oil and refined products through its subsidiary Ditas¸. Tüpras¸ and Opet also import and resell certain petroleum products. Opet engages in distribution and retailing. As of 31 December 2012, 77 per cent. of Tüpras¸’s sales (by volume) were domestic, with exports accounting for the remainder.

As of 31 December 2012, the Group held, directly and indirectly, voting rights constituting 51.0 per cent. of the total voting rights in Tüpras¸ and had an effective ownership interest of 42.7 per cent. in Tüpras¸, and the Group fully consolidated Tüpras¸, in the preparation of the Consolidated Financial Statements.

The I˙zmit Refinery is located 80 kilometres south-east of˙ Istanbul on the coast of the Gulf of I˙zmit by the Sea of Marmara, in the region that constituted approximately 35 per cent. of Turkish petroleum product demand in 2012. The I˙zmit Refinery and the I˙zmir Refinery are the two largest refineries in Turkey, each with a design capacity of 11.0 million MT of crude oil a year. In 2012, the I˙zmit Refinery processed approximately 9.6 million MT of crude oil and 0.3 million MT of other feedstock, producing approximately 9.4 million MT of refined products. The˙ Izmit Refinery, with three distillation column trains, had a Nelson Complexity Index of 7.78 (based on design capacity) at 31 December 2012.

The˙ Izmir Refinery, located on the Aegean Sea, also has a design capacity of 11.0 million MT of crude oil per year. In 2012, it processed approximately 8.5 million MT of crude oil and 0.7 million MT of other feedstock, producing 8.95 million MT of refined products. It is the only refinery in Turkey with a base oil production unit, the design production capacity of which was increased to 400,000 tonnes in 2012. The˙ Izmir Refinery, with two distillation column trains, had a Nelson Complexity Index of 7.66 (based on design capacity) at 31 December 2012.

The Kırıkkale Refinery, located inland approximately 80 kilometres south-east of Ankara, has a design capacity of 5.0 million MT and has Turkey’s largest road tanker filling capacity. In 2012, it processed approximately 3.0 million MT of crude oil and 0.2 million MT of other feedstock, producing approximately 3.0 million MT of refined products. The Kırıkkale Refinery had a Nelson Complexity Index of 6.32 (based on design capacity) as at 31 December 2012.

The Batman Refinery is located inland in south-eastern Turkey, adjacent to areas of domestic crude oil production, approximately 200 kilometres north-west of the Iraq border, and has a design capacity of 1.1 million MT. In 2012, it processed approximately 975 thousand MT of crude oil, producing approximately 942 thousand MT of refined products. The Batman Refinery had a Nelson Complexity Index of 1.83 (based on design capacity) at 31 December 2012.

Tüpras¸ has a 40 per cent. share in Opet, which was the second largest refined petroleum products distribution company in Turkey as of 31 December 2012 in terms of sales volume, based on EMRA and Petder data. The remaining 60 per cent. share in Opet consists of: (i) 10 per cent. held by other Group companies and Koç family members and (ii) 50 per cent. held by the companies controlled by Öztürk family members (“Öztürk”). Opet engages in retail and wholesale activities in fuel distribution, the production and marketing of lubricating oil, the sales of air transport fuels and the international trade of petroleum products. Opet has become the fastest and the most consistently growing refined petroleum products distributor of the last ten years, based on Petder data. Opet is the leader of customer satisfaction in its sector, for 7 years in a row according to the Turkish Customer Satisfaction Index (TCSI). Based on figures from EMRA, Opet was the second largest refined petroleum products distributor with a market share of 13.6 per cent. for black products (fuel oil and heating oil) and a market share of 18.5 per cent. for white products (gasoline and diesel) in 2012. Opet has 1,325 stations and of these stations, 916 operate under the Opet brand and the remaining 409 operating under the brand Sunpet.

LPG Distribution: Aygaz Aygaz, was founded in 1961 and was the first among the Group companies to operate in the energy sector. Aygaz has been the leader of the LPG sector in Turkey since its foundation. Aygaz was the country’s 10th largest industrial company in 2011 as measured by sales from production (according to the˙ Istanbul Chamber of Industry). Aygaz is listed on the Borsa˙ Istanbul and its market capitalization was USD 1,593 million as of 31 December 2012.

Aygaz supplies, stocks, fills, distributes and sells LPG as autogas, cylinder gas and bulk gas, provides after-sales services, and also manufactures LPG cylinders, tanks, valves and pressure regulators and exports to 22 countries in Europe, Africa and the Middle East.

- 115 - Aygaz was the market leader of the Turkish LPG sector in 2012 with a market share of 29 per cent. As of 31 December 2012 Aygaz, together with its subsidiary Mogaz, had 43 per cent. of the cylinder gas market and 23 per cent. of the autogas market (according to EMRA). Aygaz has become a generic name in Turkey for cylinder gas.

Aygaz serves customers in 81 provinces with 2,290 cylinder gas dealers and 1,491 autogas stations. Aygaz transports LPG obtained from domestic refineries or imported from foreign markets to its filling facilities via sea and overland tankers as well as pipelines. The stored LPG is then provided to consumers throughout the country, via dealers, as cylinder gas, bulk gas or autogas.

In 2012, 21 per cent. of Turkey’s total LPG supply was provided by domestic resources while 79 per cent. was provided by imports. Aygaz sources its LPG from Tüpras¸ and through imports. Aygaz meets 34 per cent. of Turkey’s domestic LPG demand in the second largest LPG market in Europe (according to WLPGA Statistical Review of Global LP Gas Report, 2011). As of 31 December 2012, Aygaz’s turnover was TL 5.6 billion, with approximately 89 per cent. from domestic sales and 11 per cent. from international sales.

Power Generation: AES Entek AES Entek, the Group’s power generation company, operates two natural gas and three hydroelectric power plants and has combined capacity of 364 MW which accounts for 1.6 per cent. of Turkey’s private sector installed capacity. AES Entek operates two natural gas combined cycle plants in Kocaeli and Bursa, and one gas turbine-based cogeneration facility in the Istanbul Koç University campus, with a total capacity of 302 MW. AES Entek also has three hydroelectric power plants, two in Karaman and one in Samsun, which have a total capacity of 62 MW.

Strengths The Group believes that the key strengths of the Energy Segment are the following:

Sole operator of oil refineries and leader in LPG products in the growing Turkish market Tüpras¸’s oil refineries are the only operating oil refineries in Turkey and produce 100 per cent. of Turkish production as of the date of this Offering Circular. In 2012, Tüpras¸’s share of the Turkish petroleum product market was approximately 60 per cent. based on diesel, gasoline, jet fuel and fuel oil data from EMRA and company data. Tüpras¸’s leading position is further augmented by having a well-established infrastructure and facilities for importing crude oil and refined products and selling refined products in Turkey, which Tüpras¸ believes gives it economic advantages over competitors that import refined products. Tüpras¸ maintains and improves its infrastructure by regularly implementing energy efficiency projects and operational efficiency projects at its refineries.

Although the LPG market is much more competitive compared to the refining market, Aygaz has been the market leader for over 50 years and has a stable market share of approximately 30 per cent. A diversified customer base mitigates any concentration risk and domestic volumes are divided among close to 3,800 dealers.

Sales and distribution capability Tüpras¸’s major customers have terminals that are connected to Tüpras¸’s refineries by pipeline, which decreases the customer’s working capital requirements and reduces their price risk by enabling them to purchase in small quantities whilst also reducing handling costs. Tüpras¸ infrastructure enables it to supply customers at low cost at multiple points throughout the country, by pipeline, rail and sea. This capability is enhanced by Tüpras¸’s access to excess capacity at the terminals of Opet and Aygaz, in order to serve regions in Turkey where Tüpras¸ does not own infrastructure. In addition, Tüpras¸ is the sole provider of asphalt to the Turkish ministry of transport and municipalities, and the only provider of specialist military fuels to the Turkish armed forces.

Throughout Turkey, Opet has a widespread petroleum stations network consisting of 1,325 stations, 916 of which operate under the Opet brand and the remaining 409 operating under the brand Sunpet. Based on figures from EMRA, Opet was the second largest refined petroleum products distributor with a market share of 13.6 per cent. for black products (fuel oil and heating oil) and a market share of 18.5 per cent. for white products (gasoline and diesel).

- 116 - Aygaz, on the other hand, operates in all three segments of LPG distribution throughout Turkey with a widespread and well established dealership network. Aygaz serves customers in 81 provinces with 2,290 cylinder gas dealers and 1,491 autogas stations. Due to the extensive distribution network, Aygaz cylinders are delivered to over 100,000 homes every day, while over one million vehicles travel with Aygaz’s autogas product, Aygaz Otogaz+, every day. The LPG cylinders, tanks, valves and regulators manufactured at the Aygaz plant in Gebze are also exported to 22 countries in Europe and Africa.

In recent years, Aygaz has been optimising its distribution network through mergers and acquisitions. Aygaz recently merged with Mogaz, formerly a wholly-owned subsidiary of Aygaz. In 2011, Aygaz acquired Total’s cylinder gas business which has helped to strengthen Aygaz’s market leadership. In addition to investing in its distribution network, Aygaz also regularly invests in maintenance capital expenditure to increase customer satisfaction and, as a result, sales. Aygaz sustains its market leadership in the autogas segment with a 23 per cent. market share, whereas the closest competitor has a 15 per cent. share (according to EMRA). This success is based on the power of the brand and the increasing number of gas stations as a result of continuing investments.

Storage and import infrastructure Tüpras¸ owns more than half of the refined product storage capacity in Turkey. It also has large scale import- export facilities at the I˙zmit and I˙zmir Refineries, which are located on the coasts of the Gulf of˙ Izmit and Aegean Sea, respectively. The˙ Izmit, Kırıkkale and Batman Refineries are all equipped with railway loading and unloading facilities enabling products to be transferred between them. These facilities allow Tüpras¸ to import and store cargo in bulk and to quickly take advantage of pricing opportunities in the market, in each case facilitating a reduction in its cost of supply.

Aygaz also has five sea terminals with 11 filling facilities operating with state-of-the-art technology in compliance with international standards and eight distribution points. With storage capacity of 170,000 m3, Aygaz has the highest LPG storage capacity in Turkey. The annual filling capacity is 1.1 million tons.

Flexibility in procurement Tüpras¸ has access to diverse sources of crude oil supply and buys various types of crude oil. In 2012, Tüpras¸ bought 14 different types of crude oil from nine countries with gravities ranging between 21 API (a measure of liquid density) and 45 API and sulphur content between 0.2 per cent. and 4.1 per cent. The configuration of Tüpras¸’s refineries allows flexibility in the selection of crude oil because the refineries are able to refine many different types of crude oil. Tüpras¸’s management is able to make key decisions in the procurement of crude oil on a monthly basis based on its supply contracts and purchases on the spot market. Tüpras¸’s procurement decisions are aided by PIMS, an industry-specific software, enabling it to determine which blend of crude oil is the most cost-effective in producing the desired refined products at each of Tüpras¸’s refineries.

Aygaz’s strategy for supply security is also based on diversification of sources and not being dependent on any single area or country. Imports are from the world’s highest volume producers, including companies such as Chevron, Sibur, Sonatrach and Statoil.

Flexibility of operations Tüpras¸ has a large number of production lines in its refineries, enabling operational flexibility and an ability to reduce operational costs in response to changing demand. By virtue of this operational flexibility, capacity utilisation can be varied to meet market and economic conditions without significantly reducing efficiency. Utilisation of semi-finished products facilitates the maximisation of product yields under a variety of capacity utilisation scenarios. This flexibility allows Tüpras¸ to manage seasonal variations in demand, as well as both planned and unplanned maintenance, without a major impact on sales activities.

Ability to generate favourable refining margins The combination of a growing domestic market, with a refined product deficit in diesel, and its operational flexibility, asset location, storage infrastructure and sales strengths, enables Tüpras¸ to generate strong refining margins. Since the completion of its investments related to Euro V petroleum product specifications, Tüpras¸ has further improved its refining margins which represent a premium over the benchmark refining margin for the Mediterranean region. Tüpras¸’s three medium-complexity refineries—the˙ Izmit Refinery,˙ Izmir Refinery and Kırıkkale Refinery – each can process a variety of crude oils and produce a high value-added mix of products. The less complex Batman Refinery is configured as a specialist asphalt refinery to process only domestic heavy crude oils and mainly produces asphalt to meet domestic demand.

- 117 - Strategic asset location Tüpras¸’s oil refineries are located near the main petroleum consumption regions of Turkey, whilst still having access to flexible and cost effective sea and land crude oil supply routes, which gives Tüpras¸ a competitive advantage and enables Tüpras¸ to extract favourable refining margins. The˙ Izmit Refinery primarily services the Marmara market (including˙ Istanbul), which constituted approximately 35 per cent. of Turkish petroleum product demand in 2012, and the coast of the Black Sea. The I˙zmir Refinery principally services the markets of western Turkey, while the Kırıkkale Refinery and Batman Refinery principally service the markets of central Anatolia and east/south-eastern Anatolia, respectively. In addition, the strategic location of each of Tüpras¸’s refineries enables Tüpras¸ to obtain a wide range of crude oils at cost-efficient prices from suppliers in the Middle East, North Africa and the Mediterranean as well as Russia and Central Asia.

Ability to increase complexity and competitive position Since the acquisition in 2006, Tüpras¸ has accelerated its rate of investment in the˙ Izmit Refinery,˙ Izmir Refinery and Kırıkkale Refinery, enabling the production of the latest specification of automotive fuels prior to the change in Turkish standards, increasing each refinery’s complexity and improving white product yields. Tüpras¸is implementing the RUP at the˙ Izmit Refinery: a significant investment which management expects to increase Tüpras¸’s competitiveness and profitability by increasing the˙ Izmit Refinery’s higher-yielding white products production capacity and reducing its black product yield by 50 per cent., thereby increasing its Nelson Complexity Index to 14.5. The RUP will enable use of the excess black products produced by Tüpras¸’s other refineries, which will enable those refineries to run at increased capacity. As of 31 December 2012, Tüpras¸ has invested USD 1.3 billion in the RUP. The RUP was approximately 54 per cent. complete (as of 31 December 2012, according to the Tecnicas Reunidas calculation method) and is expected to be commissioned and begin operations in November 2014.

Strategy The Group’s Energy Segment strategy is to maximise efficiency and increase profitability through: (1) investments in upgrading projects that would bring additional productivity and profitability; (2) continuous focus on new technology, product and service offerings, (3) introduction of operational efficiencies and profit enhancement programmes, (4) implementation of energy efficiency projects and (5) continuous investment in R&D. The Group also continuously exploits potential new investment opportunities in different fields including areas such as power generation, natural gas distribution and renewable energy.

Below are examples of actions taken to achieve such strategic goals:

New investments in upgrading projects that would bring additional productivity and profitability Tüpras¸ seeks to minimise Turkey’s diesel deficit by restructuring its refineries through the implementation of the RUP by the end of 2014. Tüpras¸ believes that the successful implementation of the RUP will enable it to convert excess fuel-oil output to an additional 2.8 million tons of diesel and will contribute to Turkey’s supply security, as well as improve Tüpras¸’s overall profitability by increasing its average capacity utilisation rate. Currently, it is not cost-effective to run the refineries at maximum capacity due to the excess of low-value black products being produced. However, Tüpras¸’s ability to utilise these low value products (i.e. fuel oil) in feed for the RUP complex, which is then converted into white products (i.e. diesel, gasoline, LPG and jet fuel), will, in the future, permit Tüpras¸ to operate its refineries at higher capacities. Tüpras¸ is targeting refinery capacity utilisation of approximately 95 per cent. based on crude oil processing as a result of the full implementation of the RUP. Tüpras¸ management expects the˙ Izmit Refinery’s Nelson Complexity Index to be 14.5 once the RUP is complete, increasing Tüpras¸’s overall average Nelson Complexity Index to 9.9. See “Tüpras¸—Residuum Upgrading Project”.

Continuous focus on new technology, product and service offerings Aygaz and Opet place significant emphasis on expanding their respective product range and improving service quality to maximise the loyalty of its customer base. Aygaz has continuously differentiated itself from its competitors and Aygaz’s cylinder LPG has become a generic name in the market, sustaining strong market shares. For example, in 2009, Aygaz launched its improved Aygaz Euro LPG+ product, Turkey’s first autogas with additives to reduce carbon buildup. Between 2010 and 2011, Aygaz began distributing drinking water in 19- liter bottles with the goal of optimising its distribution network and also launched an order system, increasing dealer satisfaction.

- 118 - Opet differentiates itself from its competitors through its new products and services and rapidly growing station network. Opet was the first brand to bring 98 octane unleaded gasoline and to offer Ultra Euro Diesel fuel to Turkish consumers. Opet has a Fuel Guarantee System, whereby Opet reimburses the expenses for fuel system breakdowns in Ford, Fiat and Alfa Romeo branded cars, provided that the fuel is purchased exclusively at Opet stations, without interruption, starting from the first registration.

Introduction of operational efficiencies and profit enhancement programmes Tüpras¸ continuously aims to improve the operational efficiency of its refineries by implementing investment projects that achieve fewer shutdowns and lower maintenance costs whilst decreasing energy costs, improving product yields and lowering accident rates. In March 2010, Tüpras¸, together with Shell Global Solutions, launched its “New Horizons” operational excellence programme and selected 15 investment projects to be implemented through March 2013. These include advance process control implementation, combustion engineering, implementation of a “permit to work system” and creation of energy roadmaps. These investment projects require little or no capital expenditures, and are designed to increase energy efficiency and improve profitability at each of the refineries. Additionally, Tüpras¸ is engaged in ongoing investments to improve its storage and refining capabilities. For example, in 2012, new high capacity pumps were purchased for the Batman refinery to increase bitumen sales and shorten filling time, thereby contributing to operational safety and modernising the refinery

Aygaz has five sea terminals, eleven filling facilities, one cylinder manufacturing facility and one cylinder refurbishing facility, all of which meet international standards and operate with the latest technology. Each year Aygaz invests approximately USD 15 million for improving its facilities and capacity.

Implementation of energy efficiency projects Tüpras¸ aims to implement energy efficiency projects at each of its refineries to avoid energy losses and reduce its refineries’ emissions. Energy efficiency is measured using the Energy Intensity Index (EII). In 2012, Tüpras¸’s EII was 103.4 according to management estimates. Management estimates that previous energy efficiency projects generated cumulative cost savings of over USD 345 million between 2008 and 2012. At the˙ Izmit Refinery, current energy efficiency projects include turbine modification, heat recovery and energy recycling from co-generation waste heat. At the˙ Izmir Refinery, current projects include hydrocracker and base oils complex units’ improvements, renewal of pumps and compressor unloader applications. At the Kırıkkale Refinery, current projects include distillation energy efficiency projects. Tüpras¸ continues to invest in projects which would place it in the top quartile of refineries globally in terms of energy efficiency.

Investment in research and development. R&D investments are key for the Group’s Energy Segment, to ensure sustainability of its competitive strengths and revenue streams.

Aygaz carries out its R&D activities in three main categories: new product development, machine and process improvement, and alternative fuels. Aygaz owns 29 patents, and has applied to the Turkish Patent Institute for three new patents in 2012.

Tüpras¸’s R&D center at I˙zmit opened in 2010 and focuses primarily on process optimisation and improvement. In addition, Tüpras¸ has signed co-operation agreements with a number of academic institutions to assist in Tüpras¸’s R&D initiatives, including Bog˘aziçi University, METU, Bilkent, Sabancı University, I˙stanbul Technical University and the Environment and Chemistry Institutes of TÜBI˙TAK MAM Energy (Turkish Scientific Research Council, Marmara Research Center). A new research campus at I˙zmit is under construction which will provide the necessary resources and infrastructure for future developments in R&D. As part of its R&D efforts in 2012, Tüpras¸ carried out a total of 11 projects approved by TEYDEB and one project approved by the EU’s Seventh Framework Programme (FP7).

The Turkish Petroleum Refining Industry The Mediterranean region in which Tüpras¸ operates is characterised by a structural shortage in middle distillates, such as diesel and gasoil, and overcapacity in fuel oil, gasoline and naphtha. According to EMRA’s 2011 Petrol Market Sector Report, the total number of refineries worldwide decreased to 655 million barrels per day (bpd) from 662 million bpd in 2010. As of 2011, there were 54 refineries in the Mediterranean region and an additional

- 119 - 18 refineries in the Black Sea region with a combined design refining capacity of 362.3 million MT (according to the Oil & Gas Journal, Reuters and other publicly reported data). While Tüpras¸ is currently the only operating oil refiner in Turkey, there are plans for additional refineries to be constructed in Turkey.

The primary driver of increasing oil consumption in Turkey is the growth in the automotive market. In 2012, there were 17 million vehicles in Turkey, an increase of 5.9 per cent. from 2011 (according to TurkStat) and this figure is expected to continue to rise, as vehicle ownership is low in Turkey compared to developed market levels. Additionally, as a result of large infrastructure investments, a major tourist industry and a more competitive, liberalised air travel market, jet fuel demand has greatly increased.

According to EMRA, diesel consumption in Turkey was 14.7 million MT in 2011, an increase of 5.6 per cent. from 2010. The bulk of diesel demand comes from goods vehicles, as Turkey depends heavily on road transportation, but is also the result of a dieselisation process, similar to that recently experienced in western European markets. Gasoline consumption in 2011, however, decreased by 4.7 per cent. from 2010, in part caused by high domestic taxation which is responsible for the switch from gasoline to LPG, and is also due to higher sales of diesel-powered cars. Over the same period, fuel oil demand continued to decline in 2011 in Turkey due to the promotion of natural gas consumption for heating and industrial purposes.

Turkey’s petroleum industry is regulated pursuant to the Petroleum Market Law (Law No. 5015), which liberalised the market as of 1 January 2005. It allows prices to be set by the market and removed all restrictions on importing refined products, except those relating to product specifications. It also stipulated that all market participants acquire a licence from EMRA to operate in Turkey. Licences are granted for a maximum period of 49 years but may be renewed. Refining licences may be terminated by EMRA if (i) the licence holder becomes bankrupt; (ii) the legal entity of the licence holder is terminated; (iii) death of the license holder; (iv) validity of a document submitted during the application is challenged; or (v) the licence holder fails to fulfil an obligation of the licence.

Tüpras¸ The principal operating assets of Tüpras¸ are the I˙zmit, I˙zmir, Kırıkkale and Batman refineries, which have a total combined design capacity of 28.1 million MT per year at 31 December 2012. Tüpras¸ purchased approximately 21.9 million MT of crude oil in 2012. Tüpras¸ has a diverse supply of crude oil imports with the bulk coming from Iran, Iraq, Russia, Saudi Arabia, Kazakhstan, Syria, Italy and Libya, and with domestic production accounting for another 2.4 million MT of crude oil. In 2012, Tüpras¸ bought 14 different types of crude oil from nine countries, with gravities ranging between 21 API and 45 API. Taking into account movements in crude oil stocks, Tüpras¸’s average refinery capacity utilisation rate was 83.5 per cent. in total in 2012.

Crude Supply As a result of the importance Tüpras¸ places on the security of its crude oil supply, it generally enters into one- year supply agreements with its foreign suppliers, which are reviewed and renegotiated on an annual basis, although Tüpras¸ has executed supply contracts of shorter duration with suppliers in some countries. As at 31 December 2012, Tüpras¸ was party to crude oil import supply contracts with the principal supplier in each of the countries set out in the table below (other than with respect to Russia, Kazakhstan and Nigeria from which crude oil is purchased on a spot basis through tender). These contracts specify the level of crude oil to be supplied and the indexed price, which is calculated based on the supplier’s monthly official selling price less a discount; the official selling price is published as a differential to Brent crude. Tüpras¸ provides its crude oil requirements to the suppliers on a monthly basis. On the 5th day of each month, Tüpras¸ submits a strategic plan to the supplier, which designates the amount of a particular crude it wishes to purchase, and normally receives a response from the supplier by the 20th day of the month. The supply agreements are structured to allow Tüpras¸to make adjustments to the amount of cargo it purchases each month from different suppliers (without paying a penalty), in order to account for rapidly changing economic conditions. Tüpras¸ also makes strategic purchases of crude oil on the spot market. For domestic crude, Tüpras¸ is a party to crude supply contracts with the national oil company, Türkiye Petrolleri Anonim Ortaklıg˘ı, and Perenco, an independent E&P company in EMEA.

The coastal locations of the˙ Izmit and I˙zmir Refineries permit them to receive waterborne crude supplies via their marine facilities and Ditas¸’s marine transport capabilities. The˙ Izmir Refinery’s location on the Aegean Sea coast allows lower delivery costs for North African and Middle Eastern crudes. The location of the I˙zmit Refinery on the Sea of Marmara coast allows it to receive Middle Eastern and Mediterranean crudes as well as, potentially, Russian and other Central Asian crudes. The Kırıkkale Refinery is land-locked and supplied through a pipeline from a marine terminal in Ceyhan, both of which are owned by BOTAS¸, which is a Turkish state-owned company.

- 120 - The following table sets out the total volumes of crude oil purchased by Tüpras¸ for processing by country of origin for the periods indicated:

For the year ended 31 December Country* 2012 2011 2010 (millions MT) Iran ...... 7.5 9.7 7.5 Iraq ...... 3.8 3.1 2.1 Domestic ...... 2.4 2.4 2.5 Russia ...... 2.0 2.0 3.7 Saudi Arabia ...... 2.8 2.0 2.0 Kazakhstan ...... 1.5 1.1 1.5 Syria ...... 0 0.3 0.4 Libya ...... 1.0 0 0 Nigeria ...... 0 0 0 Italy ...... 0.3 0.12 0.11 Other ...... 0.6 0.81 0.45 Total ...... 21.9 20.9 19.8

* Crude oil purchased on the spot market is aggregated in the table above with its country of origin.

Tüpras¸ maintains diverse sources of supply. In 2011, purchases of Iranian crude oil increased due to better prices and credit terms that were offered. Additionally, in 2011 due to geopolitical factors, there was a supply disruption in Libyan crude oil which led to price increases for other light sweet crude oils but not heavier Iranian crude oils, which prompted Tüpras¸ to increase its purchases of Iranian crude oil as Tüpras¸ could benefit from the larger light/heavy differentials in the market. Tüpras¸ purchased 9.7 million MT and 7.5 million MT of crude oil from Iran in 2011 and 2012, respectively. See “Risk Factors—Risks Relating to the Businesses of the Group— Importation of crude oil from Iran could subject Tüpras¸ to sanctions, which may have an adverse effect on the Group’s business, financial condition, results of operations and reputation.”

Extraterritorial sanctions relating to Iran In recent years, Tüpras¸ has purchased significant volumes of crude oil from Iran, in part to benefit from beneficial credit terms Iran has provided, the ability to pay in Turkish Lira and the better match for summer asphalt demand which Iranian crude is best suited to use for production. On 30 March 2012, Tüpras¸ publicly announced that it had decided to reduce the volume of its crude oil purchases and shipments from Iran by 20 per cent. Following Tüpras¸’s announcement, on 11 June 2012, the US Department of State issued an exemption from the National Defence Authorisation Act of Fiscal Year 2012 (the “Exemption”) applicable to Turkey, among other countries, allowing non-US financial institutions based in those countries to process payments through the Central Bank of Iran, thereby facilitating the purchase or acquisition of petroleum and petroleum products by non-US persons in those countries. The Exemption noted the significant reduction in the volume of crude oil purchased from Iran by Turkey, among other countries. The Exemption was extended on 7 December 2012 for another six-month period. There can be no assurance that the Exemption will be extended again but in the event that Tüpras¸ is required to eliminate crude oil purchases from Iran, Tüpras¸’s management currently believes that it will be able to procure alternative supplies of crude oil based on discussions with alternative suppliers. See “Risk Factors—Risks Relating to the Businesses of the Group—Importation of crude oil from Iran could subject Tüpras¸ to sanctions, which may have an adverse effect on the Group’s business, financial condition, results of operations and reputation.”

Other than the purchase and importation of crude oil from Iran, both of which are activities that are presently exempt from US extraterritorial sanctions under the Exemption held by Turkey, Tüpras¸ does not have any other business dealings with or for the benefit of (i) a Restricted Country; (ii) any person in a Restricted Country; (iii) any person included on, or owned or controlled by any person on the US Treasury Department’s Office of Foreign Assets Control’s list of Specially Designated Nationals and Blocked Persons; (iv) any person on the consolidated list of persons, groups and entities subject to EU financial sanctions or (v) any person on the Asset Freeze Targets List or the Investment Ban List of Her Majesty’s Treasury.

Other Imports In addition to crude oil, to maintain operational flexibility, Tüpras¸ also imports a range of refined products to meet seasonal fluctuations in demand or production shortfalls, as well as semi-finished products such as ASRFO

- 121 - (Atmospheric Straight Run Fuel Oil), HVGO, naphtha and high sulphur gas oil for processing in Tüpras¸’s refineries. The principal semi-finished product imported in 2012 was high sulphur gas oil, which was desulphurised and sold as Euro V diesel. The principal refined product imported by Tüpras¸ is diesel, for which domestic production only satisfied approximately 34 per cent. of domestic demand in 2012 (according to EMRA). Tüpras¸ imported 791 thousand MT of diesel in 2012 from suppliers in Greece, Italy, India, the United States and other countries. Tüpras¸ generally enters into one-year supply agreements with its diesel suppliers, which are negotiated on an annual basis. Imported refined products are processed (in the case of high-sulphur diesel) and sold to distributors. Total volumes of refined products and semi-finished products imported by Tüpras¸ increased to 4.4 MT in 2012 by 5 per cent. from 2011.

Refinery Production The following table sets out the crude oil distillation design capacity, quantity of crude oil and other feedstock processed, total capacity utilisation rate and quantity of refined products produced by each of the Tüpras¸ refineries for the year ended 31 December 2012:

Capacity Crude Oil Refined Other Capacity Utilisation processed products feedstock (million MT) (%) (million MT) Refinery I˙zmit ...... 11.0 89.7 9.6 9.0 0.6 I˙zmir ...... 11.0 81.3 8.5 8.5 0.8 Kırıkkale ...... 5.0 63.0 3.0 3.0 0.2 Batman ...... 1.1 88.0 0.9 0.9 0.0 Total/Average ...... 28.1 83.5 22.1 22.4 1.4

Sales at the Kırıkkale Refinery are subject to local seasonal demand as it is landlocked. Therefore, Kırıkkale Refinery’s capacity utilisation is generally lower than Tüpras¸’s other refineries.

Tüpras¸ emphasises operational flexibility in setting its production policy. In addition to crude oil refining, Tüpras¸ also processes and converts semi-finished products, or feedstock, that it imports. As a result, Tüpras¸ is able to produce higher margin white products in a cost-efficient manner. Feedstocks are processed by running conversion units at 100 per cent. utilisation rather than utilising capacity of the distillation units which would produce black products.

The following table sets out the consolidated total production yields and the approximate percentages of consolidated total production by product for the Tüpras¸ refineries for the periods indicated:

2012 2011 2010 (‘000 MT) (%) (‘000 MT) (%) (‘000 MT) (%) White Product LPG...... 783 3.5 760 3.5 685 3.3 Naphtha ...... 255 1.1 302 1.4 576 2.8 Gasoline ...... 4,571 20.4 4,292 20.1 3,809 18.5 Jet fuel ...... 3,329 14.9 2,923 13.7 2,657 12.9 Diesel ...... 5,173 23.1 4,975 23.3 2,867 13.9 High Sulphur gasoil ...... 388 1.7 335 1.6 2,044 9.9 Lubricant base stocks ...... 266 1.2 399 1.9 309 1.5 Other White ...... 239 1.1 486 2.3 489 2.4 Sub-total ...... 15,003 66.9 13,586 63.5 12,639 61.4 Black Products Domestic fuel oil ...... — — 425 2.0 431 2.1 Fuel Oil ...... 4,021 17.9 3,287 15.4 3,523 17.1 Asphalt ...... 2,810 12.5 2,959 13.8 2,789 13.6 Other Black ...... 576 2.6 255 1.2 389 1.9 Sub-total ...... 7,407 33.1 7,811 36.5 7,929 38.6 TOTAL ...... 22,411 100.0 21,397 100.0 20,568 100.0

- 122 - Residuum Upgrading Project In recent years, domestic demand for fuel oil in Turkey, a black product, has decreased rapidly, while corresponding demand for diesel and jet fuel, which are white products, has consistently increased. Tüpras¸ began implementing the RUP to increase the I˙zmit Refinery’s capacity for the production of such white products as they are more profitable than fuel oil. The average price differential between fuel oil and diesel was USD 359 per ton in 2012. The RUP is designed to transform 4.3 million tons of black products into 3.5 million tons of white products at Euro V product standards and produce nearly 780,000 tons of side products, including petrocoke and sulphur.

Tüpras¸ has chosen the “delayed coker process” for the RUP, which involves the building of vacuum distillation, coker, hydrocracker, hydrogen (steam methane reformer) and desulphurisation units as well as auxiliary units. The basic engineering work at the coker, vacuum distillation and hydroprocessing units was completed in 2009 and at the hydrogen unit in 2010. Tüpras¸ plans to commission the RUP and expects to begin operations in November 2014. Tüpras¸ believes that the RUP will eliminate the I˙zmit Refinery’s fuel oil production completely, thereby reducing the˙ Izmit Refinery’s black product yield by 50 per cent. and increasing its white product yield to above 80 per cent. (compared to the white product yield of 70.3 per cent. as of 31 December 2012) and increasing capacity utilisation among Tüpras¸’s other refineries, which can then provide a portion of their excess black products as raw material for the˙ Izmit Refinery. Management expects the I˙zmit Refinery’s Nelson Complexity Index to be 14.5 once the RUP is complete, increasing Tüpras¸’s overall average Nelson Complexity Index to 9.9.

The RUP will be mainly financed by USD 2.1 billion in loan agreements, signed on 13 October 2011, a large portion of which is insured by the Spanish export credit agency CESCE and the Italian export credit agency SACE. As of December 2012, a total of USD 1.3 billion has been spent on procurement and construction of the project and as of the end of December 2012 the progress in engineering reached 89 per cent., construction was completed by 29 per cent. and total completion reached 54 per cent. On 21 October 2010, the RUP was awarded tax incentives which Tüpras¸ expects will reduce their future tax liability. The tax incentive programme provides a tax shield of 30 per cent. of the value of the RUP (which Turkish tax authorities set at TL 3.9 billion in March 2011). Once the RUP begins operations, the corporate tax rate for earnings associated with the RUP will be reduced to 10 per cent. from 20 per cent. The 10 per cent. corporate tax rate is effective until the tax collected from the RUP-specific earnings reaches a cap of 30 per cent. of the project value. The Turkish Government has recently announced an additional tax incentive programme for strategic projects which provides for additional tax benefits. Tüpras¸ intends to seek approval for the RUP to be included in the programme although no assurance can be given that this will be accepted.

Sales In 2012, Tüpras¸’s share of the Turkish petroleum product market was approximately 60 per cent. based on diesel, gasoline, jet fuel and fuel oil data from EMRA and company data. The remainder of the market is served via imports by other oil companies, including major oil companies.

The majority of petroleum products produced in Turkey is consumed domestically, although significant volumes of gasoline and fuel oil are exported to UAE, Egypt, Malta, the Turkish Republic of Northern Cyprus and Singapore, among others, due to the domestic surplus of these products. The following table sets out total sales of petroleum products, sold by Tüpras¸’s refineries, split by domestic sales and export sales, for the periods indicated: For The Year Ended 31 December 2012 2011 2010 (thousand MT) Product Domestic Sales LPG ...... 852 883 826 Naphtha ...... 273 198 523 Gasoline ...... 1,782 1,810 1,784 Jet fuel ...... 3,332 2,815 2,640 High-sulphur gasoil ...... 111 78 4,324 Low-sulphur diesel ...... 8,457 7,793 2,388 Fuel oil ...... 1,421 1,361 1,619 Asphalt ...... 2,809 2,951 2,746 Lubricant base stocks ...... 266 380 316 Other ...... 277 477 438 Total ...... 19,581 18,745 17,606 % of total sales (export + domestic) ...... 77.0 78.4 78.6

- 123 - For The Year Ended 31 December 2012 2011 2010 (thousand MT) Product Export Sales LPG ...... 25 23 20 Naphtha ...... 14 168 0 Gasoline ...... 2,859 2,420 2,008 Jet fuel ...... 119 230 110 High-sulphur gasoil ...... 54 53 58 Low-sulphur diesel ...... 141 110 261 Fuel oil ...... 2,511 2,148 2330 Asphalt ...... 0 0 7 Other ...... 137 0 2 Total ...... 5,860 5,152 4,795 % of total sales (export + domestic) ...... 23.0 21.6 21.4 Total Sales ...... 25,441 23,897 22,401

The following tables set out total sales of refined products, split by key customers and by key distribution companies, for the past three years:

2012 2011 2010 (thousand MT) Sales Distributors ...... 11,467 10,965 10,541 Exports(1) ...... 5,860 5,152 4,795 Asphalt ...... 2,809 2,951 2,746 Other(2) ...... 3,722 3,266 2,499 LPG Distributors ...... 852 883 826 Military ...... 458 483 470 Petkim ...... 273 198 523 Total ...... 25,441 23,897 22,401

(1) Tüpras¸’s export products are sold to UAE, Egypt, Malta, the Turkish Republic of Northern Cyprus and Singapore, among other countries. (2) Includes over 45 distributors, including Lukoil and Türkiye Petrolleri and entities that buy and sell bunker fuel.

2012 2011 2010 (in thousand tons) Sales to Distribution Companies POAS¸ ...... 2,921 2,996 3,601 Shell ...... 1,743 1,911 2,324 Opet ...... 1,631 1,593 1,251 BP...... 1,166 1,098 828 Total ...... 328 303 243 Türkiye Petrolleri ...... 367 189 297 Other ...... 3,311 2,873 1,998 Total ...... 11,467 10,963 10,542

Sales to distributors in Turkey are made pursuant to framework contracts at prices established by Tüpras¸ (pursuant to a formula which is based on Platts Genova Italian CIF prices plus a margin below a maximum which has been approved by EMRA). Tüpras¸’s prices are uniform for all distributors on an equal basis, including Opet. Export sales are generally made to traders, typically at FOB spot prices.

Opet Opet is engaged in retail and wholesale activities in fuel distribution in Turkey, the production and marketing of lubricating oil in Turkey, the sales of air transport fuels in Turkey and the international trade of petroleum products. In 2012, the number of Opet’s stations in Turkey increased to 1,325 from 1,271 in 2011. Of these

- 124 - stations, 916 operate under the Opet brand and the remaining 409 under the brand Sunpet. Opet contributed approximately 13 per cent. of Tüpras¸’s operating profit in 2012 and Tüpras¸ supplied 47 per cent. of Opet’s refined product requirements on an arms’ length basis.

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 50.0 per cent. of the total voting rights in Opet and had an effective ownership interest of 17.6 per cent. in Opet, and the Group proportionately consolidated the assets, liabilities, equity, income and expenses of Opet in the preparation of the Consolidated Financial Statements. For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of Opet.

Opet is owned 40 per cent. by Tüpras¸, 10 per cent. by other Group companies and Koç family members and 50 per cent. by Öztürk. Opet is governed by and managed in accordance with a shareholders’ agreement that was made and entered into by and between the Group and the Öztürk family in regards to the acquisition by the Group of a 50 per cent. stake in Opet and to regulate the relationship between the parties thereon in the equal share (50 per cent./50 per cent.) joint venture company. The shareholders’ agreement includes an agreement between the parties to ensure that both have equal management rights in Opet and sets out terms under which the shareholders may dispose of their relevant stakes in Opet. The parties have also agreed not to compete with the business of Opet as defined in the shareholders’ agreement.

With the exception of 19 stations (as of 31 December 2012), Opet does not own its stations. Instead, Opet enters into dealership agreements with distributors who operate stations pursuant to which, in return for a small investment in the business, Opet acts as the exclusive supplier of refined products to the stations.

Opet has a joint venture with Turkish Airlines, THY-Opet, which sells jet fuel to domestic and international airlines throughout Turkey, and a joint venture with German company Fuchs in the lubricating oil business, and trading operations in London and Singapore.

According to EMRA, as of 31 December 2012, Opet had the largest storage capacity in the fuel distribution sector in Turkey. As of 31 December 2012, Opet’s total storage capacity stood at 1.1 million m3 (with six supply terminals with import capability) and Tüpras¸ and Opet jointly controlled more than half of Turkey’s total storage capacity for refined petroleum products and crude oil. In 2012, Opet’s Marmara Ereg˘lisi Terminal continued its storage service contracts with international firms active in oil trade and supply. As of 31 December 2012, 276,000 m3 of storage capacity was leased to an international firm.

Based on figures from Petder, Opet increased its market share in 2012, and as at 31 December 2012 was the second largest refined petroleum products distributor with a market share of 13.6 per cent. for black products (fuel oil and heating oil) and a market share of 18.5 per cent. for white products (gasoline and diesel). In 2012, Opet’s sales in the higher-margin white product market increased by 7 per cent. compared to 2011, while Opet sales in the lower-margin black product market decreased by 18 per cent. compared to 2011.

Opet has one of the leading brands in the petroleum products sector in Turkey. It has consistently held the highest level of customer satisfaction in the petrol sector for the past 7 years according to the results of Turkish Customer Satisfaction Index (TCSI).

The Turkish LPG Market Turkey’s 3.7 million ton LPG market is the second largest LPG market in Europe after Russia—excluding petrochemicals (according to WLPGA Statistical Review of Global LP Gas Report, 2011). Turkey is followed by the United Kingdom, Italy and France, respectively. With increasing penetration levels of natural gas in Turkey, the cylinder and bulk gas markets faced some shrinkage. However, the shrinkage in these segments has been offset by the consistent growth of the autogas segment, which resulted in 1-2 per cent. overall growth in the LPG market per year. According to EMRA’s 2012 annual report, the share of autogas as part of total LPG consumption increased from 57 per cent. to 73 per cent. in the last 5 years. On the other hand, the share of cylinder gas stands at 24 per cent. as of the year-end of 2012. According to EMRA, there are 72 LPG distribution companies in Turkey which serve 10 million homes and 3.5 million automobiles in Turkey. Despite the fragmented market and strong competition, Aygaz has been the market leader since its establishment and sustains a market share of approximately 30 per cent.

- 125 - LPG Distribution Business—Aygaz Aygaz is the Group’s LPG distribution company with consolidated total assets of TL 3 billion and consolidated net sales of TL 5.6 billion (USD 3.1 billion), whereas EBITDA and net profit was TL 267 million (USD 149 million) and TL 304 million (USD 169 million), respectively, as at and for the year ended 31 December 2012.

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 51.2 per cent. of the total voting rights in Aygaz and had an effective ownership interest of 40.7 per cent. in Aygaz, and the Group fully consolidated Aygaz in the preparation of the Consolidated Financial Statements.

The main activity of Aygaz is the bulk purchase and distribution of liquid petroleum gas (LPG) from both domestic refineries and the overseas market. Aygaz transports LPG that it purchases either by sea through one of its four seaborne vessels and five sea terminals, by road through its fleet of LPG tanker trucks (the largest such fleet in Turkey), or by pipeline. It can then store the LPG through its 170,000m3 LPG storage capacity, the largest in Turkey. Some LPG can then be delivered to bulk residential or commercial customers, or to its autogas filling stations where it is sold to motorists. Aygaz also has eleven filling plants into which the LPG is processed as cylinder gas, which is then provided to customers in Turkey through one of thousands of cylinder gas dealers. Following a merger with Gaz Aletleri A.S¸. in 2001 it has also become a manufacturer and seller of LPG cylinders, tanks, valves and regulators that are exported to 22 EMEA countries. Aygaz also provides transportation services on behalf of other LPG companies.

Like many other developing countries, energy need in Turkey is growing rapidly and the country is mostly dependent on imports for supply. Natural gas, mostly imported from neighbouring countries via pipelines, is an important source of energy for Turkey. Through its subsidiary, Aygaz Dog˘al Gaz, Aygaz is actively working on capturing opportunities in this segment.

Market Share and Brand Recognition According to data from EMRA, Aygaz is the leader of the Turkish LPG sector in 2012 with a market share of 29 per cent. By the end of 2012, Aygaz had a market share of 43 per cent. of the cylinder gas market and 23 per cent. in the autogas market. In the year ending 31 December 2011, Aygaz had a 40 per cent. share in the cylinder gas market, 23 per cent. in the autogas market and 28 per cent. in the LPG sector.

Aygaz is known as Turkey’s generic brand of cylinder gas and considers innovation and reliability as its most important priorities. Aygaz follows the changing market and business conditions closely and works to adapt quickly. Aygaz engages in brand-related investments and promotions to be competitive against other market participants.

Factors such as Aygaz’s effective logistics infrastructure, operational efficiency in primary transportation, geographical distribution of suppliers for supply, use of different brands for different segments, strong inventory turnover and financial strength, and use of technology in reaching consumers have contributed to Aygaz’s leading position in the market and brand value.

Suppliers and Supply Contracts Aygaz has a diversified mix of suppliers. Aygaz’s strategy for supply security is based on diversification of sources and avoiding dependence on any single area or country. Aygaz imports its supplies from high volume producers, such as Chevron, Sibur, Sonatrach and Statoil.

The company enters into long-term contracts (mostly one year) with its suppliers and also purchases LPG on the spot market. This gives Aygaz the flexibility to avoid any potential uncertainty that might occur in the market. Liberal market conditions allow Aygaz to reflect changes in commodity prices or exchange rates in its selling price, avoiding pressure on margins.

Distribution Network Aygaz serves customers in 81 provinces with 2,290 cylinder gas dealers and 1,491 autogas stations. Due to the extensive distribution network, Aygaz cylinders are delivered to over 100,000 homes every day, while over one million vehicles travel with Aygaz’s autogas product, Aygaz Otogaz+, every day.

- 126 - Aygaz has five sea terminals with 11 filling facilities operated with state-of-the-art technology in compliance with international standards. With storage capacity of 170,000 m3, Aygaz has the highest LPG storage capacity in Turkey.

Aygaz owns the largest fleet of overland tankers in the country, with 307 tankers and 230 cylinder vehicles. Additionally, Aygaz has a fleet of four ships which reduces its logistics costs and provides flexibility in sourcing and inventory management.

International Sales Due to the contraction in European and Turkish cylinder and bulk gas markets, Turkish companies, and particularly Aygaz, have captured strong sales potential and increased exports by focusing on Middle Eastern, African, and Gulf countries, where the use of LPG has been consistently growing. Although the Turkish market is still the main market of focus for the LPG business, in 2012 Aygaz increased its number of export markets to 22 and the share of exports in total sales increased to 12 per cent. compared to 9 per cent. in 2011. Aygaz was able to increase its international trading volume in LPG by partnering with different companies in various countries including Vitol S.A, Totsa, SHV and Naftomar.

Technology Investments and Intellectual Property Rights Aygaz’s production process meets international standards and operates with the latest technology. Its goal is to be innovative, competitive and to meet the highest standards in its products. The materials used by Aygaz in the domestic market such as cylinders, valves, small bulk tanks, and regulators are produced using state-of-the-art technology at the Gebze facility, which operates in accordance with the ISO 9001:2008 Quality Control System. Aygaz has 52,000 m2 of outdoor space and 25,000 m2 indoor space. In 2012, ISO 50001 Energy Administration Certification was obtained, combining advanced technology with high quality and security standards.

Power Generation Business—AES Entek AES Entek operates two natural gas combined cycle plants and one gas turbine-based cogeneration facility in Kocaeli, another in Bursa and a third on the Koç University Istanbul campus. AES Entek also has three hydroelectric power plants, two in Karaman and one in Samsun, which have a combined hydroelectric installed capacity of 62 MW. AES Entek has a combined installed capacity of 364 MW.

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 49.6 per cent. of the total voting rights in AES Entek and had an effective ownership interest of 34.9 per cent. in AES Entek, and the Group proportionately consolidated the assets, liabilities, equity, income and expenses of AES Entek in the preparation of the 2011 and 2012 Consolidated Financial Statements. For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of AES Entek.

With the addition of a 4,000 MW-investment, Turkey’s installed capacity grew to 57,060 MW in 2012 by 8 per cent. AES Entek holds 1.6 per cent. of Turkey’s private sector electricity producers’ installed capacity and it accounts for 1.44 per cent. of private sector electric power production. The power generated by AES Entek is mostly transmitted through existing power lines to the Market Financial Settlement Center (PMUM), while a portion goes directly to customers, and the remainder goes as steam power from its plants in Bursa and Kocaeli.

Operations—Automotive Segment Overview The Group’s operations in its automotive segment are principally carried out by Ford Otosan and Tofas¸. Other Group companies that comprise the automotive segment include TürkTraktör, Otokar and Otokoç. The Group’s automotive companies lead the Turkish automotive industry, accounting for 50 per cent. of the total Turkish automotive production, 47 per cent. of total automotive exports and 27 per cent. of the total automotive sales in Turkey in 2012 (according to the Automotive Manufacturers’ Association and company data). For the year ended 31 December 2012, total combined production of Ford Otosan and Tofas¸ was approximately 530,000 units and total revenue for the Automotive Segment for the year ended 31 December 2012 was TL 10.14 billion.

- 127 - Established in 1959 as Otosan AS¸, Ford Otosan is a publicly traded company that operates under the equal partnership of Ford and the Company since 1997. Historically Ford Otosan has pioneered automotive R&D in Turkey, manufacturing Turkey’s first automobile in 1966 and Turkey’s first diesel engine in 1986. Ford Otosan now manufactures commercial vehicles under the Ford brand and sells a diverse range of Ford passenger cars and commercial vehicles in the Turkish domestic market. Ford Otosan started manufacturing the Ford Transit in 1967, Ford Cargo trucks in 1983 and the Ford Transit Connect in 2002. Additionally, Ford Otosan is an exporter of vehicles and automotive parts in diversified export markets, encompassing 76 countries. It was the first Turkish company to export vehicles to the United States in 2009.

For the year ended 31 December 2012, Ford Otosan’s total revenue was TL 9,768 million, a year-on-year decrease of 6 per cent., and net profit for the year was TL 675 million, an increase of 2 per cent. from the prior year. Ford Otosan was the leader of the Turkish total automotive market for the 11th consecutive year with a market share of 13.8 per cent. in 2012 (according to the Automotive Manufacturers’ Association and company data).

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 41.0 per cent. of the total voting rights in Ford Otosan and had an effective ownership interest of 38.5 per cent. in Ford Otosan, and the Group proportionately consolidated the assets, liabilities, equity, income and expenses of Ford Otosan in the preparation of the Consolidated Financial Statements. For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of Ford Otosan. Ford Otosan is listed on the Borsa I˙stanbul and its market capitalisation was USD 4,225 million as of 31 December 2012.

Tofas¸ is a joint venture between the Company and Fiat Group Automobiles S.p.A. Established in 1968, Tofas¸ produced its first passenger car in 1971 named “Murat 124”. In 1993, Tofas¸ produced Tempra with the highest local parts proportion of 60 per cent. at that time. Tofas¸ also began producing the Doblo and MiniCargo in 2000 and 2005, respectively, which grew exports. Tofas¸ is the only automotive company in Turkey that manufactures both passenger cars and light commercial vehicles. It has the largest production capacity in the Turkish automotive industry. It manufactures vehicles for five global brands; Fiat, Peugeot and Citroen as well as Opel and Vauxhall, and is one of Fiat Group Automobiles S.p.A.’s three largest R&D and production centres in the world.

For the year ended 31 December 2012, Tofas¸’s total revenue was TL 6,705 million, a decrease of 9 per cent. from the prior year, and net profit for the year decreased 5 per cent. to TL 448 million. Tofas¸ ranked second in Turkey’s automotive market in 2012 with a 12.9 per cent. market share (according to the Automotive Manufacturers’ Association and company data).

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 37.9 per cent. of the total voting rights in Tofas¸ and had an effective ownership interest of 37.6 per cent. in Tofas¸, and the Group proportionately consolidated the assets, liabilities, equity, income and expenses of Tofas¸ in the preparation of the Consolidated Financial Statements. For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of Tofas¸. Tofas¸ is listed on the Borsa I˙stanbul and its market capitalisation was USD 2,939 million as of 31 December 2012.

TürkTraktör was founded in 1954 and exported Turkey’s first farm tractor in 1979. It now has a 50 per cent. share of the Turkish domestic tractor market in 2012 based on traffic registration units (according to TurkStat). In the same year annual production stood at 40,000 units with exports to over 90 countries worldwide. TürkTraktör operates a network of 100 dealers and employs a workforce of nearly 2,400 people. Total revenues for TürkTraktör in 2012 were TL 1,974 million. TürkTraktör is listed on the Borsa˙ Istanbul and its market capitalisation was USD 1,749 million as of 31 December 2012.

Otokar was founded in 1963 to manufacture intercity busses under the licence of Magirus Deutz in˙ Istanbul. In 1977, Koç Holding acquired the majority shares of Otokar. After signing an agreement with Land Rover in 1987, Otokar started to manufacture Land Rover Defenders and thus, entered into the defence industry. From the 1990s onwards, the company has been developing its own technology for military vehicles as well as busses in various sizes. Otokar is listed on the Borsa I˙stanbul and its market capitalisation was USD 572 million as of 31 December 2012.

Otokoç, founded as the first automotive company of the Group in 1928, is involved in the retailing and servicing Ford, Fiat, Alfa Romeo, Jeep, Lancia and Volvo brand vehicles in Turkey. The company also represents the Avis and Budget car rental businesses in Turkey.

- 128 - Strengths The key strengths of the Group’s Automotive Segment are the following:

Strong joint venture partnerships The Group has strong and long-standing joint venture partners (including Ford Motor Company, Fiat Group Automobiles S.p.A. and CNH Global NV). Cooperation with Ford Motor Company started in 1928, developing into manufacturing in 1960 and the Company continues to maintain an equal-share joint venture company in Ford Otosan since 1997. Being the first automotive company in Turkey, Ford Otosan had a first-mover advantage in the Turkish automotive industry and benefited from Ford Motor Company’s expertise in the business and the Group’s knowledge of the Turkish market.

Tofas¸ is also an example of a long-standing joint venture partnership. It was founded in 1968 as a joint venture by Koç Holding and Fiat Group Automobiles S.p.A.. Tofas¸ manufactures products for five different brands (Fiat, Peugeot, Citroen, Opel, Vauxhall) and distributes six brands (Fiat, Alfa Romeo, Lancia, Jeep, Ferrari and Maserati) in the Turkish market.

Core market leadership The Group’s automotive companies are the long-standing leaders in the under-penetrated automotive market in Turkey and well positioned to take the most benefit of the growth potential going forward. Compared to developed countries, Turkey has fewer cars per 1,000 adults, at 151 whereas countries such as the United States have 581 and the United Kingdom has 608 (according to LMC Automotive 2012 data). Despite changing macro conditions and heightened competition with almost all global brands, both Ford Otosan and Tofas¸ have maintained their positions in the Turkish market with their strong brand image and wide distribution networks throughout the country. Benefiting from their low cost structure, high efficiency and flexibility in their production plants, Ford Otosan and Tofas¸ are able to achieve almost half of the Turkish manufacturing and export of motor vehicles, and 27 per cent. share in the domestic market sales.

Ford Otosan was the leader in the total Turkish automotive market for the eleventh consecutive year with a market share of 13.8 per cent. in 2012. It ranked fourth in passenger cars with 8.5 per cent., first in light commercial vehicles with 26.7 per cent. and second in heavy commercial vehicles with 20 per cent. market share (according to the Automotive Manufacturers’ Association and company data). Tofas¸, ranks second in market share with 12.9 per cent. of the total automotive market including Fiat, Alfa Romeo, Lancia and Jeep brands (according to the Automotive Manufacturers’ Association and company data). It ranked fifth in the passenger car market with 8.3 per cent. and second in the light commercial vehicle market with 26.2 per cent. market share (according to the Automotive Manufacturers’ Association and company data).

Wide distribution network Both dealer and after-sales networks are critical in the automotive industry. Customers who purchase a vehicle often form long-lasting relationships with the brand and the representatives of the brand that they come in contact with over the lifetime of the vehicle. The Group has a competitive advantage with the largest distribution and after-sales network in Turkey with more than 400 points of contact. Constituting an important criterion in buying decisions, both Ford Otosan and Tofas¸ have wide-spread after-sales service points throughout Turkey. Furthermore, the companies are also strong in spare parts distribution as a supportive instrument in after-sales service quality especially for non-exclusive dealers within their networks.

Advantageous export contracts For both Ford Otosan and Tofas¸, over 50 per cent. of sales originate from international markets. The Group’s companies work with large-scale export contracts and most contracts are secured through clauses such as cost plus or take-or-pay. Ford Otosan is the export leader in the Turkish automotive industry and the second largest exporter overall, constituting 60 per cent. of Turkey’s total commercial vehicle exports. Its export destinations are diversified geographically with 76 countries in 5 continents. Ford Otosan has a single counterparty for its export receivables, Ford of Europe and its export agreements include a cost-plus clause for light and medium commercial vehicles.

Tofas¸ is the only Turkish company exporting both passenger cars and commercial vehicles, constituting more than 20 per cent. of Turkish exports based on units (according to the Automotive Manufacturers’ Association).

- 129 - Exporting to more than 80 countries in five continents, most of Tofas¸’s export performance is guaranteed by contracts until end-2018. Tofas¸ has take-or-pay advantage in its export agreements covering 72.5 per cent. of its total capacity, ensuring that Tofas¸ is paid for its costs and a mark-up even if vehicles are not ordered.

Leading R&D capabilities The Group’s companies have a strong R&D focus. This focus makes Ford Otosan, Tofas¸ and TürkTraktör an important manufacturing and development hub for their partners and the sole manufacturers of certain models. Ford Otosan has Turkey’s largest R&D organisation in terms of the number of engineers employed. As one of the three biggest R&D centers of Ford globally, Ford Otosan is the only design and engineering center for Ford’s global heavy commercial vehicles and the global development center for diesel engines for heavy commercial vehicles. Due to its well-respected R&D capability, Ford Otosan’s R&D centre is also engaged R&D and engineering services to Ford Motor Company on a project basis.

Tofas¸’s R&D department was founded in 1994 and registered in 2008 as one of the first R&D centers in Turkey. It is one of the three R&D centers within the Fiat network in the world and the second largest in Europe. Tofas¸ owns the intellectual property rights of the two light commercial vehicles it produces, the MiniCargo and New Doblo.

High growth, high margin segments The Group focuses on high growth and high margin segments (e.g. light commercial vehicles) both in Turkey and in the EU and seeks opportunities in new segments such as heavy commercial vehicles. All of Ford Otosan’s and a majority of Tofas¸’s productions consist of commercial vehicles. Within the automotive industry, the commercial vehicle market has higher growth potential, given that even in the European market, which contracted to 20-year-low levels, the commercial vehicle market stayed stable in recent years. Furthermore, margins also are higher in commercial vehicles with fewer manufacturers compared to passenger cars, hence less competition. Focusing on commercial vehicle production makes both Ford Otosan and Tofas¸ among the top companies in the Ford and Fiat global networks in terms of profitability.

Supportive ecosystem The Turkish market is a strong manufacturing hub as it has a highly skilled and experienced workforce, lower labor costs compared to developed countries, strong supply base and high usage of local supply. The Group’s automotive companies can take advantage of these positive attributes since they can attract the best workforce and work with the highest quality suppliers. With the manufacturing excellence they have attained, the Group’s automotive companies also support the supply base in terms of R&D culture and improvement in manufacturing and business processes.

Strategy The key elements of the Group’s strategy in its Automotive Segment are the following:

Grow as a product development and manufacturing hub Turkey has important competitive advantages in automotive manufacturing. Although its low labor cost advantage has decreased to some extent, Turkey is still one of the best production hubs given that its efficiency level is higher than peer countries. High efficiency stems from an experienced and highly competent workforce and flexible manufacturing conditions. The Group’s automotive companies, based on the reputation of the Group, as the leader in the Turkish Reputation Index 2011 (research conducted by Xsights Research & Consultancy), can attract the good workforce in the industry. Ford Otosan and Tofas¸, have world class manufacturing capabilities and also apply standards to their suppliers to ensure high quality products.

Become a technology provider for global partners Ford Otosan has the largest R&D Center in the Turkish automotive industry with over 1,200 R&D engineers working at its Kocaeli and Gebze (Technology Free Zone) locations. These centers conduct R&D activities for Ford Otosan products and engineering services for Ford Motor Company. In heavy commercial vehicles, Ford Otosan is Ford’s global engineering center. Ford Otosan has the capability and infrastructure to design, develop and test a complete vehicle end-to-end, including its engine. Ford Otosan has a significant position in product development and engineering within the global Ford network, providing engineering services for products that are not produced by Ford Otosan.

- 130 - Having established its R&D department in 1994, Tofas¸ employs more than 400 R&D engineers. In 2008 it was registered as an “R&D Center”, one of the first such R&D centers in Turkey. It is one of the three R&D centers in the global Fiat network and the second largest in Europe. Tofas¸ owns the intellectual property rights of the two light commercial vehicles it produces; the MiniCargo and New Doblo.

Maintain domestic market leadership through competitive product line up and marketing strength Regardless of changing macro conditions and strenuous competition with almost all global brands, Ford Otosan and Tofas¸ maintain their positions in the Turkish market with strong brand image and availability throughout the country. To sustain their positions in the market both companies give priority to marketing and customer satisfaction.

Ford Otosan offers a complete product line-up, from passenger cars to heavy commercial vehicles, to Turkish customers. Besides serving as a manufacturing hub, as Ford’s exclusive distributor in Turkey, Ford Otosan supports Ford’s global marketing strategies such as the “Ford is a technology brand” motto while democratising the technology in Turkey. Ford Otosan follows the trends and media habits of its customers through continuous research and shapes its marketing strategies accordingly. Without ignoring conventional mediums, Ford Otosan recently increased investments in digital media to take advantage of emerging innovative marketing techniques.

Tofas¸, which distributes the Fiat, Alfa Romeo, Lancia and Jeep brands, also sells Ferrari and Maserati in Turkey. With its wide variety of brands, Tofas¸ places high importance on its marketing strategy which is organized into three elements—strategic brand and model communication, tactical sales communication and new model launches. Marketing communication is a crucial tool in Fiat’s success in the Turkish market to achieve a significant increase in Fiat brand image according to Car Parc Study 2012. To further increase the brand image, marketing communication strategy will be emphasizing product novelties and unique selling propositions in a differentiating style, which blends them into Fiat brand promise.

Maximise efficiency through economies of scale and high capacity utilisation rate In the automotive sector, one of the most important performance indicators is the capacity utilization rate. According to industry statistics, a healthy capacity utilization level is considered to be approximately 80 per cent. for an automotive manufacturing company.

Ford Otosan realised 82 per cent. of capacity utilization in 2012. With new product launches in 2013 and 2014, its management expects it will sustain capacity utilization rates above Turkish and European industry averages. Tofas¸ utilized 64 per cent. of its capacity in 2012. However, due to its export contracts, two-thirds of its installed capacity is reserved for its export customers and the fixed cost plus mark up of this capacity is guaranteed by take-or-pay contracts. Therefore, Tofas¸ believes that from a financial perspective, its effective capacity utilization rate can actually be considered around 90 per cent.

The Turkish automotive market has high growth potential given the economic growth expectations, favourable customer credit conditions and low penetration rates compared to peer countries. Additionally, the ability of the Group’s automotive companies to export large quantities of their products creates an advantage of economies of scale and ensures feasible capacity utilization rates.

Products The Group’s Automotive Segment manufactures a wide range of products including passenger cars (“PC”) as well as commercial vehicles (“CV”) which include light commercial vehicles (“LCV”), medium commercial vehicles (“MCV”) and heavy commercial vehicles (“HCV”). Through TürkTraktör and Otokar, the Group produces tractors, trailers, buses and tactical armoured vehicles.

The following table sets forth the domestic unit sales volume of the Group’s Automotive Segment by vehicle categories for the periods indicated (excludes farm tractors and tactical armoured vehicles).

Sales (Units) 2012 2011 2010 Passenger Car (PC) ...... 93,452 117,651 101,438 Light Commercial Vehicle (LCV) ...... 81,293 103,246 92,975 Medium Commercial Vehicle (MCV) ...... 38,460 44,264 37,665 Heavy Commercial Vehicle (HCV) ...... 5,996 8,356 4,668 Total ...... 219,201 273,517 236,746

- 131 - Market /Industry The total automotive market in Turkey declined to 818,000 units in the year ending 31 December 2012, a drop of 10 per cent. in volume compared to the year ending 31 December 2011. In addition, total production in the Turkish automotive industry decreased by 10 per cent. in 2012 to 1.1 million vehicles (according to the Automotive Manufacturers’ Association). The industry’s domestic sales performance is tabulated below: Year ending 31 December (Units) 2012 2011 2010 HCV...... 39,859 46,428 32,259 L&MCV ...... 221,481 270,920 251,129 PC...... 556,280 593,519 509,784 Total: ...... 817,620 910,867 793,172

Commercial vehicles The domestic commercial vehicle market in Turkey contracted by 17.6 per cent. in the year ending 31 December 2012, due to adverse factors affecting the market, compared to a growth of 12 per cent. in the year ending 31 December 2011. Prominent among the extrinsic events affecting the market were the slower pace of economic growth following measures taken to cool down the economy due to the current account deficit and a contraction in the light commercial vehicle segment caused by increases in the special consumption tax (SCT) in October 2011. The light and medium commercial vehicle market declined by 18 per cent. in 2012, principally due to the SCT raise that was introduced in October 2011. The heavy commercial vehicle segment also contracted in 2012, compared to the significant increase of 44 per cent. in 2011 (according to Automotive Manufacturers’ Association). While the market was buoyed by public purchases and tenders, the bus segment fell by 7 per cent. and the large truck segment dropped by 18 per cent.

Passenger cars The contraction in the passenger car market in 2012 has been limited to 6 per cent., as a result of sales campaigns by most brands subsidizing the SCT increase. Passenger car production in Turkey contracted by 10 per cent. in 2012 due to decreasing exports and domestic sales, as well as an increasing proportion of imports. This was despite the increase in SCT on combi-class light commercial vehicles in October 2011 from 10 per cent. to 15 per cent., which resulted in a shift from light commercial vehicles to passenger cars. The passenger car share of the market increased from 65 per cent. to 68 per cent. in 2012. The segment’s domestic sales performance is tabulated below: Year ending 31 December (Units) 2012 2011 2010 Small Cars (A&B) ...... 168,828 187,776 172,792 Mid-Size Cars (C) ...... 313,701 331,835 284,472 Others ...... 73,751 73,908 52,520 Total Passenger Cars: ...... 556,280 593,519 509,784

In Europe, the Turkish automotive sector’s largest export market, passenger car unit sales numbered just 12.5 million in 2012, the lowest in 20 years as a result of continued weakness in European market conditions. Europe has seen a decrease of 7.9 per cent. in its automotive market (according to ACEA (European Automobile Manufacturers’ Association) EU27+EFTA data). Of the four largest European automotive markets, the UK rose by 4 per cent., while Germany, France and Italy declined by 3 per cent., 13 per cent. and 21 per cent., respectively.

Farm Tractors In 2012, Turkey was the world’s 5th largest farm tractor market. According to TurkStat traffic records, 50,318 farm tractors were sold in the Turkish market in 2012, a 17 per cent. decrease compared to 2011, which had record sales level of 60,341 units. Unfavorable weather conditions

- 132 - in some parts of the country kept harvest yields, especially for grain producers, at average levels. Ziraat extended fewer loans to the sector, but lower interest rates were available, especially from commercial banks newly entering the market.

Year ending 31 December (Units) 2012 2011 2010 Farm Tractor sales ...... 50,318 60,341 36,032

Competition The Group’s Automotive Segment faces competition from various domestic and foreign automotive manufacturers in the Turkish automotive market. Improving infrastructure and robust growth prospects compared to other mature markets is now attracting a number of international companies to Turkey who have either created joint-ventures with local partners or have established independently owned operations in Turkey. Main brands in the market holding a total 80 per cent. share, other than Fiat and Ford, are Volkswagen, Renault, Opel, Hyundai, Mercedes, Toyota, Citroen, Peugeot and Dacia. Global competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources. Hence, competition is likely to further intensify in the future. Examples of the latest entrants in the Turkish market include Mercedes’ light commercial vehicle Citan and Dacia’s Dokker in small sub-segment of the light commercial vehicle segment.

The Group’s market share in the domestic automotive market was 27 per cent., 30 per cent. and 31 per cent. in 2012, 2011 and 2010 respectively (according to Automotive Manufacturers’ Association and company data). Ford Otosan and Tofas¸ have been the market leader and the second leading player, respectively, in the total Turkish automotive market for the last four years.

In the domestic market, the Group’s automotive products have been designed to suit the requirements of the Turkish market based on specific customer needs such as safety, driving comfort, fuel efficiency and durability. The Group’s vehicles are suited to the general conditions of Turkish roads, and the local climate and they comply with applicable environmental regulations currently in effect. Additionally, a wide range of optional configurations is offered to meet specific customer needs. The Group’s automotive companies are developing products to strengthen their product portfolio in order to meet increasingly high customer expectations.

In the export market, the Group’s Automotive Segment operates in a globally competitive environment and faces stiff competition from established premium and other vehicle manufacturers. The European LCV (up to 3.5 tons) market volume was 1.5 million vehicles in 2012, down 7 per cent. compared to 2011. The largest markets are France, UK, Germany and Italy, accounting for 68 per cent. of the total market (according to ACEA). The main companies competing in the European LCV market are PSA, Renault, Volkswagen, Fiat and Ford. The vehicles manufactured and exported by Group’s automotive companies suit the requirements of European markets within the scheme of latest Euro norms. Ford Otosan and Tofas¸ vehicles compete primarily against other European brands such as Volkswagen, Peugeot, Renault, Citroen and Mercedes. Furthermore, Ford Otosan manufactured a Transit Connect model suitable for the North American market and has been exporting to the United States since 2009. Tofas¸ is continuing a project to export the Doblo to the United States, with again all the specifications required by the American regulations. TürkTraktör vehicles compete largely against farm tractors manufactured by John Deere and Massey Ferguson.

In recent years, the tax regime applicable to the automotive industry in Turkey has undergone changes stemming from the Government’s measures to deliberately slow down the economy. In October 2011, the SCT on passenger cars with an engine size of greater than 2000cc and those with an engine size between 1600cc and 2000cc, increased from 84 per cent. to 130 per cent., and from 60 per cent. to 80 per cent., respectively. In September 2012, the SCT was increased on passenger cars with an engine size of less than 1600 cc from 37 per cent. to 40 per cent. Despite the increase in SCT on certain commercial vehicles such as the Transit Combi and Connect Combi from 10 per cent. to 15 per cent. in October 2011, the commercial vehicle market benefited from the additional SCT levied on passenger cars.

Production Process and System Production processes vary for different categories of motor vehicles. However, production of motor vehicles generally involves the following main steps: • chassis processing and assembly, during which chassis parts including the front and rear axles and steering units are processed and mounted onto the frame to form a complete chassis; • stamping (pressing), during which steel plates are stamped into body parts of vehicles;

- 133 - • welding, during which vehicle body parts are welded to form vehicle bodies; • painting, which involves middle electrophoresis painting, layer painting and surface coating to withstand corrosion; • final assembly, during which the complete chassis, complete engine unit and other auto parts (including auto parts purchased from suppliers) are assembled into a complete motor vehicle; and • pre-delivery inspection, during which all finished products are put to quality testing before delivery to ensure consistent and high quality standards.

Ford Otosan Ford Otosan is an equal share joint venture between the Company and Ford Motor Company. In connection with the equalization of shares in the joint venture, the Company, other certain Group companies and Ford Motor Company entered into a stock acquisition and joint venture agreement on 27 June 1997. Along with the terms and conditions governing the transfer of Ford Otosan shares to Ford Motor Company, the agreement regulates the organisation, administration and operation of Ford Otosan under the joint control of the entities after the share transfer. In governing the relationship between the parties, the agreement includes exclusivity and non- competition provisions, such as preventing any Ford company from manufacturing Ford trademark vehicles in Turkey or by exporting the same to any purchaser in Turkey other than Ford Otosan by itself or by licensing any entity other than Ford Otosan, and with certain exceptions, preventing the Group companies which are party to the agreement from investing in companies the products of which are the same or substantially similar to those of Ford Otosan. The agreement provides the parties with equal representation in the board of directors of Ford Otosan by granting the right to nominate an equal number of board members to the Group companies which are party to the agreement and Ford Motor Company. The agreement divides the right to appoint senior management roles between the partners. The agreement also sets forth the terms under which the shareholders may dispose of their relevant shares and grants right of first refusal to the non-selling shareholders in the event one of the shareholders wishes to sell its shares to a third party.

Being the first automotive company in Turkey, Ford Otosan had a first-mover advantage in the Turkish automotive industry and benefited from Ford Motor Company’s expertise in the business and the Group’s knowledge of the Turkish market.

Products Ford Otosan offers a diverse product portfolio of both manufactured and imported Ford models domestically in Turkey. In 2012, Ford Otosan was the Turkish automotive market leader with a market share of 13.8 per cent. (according to the Automotive Manufacturers’ Association and company data).

The following table sets forth Ford Otosan’s product lines as of 31 December 2012, including imported products sold domestically in Turkey.

Products Type Size Models PC...... Hatchback Compact Ford Fiesta Sedan/Hatchback Medium Ford Focus Sedan Large Ford Mondeo Sport Utility Vehicle Medium Ford Kuga Multi-Activity Vehicle Large Ford Galaxy Multi-Activity Vehicle Large Ford S-Max Medium Ford C-Max LCV...... Van Small Ford Transit Connect MCV...... Van Large Ford Transit Custom and Tourneo Custom HCV ...... Cargo/Construction/Tractor Various Ford Cargo series Truck Medium Ford Ranger

Ford Otosan manufactures a range of light, medium and heavy commercial vehicles in Turkey, including general purpose trucks and vans, as well as heavy-duty diesel trucks. It is the lead manufacturer of the Ford Transit and one of two production centres globally for Ford Cargo heavy trucks. A brief description of its main manufactured products follows: • Transit is a medium commercial vehicle in the 2 ton+ segment. Transit aims to fulfil the business needs of a large customer group with van, bus and pickup derivatives. It is also the longest-running model in Ford of

- 134 - Europe’s product range and the existing generation will be slowly phased out due to the end of its 10-year life-cycle. Transit received the “International Van of the Year” award in 2001 and 2007, from a jury consisting of representatives from transportation magazines in European countries. • Transit Connect is in the light commercial vehicle segment, with van and combi derivatives produced since 2002. Engineered in Turkey, Transit Connect is exported to many countries including North America. Transit Connect received “North America Truck of the Year” award in 2010. The next generation of the Connect will be manufactured in Valencia, Spain. • Transit Custom is the new Ford medium commercial vehicle in the 1 ton+ short wheel base combi and van derivatives, used for the transportation of goods and people. Ford Otosan is the single source for the Transit Custom. Transit Custom, which was launched in 2012, received the “International Van of the Year” award in 2013 from a jury consisting of representatives from transportation magazines in European countries and was the first commercial vehicle to receive a 5-star rating in Euro NCAP safety tests. • Tourneo Custom is the new Ford medium commercial vehicle in the 8+1 bus segment. Tourneo Custom is targeted at people transportation sectors such as tourism. Ford Otosan is the single source for the Tourneo Custom and the vehicle holds a 5-star rating in Euro NCAP safety tests. • Ford Cargo tractor, road and construction trucks offering technology, durability and performance at a low cost of ownership.

The following table sets forth the production figures of Ford Otosan by vehicle categories for the years ended 31 December 2012, 2011 and 2010. Production (Units) 2012 2011 2010 LCV ...... 104,661 102,066 85,216 MCV...... 160,081 184,545 151,989 HCV...... 7,362 9,239 4,872 Total ...... 272,104 295,850 242,077

Sales, Distribution and Service Domestic Sales As of 31 December 2012, Ford Otosan had a sales and after-sales network of 116 authorized dealers and 158 service centres across Turkey, providing maintenance, services and repairs. Turkey is the fourth largest Ford market in Europe. As of 31 December 2012, there were 205 Ford Otosan dealers in Turkey, with 69 of them also serving as service centers.

Ford Otosan audits the business activities, CRM performance and financial health of the dealers and does not provide any financing or credit support to the dealers.

Ford Otosan believes it has generated substantial brand loyalty with its customers. For the past 11 consecutive years, Ford Otosan has been the market leader in Turkey by unit sales. To foster this increasingly important brand loyalty, it has placed emphasis on its after-sales service and direct marketing to existing owners. Retail customers and fleet customers are the main customer channels which are served through sales and service dealers. Fleet customers include long term lease companies, daily RAC companies, multinational companies, government accounts and large local companies. Moreover Ford Otosan is in contact with the end users of lease companies to follow customer expectations. The average length of Ford Otosan’s relationships with its customers is approximately 10 years in the case of leasing companies, while for some government accounts it is approximately 30-40 years. Retail customers’ lifecycle is between 3 to 5 years. Ford Otosan sells vehicles and spare parts to its dealership network. Dealer receivables are collected by means of direct debiting their bank accounts on an average of 30 days.

In the year ended 31 December 2012, approximately 30 per cent. of domestic sales were conducted on a cash basis, and 70 per cent. was financed through instalment loans. Retail Sales (Units) 2012 2011 2010 PC...... 47,030 58,807 55,212 LCV ...... 28,971 37,883 32,398 MCV...... 30,165 36,587 31,524 HCV...... 5,996 8,356 4,668 Total ...... 112,162 141,633 123,802

- 135 - Exports Ford Otosan also exports commercial vehicles throughout the world to 76 countries in five continents. All exports are through Ford of Europe on a cost plus basis. Ford of Europe organizes orders for light and medium commercial vehicles to be exported to the dealers in various countries. The export revenues of these vehicles are collected from Ford of Europe by Ford Otosan. In 2012, at 24 per cent., the highest proportion of Ford Otosan’s exports was to North America, followed by 22 per cent. to the United Kingdom and 13 per cent. to Germany. As part of its large-scale export programme, Ford Otosan also added new export markets in 2012, including South Africa, Georgia, Turkmenistan and Kazakhstan. Ford Otosan also exports spare parts to a wide set of countries. In 2012 total spare parts export revenue was TL 46 million.

Exports (Units) 2012 2011 2010 LCV ...... 75,694 65,055 53,426 MCV...... 127,840 147,770 122,955 HCV...... 955 824 547 Total ...... 204,489 213,649 176,928

The following table sets forth the domestic and export revenues of Ford Otosan for the years ended 31 December 2012, 2011 and 2010.

Revenues (TL million) 2012 2011 2010 Export ...... 5,936 5,854 4,105 Domestic ...... 3,832 4,591 3,544 Total ...... 9,768 10,445 7,649 Share of exports ...... 61% 56% 54%

Production Facilities and Properties Ford Otosan currently operates a manufacturing and assembly facility for the Transit and Connect vehicles at Kocaeli, Turkey. Production commenced in 2012 for Ford’s new models, Transit Custom and Tourneo Custom. The Kocaeli plant has an annual production capacity of 320,000 units per year and has been the main global production centre since 2004 for the Transit. It will also be producing the next generation Transit.

Ford Otosan also operates the I˙nönü plant in Eskis¸ehir which manufactures the Cargo series of trucks, engines and powertrains and currently has an annual production capacity of 10,000 trucks.

Ford Otosan has an ongoing investment programme that started in 2011 and is expected to be completed by 2014 with investments totalling over USD 1 billion for three new projects, which are described below. • New generation Transit family: USD 630 million project that includes the production of a new line of vehicles, Transit Custom and Tourneo Custom, and the next generation of Transit. • New LCV: EUR 205 million fixed asset procurement for the production of a brand new line of vehicles, Transit Courier and Tourneo Courier. The foundations of a third plant, Yeniköy, was laid in 2012 on property owned by the Kocaeli Plant and is planned to be the sole global production centre for the Transit Courier and Tourneo Courier which will be launched in the first quarter of 2014. • New heavy truck: USD 75 million investment for the development, design, engineering and production of the New Ford Cargo which will be manufactured at the Inonu plant and in Brazil.

As a result of the major investment programme, the capacity of the Kocaeli Plant will increase to 400,000 units and the capacity of the Inonu plant will increase to 15,000 units in 2014. These projects have been financed primarily by: (1) a EUR 150 million loan agreement with the European Bank for Reconstruction and Development was signed in 2010 (5-year loan with 2-years grace period at EURIBOR + 275 bps) (2) EUR 190 million loan agreement was signed with European Investment bank in 2012 (8-year loan with 2-years grace period (EUR 100 million in Q3 at 2.06 per cent.; EUR 90 million in Q4 at 1.47 per cent.).

For the year ended 31 December 2012, Ford Otosan’s production plants operated at a utilization ratio of 82 per cent., calculated by dividing the actual number of units produced, 272,104, by the production capacity,

- 136 - 330,000. Ford Otosan’s utilization ratio for its production plants was 90 per cent. and 73 per cent. for the years ended 31 December 2011 and 2010, respectively. The following table shows Ford Otosan’s installed capacity as of 31 December 2012, and production levels by plant in the years ended 31 December 2012, 2011 and 2010:

Year ended 31 December Production (Units) Installed Capacity(1) 2012 2011 2010 Kocaeli Light and Medium Commercial Vehicles ...... 320,000 264,742 286,601 237,205 I˙nönü Heavy Commercial Vehicles ...... 10,000 7,362 9,239 4,872

(1) Calculated based three shifts (8 hours per shift) per day multiplied by 282 working days per year and includes capacity for manufacture of parts/represents capacity only for complete vehicles.

Ford Otosan also operates the largest parts distribution centre in Turkey, Kartal Parts Distribution Centre with 25,000 m2 of covered area. The spare parts produced and supplied are stored in the center and all logistic organization is made centrally both to domestic dealers and export customers.

Gebze Technology Centre, located in the TUBITAK-MAM Technology Free Zone, is Ford Otosan’s engineering centre and the global engineering centre for Ford diesel engines and heavy trucks. It is the third largest Ford R&D centre globally and enabled Ford Otosan to be integrated with Ford of Europe in product development. In 2012 Ford Otosan employed 1,240 engineers across two sites in Kocaeli and Gebze, one of the largest R&D staff and the highest R&D spending ratio in the Turkish automotive sector.

The following table sets out the location of Ford Otosan’s properties and certain other information of each property as of 31 December 2012.

Year operations Location Name of Facility commenced Principal operations Kocaeli ...... Kocaeli Plant 2001 Production of light and medium commercial vehicles; 1,600,000m2 total area and 340,000m2 covered area. Eskis¸ehir ...... I˙nönü Plant 1983 Production of the Cargo family of vehicles; 1,100,000m2 total area and 76,000m2 covered area. I˙stanbul ...... Kartal Parts 1998 Marketing, sales, parts operations, Distribution Centre warranty, field operations, dealer training and customer relations. TUBITAK-MAM Technology Gebze Technology 2007 Engineering services for Ford Otosan Free Zone ...... Centre and Ford Europe’s Product Development Centres

Tofas¸ Tofas¸ is an equal share joint venture between the Company and Fiat Group Automobiles S.p.A.. In order to govern various aspects of the administration and operations of the joint venture, the Company and Fiat Group Automobiles S.p.A. entered into a shareholders’ agreement on 26 June 1997 which was subsequently amended in 1998 and 2001. The agreement regulates organisational structure and senior management of Tofas¸. In particular, the parties agreed on principles regarding operational integration of Tofas¸ with Fiat Group Automobiles S.p.A. with respect to, amongst other things, personnel, systems, standards in operation and the sale of Tofas¸ products, such as selling in any export market only through Fiat Group Automobiles S.p.A. or its authorised importers or distributors or ensuring that specifications of Tofas¸ products are consistent with products manufactured by Fiat Group Automobiles S.p.A. or its subsidiaries. According to the articles of association of Tofas¸, the parties are entitled to equal representation in the board of directors of Tofas¸ through nomination of an equal number of members. The right to appoint senior management is also divided between the partners. The agreement also sets forth the terms under which the shareholders may dispose of their relevant shares and grants right of first refusal to the non-selling shareholders in the event one of the shareholders wishes to sell its shares to a third party.

- 137 - Products Tofas¸ manufactures and distributes a diverse range of PCs and LCVs. Historically, 65.5 per cent. of the vehicles manufactured by Tofas¸ have been LCVs, with the remainder consisting of PCs.

Tofas¸’s PCs include mid-size cars. In recent years, market demand for fuel efficient cars has increased due to the rise in fuel prices and increased global environmental regulations since 2007. Tofas¸’s PCs are offered in gasoline- and diesel-fuel models. In 2012, Linea was the best selling passenger car model in Turkey with a market share of 6 per cent.. Tofas¸’s LCV’s include vans and small multi-activity vehicles. In 2012, Tofas¸’s Fiat Doblo was the best selling light commercial vehicle with a 13.7 per cent. market share (according to the Automotive Manufacturers’ Association). Tofas¸ has the second highest market share after Ford Otosan in the total domestic automotive market.

The following table sets forth Tofas¸’s product lines as of 31 December 2012.

Products Type Size Models PC...... Sedan Medium Linea Multi Activity Vehicle Medium Doblo – Panorama Multi Activity Vehicle Medium New Doblo – Panorama Multi Activity Vehicle Compact MiniCargo – Panorama LCV ...... Van Medium Doblo – Combi/Cargo Medium New Doblo – Combi/ Cargo Compact MiniCargo – Combi/ Cargo

Tofas¸ also imports premium brands including Jeep, Lancia and Alfa Romeo and Ferrari and Maserati through its subsidiary Fer-Mas.

Sales Distribution and Service Domestic Sales In the domestic market, Tofas¸ operates a distribution network of 113 sales points (of which 75 are main dealers) and 135 service centres. Tofas¸ represents the Fiat, Alfa Romeo, Lancia and Jeep brands in Turkey and also sells Ferrari and Maserati through its subsidiary Fer-Mas. The dealers are separate entities that operate according to guidelines as set out by Tofas¸. The business activities, CRM performance and financial health of the dealers are audited by Tofas¸. Most of the dealers are exclusive, selling only the vehicles that distributed by Tofas¸. Tofas¸ does not provide financing or credit support to the dealers. Tofas¸ uses direct debiting system to collect receivables from dealers. Sales are divided into three main channels as private, special sales and fleet sales. In 2012, private and special sales accounted for 70 per cent. of all sales, followed by 30 per cent. of fleet sales.

The private customer base consists of individual final consumers. The special sales customer base is comprised of corporations purchasing up to ten vehicles, SMEs, taxi owners and specific discount groups such as Tofas¸ suppliers, Tofas¸ employees and Group employees. The fleet sales customer base consists of public (government corporations) sales, corporations purchasing more than 10 vehicles and Rent-A-Car (RAC) companies. RAC companies are a major source of sales accounting for up to 20 per cent. of all sales (two-thirds of all fleet sales). RAC companies and corporations tend to renew their vehicles periodically and make a new purchase every two- three years whereas, private customers tend to renew their vehicle every four years on average.

The following table sets forth Tofas¸’s domestic sales by product for the years ended 31 December 2012, 2011 and 2010.

Retail Sales (units) 2012 2011 2010 PC...... 47,095 58,997 47,394 L&MCV ...... 71,316 85,614 86,921 Total ...... 118,411 144,611 134,315

Exports Tofas¸ exports its products to diverse markets. New markets in South America and the MENA region have been added in response to the continuing economic recession in southern Europe. Additionally, 72.5 per cent. of

- 138 - Tofas¸’s capacity is reserved under three take-or-pay contracts which are sold at cost plus mark-up to Fiat Group Automobiles S.p.A. and PSA. Since the investments for the manufactured vehicles are made by Tofas¸, export contracts are secured with take-or-pay clauses which require the buyers to pay the cost and the agreed mark-up for the reserved quantity of vehicles even if it is not bought. The take-or-pay amount is reflected in export revenue. The total reserved capacity for take-or-pay arrangements is 290,000 units. Additionally, warranty or product liability claims with respect to exported products are the responsibility of the contract counterparty, not Tofas¸.

Tofas¸ is currently working on a project to export to North America and has signed a letter of intent with Chrysler.

The following table sets forth Tofas¸’s export sales by product for the years ended 31 December 2012, 2011 and 2010.

Exports (units) 2012 2011 2010 PC...... 46,869 53,216 68,515 L&MCV ...... 107,200 113,562 112,842 CKD...... — 13,920 12,384 Total ...... 154,069 180,698 193,741

Production The following table sets forth the production figures of Tofas¸ by vehicle categories for the years ended 31 December 2012, 2011 and 2010.

2012 2011 2010 PC...... 80,943 100,801 103,144 LCV ...... 175,485 193,259 196,525 CKD* ...... 0 13,728 12,576 Total ...... 256,428 307,788 312,245

* CKD (Complete Knocked Down) sales previously made to the Russian market were discontinued in 2011.

Tofas¸ owns and operates a manufacturing and assembly facility in Bursa, Turkey which has the largest production capacity in the country. The Bursa plant has a total area of 933,832m2, with total covered area of 352,477m2 and total production area of 216,392m2. Three models, Linea, Doblo and MiniCargo, are produced at the Bursa plant.

For the year ended 31 December 2012, Tofas¸’s production plant operated at a utilization ratio of 64 per cent., calculated by dividing the actual number of units produced, 256,428, by the production capacity, 400,000. The Bursa Facility’s utilization ratio was 77 per cent. and 78 per cent. for the years ended 31 December 2011 and 2010, respectively. However, due to the capacity reserved for contracted export sales, which is covered by take- or-pay agreements, Tofas¸ considers financial capacity utilization rates for 2012, 2011 and 2010 to be 94.5 per cent., 92.8 per cent. and 89.0 per cent., respectively.

Tofas¸ has an R&D center within its Bursa facility employing 400 engineers. The company is able to oversee the full development of a vehicle. The total laboratory and office area is 17,000 m2. The company owns the intellectual property rights for both the MiniCargo and Doblo vehicles it is manufacturing.

Financing Koç Fiat Kredi (“KFK”) a subsidiary of Tofas¸ provides financial solutions for the sales of Tofas¸ through 111 sales points in Turkey. In 2012 KFK extended loans of TL1 billion for more than 45,000 vehicles and issued securities with a total nominal value of TL 365 million to finance these loans. KFK takes as collateral the vehicle that is financed and in the case of non-payment, will repossess the vehicle and sell it second-hand.

Other Automotive Companies TürkTraktör TürkTraktör is the market leader in the Turkish farm tractor market, based on traffic registration units, with a 50 per cent. share in 2012 (according to TurkStat). In the same year annual production stood at 40,000 units. As

- 139 - the largest Turkish farm tractor exporter, TürkTraktör also manufactures transmissions and engines for farm tractors, and imports farm tractors, combine harvesters and other heavy agricultural equipment. It sells its products to both public and private sectors.

TürkTraktör is an equal share joint venture between the Company and CNH Group. With respect to the establishment of the joint venture, the Company and New Holland BV, now known as CNH Global NV, entered into a joint venture agreement on 22 April 1998 which was subsequently amended in 2007. The agreement regulates the organisation, administration and operation of TürkTraktör under the joint control of the parties after equalization of shares with CNH Global NV. In particular, the agreement governs operational integration of TürkTraktör with CNH Global NV with respect to, amongst others, product development, engineering, manufacturing, logistics and export. The agreement provides the parties with equal representation on the board of directors of TürkTraktör by granting the right to nominate an equal number of members to parties and also governs appointment of senior management and formation of the executive committee of TürkTraktör. The agreement also includes terms under which the shareholders may dispose of their relevant shares in TürkTraktör and grants right of first refusal to the non-selling shareholders in the event one of the shareholders wishes to sell its shares to a third party. In addition, the parties agree not to engage in activities in competition with those of TürkTraktör in Turkey. On 16 February 2011, CNH Global NV transferred its shares in TürkTraktör to its wholly controlled subsidiary, CNH Österreich GmbH.

TürkTraktör was founded in 1954 and exported Turkey’s first farm tractor in 1979. Its sales have now grown to constitute a 50 per cent. share of the Turkish farm tractor market and 57 per cent. of the Turkish combine harvester market. More than 25 per cent. of TürkTraktör’s production is exported to over 90 countries. TürkTraktör’s factory has an area of over 250,000m2 and has an annual capacity of 35,000 tractors and 25,000 engines. It manufactures 250 main models and 500 different types of tractor. TürkTraktör also has an in-house R&D centre that engages in market analysis, design planning, testing, production, approval and after-sales monitoring. TürkTraktör’s workforce comprises around 2,400 people and it operates a network of 126 dealers.

Farm tractors are sold under the New Holland Agriculture and Case IH Agriculture brands, the rights to which are owned by CNH Global NV. TürkTraktör also acts as the engineering centre and production hub for TDD and JX farm tractor models. It also offers after-sales care and on-site repair services to end-users through its 456 after-sales service points.

Otokar Founded in 1963, Otokar designs, manufactures and markets minibuses, buses, semi-trailers, tactical wheeled and armoured vehicles and off-road vehicles. It exports to over 60 countries, employs approximately 2,281 employees and operates a 552,000m2 factory. Otokar benefits from owning the majority of intellectual property rights that it uses over the course of manufacture.

Otokar is the largest private sector defence industry company in Turkey and is the main supplier of the Turkish Military & Security Forces for 4x4 tactical vehicles. It is the main contractor in Turkey’s national battle tank project, having opened in 2012 Turkey’s first battle tank test centre.

Otokar exports buses to over 60 countries. It produces buses of various sizes and for use over both long and short distances. In 2012, Otokar was the market leader in the 25+ capacity passenger bus market. It established Otokar Europe in 2010 to oversee its bus exports.

Following the acquisition and merger of Istanbul Freuhauf A.S¸., another Group company in 2002, Otokar began producing trailers and semi-trailers, introducing its own brand of trailers in 2006. It is now the second-best- selling brand of trailer in Turkey, and first in the sectors of perishable food transport and hazardous material transport.

Otokar’s production and sales figures are as follows:

2012 2011 2010 Production Sales Production Sales Production Sales Minibus ...... 52 56 168 152 286 283 Medium Size Bus ...... 1,812 1,877 1,492 1,383 988 1,033 Bus ...... 616 519 727 607 379 405 Armoured Tactical Vehicle ...... 369 215 675 751 579 183 Trailer ...... 1,191 1,190 2,614 2,616 1,158 1,159 TOTAL ...... 4,040 4,138 5,676 5,509 3,390 3,475

- 140 - Otokoç Otokoç is the automotive retailing and car-rental company of the Group. The company provides sales and after- sales services for Ford, Fiat, Alfa Romeo, Lancia, Jeep and Volvo brands. Moreover, Otokoç is engaged in the car-rental business representing the Avis and Budget brands. The company has 133 locations in total for automotive retailing, after-sales services and car-rental services.

Operations—Consumer Durables Segment The Group is present in the consumer durables sector through its flagship company Arçelik and Arçelik-LG Klima. Arçelik accounts for approximately 94 per cent. of total sales in the Group’s Consumer Durables Segment while the remainder is through Arçelik LG Klima. Due to its greater contribution to sales, only Arçelik is presented in detail below. Arçelik LG Klima is a joint venture between the Group and LG Electronics and it is the leading air conditioner company in Turkey.

Overview Arçelik is a leading producer of white goods and consumer electronics. Founded in 1955, Arçelik has grown to become the third largest white goods company in Europe. It has strong market positions in Turkey, Europe, the Middle East, CIS countries and Africa, where it generated approximately 98 per cent. of its revenues in 2012. Arçelik focuses on innovation and customer appeal in its product lines and places a particular emphasis on environmentally friendly and energy efficient technology. Arçelik had total revenues of TL 10,556.9 million and operating profit of TL 757.1 million in the year ended 31 December 2012. Arçelik had 22,552 employees as of 31 December 2012.

As of 31 December 2012, the Group held, directly and indirectly, voting rights constituting 51.9 per cent. of the total voting rights in Arçelik and had an effective ownership interest of 40.5 per cent. in Arçelik, and the Company fully consolidated Arçelik in the preparation of the Consolidated Financial Statements. Arçelik is listed on the Borsa I˙stanbul and its market capitalisation was USD 4,448 million as of 31 December 2012.

Arçelik owns 10 brands, including the Arçelik brand, Turkey’s leading white goods brand; Beko, the largest appliance brand in the UK and the number three brand in Europe; Arctic, the leading brand in Romania; and Defy, the leading brand in the South African white goods market. Arçelik’s principal product segments are: • White goods: including refrigerators, freezers, washers and dryers, dishwashers, ranges and ovens, which generated revenues of TL 7,079.4 million (67.1 per cent. of total revenue) in the year ended 31 December 2012; • Consumer electronics: including televisions (“TVs”), personal computers, audio, video and recording systems, which generated revenues of TL 1,798.2 million (17.0 per cent. of total revenue) in the year ended 31 December 2012; and • Other appliances: including air conditioners, personal care products and small kitchen appliances, and others which generated revenues of TL 1,679.2 million (15.9 per cent. of total revenue) in the year ended 31 December 2012.

For the year ended 31 December 2012, Arçelik had an over 50 per cent. market share in Turkey. In the same period, it also had an 8.1 per cent. market share in Eastern Europe and 7.2 per cent. market share in Western Europe (based on GfK data as of end-2012). Arçelik, with its global and local brands, is one of the top three brands in many of its markets, including the UK, Ireland, Estonia, Lithuania, Croatia, Slovenia, Bosnia- Herzegovina, Romania, Bulgaria, Turkey, Algeria, Tunisia, Libya, Jordan, Iraq, Georgia, Azerbaijan, Turkmenistan, South Africa, and one of the top five brands in many others, including Belgium, Germany, Belarus, Serbia, Albania, Morocco and Kazakhstan.

Arçelik has 14 production facilities located in Turkey, Romania, Russia, China and South Africa, which generally benefit from relatively low labour costs as well as lower logistics costs for distribution, as a result of their proximity to end consumers which supports Arçelik’s margins. Arçelik has sales and marketing organisations in 23 countries and distributes its products in over 100 countries. Going forward, Arçelik aims to improve retail channel penetration and shelf space in international markets to reach more consumers with a broader product range, covering the full product and price range. Arçelik also aims to improve its digital profile in global markets by leveraging its internet presence.

- 141 - Strengths Arçelik believes it offers a number of key competitive advantages in the markets in which it operates, including:

Core market leadership Turkey Arçelik is Turkey’s leading producer of white goods with over 50 per cent. market share based on unit sales in 2012. Arçelik is the premium brand in the Turkish white goods market, and Arçelik branded products are positioned in the premium price segment. Arçelik’s international brand, Beko, is also among the top three brands in the Turkish market. Arçelik has a centrally managed business model of acting through exclusive dealers for each of its Arçelik and Beko brands across Turkey, many of whom have long-standing relationships with Arçelik, stature in local communities and detailed knowledge of local markets. Exclusive dealers in Turkey operate on standard Arçelik group-wide sales contracts, which include recommended retail pricing guidance that is followed closely by the dealers but also provides for a range of other options. Arçelik also manages key aspects of the dealer’s operations. Arçelik also caters to price conscious consumers through its Altus brand of home appliances and televisions which are sold through other retailers. Arçelik believes that, given expected continued growth in the Turkish economy, urbanization and other demographic factors, the white goods sector in Turkey remains underpenetrated and that there is significant growth potential in the near to medium term.

International Arçelik also has market leading positions in many of its key international markets and has continued to grow its market share in regions outside of Turkey through organic and inorganic growth. Arçelik believes that it has experienced steady growth in market share in each of its key markets during recent years and going forward, intends to continue its focus on brand improvement and recognition in order to retain and grow its leadership positions. Arçelik’s market share in Western Europe rose from 6.0 per cent. in 2011 to 7.2 per cent. in 2012, while its market share in Eastern Europe rose from 7.7 per cent. in 2011 to 8.1 per cent. in 2012 (according to GfK data).

Strong brand portfolio in local and international markets Arçelik has one of the top three brands in many of its markets, including the UK, Ireland, Estonia, Lithuania, Croatia, Slovenia, Bosnia-Herzegovina, Romania, Bulgaria, Turkey, Algeria, Tunisia, Libya, Jordan, Iraq, Georgia, Azerbaijan, Turkmenistan, South Africa, Namibia, Botswana, Zambia and Malawi, and one of the top five brands in many others, including Belgium, Germany, Belarus, Serbia, Albania, Morocco and Kazakhstan. Arçelik has a comprehensive global and local brand portfolio including Arçelik, Beko, Grundig, Altus, Blomberg, Arctic, Leisure, Elektrabregenz, Flavel and Defy. Arçelik believes that it has powerful brand awareness across its portfolio, but particularly with its Arçelik and Beko brands. The Arçelik brand was cited by AC Nielsen as having the highest level of brand recognition in Turkey in 2010. In Europe, the Beko brand has become the third largest white goods brand. Arçelik has invested continuously in the development of its brands to gain market share across the geographies in which it operates. Arçelik’s brand portfolio has been strategically deployed across its key markets to ensure coverage at different price points and product mix through a combination of its global brands, such as Beko and Grundig and its local brands such as Arctic in Romania and Defy in South Africa, with a key objective of ensuring no cannibalisation of market share.

Sustainable cost competitiveness Arçelik has been able to manage its costs by focusing on low cost labour jurisdictions, achieving economies of scale in production and by locating production facilities near its customer base. It also benefits from Turkey’s customs union with the EU. Arçelik believes that by locating its manufacturing operations in low cost countries, it is also able to achieve higher utilisation rates in its operations than many of its competitors. Arçelik manufactures its products in low labour cost countries, including Turkey, Romania, China, Russia and South Africa, and believes this offers an advantage against its Western competitors, many of whom have legacy manufacturing operations in European jurisdictions which were historically considered to be low cost, but which, for a variety of reasons, including membership in the EU, are no longer low cost when compared to the jurisdictions where Arçelik’s manufacturing facilities are located. Arçelik also believes that many of its manufacturing facilities are the largest of their kind, providing benefits from economies of scale. Arçelik also manages its raw materials and components purchasing centrally to help control costs. These factors have allowed Arçelik to support its margins even during periods of competitive price reduction.

- 142 - Diversification across product range and geography Arçelik has built a diversified presence across geographic end markets, products and customers with a presence in multiple retail distribution channels such as its exclusive dealer network in Turkey, large retail chains both in Turkey and international markets, buying groups, internet sales outlets and specialist retail outlets. It has 14 production facilities in five countries, a sales and marketing organisation operating in 23 countries and offers its products and services in over 100 countries. Arçelik’s brand portfolio targets a wide range of customers and Arçelik believes that its strong portfolio diversification provides a natural hedge against individual country or product risk. This has been particularly apparent during the global financial crisis, which has impacted Arçelik’s key markets differently. Arçelik has been able to respond to the varied conditions and consumer demands and continue to grow its sales in its different geographies and its market share, which has been reflected in its distribution of revenues in the periods under review. Arçelik continues to capitalise on its ability to diversify its branding and product range and has recently launched a high end white goods line under its Grundig brand, which previously focused on consumer electronics.

Leading R&D capabilities Arçelik differentiates itself with its innovative, high-quality and state-of-the-art products. The technological capability of its R&D department is one of the key drivers of its success. Arçelik’s principal focus in product and technology development in its white goods segment has been on technology promoting energy efficiency, diminishing water consumption and decreasing noise levels. In Turkey, the brand awareness of Arçelik is such that it has become strongly associated with high quality, energy efficient products which are supported by comprehensive after-sales service. Arçelik has had several world-leading products recognised by independent organisations, such as Which?, Stiwa and the Energy Saving Trust, whose recognition has led to increases in product sales, particularly as such endorsements tend to increase the online presence of the relevant product and its brand. Arçelik currently has 1,200 patents and 2,000 patent applications pending and accounts for approximately 45 per cent. of all patent applications originating from Turkey. It is the only Turkish company to be repeatedly named in the “Top 500 PCT Applicants” list prepared by the World Intellectual Property Organization. Arçelik has several ongoing cooperation projects with leading universities and has opened dedicated R&D centres in Taiwan and Shenzhen. Arçelik plays an important role in the development of Turkey’s R&D culture and R&D is expected to remain central to Arçelik’s global agenda. Arçelik’s dedication to R&D has been recognised by The European Investment Bank as one of the first operations in Turkey to support private sector R&D.

Strategy Arçelik’s overarching strategic goal is to continue to improve its leading positions domestically and internationally through profitable growth. It intends to achieve this goal by continuing to implement the following key strategies:

Sustain leading position in core markets Turkey Arçelik benefits from a unique infrastructure, which includes its low cost manufacturing operations located in Turkey, as well as its extensive, exclusive dealer network. Arçelik manages one of the largest networks of exclusive white goods and consumer electronics dealers in Turkey with over 3,000 locations. Further strengthening its dealership network is a key priority for Arçelik and, consequently, it has undertaken a modernisation programme, implemented by the individual dealers, to improve store presentation and marketing. While sustaining its market leadership in Turkey, Arçelik plans to focus on fast-growing product categories which currently have low market penetration. It plans to counter price pressure from competitors by customising its promotions for target customer groups and capitalising on its significant customer data resource, which is a product of its history of market leadership and well developed after-sales service network.

International Arçelik is also committed to maintaining its leadership positions in its key international markets, including the UK with its Beko brand, South Africa with its Defy brand and Romania with its Arctic and Beko brands.

Grow market share internationally Arçelik aims to continue increasing its market share in Europe and to ultimately make Beko one of the top two brands in the region. Arçelik has also recently launched a white goods product range under its Grundig brand in

- 143 - order to grow market share in higher end product segments initially in the Northern European and Nordic markets by leveraging the brand’s significant recognition in the consumer electronics sector.

Arçelik also aims to become a leading player in the Middle East and Africa regions. In line with this growth strategy and targeted expansion into new markets, a new subsidiary was established in Egypt in 2012. Additionally, Arçelik has been sustaining its leadership in the South African market with the Defy brand, which was acquired in 2011 and experienced market share growth in 2012. Along with its significant growth in Africa, Arçelik has also increased its market share in many Middle Eastern countries, while sustaining its leadership in different product categories. A new subsidiary was also established in Ukraine in 2012, in line with Arçelik’s international growth strategy.

Going forward, Arçelik aims to improve retail channel penetration in international markets to reach more consumers with a diverse product range, including through increased focus on premium category products. Arçelik is targeting volume and production capacity increases to support this strategy.

Organic and inorganic growth in key markets Inorganic growth remains a key part of Arçelik’s strategy to increase market share and geographic coverage. Arçelik is continuously evaluating inorganic growth opportunities that are expected to emerge due to anticipated consolidation in the white goods sector, to complement its organic growth strategy, by providing clear and achievable value creation. In evaluating any acquisition, Arçelik would seek to manage its leverage in line with past practice. It is targeting volume and production capacity growth capability in emerging markets and is consequently seeking acquisitions or greenfield investments in South and Southeast Asia. Should the opportunity present itself, Arçelik is seeking to acquire a global premium brand with a presence in developed markets to complement its existing brand portfolio and geographic coverage. While potential acquisitions form an important part of Arçelik’s strategy, no specific target has been identified.

History and corporate structure Arçelik was established in 1955 in Istanbul, Turkey. In 1959, it produced Turkey’s first washing machine, followed by the production of the first refrigerator in Turkey in 1960. In 1975, the Eskisehir refrigerator plant began production, which expanded in 1977 with the addition of a compressor plant. Arçelik founded its Research and Development Centre in 1991, moving from an outsourcer to an original equipment manufacturer. It expanded its production capacity outside Turkey in 2006 with the construction of its Russian refrigerator and washing machine plant and its washing machine production facility in China. In 1999, it merged with Ardem, another Group company manufacturing cooking and heating appliances. Since 2002, Arçelik expanded its business through acquisitions in Europe, including Arctic in Romania, Blomberg in Germany, and Elektrabregenz in Austria. Grundig Multimedia, located in Germany, which was first a joint venture of Arçelik, was fully acquired in 2008 by Grundig Elektronik A.S¸. located in Turkey, then a subsidiary of Arçelik. Grundig Elektronik A.S¸., operating in the consumer electronics segment, merged with Arçelik in 2009. In 2011, Arçelik completed the acquisition of Defy, South Africa’s leading white goods brand.

Product Segments The following table sets out Arçelik’s revenues for each product segment by region for the year ended 31 December 2012.

(TL Millions) White goods Consumer Electronics Other Appliances Turkey ...... 2,453.1 660.4 1,340.1 Europe ...... 2,922.1 1,055.6 123.0 Africa ...... 845.5 2.2 78.2 Other ...... 858.7 80.0 138.0

White goods Arçelik was the leading producer of white goods in Turkey and the third largest in Europe. Its key products in this sector are refrigerators, freezers, washing machines, dryers, ovens and dishwashers. It focuses on continuous innovation in its product lines and places a particular emphasis on environmentally friendly and energy efficient technology in its white goods. Improvements to Arçelik’s existing products, the ability to introduce new products to market, consumer perception of quality and value and acceptance by consumers are all key factors in the

- 144 - success of Arçelik’s business. In recent years, it has been working to popularise its energy efficient and environmentally aware approach among its customers and to increase the use of energy efficient products, both domestically in Turkey and abroad, and use these aspects as a key feature of its marketing campaigns.

Turkey For the year ended 31 December 2012, Arçelik generated revenue of TL 2,453.1 million from white goods sales in Turkey (34.7 per cent. of total white goods segment revenue in 2012). Arçelik believes it had over 50 per cent. market share in the Turkish white goods sector and that the approximate size of this sector is TL 4.5 billion according to management estimates. The Turkish white goods market is highly concentrated, with the top three companies accounting for approximately 94 per cent. of the market. Its principal brands in this market are the Arçelik brand and the Beko brand, and Arçelik believes its principal competitors are Bosch-Siemens and Vestel. The Arçelik brand has been consistently ranked as Turkey’s most recognisable brand. This level of awareness has allowed Arçelik to achieve significant market penetration and to become a price leader.

Turkey is a key market for Arçelik’s business as it believes that the consumer durables sector, including white goods, remains generally underpenetrated in Turkey due to cohabitation of multigenerational families and the continuing demand for new residential housing. Turkey has recently been experiencing rapid new household formation and urbanisation and, consequently, new real estate developments are contributing to demand for white goods. The kitchen’s continuing dominant role in the household, combined with the fact that renovations in older households are now commonly done with built-in products, has contributed to industry growth supported by the transition from free-standing to built-in white goods products. Energy efficiency is also particularly important in the Turkish market, where household electricity is expensive. The refrigerator, washing machine, tumble dryer and dishwasher categories of the white goods market have also experienced growth, while the full-size oven category shrank in light of the increasing trend towards built-in products.

Europe For the year ended 31 December 2012, Arçelik generated revenue of TL 2,922.1 million from white goods sales in Europe (41.2 per cent. of total white goods segment revenue in 2012). In 2012, Arçelik had a 7.2 per cent. market share in the Western European white goods market and 8.1 per cent. market share in the Eastern European white goods market based on units reported by GfK. The European market as a whole is fairly concentrated with the top five brands accounting for over 60 per cent. of the market in 2012. Principal brands of Arçelik in this market are Beko and Grundig, and Arçelik believes its principal competitors are Indesit, Electrolux, Whirlpool and Bosch-Siemens, however, notwithstanding the concentration in the market as a whole, many of Arçelik individual markets in Europe are highly fragmented and as a result it has a number of local competitors such as Candy in Italy and Fagor in Spain. Arçelik also uses local brands it has acquired in the past, such as Leisure and Flavel in the UK, Elektrabregenz in Austria, Arctic in Romania and Blomberg in Germany and in several other selected countries.

Arçelik has seen particular growth in the Western European markets due to the “search for value” effect resulting from the global financial crisis, as consumers who might have previously focused on higher end, premium brands look for comparable quality at a lower price.

In 2012, Beko posted the highest market share growth in Western Europe and the second largest market share growth in Eastern Europe in white goods unit sales. In 2012, Beko was the UK’s overall leader in the major domestic appliance market, and also in the freezer, refrigerator and washing machine product categories. Arçelik is one of the major players in the Austrian market with both Beko and Elektrabregenz. Beko is one of the top three brands by unit market share of Poland’s refrigerator, freezer and washing machine markets. It has also seen significant growth in the white goods markets of France and has increased the market shares of its six main product groups in Germany, Spain and Romania. In addition, Arctic is the overall leader in Romania’s white goods market, holding the number one spot for refrigerators and washing machines, and second place for cooking appliances.

In recent years, this market has seen an increased focus on feature-rich products. Going forward, Arçelik plans to introduce built-in refrigerators with higher net capacity, better energy efficiency and updated designs, as well as a line of induction ovens and more energy efficient tumble dryers and washing machines.

Africa For the year ended 31 December 2012, Arçelik generated revenue of TL 845 million from white goods sales in Africa (11.9 per cent. of total white goods segment revenue in 2012). In 2012, Arçelik had a 39.7 per cent.

- 145 - market share in the South African white goods market. Its principal brand in this market is Defy, which Arçelik acquired in 2011, and which substantially increased Arçelik’s market share in the African market. The market is less concentrated than many others with the top five brands accounting for approximately 40 per cent. of the market. Arçelik believes its principal competitors are Electrolux, LG, Whirlpool, Samsung and Bosch-Siemens.

Defy, as the market leader in South Africa, has a strong sales and distribution network, including 2,000 outlets. Defy has three local manufacturing facilities located in Durban, Ezakheni (Ladysmith) and East London and an extensive product portfolio including free-standing stoves, built-in ovens and hobs, tumble dryers, chest freezers and refrigerators. Arçelik believes that the acquisition of Defy provides valuable access to the South African market and a gateway to the rest of Africa. Arçelik plans to use Defy to establish a platform for growth in Sub- Saharan Africa by expanding the product range in Defy’s existing markets and by expanding into new markets. Arçelik believes that there are significant synergies that can be realised, particularly in the procurement and production areas and to date, integration of Defy and synergies realised post-acquisition are in line with management expectations.

Other Geographies in Arçelik’s “other” segment include the Middle East, Russia and the CIS, China and other Asian countries, Australia, New Zealand and the Americas.

For the year ended 31 December 2012, Arçelik generated revenue of TL 858.7 million from white goods sales in other countries (12.1 per cent. of total white goods segment revenue in 2012). The increase in revenues generated by the other segment was primarily due to the commencement of operations in Australia and New Zealand in 2011.

Consumer electronics Although a less significant share of Arçelik’s revenues, the consumer electronics segment provides value in expanding the Arçelik product lines to maintain customer loyalty, drives traffic in its exclusive dealer network and extends brand awareness. Grundig is a prominent brand of consumer electronics, whose products are sold in 63 countries. Arçelik’s key products in this sector include televisions, audio equipment, including radios and Bluetooth devices, and personal computers.

In recent years, the consumer electronics industry has witnessed the transition to large screen TVs and LED technologies. Slimmer models with more focus on design, that are also energy efficient, have also become more popular. The spread of broadband infrastructure and changing consumer habits due to mobile technologies have also resulted in an increase of smart TVs. Interconnectivity between devices, such as between TVs and computers or smartphones, plays an important role in the development of these products. The increasing content in LED TVs is expected to result in an accelerated rise in 3D TV solutions in the coming years. The changing standards that have spread in parallel with HD broadcasting have enabled the evolution of much more efficient broadcasting systems.

The sale of cathode ray tube TVs ended in 2011 and the transition to LCD and LED TVs has continued. Unit sales of LCD TVs increased, with popular demand for larger screens resulting in increased turnover. TVs with interactive, multi-touch screens were launched and showcased at stores, using technology-centred and easy-to- understand presentations.

The Digital Signage broadcasting system that was developed to provide high-quality HD streaming to dealer stores, and to create new advertisement and promotional spaces in them, has become a unique product offering from Grundig. The system is used particularly in domestic and international soccer stadiums as well as in universities and other institutions. Like the LCD and LED TVs mentioned above, personal computer and non-TV electronic products were also incorporated under the Grundig brand and are sold at authorised dealerships.

Audio products are another one of Arçelik’s growing product segments within consumer electronics. In recent years, wireless streaming, bluetooth technology, stylish retro designs and Digital Audio Broadcasting (“DAB”) features have dominated the market. Arçelik has developed lines of Bluetooth speakers and retro-style radios that it believes are leaders in their key markets, particularly in Germany. Most of Arçelik’s current product lines in this sector are equipped with DAB features and new projects in the pipeline will support this feature as well.

Grundig is the market leader in unit sales of home sound systems, and in turnover of world receivers and alarm clock radios in Germany. The product range for home sound systems includes easy-to-use hi-fi systems with “motion sensor” functionality or digital Internet radios with superior sound quality.

- 146 - Other appliances Arçelik is also a leading provider of air conditioners and small domestic appliances, such as coffee makers, irons and vacuum cleaners as well as personal care products in Turkey. Arçelik’s air conditioner products are mainly manufactured by a joint venture of the Group and LG Electronics Inc., and sold under the Arçelik brand.

Arçelik’s air conditioner product range is tailored to fit Turkish market requirements. In addition to its leadership in the Turkish market, Arçelik is also enlarging its footprint in export markets with Beko branded air conditioner products. As new regulations become effective in emerging markets for ozone friendly cooling agents and energy efficient products, Arçelik plans to further extend its air conditioner business. As the market as a whole is shifting towards more energy efficient products, the popularity of inverter air conditioners is expected to rise. New regulation in Europe requiring even more energy efficient air conditioners is expected in 2013, which Arçelik views as an opportunity for this area of its product range.

Small domestic appliance products are one of the fastest growing product categories in Turkey and are an increasing area of focus for Arçelik. In 2012 Arçelik launched a full range of small food and beverage preparation appliances including coffee makers, kettles, hand blenders, table blenders, contact grills, choppers, toasters, citrus juicers and hand mixers, as well as a specialist Turkish coffee machine.

Small home care items are also a growing area, particularly with respect to energy efficient products. Arçelik has developed an iron that has a “smart eco algorithm” which makes it possible to iron all types of clothes with approximately 40 per cent. less energy consumption without losing performance. A similar trend is also evident in the market for vacuum cleaners. Arçelik offers a range of products including cyclonic, no-dust bag models and water-filtration vacuum cleaners as well as conventional canisters and rechargeable battery, easy use vacuum cleaners.

Key Brands Arçelik believes that the quality of its product portfolio is one of the key aspects of its business that differentiates it from its competitors. The Arçelik brand is the leading white goods brand in Turkey, with over 50 per cent. market share for the year ended 31 December 2012 based on unit sales. Arçelik’s extensive dealer network has helped support this level of brand recognition. In addition to its extensive product range composed of white goods, built in appliances, consumer electronics, air conditioners, kitchen furniture, and small home appliances, it also has the strongest after-sales service network in Turkey.

Beko is the third largest brand in terms of unit sales among 26 European countries and has continued to grow globally in recent years, with a particular increase in online sales and marketing. Beko has been positioned as a mid-tier brand in Europe. Recently it has been targeting higher end consumers with the help of increased brand awareness and an emphasis on product quality. Beko’s principal sales channels are large retailers, technology superstores, and increasingly, the Internet.

Arctic, Elektrabregenz and Blomberg are local white goods brands in Romania, Austria and Germany, respectively. Leisure and Flavel are strong brands of cooking appliances in the UK and Ireland. Grundig is a well-known brand of consumer electronics and personal care appliances both in Turkey and internationally. Defy is the leading brand in the South African white goods market based on unit sales, which Arçelik acquired in 2011. Altus is a white goods and consumer electronics brand focused on low price points.

Arçelik’s brand portfolio is strategically deployed across its markets to ensure coverage at different price points while avoiding cannibalising market share. Arçelik combines the use of its global brands, such as Beko and Grundig, with local brands such as Arctic, in key markets in order to grow its market share across consumer groups.

Grundig was established in 1945 in Germany. The company is recognised for its product quality and consumer- oriented approach and has over 90 per cent. brand awareness in Germany. Grundig is a global brand and is particularly well recognised in Austria, Switzerland, the Balkans, and in Scandinavian and Baltic countries. Grundig has six main product ranges that include TV, radio, audio, hi-fi, home care and small kitchen appliances and personal care.

In 2011, Grundig became the “Official Technology Partner of the Bundesliga”. The Grundig logo has appeared, and will continue to appear, during all Bundesliga and Bundesliga 2 match screenings of the 2011/2012 and 2012/2013 seasons. This partnership significantly increased Grundig’s brand awareness in Germany and around the world. In connection with its sponsorship arrangements, Grundig presented its state-of-the-art technology products at the IFA fair with its soccer match-themed concept “You’ll never watch alone”.

- 147 - Going forward, Grundig aims to expand its sales network and increase its sales capacity, while investing in its supply and logistics chain to increase productivity. Grundig plans to continue with its product development activities and introduce products with innovative designs and technologies. Grundig also plans to expand its partnership with the Bundesliga on an international level and to continue improving the brand. Grundig’s target demographic is mid-tier income consumers. Its principal sales channels are large electronics retailers and buying groups.

Sales, Marketing and Distribution The effectiveness of Arçelik’s sales, marketing and distribution capabilities are crucial to the success of its business.

Arçelik’s sales and distribution strategy differs significantly between the Turkish and international markets. In the Turkish market, Arçelik sells the vast majority of its products through its exclusive dealer network. In international markets, sales are made either via direct sales from Arçelik to a distributor or via its subsidiaries. With direct sales, distributors keep Arçelik’s inventory and on-sell the stock to the relevant sales channel, taking responsibility for all import and customs issues and charges. In these cases, marketing activities are still coordinated through Arçelik’s central marketing function, but after-sales service is either provided by the distributor or outsourced. In markets where Arçelik has committed to developing its own infrastructure, sales are handled through subsidiaries which have their own logistics, marketing, channel development, finance and service functions.

Globally, Arçelik aims to improve current channel penetration and shelf space in both domestic and international markets to reach more consumers with an appropriate product range. Arçelik is also seeking to strengthen its sales infrastructure by modernising its retail activities. Arçelik is also rolling out shop-in-shop sales points in international markets. In addition, it also participates in commercial exhibitions both in Turkey and internationally. These include special product launches and larger trade show exhibitions.

Arçelik also aims to leverage its internet presence in distribution, training, and interactive communication in suitable markets. The aim is to have integrated and consistent communication which increases the global effectiveness of its brands through various new and traditional media channels. In connection with this initiative, Beko is a title sponsor of the German Basketball League and the Lithuanian Basketball League. In 2011, Grundig became the official technology partner of the Bundesliga.

Going forward, Arçelik expects that marketing will focus on features which can be emphasised in line with brand positioning and local markets. Arçelik’s sales and marketing are managed centrally, but its goal is to create distinctive solutions in individual geographies through customer oriented products and innovations.

Turkey Arçelik and Beko products are sold through over 3,000 exclusive dealers in Turkey. This exclusive dealer network accounts for the substantial majority of Arçelik’s white goods sales in Turkey. Exclusive dealers in Turkey operate on standard Arçelik group-wide sales contracts (with a range of potential deviations to allow for promotional activities, and other matters), including recommended retail pricing that is followed closely by the dealers. Arçelik also manages key aspects of the dealer’s operations, including marketing, store presentation, promotions and after-sales care, which Arçelik believes make its products highly attractive to customers and reinforces the dealers’ adherence to Arçelik’s business terms. During the period from 2010 to 2012, Arçelik introduced a new concept to improve pilot retail stores and installed 280 Arçelik and 219 Beko flagship stores at strategic locations, including the 1,000 m2 Arçelik Concept Store that opened in Izmir in 2011. In recent years, Arçelik has also increased its online presence by selling products on its redesigned website and strengthening its customer relations through the use of social media. Arçelik also sells some of its products through large retailers in Turkey, however, to maintain its brand profile and price leadership, only Altus and Grundig branded products are sold outside the exclusive dealer network.

Europe In Europe, Arçelik’s key sales channels can be categorised as technology superstores and large chains, hypermarkets, independents and buying groups, department stores, mail order and Internet outlets. It has made a concerted effort in recent years to increase its penetration in each of these channels. In countries where Arçelik has significant market share, such as the UK, Germany, Romania and Poland, its sales are spread relatively uniformly across these channels. In other markets, sales may be concentrated in one channel, such as buying groups in Spain or small independents in Austria.

- 148 - In addition, Beko has increased its online presence by starting to sell products on its redesigned website and strengthening its customer relations through the use of social media. Beko’s principal sales channels are large white goods and electronics retailers, both online and in physical stores and DIY superstores.

Beko is the main sponsor and name holder of the Turkish Basketball Federation including naming rights for the All-Star games. Beko also sponsors the German, Lithuanian and Russian Basketball Leagues. Beko plans to continue to position its communication strategy around these leagues going forward.

Arctic has recently re-activated its online platform, with a modern, attractive design and a user-friendly interface. The site facilitates information access to products and services while providing new customer-tailored sections and functions.

Africa Defy, Arçelik’s principal brand in South Africa, sells its products through independent retailers and buying groups.

Other In 2011, Arçelik moved its Beko brand into Australia and New Zealand through a partnership with Australia’s largest supply chain. Beko products are sold through superstores and buying groups.

After-sales service Arçelik has a comprehensive after-sales service network for its products in Turkey and is actively expanding its capabilities abroad. In Turkey, Arçelik has 10 regional after-sales service centres, more than 500 authorised after- sales service points and more than 5,000 service vehicles.

After-sales service encompasses delivery, assembly and installation, repair and general customer support activities. These services are delivered at the point of sale, in person through home visits and via Arçelik’s call centre. In order to maximise the efficiency of its after-sales service, Arçelik has made significant investments in technology and training.

Managing the manufacture and distribution of spare parts is also a key part of Arçelik’s after-sales service. It currently manages the supply of approximately 317,000 different spare parts across its product ranges. It works with 212 suppliers for these parts, 52 of which are located in Turkey, and distributes these parts through over 1,000 outlets.

In particular, Arçelik considers training to be an essential part of its service quality. Accordingly, it provides its sales and technical service personnel with product specific training for all product categories at the Arçelik Academy, which has offered approximately 360,000 man hours of product training through 125 different training sessions in 35 countries.

Arçelik currently offers after-sales services with its own in-house customer service organisation in 15 countries and through its distributors and contract technical service providers in other countries. The establishment of after- sales service networks in Australia, Egypt and Ukraine and the alignment and integration of the Defy after-sales service network in South Africa are among the key projects targeted for implementation in 2013.

Call centres Arçelik’s call centre offers quality services to its customers with a team of approximately 250 employees. The principal aim of the call centre is to resolve customer issues quickly and efficiently while maintaining a positive dialogue with the customer in order to reinforce Arçelik’s brand message and enhance customer satisfaction. A significant part of incoming requests are resolved by call centre staff, without having to visit the customer’s house.

Arçelik has continued to expand its overseas call centre services network. From its facilities in Turkey, Arçelik also provides customer support to its Elektrabregenz, Beko, Altus and Grundig brands in the German and Austrian markets. It aims to continue to increase its overseas customer support coverage from dedicated call centres located in the key markets.

- 149 - Production Facilities and Manufacturing Arçelik has 14 production facilities located in Turkey, Romania, Russia, China and South Africa.

Production facilities The following table sets out the location, type and other information about each of Arçelik’s production facilities as of and for the year ended 31 December 2012.

Location Type Area Units produced (million units) Eskis¸ehir, Turkey refrigerator plant production area of 388,000m2, of which 3.4 89,750m2 is enclosed Eskis¸ehir, Turkey compressor plant enclosed production area of 18,000m2 2.37 Tuzla/Istanbul, Turkey washing machine production area of 520,595m2, of which 2.85 plant 67,600m2 is enclosed Beylikdüzü/Istanbul, electronics plant closed production area of 160,000m2 over 2.39 Turkey 170,000m2 of land Bolu, Turkey cooking appliances production area of 264,000m2, of which 2.92 plant 109,836m2 is enclosed Ankara, Turkey dishwasher plant production area of 130,000m2, of which 1.75 36,000m2 is enclosed Çerkezköy/Tekirdag˘, electric motor plant open space production area of 74,000m2, 9.11 Turkey and an indoor space production area of 43,000m2 Çerkezköy/Tekirdag˘, tumble dryer plant production area of 75,000m2, of which 0.64 Turkey 28,000m2 is enclosed Gaesti, Romania Arctic cooling production area of 297,000m2, of which 1.65 appliances plant 96,244m2 is enclosed Kirzach, Russia refrigerator and production area of 546,000m2, of which 0.305(washing washing machine 78,500m2 is enclosed machines)/0.257 plant (refrigerators) Changzhou, China washing machine production area of 47,000m2, of which 0.325 plant 20,000m2 is enclosed Jacobs, South Africa cooking appliances production area of 87,500m2, of which 0.37 (cooking and tumble dryer 50,000m2 is enclosed appliances)/0.44 plant (tumble dryers) Ezakheni (Ladysmith), cooling appliances rented production area of 75,271m2,of 0.4 South Africa plant which 31,617m2 is enclosed East London, South Africa refrigerator plant production area of 83,226m2, of which 0.06 10,000m2 is enclosed

Manufacturing Arçelik concentrates its most labour intensive functions in low labour cost jurisdictions, where in addition to benefiting from lower hourly wages, hours worked tend to be significantly higher, resulting in higher capacity utilisation for its plants. It also benefits from economies of scale with significant manufacturing capability in concentrated locations. Arçelik believes that its logistics costs are significantly lower than those of many of its competitors as it manufactures significant portions of its products in locations such as Turkey and Romania, which are closer to the end consumer than many Asian jurisdictions utilised by competitors.

Arçelik aims to develop and market products that are resource and energy efficient, technologically innovative in design and easy to use, while also fulfilling its commitment to work on solutions against future threats such as drought, global warming and diminishing natural resources. Consequently, one of Arçelik’s goals during product development is to prevent the waste of resources. Arçelik attempts to limit the environmental impact a product has during its life cycle by assessing every factor at the beginning of the design stage; departments responsible for R&D and industrial design also conduct technological, product development and improvement studies.

Arçelik has implemented Total Productive Management (TPM) and Six Sigma methodologies in its manufacturing operations for cost reduction and quality and process improvement while also maintaining a flexible production structure. Its plants adhere to international production and quality standards. All its plants in

- 150 - Turkey, Romania, Russia and China have ISO 9001 and ISO 14001 certificates. Arçelik conducts its operations in line with its “Total Quality” principle, simultaneously integrating all its quality management, environmental management and occupational health and safety management systems.

Supply Chain Management Arçelik’s Total Purchasing Cost Management system oversees all aspects of purchasing including raw materials, components, labour and logistics. It implements design change, alternative material and supply source development and cost improvement projects by engaging with the individual purchasing and manufacturing departments. It has implemented dynamic inventory management policies and consignment purchases to optimise inventory levels.

Raw materials procurement, trade goods and logistics comprise approximately 73 per cent. of Arçelik’s costs in 2012. Effective management of these areas of Arçelik’s business is crucial to its ability to remain competitive in its key markets. Arçelik has invested significant resources in optimising its supply chain management infrastructure in order to maximise its efficiency and its margins. It manages its purchasing of raw materials and components centrally to enhance cost control oversight.

Arçelik’s purchases of raw materials and components typically originate from low cost countries, such as China, Malaysia, Vietnam, Russia, Romania, Poland and Hungary. Arçelik invests considerable time and resource in continuing to investigate alternative routes of supply in low cost countries.

Raw materials Raw material purchases, mainly metal and plastic materials, account for the largest part of Arçelik’s total purchasing volume. Raw material purchases made by Arçelik and its suppliers, accounts for nearly 40 per cent. of the final cost of the product. In addition to their direct impact, raw materials are also critical in determining the price of some component groups that require the intensive use of raw materials. Metal raw material and chemical and polymer raw material accounted for 54 per cent. and 46 per cent., respectively, of all raw material purchases in 2012. Metal sheet purchases accounted for 79 per cent. of all metal raw material purchases in 2012.

Commodities are affected by price fluctuations across global markets and Arçelik’s operations are thus subject to variability in the cost of raw materials. Arçelik’s central purchasing team monitors changes in Arçelik’s key raw material prices through a market raw material index, developed by Arçelik’s procurement team, to measure the impact of raw materials used in manufacturing on total manufacturing cost. Overall, the market raw material index average decreased by 7.8 per cent. in 2012 compared to 2011. Arçelik has achieved flexibility in its cost and inventory management by monitoring the commodities markets closely. In addition, it seeks to minimise the effects of seasonal price fluctuations on its costs by establishing medium and long-term relationships with its suppliers. Arçelik also manages raw material supply risk by outsourcing a portion of the production of certain components, such as motors and compressors to third parties.

Process management Total Purchasing Cost Management encompasses all the region and category-based areas discussed above. Through its purchasing and manufacturing departments, Arçelik implements design change, alternative material and supply source development and cost improvement projects within the framework of its annual activity plan in line with market dynamics. Other practices that help Arçelik maintain its profitability by reducing costs are its dynamic inventory management policies, consignment purchases to optimise inventory levels, activities aimed at developing auxiliary industries, and electronic tender management applications. For example, for certain critical materials, consignment agreements are entered into with suppliers in order to provide flexibility in demand management. Additionally, e-sourcing methods such as Electronic Request for Proposal/Quote/Information/ Tender and e-auction are used regularly throughout the sourcing process.

Following the launch of its purchasing office in Shenzhen, China in 2010, Arçelik further increased the reach of its purchasing operations across the Asia-Pacific region by opening a new purchasing office in Taipei, Taiwan in 2011, giving Arçelik a presence in an important country for the consumer electronics industry. Through this office, Arçelik aims to increase the effectiveness of its efforts to engage suppliers in Taiwan and other countries in the region. Arçelik has also begun to collaborate with local suppliers in order to reach potential suppliers elsewhere in the region. With this strategy, Arçelik aims to create a strong global supplier pool and thus maintain the sustainability of sourcing from low-cost countries and ensure the integrity of its supply chain.

- 151 - Supplier management Arçelik has established a supplier development unit in order to enhance the capabilities of the suppliers who are considered to be crucial stakeholders in its supply chain process and to improve the effectiveness of efforts aimed at joint development projects relating to process efficiency and mutually developed business plans. The aim of supplier relations is the establishment of long-term partnerships with suppliers based on integrity, trust, mutual interest, sustainability and a shared growth strategy. From the outset, Arçelik sets up supplier meetings, mutual visits, information sharing through the supplier portal, organisational development in areas where suppliers converge and supplier days as crucial means of increasing cooperation.

Arçelik considers supplier selection and evaluation to be strategic priorities. Suppliers are expected to meet Arçelik’s requirements for quality, environment and business ethics. Arçelik monitors the operational performance of its suppliers on a regular basis and provides feedback.

Research and Development Arçelik maintains a strong focus on research and development (“R&D”) and believes its ability to deliver innovative products is key to its success. Arçelik is the only Turkish company in the last three years to be named on the “Top 500 PCT Applicants” (Patent Cooperation Treaty) list, which reports international patent filings, prepared by the World Intellectual Property Organization. Arçelik was ranked 95th in 2010. With an average of 145 patents filed annually, Arçelik accounted for over one-third of all international patent applications filed from Turkey over the last years. Arçelik’s particular focus in R&D has been to develop energy and water efficient products at an affordable price point without compromising quality or design. Arçelik employs approximately 1,000 personnel in 13 R&D units located in five countries, although the majority of its R&D capability is concentrated in Turkey. In addition to its expertise in its principal product areas, Arçelik has also consciously developed its capability in the engineering disciplines that underpin Arçelik’s products and their functions, including thermodynamics, fluid mechanics, vibration and acoustics, electronics, and computer assisted design and engineering.

Arçelik attributes its success to its significant investments in R&D and technology. Providing customers with technologically innovative products is a key aspect of Arçelik’s strategy to strengthen its brands and its global presence. In particular, Arçelik has leveraged product specific R&D across its segments in order to further drive innovation. Arçelik seeks to ensure that its intellectual property is protected with patent applications, but also on occasion makes some items public through publication in scientific journals or by presenting them at conferences. Arçelik continues to strengthen its R&D capability on a global scale through various projects, platforms and funds. Besides its strong collaborations with prestigious universities in Turkey and elsewhere, Arçelik has participated in international collaborative activities and has actively been a part of the European Union’s innovative project platform since 1993. It has achieved significant success in the European Union’s FP7. For example, Arçelik was named the number one company in “The Five Most Successful Companies Based on the Number of their FP7 Partnerships” by the TUBITAK EU Framework Programmes National Coordination Office. Arçelik has also received backing from the Marie Curie Fund for projects related to environmentally friendly chemical engineering. One project has been completed and six more are ongoing as part of EUREKA, the international support platform for the development of products and processes that are market oriented and rapidly commercialisable. Arçelik is a member of the Network and Electronic Media (“NEM”) technological platform, which is part of the EU Research Platform. This membership allows Arçelik to actively participate in the specification of international demands and strategic research areas. Arçelik participated in the 2010 and 2011 general assemblies of NEM and was elected to the R&D Governing Board of NEM during the 2012 summit.

Intellectual property Intellectual property is among Arçelik’s most important assets. As at 31 December 2012, Arçelik had 1,200 granted patents and 2,000 patent applications pending. Intellectual property also includes copyrights, trade secrets and know-how and other proprietary information. Arçelik employs policies and procedures to identify, protect (by patent and trademark registration, and maintenance of proprietary information), defend and manage its intellectual property. It is Arçelik’s policy that new and redesigned products, processes and software are thoroughly reviewed at regular points throughout development to safeguard against the potential infringement of the intellectual property rights of third parties. None of Arçelik’s material patents will expire in the near future.

Energy efficiency Arçelik has been awarded the ISO 50001 certificate for its energy efficiency applications in its production and management activities, the first company in its sector in Turkey to do so. ISO 50001 Energy Management

- 152 - System is based on a determination of energy policies, management of energy consumption, and evaluation and improvement of energy management systems by organisations with targets such as protecting the environment, effective use of resources and formalisation of energy policies. The Beko brand has also received the Energy Saving Trust endorsements for built-in ovens and hobs. Energy Saving Trust is a prestigious, independent social enterprise in the UK that gives authoritative advice on how to reduce carbon emissions and use water more sustainably. Arçelik published its 2011 Sustainability Report in 2012 with a “B+” application level in accordance with the Global Reporting Initiative G3 Principles.

Operations—Finance Segment Overview Koç Holding is active in the financial services sector through its joint venture with UniCredit. The Group and UniCredit formed Koç Financial Services (“KFS”) as a joint venture in October 2002 and today KFS is the majority owner of the fourth largest private bank in Turkey, Yapı Kredi. Yapı Kredi is listed on the Borsa I˙stanbul and its market capitalisation was USD 12,716 million as of 31 December 2012

As of 31 December 2012, the Company held, directly and indirectly, voting rights constituting 50 per cent. of the total voting rights in KFS, the Bank’s holding company, and had an effective ownership interest of 40.2 per cent., and the Group proportionately consolidated the assets, liabilities, equity, income and expenses of KFS in the preparation of the Consolidated Financial Statements. For financial reporting periods commencing on or after 1 January 2013, the Group will use the equity method of accounting for joint ventures as required by IFRS 11 and will no longer proportionately consolidate the results of KFS.

Yapı Kredi is a full service bank with its headquarters in Istanbul, Turkey. It was established on 7 July 1944.

According to BRSA statistics, as of 31 December 2012, Yapı Kredi is the fourth largest private bank in Turkey by total assets with 8.9 per cent. market share. As of 31 December 2012, the Bank had 928 branches covering all regions of Turkey and served 6.5 million customers in Turkey. It maintains significant positions in key segments and products supported by its strong franchise, large network and leading brand. The Bank is organised into three segments; retail banking, corporate and commercial banking and private banking and wealth management. The Bank’s service model is supported by its domestic and international subsidiaries. The Bank’s shares are listed on the Borsa I˙stanbul and its global depositary receipts are listed on the London Stock Exchange.

As of 31 December 2012, the Bank held market-leading positions in Turkey in credit cards (19.4 per cent. market share in credit card outstanding volume; 19.3 per cent. market share in credit card acquiring volume, 17.2 per cent. market share in number of credit cards and 13.6 per cent. market share in number of credit card holders according to the Interbank Card Centre data), leasing (17.2 per cent. market share according to the Turkish Leasing Association) and factoring (15.0 per cent. market share according to the Turkish Factoring Association). As of 31 December 2012, the Bank also had strong positions in non-cash loans (ranked second with a 13.2 per cent. market share according to the BRSA statistics), asset management (ranked second with 17.6 per cent. market share according to Rasyonet), brokerage services (ranked second with 7.0 per cent. market share according to the Capital Markets Board), private pension funds (ranked third with a 17.1 per cent. market share according to the Pension Monitoring Centre) and life and non-life insurance (ranked fourth with 7.7 per cent. market share and ranked fifth with 7.2 per cent. market shares respectively (according to the Turkish Insurance and Reinsurers Association).

As of 31 December 2012, the Bank had the fifth largest branch network in Turkey (according to BRSA data) with 928 branches covering all regions of Turkey and served approximately 6.5 million customers in Turkey. While the Bank’s branch network covers all regions in Turkey, there is a substantial concentration in the larger cities (including Istanbul, Ankara,˙ Izmir, Antalya, Bursa, Konya and Adana). As of 31 December 2012, 70 per cent. of the Bank’s branches were located in the 10 largest cities in Turkey compared to 65 per cent. as of 31 December 2007 and 70 per cent. as of 31 December 2011. In the largest 10 cities, the Bank’s market share as of 31 December 2012, in terms of branches was 9.9 per cent., compared to 9.1 per cent. across Turkey and as of 31 December 2011 these figures were 10.2 per cent. and 9.2 per cent., respectively (according to Turkish Banks Association statistics).

In addition to its branch network, the Bank offers products and services through a wide array of alternative delivery channels including 2,819 ATMs and “advanced” ATMs with cash deposit functionality (the sixth largest ATM network in Turkey with a 7.8 per cent. market share), award-winning individual and corporate internet banking with 2.4 million customers, a leading position in mobile banking with a 12.0 per cent. market share as

- 153 - well as 2 award-winning call centres, as of 31 December 2012 (according to BRSA statistics). See “Sales and Distribution—Alternative Delivery Channels”. As of 31 December 2012, and 31 December 2011 KFS and its subsidiaries in total had 17,461 and 17,350 employees, respectively, of which 14,733 and 14,859 were employees of the Bank. Internationally, the Bank carries out business through subsidiaries in the Netherlands, Russia and Azerbaijan and a branch in Bahrain.

The Bank had total assets of TL 130.9 billion as of 31 December 2012 compared with TL 116.1 billion as of 31 December 2011 and TL 91.8 billion as of 31 December 2010.

For the year ended 31 December 2012, the Bank had operating income of TL 7.0 billion compared to TL 5.9 billion for the year ended 31 December 2011, an increase of 19.6 per cent. For the year ended 31 December 2011, the Bank had operating income of TL 5.9 billion, compared with TL 5.7 billion for the year ended 31 December 2010 (an increase of 3.5 per cent.) and TL 6.0 billion for the year ended 31 December 2009 (a decrease of 5 per cent.). For the year ended 31 December 2012, the Bank’s cost to income ratio was 40.7 per cent. For the year ended 31 December 2011, the Bank’s cost to income ratio was 42.7 per cent., compared with 40.8 per cent. in 2010. The Bank’s net income was TL 2.3 billion and its return on average shareholders’ equity (excluding non-controlling interest) was 17.2 per cent. for the year ended 31 December 2012 compared with TL 2.4 billion and 22.3 per cent., respectively, for the year ended 31 December 2011. The Bank’s net income was TL 2.2 billion and its return on average shareholders’ equity (excluding non-controlling interest) was 25.8 per cent. for the year ended 31 December 2010. As of 31 December 2012 and 31 December 2011, the Bank’s capital adequacy ratio according to BRSA Principles was 16.3 per cent. and 14.7 per cent., respectively, and the Bank’s capital adequacy ratio was 15.2 per cent. and 14.9 per cent., respectively, on a consolidated basis.

On 26 March 2013, Yapı Kredi signed a share purchase agreement for the sale of its insurance and private pension subsidiaries to Allianz for TL 1,602 million. As part of the deal with Allianz, Yapı Kredi will sell its 94 per cent. stake in Yapı Kredi Sigorta to Allianz and will retain a 20 per cent. stake in Yapı Kredi Emeklilik. In addition to the share purchase agreement, Yapı Kredi has also signed the Bancassurance Agreement with Allianz to provide customers in Turkey with non-life insurance, life insurance, and pension products via its alternative delivery channels and 928 branches.

Strengths The Bank believes that it has a number of key strengths that enable it to compete effectively in the Turkish banking sector, including:

Strong retail focus with leading market positions in key segments and products As of 31 December 2012, the Bank was the fourth largest privately owned bank in Turkey by assets, with leading market positions in Turkey in credit cards, asset management, brokerage, leasing, factoring, private pension funds, life and non-life insurance (according to BRSA data).

Robust and customer-oriented balance sheet The Bank has a strong link to the real economy with total assets, as at 31 December 2012, incorporating a high proportion of loans (63 per cent.) and a low proportion of securities (17 per cent.). As one of the most retail oriented banks in Turkey, the majority of the Bank’s loans and deposits are generated by retail segment, providing significant diversification. In line with its “Smart Growth” strategy, the Bank focuses on growth in key value generating products and segments.

Large network and leading brand The Bank has a solid distribution platform, including the fifth largest branch network in Turkey with 928 branches and an innovative alternative delivery channel network including 2,819 ATMs and “advanced” ATMs with cash deposit functionality (the sixth largest ATM network in Turkey with a 7.8 per cent. market share, as at 31 December 2012, award-winning internet banking with 2.4 million customers, a leading position in mobile banking with a 12.0 per cent. market share as well as 2 award-winning call centres as of 31 December 2012 (according to BRSA statistics). As a result of continuous efforts to leverage on the multi channel approach, the Bank’s share of alternative delivery channels in total banking transactions reached 80 per cent. as of 31 December 2012 compared to 78 per cent. as of 31 December 2011 and 56 per cent. as of 31 December 2007.

- 154 - Solid risk profile The Bank has a conservative risk management strategy with solid credit risk infrastructure, underwriting and monitoring systems. The Bank avoids speculative open foreign exchange positions and maintains liquidity ratios well above the levels required by the regulator. As of 31 December 2012, and 31 December 2011, the Bank’s standalone capital adequacy ratio according to BRSA Principles was 16.3 per cent. and 14.7 per cent., respectively, and the Bank’s capital adequacy ratio was 15.2 per cent. and 14.9 per cent., respectively, on a consolidated basis.

Diversified, high quality revenue mix The Bank believes it has a sustainable revenue base with a high share of fees in total revenues amounting to 26 per cent. and strong net interest margin of 3.7 per cent. for the annual period ended 31 December 2012. The Bank focuses on profitable and value generating segments including individual and SME lending.

Proven track record of cost control and efficiency improvements Driven by strict cost containment and improvements in efficiency, the Bank has improved its cost to income ratio to 41 per cent. as of 31 December 2012 from 50 per cent. in 2007. Between 2007 and 2012, the Bank increased its costs by 8 per cent. (in line with average inflation), its number of branches by 37 per cent., number of ATMs by 46 per cent. and number of employees by only 3 per cent.

Strategy As a fully integrated banking and financial services group, the Bank is working towards its goal of becoming a leader in the finance sector. The Bank’s mission is to ensure long-term sustainable growth and value creation for all stakeholders and become the first choice of customers and employees. The Bank’s strategy is structured around three main principles:

Healthy and consistent growth Focus on core banking activities, growth in value generating segments and products, continuous improvement in commercial effectiveness, expansion of market presence and funding diversification to sustain long-term performance

Strong and sustainable profitability Address specific customer needs via segment based service model, optimise cost to serve to improve competitiveness and maintain effective cost and risk management

Superior and long-lasting customer satisfaction Enhance easy to work with approach through continuous investments in technology and delivery channels while maintaining focus on innovation, employee satisfaction and loyalty

Key strategic objectives The Bank aims to achieve a sustainable performance through its strong focus on customer satisfaction. The Bank expects to continue its strong performance through the following key long-term strategic pillars:

Growth and Commercial Effectiveness • Selective and quality loan growth • Focus on customer penetration, acquisition, activation and cross-selling • Continuation of organic growth • Process redesign and enhancement of sales effectiveness

Funding and Capital • Above-sector deposit growth and optimisation of pricing/mix • Customised deposit pricing

- 155 - • Proactive loans/deposits ratio management • Funding diversification with focus on pricing/maturity • Effective use of capital with strengthening actions in place

Efficiency and Cost Optimisation • Disciplined cost efficiency approach • Development of lower cost to serve models with enhancement of time to serve • Ongoing investments for growth, and leveraging on multi-channel approach

Asset Quality • Dynamic and proactive non-performing loan (“NPL”) portfolio management • Continuous investments to maintain below through-the-cycle cost of risk • Focus on decreasing NPL entries while improving collections /collateralisation

History The Bank in its present form results from the merger of Yapı ve Kredi Bankası A.S¸. and Koçbank in 2006. Yapı ve Kredi Bankası A.S¸. was established on 7 July 1944 as Turkey’s first retail focused privately owned bank with a nationwide presence.

KFS was established in March 2001 as a management company and all financial services companies owned by Koç Holding, including Koçbank, were united under KFS. In October 2002, Koç Holding and UniCredit signed a joint venture agreement and became shareholders in KFS (each with a 50 per cent. interest), making KFS the first foreign partnership to be established in the financial sector in Turkey.

In January 2005, pursuant to its agreement with the BRSA and the SDIF, Çukurova Group sold KFS 57.4 per cent. of Bank shares. In April 2006 Koçbank acquired a further 9.9 per cent. of the Bank’s shares, taking Koçbank’s interest in the Bank to 67.3 per cent. In October 2006, Yapı ve Kredi Bankası A.S¸. was merged with Koçbank, with the combined legal entity continuing under the name Yapı ve Kredi Bankası A.S¸.

Business Segments—Products and Services The Bank’s operations are carried out through three main segments (1) retail banking, which includes the Bank’s individual, SME and card payment systems (2) private banking and wealth management, and (3) corporate and commercial banking. The Bank’s service model is supported by its domestic and international subsidiaries.

Retail Banking Overview The Bank’s retail banking division consists of its credit cards business, individual banking and SME banking businesses.

The Bank has a strong focus on retail banking. As of 31 December 2012, the Bank had approximately 6.5 million retail customers (of which approximately 5.3 million belong to the “mass segment”, 439 thousand belong to the “affluent segment” and 639 thousand are SME customers) with TL 37.6 billion of assets in its retail banking segment (including individual banking, SME and card payment systems), amounting to 29 per cent. of the Bank’s total assets. The Bank’s retail products and services include mortgages, working premise loans, home equity lines of credit, home improvement loans, general purpose loans, auto loans (including FordFinans), individual flexible accounts, product bundles, bill payments, regular payments, rent payments, university payments, safety deposit box, deposits working accounts, private pension products, health insurance, life insurance, and property and casualty insurance. The Bank provides its SME customers with a range of banking products and services tailored to the SME market, including commercial installment loans, revolving loans, flexible commercial accounts, commercial purchasing cards, product bundles, POS and merchant services, agriculture loans, cash management products, commercial credit cards and investment products. Card payment systems include Worldcard, World Gold, World Platinum, Opet Worldcard, Play, adios, adios Premium, taksitçi, Crystal, Fenerbahçe Worldcard, KoçAilem Worldcard, World Business, Debit Cards (TLcard, Play TLcard, Business TLcard), World Gift Card and World Loyalty Programme.

- 156 - Retail banking is a key source of growth for the Bank, especially in credit cards, consumer lending, SME loans, asset gathering (deposits and mutual funds) and pension funds. The Bank’s retail banking division serves approximately 6.5 million active retail customers, of which approximately 5.3 million are mass market customers, 439 thousand affluent, and 639 thousand SMEs, serviced by 3,350 retail relationship managers, of which 1,594 are focused on SMEs and 1,756 are focused on individuals, through 820 retail branches. In general, the Bank considers a retail customer to be active on the basis of the customer carrying out any transaction in the prior three months or having an average demand deposit balance of TL 100 or more in the prior three months.

In the Turkish retail banking market, as of 31 December 2012, the Bank was the market leader by credit card volume outstanding and acquiring volume as well as number of cards and cardholders. As of 31 December 2012, the Bank was seventh largest by volume of consumer loans and sixth largest by volume of deposits, in each case according to BRSA statistics. Income from the Bank’s retail banking activities comprises primarily interest income from loans to individuals and SMEs and commission income from loans, credit cards, point-of-sale business and other banking transactions. As of 31 December 2012, the Bank had loans in its consumer segment (excluding credit cards) of TL 15,565,003 thousand, compared to TL 13,641,075 thousand as of 31 December 2011 and TL 9,781,173 thousand as of 31 December 2010.

The Bank offers its retail customers a broad range of products and services, including general purpose loans, mortgage loans, auto loans, credit, debit and prepaid cards, wireless payments via mobile phones, payment and collection services, deposit and overdraft accounts, asset management products, ATMs, telephone banking, internet banking and mobile banking and life and non-life insurance products. The Bank introduced some of these products and services to the Turkish banking industry, including consumer loans, credit cards, overdraft accounts, telephone banking, ATMs and point of sale (“POS”) terminals.

Retail Customer Segmentation Within the retail banking division, the Bank’s customers are divided into three segments to facilitate customer management and to allow a clear and focused approach for responding to different groups’ behaviours and needs. These three segments are: the mass segment, the affluent segment (for individuals) and the SMEs (for companies) which are further subdivided into micro SMEs and macro SMEs.

Individuals are segmented mainly by the value of their assets with the Bank and/or the amount of their monthly salary, while SME customers are segmented according to their annual turnover. Mass customers are customers with total personal financial assets of up to TL 50,000 and/or a monthly salary below TL 4,000. Affluent customers are individual customers with personal financial assets between TL 50,000 and TL 500,000 and/or a monthly salary between TL 4,000 and TL 20,000. In addition, credit cards are offered to individual customers over the age of 18 with the required minimum income and corporate customers. POS products are offered to merchants who accept credit cards.

Within the SME segment, micro SMEs are customers with annual turnover of less than USD 250,000, while macro SMEs are corporate customers with annual turnover of greater than USD 250,000 and less than USD 5,000,000.

Credit Card Business The Bank was the first bank in Turkey to issue credit cards, starting in 1988. Since then, it has been a leader in the credit card sector and this remains an important focus for the Bank. The Bank has maintained non-exclusive agreements with Visa International since 1981, Visa Europe since 2009 and MasterCard International since 1988.

Credit Cards As of 31 December 2012, the Bank had approximately 9.3 million credit cards (including virtual cards) issued representing approximately 17.2 per cent. and 19.4 per cent. market share in Turkey by number of cards and by outstanding balance, respectively (according to Interbank Card Center data). The Bank’s outstanding credit card receivables (including corporate cards), increased to TL 14,468,597 thousand as of 31 December 2012 from TL 10,366,740 thousand as of 31 December 2011 and TL 8,492,296 thousand as of 31 December 2010.

The Bank’s own credit card brand, Worldcard, was launched in 1991. In 2002, following changes in both card technology and customer preferences, the Bank re-launched the Worldcard brand by allowing the card to be used with merchants in the Bank’s merchant network to purchase items on instalment plans and offered a new Worldcard loyalty programme. The Bank offers a wide variety of credit cards each targeted at a specific range of customers.

- 157 - The Bank offers an instalment payment programme on its credit cards in conjunction with certain members of its merchant network, whereby cardholders are able to make instalment payments for their purchases, and provided the instalment payments are paid over the agreed time period, interest will not accrue on the amount of the purchase. The programme is only available where the Bank’s cardholders make a purchase through one of the Bank’s participating merchants, except where customers have the Taksitçi card in which case a limited number of purchases may be made on an installment basis.

In 2011, the Bank launched a new mobile payment technology called Paymobile. Paymobile consists of the Paymobile-iCarte and Paymobile-Simcard applications, offering different solutions for different mobile phones. The Bank’s Paymobile iCarte solution (designed for iPhone users) won the Most Innovative Use of Visa Europe Systems or Services prize by Visa Europe Member Awards in April 2011. Paymobile gives the Bank a strong foothold in the mobile solutions market and to help the Bank gather information in relation to near field communication technology.

The Bank’s credit card business operates in accordance with the Bank Cards and Credit Cards Law enacted in 2006 (Law No. 5464), which requires that banks issue credit cards only upon the request of a customer, either orally or in writing. Credit limits are set at an amount not exceeding twice the cardholder’s average monthly salary for the first year the customer receives its first credit card from a Turkish bank, and an amount not exceeding four times the average monthly salary for the second year. The Central Bank determines the maximum contractual and default interest rates of credit cards.

Co-branding Partnerships The Bank began its credit card co-branding partnerships in 2006. As of the date of this Offering Circular, the Bank has credit card co-branding partnership agreements with TEB, VakıfBank, Anadolubank and Albaraka Turk. These partnerships have helped the Bank’s credit card brand “World” become Turkey’s largest credit card network and marketing platform, with over 13 million credit cards.

Merchant Network The Bank has been a leader in total acquiring volume in the market. The Bank’s acquiring volume as of 31 December 2012 is TL 70.3 billion as compared to TL 50.7 billion and TL 59.5 billion in 2010 and 2011 respectively. Yapı Kredi’s POS terminals increased to a total of 446 thousand, as of 31 December 2012, from a total of 432 thousand and 404 thousand units as of 31 December 2011 and 2010 respectively.

Individual Banking The Bank’s individual banking activities are organised under mass and affluent sub-segments to enable the Bank to differentiate its services and to provide the most suitable products to different customer groups. As of 31 December 2011 and 31 December 2012, the Bank provided individual banking services to approximately 5.0 million and 5.3 million active mass and approximately 410 thousands and 439 thousands active affluent customers, respectively. In general, the Bank considers a retail customer to be active on the basis of the customer carrying out any transaction in the prior three months or having an average demand deposit balance of TL 100 or more in the prior three months.

The Bank’s product offering includes mortgages, general purpose loans, home improvement loans, education loans and auto loans.

The Bank offers customers in its mass segment a wide variety of products and services through diverse delivery channels including branches and a variety of alternative distribution channels such as internet and mobile banking portals, ATMs and call centres. The Bank’s loans in its mass segment comprised 32 per cent. of its total loans to its retail customers as of 31 December 2012 and the Bank’s deposits from mass segment comprised 28 per cent. of its total deposits from its retail customers as of 31 December 2012.

The Bank’s affluent customers are served by 554 relationship managers, as of 31 December 2012 and a wide distribution network. In addition to the standard individual banking products offered to all individual customers, the Bank’s relationship managers for affluent customers have expertise in investment and mortgage products. Affluent customers also benefit from the Bank’s asset management and brokerage services. The Bank’s loans in its affluent segment comprised 21 per cent. of its total loans to its retail customers as of 31 December 2012 and the Bank’s deposits from customers in its affluent segment comprised 47 per cent. of its total deposits from its retail customers as of 31 December 2012.

- 158 - The Bank’s CRM systems and analytical “data mining” models played a key role in increasing customer loyalty and increasing product sales to its individual customers. The Bank produces targeted offers for its mass segment customers through its campaign management system.

General Purpose Loans In 2012, Yapı Kredi’s individual banking loan growth was driven by general purpose loans. The Bank recorded strong annual growth of 24 per cent. in general purpose loans reaching TL 6.9 billion volume in 2012 compared to sector growth of 16 per cent. (according to BRSA statistics). This growth was driven by the introduction of specialised campaigns in all alternative delivery channels using customer relationship management capabilities. The Bank’s fast loan application system, Kredi S¸imdi, also provided strong sales throughout the year. The Kredi S¸imdi platform allows loan applications to be finalised within 3 minutes on average.

Mortgages Mortgage loans are an increasingly important part of retail banking services in the Turkish banking sector and are a growing part of the Bank’s loan portfolio. As of 31 December 2012, 31 December 2011 and 2010 mortgage loans amounted to 10.6 per cent., 10.7 per cent. and 11.5 per cent., respectively, of aggregate loans in the Turkish banking sector (according to BRSA weekly data).

According to BRSA information, the Bank’s mortgage loan portfolio increased by 9.6 per cent. to TL 7,230,938 thousand as of 31 December 2012 from TL 6,599,802 thousand as of 31 December 2011, which represented an increase of 26.2 per cent. from TL 5,231,198 thousand as of 31 December 2010. As of 31 December 2012, the Bank’s mortgage loans represented 9.0 per cent. of the value of the Bank’s total gross loans, compared to 9.2 per cent. as of 31 December 2011 and 9.3 per cent. as of 31 December 2010.

The Bank’s mortgage loan strategy is based on providing service to customers through the Bank’s mortgage experts, developing dedicated branch and non-branch delivery channels and offering innovative mortgage products. The Bank’s mortgage experts provide customers with mortgage products and provide consultancy for all aspects of mortgages including financial, legal, technical and tax-related issues at branches. As of 31 December 2012, the Bank had 1,098 mortgage experts.

The Bank has established a dedicated team within the mortgage department to work with real estate developers and improve the flow of new individual mortgage applications to the Bank. This programme has helped the Bank to strengthen its mortgage services through its relationships with real estate developers for 80 projects and 2,248 realtors.

Payroll Services The Bank has established limited service branches/mobile branches in locations where its payroll services customers work in order to provide convenient service.

Auto loans The Bank’s auto loans (including commercial instalment auto loans) comprised 3.8 per cent., 4.6 per cent. and 4.0 per cent. of the Bank’s total gross loans as of 31 December 2012, 31 December 2011 and 2010, respectively. The decrease in 2012 was mainly due to high base effect resulting from strong growth in 2011. The Bank has had an exclusive agreement with Ford Otosan since December 2007, which allows the Bank the exclusive right to provide FordFinans branded auto loans for Ford automobiles in Turkey and allows customers to apply for an auto loan directly from a dealership through an online system. The agreement excludes heavy commercial vehicles, fleet sales and sales for car rental companies.

Bancassurance The Bank coordinates all insurance activities through a dedicated bancassurance unit formed in 2009. In 2012, a devoted sales force was formed to further strengthen sales initiatives, leveraging on the Bank’s strong customer base. In addition, a focused project was initiated to improve product offerings, re-engineer processes and strengthen collaboration with Yapı Kredi Insurance and Yapı Kredi Pension.

- 159 - Small and Medium-sized Enterprises (“SME”) SMEs are an important segment for the Bank. Micro SMEs (“MSME”) are customers with annual turnover of less than USD 250,000. Macro SMEs are customers with annual turnover between USD 250,000 and USD 5,000,000. As of 31 December 2011 and 31 December 2012 the Bank had over 597,448 and 638,837 active SME clients, respectively.

The Bank’s SME customers are served through a network of 1,594 dedicated relationship managers in the Bank’s branches, as at 31 December 2012 and are encouraged to utilise the Bank’s alternative distribution channels such as internet banking, ATMs and operating out of call centres. In addition, the Bank offers its SME customers access to its e-business platform for SMEs, called Kobiline, provides information about domestic and international loan grants, technology, internet and patent services, and also provides consultancy services in order to support its SMEs in obtaining grants. The Bank provides SME customers a similar range of products to those provided for corporate customers, as well as products specifically designed for SMEs. In addition, more than 260,000 SME customers are merchants in the Bank’s Worldcard merchant network.

The Bank is involved in four MSME/SME loan programme in conjunction with European financial development organisations to provide funding for SME clients. Since 2008, private banks in Turkey have been authorised to provide KOSGEB (Small and Medium Size Industry Development Organisation) interest-subsidised loans to SMEs, craftsmen and artisans. The Bank also collaborates with the Credit Guarantee Fund, which provides loan guarantees to support SMEs.

The Bank has named Agricultural Banking as a strategic sector and has developed various strategy and action plans during the last two years. Within this strategy, a new Agricultural Marketing team has been established under the SME Banking Marketing department. In addition, agricultural experts have been located throughout the Bank’s regions, and the agri-loans product range has been expanded by establishing specific loan types. The Yapı Kredi Agricultural Banking business now operates through more than 250 “agri-branches” (standard branches whose main economic activity is agriculture) nationwide.

Private Banking and Wealth Management The private banking division serves the Bank’s high net worth and ultra high net worth customers. The Bank’s wealth management services are carried out by its subsidiaries Yapı Kredi Invest and Yapı Kredi Asset Management, providing asset management and brokerage to the Bank’s clients.

Private Banking The Bank has a leading position in the private banking market in Turkey both in terms of total asset size, which amounted to TL 25 billion as of 31 December 2012, and distribution network, private banking centres, branches and corners as well as remote services. Customers with personal financial assets in excess of TL 500,000 are serviced by the Bank’s private banking division. The Bank considers a private banking customer to be active if the customer has actual funds on the account and has made at least one transaction in the last three months. As of 31 December 2011 and 31 December 2012, the Bank had 24,729 and 23,965 active private banking customers, respectively.

In 2009, the Bank’s asset management and brokerage businesses were brought together under the governance of the private banking and wealth management division, and the Bank’s customer segmentation criteria were revised to provide more focused products and services to its customers.

Private banking customers are served by 155 private banking relationship managers through 22 private banking centres. Alternative distribution channels for the private banking segment also include a dedicated call centre team and a separate private banking web page on the Bank website.

As of 31 December 2008, the Bank had private banking assets amounting to approximately TL 13 billion which remained stable at approximately TL 13 billion as of 31 December 2009, increased to approximately TL 15 billion as of 31 December 2010 and increased to approximately TL 20 billion as of 31 December 2011 and TL 21 billion as of 31 December 2012 (excluding equity balance). In the mutual fund business, the Bank represented 17.6 per cent. of the Turkish market, ranking number two in assets under management in mutual funds as of 31 December 2012 (according to Capital Markets Board statistics). The Bank also ranked third in the pension fund business through its subsidiary Yapı Kredi Emeklilik with approximately 17.1 per cent. and 16.1 per cent. market shares as of 31 December 2012 and 31 December 2011, respectively (according to Capital Markets Board statistics).

- 160 - The private banking division provides a wide range of products and services, including 40 different type of mutual funds including hedge fund, fund of world funds, fund of commodities fund, different types of capital guaranteed funds, pioneer funds, managed fund account, bills & bonds, Eurobonds, equity, TurkDex, Varant and structured products. The Bank uses CRM modelling tools in order to define eligible customers for different types of products such as securities, derivative products (forwards, futures and options), foreign exchange, gold and equity trading, insurance products, safe deposit boxes and e-banking services. The Bank also has affiliates and subsidiaries, which provide investment, advisory and portfolio management services, supported by the Bank’s relationship with UniCredit and its subsidiaries. The Bank also offers various advisory services through different and specialised business partners such as Tax Advisory, Art Advisory, Inheritance Advisory, Real Estate Advisory and Philanthropy Advisory. Philanthropy Advisory has been launched in June 2012, and the service is provided through the Bank’s business partner TUSEV. It is not only the Bank’s newest service but also the first Philanthropy Advisory in Turkey. Private banking customers are also entitled to a number of services such as 24 hour emergency ambulance service and have access to seminars on pertinent issues relevant to their financial interests, including investments, financial markets and taxation and are kept informed on the economy and capital markets through daily e-mails.

Corporate and Commercial Banking The Bank also provides a wide range of financial products and services to corporate and commercial customers, which include large Turkish corporates and trade companies. The Bank’s principal products and services include loan guarantees, money transfers, working capital, long-term loans, trade finance, payments for enterprises, project finance, direct debit, BANKOTM-OHES, payment products, collection products, government payments and import and export financing products.

As of 31 December 2012, the Bank had approximately 1,405 corporate clients and approximately 30,112 active commercial clients. The Bank serves its corporate clients via 3 branches and 57 relationship managers and its commercial clients via 77 branches and 504 relationship managers, as of 31 December 2012. Corporate and commercial customers are segmented mainly by the value of their annual turnover. Commercial customers are companies with an annual turnover of USD 5 million to USD 100 million, while corporate customers are companies with an annual turnover of more than USD 100 million. Companies with turnover of less than USD 5 million are considered part of the Bank’s SME segment and are managed within the retail banking division.

Following the introduction of the Bank’s new organisational structure in February 2009, corporate and commercial banking, which were previously separate, were brought together. The Bank’s leasing and factoring departments and international banking operations were also brought together under corporate and commercial banking. In commercial banking, Yapı Kredi utilises a sub-segmented service model which divides customers into two segments, as mid-commercial and large-commercial, according to product usage and turnover criteria. In this way, Yapı Kredi recorded improvement in both productivity and customer satisfaction by offering tailored products and services.

As of 31 December 2012, the Bank’s lending to the corporate and commercial segment comprised 58 per cent. of its total loan portfolio, while deposits from corporate and commercial customers comprised 42 per cent. of the Bank’s total deposits.

The Bank provides additional services to its corporate customers including working capital financing, foreign trade finance, project finance, a variety of domestic and international non-cash credit line facilities such as letters of credit and guarantees, cash management, investment banking and brokerage services, factoring, leasing and insurance services. In addition, in non-cash loans, the Bank provides both domestic and foreign currency facilities to its customers, principally comprising guarantees in relation to imports and letters of credit in respect of trade financing activities.

The primary business lines in the commercial banking segment are working capital, financing, foreign trade finance, project finance, leasing and factoring, domestic and international non cash credit line facilities such as letters of credit and guarantees, cash management and e-banking services to midsized and large corporates.

Operating profit for the corporate and commercial banking segment increased by 21 per cent. to TL 1,140,723 thousand for the year ended 31 December 2012 from TL 944,397 thousand for the year ended 31 December 2011. This annual increase for the year ended 31 December 2012 was the result of: • A focus on high margin foreign currency project finance loans driven by selective loan growth and disciplined pricing approach in corporate banking; and

- 161 - • A focused approach on mid-commercial sub-segment driven by upward loan repricing initiatives in commercial banking.

Project Finance The Bank has been active in providing project finance loans and syndicated loans in Turkey since 1999. Its project finance team is specialised in energy, real estate and transportation projects, as well as acquisition finance.

In 2012, the Bank’s project finance volume reached USD 5.9 billion compared to USD 5.8 billion as of 31 December 2011. The maturity of project finance loans typically range from five to 12 years, with a maximum grace period of four years. The Bank continued to concentrate on the energy sector, particularly financing energy production, electricity transmission and distribution projects as well as thermal and renewable energy power plants and large dam and hydroelectric power plant projects.

Cash Management The Bank is a leading bank in cash management and e-banking. The Bank’s cash management team offers a broad variety of products, including collection services, cash transfer services, electronic banking and operational services. Among the latest products introduced by the Bank were automated supplier finance system, labelled remittance (including 24 hour access through internet banking and ATM’s), new version of the Banko™ Client programme for BANKO™-OHES, the preferred automated bulk payments system, SWIFT File Act and SWIFT Score, which are offered to corporate and multinational customers in particular. The Bank also maintains its leading position in terms of business-to-business volume by market share in key products (namely direct debit and cheque clearing). The Bank’s market share in cheque clearing services (according to the Central Bank Cheque Clearing House records) was 11.8 per cent. in 2012.

International and Multinational Relationship Banking The Bank provides specialised services to international and multinational companies through an expert team. Products offered span a wide range including cash management, trade finance, project finance, treasury products, and investment banking services. The opening of a dedicated branch at the beginning of 2012 contributed to an increase in the number of customers to 594 in 2012 from 461 in 2011.

Correspondent Banking The Bank was one of the first Turkish banks to establish correspondent banking relationships and to undertake foreign business. The relationship management function for foreign financial institutions for the Bank is conducted by the Financial Institutions team.

Trade Finance The Bank provides a variety of support services and payment management mechanisms to Turkish firms engaging in international trade transactions. These include advance payments, letters of credit (sight, deferred and acceptance), cash against documents, cash against goods, standby letters of credit, export financing (pre and post shipment), import financing (post financing, promissory note discount), forfeiting and export credit insurance (export receivables backed financing guaranteed by Turk Eximbank and Coface Insurance), back-to- back letters of credit and transferable letters of credit.

In addition to traditional import and export products, the Bank offers its customers innovative and alternative foreign trade products and structured solutions. In order to increase pace of delivery and ease of use for customers, the Bank renewed its foreign trade transactions menu in the Bank’s internet banking service and started the trade finance call centre service in 2009. In 2012, the Bank also started a new payment programme for commercial and corporate clients, which is an automation payment programme of Import and FX payments.

The Bank’s trade finance unit provides direct support to the Bank’s sales teams and foreign trade customers. The Bank is one of the Turkish trade finance sector’s leading institutions with more than 19 thousand customers and a transaction volume of approximately USD 69 billion. The Bank’s trade finance unit monitors the import and export volumes and revenues of the Bank’s clients and aims to provide tailor-made solutions. The Bank also relies on support from UniCredit in offering its trade finance services.

- 162 - Trade finance products are offered through three dedicated corporate branches for large corporate customers, and through sales representatives at the commercial regions for small and medium-sized customers. The Bank has trade finance specialists who are responsible for sales support activities and monitoring of processes and finalisation of transactions. The Bank actively monitors the sales of trade finance products within the branches and sets targets for sales teams based upon the number of foreign trade customers undertaking trade finance transactions at the relevant branch.

Treasury The Bank also conducts treasury operations, covering Turkish Lira and foreign currency fixed income, money market instruments and currency and interest rate swaps and other derivatives, both for its own account and for the account of its customers.

The Bank’s treasury department consists of five major groups: Fixed Income Securities, Money Markets and Balance Sheet Management, Foreign Exchange and Derivatives, ALM Planning and Financial Monitoring, and Treasury Marketing. It also manages the Bank’s ongoing liquidity needs, interest rate risks, foreign exchange rates and controls its proprietary investment portfolio.

Fixed Income Securities The Fixed Income group is primarily in charge of managing the Banks’ local and foreign currency fixed income portfolios. The Bank is one of the 12 primary dealers accepted by the Undersecretariat of Treasury in Turkey. The Bank also manages local and foreign currency deposits. As of 31 December 2012 the Bank’s securities portfolio amounted to 17 per cent. of its total assets.

The Bank had a 17.9 per cent. market share in securities trading on the Borsa˙ Istanbul for the year 2011 and 16.6 per cent. as of 31 December 2012 (according to the Borsa˙ Istanbul).

Money Market & Balance Sheet Management and Foreign Exchange & Derivatives The Money Market & Balance Sheet Management and Foreign Exchange & Derivatives groups are primarily involved in asset and liability management activities, interbank money market transactions and foreign exchange trading, including derivatives. According to Reuters, the Bank was ranked first among Turkish banks and fourth among international banks in Turkish Lira foreign exchange spot trading in 2012. As of 31 December 2012, the Bank also held 15.8 per cent. and 13.8 per cent. market shares in the domestic spot trading and forward markets (customer transactions), respectively.

The Money Market & Balance Sheet Management group is also responsible for stabilising the interest income on the balance sheet and creating necessary funding for targeted asset growth purposes.

ALM Planning and Financial Monitoring The ALM Planning and Financial Monitoring group is primarily responsible for monitoring the treasury department’s performance and activities. This group also assists other groups within the treasury department with introducing new products.

Treasury Marketing The Treasury Marketing group is the contact point for large scale corporate, commercial and private customers. The group advises and assists customers with managing risk exposures and hedging opportunities. The group completed approximately USD 142 billion transactions for customers in the year ended 31 December 2012, compared to USD 102.5 billion for the year ended 31 December 2011 and USD 120 billion for the year ended 31 December 2010.

Sales and Distribution The Bank offers its banking products and services through an extensive distribution network, which includes both branches as well as advanced alternative delivery channels such as ATMs, call centres, internet banking and mobile banking.

- 163 - Branches The Bank had the fifth largest branch network in Turkey with 928 branches covering all regions of Turkey and serves approximately 6.5 million customers in Turkey, as at 31 December 2012. While the Bank’s branch network covers all regions in Turkey, there is a substantial concentration in the largest cities in Turkey including Istanbul, Ankara, Adana, Antalya, I˙zmir and Bursa. According to BRSA statistics, the Bank’s market share in the 10 largest cities in Turkey as of 31 December 2011 and 31 December 2012 in terms of branches was 10.2 per cent. and 9.9 per cent., respectively, compared to 9.2 per cent. and 9.1 per cent. across Turkey, respectively, with 68 per cent. and 70 per cent. of the Bank’s branches being located in the 10 largest cities in Turkey, respectively.

The Bank has a number of different types of branches, including standard, satellite and mobile, which provide customers with a wide range of services. Of the Bank’s branches, 820 were retail-related as of 31 December 2012, demonstrating the retail market orientation of the Bank. As of 31 December 2012, the Bank’s corporate- commercial branch network consisted of 80 branches and the Bank’s private banking network comprised 22 private banking centres.

Alternative Delivery Channels The Bank uses three main alternative delivery channels: ATMs, internet and mobile banking and two 24-hour call centres, all of which rely upon the Bank’s information technology platform. These channels allow customers to access services 24 hours a day and seven days a week. The cost of processing transactions through alternative delivery channels is lower than processing transactions through branches. Therefore the Bank encourages its customers to utilise these channels by offering promotions and reduced fees in return for customers using these channels instead of the branches. As of 31 December 2012, the Bank handles approximately 80 per cent. of transactions through alternative delivery channels (“ADCs”) and the remaining 20 per cent. through branches. Of the 80 per cent. through ADCs, the Bank handles 47 per cent. via ATMs, 21 per cent. via internet and mobile banking, 1 per cent. via its two call centres and the remaining 11 per cent. via other channels including post office and centralised automated transaction channels.

ATMs As of 31 December 2012 the Bank had the sixth largest ATM network in Turkey, comprised of 2,819 ATM machines, of which 83 per cent. were “advanced” ATMs with cash deposit functionality. Approximately 3.6 million customers actively used the Bank’s ATMs in 2012 per month. The Bank intends to continue to expand and improve the technology of its ATM network by deploying cash deposit feature ATMs (Tele24 Plus).

Of the Bank’s total ATMs, 83 per cent. had cash deposit features and coin dispensers, as at 31 December 2012. There were 353 ATMs tailored for disabled customers, a first in the Turkish banking sector, as at 31 December 2012.

The Bank continues to focus on product innovation as the retail banking market matures in order to meet changing client needs and to better satisfy existing ones.

In 2008, the Bank launched “Enabled Banking”, as Turkey’s first service offering disabled customers with easy access to banking services. The Bank redesigned call centres to assist hearing impaired customers by introducing text-to-speech technology, installed in selected locations wheelchair-accessible enabled ATM’s and launched the first “talking ATMs” adding new features to enable blind and visually impaired customers to perform banking operations. The Bank received numerous awards for its Enabled Banking Programme.

In 2010, the Bank presented “ATM with Keyboard” technology, providing an advanced facility for customers to add text and explanations for deposit and transfer transactions and pay motor vehicle taxes using the ATM’s alphanumeric keyboard for typing the letters of the licence plate.

In 2011, the Bank increased its focus on sale offers at ATMs. For example, ATM users may be presented on- screen with the option to increase their credit card limit, apply for a credit card, open flexible accounts and other banking packages, make insurance payments, apply for loans, and participate in other high-value sale offers.

Internet and Mobile Banking Internet banking is an important channel through which the Bank is able to provide a simple, fast and seamless banking experience to customers. As of 31 December 2012, the Bank had 2.4 million internet banking customers.

- 164 - The share of total transactions executed through internet banking increased to 21 per cent. in 2012 from 20 per cent. in 2011. The Bank has experienced increasing numbers of transactions and transaction volumes in recent years, mainly due to higher internet penetration rates globally and in Turkey, and significant marketing efforts of the Bank’s internet banking services.

Following the launch of an advanced mobile banking application in 2011, Yapı Kredi became the first bank in Turkey to provide mobile banking services covering all types of mobile phones. The number of customers using this channel increased to 165,000 in 2012 from 68,000 in 2011 and mobile banking market share reached 12.0 per cent. (according to the Turkish Banking Association). The Bank continuously adds new functionalities to its existing mobile banking applications including an innovative money transfer tool, Bump to Send, where customers can transfer money to other Yapı Kredi mobile banking users by just bumping their mobile devices together.

Smart Assistant, an alarm and reminder service via SMS and e-mail covering a wide range of banking transactions, was utilised by over 2 million Yapı Kredi customers in 2012 indicating an annual increase of 61 per cent. This initiative contributes to increased efficiency in branches and call centers through lower workload and inquiry calls.

Yapı Kredi also uses social media effectively as a medium for communication, customer service and feedback. The Bank has over 329,000 Facebook and over 22,000 Twitter followers.

To ensure secure internet connections, the Bank offers One Time Password (OTP) products through OTP Tokens, OTP Mobile (a JAVA application operating on mobile phones), OTP SMS (one time password sent via SMS), Mobile Signature, Smart Banking and Smart Pin (OTP produced through a credit card).

The Bank’s internet banking system provides 24-hour customer service through live chat, call centres or email enquiries. The Bank’s internet banking system received several awards in recent years for outstanding service and technology. Interactive Media Awards awarded the Bank the Best in Class award for its Adios credit card website and its Private Banking website in 2011. The Bank was also awarded the “Best Internet Banking Award” by Altın Örümcek (Golden Spider) Awards in 2011. Global Finance World’s Best Internet Bank Awards awarded the Bank “Best Bill Payment and Presentment in Europe” in 2011 and 2012, and the “Best Corporate Internet Branch in Europe” in 2012.

Call Centre The Bank’s award-winning call centre is one of the largest financial call centres in Turkey in terms of agents and number of calls received with two locations, Istanbul and Samsun. The call centre serves in a wide array of areas including credit cards, merchants, retail, SME, corporate, commercial and private banking, serving both individual and corporate customers. As of 31 December 2012, the call centre had a staff of 928. This service is supported through technical infrastructure with the capacity to serve 1,500 customers simultaneously, as at 31 December 2012. In addition to being one of the most important service channels, the Bank’s call centre has a significant role as a sales hub, with approximately 2.3 million sales, 430,000 retained credit card customers and 260,000 returning customers, in 2012.

- 165 - Subsidiaries, Associate and Joint Ventures The following table lists the Bank’s subsidiaries, affiliate and joint venture.

Name Business Ownership and Status

Domestic Subsidiaries Yapı Kredi Leasing Leasing products. Listed on ISE in 1994. Delisted following in 2012. Established in 1987. Yapı Kredi Factoring Factoring services in Turkey 99.95 per cent. owned by Yapı (monitoring and collection of Kredi. Established in 1999. short term receivables from sales, guarantees against payment defaults and flexible financing through early payments). Yapı Kredi Insurance (Yapı Kredi Non life insurance products, 93.94 per cent. owned by Yapı Sigorta)* including health insurance. Kredi. Established in 1943. Listed on the ISE Yapı Kredi Pension (Yapı Kredi Private pension and life products. 99.93 per cent. owned by Yapı Emeklilik)* Kredi Insurance. Founded in 1991. Yapı Kredi Invest (Yapı Kredi Provides capital market products, Founded in 1989. Yatırım) brokerage, corporate finance, derivatives and investment advisory services. Yapı Kredi Asset Management (Yapı Mutual funds, private pension Established in 2002. Kredi Portföy) funds and discretionary portfolio management products together with portfolio advisory and private fund establishment services. Provides management services to 16 private pension funds. Yapı Kredi B-Type Investment Trust Portfolio management services Entire stake to be sold. through trading capital market Consideration to be based on instruments listed on domestic and fair value of portfolio on day international markets. before shares transferred. International Subsidiaries Yapı Kredi Bank Nederland N.V. Offers a wide range of retail Wholly owned indirect services, corporate services (such subsidiary of Yapı Kredi. as structured commodity finance Resulted from 2007 merger of and trade finance solutions) and Koçbank Nederland N.V. and private banking services, as well Yapı Kredi Bank Nederland as foreign trade financing. N.V. Yapı Kredi Bank Moscow Wholesale commercial bank 100 per cent. owned subsidiary serving companies operating in of Yapı Kredi. Established in Russia. Provides commercial 1994. lending, deposit taking, money market operations and forex. Yapı Kredi Bank Azerbaijan Retail and corporate banking Wholly owned by KFS since services (loans, deposits, project 2006. finance, money transfers, trade Established as a joint venture finance, equity market and between Koçbank (80 per cent.) securities transactions, credit card and the International Finance transactions, safe deposit box and Corporation (20 per cent.) in travel cheques). 2000.

- 166 - Name Business Ownership and Status

Yapı Kredi Bank Malta Yapı Kredi obtained a banking Will ultimately be a 100 per licence to establish a new bank in cent. subsidiary of Yapı Kredi. Malta. Operations expected to start in 2013. Affiliate Banque de Commerce et de Trade finance, wealth 31 per cent. owned by Yapı Placements S.A. management, treasury services, Kredi. Established in 1963; and correspondent banking. affiliated with Yapı Kredi since 1996. Joint Venture Yapı Kredi Koray Gayrimenkul Real estate investment trust 30.45 per cent. owned by Yapı Yatirim Ortaklıg˘ı A.S. headquartered in Istanbul. Kredi. Established in 1996.

* Yapı Kredi has reached an agreement for the sale of its insurance and private pension subsidiaries with Allianz in March 2013. See “Management’s Discussion and Analysis of Financial Condition and Result of Operations—Recent Developments”

Information Technologies and Operations The Bank’s information technologies and operations departments are integrated in order to provide better service internally and improve the efficiency of core banking activities.

The Bank maintains its Operations and Information Technologies infrastructure in order to support its growing business and minimise operational risk and business interruption. The Bank operates a 2,000m2 information technology centre in Gebze, Kocaeli (43 kilometers from Istanbul), which serves as the hub of all of the Bank’s technology functions and initiatives. The fully operational information technology centre provides services to the Bank’s headquarters, branches and customers. The Bank has developed much of its software in-house, including its internet banking software, through its software development department.

The Bank has developed and implemented procedures for emergency system and data restoration and maintains a separate disaster recovery centre in Ankara, which has been in place since 1998. Disaster recovery site contains all key applications that have been agreed with business, such as Core Banking, Internet Banking, Workflow Systems, Credit Cards Systems (with Open World project), ATMs, EFT, SWIFT, Treasury. Data is transferred online as defined in DR Procedures. The Bank maintains a remote online real time disaster recovery system, which is operated when the main production system or main data centre is not available. The Bank can transfer operations and re-route data lines through the disaster recovery system within thirty minutes. The disaster recovery centre is tested on a bi-annual basis. This has enabled the Bank to be in full compliance with Basel II requirements for systems and data.

Operations—Other Segment Overview The Group’s other segment comprises a diverse range of portfolio companies in various markets, including food, DIY/home improvement, tourism, hotel management and shipyards.

Tat Konserve Tat Konserve is one of the largest food companies in Turkey. Tat Konserve gathered the Tat, SEK, Maret and Pastavilla brands under one umbrella in 2003.

Tat Konserve is the domestic market leader in the tomato paste, ketchup, tomato products, premium macaroni and fresh pasteurised milk markets. It is second in the domestic mayonnaise and delicatessen markets. It also exports to 36 countries.

Koçtas¸ Koçtas¸ is Turkey’s leading do-it-yourself market chain and a 50/50 joint venture between the Company and B&Q, a leading home improvement and garden centre retailer in Europe. Koçtas¸ has 37 stores in 19 provinces throughout Turkey and a total sales area of 196,000m2 as of 31 December 2012.

- 167 - Setur Setur is a leading travel agency in Turkey that also operates duty-free stores at six airports, six land border gates and nine seaports.

Divan Divan is engaged in the hotel management and food and beverage industries and includes the Divan hotel chain and Divan Patisseries.

RMK Marine RMK Marine is one of Turkey’s largest private shipyards, providing ship and yacht construction, maintenance and repair services.

Intellectual Property The Group’s intellectual property rights portfolio –consisting of over 6,000 brands, 2,300 patent families, 600 industrial designs and 3,000 internet domain names– is the largest in Turkey (according to statistics provided by Turkish Patent Institute and Company data). Members of the Group applied for over 270 patents in 2011 and over 300 patents in 2012. The Group files over one third of all international patent applications from Turkey and Arçelik, is the first and only Turkish company to be listed in the top-500 list of the World Intellectual Property Organization (WIPO).

The Group defines its intellectual property strategy as follows: 1. Maximising its use of the intellectual property system to obtain sustainable competitive advantage and achieve the best business results. 2. Protecting innovations that make difference and strong brands in the markets it operates. 3. Creating value by managing its intellectual property portfolio in an alignment with its business goals. 4. Commercialising intellectual property through acquisition, sale or licensing and being open to partnerships in this field. 5. Respecting the intellectual property rights of others.

In this respect, the Group is the first and only group in Turkey which established and shared an intellectual property strategy with its stakeholders.

Intellectual property (IP) is among Arçelik’s most important assets. As at 31 December 2012, Arçelik had 1,200 granted patents and 2,000 patent applications pending. Intellectual property also includes copyrights, trade secrets and know-how and other proprietary information. It is Arçelik’s policy, and procedures are in place, to identify, protect (by patent and trademark registration, and maintenance of proprietary information), defend and manage its intellectual property. It is Arçelik’s policy that new and redesigned products, processes and software are thoroughly reviewed at regular points throughout development to safeguard against the potential infringement of the intellectual property rights of third parties. Additionally, Tofas¸ owns the full intellectual and industrial property rights for the models that it produces, the MiniCargo and New Doblo. Tofas¸ also finances and manages the full development of these models. While many members of the Group seek and hold various patents or other intellectual property covering various products and processes, no individual IP or series of IP is considered material to the Group as a whole.

Research and Development The Group is committed to innovation in all the fields and has the largest R&D spending in Turkey. Koç Holding was listed among the world’s top companies by R&D investment according to the “EU Industrial R&D Investment Scoreboard” for 7 consecutive years, rising to 485th place in 2012. Key R&D centres for each of the Group’s manufacturing segments are set forth below.

Energy Segment Tüpras¸ opened its R&D Center in I˙zmit in 2010 and signed cooperation agreements with a number of academic institutions to assist in Tüpras¸’s R&D initiatives, including Bogˇaziçi University, METU, Bilkent, Sabancı University,˙ Istanbul Technical University and the Environment and Chemistry Institutes of TÜBI˙TAK MAM Energy (Turkish Scientific Research Council, Marmara Research Center).

- 168 - Joint projects undertaken by Tüpras¸ and its university partners include a real time optimisation and control system design and implementation project at˙ Izmit Refinery’s hydrocracker unit and pollution monitoring at the I˙zmir Refinery

Automotive Segment Gebze Technology Centre, located in the TUBITAK-MAM Technology Free Zone, is Ford Otosan’s engineering centre and the global engineering centre for Ford diesel engines and heavy trucks. It is the third largest Ford R&D centre globally and enabled Ford Otosan to be integrated with Ford of Europe in product development. In 2012, Ford Otosan employed 1,240 R&D personnel.

Tofas¸ has an R&D center within its Bursa facility employing approximately 400 engineers. It is able to oversee the full development of a vehicle. The total laboratory and office area is 17,000 m2. Among its R&D activities in 2012 were 64 technological research projects, including the electrification of the Doblo.

Consumer Durables Segment Arçelik’s particular focus in R&D has been to develop energy and water efficient products at an affordable price point without compromising quality or design. Arçelik employs approximately 1,000 personnel in 13 R&D units located in five countries, although the majority of its R&D capability is concentrated in Turkey.

Employees As of 31 December 2012, the Group employed 82,158 employees, 73,869 of which were in Turkey and 8,289 in other countries.

Collective labour agreements are in place within certain Group companies. In 2012, the Turkish government implemented several amendments to certain principal laws regulating employment in Turkey, including the Law on Labour Unions and the Law on Collective Labour Agreements, Strikes, Lock-outs which were replaced by the newly-adopted Law on Labour Unions and Collective Labour Agreements. Major amendments were also brought to the legislation on occupational health and safety. The Group promptly commenced implementation of necessary measures in accordance with the new legislation. As a consequence of such amendments to legislation, secondary regulations are being published by the Turkish government as well and the Group monitors such amendments regularly to adopt necessary measures swiftly as may be required.

Collective bargaining agreements are usually renewed every two years in accordance with the procedures prescribed by the legislation governing such process.

Currently, the collective labour agreements regarding Aygaz, Tofas¸, Arçelik, Arçelik-LG, Ford Otosan, TürkTraktör, Otokar, Yapı Kredi, Tüpras¸, Tat Konserve and shipping subsidiaries’ workplaces are in the process of being negotiated with labour unions for renewal due to the end of their term. There have been no significant work stoppages, strikes or material labour unrest at any of the Group’s workplaces in the past three years and the Company believes it generally enjoys good relations with employees.

Information Technology The Group considers as a priority the protection of information against attempts of unauthorised access or attack and it uses trusted infrastructure protection technologies all of which are highly rated by IT industry specialists, to ensure a high level of security. Network security is regularly tested and weaknesses identified and remedied. There have been no major IT issues across the Group companies in the past three years.

Insurance The Company monitors the insurance policies that Group companies carry to ensure that the coverage is adequate and the Company’s management believes that its principles are conservative with respect to insurance.

In the Energy Segment, Tüpras¸ maintains property and liability insurance against its business risks to the extent its management considers appropriate. Within the scope of the property insurance policy, Tüpras¸ is covered for damages caused by terrorism but not business interruption risk.

- 169 - Both of the Group’s automotive companies, Ford Otosan and Tofas¸ have insurance coverage which their respective management considers reasonably sufficient to cover all normal risks associated with its operations (including business interruptions, property and marine) and believes is in accordance with industry standards in Turkey. Neither Ford Otosan nor Tofas¸ has product liability insurance as any claims relating to exported products are the responsibility of the contract counterparty and in Turkey, such product liability cases are rare.

The Bank maintains insurance policies with levels of coverage it deems to be sufficient for the nature of its business. The Bank’s fixed assets, cash in transit and cash in hand are covered by general insurance arrangements covering normal risks. The Bank generally requires that real property assets owned by borrowers which form part of the collateral for loans the Bank makes are insured. The Bank does not have any credit risk insurance in relation to defaults by its customers as this type of insurance is generally not available in Turkey. The Bank maintains real property insurance on its properties, including its head office and branches and personal property, with respect to such risks, including earthquakes and terrorist attacks, and in such amounts as the Bank deems appropriate.

Arçelik maintains a number of key insurance policies in Turkey and globally, that it believes are commercially appropriate to cover the risks associated with its business operations. Arçelik maintains an insurance portfolio that covers both physical assets and liability exposures. It has global insurance programmes covering liability insurance for Arçelik companies, as well as an all-risk policy covering property and business interruption. All of Arçelik’s manufacturing facilities and other principal properties are insured.

Koç Holding maintains insurance policies that cover its physical assets and as well as directors and officers liability insurance policy covering the Group’s certain directors and officers.

Legal Matters The Company’s legal team is comprised of 14 people who provide legal advice not only to the Company but to Group members as well. Most of the Group companies has an in-house legal team that works alongside the Company’s legal team when needed. The Company’s legal team will organize trainings or review legal documents on behalf of its portfolio companies.

The General Counsel of the Company is also a member of the investment committee and participates in deliberations relating to investment decisions.

Energy Segment In July 2012, Tüpras¸ and Opet were notified that the Competition Board had opened an investigation against them alleging in general terms (i) that Tüpras¸ had abused its dominant position in the Turkish refining market with respect to prices it offered to distributors (the “Dominant Position Allegation”) and (ii) that Tüpras¸ and Opet had improperly acted in concert with respect to sales of refined products to the third party distributors in Turkey (the “Acting in Concert Allegation”). In August 2012 Tüpras¸ and Opet filed written responses with the Competition Board in which it refuted these allegations. In accordance with the procedures set out in the Anti- Trust Law, the Competition Board is continuing its investigation and is required to issue a report by no later than August 2013 containing more specific allegations and a detailed factual analysis of the allegations. Following receipt of the report Tüpras¸ and Opet will be permitted to prepare written rebuttals of the allegations. The Competition Board shall send its responses to such rebuttals upon which Tüpras¸ and Opet will provide a final set of written rebuttals. Following these rebuttals, the Competition Board will hold a hearing to hear verbal arguments and is required to issue a verdict within 15 days thereafter. Based on the procedural timetable established under the Anti-Trust Law, Tüpras¸ believes that any such verdict will occur no earlier than July 2013 and no later than February 2014.

The maximum penalties allowed under the relevant regulations related to the Anti-Trust Law with respect to the Dominant Position Allegation would be three per cent. of the annual revenue of Tüpras¸ and with respect to the Acting in Concert Allegation would be four per cent. of the annual revenues of each of Tüpras¸ and Opet. In assessing the magnitude of any penalty to be imposed, the Competition Board is required to take into account various considerations, including whether or not the improper action was willful. To date the largest penalty imposed by the Competition Board in Turkey was TL 213.4 million in 2013 (which was imposed as a result of an investigation in the banking industry and represented 1.5 per cent. of the annual revenue of the target of the investigation). In that case the action was determined to be a wilful violation of the Anti-Trust Law.

- 170 - Tüpras¸ and Opet managements, respectively believes that their actions at all times have been in compliance with the Anti-Trust Law and accordingly believe that they have strong defences to the Dominant Position Allegation and the Acting in Concert Allegation. However, due to the early stage of this investigation it is not possible to determine what conclusion will be reached by the Competition Board with respect to these allegations, and the level of penalties, if any, that may be imposed. See “Risk Factors—Risks Relating to the Businesses of the Group—Unfavourable outcomes in pending or future litigations or investigations and regulatory actions may negatively affect the Group”.

In 2010, a tax liability claim amounting to TL 605.4 million was filed against Tüpras¸ in relation to back payments of a special consumption tax that applied to the use of fuel, particularly in the production of asphalt, in Tüpras¸’s refineries from 2005-2009. Tüpras¸ disputed this claim, and following negotiations with the relevant tax authorities, a general tax amnesty was agreed where the final payment was heavily discounted. In 2010, TL 181.2 million was booked as a provision for a tax liability and related interest expense and in 2011, Tüpras¸ paid the tax penalty amount of TL 175 million to the relevant authorities.

There has been no material litigation regarding Aygaz.

Automotive Segment There has been no material litigation regarding the Group’s automotive companies.

Consumer Durables Segment Arçelik is subject to litigation in the ordinary course of its business and it does not believe that it is subject to any current, pending or threatened litigation that is material to its business.

Arçelik’s international white goods brand, Beko, has undertaken three ongoing recalls in Europe in recent years in relation to products manufactured before 2010. These recalls relate to certain models of cookers that have been the subject of a voluntary corrective action programme since 2008, certain models of refrigerators that were manufactured from 2000-2006 and have been the subject of a voluntary corrective action programme since 2011, and certain models of tumble dryers that have been the subject of a voluntary corrective action programme since 2012. Beko has mobilised significant resources to rectify and raise awareness of the three product issues. Activities undertaken include customer letters, customer calls, national, regional and specialist media safety notice advertising, the ‘Be a Hero’ public information campaign, leafleting and door knocking campaigns as well as posting extensive safety information on its website. There can be no assurance that Arçelik will not suffer reputational or other damage as a result of these or future recalls and/or the adverse publicity associated with them.

Finance Segment From time to time, in the ordinary course of its business, Yapı Kredi is party to legal proceedings, both as a plaintiff and a defendant. There are no legal proceedings pending, or to its knowledge threatened, that may materially adversely affect Yapı Kredi’s business, results of operations or financial condition. As of 31 December 2012, Yapı Kredi recognised a provision of TL 48,743 thousand in respect of legal proceedings.

Competition Board Investigations Competition in Turkey is mainly regulated by Law No. 4054 on the Protection of Competition. This law is enforced by the Competition Board, which has the power to investigate possible breaches and impose fines.

In August 2009, the Competition Board released a report announcing that it had initiated an investigation of eight major banks, including the Bank, into allegations of collusion among such banks in relation to the provision of promotions to public and private corporate customers while providing payroll deposit services, in breach of the Competition Law. After its investigation, the Competition Board announced in March 2011 that it imposed an administrative fine amounting to TL 12,987,340 on the Bank with the possibility of the Bank’s appealing the fine to the Council of State. In September 2011, the Bank announced that TL 9,740,505 of the fine (the amount calculated by benefiting from the discount within the framework of the provision of Article 17 of the Misdemeanor Law No. 5326) had been paid by the Bank on 21 September 2011; provided that the Bank reserved its right to litigate against the related decision and to claim for refund. The appeal process is still currently pending.

- 171 - In November 2011, the Bank, together with 11 other banks operating in Turkey, was subject to another investigation by the Competition Board. The Competition Board announced that it had initiated an investigation of 12 major banks (including the Bank), as well as two other financial institutions, with respect to allegations of acting in concert regarding interest rates and fees on deposits and loans in breach of the competition law. On 8 March 2013, the Competition Board ruled that the Bank was to be fined TL 150 million (other banks were also fined, ranging from TL 10 to TL 213 million, with fines generally based upon net income) in connection with this investigation. The Bank’s management has indicated that it intends to explore options to object to this decision through proceedings in the administrative courts. While there is no precedent Turkish court decision approving the legal validity of any such claims by customers and there are not any resolved cases opened by any customers against the Bank in this respect, under articles 57 and 58 of the Law on the Protection of Competition customers may be able to bring claims against the Bank seeking damages.

- 172 - MANAGEMENT

The Board of Directors Pursuant to the provisions of the Articles of Association and the TCC, all Company affairs are conducted by the Company’s board of directors (the “Board of Directors”) elected by a resolution passed at the General Meeting.

The Board of Directors manages and represents the Company by taking its long-term interests into consideration. It does this by engaging in rational and cautious risk management that maintains the balance between the Company’s risk, growth and profits at the most appropriate levels through the strategic decisions that it makes. The Board of Directors defines the Company’s strategic goals, identifies the human and financial resources needed and oversees the performance of management.

The Board of Directors meets as frequently as needed to effectively carry out its duties. Moreover, four times a year, the Company holds strategic meetings where, in addition to evaluating financial performance vis-a-vis the budget, developments in strategy are monitored and recommendations are made. During the year-end performance appraisal process, achievements vis-a-vis targets regarding the realisation of company strategies are also measured as part of the overall performance and reward process.

The Board of Directors oversees company operations and assesses them in terms of their compliance to regulations, the Articles of Association, internal regulations and policies formed. Taking the Company’s long- term interests, it makes sure that the Company properly functions.

The Board of Directors includes independent members who are not related with the main shareholders and the Group in terms of shareholdings, business, management, employment or any other interest and who are not involved directly in the operations of the Company and chosen from among internationally successful professionals. None of the current members of the Board of Directors is involved in the management or otherwise engaged in the running of the day-to-day operations of the Company. 5 of the 15 members of the current Board of Directors are approved by the CMB as independent in accordance with CMB regulations. The CMB granted a waiver at its meeting on 6 March 2013 to allow independent membership of Dr. Victor K. Fung (who did not fully meet the criteria as being non-resident in Turkey under the criterion that requires at least a half of independent members to be accepted as resident in Turkey). Apart from abovementioned five independent members, an additional two members also meet the CMB independence criteria except for the criteria of “residing in Turkey” and term of board membership. According to CMB regulations, at least half of the independent members should satisfy the condition of residing in Turkey and any person who has been a board member more than 6 years within last 10 years in any group company cannot be deemed as independent.

In accordance with the Articles of Association, the Board of Directors consists of a minimum nine and maximum 15 members elected by the General Assembly of Shareholders. For 2013, the Board of Directors consists of 15 members. The members, including the independent members are elected by ordinary majority vote in the General Assembly of Shareholders. Even if the term of election has not expired, the General Assembly of Shareholders may at any time resolve to renew the Board of Directors provided that the requirements regarding independent members under the Corporate Governance Regulations of CMB are reserved. The number of independent board members and necessary qualifications is determined in accordance with the Corporate Governance Regulations of CMB. Pursuant to the Corporate Governance Regulations of CMB, at least one-third, and no less than two, members of the Board of Directors are required to be independent members. The Company is required to obtain approval from the CMB prior to the General Assembly with respect to the independent members of the Board of Directors confirming that they meet the independency qualifications determined by Corporate Governance Regulations of the CMB.

In the event of a vacancy occurring in the Board of Directors, the vacancy must be filled by the Board of Directors through an election conducted pursuant to Article 363 of the TCC and Corporate Governance Regulations of the CMB. If a seat on the Board of Directors occupied by an independent director becomes vacant, the vacancy must be filled by the Board of Directors through an election from among the nominees who are deemed independent under CMB regulations.

The meeting and decision quorum of the Board of Directors is a simple majority of the number of the members. However, in respect of any resolutions concerning re-participation in a company, or sale of current shares, it is essential that 7 votes of a Board of Directors with 9 members, 8 votes of a Board of Directors with 10 members, 9 votes of a Board of Directors with 11, 12 and 13 members, 10 votes of a Board of Directors with 14 members, and 11 votes of a Board of Directors with 15 members, be made in the affirmative. The obligations set forth by the Corporate Governance Regulations of CMB are reserved.

- 173 - The Board of Directors may delegate the management and representation duties among its members or transfer them fully or partially to the Executive Members or Managers that are not required to be a shareholder. The Board of Directors is authorised to distribute the management and representative functions. The authority and responsibility of the Executive Members and Managers is determined by the Board of Directors and all responsibility and authority of the Board of Directors can, subject to its own conditions, provisions, and restrictions, be transferred to related persons, and these authorities can be changed and amended or removed as and when it is required.

The following table provides certain information about the Board of Directors as of the date of this Offering Circular:

Year first elected to the Name Age Position Board Rahmi M. Koç ...... 83 Honorary Chairman ...... 1963 Mustafa V. Koç ...... 53 Chairman ...... 2001 Temel Kamil Atay ...... 73 Vice Chairman ...... 1996 Ömer M. Koç ...... 51 Vice Chairman ...... 2004 Semahat Arsel ...... 85 Member ...... 1963 I˙nan Kıraç...... 76 Member ...... 1993 AliY.Koç ...... 46 Member ...... 2008 Dr. Bülent Bulgurlu ...... 66 Member ...... 2007 Kutsan Çelebican(*) ...... 68 Member ...... 2013 Muharrem Hilmi Kayhan(*) ...... 58 Member ...... 2012 Prof. Dr. John H. McArthur(**) ...... 79 Member ...... 1999 Prof. Dr. Heinrich V. Pierer(***) ...... 72 Member ...... 2008 Sanford I. Weill(*) ...... 80 Member ...... 2009 Peter Denis Sutherland(*) ...... 67 Member ...... 2009 Kwok King Victor Fung(*) ...... 68 Member ...... 2011

(*) Independent members under CMB criteria (**) Mr. McArthur meets all independency criteria of CMB except for two: (i) Turkish residency requirement for at least half of the independent members and (ii) time-barred for having been a member of the board for more than six of the last ten years. (***) Mr. Pierer meets all independency criteria of CMB except for the Turkish residency requirement for at least half of the independent members.

The address for each of the Issuer’s directors is the registered office of the Issuer.

Rahmi M. Koç, Honorary Chairman (Age 83). Rahmi M. Koç graduated from Johns Hopkins University with a B.Sc. in Business Administration. After completing his military service, he joined Koç Group in 1958 at Otokoç and held various senior positions at Koç Holding. He became Chairman of the Management Committee in 1980 and was named Chairman of the Board of Directors of Koç Holding in 1984. He retired in 2003 and since then he assumes the title of Honorary Chairman. He was the President of the International Chamber of Commerce between 1995-1996. In addition to his role as Koç Holding Honorary Chairman, Rahmi M Koç also serves as Vice Chairman of the Board of Trustees of Vehbi Koç Foundation, Chairman of the Board of Trustees of Koç University, Founder and Chairman of the Board of Directors of Rahmi M. Koç Museum and Cultural Foundation, Chairman of the Board of Directors of Vehbi Koç Foundation American Hospital, Honorary Chairman and Founder of TURMEPA (Turkish Marine and Environment Protection Association), Honorary President of the High Advisory Council of Turkish Industrialists’ and Businessmen’s Association (“TÜSI˙AD”), Member of the Advisory Board of the Turkish Employers Association, Honorary Member of the Foreign Policy Association, Honorary Member of the New York Metropolitan Museum Board of Trustees and Founder Member of Global Relations Forum.

Mustafa V. Koç, Chairman (Age 53). Mustafa V. Koç graduated with a B.A. degree in Business Administration from George Washington University in 1984 when he joined Koç Group in Tofas¸. In 1992, he moved to Koç Holding and served as Vice President and President of various business groups. He became a Member of the Board of Directors in 2001 and Vice Chairman in 2002. He was appointed as Chairman of Koç Holding Board of Directors on 4 April 2003. Mr. Koç is a Member of the Rolls Royce International Advisory Board, the JP Morgan International Council, and the Global Advisory Board of the Council on Foreign Affairs. He is also a Member of the Steering Committee of the Bilderberg Meetings and Honorary Consul General of Finland in Istanbul. Mr. Koç was awarded the Cavaliere d’Industria medal by the Government of Italy in 2005 and the

- 174 - International Leonardo Prize, known as the “Oscar of Business” in 2012. He is Honorary Chairman of TÜSI˙AD’s High Advisory Council. Mr. Koç is also a Member of the Board of his family’s philanthropic foundation, the Vehbi Koç Foundation. He is strongly committed to its work in the cultural, educational and medical fields in Turkey, whose excellence has been recognised internationally by, among others, the World Monuments Fund, the Carnegie Foundation, and BNP Paribas.

Temel Kamil Atay, Vice Chairman (Age 73). Temel Kamil Atay graduated with a B.Sc. in Mechanical Engineering from Istanbul Technical University, and he holds an MBA degree from Wayne State University. He joined Koç Group in 1966 and later served as the General Manager of Otoyol Sanayi and Tofas¸. After working in various senior management posts at Koç Holding, he served as the CEO between 2000-2001. He has been a Member of the Board of Directors since 1996 and was named Vice Chairman in 1998.

Ömer M. Koç, Vice Chairman (Age 51). Ömer M. Koç received his BA degree from Columbia University in 1985. He worked at Kofisa Trading for one year. After completing his MBA at Columbia University in 1989, he worked at Ramerica International Inc. He worked at Gazal A.S¸. He held various senior positions at Koç Holding including Finance Coordinator, Vice President and President of Energy Group. He has been a Member of Koç Holding Board of Directors since 2004 and Vice Chairman since May 2008. He is also the President of Turkish Educational Foundation and Geyre Foundation and Chairman of Yapı Kredi Kültür Sanat Yayıncılık Board of Directors and Tüpras¸ Board of Directors.

Semahat Arsel, Member (Age 85). Semahat Arsel graduated from the American College for Girls in Istanbul, she studied German at Goethe Institute and is fluent in both English and German. She began her career in 1964 as a Member of Koç Holding Board of Directors, a position she continues to hold. In addition, she is the Chairman of the Board of Directors of Vehbi Koç Foundation, Chairman of the Tourism Group Board of Directors, Chairman of Semahat Arsel Nursing Education and Research Center and second Chairman of Florence Nightingale Foundation. She is also the Founder of Koç University School of Nursing.

Inan Kiraç, Member (Age 76). I˙nan Kıraç graduated from City College of Business in London and he joined Koç Group in 1961. He served as General Manager of Tofas¸ Oto Ticaret A.S¸., Tofas¸ Group President and President of Automotive Companies prior to his appointment as Koç Holding CEO between 1994-1998. In 1998, with his close friends, he founded Kıraça Group of Companies and he has been serving as the Chairman of the Board of Directors. He has been a Member of Koç Holding Board of Directors since 1993.

Ali Y. Koç, Member (Age 46). Ali Y. Koç graduated from Rice University in Business Administration and completed his MBA degree at Harvard Business School. He attended the American Express Bank Management Trainee programme between 1990-1991 and worked as an analyst at Morgan Stanley Investment Bank between 1992-1994. He held various senior positions at Koç Holding such as the New Business Development Coordinator and President of Information Technology Group between 1997-2006. He was the President of Corporate Communications and Information Technology Group between 2006-2010. He was appointed as a Member of Koç Holding Board of Directors on 30 January 2008. He is also a Member of Bank of America Global Advisory Council.

Dr. Bülent Bulgurlu, Member (Age 66). Bülent Bulgurlu graduated from Ankara Engineering and Architectural Faculty and earned his Ph.D. from Norwegian University of Science and Technology (NTNU). He started his career in 1972 as a Construction Engineer at Elliot Strömme A/S in Oslo. He joined Garanti˙ Ins¸aat in 1977 as Construction Engineer and worked as Planning and Construction Manager, Site Coordination and Construction Manager, Assistant General Manager and General Manager. He has worked at Koç Holding since 1996 as President of Tourism and Services Group, President of Tourism and Construction Group and President of Consumer Durables and Construction Group. He was Koç Holding CEO between May 2007-April 2010. He is a Member of Koç Holding Board of Directors since May 2007. He is also a Member of TÜSI˙AD, TURMEPA (Turkish Marine and Environment Protection Association).

Kutsan Çelebican, Member (Age 68). He graduated from Ankara University School of Political Science. He began his career at the Ministry of Finance Tax Auditors Board in 1969, served as Deputy General Director at the General Directorate of Treasury of the Ministry of Finance between 1979-1982 and was appointed as Assistant to Executive Director in World Bank (IBRD). He joined Koç Group in 1987 and served as Finance Coordinator, Vice President and President of the Finance Group. He retired from Koç Group as of December 2001. He currently manages his own financial consulting company. He served as a legal auditor of Koç Holding between April 2008-April 2012 and he resigned due to beginning of his career as an independent member of the board of Koç Group Companies. He has been serving as an Independent Member of the Board of Directors of Tüpras¸ and Arçelik since 2012.

- 175 - Muharrem Hilmi Kayhan, Member (Age 58). Muharrem Kayhan was educated at St. Joseph French School and Robert College of Istanbul. He got his Engineering Degree in Textiles in 1976 from the University of Manchester in England. He received his MBA from Cornell University in 1978. Muharrem Kayhan is presently Vice-Chairman of the Board of Söktas¸. He has represented the interests of the Turkish textile industry in various European Union platforms while serving on the Boards of the Aegean Chamber of Industry, the Exporters’ Union, and the Turkish Textile Employers’ Union. He has served as the Chairman of TÜSI˙AD between 1997- 1999, and is now one of its Honorary Chairmen. Muharrem Kayhan serves on the Board of Trustees of Robert College, Sabancı University, and the˙ Izmir Culture, Art and Education Foundation. He represents Spain as Honorary Consul in Izmir since 2003. He is the recipient of the Turkish National Assembly Distinguished Service Award (2009). He was appointed as a Member of Koç Holding Board of Directors on 2012.

Prof. Dr. John H. McArthur, Member (Age 79). John H. McArthur graduated from the University of British Columbia and received his MBA and doctorate from the Harvard Business School. He became a professor at the Harvard Business School in 1962 and served as Dean between 1980-1995. He currently chairs the Asia Pacific Foundation of Canada and is a Member of the Board of Directors of Duke University Health Systems, e-Rewards Inc., Stemnion, Inc., Development Gateway Foundation, and the Thomson Reuters Founders Share Co. Ltd. For many years, he served as Chair of the Brigham and Women’s Hospital and, following its merger with the Massachusetts General Hospital, was the founding co-chair of the Board of Partners HealthCare System, Inc. He has also served on the boards of Chase Manhattan Corporation, Bell Canada, GlaxoSmithKline PLC, and the AES Corporation. John H. McArthur has been a Member of Koç Holding Board of Directors since 1999.

Prof. Dr. Heinrich V. Pierer, Member (Age 72). Heinrich V. Pierer studied Law and Economics at the Friedrich Alexander University Erlangen-Nuremberg. He joined Siemens AG in 1969 and held various senior positions in the Company. He was the Chief Executive Officer of Siemens AG between 1992-2005 and the Chairman of the Supervisory Board of Siemens AG between 2005-2007. He served as Chairman of the Asia-Pacific Committee of German Business between 1993-2006. Prof. Dr. Heinrich V. Pierer holds various honorary doctorates and is a Honorary Professor at the Friedrich Alexander University Erlangen-Nuremberg: Law School, School of Business and Economics. He has been a Member of Koç Holding Board of Directors since 2008.

Sanford I. Weill, Member (Age 80). Sanford I. Weill graduated from of Cornell University. He served as the Chairman of Shearson Loeb-Rhoades and its predecessor companies (1965-1985), President of American Express Co. (1983-1985), Chairman and CEO of Fireman’s Fund Insurance Co. (1983-1985), Chairman and CEO of Travelers and its predecessor companies (1986-1998). He was a Director on the Boards of United Technologies Corp, (1999-2003), AT&T Corp. (1999-2003) and E. I. Du Pont Nemours & Co. (1998-2001). He served as Director of the Federal Reserve Bank of New York (2001-2006). He retired as CEO of Citigroup in 2003 and served as Chairman until 2006. Some of Mr Weill’s charitable endeavors include, Chairman of Weill Cornell Medical College (since 1995); Chairman of Carnegie Hall (since 1991); Founder and Chairman of the National Academy Foundation (since 1982); Chairman of the Green Music Center Board of Advisors at Sonoma State University; a member of the Board of Governors of the San Francisco Symphony; a member of the Executive Council of the University of California, San Francisco Medical Center; and a Director of the Lang Lang International Music Foundation. Mr Weill has been the recipient of many corporate and philanthropic awards including Chief Executive Magazine’s 2002 CEO of the Year Award, and, along with his wife Joan, the 2009 Carnegie Medal of Philanthropy. Mr. Weill was recently elected to the prestigious American Academy of Arts and Sciences. Sanford I. Weill has been a Member of Koç Holding Board of Directors since 2009.

Peter Denis Sutherland, Member (Age 67). Peter Dennis Sutherland was educated at Gonzaga College, University College Dublin and the King’s Inns and graduated in Civil Law. He served as Attorney General of Ireland (1981-1984), EC Commissioner responsible for Competition Policy (1985-1989), Director General of The World Trade Organization (1993-1995) and Chairman of BP p.l.c. (1997-2009). Mr. Sutherland is Chairman of Goldman Sachs Intl. (1995- current) and the London School of Economics and UN Special Representative for Migration and Development. His other associations include Allianz BoD, BW Group Ltd. BoD, Eli Lilly Advisory Board, World Economic Forum, Trilateral Commission (Europe) and The Federal Trust. He has received fifteen honorary doctorates from universities in Europe and America and has many awards and publications. P.D. Sutherland has been a Member of Koç Holding Board of Directors since 2009.

Kwok King Victor Fung, Member (Age 68). Kwok King Victor Fung received his bachelor and master’s degrees in Electrical Engineering from the Massachusetts Institute of Technology, and a doctorate in Business Economics from Harvard University. He was the Chairman of the Hong Kong Trade Development Council (1991-2000), the Hong Kong representative on the APEC Business Advisory Council (1996-2003), Chairman of the Hong Kong

- 176 - Airport Authority (1999-2008), Chairman of The Council of The University of Hong Kong (2001-2009) and Chairman of the Greater Pearl River Delta Business Council (2004 to February 2013). Dr. Fung is the Group Chairman of the Fung Group (formerly known as the Li & Fung Group), a Hong Kong-based multinational which comprises major subsidiaries in trading, logistics, distribution and retailing. They include publicly-listed Li & Fung Limited, Convenience Retail Asia Limited and Trinity Limited. He is the Founding Chairman of the Fung Global Institute, an independent, non-profit think-tank based in Hong Kong, Honorary Chairman of the International Chamber of Commerce and a member of the WTO Panel on Defining the Future of Trade. He is also a member of Chinese People’s Political Consultative Conference, Vice Chairman of China Centre for International Economic Exchanges and a member of the Economic Development Commission of the Hong Kong Government. Dr. Fung is an independent non-executive Director of the Bank of China (Hong Kong) Limited and Chow Tai Fook Jewellery Group Limited in Hong Kong, and China Petrochemical Corporation in the People’s Republic of China. He is also Chairman of the Asia Advisory Board of Prudential Financial, Inc (USA). He was awarded the Gold Bauhinia Star in 2003 and Grand Bauhinia Medal in 2010 for distinguished service to the community. Fung has been a Member of Koç Holding Board of Directors since 2011.

Executive Management

The following table provides certain information about the Company’s executive management as of the date of this Offering Circular:

Number of Years Name Age Position with the Company Osman Turgay Durak ...... 61 CEO 37 Ali Tarık Uzun ...... 49 President, Audit Group 21 Tamer Has¸imog˘lu...... 49 President, Tourism, Food and Retailing Group 24 Erol Memiog˘lu ...... 59 President, Energy Group 14 Kudret Önen ...... 60 President, Defence Industry, Other Automotive and IT Group 38 Ahmet Ashabog˘lu...... 42 CFO–President, Finance and Strategic Planning Group 10 Cenk Çimen ...... 46 President, Automotive Group 22 Levent Çakırog˘lu ...... 46 President, Consumer Durables Group 15 Faik Açıkalin ...... 51 President, Banking and Insurance Group 4

The Planning and Coordination Council shall be established comprising of the members to be determined by the Board of Directors under chairmanship of the Board of Directors. Council is an institution making assessment, delivering opinions and advice about the activity results, business programmes, long-term plans and personnel policies of the companies where Koç Holding is a shareholder or is effective in management.

Board Committees Corporate Governance Committee The Corporate Governance Committee was established in the Board of Directors meeting dated 29 March 2007 to give advice and recommendations to the Board of Directors for the purpose of improving the corporate governance implementations of the Company under the provisions defined in the Corporate Governance Principles of CMB. This Committee oversees compliance with the CMB’s Corporate Governance Principles, assesses the reasons behind non-compliance in some areas, and proposes improvements to the Board of Directors.

The Corporate Governance Committee is comprised of at least two members. The Chairman of the Committee is elected from among the independent members of the Board of Directors. The CEO/General Manager may not be assigned to the Committee.

The Committee meets at least two times a year or more when needed.

Risk Management Committee The Risk Management Committee was established in the Board of Directors meeting dated 17 July 2012 for the purpose of making suggestions to the Board of Directors to early diagnosis of the risks and efficient management of the risk, within the scope of provisions of the TCC and Corporate Governance Principles of CMB.

- 177 - The purpose of the Risk Management Committee is to provide an early diagnosis of the risks that would endanger the existence, development and continuity of the Company, implementing the measures and remedies required in this respect, and to manage and report these risks in parallel with the Company’s corporate risk -taking profile, to apply necessary precautions relevant to recognised risks, to consider while making decision and to make suggestions to the board about developing and integrating internal control systems.

The Risk Management Committee is comprised of at least two members. The Chairman of the committee is elected from among the independent members of the Board. The CEO/General Manager of the Company may not be assigned to the committee and the Committee presents at least six risk reports within a year to the Board of Directors.

Audit Committee At the meeting of the Board of Directors on 4 April 2003, the Audit Committee was established to fulfill the functions stipulated in the CMB Regulations for the audit committee. Within this frame, it conducts the disclosure and independent audit of the accounting system and financial information of the Company and the supervision of the operation and efficiency of the internal control system of the Company, selection of the independent audit company, preparation of independent audit contracts and initiation of independent audit process, and supervision of the studies of the independent audit company at every stage are all carried out under the supervision of the audit committee.

The Audit Committee meets at least four times a year or more when necessary as it has to submit a written report to the Board of Directors containing its assessments and the views of the responsible executives of the Company and of the independent auditors in relation to the truth, accuracy and compliance of annual and interim financial statements to be disclosed to public with the accounting principles adopted by the Company.

Audit Committee is not only responsible for conducting internal and external auditing, but also for seeing to it that recording and reporting procedures comply with laws, rules and regulations pertaining to them and that they conform to the principles of the CMB and IFRS. This committee is comprised of the Chairman of the Committee and non-executive members.

The Nomination and Remuneration Committee At the meeting of the Board of Directors on 17 July 2012, the Nomination and Remuneration Committee was established to give advice and recommendations to the Board of Directors for the purpose of improving the corporate governance implementations on the issues of nomination of Board members and remuneration of the key executives of the Company under the provisions defined in the Corporate Governance Principles of CMB.

The key purpose of the committee is to fulfill the duties required by CMB Corporate Governance Principles on the issues of nomination of Board members and remuneration of the key executives. The frequency with which the Nomination and Remuneration Committee gathers depends on what is required by the task assigned to it. The Nomination and Remuneration Committee is comprised of at least two members. The Chairman of the Committee is elected from among the independent Members of the Board. The CEO/General Manager of the Company may not be assigned to the committee.

Executive Committee The Executive Committee was established in the Board of Directors meeting dated 15 May 2012 to enhance efficiency of the Board of Directors by ensuring effective coordination between the Board of Directors and administrative structure of the Company, to convey recommendations and suggestions to the Board of Directors to ensure efficiency in investments and business development in line with strategic goals of the Company.

The Executive Committee shall be comprised of at least 1/3 of the number of the members of the Board of Directors. The Committee gathers at least once a month, unless more frequent gatherings of the Committee are required. The Committee attends general and special contact meetings or assessment meetings (such as meetings of the Planning Council, the Annual Budget, or special purposed meetings) related to the operations of the Company/Group when so required by the Chairman of the Board of Directors.

The decisions of the Committee are advisory to the Board of Directors and the Board of Directors makes the final decision on the subject matter in question.

- 178 - Remuneration of the Board and Executive Management The benefits granted to the members of the Board of Directors are determined at the General Assembly Meeting, which is open to the press and announced to the public by means of meeting minutes and in the footnotes to the Group’s financial statements.

No stock options or company performance-based payment plans are used in the determination of fees to be paid to independent members of the Board of Directors.

Koç Holding does not get involved in transactions that might lead to conflict of interest such as extending loans to members of the Board of Directors or executives, or providing collateral on their behalf.

Conflict of Interests There is no actual or potential conflict of interests between the duties of any of the members of the Board of Directors or the executive management and their respective private interest or other duties.

- 179 - SHARE CAPITAL, OWNERSHIP AND RELATED PARTY TRANSACTIONS

Share Capital and Ownership The registered share capital of the Company is TL 5,000,000,000. The issued share capital of the Company is TL 2,535,898,050 and comprises of 67,877,342,230 Group A shares and 185,712,462,770 Group B shares with a registered nominal value of Kurus¸ 1 each. Each registered Group A share is entitled to two votes at the General Assembly Meeting. However, in decisions requiring a change in the Articles of Association and resolutions regarding release and filing liability claims, all shareholders are entitled to one vote. As stated in the Company’s Articles of Association, shareholders of preferred stock do not have the privilege to nominate candidates to the Board of Directors. As of 31 December 2012, Group A shares represent 26.77 per cent. of the paid-in capital and 42.23 per cent. of the total voting rights. Group B shares, each of which is entitled to one vote represent 73.23 per cent. of the paid-in capital and 57.77 per cent. of the total voting rights.

An ordinary shareholder can vote either personally or by appointing a shareholder or non-shareholder third party as his/her representative. The Company’s Articles of Association does not include a provision concerning publicly traded shares that prevents non-holders to vote by proxy as an appointed representative.

Within the Company, no cross ownerships exist that are associated with a controlling relationship. Although the Company is a family-owned holding company, the family mainly assumes board level responsibility and is not involved in any day-to-day operations in the Company.

Koç Holding is registered with the CMB and its shares have been quoted on the Borsa˙ Istanbul since 10 January 1986. As of 31 December 2012, the principal shareholders and their respective shareholding and voting rights in Koç Holding were as follows:

% of total %of voting shareholding rights Companies owned by Koç family members ...... 42.69 54.79 Koç family members ...... 25.82 20.36 Vehbi Koç Vakfı ...... 7.15 5.64 Koç Holding Emekli ve Yardım Sandıg˘ı Vakfı ...... 1.99 1.57 Other ...... 22.35 17.64 100.00 100.00

Related Party Transactions For information regarding the Group’s related party transactions, see Note 30 of the 2012 Consolidated Financial Statements and the 2011 Consolidated Financial Statements.

- 180 - CONDITIONS OF THE NOTES

The following is the text of the Conditions of the Notes which (subject to modification and except for the paragraphs in italics) will be endorsed on the Certificates issued in respect of the Notes:

The USD 750,000,000 3.500 per cent. Notes due 2020 (the “Notes”, which expression shall in these Conditions, unless the context otherwise requires, include any further notes issued pursuant to Condition 14 and forming a single series with the Notes) of Koç Holding A.S¸. (the “Issuer”) are issued subject to and with the benefit of an Agency Agreement dated 24 April 2013 (such agreement as amended and/or supplemented and/or restated from time to time, the “Agency Agreement”) made between the Issuer, Citigroup Global Markets Deutschland AG as registrar (the “Registrar”), Citibank, N.A., London Branch as fiscal agent and principal paying agent (the “Fiscal Agent”) and the other initial paying agents named in the Agency Agreement (together with the Fiscal Agent, the “Paying Agents”) and the other agents named in it (together with the Fiscal Agent, the Registrar and the other Paying Agents, the “Agents”). The holders of the Notes (the “Noteholders”) are entitled to the benefit of a Deed of Covenant (the “Deed of Covenant”) dated 24 April 2013 and made by the Issuer. The original of the Deed of Covenant is held by the Fiscal Agent on behalf of the Noteholders at its specified office.

The statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Agency Agreement. Copies of the Agency Agreement appertaining to the Notes are available for inspection during normal business hours by the holders of the Notes (the “Noteholders”) at the specified office of each of the Paying Agents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement and the Deed of Covenant applicable to them. References in these Conditions to the Fiscal Agent, the Registrar, the Paying Agents and the Agents shall include any successor appointed under the Agency Agreement.

The owners shown in the records of Euroclear Bank SA/NV (“Euroclear”), Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) and the Depository Trust Company (“DTC”) of book-entry interests in Notes are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them.

1. FORM, DENOMINATION AND TITLE 1.1 Form and Denomination The Notes are issued in registered form in amounts of USD 200,000 and integral multiples of USD 1,000 in excess thereof (referred to as the “principal amount” of a Note). A certificate (each, a “Certificate”) will be issued to each Noteholder in respect of its registered holding of Notes. Each Certificate will be numbered serially with an identifying number which will be recorded on the relevant Certificate and in the register of Noteholders which the Issuer will procure to be kept by the Registrar. The Notes are issued pursuant to the Turkish Commercial Code (Law No. 6102), the Capital Markets Law (Law No. 6362) and the Communiqué Serial II, No. 22 of the Capital Markets Board (“CMB”) on Registration and Sale of Debt Instruments.

1.2 Title Title to the Notes passes only by registration in the register of Noteholders. The holder of any Note will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the holder. In these Conditions, “Noteholder” and (in relation to a Note) “holder” means the person in whose name a Note is registered in the register of Noteholders. For a description of the procedures for transferring title to book-entry interests in the Notes, see “Book- Entry Clearance Systems”.

2. TRANSFERS OF NOTES AND ISSUE OF CERTIFICATES 2.1 Transfers A Note may, subject to Condition 2.4, be transferred in whole or in part by depositing the Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed, at the specified office of the Registrar or any of the Agents. For a description of certain restrictions on transfers of interests in the Notes, see “Transfer Restrictions”.

- 181 - 2.2 Delivery of new Certificates Each new Certificate to be issued upon transfer of Notes pursuant to Condition 2.1 will, within five business days of receipt by the Registrar or the relevant Agent of the duly completed form of transfer endorsed on the relevant Certificate, be mailed by uninsured mail at the risk of the holder entitled to the Note to the address specified in the form of transfer. For the purposes of this Condition, “business day” shall mean a day on which banks are open for business in the city in which the specified office of the Agent with whom a Certificate is deposited in connection with a transfer is located. Except in the limited circumstances described herein (see “The Global Certificates—6. Registration of Title”), owners of interests in the Notes will not be entitled to receive physical delivery of Certificates. Issues of Certificates upon transfer of Notes are subject to compliance by the transferor and transferee with the certification procedures described above and in the Agency Agreement and, in the case of Rule 144A Notes, compliance with the Securities Act Legend. Where some but not all of the Notes in respect of which a Certificate is issued are to be transferred a new Certificate in respect of the Notes not so transferred will, within five business days of receipt by the Registrar or the relevant Agent of the original Certificate, be mailed by uninsured mail at the risk of the holder of the Notes not so transferred to the address of such holder appearing on the register of Noteholders or as specified in the form of transfer.

2.3 Formalities free of charge Registration of a transfer of Notes will be effected without charge by or on behalf of the Issuer or any Agent but upon payment by the Noteholder (or the giving of such indemnity as the Issuer or any Agent may reasonably require) in respect of any Taxes (as defined in Condition 8) or other governmental charges which may be imposed in relation to such transfer.

2.4 Closed Periods No Noteholder may require the transfer of a Note to be registered (i) during the period of 15 days ending on (and including) the due date for any payment of principal or interest on that Note or (ii) after any such Note has been called for redemption.

2.5 Regulations All transfers of Notes and entries on the register of Noteholders will be made subject to the detailed regulations concerning transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests one.

3. STATUS The Notes are direct, unconditional, unsubordinated and (subject to the provisions of Condition 4.1) unsecured obligations of the Issuer and (subject as provided above) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

4. COVENANTS So long as any of the Notes remains outstanding:

4.1 Negative pledge So long as any of the Notes remains outstanding, the Issuer will not create or have outstanding any mortgage, charge, lien, pledge or other security interest (each, a “Security Interest”) upon, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness (as defined below), unless the Issuer, in the case of the creation of a Security Interest, before or at the same time and, in any other case, promptly, takes any and all action necessary to ensure that: (a) all amounts payable by it under the Notes are secured by the Security Interest equally and rateably with the Relevant Indebtedness; or

- 182 - (b) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is provided as is approved by an Extraordinary Resolution.

4.2 Financial statements The Issuer shall send to the Fiscal Agent as soon they become available but in any event (i) within six months after the end of each of its financial years, a copy of the Issuer’s audited annual consolidated financial statements for such financial year, together with the report thereon by the Issuer’s independent auditors, and (ii) within 90 days after the end of each first half year of each of its financial years, a copy of the Issuer’s consolidated financial statements for such six-month period, together with the review report thereon by the Issuer’s independent auditors, each prepared and presented in accordance with the relevant laws of the Republic of Turkey. The Issuer shall procure that the Fiscal Agent delivers a copy of such financial statements, together with, in respect of any audited annual consolidated financial statements, the relevant auditors’ report, or review report, as the case may be, thereon, to any Noteholder promptly upon written request by such Noteholder.

4.3 Maintenance of Authorisations The Issuer shall (i) take all action considered necessary, in the opinion of the Issuer, to ensure the continuance of its corporate existence, its business and/or operations; and (ii) take all necessary action to obtain, and do or cause to be done all things necessary to (a) ensure the continuance of, all consents, licences, approvals and authorisations in the Republic of Turkey, and (b) make or cause to be made all registrations, recordings and filings, which may be required in the Republic of Turkey, for, in the case of both (a) and (b), the execution, delivery or performance of the Notes and the Fiscal Agency Agreement or for the validity, enforceability or admissibility in evidence thereof.

4.4 Transactions with Affiliates The Issuer shall not directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, transfer, assignment, lease, conveyance or exchange of any property or the rendering of any service) in any twelve month period which has or in aggregate have a value in excess of USD 25,000,000 with, or for the benefit of, any Affiliate (an Affiliate Transaction) including, without limitation, intercompany loans, disposals or acquisitions, unless the terms of such Affiliate Transaction are no less favourable to the Issuer than those that could be obtained (at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor) in a comparable arm’s-length transaction with a Person that is not an Affiliate of the Issuer.

4.5 Interpretation In these Conditions: “Affiliate(s)” of any specified person means any other persons, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, “control” when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. “Person” means any individual, company, corporation, firm, partnership, joint venture, association, unincorporated organisation, trust or other judicial entity, including, without limitation, any state or agency of a state or other entity, whether or not having separate legal personality. “Relevant Indebtedness” means (i) any present or future indebtedness (whether being principal, interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock or other securities which are for the time being quoted, listed or ordinarily dealt in on any stock exchange, over-the- counter or other securities market (which shall not, for the avoidance of doubt, include private sales or transfers of bank loans), and (ii) any guarantee or indemnity of any such indebtedness.

- 183 - 5. INTEREST 5.1 Interest Rate and Interest Payment Dates The Notes bear interest on their outstanding principal amount from and including 24 April 2013 at the rate of 3.500 per cent. per annum, payable semi-annually in arrear on 24 April and 24 October (each an “Interest Payment Date”). The first payment (representing a full six months’ interest) shall be made on 24 October 2013.

5.2 Interest Accrual Each Note will cease to bear interest from and including its due date for redemption unless, upon due surrender of the Certificate representing such Note, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment. In such event, interest will continue to accrue until whichever is the earlier of: (a) the date on which all amounts due in respect of such Note have been paid; and (b) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Fiscal Agent or the Registrar, as the case may be, and notice to that effect has been given to the Noteholders in accordance with Condition 12.

5.3 Calculation of Broken Interest If interest is required to be calculated in respect of a period of less than a full six months, it shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed on the basis of a month of 30 days.

6. PAYMENTS 6.1 Payments in respect of Notes Payment of principal and interest will be made by transfer to the registered account of the Noteholder or by US dollar cheque drawn on a bank that processes payments in US dollars mailed to the registered address of the Noteholder if it does not have a registered account. Payments of principal and payments of interest due otherwise than on an Interest Payment Date will only be made against surrender of the relevant Certificate at the specified office of any of the Agents. Interest on Notes due on an Interest Payment Date will be paid to the holder shown on the register of Noteholders at the close of business on the date (the “record date”) being the fifteenth day before the due date for the payment of interest. For the purposes of this Condition, a Noteholder’s registered account means the US dollar account maintained by or on behalf of it with a bank that processes payments in US dollar, details of which appear on the register of Noteholders at the close of business, in the case of principal, on the second Business Day (as defined in Condition 6.4 below) before the due date for payment and, in the case of interest, on the relevant record date, and a Noteholder’s registered address means its address appearing on the register of Noteholders at that time.

6.2 Payments subject to Applicable Laws Payments in respect of principal and interest on the Notes are subject in all cases to (i) any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the US Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official interpretations thereof or (without any prejudice to the provisions of Condition 8) law implementing an intergovernmental approach thereto.

6.3 No commissions No commissions or expenses shall be charged to the Noteholders in respect of any payments made in accordance with this Condition.

6.4 Payment on Business Days Where payment is to be made by transfer to a registered account, payment instructions (for value the due date or, if that is not a Business Day, for value the first following day which is a Business Day) will be

- 184 - initiated and, where payment is to be made by cheque, the cheque will be mailed, on the Business Day preceding the due date for payment or, in the case of a payment of principal or a payment of interest due otherwise than on an Interest Payment Date, if later, on the Business Day on which the relevant Certificate is surrendered at the specified office of an Agent. Noteholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the due date is not a Business Day, if the Noteholder is late in surrendering its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after the due date for payment. In these Conditions, “Business Day” means a day (other than a Saturday or Sunday) on which commercial banks are open for business in London and New York City and, in the case of presentation of a Certificate, in the place in which the Certificate is presented.

6.5 Partial Payments If the amount of principal or interest which is due on the Notes is not paid in full, the Registrar will annotate the register of Noteholders with a record of the amount of principal or interest in fact paid.

6.6 Agents The names of the initial Agents and their initial specified offices are set out at the end of these Conditions. The Issuer reserves the right at any time to vary or terminate the appointment of any Agent and to appoint additional or other Agents provided that: (a) there will at all times be a Fiscal Agent; (b) there will at all times be an Agent (which may be the Fiscal Agent) having a specified office in a European city; (c) the Issuer undertakes that it will ensure that it maintains a Paying Agent in a Member State of the European Union that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; and (d) there will at all times be a Registrar. Notice of any termination or appointment and of any changes in specified offices given to the Noteholders promptly by the Issuer in accordance with Condition 12.

7. REDEMPTION AND PURCHASE 7.1 Redemption at Maturity Unless previously redeemed or purchased and cancelled as provided below, the Issuer will redeem the Notes at their principal amount on 24 April 2020.

7.2 Redemption for Taxation Reasons If: (a) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (as defined in Condition 8), or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective after 19 April 2013, on the next Interest Payment Date, the Issuer would be required to pay additional amounts as provided or referred to in Condition 8; and (b) the requirement cannot be avoided by the Issuer taking reasonable measures available to it, the Issuer may at its option, having given not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 12 (which notice shall be irrevocable), redeem all the Notes, but not some only, at any time at their principal amount together with interest accrued to but excluding the date of redemption. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Fiscal Agent a certificate signed by two Directors of the Issuer stating that the requirement referred to in (a) above will apply on the next Interest Payment Date and cannot be avoided by the Issuer

- 185 - taking reasonable measures available to it and an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of the change or amendment.

7.3 Redemption at the Option of the Holders Upon a Change of Control If a Change of Control Put Event occurs, the Issuer will, upon any Noteholder giving to the Issuer through an Agent notice within the Change of Control Put Period (unless prior to the giving of such notice the Issuer has given notice of redemption under Condition 7.2) redeem in whole (but not in part) the Notes the subject of the notice on the Change of Control Redemption Date at 100 per cent. of their principal amount (the “Change of Control Redemption Amount”) together with interest accrued to the date of redemption. Within 14 days of the Issuer becoming aware that a Change of Control Put Event has occurred, the Issuer shall give notice to the Noteholders in accordance with Condition 12 (a “Change of Control Notice”) specifying the nature of the relevant Change of Control Put Event, the circumstances giving rise to it and the procedure for Noteholders to exercise their rights to require redemption of any Notes pursuant to this Condition 7.3. To exercise such right, any holder of the Notes must deliver at the specified office of any Agent on any Business Day falling within the Change of Control Put Period, a duly signed and completed notice of exercise in the form obtainable from any specified office of any Agent (a “Change of Control Put Notice”) and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this paragraph accompanied by the Certificate for such Notes or evidence satisfactory to the Agent concerned that the Certificate for such Notes will, following the delivery of the Change of Control Put Notice, be held to its order or under its control. A Change of Control Put Notice given by a holder of any Note shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing in which event such holder, at its option, may elect by notice to the Issuer to withdraw the Change of Control Put Notice and instead to give notice that the Note is immediately due and repayable under Condition 10. If 85 per cent. or more in nominal amount of the Notes outstanding on the Change of Control Redemption Date immediately prior to any redemption of the Notes pursuant to this Condition 7.3 are redeemed on such redemption, the Issuer may, on giving not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 12 (such notice to be given within 30 days of the Change of Control Redemption Date), redeem all but not some only of the remaining outstanding Notes at the Change of Control Redemption Amount together with interest accrued to the date of redemption. For the purposes of this Condition 7.3: a“Change of Control” will occur if at any time members of the Koç Group:(A) cease to own, directly or indirectly, more than 50 per cent. of (i) the issued share capital of the Issuer or (ii) the voting rights of the Issuer; or (B) otherwise cease to Control, directly or indirectly, the Issuer. For the purposes of this definition, the Koç Group will be deemed to Control the Issuer if (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract, trust or otherwise) it has the power to appoint and/or remove all or the majority of the members of the board of directors or other governing body of the Issuer; “Change of Control Period” means the period commencing on the Relevant Announcement Date and ending 60 days after the Change of Control (or such longer period for which the Notes are under consideration (such consideration having been announced publicly within the period ending 60 days after the Change of Control) for rating review or, as the case may be, rating by a Rating Agency, such period not to exceed 60 days after the public announcement of such consideration); a“Change of Control Put Event” will be deemed to occur if a Change of Control occurs and on the Relevant Announcement Date the Notes have: (a) been assigned at the invitation of the Issuer: (i) an investment grade rating by any Rating Agency and, within the Change of Control Period, that credit rating is either downgraded to a non-investment grade rating or such Rating Agency ceases to assign a credit rating to the Notes and, in each case, does not subsequently upgrade its credit rating assigned to the Notes to an investment grade rating or re-assign an investment grade rating to the Notes by the end of the Change of Control Period; or

- 186 - (ii) a non-investment grade rating by any Rating Agency and, within the Change of Control Period, that credit rating is either downgraded by one or more categories (by way of example, BB+ to BB being one rating category) or such Rating Agency ceases to assign a credit rating to the Notes and, in each case, does not subsequently upgrade its credit rating assigned to the Notes to, or re-assign a credit rating to the Notes of, the category assigned to the Notes on the Relevant Announcement Date or better by the end of the Change of Control Period, provided that if on the Relevant Announcement Date the Notes have been assigned at the invitation of the Issuer a credit rating from more than one Rating Agency, at least one of which is an investment grade rating, then paragraph (i) only will apply; or (b) not been assigned a credit rating by any Rating Agency at the invitation of the Issuer and a Negative Rating Event also occurs within the Change of Control Period; “Change of Control Put Period” means the period of 30 days following the date on which a Change of Control Notice is given; “Change of Control Redemption Date” means the fifth Business Day following the expiry of the Change of Control Put Period; an “investment grade rating” shall mean, in relation to S&P, a rating of BBB- or above, in relation to Moody’s, a rating of Baa3 or above, in relation to Fitch, a rating of BBB- or above and, in the case of any other Rating Agency, a comparable rating from that Rating Agency; “Koç Group” shall mean the following natural persons or companies, or companies which are controlled directly or indirectly, jointly or individually by the following natural persons or companies and shall include, in the case of natural persons, any individual, spouse, family member or relative which is the legal heir of such natural person. Temel Ticaret ve YatırımA.S¸ and/or Vehbi Koç Vakfı and/or Rahmi M. Koç and/or Semahat S. Arsel and/or Suna Kıraç and/or Mustafa V. Koç and/or Ömer M. Koç and/or Ali Y. Koç and/or˙ Ipek Kıraç; a“Negative Rating Event” shall be deemed to have occurred at any time if at such time there is no credit rating assigned to the Notes by any Rating Agency at the invitation of the Issuer and (i) the Issuer does not, either prior to, or not later than 21 days after, the occurrence of the Change of Control seek, and thereafter throughout the Change of Control Period use all reasonable endeavours to obtain, a credit rating of the Notes or (ii) if the Issuer does so seek and use such endeavours, it is unable to obtain such a credit rating that is an investment grade rating by the end of the Change of Control Period; a“non-investment grade rating” shall mean, in relation to S&P, a rating of BB+ or below, in relation to Moody’s, a rating of Ba1 or below, in relation to Fitch, a rating of BB+ or below and, in the case of any other Rating Agency, a comparable rating from that Rating Agency; “Rating Agency” means Standard & Poor’s Credit Market Services Europe Limited (“S&P”), Fitch Ratings Limited (“Fitch”) or Moody’s Investors Service Limited (“Moody’s”), or any of their respective successors, or any other rating agency of international standing; “Relevant Announcement Date” means the date that is the earlier of (i) the date of the first public announcement of the relevant Change of Control and (ii) the date of the earliest Relevant Potential Change of Control Announcement (if any); and “Relevant Potential Change of Control Announcement” means any public announcement or statement by the Issuer, any actual or potential bidder or any adviser acting on behalf of any actual or potential bidder relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs.

7.4 Purchases The Issuer or any of its Subsidiaries (as defined above) may at any time purchase Notes in any manner and at any price. Such Notes may be held, re-issued, resold or, at the option of the Issuer, surrendered to any Paying Agent or the Registrar for cancellation.

7.5 Notices Final Upon the expiry of any notice as is referred to in Condition 7.2 or 7.3 above the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the terms of such paragraph.

- 187 - 8. TAXATION 8.1 Payment without Withholding All payments in respect of the Notes by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for, or on account of, any present or future taxes, duties, levies, assessments or governmental charges of whatever nature (“Taxes”) imposed, assessed or levied by or on behalf of any Relevant Jurisdiction, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes in the absence of the withholding or deduction; except that no additional amounts shall be payable in relation to any payment in respect of any Note: (a) presented for payment by or on behalf of a holder who is liable to the Taxes in respect of the Note by reason of his having some connection with any Relevant Jurisdiction other than the mere holding of the Note; or (b) presented for payment in the Republic of Turkey; or (c) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or (d) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note to another Paying Agent in a Member State of the European Union; or (e) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that a holder would have been entitled to additional amounts on presenting the same for payment on the last day of the period of 30 days assuming that day to have been a Business Day.

8.2 Interpretation In these Conditions: (a) “Relevant Date” means the date on which the payment first becomes due but, if the full amount of the money payable has not been received by the Fiscal Agent on or before the due date, it means the date on which, the full amount of the money having been so received, notice to that effect has been duly given to the Noteholders by the Issuer in accordance with Condition 12; and (b) “Relevant Jurisdiction” means the Republic of Turkey or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer becomes subject in respect of payments made by it of principal and interest on the Notes.

8.3 Additional Amounts Any reference in these Conditions to principal and/or interest shall be deemed to refer to any additional amounts which may be payable under this Condition.

9. PRESCRIPTION Claims in respect of principal and interest will become prescribed and become void unless made within 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date, as defined in Condition 8.

10. EVENTS OF DEFAULT 10.1 Events of Default The holder of any Note may give notice to the Issuer that the Note is, and it shall accordingly forthwith become, immediately due and repayable at its principal amount, together with interest accrued to the date of repayment, if any of the following events (“Events of Default”) shall have occurred and be continuing: (a) if default is made in the payment of any principal or interest due in respect of the Notes or any of them and, in the case of a payment of principal, the default continues for a period of 3 Business Days and in the case of a payment of interest, the default continues for a period of 7 Business Days; or

- 188 - (b) if the Issuer fails to perform or observe any of its other obligations under these Conditions and (except in any case where the failure is incapable of remedy, when no continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 45 days following the service by any Noteholder on the Issuer of notice requiring the same to be remedied; or (c) (i) any Indebtedness for Borrowed Money of the Issuer becomes due and repayable prematurely by reason of an event of default (howsoever described); (ii) the Issuer fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment or (as the case may be) within any originally applicable grace period for the payment thereof; (iii) default is made by the Issuer in making any payment due under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person; or (iv) any Indebtedness for Borrowed Money of any Subsidiary which is guaranteed by the Issuer becomes due and repayable prematurely by reason of an event of default (howsoever described) and (A) such Subsidiary fails to make any payment in respect of such Indebtedness for Borrowed Money on the due date for payment and such failure to pay continues for 5 Business Days and (B) the guarantee of the Issuer in respect thereof has been called, provided that the aggregate nominal amount of any such Indebtedness for Borrowed Money of the Issuer in the case of (i), and/or (ii) above, and/or amount of Indebtedness for Borrowed Money in relation to which such guarantee and/or indemnity of the Issuer has been given in the case of (iii) and/ or (iv) above, is at least USD 50,000,000 (or its equivalent in any other currency) (on the basis of the middle spot rate for the relevant currency against the US dollar as quoted by any leading bank on the day on which this paragraph operates); or (d) any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person) and is not being contested in good faith by the Issuer and is not discharged or stayed within 60 days, provided that the value of the claim of any such enforcement action exceeds USD 50,000,000 (or its equivalent in any other currency) (on the basis of the middle spot rate for the relevant currency against the US dollar as quoted by any leading bank on the day on which this paragraph operates); or (e) (i) if any order is made by any competent court or resolution is passed for the winding up or dissolution of the Issuer, provided that such event is not being contested in good faith by the Issuer, and is not discharged or stayed within 60 days, or the Issuer ceases or threatens to cease to carry on all, or a substantially all, of its business or operations, save for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation or solvent voluntary winding-up on terms approved by an Extraordinary Resolution of Noteholders; or (ii) one or more judgments or orders or arbitral awards is rendered against any part of the property, assets or revenues of the Issuer, provided that such event is not being contested in good faith by the Issuer and is not discharged or stayed within 60 days, provided further that the value of such claim exceeds USD 50,000,000 or its equivalent in any other currency (on the basis of the middle spot rate for the relevant currency against the US dollar as quoted by any leading bank on the day on which this paragraph operates); or (f) (i) the Issuer becomes (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts as they fall due, or (ii) an administrator or liquidator is appointed in respect of the Issuer or the whole or a material part of the business or operations of the Issuer (or application for any such appointment is made and such application is not being contested in good faith by the Issuer, and is not discharged or stayed within 60 days) or (iii) the Issuer takes any action for a readjustment or deferment of any of its obligations in respect of all of, or a material part of, its debts; or (g) if the Issuer (or its directors or shareholders) initiates or consents to judicial proceedings relating to itself under any applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium) or makes a conveyance or assignment for the benefit of, or enters into any composition or other arrangement with, or for the benefit of, its creditors generally (or any class of its creditors) or any meeting is convened to consider a proposal for a composition or other arrangement with, or for the benefit of, its creditors generally (or any class of its creditors).

10.2 Interpretation For the purposes of this Condition 10: “Indebtedness for Borrowed Money” means any indebtedness (whether being principal, premium, interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock or other securities or any borrowed money or any liability under or in respect of any acceptance or acceptance credit excluding trade supply arrangements entered into in the ordinary course of business; and

- 189 - “Subsidiary” means, in relation to any Person (the “first Person”) at any particular time, any other Person (the “second Person”) (i) in which such first Person owns more than 50 per cent. of share capital and/or voting rights or (ii) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, ownership of voting rights, contract, the power to appoint or remove members of the governing body of the second Person or otherwise.

11. REPLACEMENT OF CERTIFICATES If any Certificate is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Registrar upon payment by the claimant of the expenses incurred in connection with the replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.

12. NOTICES 12.1 Notices to the Noteholders All notices to the Noteholders will be valid if mailed to them at their respective addresses in the register of Noteholders maintained by the Registrar. The Issuer shall also ensure that notices are duly given or published in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are for the time being listed. Any notice shall be deemed to have been given on the weekday (being a day other than Saturday and Sunday) after being so mailed or on the date of publication or, if so published more than once or on different dates, on the date of the first publication.

12.2 Notices from the Noteholders Notices to be given by any Noteholder shall be in writing and given by lodging the same, together with the relative Certificate, with the Fiscal Agent or, if the Certificates are held in a clearing system, may be given through the clearing system in accordance with its standard rules and procedures.

13. MEETINGS OF NOTEHOLDERS AND MODIFICATION 13.1 Meetings of Noteholders The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of any of these Conditions or any of the provisions of the Agency Agreement. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing more than 50 per cent. in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons present whatever the principal amount of the Notes held or represented by him or them, except that at any meeting the business of which includes the modification of certain of these Conditions the necessary quorum for passing an Extraordinary Resolution will be one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, of the principal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders will be binding on all Noteholders, whether or not they are present at the meeting.

13.2 Modification The Fiscal Agent may agree, without the consent of the Noteholders, to any modification of any of these Conditions or any of the provisions of the Agency Agreement either (i) for the purpose of curing any ambiguity or of curing, correcting or supplementing any manifest or proven error or any other defective provision contained herein or therein or (ii) in any other manner which is not materially prejudicial to the interests of the Noteholders. Any modification shall be binding on the Noteholders and, unless the Fiscal Agent agrees otherwise, any modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 12.

14. FURTHER ISSUES The Issuer may from time to time without the consent of the Noteholders create and issue further notes, having terms and conditions the same as those of the Notes, or the same except for the amount of the first payment of interest, which may be consolidated and form a single series with the outstanding Notes.

- 190 - 15. GOVERNING LAW AND SUBMISSION TO JURISDICTION 15.1 Governing Law The Agency Agreement, the Deed of Covenant and the Notes, and any non-contractual obligations arising out of or in connection with the Agency Agreement, the Deed of Covenant and the Notes, are governed by, and will be construed in accordance with, English law.

15.2 Jurisdiction of English courts The Issuer has irrevocably agreed for the benefit of the Noteholders that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Notes, and any non-contractual obligations arising out of or in connection with the Notes, and accordingly has submitted to the exclusive jurisdiction of the English courts. The Issuer has waived, to the extent permitted by law, any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum. To the extent permitted by law, the Noteholders may take any suit, action or proceeding arising out of or in connection with the Notes (including any proceeding relating to any non-contractual obligations arising out of or in connection with the Notes) (together referred to as “Proceedings”) against the Issuer in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions.

15.3 Consent to Enforcement The Issuer agrees, without prejudice to the enforcement of a judgment obtained in the English courts according to the provisions of Article 54 of the International Private and Procedural Law of Turkey (Law No. 5718), that in the event that any action is brought in relation to the Issuer in a court in the Republic of Turkey in connection with the Notes, any judgment obtained in the courts of England in connection with such action shall constitute conclusive evidence of the existence and amount of the claim against the Issuer, pursuant to the provisions of the first sentence of Article 193 of the Civil Procedure Code of Turkey (Law No. 6100) and Articles 58 and 59 of the International Private and Procedural Law of Turkey (Law No. 5718).

15.4 Appointment of Process Agent The Issuer hereby irrevocably and unconditionally appoints Beko Plc. at its registered office at Beko House, Caxton Way, Watford, Hertfordshire, WD18 8UF, United Kingdom as its agent for service of process in England in respect of any Proceedings and undertakes that in the event of such agent ceasing so to act it will appoint another person as its agent for that purpose.

15.5 Other Documents The Issuer has in the Agency Agreement and the Deed of Covenant submitted to the jurisdiction of the English courts and appointed an agent in England for service of process, in terms substantially similar to those set out above.

16. RIGHTS OF THIRD PARTIES No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

- 191 - THE GLOBAL CERTIFICATES

The Global Certificates contain the following provisions which apply to the Notes in respect of which they are issued whilst they are represented by the Global Certificates, some of which modify the effect of the Conditions of the Notes. Terms defined in the Conditions of the Notes have the same meaning in paragraphs 1 to 7 below.

1. ACCOUNTHOLDERS For so long as any of the Notes are represented by the Global Certificates, each person (other than another clearing system) who is for the time being shown in the records of DTC or Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of such Notes (each an “Accountholder”) (in which regard any certificate or other document issued by DTC or Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes) shall be treated as the holder of such aggregate principal amount of such Notes (and the expression “Noteholders” and references to “holding of Notes” and to “holder of Notes” shall be construed accordingly) for all purposes other than with respect to payments on such Notes, the right to which shall be vested, as against the Issuer, solely in the nominee for the relevant clearing system (the “Relevant Nominee”) in accordance with and subject to the terms of the Global Certificates. Each Accountholder must look solely to DTC or Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to the Relevant Nominee.

2. CANCELLATION Cancellation of any Note following its redemption or purchase by the Issuer or any of its subsidiaries will be effected by reduction in the aggregate principal amount of the Notes in the register of Noteholders and by the annotation of the appropriate schedule to the relevant Global Certificate.

3. PAYMENTS Payments of principal and interest in respect of Notes represented by a Global Certificate will be made upon presentation or, if no further payment falls to be made in respect of the Notes, against presentation and surrender of such Global Certificate to or to the order of the Fiscal Agent or such other Agent as shall have been notified to the holders of the Global Certificates for such purpose. Distributions of amounts with respect to book-entry interests in the Regulation S Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Fiscal Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures. Holders of book-entry interests in the Rule 144A Notes holding through DTC will receive, to the extent received by the Fiscal Agent, all distribution of amounts with respect to book-entry interests in such Notes from the Fiscal Agent through DTC. Distributions in the United States will be subject to relevant US tax laws and regulations. A record of each payment made will be endorsed on the appropriate schedule to the relevant Global Certificate by or on behalf of the Fiscal Agent and shall be prima facie evidence that payment has been made.

4. NOTICES So long as the Notes are represented by a Global Certificate and such Global Certificate is held on behalf of a clearing system, notices to Noteholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled Accountholders in substitution for notification as required by Condition 12. Any such notice shall be deemed to have been given to the Noteholders on the day after the day on which such notice is delivered to such clearing system. Whilst any of the Notes held by a Noteholder are represented by a Global Certificate, notices to be given by such Noteholder may be given by such Noteholder (where applicable) through the applicable clearing system’s operational procedures and otherwise in such manner as the Fiscal Agent and the applicable clearing system may approve for this purpose.

- 192 - 5. CHANGE OF CONTROL PUT EXERCISE NOTICE For so long as any Note is represented by a Global Certificate, to exercise the right to require redemption of this Note under Condition 7.3 the Noteholder must, within the notice period set out in Condition 7.3, give notice to any Agent of such exercise in accordance with the standard procedures of Euroclear, Clearstream, Luxembourg or DTC, as applicable (which may include notice being given on such Noteholder’s instruction by Euroclear, Clearstream, Luxembourg, DTC or any depositary for them to any Agent by electronic means) in a form acceptable to Euroclear, Clearstream, Luxembourg or DTC, as applicable, from time to time. Any notice given in accordance with the standard procedures of Euroclear, Clearstream, Luxembourg or DTC, as applicable, by a Noteholder under Condition 7.3 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing in which event such Noteholder, at its option, may elect by notice to the Issuer to withdraw such notice and instead to give notice that the Note is immediately due and repayable under Condition 10.

6. REGISTRATION OF TITLE Registration of title to Notes in a name other than that of the Relevant Nominee will not be permitted unless Euroclear or Clearstream, Luxembourg or DTC, as appropriate, notifies the Issuer that it is unwilling or unable to continue as a clearing system in connection with a Global Certificate or, in the case of DTC only, DTC ceases to be a clearing agency registered under the US Securities Exchange Act of 1934, and in each case a successor clearing system is not appointed by the Issuer within 90 days after receiving such notice from Euroclear, Clearstream, Luxembourg or DTC or becoming aware that DTC is no longer so registered. In these circumstances title to a Note may be transferred into the names of holders notified by the Relevant Nominee in accordance with the Conditions of the Notes, except that Certificates in respect of Notes so transferred may not be available until 21 days after the request for transfer is duly made. The Registrar will not register title to the Notes in a name other than that of the Relevant Nominee for a period of 15 calendar days preceding the due date for any payment of principal or interest in respect of the Notes. If only one of the Global Certificates (the “Exchanged Global Certificate”) becomes exchangeable for Certificates in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Certificates issued in exchange for beneficial interests in the Exchanged Global Certificate and, on the other hand, persons wishing to purchase beneficial interests in the other Global Certificate.

7. TRANSFERS Transfers of book-entry interests in the Notes will be effected through the records of Euroclear, Clearstream, Luxembourg and DTC and their respective participants in accordance with the rules and procedures of Euroclear, Clearstream, Luxembourg and DTC and their respective direct and indirect participants, as more fully described under “Clearing and Settlement Procedures”.

- 193 - BOOK-ENTRY CLEARANCE SYSTEMS

The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of each of DTC, Euroclear or Clearstream, Luxembourg (together, the “Clearing Systems”) currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuer believes to be reliable, but none of the Managers takes any responsibility for the accuracy thereof. Investors wishing to use the facilities of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of such facilities. None of the Issuer nor any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of the Clearing Systems or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Book-Entry Systems Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depositary and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other. Euroclear and Clearstream, Luxembourg customers are worldwide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system.

DTC DTC has advised the Issuer that it is a limited purpose trust company organised under the New York Banking Law, a “banking organisation” within the meaning of the New York Banking Law, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among its participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerised book-entry changes in participants’ accounts. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly.

Registration and Form Book-entry interests in the Notes held through Euroclear and Clearstream, Luxembourg will be represented by the Unrestricted Global Certificate registered in the name of a nominee of, and held by, a common depositary for Euroclear and Clearstream, Luxembourg. Book-entry interests in the Notes held through DTC will be represented by the Restricted Global Certificate registered in the name of Cede & Co., as nominee for DTC, and held by a custodian for DTC. As necessary, the Registrar will adjust the amounts of Notes on the Register for the accounts of Euroclear, Clearstream, Luxembourg and DTC to reflect the amounts of Notes held through Euroclear, Clearstream, Luxembourg and DTC, respectively. Beneficial ownership of book-entry interests in Notes will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream, Luxembourg and DTC.

The aggregate holdings of book-entry interests in the Notes in Euroclear, Clearstream, Luxembourg and DTC will be reflected in the book-entry accounts of each such institution. Euroclear, Clearstream, Luxembourg or DTC, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book-entry interests in the Notes will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book-entry interests in the Notes. The Registrar will be responsible for maintaining a record of the aggregate holdings of Notes registered in the name of a common nominee for Euroclear and Clearstream, Luxembourg, a nominee for DTC and/or, if individual Certificates are issued in the

- 194 - limited circumstances described under “The Global Certificates—6. Registration of Title”, holders of Notes represented by those individual Certificates. The Fiscal Agent will be responsible for ensuring that payments received by it from the Issuer for holders of book-entry interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be, and the Fiscal Agent will also be responsible for ensuring that payments received by the Fiscal Agent from the Issuer for holders of book-entry interests in the Notes holding through DTC are credited to DTC.

The Issuer will not impose any fees in respect of holding the Notes; however, holders of book-entry interests in the Notes may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear, Clearstream, Luxembourg or DTC.

Clearing and Settlement Procedures Initial Settlement Upon their original issue, the Notes will be in global form represented by the two Global Certificates. Interests in the Notes will be in uncertified book-entry form. Purchasers electing to hold book-entry interests in the Notes through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional Eurobonds. Book-entry interests in the Notes will be credited to Euroclear and Clearstream, Luxembourg participants’ securities clearance accounts on the business day following the Closing Date against payment (value the Closing Date). DTC participants acting on behalf of purchasers electing to hold book-entry interests in the Notes through DTC will follow the delivery practices applicable to securities eligible for DTC’s Same Day Funds Settlement system. DTC participants’ securities accounts will be credited with book-entry interests in the Notes following confirmation of receipt of payment to the Issuer on the Closing Date.

Secondary Market Trading Secondary market trades in the Notes will be settled by transfer of title to book-entry interests in the Clearing Systems. Title to such book-entry interests will pass by registration of the transfer within the records of Euroclear, Clearstream, Luxembourg or DTC, as the case may be, in accordance with their respective procedures. Book-entry interests in the Notes may be transferred within Euroclear and within Clearstream, Luxembourg and between Euroclear and Clearstream, Luxembourg in accordance with procedures established for these purposes by Euroclear and Clearstream, Luxembourg. Book-entry interests in the Notes may be transferred within DTC in accordance with procedures established for this purpose by DTC. Transfer of book-entry interests in the Notes between Euroclear or Clearstream, Luxembourg and DTC may be effected in accordance with procedures established for this purpose by Euroclear, Clearstream, Luxembourg and DTC.

General None of Euroclear, Clearstream, Luxembourg or DTC is under any obligation to perform or continue to perform the procedures referred to above, and such procedures may be discontinued at any time. None of the Issuer, the Fiscal Agent or any of their agents will have any responsibility for the performance by Euroclear, Clearstream, Luxembourg or DTC or their respective participants of their respective obligations under the rules and procedures governing their operations or the arrangements referred to above and none of them will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the Notes represented by Global Certificates or for maintaining, supervising or reviewing any records relating to such beneficial interests.

- 195 - TAXATION

This is a general summary of certain US federal and Turkish income tax considerations in connection with an investment in the Notes. This summary does not address all aspects of US federal and Turkish tax law and does not discuss any state or local tax considerations. While this summary is considered to be a correct interpretation of existing laws in force on the date of this Offering Circular, there can be no assurance that those laws or the interpretation of those laws will not change. This summary does not discuss all of the income tax consequences that may be relevant to an investor in light of such investor’s particular circumstances or to investors subject to special rules, such as regulated investment companies, certain financial institutions or insurance companies. Prospective investors are advised to consult their tax advisers with respect to the tax consequences of the purchase, ownership or disposition of the Notes (or the purchase, ownership or disposition by an owner of beneficial interests therein) as well as any tax consequences that may arise under the laws of any state, municipality or other taxing jurisdiction. References to “resident” herein refer to tax residents of Turkey and references to “non-resident” herein refer to persons who are not tax residents of Turkey.

Certain US Federal Income Tax Consequences The discussion of US tax matters set forth in this Offering Circular was written in connection with the promotion or marketing of this Offering and was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax-related penalties under US federal, state or local tax law. Each taxpayer should seek advice based on its particular circumstances from an independent tax adviser.

The following summary describes certain US federal income tax consequences of the acquisition, ownership and disposition of a Note by a US Holder (as defined below) whose functional currency is the US dollar that acquires the Note in this Offering from the Managers at a price equal to the issue price of the Notes (the first price at which a substantial amount of the Notes is sold for money to investors) and holds it as a capital asset. This summary does not address all aspects of US federal income taxation that may be applicable to particular US Holders subject to special US federal income tax rules, including, among others, tax-exempt organisations, financial institutions, dealers and traders in securities or currencies, US Holders that will hold a Note as part of a “straddle,” hedging transaction, “conversion transaction” or other integrated transaction for US federal income tax purposes, US Holders that enter into “constructive sale” transactions with respect to the Notes, issues concerning Medicare contribution tax, US Holders liable for alternative minimum tax and certain US expatriates. In addition this summary does not address consequences to US Holders of the acquisition, ownership and disposition of a Note under any other US federal tax laws (e.g., estate or gift tax laws) or under the tax laws of any state, locality or other political subdivision of the United States or other countries or jurisdictions.

As used herein, the term “US Holder” means a beneficial owner of a Note that is for US federal income tax purposes: (i) an individual who is a citizen or resident of the US; (ii) a corporation created or organised in or under the laws of the US, any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to US federal income taxation regardless of its source; or (iv) a trust that is subject to US tax on its worldwide income regardless of its source.

If an entity or arrangement treated as a partnership for US federal income tax purposes holds a Note, the US federal income tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Therefore, a partnership holding a Note and its partners should consult their own tax advisers regarding the US federal income tax consequences of the acquisition, ownership and disposition of a Note.

The discussion below is based on the Internal Revenue Code of 1986, as amended (the “Code”), US Treasury regulations thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this Offering Circular and any of which may at any time be repealed, revoked or modified or subject to differing interpretations, potentially retroactively, so as to result in US federal income tax consequences different from those discussed below.

The summary of US federal income tax consequences set out below is for general information only. Prospective purchasers should consult their tax advisers as to the particular tax consequences to them of owning the Notes, including the applicability and effect of state, local, non-US and other tax laws and possible changes in tax law.

- 196 - Payments of interest Payments of interest on the Notes, including additional amounts, if any, generally will be taxable to a US Holder as ordinary income at the time that such payments are received or accrued, in accordance with such US Holder’s usual method of accounting for US federal income tax purposes. Interest income on a Note generally will constitute foreign source income for US federal income tax purposes and generally will be considered “passive” income, which is treated separately from other types of income in computing the foreign tax credit that may be allowable to US Holders under US federal income tax laws. If the Notes are issued with more than a de minimis amount of discount (generally, discount at or in excess of 0.25 per cent. multiplied by the number of complete years in the term of the Notes), they will be treated as issued with original issue discount (“OID”) for US federal income tax purposes. If the Notes are treated as issued with OID, a US Holder would be required to include the OID in income as it accrues based on a constant yield to maturity method, which in this case would be before the receipt of corresponding cash payments. It is expected, and this discussion assumes, that the Notes will not be treated as being issued with OID.

Sale, exchange and redemption of Notes Upon the sale, exchange, redemption, retirement at maturity or other taxable disposition of a Note, a US Holder generally will recognise taxable gain or loss equal to the difference between the amount realised (i.e., the amount of cash and the fair market value of any property) received on the disposition (except to the extent the cash or property received is attributable to accrued and unpaid interest which, if not previously included in income, is taxable like a payment of interest) and the US Holder’s tax basis in the Note. A US Holder’s tax basis in a Note generally will equal the amount paid for the Note. Gain or loss recognised by a US Holder on the sale, exchange or other disposition of a Note will be capital gain or loss and will be long-term capital gain or loss if the Note was held by the US Holder for more than one year. Gain or loss realised by a US Holder on the sale or retirement of a Note generally will be US source. The deductibility of capital losses is subject to significant limitations.

Information reporting and backup withholding Information returns may be filed with the US Internal Revenue Service (“IRS”) (unless the US Holder establishes, if requested to do so, that it is an exempt recipient) in connection with payments on the Notes, and the proceeds from the sale, exchange or other disposition of Notes. If information reports are required to be made, a US Holder may be subject to US backup withholding if it fails to provide its taxpayer identification number, or to establish that it is exempt from backup withholding. The amount of any backup withholding imposed on a payment will be allowed as a credit against any US federal income tax liability of a US Holder and may entitle the US Holder to a refund, provided the required information is timely furnished to the IRS.

US holders should consult their own tax advisers regarding any filing and reporting obligations they may have as a result of their acquisition, ownership or disposition of notes. Failure to comply with certain reporting obligations could result in the imposition of substantial penalties.

Certain Turkish Tax Considerations The following discussion is a summary of certain Turkish tax considerations relating to an investment by a person who is a non resident of Turkey in Notes of a Turkish company issued abroad. The discussion is based upon current law and is for general information only. The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership or disposition of the Notes that may be relevant to a decision to make an investment in the Notes. Furthermore, the discussion only relates to the investment by a person where the Notes will not be held in connection with the conduct of a trade or business through a permanent establishment in Turkey. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation. This discussion is based upon laws and relevant interpretations thereof in effect as of the date of this Offering Circular, all of which are subject to change, possibly with a retroactive effect. In addition, it does not describe any tax consequences: (a) arising under the laws of any taxing jurisdiction other than Turkey or (b) applicable to a resident of Turkey or a permanent establishment in Turkey that is constituted either by the existence of a fixed place of business or appointment of a permanent representative.

For Turkish tax purposes, a legal entity is a resident of Turkey if its corporate domicile is in Turkey or its effective place of management is in Turkey. A resident legal entity is subject to Turkish taxes on its worldwide income, whereas a non resident legal entity is only liable to the Turkish taxes for the income sourced in Turkey. How the income is accepted as sourced in Turkey is determined by taking into account of Individual Income Tax Law, Corporate Tax Law, Tax Procedural Law and relevant Double Tax Treaties.

- 197 - An individual is a resident of Turkey if such individual has established domicile in Turkey or stays in Turkey more than six months in a calendar year. On the other hand, foreign individuals who stay in Turkey for six months or more for a specific and temporary job or business or particular purposes that are specified in the Turkish Income Tax Law may not be treated as a resident of Turkey, depending on the characteristics of the stay. A resident individual is liable for Turkish taxes on his/her worldwide income, whereas a non resident individual is liable for Turkish tax for the income sourced in Turkey.

Income from capital investment is sourced in Turkey when the principal is invested in Turkey. Capital gain derived from trading income is considered sourced in Turkey when the activity or transaction generating such income is performed or accounted for in Turkey. The term “accounted for” means that a payment is made in Turkey, or if the payment is made abroad, it is recorded in the books in Turkey or apportioned from the profits of the payer or the person on whose behalf the payment is made in Turkey.

Any withholding tax levied on income derived by a non resident person is the final tax for the non resident person and no further declaration is needed. Any other income of a non resident person sourced in Turkey that has not been subject to withholding tax will be subject to taxation through declaration’ where exemptions are reserved.

Interest paid on notes (such as the Notes) issued abroad by Turkish corporates is subject to withholding tax. Through the Decrees, the withholding tax rates are set according to the original maturity of notes issued abroad as follows: • 10 per cent. withholding tax for notes with an initial maturity of less than one year, • 7 per cent. withholding tax for notes with an initial maturity of at least one year and less than three years, • 3 per cent. withholding tax for notes with an initial maturity of at least three years and less than five years, and • 0 per cent. withholding tax for notes with an initial maturity of five years and more.

Such withholding tax is the final tax for a non resident person and no further declaration is required. In general, capital gains are not taxed through withholding tax and therefore any capital gain sourced in Turkey with respect to the Notes may be subject to declaration. However, pursuant to Provisional Article 67 of the Turkish Income Tax Law, as amended by the Law numbered 6111, special or separate tax returns will not be submitted for capital gains from the notes of a Turkish corporate issued abroad when the income is derived by a non resident. Therefore, no tax is levied on the non resident persons on capital gains from such Notes and no declaration is required.

A non resident holder will not be liable for Turkish estate, inheritance or similar tax with respect to its investment in the Notes, nor will it be liable for any Turkish stamp issue, registration or similar tax or duty relating thereto.

Reduced Withholding Tax Rates Under current Turkish laws and regulations, interest payments on notes by an issuer to a non resident holder will be subject to a withholding tax at a rate between 10 per cent. and 0 per cent. in Turkey, as detailed above.

If a double taxation treaty is in effect between Turkey and the resident country of the holder of the notes (in some cases, for example, pursuant to the treaties with the United Kingdom and the United States, the term “beneficial owner” is used), which provides for the application of a lower withholding tax rate than the local rate to be applied by the corporation, then the lower rate may be applicable. For the application of withholding at a reduced rate that benefits from the provisions of a double tax treaty concluded between Turkey and the Relevant Jurisdiction where the investor is a resident, an original copy of the certificate of residence signed by the competent authority referred to in Article 3 of the Treaty is required for each calendar year, together with a translated copy translated by a translation office, to verify that the investor is subject to taxation over its worldwide gains in the relevant jurisdiction on the basis of resident taxpayer status, as a resident of the relevant jurisdiction to the person responsible for withholding tax prior to the application of withholding. In the event the certificate of residence is not delivered prior to the application of withholding tax, then upon the subsequent delivery of the certificate of residence, refunding of the excess tax shall be granted pursuant to the provisions of the relevant double taxation treaty and the Turkish tax legislation.

EU Savings Directive Under the EU Savings Directive, member states are required to provide to the tax authorities of another member state details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual

- 198 - resident in that other member state or to certain limited types of entities established in that other member state. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).

The European Commission has proposed certain amendments to the EU Savings Directive, which may, if implemented, amend or broaden the scope of the requirements described herein.

- 199 - PLAN OF DISTRIBUTION

The Company intends to offer the Notes through the Managers and their broker-dealer affiliates, as applicable, named below. Subject to the terms and conditions stated in a subscription agreement dated 19 April 2013 among the Managers and the Company (the “Subscription Agreement”), each of the Managers has severally agreed to purchase, and the Company has agreed to sell to each of the Managers, the principal amount of the Notes set forth opposite each Manager’s name below.

Principal Managers Amount of Notes BNP Paribas ...... 183,000,000 Citigroup Global Markets Limited ...... 183,000,000 Deutsche Bank AG, London Branch ...... 183,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated ...... 183,000,000 UniCredit Bank Austria AG ...... 18,000,000 TOTAL ...... 750,000,000

The Subscription Agreement provides that the obligations of the Managers to purchase the Notes are subject to approval of legal matters by counsel and to other conditions. The offering of the Notes by the Managers is subject to receipt and acceptance and subject to the Managers’ right to reject any order in whole or in part.

The Company has been informed that the Managers propose to resell beneficial interests in the Notes at the offering price set forth on the cover page of this Offering Circular within the United States to persons reasonably believed to be QIBs in reliance upon Rule 144A, and to non-US persons (as defined in Regulation S) outside the United States in reliance upon Regulation S. See “Transfer Restrictions”. The prices at which beneficial interests in the Notes are offered may be changed at any time without notice.

Offers and sales of the Notes in the United States will be made by those Managers or their affiliates that are registered broker-dealers under the Exchange Act, or in accordance with Rule 15a-6 thereunder.

The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the registration requirements of the Securities Act. See “Transfer Restrictions”.

Accordingly, until 40 days after the closing date of this Offering (the “Distribution Compliance Period”), an offer or sale of Notes (or beneficial interests therein) within the United States by a dealer that is not participating in this Offering may violate the registration requirements of the Securities Act if that offer or sale is made otherwise than in accordance with Rule 144A.

The Notes will constitute a new class of securities of the Company with no established trading market. The Company cannot provide any assurances to investors that the prices at which the Notes (or beneficial interests therein) will sell in the market after this Offering will not be lower than the initial offering price or that an active trading market for the Notes will develop and continue after this Offering. The Managers have advised the Company that they currently intend to make a market in the Notes. However, they are not obligated to do so, and they may discontinue any market-making activities with respect to the Notes at any time without notice. Applications have been made to admit the Notes to listing on the Official List and to have the Notes admitted to trading on the Main Securities Market; however, no assurance can be given that such applications will be accepted. Accordingly, the Company cannot provide any assurances to investors as to the liquidity of or the trading market for the Notes.

In connection with the Offering, one or more Manager(s) may purchase and sell Notes (or beneficial interests therein) in the open market. These transactions may include overallotment, syndicate covering transactions and stabilising transactions. Overallotment involves the sale of Notes (or beneficial interests therein) in excess of the principal amount of Notes to be purchased by the Managers in this Offering, which creates a short position for the Managers. Covering transactions involve the purchase of the Notes (or beneficial interests therein) in the open market after the distribution has been completed in order to cover short positions. Stabilising transactions consist of certain bids or purchases of Notes (or beneficial interests therein) made for the purpose of preventing or retarding a decline in the market price of the Notes (or beneficial interests therein) while the offering is in

- 200 - progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes (or beneficial interests therein). They may also cause the price of the Notes (or beneficial interests therein) to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Managers may conduct these transactions in the over-the-counter market or otherwise. If the Managers commence any of these transactions, they may discontinue them at any time.

The Managers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Managers or their respective affiliates may have performed investment banking and advisory services for the Company and its affiliates from time to time for which they may have received fees, expenses, reimbursements and/or other compensation. The Managers or their respective affiliates may, from time to time, engage in transactions with and perform advisory and other services for the Company and its affiliates in the ordinary course of their business. Certain of the Managers and/or their respective affiliates have acted and expect in the future to act as a lender to the Company and/or other members of the Group and/or otherwise participate in transactions with the Group.

In the ordinary course of their various business activities, the Managers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and/or instruments of the Company or the Company’s affiliates. In addition, certain of the Managers and/or their respective affiliates hedge their credit exposure to the Company pursuant to their customary risk management policies. These hedging activities could have an adverse effect on the future trading prices of the Notes offered hereby. The Managers and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

The Company has agreed to indemnify each Manager against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Managers may be required to make because of those liabilities.

- 201 - SELLING RESTRICTIONS

General No action has been taken by the Issuer or any of the Managers that would, or is intended to, permit a public offer of the Notes, or possession or distribution of this Offering Circular or any other offering or publicity material relating to the Notes in any country or jurisdiction where any such action for that purpose is required. Accordingly, each Manager has undertaken that it will not, directly or indirectly, offer or sell any Notes or have in its possession, distribute or publish any offering circular, prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms.

United States The Company has not registered the Notes under the Securities Act or the laws of any state securities commission and, therefore, the Notes may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. See “Transfer Restrictions”.

Turkey THE OFFERING OF THE NOTES HAS BEEN AUTHORISED BY THE CMB ONLY FOR THE PURPOSE OF THE SALE OF THE NOTES OUTSIDE OF TURKEY IN ACCORDANCE WITH ARTICLE 15(B) OF DECREE 32 AND THE COMMUNIQUÉ. THE NOTES (OR BENEFICIAL INTERESTS THEREIN) HAVE TO BE OFFERED OR SOLD OUTSIDE OF TURKEY AND THE CMB HAS AUTHORISED THE OFFERING OF THE NOTES; PROVIDED THAT, FOLLOWING THE PRIMARY SALE OF THE NOTES, NO TRANSACTION THAT MAY BE DEEMED AS A SALE OF THE NOTES (OR BENEFICIAL INTERESTS THEREIN) IN TURKEY BY WAY OF PRIVATE PLACEMENT OR PUBLIC OFFERING MAY BE ENGAGED IN. PURSUANT TO ARTICLE 15(D)(II) OF DECREE 32, THERE IS NO RESTRICTION ON THE PURCHASE OR SALE OF THE NOTES (OR BENEFICIAL INTERESTS THEREIN) BY RESIDENTS OF TURKEY; PROVIDED THAT THEY PURCHASE OR SELL SUCH NOTES (OR BENEFICIAL INTERESTS) IN THE FINANCIAL MARKETS OUTSIDE OF TURKEY AND SUCH SALE AND PURCHASE IS MADE THROUGH BANKS AND/OR LICENSED BROKERAGE INSTITUTIONS AUTHORISED PURSUANT TO CMB REGULATIONS AND THE PURCHASE PRICE IS TRANSFERRED THROUGH BANKS. AS SUCH, TURKISH RESIDENTS SHOULD USE BANKS OR LICENSED BROKERAGE INSTITUTIONS WHEN PURCHASING NOTES (OR BENEFICIAL INTERESTS THEREIN) AND TRANSFER THE PURCHASE PRICE THROUGH BANKS. THE ISSUANCE CERTIFICATE RELATING TO THE NOTES IS EXPECTED TO BE APPROVED BY THE CMB ON OR ABOUT 24 APRIL 2013.

THE MANAGERS HAVE AGREED THAT NEITHER THEY, NOR ANY OF THEIR RESPECTIVE AFFILIATES, NOR ANY PERSON ACTING ON BEHALF OF ANY OF THE MANAGERS OR ANY OF THEIR RESPECTIVE AFFILIATES, HAVE ENGAGED OR WILL ENGAGE IN ANY DIRECTED SELLING EFFORTS WITHIN TURKEY IN CONNECTION WITH THE NOTES. THE MANAGERS HAVE FURTHER AGREED THAT NEITHER THEY NOR ANY OF THEIR RESPECTIVE AFFILIATES, NOR ANY PERSON ACTING ON BEHALF OF ANY OF THE MANAGERS OR ANY OF THEIR RESPECTIVE AFFILIATES (I) HAVE ENGAGED OR WILL ENGAGE IN ANY FORM OF GENERAL SOLICITATION OR GENERAL ADVERTISING IN CONNECTION WITH ANY OFFER AND SALE OF THE NOTES IN TURKEY, OR (II) WILL MAKE ANY DISCLOSURE IN TURKEY IN RELATION TO THE ISSUER, THE NOTES OR THE OFFERING CIRCULAR WITHOUT THE PRIOR CONSENT OF THE ISSUER, SAVE AS MAY BE REQUIRED BY APPLICABLE LAW, COURT ORDER OR REGULATION.

United Kingdom In the United Kingdom, this Offering Circular is being distributed only to and is directed only at: (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, (b) high net worth bodies corporate falling within Article 49(2) of the Order and (c) any other persons to whom it may otherwise lawfully be communicated

- 202 - (all such persons together being referred to as “relevant persons”). Each Manager has represented, warranted and agreed that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Company, and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

- 203 - TRANSFER RESTRICTIONS

Because the following restrictions will apply with respect to the Notes, investors in the Notes are advised to consult legal counsel prior to making an offer, resale, pledge or transfer of any of the Notes. References to Notes in this section should, as appropriate, be deemed to refer to the Notes themselves and/or beneficial interests therein.

According to Article 15d(ii) of Decree 32 regarding the Protection of the Value of the Turkish Currency, residents of Turkey will be free to purchase and sell securities and other capital market instruments (or beneficial interests therein) traded on financial markets outside of Turkey, provided that such sale and purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations and the purchase price is transferred through banks. As such, Turkish residents should use banks or licensed brokerage institutions when purchasing Notes (or beneficial interests therein) and transfer the purchase price through banks. However the Notes cannot be offered or sold in Turkey as the issuance is approved by the CMB with the condition that the Notes are offered and sold outside Turkey and following the primary sale of the Notes, no transaction that may be deemed as a sale of the Notes (or beneficial interests therein) in Turkey by way of private placement or public offering may be engaged in.

The Company has not registered the Notes under the Securities Act or the laws of any state securities commission and, therefore, the Notes may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold only: (a) to persons reasonably believed to be QIBs in reliance upon Rule 144A under the Securities Act and (b) to non-US persons outside the United States in reliance upon Regulation S under the Securities Act.

If an investor invests in the Notes, then such investor will be deemed to have acknowledged, represented and agreed with the Managers and the Company as follows: (a) Such investor understands and acknowledges that the Notes have not been registered under the Securities Act or any other applicable securities law and that the Notes are being offered for resale in transactions not requiring registration under the Securities Act or any other securities law, including sales pursuant to Rule 144A under the Securities Act, and, unless so registered, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with the conditions for transfer set forth in paragraph (d) below. (b) Such investor is not an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company and is not acting on the Company’s or any such affiliate’s behalf and such investor is either: (i) a QIB and is aware that any sale of Notes to it will be made in reliance upon Rule 144A and such acquisition will be for its own account or for the account of another QIB or (ii) not a “US person” (as defined in Regulation S under the Securities Act) or purchasing for the account or benefit of a US person (other than a distributor) and is purchasing Notes in an offshore transaction in accordance with Regulation S under the Securities Act.

(c) Such investor acknowledges that none of the Company or the Managers, or any person representing the Company or the Managers, has made any representation to it with respect to the Company or the offer or sale of any of the Notes, other than the information contained in this Offering Circular, which has been delivered to the investor and upon which such investor is relying in making its investment decision with respect to the Notes. Such investor acknowledges that the Managers make no representation or warranty as to the accuracy or completeness of this Offering Circular. Such investor has had access to such financial and other information concerning the Company and the Notes as it has deemed necessary in connection with its decision to purchase the Notes, including an opportunity to ask questions of and request information from the Company and the Managers. (d) Such investor is purchasing the Notes for its own account, or for one or more investor accounts for which such investor is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other law. Such investor agrees (or will be deemed to agree) on its own behalf and on behalf of any investor account for which it is purchasing Notes, and each subsequent holder of the Notes by its acceptance thereof will agree, to offer, sell or otherwise transfer such Notes prior to: (i) the date that is one year (or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereunder) after the later of the Issue Date and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto), or (ii), such later date, if any, as may be required by

- 204 - applicable law (the “Resale Restriction Termination Date”), only: (A) to the Company, (B) pursuant to a registration statement that has been declared effective under the Securities Act, (C) for so long as the Notes are eligible for resale pursuant to Rule 144A, to a person reasonably believed to be a QIB that purchases for its own account or for the account of another QIB to whom such investor gives notice that the transfer is being made in reliance upon Rule 144A, (D) in an offshore transaction complying with Rule 903 or 904 of Regulation S under the Securities Act or (E) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date; however, any resale of the Notes thereafter will continue to need to comply with all applicable laws. Such investor acknowledges that the Company reserves the right prior to any offer, sale or other transfer of the Notes pursuant to clause (D) or (E) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company. With respect to the Regulation S Notes, each investor therein agrees (or will be deemed to agree) on its own behalf and on behalf of any investor account for which it is purchasing a Regulation S Note, that no offer, sale, pledge or other transfer made during the Distribution Compliance Period (i.e., prior to the date 40 days after the closing date of this Offering) will be made to a US person or for the account or benefit of a US person (other than a distributor). (e) Each Rule 144A Note will contain a legend substantially in the following form: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE (OR OF A BENEFICIAL INTEREST HEREIN) BY ITS ACCEPTANCE HEREOF (OR OF A BENEFICIAL INTEREST HEREIN): (a) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (b) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED THIS NOTE (OR A BENEFICIAL INTEREST HEREIN) THAT IT WILL NOT PRIOR TO: (i) THE DATE THAT IS ONE YEAR (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ISSUE DATE OR THE LAST DAY ON WHICH THE ISSUER OR ANY AFFILIATE (AS DEFINED IN RULE 144) OF THE ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE), OR (ii) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE (OR A BENEFICIAL INTEREST HEREIN) EXCEPT: (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE UPON RULE 144A UNDER THE SECURITIES ACT, (D) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH THE RELEVANT SECURITIES LAWS OF ANY OTHER JURISDICTION, AND (c) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE (OR A BENEFICIAL INTEREST HEREIN) IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUER SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER HEREOF AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION”, “UNITED STATES” AND “US PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

- 205 - Each Regulation S Note will contain a legend substantially in the following form: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. (f) If such investor is a purchaser in a sale that occurs outside the United States within the meaning of Regulation S, such investor acknowledges that until the expiration of the “40-day distribution compliance period” within the meaning of Rule 903 of Regulation S, any offer or sale of the Notes will not be made by such investor to a US person or for the account or benefit of a US person within the meaning of Rule 902 under the Securities Act. (g) Such investor acknowledges that the Registrar will not be required to accept for registration of transfer any Notes acquired by it except upon presentation of evidence satisfactory to the Company and the Registrar that the restrictions set forth herein have been complied with. (h) Such investor acknowledges that: (i) the Company, the Managers and others will rely upon the truth and accuracy of such investor’s acknowledgements, representations and agreements set forth herein and such investor agrees (or will be deemed to agree) that if any of its acknowledgements, representations or agreements herein cease to be accurate and complete, such investor will notify the Company and the Managers promptly in writing, and (ii) if such investor is acquiring any Notes as fiduciary or agent for one or more investor accounts, such investor represents with respect to each such account that: (A) such investor has sole investment discretion, and (B) such investor has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account and that each such investment account is eligible to purchase the Notes. (i) Such investor agrees that it will give to each person to whom it transfers a Note notice of any restrictions on the transfer of such Note. (j) Such investor understands that no action has been taken in any jurisdiction (including the United States) by the Company or the Managers that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Circular or any other material relating to the Company or the Notes in any jurisdiction where action for that purpose is required. Consequently, any transfer of the Notes will be subject to the selling restrictions set forth under this “Transfer Restrictions” section and “Selling Restrictions”.

- 206 - ENFORCEMENT OF JUDGMENTS AND SERVICE OF PROCESS

The Company is a public joint stock company organised under the laws of Turkey. Certain of the directors and officers of the Company named herein reside inside Turkey and all or a significant portion of the assets of such persons may be, and substantially all of the assets of the Company are, located in Turkey. As a result, it may not be possible for investors to effect service of process upon such persons outside Turkey or to enforce against them in the courts of jurisdictions other than Turkey any judgments obtained in such courts that are predicated upon the laws of such other jurisdictions. In order to enforce such judgments in Turkey, investors should initiate enforcement lawsuits before the competent Turkish courts. In accordance with Articles 50-59 of Turkey’s International Private and Procedure Law (Law No. 5718), the courts of Turkey will not enforce any judgment obtained in a court established in a country other than Turkey unless: (a) there is in effect a treaty between such country and Turkey providing for reciprocal enforcement of court judgments, (b) there is de facto enforcement in such country of judgments rendered by Turkish courts, or (c) there is a provision in the laws of such country that provides for the enforcement of judgments of Turkish courts.

There is no treaty between Turkey and either the United States or the United Kingdom providing for reciprocal enforcement of judgments. There is no de facto reciprocity between Turkey and the United States. Turkish courts have rendered at least one judgment confirming de facto reciprocity between Turkey and the United Kingdom; however, since de facto reciprocity is decided by the relevant court on a case-by-case basis, there is uncertainty as to the enforceability of court judgments obtained in the United States or the United Kingdom by Turkish courts. Moreover, there is uncertainty as to the ability of an investor to bring an original action in Turkey based upon the US federal or any other non-Turkish securities laws.

In addition, the courts of Turkey will not enforce any judgment obtained in a court established in a country other than Turkey if: (a) the court rendering the judgment did not have jurisdiction to render such judgment; (b) the defendant was not duly summoned or represented or the defendant’s fundamental procedural rights were not observed and the defendant brought an objection before Turkish courts against the request for enforcement on any of these grounds; (c) the judgment in question was rendered with respect to a matter within the exclusive jurisdiction of the courts of Turkey; (d) the judgment is incompatible with a judgment of a court in Turkey between the same parties and relating to the same issues or, as the case may be, with an earlier foreign judgment on the same issue and enforceable in Turkey; (e) the judgment is not of a civil nature; (f) the judgment is clearly against public policy rules of Turkey; (g) the judgment is not final and binding with no further recourse for appeal under the laws of the country where the judgment has been rendered; or (h) the judgment was rendered by a foreign court that has deemed itself competent even though it has no actual relationship with the parties or the subject matter at hand and the defendant brought an objection before Turkish courts against the request for enforcement on this ground.

As a result, it may not be possible to: • effect service of process within the United States upon the Company or any of the directors and executive officers named in this Offering Circular; or • enforce, in the Republic of Turkey, court judgments obtained in courts of the United States against the Company or any of the directors and executive officers named in this Offering Circular in any action, including actions under the civil liability provisions of federal securities laws of the United States.

In addition, it may be difficult to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities predicated upon U.S. securities laws.

- 207 - In any suit or action against the Company in the Turkish courts, a foreign plaintiff may be required to deposit security for court costs (cautio judicatum solvi), provided however that the court may in its discretion waive such requirement for security in the event that the plaintiff is considered to be (i) a national of one of the contracting states of the Convention Relating to Civil Procedures signed at The Hague on 1 March 1954 (ratified by Turkey by Law No. 1574) or (ii) a national of a state that has signed a bilateral treaty with Turkey which is duly ratified and contains, inter alia, a waiver of the cautio judicatum solvi requirement on a reciprocal basis.

In connection with the issuance of the Notes, service of process may be made upon the Company at Beko Plc., Beko House, Caxton Way, Watford, Hertfordshire WD18 8UF with respect to any proceedings in England.

- 208 - LEGAL MATTERS

Certain matters as to United States law will be passed upon for the Company by Clifford Chance LLP and by Yegin Avukatlık Bürosu as to matters of Turkish law (who will also pass upon matters of Turkish tax law). Certain matters as to English and United States law will be passed upon for the Managers by Allen & Overy LLP, and certain matters as to Turkish law will be passed upon for the Managers by Paksoy Ortak Avukat Bürosu (who will also pass upon matters of Turkish tax law).

- 209 - OTHER GENERAL INFORMATION

Authorisation The issuance and sale of the Notes by the Company and the execution and delivery by the Company of the Transaction Documents have been authorised pursuant to the authority of the officers of the Company under a resolution of its Board of Directors dated 1 March 2013.

Listing Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on its regulated market, however, no assurance can be given that such application will be accepted. It is expected that admission of the Notes to the Official List and to trading on the Main Securities Market will be granted on or about 19 April 2013, subject only to the issue of the Notes.

The estimated total expenses related to the admission of the Notes to trading on the Main Securities Market are EUR 5,000.

Listing Agent Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Company in connection with the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on its regulated market for the purposes of the Prospectus Directive.

Clearing Systems The Unrestricted Global Certificate has been accepted for clearance through Euroclear and Clearstream, Luxembourg (ISIN XS0922615819 and Common Code 092261581). Application has been made for acceptance of the Restricted Global Certificate into DTC’s book-entry settlement system (ISIN US49989AAA79, Common Code 092281213 and CUSIP 49989A AA7).

No Significant or Material Adverse Change Except as disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” on p. 61, there has been no significant change in the financial or trading position of either the Group or the Company since 31 December 2012, being the end of the last financial period for which the Group’s financial statements have been published and no material adverse change in the financial position or prospects of either the Group or the Company since 31 December 2012.

Legal and Arbitration Proceedings Except as disclosed under “Business—Legal Matters”, neither the Group or the Company is presently involved, nor has been in a period covering at least the previous 12 months, in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Group or the Company is aware) that may have, or have had in the recent past, significant effects on the Group or the Company’s financial position or profitability.

Interests of Natural and Legal Persons Involved in the Issue So far as the Company is aware, no person involved in the offer of the Notes has an interest material to the offer.

Independent Auditors The annual consolidated financial statements of Koç Holding A.S¸. as of and for the years ended 31 December 2012, 2011 and 2010 prepared in Turkish have been audited by Güney Bag˘ımsız Denetim ve Serbest Muhasebeci Mali Müs¸avirlik A.S¸. (a member firm of Ernst & Young Global Limited), independent auditors, as stated in the auditor’s reports thereon.

Güney Bag˘ımsız Denetim ve Serbest Muhasebeci Mali Müs¸avirlik A.S¸. (a member firm of Ernst & Young Global Limited) is authorised by the CMB, BRSA, Turkish Treasury, EMRA and Public Oversight Accounting and Auditing Standards Authority Board to conduct independent audits in Turkey.

- 210 - Certain Information about the Company Koç Holding A.S¸. is a holding and operating company that was incorporated in Istanbul, Turkey on 6 December 1963, under registration number 85714. The Company operates under the Turkish Commercial Code. The Company’s principal office is at Nakkas¸tepe, Azizbey Sokak No:1, Kuzguncuk 34674, Istanbul, Turkey and its telephone number is +90(216)5310000.

Documents The Company produces audited consolidated annual and unaudited consolidated quarterly and semiannual interim financial statements. Copies (with English translations where the documents at issue are not in English) of the Company’s articles of association and of its audited financial statements as of and for the years ended 31 December 2012 and 2011, and copies of the transaction documents referred to herein (including the forms of the Notes) will be available for inspection in physical form, at the offices of the Company and the Fiscal Agent.

As long as the Notes are outstanding, copies of this Offering Circular, the constitutional documents of the Company and (after the Issue Date) the Deed of Covenant and the Agency Agreement will be available for inspection in physical form at the offices of the Company and the Fiscal Agent.

Documents Incorporated by Reference No documents or contents of any website are incorporated by reference in this Offering Circular.

Material Contracts Except as disclosed in this Offering Circular under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”, the Company has not entered into any material contract outside the ordinary course of its business that could result in the Company being under an obligation or entitlement that is material to its ability to meet its obligations in respect of the Notes.

Language The language of this Offering Circular is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.

- 211 - INDEX OF DEFINED TERMS

€ ...... 48 Exemption ...... 125 2010 Consolidated Financial Statements ..... 45 EY...... 46 2011 Consolidated Financial Statements ..... 45 Fiat ...... 2 2012 Consolidated Financial Statements ..... 45 Ford ...... 2 Acting in Concert Allegation ...... 176 Ford Otosan ...... 48 ADCs ...... 170 FSMA ...... 210 AES...... 7 Global Certificates ...... i affiliate ...... 211 Group ...... iii AKP...... 31 Halkbank ...... 21 Allianz ...... 64 HV...... 135 Anti-Trust Law ...... 19 IAS29...... 1 Arçelik ...... 48 IASB ...... 45 B&Q ...... 7 IFRS ...... 45 Bancassurance Agreement ...... 64 IMF ...... 29 Bank ...... 48 Interest Payment Date ...... 42 Basel Committee ...... 26 International Offering ...... i Basel II ...... 26 Investor’s Currency ...... 36 Basel III ...... 26 Irish Stock Exchange ...... 34 BDP...... 31 IRS...... 204 Board of Directors ...... 178 Issue Date ...... i BRSA ...... 2 Issuer ...... iii BRSA Principles ...... 46 IT...... 20 Capital Markets Law ...... i Joint Lead Manager ...... i CCP...... 33 KFK...... 144 Central Bank ...... iii KFS...... 153 Chapters ...... 32 KH share ...... 116 CHP...... 31 Koç Holding ...... iii CIF...... 128 LCV...... 135 CIS...... 2 LG Electronics ...... 7 Clearing Systems ...... 201 Lira ...... 48 Clearstream, Luxembourg ...... i Main Securities Market ...... 34 CMB ...... 178 Managers ...... i CMB Financial Reporting Standards ...... 45 MCV ...... 135 CML ...... 33 MHP ...... 31 Code ...... 203 Moody’s ...... i Co-Manager ...... i MSME ...... 165 Commission ...... 33 NEM ...... 157 Communiqué ...... ii Non-Finance Segments ...... 10 Company ...... iii Notes ...... i Competition Board ...... 18 NPL...... 161 Consolidated Financial Statements ...... 45 OFAC ...... 34 CPI...... 29 Offering ...... i CRA Regulation ...... i Offering Circular ...... i CRM ...... 1 Official List ...... 34 CV...... 135 Offshore Transaction ...... 213 DAB ...... 151 OID ...... 204 Decree 32 ...... ii Öztürk ...... 118 Decrees ...... iv PC ...... 135 Distribution Compliance Period ...... 207 Petder ...... 1 Dominant Position Allegation ...... 176 POS...... 162 EMRA ...... 1 Prospectus Directive ...... i EU Industrial R&D Investment Scoreboard . . . 174 QIB ...... i EU Savings Directive ...... 37 Qualified Institutional Buyer ...... 212 EUR...... 48 R&D ...... 157 Euro ...... 48 Rating Agencies ...... i Euroclear ...... i Regulation S ...... i Exchange Act ...... iv Regulation S Notes ...... i Report ...... 33

- 212 - Resale Restriction Termination Date ...... 212 Tofas¸ ...... 48 Restricted Country ...... 34 Tüpras ...... 48 Restricted Global Certificate ...... i Turkey ...... i RSA...... iv Turkish Lira ...... 48 Rule 144A ...... i TurkStat ...... iii Rule 144A Notes ...... i TÜSI˙AD ...... 174 RUP...... 8 TVs ...... 146 S&P...... i Unicredit ...... 7 Sanction Targets ...... 34 United States ...... i SEC...... iii Unrestricted Global Certificate ...... i Securities Act ...... i US ...... i SEEs ...... 30 US dollars ...... 48 Smart Growth ...... 159 US Holder ...... 203 SSI...... 106 US Offering ...... i Stabilising Manager ...... iii US person ...... 211 Subscription Agreement ...... 207 US$ ...... 48 T+4 ...... i USD...... 48 Taxes ...... 42 VakıfBank ...... 21 TCC...... 33 World ...... 163 TCO...... 33 Yapı Kredi ...... 48 Temel ...... 16 Ziraat ...... 21 TL ...... 48

- 213 - ANNEX A: SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IFRS AND CMB FINANCIAL REPORTING STANDARDS

Summary of Significant Differences between IFRS and CMB Financial Reporting Standards The Consolidated Financial Statements in this Offering Circular have been prepared in accordance with CMB Financial Reporting Standards which differ from International Financial Reporting Standards (“IFRS”) as described below.

Both the IASB and the CMB required companies operating in relevant jurisdictions including Turkey to apply International Accounting Standards (IAS) 29 Financial Reporting in Hyperinflationary Economies (“IAS 29”) for the year ended 31 December 2004. Based on IASB guidelines, Turkey would have been a jurisdiction that was required to apply IAS 29 for the year ended 31 December 2005 as well. However, the CMB did not require the same for companies listed on the Borsa˙ Istanbul.

Application of IAS 29 requires the restatement of non-monetary items and equity items in the balance sheet. As a result of the non-application by the Group of IAS 29 for the year ended 31 December 2005 a permanent difference has emerged between IFRS and CMB Financial Reporting Standards.

Because of the changes in the general purchasing power of the currency of a hyperinflationary economy as of 31 December 2004 (including Turkey), IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date and the corresponding figures for previous periods also to be restated in terms of the measuring unit current at the balance sheet date. Index and conversion factors applied to the Turkish Lira as of 31 December 2004 for the previous three years are as follows:

Conversion Index Factor 31 December 2002 ...... 6,478.8 1.29712 31 December 2003 ...... 7,382.1 1.13840 31 December 2004 ...... 8,403.8 1.00000

The main guidelines for the restatement of the Company’s prior consolidated financial statements in accordance with IAS 29 are as follows:

The consolidated financial statements as of 31 December 2004 were restated with the purchasing power of the relevant currency at 31 December 2004.

Non-monetary assets and liabilities which were not carried at amounts in terms of the measuring unit current at the balance sheet date and the components of shareholders’ equity including the adjustment to share capital in the consolidated balance sheet as at 31 December 2004 were restated by applying the relevant conversion factors at current amounts prevailing as of 31 December 2004.

The effect of inflation on the net monetary position of a Company was included in the income statement for the year ended 31 December 2004 as a monetary gain or loss.

The restatement of non-monetary items and equity items in the balance sheet in terms of the measuring unit current at the balance sheet date was terminated with effect from 1 January 2005. Non-monetary assets and liabilities and the components of shareholders’ equity including the adjustment to share capital in the consolidated balance sheet were presented with the additions until 31 December 2004 expressed in terms of the purchasing power of the relevant currency at 31 December 2004 and the additions after 31 December 2004 at the carrying nominal value.

Depreciation and amortisation charges, and gain and losses on disposal of these assets were calculated based on the total of restated gross book value of property, plant and equipment and intangible assets expressed in terms of the purchasing power of as of 31 December 2004 and nominal value of additions after 1 January 2005.

Conversion of prior years’ balance sheet and income statement accounts to current values by multiplying with price index and related coefficients does not mean that a company could convert these assets and liabilities to cash. Similarly, this situation does not mean that the increase in the capital can be distributed to shareholders.

A-1 ANNEX B: SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN IFRS AND BRSA ACCOUNTING PRINCIPLES

The BRSA Principles differ from IFRS. Such differences primarily relate to format of presentation of financial statements, disclosure requirements (e.g. IFRS 7) and accounting policies. BRSA format and disclosure requirements are prescribed by relevant regulations and do not always meet IFRS or IAS 34 standards. Among the differences in accounting policies some of the most important are:

• Consolidation Only financial sector subsidiaries and associates are consolidated under BRSA Principles, others are carried at cost or at fair value.

• Associates The definitions of “associate” differ; under the BRSA Principles “associate” is an entity in whose capital the parent bank participates and over which it has significant influence but no capital or management control, whose main operation is banking and which operates pursuant to special legislation with permission and licence and is established abroad. The related associate is consolidated according to the equity method and materiality principle. According to BRSA Principles, if the parent bank has 10 per cent. or more of the voting rights in the associate it is presumed to have significant influence on that associate unless proven otherwise, whereas according to IFRS the applicable rate of voting rights is 20 per cent. or more.

• Specific provisioning for loan losses The BRSA provisioning for loan losses is different from the IAS 39 and is based on minimum percentages relating to number of days overdue prescribed by relevant regulations, whereas the IFRS provisioning for loan losses is based on the present value of future cash flows discounted at original effective interest rates.

• General loan loss provisioning This is required under BRSA Principles but prohibited under IFRS. Instead, IFRS require portfolio/ collective provisioning for groups of loans and receivables sharing similar characteristics and not individually identified as impaired. Moreover, the BRSA generic provisioning is based on minimum percentages defined in regulations for many asset classes (both on-balance and off-balance sheet), not only for loans, which is not the case with IFRS.

• Investment property and assets held for sale Definitions and accounting treatment according to BRSA Principles are different from those under IFRS (based on regulations prescribed by the BRSA). Under the BRSA Principles depreciation of assets held for sale is taken into account, whereas pursuant to IFRS it is carried at lower of cost or fair value less cost to sell.

• Deferred taxation Certain differences exist in this area. According to the IAS 12 Income Taxes deferred taxation is calculated in full on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements when it is probable that the future economic benefit resulting from the reversal of temporary differences will flow to or from the Group, whereas under the BRSA Principles there are some specific exemptions. For example, under the BRSA Principles no deferred tax is computed in relation to general loan loss provisions.

• Application period for hyperinflationary accounting Under the BRSA Principles, this period ends at 1 January 2005 whereas under IFRS it ends at 1 January 2006, constituting a one year difference between the two.

Similar differences with IFRS also exist in the accounting policies and disclosure requirements applied to consolidated subsidiaries, especially those providing life and non-life insurance services which are subject to Undersecretariat of Treasury policies/requirements and factoring and leasing services which are subject to specific BRSA policies/requirements.

B-1 Effect of the CMB Financial Reporting Standards on the Consolidated Financial Statements If the Group had prepared its Consolidated Financial Statements as of and for the period ended 31 December 2012 in line with the IAS 29, the following balance sheet line items would be different: investment properties, property, plant and equipment, intangible assets, goodwill, deferred tax assets / liabilities and total equity.

If the Group had prepared its Consolidated Financial Statements as of and for the period ended 31 December 2012 in line with the IAS 29, the following comprehensive income statement items would be different: depreciation and amortisation (included in cost of sales, marketing, selling and distribution expenses, general administrative expenses and other expenses) and deferred tax income / (expense).

As a result of the foregoing, gross profit, operating profit, profit before tax and profit for the period lines would be different as well.

Management believes that the impact of this difference on its financial statements is decreasing over time, as a number of its fixed assets that existed at 31 December 2004 were fully depreciated at the time IAS 29 was applied and as such there would have been no depreciation charge of those fully depreciated restated assets in the Group’s comprehensive income statement.

B-2 INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2012 INDEPENDENT AUDITORS’ REPORT ...... F-3 Consolidated Balance Sheets ...... F-6 Consolidated Statements of Income ...... F-8 Consolidated Statements of Comprehensive Income ...... F-9 Consolidated Statements of Changes in Equity ...... F-10 Consolidated Statements of Cash Flow ...... F-11 Notes to the Consolidated Financial Statements ...... F-12 CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2011 INDEPENDENT AUDITORS’ REPORT ...... F-108 Consolidated Balance Sheets ...... F-111 Consolidated Statements of Income ...... F-113 Consolidated Statements of Comprehensive Income ...... F-114 Consolidated Statements of Changes in Equity ...... F-115 Consolidated Statements of Cash Flow ...... F-116 Notes to the Consolidated Financial Statements ...... F-117 CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 INDEPENDENT AUDITORS’ REPORT ...... F-205 Consolidated Balance Sheets ...... F-208 Consolidated Income Statements ...... F-210 Consolidated Statements of Comprehensive Income ...... F-211 Consolidated Statements of Changes in Equity ...... F-212 Consolidated Cash Flow Statements ...... F-213 Notes to the Consolidated Financial Statements ...... F-214

F-1

KOÇ HOLDøNG A.ù.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2012 TOGETHER WITH THE INDEPENDENT AUDITORS’ REPORT

(CONVENIENCE TRANSLATION INTO ENGLISH OF THE INDEPENDENT AUDITORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

F-2 F-3 F-4 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2012

CONTENTS INDEX

CONSOLIDATED BALANCE SHEETS ...... 1-2

CONSOLIDATED STATEMENTS OF INCOME ...... 3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ...... 4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ...... 5

CONSOLIDATED STATEMENTS OF CASH FLOW ...... 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 7-101

NOTE 1 GROUP’S ORGANISATION AND NATURE OF OPERATIONS ...... 7-12 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ...... 13-31 NOTE 3 BUSINESS COMBINATIONS ...... 32-35 NOTE 4 JOINT VENTURES ...... 36 NOTE 5 SEGMENT REPORTING ...... 37-41 NOTE 6 CASH AND CASH EQUIVALENTS ...... 42 NOTE 7 BALANCES WITH CENTRAL BANKS ...... 42 NOTE 8 FINANCIAL ASSETS ...... 43-45 NOTE 9 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...... 46 NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS ...... 47-49 NOTE 11 TRADE RECEIVABLES AND PAYABLES ...... 50 NOTE 12 RECEIVABLES FROM FINANCE SECTOR OPERATIONS ...... 51-52 NOTE 13 INVENTORIES ...... 52-53 NOTE 14 INVESTMENT PROPERTIES ...... 53 NOTE 15 PROPERT, PLANT AND EQUIPMENT ...... 54-55 NOTE 16 INTANGIBLE ASSETS ...... 56-57 NOTE 17 GOODWILL...... 58-59 NOTE 18 PAYABLES OF FINANCE SECTOR OPERATIONS ...... 60-61 NOTE 19 FINANCIAL LIABILITIES ...... 62-64 NOTE 20 TAX ASSETS AND LIABILITIES ...... 65-67 NOTE 21 OTHER PAYABLES ...... 67 NOTE 22 PROVISIONS FOR EMPLOYEE BENEFITS ...... 68-70 NOTE 23 OTHER ASSETS AND LIABILITIES ...... 71-73 NOTE 24 ASSETS HELD FOR SALE ...... 74 NOTE 25 EQUITY ...... 75-77 NOTE 26 REVENUE ...... 78 NOTE 27 EXPENSES BY NATURE ...... 78-79 NOTE 28 OTHER INCOME/EXPENSES ...... 79 NOTE 29 FINANCIAL INCOME/EXPENSES ...... 80 NOTE 30 RELATED PARTY DISCLOSURES ...... 80-81 NOTE 31 GOVERNMENT GRANTS ...... 81 NOTE 32 COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES ...... 81-84 NOTE 33 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT ...... 85-97 NOTE 34 FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES ...... 98-99 NOTE 35 EARNINGS PER SHARE ...... 99 NOTE 36 SUPPLEMENTARY CASH FLOW INFORMATION ...... 100 NOTE 37 EVENTS AFTER THE BALANCE SHEET DATE ...... 101

F-5 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2012 2012 2012 2011 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

ASSETS

Current assets: Cash and cash equivalents 6 4.453.895 5.875.813 10.474.225 6.796.244 Balances with central banks 7 2.113.583 2.788.350 4.970.513 4.524.256 Financial assets 8 394.995 521.098 928.909 1.223.670 Derivative financial instruments 10 86.255 113.792 202.845 210.768 Trade receivables 11 3.480.340 4.591.448 8.184.716 9.262.692 Receivables from finance sector operations 12 9.795.264 12.922.430 23.035.524 18.278.713 Inventories 13 2.830.709 3.734.421 6.656.979 6.790.072 Other current assets 23 1.073.979 1.416.850 2.525.676 2.315.485

Assets held for sale 24 10.839 14.300 25.491 6.160

Total current assets 24.239.859 31.978.502 57.004.878 49.408.060

Non-current assets: Financial assets 8 4.280.813 5.647.474 10.067.188 9.624.409 Investments accounted for using the equity method 9 45.158 59.574 106.197 101.795 Derivative financial instruments 10 26.204 34.570 61.625 167.588 Trade receivables 11 66.348 87.529 156.030 119.724 Receivables from finance sector operations 12 8.537.996 11.263.776 20.078.807 20.036.686 Investment properties 14 39.872 52.601 93.766 90.755 Property, plant and equipment 15 6.066.620 8.003.406 14.266.871 11.536.650 Intangible assets 16 798.007 1.052.772 1.876.672 1.736.815 Goodwill 17 1.629.903 2.150.254 3.833.043 3.761.648 Deferred tax assets 20 157.595 207.908 370.616 409.214 Other non-current assets 23 489.575 645.873 1.151.333 1.627.743

Total non-current assets 22.138.091 29.205.737 52.062.148 49.213.027

Total assets 46.377.950 61.184.239 109.067.026 98.621.087

(*) Euro (“EUR”) and US Dollar (“USD”) amounts presented above have been translated from Turkish Lira (“TL”) for convenience purposes only, at the official TL bid rate announced by the Central Bank of the Republic of Turkey (“CBRT”) at 31 December 2012, and therefore do not form part of these consolidated financial statements (Note 2.1.3).

These consolidated financial statements as of and for the year ended 31 December 2012 have been approved for issue by the Board of Directors (“BOD”) on 8 March 2013 and signed on behalf of the BOD by the CFO (Chief Financial Officer), Ahmet F. Ashabo÷lu and by Accounting Director, Emine Alangoya. These consolidated financial statements will be finalised following their approval in the General Assembly.

The accompanying notes form an integral part of these consolidated financial statements.

F-6 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2012 2012 2012 2011 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

LIABILITIES

Current liabilities: Payables of finance sector operations 18 14.991.862 19.778.055 35.256.360 33.898.224 Financial liabilities 19 5.204.239 6.865.707 12.238.810 11.900.696 Derivative financial instruments 10 83.042 109.554 195.291 227.624 Trade payables 11 3.552.849 4.687.106 8.355.236 9.186.672 Other payables 21 841.571 1.110.245 1.979.123 1.932.771 Current income tax liabilities 20 87.180 115.013 205.022 210.909 Provisions for employee benefits 22 41.566 54.836 97.751 87.208 Other current liabilities 23 2.783.073 3.671.573 6.544.951 4.581.850

Liabilities held for sale 24 1.692 2.232 3.979 5.517

Total current liabilities 27.587.074 36.394.321 64.876.523 62.031.471

Non-current liabilities: Payables of finance sector operations 18 331.234 436.982 778.963 956.795 Financial liabilities 19 6.201.204 8.180.955 14.583.371 9.763.278 Derivative financial instruments 10 202.061 266.570 475.187 325.666 Provisions for employee benefits 22 373.303 492.481 877.897 791.701 Deferred tax liabilities 20 192.270 253.653 452.161 819.108 Other non-current liabilities 23 115.525 152.406 271.679 662.244

Total non-current liabilities 7.415.597 9.783.047 17.439.258 13.318.792

Total liabilities 35.002.671 46.177.368 82.315.781 75.350.263

Equity: Paid-in share capital 25 1.078.325 1.422.584 2.535.898 2.415.141 Adjustment to share capital 25 411.314 542.628 967.288 967.288

Total share capital 1.489.639 1.965.212 3.503.186 3.382.429 Share premium 3.949 5.209 9.286 9.286 Revaluation funds 25 101.596 134.031 238.923 (245.317) Currency translation differences 45.220 59.657 106.344 142.563 Restricted reserves 25 993.465 1.310.632 2.336.332 2.309.638 Prior years’ income 3.306.970 4.362.729 7.777.001 6.173.681 Profit for the period 984.343 1.298.598 2.314.880 2.124.469

Equity holders of the parent 6.925.182 9.136.068 16.285.952 13.896.749 Non-controlling interest 4.450.097 5.870.803 10.465.293 9.374.075

Total equity 11.375.279 15.006.871 26.751.245 23.270.824

Total liabilities and equity 46.377.950 61.184.239 109.067.026 98.621.087

Commitments and contingent liabilities 32

(*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the official TL bid rate announced by the CBRT on 31 December 2012, and therefore do not form part of these consolidated financial statements (Note 2.1.3). The accompanying notes form an integral part of these consolidated financial statements.

F-7 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2012 2012 2012 2011 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Revenue 26 33.645.304 43.255.567 77.535.603 68.969.387 Interest, fee, commission and similar income 5 3.166.730 4.071.257 7.297.729 5.973.720

Total revenue 5 36.812.034 47.326.824 84.833.332 74.943.107

Cost of sales (-) 27 (30.165.849) (38.782.258) (69.517.198) (60.829.381) Interest, fee, commission and similar expenses (-) (1.571.414) (2.020.264) (3.621.323) (2.953.838)

Total costs 5 (31.737.263) (40.802.522) (73.138.521) (63.783.219)

Gross profit non-finance 3.479.455 4.473.309 8.018.405 8.140.006 Gross profit finance 5 1.595.316 2.050.993 3.676.406 3.019.882

Gross profit 5 5.074.771 6.524.302 11.694.811 11.159.888

Marketing, selling and distribution expenses (-) 27 (1.376.862) (1.770.141) (3.172.978) (2.698.588) General administrative expenses (-) 27 (1.449.457) (1.863.472) (3.340.274) (2.981.145) Research and development expenses (-) 27 (72.253) (92.891) (166.507) (141.562) Other income 28 117.170 150.638 270.018 599.119 Other expense (-) 28 (356.187) (457.926) (820.832) (447.773)

Operating profit 5 1.937.182 2.490.510 4.464.238 5.489.939

Share of profit/loss of investments accounted for using the equity method 9 3.860 4.963 8.896 7.210

Financial income 29 995.310 1.279.606 2.293.693 2.403.540 Financial expense (-) 29 (976.059) (1.254.856) (2.249.329) (3.193.221)

Profit before tax 5 1.960.293 2.520.223 4.517.498 4.707.468

Tax income/expense (180.426) (231.962) (415.791) (857.115) - Current income tax expense (-) 20 (392.583) (504.718) (904.707) (796.303) - Deferred tax income/expense 20 212.157 272.756 488.916 (60.812)

Profit for the period 1.779.867 2.288.261 4.101.707 3.850.353

Attributable to: Non-controlling interest 775.364 996.835 1.786.827 1.725.884 Equity holders of the parent 1.004.503 1.291.426 2.314.880 2.124.469

Earnings per share (Kr) 35 0,913 0,838

(*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the EUR and USD average CBRT bid rates for the year ended 31 December 2012, and therefore do not form part of these consolidated financial statements (Note 2.1.3).

The accompanying notes form an integral part of these consolidated financial statements.

F-8 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2012 2012 2012 2011 (*) EUR’000 (*) USD’000 TL’000 TL’000

Profit for the period 1.779.867 2.288.261 4.101.707 3.850.353

Other comprehensive income:

Financial assets fair value reserve Fair value gains/losses on financial assets 437.512 562.481 1.008.247 (185.814) Reclassification to the statement of income (3.148) (4.048) (7.255) (421) Tax effect (86.708) (111.475) (199.819) 25.871 347.656 446.958 801.173 (160.364) Hedging reserve Cumulative gains/losses on hedging (110.523) (142.093) (254.701) (433.638) Reclassification to carrying amount of hedged item (Note 3) - - - 20.965 Reclassification to the statement of income 67.141 86.319 154.726 111.529 Tax effect 10.147 13.045 23.383 59.303 (33.235) (42.729) (76.592) (241.841) Non-current assets revaluation fund Tax effect 183 235 422 423 183 235 422 423

Currency translation differences (40.274) (51.779) (92.813) 245.087

Other comprehensive income (after tax) 274.330 352.685 632.190 (156.695)

Total comprehensive income 2.054.197 2.640.946 4.733.897 3.693.658

Attributable to: Non-controlling interest 854.992 1.099.207 1.970.329 1.738.287 Equity holders of the parent 1.199.205 1.541.739 2.763.568 1.955.371

The accompanying notes form an integral part of these consolidated financial statements.

F-9 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Capital Revaluation funds Retained earnings Financial Non-current Paid-in Adjustment assets assets Currency Profit Prior Equity Non- share to share Share fair value Hedging revaluation translation Restricted for the years’ holders of controlling Total capital capital premium reserve reserve fund differences reserves period income the parent interest equity

Balances at 1 January 2011 2.415.141 967.288 9.286 109.626 (103.485) 13.662 47.210 2.291.920 1.734.479 5.089.065 12.574.192 8.403.722 20.977.914

Transfers ------17.718 (1.734.479) 1.716.761 - - - Capital increases ------11.882 11.882 Dividends paid ------(604.380) (604.380) (746.292) (1.350.672) Effects of business combinations ------10.832 10.832 Transactions with non-controlling interests ------(28.434) (28.434) (44.356) (72.790) Total comprehensive income - - - (113.870) (165.403) 14.153 95.353 - 2.124.469 669 1.955.371 1.738.287 3.693.658

Balances at 31 December 2011 2.415.141 967.288 9.286 (4.244) (268.888) 27.815 142.563 2.309.638 2.124.469 6.173.681 13.896.749 9.374.075 23.270.824

Balances at 1 January 2012 2.415.141 967.288 9.286 (4.244) (268.888) 27.815 142.563 2.309.638 2.124.469 6.173.681 13.896.749 9.374.075 23.270.824

Transfers ------26.694 (2.124.469) 2.097.775 - - - Capital increases ------95.136 95.136 Dividends paid (Note 25) 120.757 ------(493.568) (372.811) (963.904) (1.336.715) Transactions with non-controlling interests ------(1.554) (1.554) (10.343) (11.897) Total comprehensive income - - - 526.157 (38.015) (3.902) (36.219) - 2.314.880 667 2.763.568 1.970.329 4.733.897

Balances at 31 December 2012 2.535.898 967.288 9.286 521.913 (306.903) 23.913 106.344 2.336.332 2.314.880 7.777.001 16.285.952 10.465.293 26.751.245

The accompanying notes form an integral part of these consolidated financial statements.

F-10 CONVENIENCE TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2012 2012 2012 2011 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Operating activities: Profit before tax 1.960.293 2.520.223 4.517.498 4.707.468

Adjustments to reconcile net cash generated: Depreciation and amortisation 5 498.684 641.125 1.149.217 1.035.051 Changes in provisions 36 435.551 559.959 1.003.727 690.466 Net interest income 36 (909.996) (1.169.922) (2.097.085) (1.715.750) Finance sector interest received 1.888.270 2.427.625 4.351.518 4.003.683 Finance sector interest paid (1.230.888) (1.582.472) (2.836.581) (2.242.299) Exchange losses on borrowings (293.742) (377.645) (676.928) 1.150.754 Exchange gains on cash and cash equivalents 102.769 132.123 236.831 (475.193) Gain on sale of subsidiaries (net) 28 1.604 2.062 3.697 (150.964) Gain on sale of property, plant and equipment and scraps (net) 28 (8.315) (10.691) (19.163) (102.991)

2.444.230 3.142.387 5.632.731 6.900.225

Net changes in operating assets and liabilities 36 (570.367) (733.284) (1.314.411) (9.779.286) Income taxes paid (395.137) (508.002) (910.594) (795.261)

Cash flows from operating activities 1.478.726 1.901.101 3.407.726 (3.674.322)

Investing activities: Purchases of property, plant and equipment and intangible assets 5 (1.661.555) (2.136.152) (3.829.053) (2.232.536) Sale of property, plant and equipment and intangible assets 145.700 187.317 335.765 400.874 Cash outflow due to acquisition of subsidiary (net) 3 (88.121) (113.291) (203.074) (502.400) Cash inflow due to sale of subsidiaries (net) - - - 236.037 Increase in financial assets (3.465) (4.455) (7.986) (22.769) Non-finance sector interest received 124.414 159.951 286.712 371.621 Transactions with non-controlling interests (net) (5.163) (6.637) (11.897) (72.790)

Cash flows from investing activities (1.488.190) (1.913.267) (3.429.533) (1.821.963)

Financing activities: Share capital increases 41.283 53.074 95.136 11.882 Dividend payments (580.046) (745.727) (1.336.715) (1.350.672) Increase in short-term borrowings (net) 300.779 386.692 693.145 2.402.902 Increase in long-term borrowings (net) 2.207.017 2.837.417 5.086.070 997.656 Non-finance sector interest paid (231.978) (298.239) (534.593) (389.950)

Cash flows from financing activities 1.737.055 2.233.217 4.003.043 1.671.818

Effects of foreign exchange rate changes on cash and cash equivalents (102.769) (132.123) (236.831) 475.193

Net increase/(decrease) in cash and cash equivalents 1.624.822 2.088.928 3.744.405 (3.349.274) Cash and cash equivalents at the beginning of the period 2.759.549 3.547.772 6.359.381 9.708.655

Cash and cash equivalents at the end of the period 36 4.384.371 5.636.700 10.103.786 6.359.381

The accompanying notes form an integral part of these consolidated financial statements.

6 F-11 CONVENIENCE TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS

Koç Holding A.ù. (“Koç Holding”) was established on 11 December 1963 in Turkey. Koç Holding’s business activities include acquisition, disposal and exchanging of shares of domestic and foreign corporations and limited liability companies which are established or will be established for all types of commercial, industrial, agricultural and financial activities, buy, sell and exchange securities without brokerage and portfolio management purposes and to increase, decrease or cease its participation to these companies.

As of 31 December 2012, the number of personnel employed by Koç Holding, Subsidiaries and Joint Ventures (collectively referred as the “Group”) is 82.158 (31 December 2011: 80.987).

The registered address of Koç Holding is as follows: Nakkaútepe Azizbey Sok. No: 1 Kuzguncuk-øSTANBUL

Koç Holding is registered to the Capital Markets Board (“CMB”) and its shares have been quoted on the Istanbul Stock Exchange (“ISE”) since 10 January 1986. As of 31 December 2012, the principal shareholders and their respective shareholding rates in Koç Holding are as follows:

Companies owned by Koç Family members 42,69 Koç Family members 25,82 Vehbi Koç VakfÕ 7,15 Koç Holding Emekli ve YardÕm SandÕ÷Õ VakfÕ 1,99 Other 22,35

100,00

Koç Holding is organized mainly in Turkey under five core business segments: x Energy x Automotive x Consumer durables x Finance (1) x Other (2)

(1) The finance segment includes three main groups; banking, insurance and consumer finance. Leasing, factoring, portfolio management, custody and brokerage services are included in the banking sector.

(2) Other operations of Group mainly comprise of food, retail, tourism, information technologies and construction, none of which are of a sufficient size to be reported separately.

F-12 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Energy Sector

Country of Nature of Subsidiaries incorporation business

Akpa DayanÕklÕ Tüketim LPG ve AkaryakÕt Ürünleri Pazarlama A.ù. (“Akpa”) Turkey Trading AnadoluhisarÕ Tankercilik A.ù (“AnadoluhisarÕ Tankercilik”) Turkey Shipping Aygaz A.ù. (“Aygaz”) Turkey LPG Aygaz Do÷al Gaz øletim A.ù. (“Aygaz øletim”) Turkey LNG Aygaz Do÷al Gaz Toptan SatÕú A.ù. (“Aygaz Toptan SatÕú”) Turkey LNG Beykoz Tankercilik A.ù. (“Beykoz Tankercilik”) Turkey Petroleum Shipping Damla Denizcilik A.ù. (“Damla Denizcilik”) Turkey Petroleum Shipping Demir Export A.ù. (“Demir Export”) Turkey Mining Deniz øúletmecili÷i ve Tic. A.ù. (“Ditaú”) Turkey Petroleum Shipping Enerji YatÕrÕmlarÕ A.ù. (“Enerji YatÕrÕmlarÕ”) Turkey Investment KadÕköy Tankercilik A.ù. (“KadÕköy Tankercilik”) Turkey Petroleum Shipping Kandilli Tankercilik A.ù. (“Kandilli Tankercilik”) Turkey Shipping KarúÕyaka Tankercilik A.ù. (“KarúÕyaka Tankercilik”) (1) Turkey Petroleum Shipping Kartal Tankercilik A.ù. (“Kartal Tankercilik”) (1) Turkey Petroleum Shipping Kuleli Tankercilik A.ù. (“Kuleli Tankercilik”) Turkey Shipping Kuzguncuk Tankercilik A.ù. (“Kuzguncuk Tankercilik”) Turkey Shipping Maltepe Tankercilik A.ù. (“Maltepe Tankercilik”) (1) Turkey Petroleum Shipping Mogaz Petrol GazlarÕ A.ù. (“Mogaz”) Turkey LPG Salacak Tankercilik A.ù. (“Salacak Tankercilik”) (1) Turkey Petroleum Shipping SarÕyer Tankercilik A.ù. (“SarÕyer Tankercilik”) Turkey Shipping Türkiye Petrol Rafinerileri A.ù. (“Tüpraú”) Turkey Production and Trading of Petroleum Products Üsküdar Tankercilik A.ù. (“Üsküdar Tankercilik”) Turkey Petroleum Shipping

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

AES Enerji Ltd. (“AES Enerji”) (2) AES Mont Blanc Holdings B.V. Turkey Power Generation AES Entek Elektrik Üretimi A.ù. (“AES Entek”)AES Mont Blanc Holdings B.V. Turkey Power Generation Ayas Enerji Üretim ve Ticaret A.ù. (“Ayas Enerji”) (2) Ordu YardÕmlaúma Kurumu Turkey Power Generation Cenay Elektrik Üretim, ønúaat, Sanayi ve Ticaret Ltd. (“Cenay Elektrik”) (2) AES Mont Blanc Holdings B.V. Turkey Power Generation Eltek Elektrik Enerjisi øthalat øhracat ve Toptan Ticaret A.ù. (“Eltek”) AES Mont Blanc Holdings B.V. Turkey Power Generation Güney Tankercilik A.ù. (Güney Tankercilik”) (1) Türk Hava YollarÕ Turkey Petroleum Products Trading Kumköy Enerji Üretim A.ù. (“Kumköy Enerji”) (2) AES Mont Blanc Holdings B.V. Turkey Power Generation Kuzey Tankercilik A.ù. (Kuzey Tankercilik”) (1) Türk Hava YollarÕ Turkey Petroleum Products Trading Opet GÕda ve øhtiyaç Mad. Tur. San. øç ve DÕú Ticaret A.ù. (“Opet GÕda”) (3) Öztürk Family Turkey Food Distribution Opet International Limited (“Opet International”) Öztürk Family The UK Petroleum Products Trading Opet Petrolcülük A.ù. (“Opet”) Öztürk Family Turkey Petroleum Products Trading Opet Trade B.V. (“Opet Trade BV”) Öztürk Family The Netherlands Petroleum Products Trading Opet Trade (Singapore) Pte. Ltd. (“Opet Singapore”) Öztürk Family Singapore Petroleum Products Trading Selen Elektrik Üretim A.ù. (“Selen Elektrik”) (2) AES Mont Blanc Holdings B.V. Turkey Power Generation Seymenoba Elektrik Üretim A.ù. (“Seymenoba Elektrik”) (1) AES Mont Blanc Holdings B.V. Turkey Power Generation THY Opet HavacÕlÕk YakÕtlarÕ A.ù. (“THY Opet”) Türk Hava YollarÕ Turkey Petroleum Products Trading

(1) Established in 2012. (2) Acquired in 2012 (Note 3). (3) In the process of liquidation

F-13 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Automotive Sector

Country of Nature of Subsidiaries incorporation business

Otokar Otobüs Karoseri Sanayi A.ù. (“Otokar”) Turkey Production Otokoç Otomotiv Tic. ve San. A.ù. (“Otokoç”) Turkey Trading Otokoç Sigorta AracÕlÕk Hizmetleri A.ù. (“Otokoç Sigorta”) Turkey Insurance Tasfiye Halinde Otoyol Sanayi A.ù. (“Otoyol”) (*) Turkey Trading

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Fer Mas Oto Ticaret A.ù. (“Fer-Mas”) Fiat Auto S.p.A. Turkey Trading Ford Otomotiv Sanayi A.ù. (“Ford Otosan”) Ford Motor Co. Turkey Production Tofaú Türk Otomobil FabrikasÕ A.ù. (“Tofaú”) Fiat Auto S.p.A. Turkey Production Türk Traktör ve Ziraat MakinalarÕ A.ù. (“Türk Traktör”)CNH Osterreich Gmbh Turkey Production

(*) In the process of liquidation.

Platform AraútÕrma Geliútirme TasarÕm ve Tic. A.ù. (“Platform”) was liquidated on 27 December 2012.

F-14 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Consumer Durables Sector

Country of Nature of Subsidiaries incorporation business

Archin Limited (“Archin”) (1) Hong Kong, China Trading Arçelik A.ù. (“Arçelik”) Turkey Production/Sales ArcticPro SRL (“ArcticPro”) (1) Romania Service Ardutch B.V. (“Ardutch”) The Netherlands Holding Ardutch B.V. Taiwan (“Ardutch Taiwan”) Taiwan Procurement Beko A and NZ Pty Ltd. (“Beko Australia”) Australia Trading Beko Cesko (“Beko Cesko”) (1) Czech Republic Trading Beko Deutschland GmbH (“Beko Deutschland”) Germany Trading Beko Egypt Trading LLC (“Beko Egypt”) (2) Egypt Trading Beko Electronics Espãna S.L. (“Beko Espana”) Spain Trading Beko France S.A.S. (“Beko France”) France Trading Beko Italy SRL (“Beko Italy”) Italy Trading Beko Llc (“Beko Russia”) Russia Production/Sales Beko Magyarorszag K.F.T. (“Beko Magyarorszag”) (1) Hungary Trading Beko Plc. (“Beko UK”) The UK Trading Beko Shanghai Trading Company Ltd. (“Beko Shanghai”) China Trading Beko Slovakia S.R.O. (“Beko Slovakia”) Slovakia Trading Beko S.A. (“Beko Polska”) Poland Trading Beko S.A. Czech Republic (“Beko Czech”) Czech Republic Trading Beko S.A. Hungary (“Beko Hungary”) (1) Hungary Trading Beko Ukraina (“Beko Ukraina”) (2) Ukraina Trading Blomberg Werke GmbH (“Blomberg Werke”) (1) Germany Production Carron SA (Proprietary) Limited (“Defy Carron”) (1) Republic of South Africa Trading Changzhou Beko Electrical Appliances Co. Ltd. (“Beko China”) China Production/Sales Defy Appliances (Proprietary) Limited (“Defy”) Republic of South Africa Production/Sales Defy (Botswana) (Proprietary) Limited (“Defy Botswana”) Botswana Trading Defy (Namibia) (Proprietary) Limited (“Defy Namibia”) Namibia Trading Defy Trust Two (Proprietary) Limited (“Defy Trust Two”) Republic of South Africa Investment Elektra Bregenz AG (“Elektra Bregenz”) Austria Trading Grundig Ceska Republika S.r.o (“Grundig Czech Republic”) (1) Czech Republic Trading Grundig Intermedia Ges.m.b.H (“Grundig Austria”) (1) Austria Trading Grundig Intermedia GmbH (“Grundig Intermedia”) Germany Trading Grundig Magyarország Kft. (“Grundig Hungary”) (1) Hungary Trading Grundig Multimedia B.V. (“Grundig Multimedia”) The Netherlands Holding Grundig Nordic AB. (“Grundig Sweden”) Sweden Trading Grundig Nordic No AS (“Grundig Norway”) Norway Trading Grundig Portuguesa Lda (“Grundig Portugal”) (1) Portugal Trading Grundig Slovakia s.r.o. (“Grundig Slovakia”) (1) Slovakia Trading Kindoc Park (Proprietary) Limited (“Defy Kindoc”) Republic of South Africa Investment Ocean Appliances Limited. (“Defy Ocean”) (1) Republic of South Africa Trading Raupach Wollert GmbH (“Raupach”) Germany Holding SC Arctic SA (“Arctic”) Romania Production/Sales

Grundig Polska Sp. z o.o. (“Grundig Polska”) and Grundig Italiana S.p.A. (“Grundig Italy”) was liquidated in 2012. Beko Deutschland and Blomberg Vertriebsgesellschaft GmbH (“Blomberg Vertrieb”) legally merged in April, 2012.

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Arçelik-LG Klima San. ve Tic. A.ù. (“Arçelik LG”) LG Electronics Inc. Turkey Air Conditioner Production

(1) Ceased its operations as of the balance sheet date. (2) Established in 2012.

F-15 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Finance Sector

Country of Nature of Subsidiaries incorporation business

Koç Tüketici FinansmanÕ A.ù. (“Koç Finans”) Turkey Consumer Finance

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Koç Fiat Kredi Tüketici FinansmanÕ A.ù. (“Fiat Finans”) Fiat Auto S.p.A. Turkey Consumer Finance Koç Finansal Hizmetler A.ù. (“Koç Finansal Hizmetler” or “KFS”) UniCredit S.p.A. Turkey Holding Stiching Custody Services YKB (“Stiching Custody”) UniCredit S.p.A. The Netherlands Custody UniCredit Menkul De÷erler A.ù. (“UniCredit Menkul”) UniCredit S.p.A. Turkey Brokerage YapÕ Kredi Azerbaijan C.J.S.C. (“YapÕ Kredi Azerbaycan”) UniCredit S.p.A. Azerbaijan Banking YapÕ Kredi B Tipi YatÕrÕm OrtaklÕ÷Õ A.ù. (“YapÕ Kredi YatÕrÕm”) UniCredit S.p.A. Turkey Investment Trust YapÕ Kredi Bank Nederland N.V. (“YapÕ Kredi Nederland”) UniCredit S.p.A. The Netherlands Banking YapÕ Kredi Bank Moscow (“YapÕ Kredi Moscow”) UniCredit S.p.A. Russia Banking YapÕ Kredi Diversified Payment Rights Special Purpose Finance Company (“YapÕ Kredi SPC”) (*) UniCredit S.p.A. Cayman Islands Company YapÕ Kredi Emeklilik A.ù. (“YapÕ Kredi Emeklilik”) UniCredit S.p.A. Turkey Life Insurance YapÕ Kredi Faktoring A.ù. (“YapÕ Kredi Faktoring”) UniCredit S.p.A. Turkey Factoring YapÕ Kredi Finansal Kiralama A.O. (“YapÕ Kredi Finansal Kiralama”) UniCredit S.p.A. Turkey Leasing YapÕ Kredi Holding B.V. (“YapÕ Kredi Holding”) UniCredit S.p.A. The Netherlands Financial Consulting YapÕ Kredi Invest LLC. (“YapÕ Kredi Invest”) UniCredit S.p.A. Azerbaijan Brokerage YapÕ Kredi Koray Gayrimenkul YatÕrÕm OrtaklÕ÷Õ A.ù. (“YapÕ Kredi Koray”) Koray Group Companies Turkey Real Estate YapÕ Kredi Portföy Yönetimi A.ù. (“YapÕ Kredi Portföy”) UniCredit S.p.A. Turkey Portfolio Management YapÕ Kredi Sigorta A.ù. (“YapÕ Kredi Sigorta”) UniCredit S.p.A. Turkey Insurance YapÕ Kredi YatÕrÕm Menkul De÷erler A.ù. (“YapÕ Kredi Menkul”) UniCredit S.p.A. Turkey Brokerage YapÕ ve Kredi BankasÕ A.ù. (“YapÕ Kredi BankasÕ”) UniCredit S.p.A. Turkey Banking

(*) Although YapÕ Kredi BankasÕ has no shareholding interest, the special purpose company established for securitisation transactions is included in the scope of consolidation.

Country of Nature of Associates incorporation business

Banque de Commerce et de Placements S.A. (“Banque de Commerce”) Switzerland Banking

F-16 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Other Sectors

Country of Nature of Subsidiaries incorporation business

AyvalÕk Marina ve Yat øúletmecili÷i San. ve Tic. A.ù. (“AyvalÕk Marina”) Turkey Tourism Bilkom Biliúim Hizmetleri A.ù. (“Bilkom”) Turkey Trading Divan Turizm øúletmeleri A.ù. (“Divan”) (*) Turkey Tourism Düzey Tüketim MallarÕ Sanayi Pazarlama A.ù. (“Düzey”) Turkey Trading Harranova Besi ve TarÕm Ürünleri A.ù. (“Harranova Besi”) Turkey Agriculture and Food Koç Sistem Bilgi ve øletiúim Hizmetleri A.ù. (“Koç Sistem”) Turkey Technology Koç YapÕ Malzemeleri Ticaret A.ù. (“Koç YapÕ Malzeme”) Turkey Trading Marmaris AltÕnyunus Turistik Tesisleri A.ù. (“Mares”) Turkey Tourism Ram DÕú Ticaret A.ù. (“Ram DÕú Ticaret”) Turkey Foreign Trade RMK Marine Gemi YapÕm Sanayi ve Deniz Taú. øúl. A.ù. (“RMK Marine”) Turkey Ship Construction Setur Servis Turistik A.ù. (“Setur”) Turkey Tourism Setur Yalova Marina øúletmecili÷i A.ù. (“Yalova Marina”) Turkey Tourism Tat Konserve Sanayi A.ù. (“Tat Konserve”) Turkey Food Tat Tohumculuk A.ù. (“Tat Tohumculuk”) Turkey Agriculture Tek-Art KalamÕú ve Fenerbahçe Marmara Turizm Tesisleri A.ù. (“Tek-Art Marina”) Turkey Tourism Zer Merkezi Hizmetler ve Ticaret A.ù. (“Zer Ticaret”) Turkey Trading

(*) Palmira Turizm Ticaret A.ù.’s trade name has been changed to Divan Turizm øúletmeleri A.ù. (“Divan”) in 2012.

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Koçtaú YapÕ Marketleri Ticaret A.ù. (“Koçtaú YapÕ Market”) Kingfisher Plc Turkey Retail Netsel Turizm YatÕrÕmlarÕ A.ù. (“Netsel”) Torunlar GYO A.ù. Turkey Tourism

For the purpose of segment presentation in these consolidated financial statements, Koç Holding’s stand-alone financial statements have been included in the “Other” segment (Note 5).

F-17 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of presentation

2.1.1 Financial reporting standards

The CMB regulated the principles and procedures of preparation, presentation and announcement of financial statements prepared by the entities with the Communiqué No: XI-29, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”). According to the Communiqué, entities shall prepare their financial statements in accordance with International Financial Reporting Standards (“IAS/IFRS”) endorsed by the European Union. Until the differences of the IAS/IFRS as endorsed by the European Union between the ones issued by the International Accounting Standards Board (“IASB”) are announced by the Public Oversight of the Accounting and Auditing Standards Board (previously known as Turkish Accounting Standards Board), IAS/IFRS issued by the IASB shall be applied. Accordingly, the Turkish Accounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”) issued by the Public Oversight of the Accounting and Auditing Standards Board which are in line with the aforementioned standards shall be considered.

With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey and preparing their financial statements in accordance with the CMB Financial Reporting Standards. Accordingly, IAS 29, “Financial Reporting in Hyperinflationary Economies”, issued by the IASB, has not been applied in the financial statements for the accounting year commencing 1 January 2005.

The consolidated financial statements are prepared within the framework of Communiqué XI, No:29 and the related promulgations to this Communiqué as issued by the CMB, in accordance with the financial reporting standards accepted by the CMB (“CMB Financial Reporting Standards”) which are based on the IAS/IFRS. The consolidated financial statements and the related notes are presented in accordance with the formats recommended by the CMB including the compulsory disclosures.

Koç Holding and its Subsidiaries and Joint Ventures registered in Turkey maintain their books of account and prepare their statutory financial statements (“Statutory Financial Statements”) in TL in accordance with the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts (“UCA”), issued by the Ministry of Finance, applicable Turkish insurance laws for insurance companies and banking law, accounting principles and instructions promulgated by the Banking Regulation and the Supervision Agency (“BRSA”) for banks. Foreign Subsidiaries, Joint Ventures and Associates maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. These consolidated financial statements have been prepared under the historical cost conversion except for financial assets and liabilities which are presented at fair values and revaluations related to differences between the carrying value and fair value of the non-current assets recognised during business combinations.

2.1.2 Comparatives and adjustment of prior periods’ financial statements

Gross barge operator sales of Opet Singapore, a Joint Venture of the Group, has been deemed as intermediary trade and therefore eliminated in order to reflect the substance of the transaction more accurately. In this context, “revenue” and “cost of sales” has been decreased by TL797.754 thousand in the consolidated statement of income as of 31 December 2011.

F-18 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2- BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.1.3 EUR and USD amounts presented in the financial statements

EUR and USD amounts shown in the consolidated balance sheet prepared in accordance with the CMB Financial Reporting Standards have been translated from TL, as a matter of arithmetic computation only, at the official EUR and USD bid rates announced by the CBRT on 31 December 2012 of TL2,3517 = EUR1 and TL1,7826 = USD1, respectively and EUR and USD amounts shown in the consolidated income, comprehensive income and cash flow statements have been translated from TL, as a matter of arithmetic computation only, at the average EUR and USD bid rates calculated from the official daily bid rates announced by the CBRT for the year ended 31 December 2012 of TL2,3045 = EUR1 and TL1,7925 = USD1, respectively, and do not form part of these consolidated financial statements.

2.2 Amendments in International Financial Reporting Standards

The accounting policies adopted in the preparation of the financial statements for the year ended and as of 31 December 2012 are consistent with the financial statements dated 31 December 2011 except for the new standards and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations summarised below.

Standards, amendments and interpretations effective as of 1 January 2012:

- IAS 12 Income Taxes - Recovery of Underlying Assets (Amended) - IFRS 7 Financial Instruments: Disclosures - Transfers of Financial Assets (Amended)

The aforementioned amendments had no significant effect on the consolidated financial statements of the Group.

Standards, amendments and improvements issued but not yet effective and not early adopted:

Standards, amendments and improvements effective as of 1 January 2013,

- IAS 1 Presentation of Financial Statements (Amended) - Presentation of Items of Other Comprehensive Income - IAS 19 Employee Benefits (Amended) - IAS 27 Separate Financial Statements (Amended) - IAS 28 Investments in Associates and Joint Ventures (Amended) - IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amended) - IFRS 10 Consolidated Financial Statements - IFRS 11 Joint Arrangements (*) - IFRS 12 Disclosure of Interests in Other Entities - IFRS 13 Fair Value Measurement - IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine - Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) - Improvements to IFRSs (Annual Improvements to IFRSs – 2009-2011)

Amendments effective as of 1 January 2014, - IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amended) - IFRS 10 Consolidated Financial Statements (Amended)

Standard effective as of 1 January 2015, - IFRS 9 Financial Instruments - Classification and Measurement

The aforementioned amendments, standards and interpretations have not been early adopted by the Group. The Group has evaluated the effects of changes on the consolidated financial statements. The aforementioned amendments except for IFRS 11 will have no significant effect on the consolidated financial statements.

(*) According to the effective IFRS standards, companies that are preparing consolidated financial statements may apply proportionate consolidation method or equity method in accounting of their joint ventures. IFRS 11 “Joint Arrangements” Standard being effective as of 1 January 2013 requires to apply the equity method in accounting of joint ventures on consolidated financial statements.

In this context, had the Group early adopted the relevant standard and accounted all their proportionally consolidated Joint Ventures by applying the equity method; the Group’s total consolidated assets in 2012 year- end would have decreased by approximately 55% (2011: 55%) , whereas total consolidated sales would have decreased by approximately 24% (2011: 25%). On the other hand, equity holders of the parent and net profit for the period attributable to equity holders of the parent would have remained same. 14

F-19 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2- BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.3 Restatement and Errors in the Accounting Policies and Estimates

Any change in accounting policies resulting from the first time adoption of a new TAS/TFRS is made either retrospectively or prospectively in accordance with the transition requirements of TAS/TFRS. Changes without any transition requirement, material changes in accounting policies or material errors are corrected, retrospectively by restating the prior period consolidated financial statements. The accounting policies used in the preparation of these consolidated financial statements for the year ended 31 December 2012 are consistent with those used in the preparation of the consolidated financial statements for the year ended 31 December 2011, except for the reclassifications explained in Note 2.1.2.

If changes in accounting estimates are related to only one period, they are recognised in the period when the changes are applied; if changes in estimates are related to future periods, they are recognised both in the period where the change is applied and in future periods prospectively. The estimates used in the preparation of these consolidated financial statements are consistent with those used in the preparation of consolidated financial statements for the year ended 31 December 2011.

YapÕ Kredi BankasÕ, a Joint Venture of the Group, calculates collective provision for loans with intrinsic elements such as loss confirmation periods, probability of default and loss given defaults along with expert views. Taking into consideration the historical loss experience, YapÕ Kredi BankasÕ has reassessed the parameters for different segments. As a result of such reassessment, TL51.123 thousand (31 December 2011: TL53.230 thousand) of income is recorded in other income/expense in the consolidated statement of income for the year ended 31 December 2012.

2.4 Summary of Significant Accounting Policies

Accounting policies used in the preparation of consolidated financial statements, consistent with the prior periods, are summarised below:

2.4.1 Group accounting a) The consolidated financial statements include the accounts of the parent company, Koç Holding, its Subsidiaries, its Joint Ventures and its Associates on the basis set out in sections (b) to (g) below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements with adjustments and reclassifications for the purpose of fair presentation in accordance with CMB Financial Reporting Standards and the application of uniform accounting policies and presentation. b) Subsidiaries are companies over which Koç Holding has the power to control the financial and operating policies for the benefit of Koç Holding, either (a) through the power to exercise more than 50% of voting rights relating to the shares in the companies as a result of the ownership interest owned directly and indirectly by itself, and/or as a result of agreements by certain Koç Family members and companies owned by them whereby Koç Holding exercises control over the ownership interest of the shares held by them; or (b) although not having the power to exercise more than 50% of the ownership interest, through the power to exercise control over the financial and operating policies.

The balance sheets and income statements of the Subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by Koç Holding and its Subsidiaries is eliminated against the related equity. Intercompany transactions and balances between Koç Holding and its Subsidiaries are eliminated during the consolidation. The nominal amount of the shares held by Koç Holding in its Subsidiaries and the associated dividends are eliminated from equity and income for the period, respectively.

Subsidiaries are consolidated from the date on which the control is transferred to the Group and are no longer consolidated from the date that the control ceases.

F-20 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 -BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsidiaries included in the scope of the consolidation and their effective interests (%):

Akpa 40,68 40,68 100,00 100,00 - - 100,00 100,00 AnadoluhisarÕ Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 Archin 40,51 40,51 100,00 100,00 - - 100,00 100,00 Arctic 39,18 39,18 96,71 96,71 - - 96,71 96,71 Arctic Pro 39,18 39,18 100,00 100,00 - - 100,00 100,00 Arçelik 40,51 40,51 40,51 40,51 11,42 11,42 51,93 51,93 Ardutch 40,51 40,51 100,00 100,00 - - 100,00 100,00 Ardutch Taiwan 40,51 40,51 100,00 100,00 - - 100,00 100,00 Aygaz 40,68 40,68 40,68 40,68 10,53 10,53 51,21 51,21 Aygaz øletim (1) 40,53 40,30 100,00 100,00 - - 100,00 100,00 Aygaz Toptan SatÕú (1) 40,36 40,30 100,00 100,00 - - 100,00 100,00 AyvalÕk Marina 48,41 48,41 95,57 95,57 4,43 4,43 100,00 100,00 Beko Australia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Cesko 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko China 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Czech 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Deutschland 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Egypt (2) 40,51 - 100,00 - - - 100,00 - Beko Espana 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko France 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Italy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Magyarorszag 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Plc 20,26 20,26 50,00 50,00 50,00 50,00 100,00 100,00 Beko Polska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Russia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Shangai 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Ukraine (2) 40,51 - 100,00 - - - 100,00 100,00 Beykoz Tankercilik 34,13 34,13 100,00 100,00 - - 100,00 100,00 Bilkom (3) 82,28 82,27 99,94 99,94 0,06 0,06 100,00 100,00 Blomberg Vertrieb (4) - 40,51 - 100,00 - - - 100,00 Blomberg Werke 40,51 40,51 100,00 100,00 - - 100,00 100,00 Damla Denizcilik 34,13 34,13 100,00 100,00 - - 100,00 100,00 Demir Export 2,34 2,34 2,34 2,34 97,46 97,46 99,80 99,80 Defy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Defy Botswana 40,51 - 100,00 - - - 100,00 - Defy Carron 40,51 40,51 100,00 100,00 - - 100,00 100,00 Defy Kindoc 40,51 40,51 100,00 100,00 - - 100,00 100,00 Defy Namibia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Defy Ocean 40,51 40,51 100,00 100,00 - - 100,00 100,00 Defy Trust Two 40,51 40,51 100,00 100,00 - - 100,00 100,00 Ditaú 34,13 34,13 80,00 80,00 - - 80,00 80,00 Divan (5) 11,79 9,63 25,46 20,78 74,54 79,22 100,00 100,00 Düzey 31,65 31,65 32,28 32,28 61,28 61,28 93,56 93,56 Elektra Bregenz 40,51 40,51 100,00 100,00 - - 100,00 100,00 Enerji YatÕrÕmlarÕ 83,66 83,66 96,50 96,50 - - 96,50 96,50 Grundig Austria 40,51 40,51 100,00 100,00 - - 100,00 100,00

F-21 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 -BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Subsidiaries 2012 2011 2012 2011 2012 2011 2012 2011 Grundig Czech Republic 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Intermadia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Italy (6) - 40,51 - 100,00 - - - 100,00 Grundig Multimedia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Norway 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Polska (6) - 40,51 - 100,00 - - - 100,00 Grundig Portugal 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Sweden 40,51 40,51 100,00 100,00 - - 100,00 100,00 Harranova Besi 41,95 41,95 74,62 74,62 15,38 15,38 90,00 90,00 KadÕköy Tankercilik 34,13 34,13 100,00 100,00 - - 100,00 100,00 Kandilli Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 KarúÕyaka Tankercilik (2) 34,13 - 100,00 - - - 100,00 - Kartal Tankercilik (2) 34,13 - 100,00 - - - 100,00 - Koç Finans 64,71 64,71 94,50 94,50 5,50 5,50 100,00 100,00 Koç Sistem (3) 41,14 41,11 41,18 41,11 53,17 53,17 94,35 94,28 Koç YapÕ Malzeme 43,18 43,18 43,18 43,18 47,62 47,62 90,81 90,81 Kuleli Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 KuzguncukTankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 Maltepe Tankercilik (2) 34,13 - 100,00 - - - 100,00 - Mares 36,81 36,81 36,81 36,81 33,46 33,46 70,27 70,27 Mogaz 40,68 40,68 100,00 100,00 - - 100,00 100,00 Otokar (7) 44,90 44,90 44,92 44,92 2,70 2,70 47,62 47,62 Otokoç 96,42 96,42 96,57 96,57 3,43 3,43 100,00 100,00 Otokoç Sigorta 48,22 48,22 50,02 50,02 49,98 49,98 100,00 100,00 Otoyol 53,95 53,95 53,95 53,95 10,18 10,18 64,13 64,13 Ram DÕú Ticaret 57,70 57,70 83,44 83,44 14,66 14,66 98,10 98,10 Raupach 40,51 40,51 100,00 100,00 - - 100,00 100,00 RMK Marine 53,81 53,81 66,84 66,84 33,16 33,16 100,00 100,00 Salacak Tankercilik (2) 34,13 - 100,00 - - - 100,00 - SarÕyer Tankercilik 34,13 34,13 100,00 100,00 - - 100,00 100,00 Setur 46,32 46,32 81,07 81,07 18,87 18,87 99,94 99,94 Tat Konserve 43,82 43,82 44,07 44,07 7,12 7,12 51,19 51,19 Tat Tohumculuk (7) 16,15 16,15 33,00 33,00 3,00 3,00 36,00 36,00 Tek-Art Marina 50,48 50,48 51,94 51,94 47,46 47,46 99,40 99,40 Tüpraú 42,67 42,67 51,00 51,00 - - 51,00 51,00 Üsküdar Tankercilik 34,13 34,13 100,00 100,00 - - 100,00 100,00 Yalova Marina 46,63 46,64 100,00 100,00 - - 100,00 100,00 Zer Ticaret 39,00 39,00 39,00 39,00 60,06 60,05 99,06 99,05

(1) Only Aygaz participated to the capital increase realised in 2012. (2) Established in 2012. (3) 0,07% percentage of the shares of Koç Sistem that the other shareholders hold were acquired by Koç YapÕ Malzeme. (4) Legally merged with Beko Deutschland in April 2012. (5) 4,67% percentage of the shares held by other shareholders were acquired by Setur. (6) Liquidated in 2012. (7) Although the total ownership interest of Koç Holding in these Subsidiaries is less than 50%, Koç Holding has the power to exercise control over the financial and operating policies of these companies.

F-22 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Voting rights of the Joint Ventures and their effective interests (%): Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Joint Ventures 2012 2011 2012 2011 2012 2011 2012 2011 AES Enerji Ltd. (1) 34,90 - 49,62 - - - 49,62 - AES Entek 34,90 34,90 49,62 49,62 - - 49,62 49,62 Arçelik LG Klima 23,23 23,23 50,00 50,00 - - 50,00 50,00 Ayas Enerji (1) 17,45 - 49,62 - - - 49,62 - Cenay Elektrik (1) 34,90 - 49,62 - - - 49,62 - Eltek 34,90 34,90 49,62 49,62 - - 49,62 49,62 Fer-Mas 37,37 37,37 37,86 37,86 - - 37,86 37,86 Fiat Finans 37,59 37,59 37,86 37,86 - - 37,86 37,86 Ford Otosan 38,46 38,46 38,46 38,46 2,58 2,58 41,04 41,04 Güney Tankercilik (2) 8,79 - 50,00 - - - 50,00 - Koç Finansal Hizmetler 40,21 40,21 44,12 44,12 5,88 5,88 50,00 50,00 Koçtaú YapÕ Market 42,64 42,64 49,92 49,92 0,08 0,08 50,00 50,00 Kumköy Enerji (1) 34,90 - 49,62 - - - 49,62 - Kuzey Tankercilik (2) 8,79 - 50,00 - - - 50,00 - Netsel 27,76 27,76 55,00 55,00 - - 55,00 55,00 Opet 17,59 17,59 41,33 41,33 8,67 8,67 50,00 50,00 Opet GÕda 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet International 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade BV 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade Singapore 17,59 17,59 50,00 50,00 - - 50,00 50,00 Platform (3) - 37,21 - 37,86 - - - 37,86 Selen Elektrik (1) 34,90 - 49,62 - - - 49,62 - Seymenoba Elektrik (2) 34,90 - 49,62 - - - 49,62 - Stiching Custody 32,89 32,89 50,00 50,00 - - 50,00 50,00 THY Opet (4) 8,79 8,79 50,00 50,00 - - 50,00 50,00 Tofaú 37,59 37,59 37,59 37,59 0,27 0,27 37,86 37,86 Türk Traktör 37,50 37,50 37,50 37,50 - - 37,50 37,50 UniCredit Menkul 40,21 40,21 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Azerbaycan 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi BankasÕ 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Emeklilik 30,90 30,90 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Faktoring 32,88 32,88 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Fin.Kiralama 32,88 32,80 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Holding 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Invest 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Koray 10,01 10,01 30,45 30,45 - - 30,45 30,45 YapÕ Kredi Menkul 32,88 32,88 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Moscow 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Nederland 32,89 32,89 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Portföy 32,87 32,87 50,00 50,00 - - 50,00 50,00 YapÕ Kredi Sigorta 30,90 30,90 50,00 50,00 - - 50,00 50,00 YapÕ Kredi YatÕrÕm 18,44 18,44 50,00 50,00 - - 50,00 50,00 (1) Acquired in 2012. (2) Established in 2012. (3) Platform AraútÕrma Geliútirme TasarÕm ve Tic. A.ù. (“Platform”) was liquidated on 27 December 2012. (4) The consolidation rate is 25% since the company is a joint venture of Opet. 18

F-23 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) d) Associates are accounted for using the equity method. Associates are companies in which the Group has voting power between 20% and 50% or the Group has power to participate in the financial and operating policy decisions but not control them. Unrealised gains or losses arising from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.

Voting rights of the Associates and their effective interests (%):

Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Associates 2012 2011 2012 2011 2012 2011 2012 2011

Banque de Commerce 10,09 10,09 30,67 30,67 - - 30,67 30,67 e) Available-for-sale financial assets in which the Group together with Koç Family members, have ownership interests below 20%, or over which the Group does not exercise a significant influence or which are immaterial and do not have quoted market prices in active markets and whose fair values cannot be reliably measured, are carried at cost, less any accumulated impairment loss.

Available-for-sale financial assets, in which the Group together with Koç Family members, have ownership interests below 20% or over which the Group does not exercise a significant influence and that have quoted market prices in active markets and whose fair values can be reliably measured, are carried at fair value in the consolidated financial statements. f) Non-controlling shares in the net assets and operating results of Subsidiaries are separately classified in the consolidated balance sheets and income statements as “non-controlling interest”. Certain Koç Family members and companies controlled by them have interests in the share capital of certain subsidiaries. In the consolidated financial statements, these interests of Koç Family members and companies controlled by them are treated as non-controlling interest and are not included in the Group's net assets and profits attributable to the shareholders of Koç Holding. g) All balances and transactions of/with the Joint Ventures in the notes to the consolidated financial statements are presented with the total ownership interest of the Group in the Joint Ventures.

2.4.2 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. As the sectors merged under “Other” do not meet the required minimum quantitative thresholds to be a reportable segment, these sectors have been merged for the purpose of segment reporting.

For an operating segment to be identified as a reportable segment, its reported revenue, including both sales to external customers and intersegment sales or transfers, should be 10 percent or more of the combined revenue, internal and external, of all internal and external operating segments; the absolute amount of its reported profit or loss should be 10 percent or more of the combined profit or loss or its total assets should be 10 percent or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered as reportable, and separately disclosed, if the management believes that information about the segment would be useful to users of the financial statements.

In the segment reporting, intra segment transactions are eliminated at the segment level, whereas the elimination of inter segment transactions are presented as inter-segment elimination at the consolidated level.

F-24 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.3 Foreign currency translation

Functional and presentation currency

Items included in the consolidated financial statements of the Subsidiaries, Joint Ventures and Associates of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in TL, which is Koç Holding’s functional and presentation currency. Foreign currency transactions and balances Foreign currency transactions are translated using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates at the balance sheet date. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated financial statement as interest, fee, commission and similar income by the Group companies operating in the finance sector and as financial income/expense by the Group companies operating in non-finance sectors.

Non monetary items that are measured in terms of historical cost in a foreign currency are translated to functional currency using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Financial statements of foreign subsidiaries, joint ventures and associates

The assets and liabilities, presented in the financial statements of the foreign Subsidiaries, Joint Ventures and Associates prepared in accordance with the Group’s accounting policies, are translated into TL at the exchange rate at the date of the balance sheet whereas income and expenses are translated at the average exchange rates for the respective periods. Exchange differences resulting from using the exchange rates at the balance sheet date and the average exchange rates are recognised in the currency translation differences under the equity.

2.4.4 Assets and liabilities held for sale

Discontinued operation is a major line of business or geographical area of operations that is part of a single coordinated plan to be disposed of or is held-for-sale.

A single amount on the face of the income statements comprising the total of the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognised by the disposal of the assets constituting the discontinued operation is disclosed. Also, the net cash flows of the discontinued operations associated with the operating, investment and financing activities are specified in the related note.

Group of non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. Liabilities directly associated with those assets are also classified similarly.

Non-current assets or asset groups that meet the criteria of asset held for sale are measured at the lower of its carrying amount and fair value less cost to sell. These assets are not depreciated.

2.4.5 Related parties

For the purpose of these consolidated financial statements, shareholders, Koç Holding A.ù. key management personnel and BOD members, their close family members and the legal entities over which these related parties exercise control and significant influence, subsidiaries and joint ventures excluded from the scope of consolidation are considered and expressed as “related parties”.

F-25 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.6 Financial assets

The appropriate classification of financial assets is determined at the time of the purchase and re-evaluated by management on a regular basis.

“Financial assets at fair value through profit or loss” are either acquired for generating a profit from short-term price fluctuations or dealers’ margin, or included in a portfolio in which a pattern of short-term profit making exists. Financial assets at fair value through profit or loss are initially recognised and subsequently measured at fair value. All related gains and losses are accounted in the income statement.

Non-derivative financial assets with fixed maturities, where management has both the intent and the ability to hold to the maturity excluding the financial assets classified as loans and advances to customers are classified as “held- to-maturity financial assets”. Held-to-maturity financial assets are carried at amortised cost using the effective yield method.

“Available-for-sale financial assets” are non-derivatives that are not designated in financial assets at fair value through profit or loss, held-to-maturity financial assets or loans and receivables. These are included in non- current assets unless management has the intention of holding these investments for less than 12 months from the balance sheet date, or unless they will need to be sold to raise operating capital, in which case they are included in current assets.

Available-for-sale financial assets are subsequently measured at fair value. Available-for-sale financial assets that are quoted in active markets are measured based on current bid prices. If the market for a financial asset is not active the fair value is determined by using valuation techniques such as discounted cash flow analysis and option pricing models.

Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are accounted in equity net of tax under “financial assets fair value reserve”. Unrealised gains and losses arising from changes in the fair value of available-for-sale debt securities are the differences between the fair value of such securities and their amortised costs at the balance sheet date. When available-for-sale securities are sold, collected or otherwise disposed of, related deferred gains and losses in equity are transferred to the consolidated income statement. If the difference between the cost and the fair value of the available-for-sale securities is permanent, gains and losses are transferred to the consolidated income statement.

Interest and dividends associated to the available-for-sale financial assets are accounted under corresponding interest income and dividend income accounts.

“Loans and receivables” are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. Those with maturities more than 12 months are classified as non-current assets. The Group’s loans and receivables comprise “cash and cash equivalents”, “trade receivables” and “loans and advances to customers”.

2.4.7 Repurchase and resale transactions

Securities sold subject to linked repurchase agreements (“repo”) are classified in the consolidated financial statements as financial assets with the counter party liabilities included in deposits. The portion of the difference between the sale and repurchase price of these agreements in the current period is treated as interest expense and accrued over the life of the repurchase agreement.

Securities purchased under agreements to resell are recorded as 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.

F-26 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.8 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held in banks with maturities of 3 months or less, government bonds/treasury bills classified as available for sale financial assets with maturities of 3 months or less and other short-term liquid investments.

2.4.9 Trade receivables

Trade receivables that are created by way of providing goods or services directly to a debtor are carried at amortised cost. Trade receivables, net of unearned financial income, are measured at amortised cost, using the effective interest rate method, less the unearned financial income. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant.

A credit risk provision for trade receivables is recognised 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. 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 partial/full collection, the release of the provision is credited to other income.

2.4.10 Loans and advances to customers

Financial assets generated as a result of lending money or providing a loan are classified as loans and advances to customers and are carried at amortised cost, less any impairment.

All loans and advances are recognised in the consolidated financial statements when cash is transferred to customers.

A credit risk provision for loan impairment is recognised if there is objective evidence that the Group will not be able to collect all the amounts due. The amount of the provision for impaired loans and loans under legal follow- up is the difference between the carrying amount and the recoverable amount. The recoverable amount is the net present value of the expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of the associated loan.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a loan or receivable is uncollectible, it is written off against the allowance account for loans or receivables on the balance sheet. Subsequent recoveries of amounts previously impaired are credited against the allowance account on the balance sheet and accounted for as an income in the related provision account in the income statement.

2.4.11 Credit finance income/expenses

Credit finance income/expenses represent imputed finance charges on credit sales and purchases. Such income and expenses are recognised using the effective yield method over the period of credit sales and purchases within the materiality principle, and classified under financial income and expenses. 22

F-27 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.12 Inventories

Cost elements included in inventories are materials, labour and an appropriate amount of factory overheads. The cost of inventories is determined by the weighted average method. Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

2.4.13 Investment property

Land and buildings that are held for rental yields or for capital appreciation or both rather than held in the production or supply of goods or services or for administrative purposes or for the sale in the ordinary course of business are classified as “investment property”. Investment properties are carried at cost less accumulated depreciation (except for land). Depreciation is provided for investment properties on a straight-line basis over their estimated useful lives, ranging from 3-30 years.

Investment properties are reviewed for possible impairment losses and where the carrying amount of the investment property is greater than the estimated recoverable amount, it is written down to its recoverable amount. Recoverable amount of the investment property is the higher of future net cash flows from the utilisation of this investment property or fair value less cost to sell.

2.4.14 Property, plant and equipment and related depreciation

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided for property, plant and equipment on a straight-line basis over their estimated useful lives. Land is not depreciated as it is deemed to have an indefinite useful life.

The depreciation periods for property, plant and equipment, which approximate the economic useful lives of such assets, are as follows:

Buildings 5 - 50 years Land improvements 3 - 50 years Machinery and equipment 3 - 50 years Furniture and fixtures 2 - 50 years Motor vehicles 4 - 30 years Leasehold improvements 1 - 10 years

Useful life and the depreciation method are constantly reviewed, and accordingly, parallels are sought between the depreciation method and the period and the useful life to be derived from the related asset.

Property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the asset’s net selling price or value in use. Recoverable amount of the property, plant and equipment is the higher of future net cash flows from the utilisation of this property, plant and equipment or its fair value less cost to sell.

Repairs and maintenance are charged to the income statements during the period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.

Machinery and equipment are capitalised and amortised when their capacity is fully available for use and their physical situations meet the determined production capacities.

Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their restated carrying amounts and are included in the related income and expense accounts, as appropriate. 23

F-28 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.15 Intangible assets and related amortisation

Intangible assets comprise usage rights, brands, development costs, information systems, generation licences and other identified rights. They are initially recognised at acquisition cost and amortised on a straight-line basis over their estimated useful lives. Intangible assets with indefinite useful lives are not amortised, however are tested for impairment annually. Whenever there is an indication that the intangible is impaired, the carrying amount of the intangible asset is reduced to its recoverable amount and the impairment loss is recognised as an expense.

The amortisation periods for intangible assets, which approximate the economic useful lives of such assets, are as follows:

Rights 3 - 15 years Brands 10 years Development costs 2 - 10 years Other intangible assets 5 - 42 years

2.4.16 Leases a) The Group - as the lessee

Finance leases

Leases of property, plant and equipment where the Group substantially assumes all the risks and rewards of ownership are classified as finance leases. Finance leases are included in the property, plant 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. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate. The property, plant and equipment acquired under finance leases are depreciated over the useful life of the asset. An impairment loss is recognised when a decrease in the carrying amount of the leased property is identified. Interest expenses and foreign exchange losses related to the finance lease liabilities are accounted in the consolidated statement of income. Lease payments are deducted from finance lease liabilities.

Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease. b) The Group - as the lessor

Finance leases

Assets held under a finance lease are presented in the consolidated balance sheet as a receivable at an amount equal to the present value of lease payments. Interest income is determined over the term of the lease using the net investment period, which reflects a constant periodic rate of return and the deferred financial income on the transaction date is recognised as unearned finance income.

Operating leases

Assets leased out under operating leases are included in investment properties or property, plant and equipment in the consolidated balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income is recognised in the consolidated income statement on a straight-line basis over the lease term.

F-29 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.17 Business combinations and goodwill

A business combination is evaluated as the bringing together of separate entities or businesses into one reporting entity.

Business combinations realised before 1 January 2010 have been accounted for by using the purchase method in the scope of IFRS 3 “Business combinations” prior to the amendment. Under this method, the cost of a business combination is the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree and in addition, any costs directly attributable to the business combination. If a business combination contract includes clauses that enable adjustments in the cost of business combination depending on events after the acquisition date; in case the adjustment is measurable and more probable than not, than cost of business combination at acquisition date is adjusted.

Any excess of the cost of acquisition over the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities is accounted for as goodwill in the consolidated financial statements.

Goodwill recognised in business combinations is tested for impairment annually (as of 31 December) or more frequently if events or changes in circumstances indicate impairment, instead of amortisation. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the purpose of impairment testing.

Any excess of the Group’s share in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is accounted for as income in the related period.

In business combinations involving entities under common control, assets and liabilities subject to a business combination are recognised at their carrying amounts in the consolidated financial statements. In addition, statements of income are consolidated from the beginning of the financial year in which the business combination takes place. Similarly, comparative consolidated financial statements are restated retrospectively for comparison purposes. As a result of these transactions, no goodwill is recognised. The difference arising in the elimination of the carrying value of the investment held and share capital of the acquired company is directly accounted under “effect of transactions under common control” in “retained earnings”.

Fair value changes of contingent consideration that arise from business combinations realised before 1 January 2010 are adjusted against goodwill.

The Group applied revised IFRS 3 “Business Combinations”, which is effective for the periods beginning 1 January 2010 for the business combinations realised in 2011 and 2012.

The revised IFRS 3 introduces a number of changes in accounting of business combinations having an impact on the amount of goodwill recognised in the consolidated financial statements, the reported results in the period of the acquisition, and the results that will be reported in the future. According to these changes, the costs related to the acquisition are accounted for as expense and subsequent changes in the fair value of contingent consideration are recognised in the profit or loss (rather than by adjusting goodwill).

Transactions with non-controlling interests

The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For share purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. In case of the share sales to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recorded in equity. 25

F-30 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.18 Taxes on income

Taxes include current period income tax liabilities and deferred tax liabilities. A provision is recognised for the current period tax liability based on the period results of the Group at the balance sheet date.

Deferred income tax is provided for in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements. Currently enacted tax rates are used to determine deferred income tax.

Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences (including unused incentive amounts and carried forward tax losses of prior years) are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised.

Government grants allowing reduced corporate tax payment are evaluated within the scope of IAS-12 Income Taxes standard and are recognized as deferred tax asset by the qualified tax advantage amount, to the extent it is highly probable that future taxable profits will be available against which the unused investment tax credits can be utilised.

The tax effects of the transactions that are accounted directly in the equity are also reflected to the equity.

When the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority with the condition of being same taxpayer entity 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.

2.4.19 Financial liabilities and deposits

Financial liabilities and deposits are measured initially at fair value. Any transaction costs directly attributable to the undertaking of a financial liability are added on the fair value of the financial liability. These financial liabilities are subsequently measured at amortised cost using the effective interest method. Financial liabilities subject to hedging are accounted within the framework of hedge accounting.

2.4.20 Trade payables

Trade payables are payments to be made arising from the purchase of goods and services from suppliers within the ordinary course of business. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.4.21 Provisions for employee benefits a) Provision for employment termination benefits

The provision for employment termination benefits, as required by Turkish Labour Law represents the present value of the future probable obligation of the Group arising from the retirement of its employees based on the actuarial projections. b) Pension rights

The personnel of YapÕ Kredi BankasÕ, a Joint Venture of the Group, are members of the YapÕ ve Kredi BankasÕ Anonim ùirketi MensuplarÕ YardÕm ve Emekli SandÕ÷Õ VakfÕ (“the Fund”) which was established in accordance with the 20th temporary article of the Social Security Law numbered 506. The technical financial statements of the Fund are audited in accordance with Article 38 of the Insurance Supervision Law and with “Regulation regarding the Actuaries” by a registered independent actuary.

Paragraph one of temporary article 23 of the Banking Act published in the Official Gazette dated 1 November 2005 numbered 25983 stated that foundations like the Fund are to be transferred to the Social Security Institution (“SSI”) within three years of the published date of the article. 26

F-31 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Law article related to the transfer was cancelled (pursuant application by the President on 2 November 2005) by the decision of Constitutional Court (decision no: E.2005/39, K. 2007/33 dated 22 March 2007) published in the Official Gazette No. 26479 dated 31 March 2007, and the effect of the law article ceased at the date of the publication of the decision.

The reasoning of the Constitutional Court regarding the abrogation of the corresponding article was published in the Official Gazette dated 15 December 2007, numbered 26372. With the publication of the reasoning of the decision, the Grand National Assembly of Turkey (“GNAT”) started to work on new legal arrangements regarding the transfer of the fund members to SSI and the related articles of the “Law Regarding the Changes in Social Insurance and General Health Insurance Law and Other Related Laws and Regulations” numbered 5754 (“the New Law”) regulating the transfer of the funds were approved by the GNAT on 17 April 2008. The New Law was published in the Official Gazette dated 8 May 2008, numbered 26870 and came into force. The New Law requires that the employee funds of the bank are transferred to the SSI in three years periods starting from the issuance date of the related article and this period can be extended for maximum two years with the decision of the Council of Ministers. The transfer period is extended for another two years with the decision of the Council of Ministers No. 2011/1559 published in the Official Gazette dated 9 April 2011. According to the Amendment of Social Insurance and General Health Insurance Law No. 6283 published in the Official Gazette dated 8 March 2012; Council of Ministers was authorized to increase the two-year extension period mentioned above to four years.

In accordance with the New Law, the social rights and payments of Fund members and their beneficiaries, which are not provided although they are included in the Fund Title Deed, will be provided by the Fund and the employers of the Fund members.

YapÕ Kredi BankasÕ accounts for a provision for the technical deficit based on the report prepared by a registered actuary in accordance with the rates determined by the New Law. c) Defined benefit plans

The Group has to pay contributions to the Social Security Institution on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. These contributions are recognised as an employee benefit expense when they are accrued. d) Short term employee benefits

Liabilities arising from unused vacations of the employees are classified under “short term employee benefits”. These liabilities are accrued in the period when the unused vacations are qualified and are not discounted.

2.4.22 Insurance technical reserves

Life mathematical reserves

Life mathematical reserves consist of actuarial mathematical reserves (with minimum income guarantee to the policyholders) and life profit share reserves and represent the total liability of the Subsidiaries and Joint Ventures of the Group in the insurance sector to the policyholders in the life branch.

F-32 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding claims provision

Full outstanding claims provision is recorded for the estimated ultimate cost of settling claims incurred as of the balance sheet date, less amounts already paid in respect of these claims. Claim provisions are accounted for based on reports of experts or initial assessments of policyholders and experts. Additional outstanding claims provision is booked for all claims that are notified after, but occurred before the balance sheet date (IBNR).

Unearned premium reserve

Unearned premium reserve is calculated as the unearned portion of the premiums on a daily basis in respect of all policies in force as of balance sheet date. 2.4.23 Provisions, contingent assets and liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result 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.

Where the effect of the time value of money is material, the amount of provision shall be the present value of the expenditures expected to be required to settle the obligation. The discount rate reflects current market assessments of the time value of money and the risks specific to the liability. The discount rate shall be a pre-tax rate and shall not reflect risks for which future cash flow estimates have been adjusted.

Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are not included in the consolidated financial statements and treated as contingent assets or liabilities.

2.4.24 Revenue recognition

Contract revenue and costs related to the projects are recognised when the amount of revenue can be reliably measured and the increase in the revenue due to change in the scope of the contract related with the project is probable. Contract revenue is measured at the fair value of the consideration received or receivable. Projects are fixed price contracts and revenue is recognised in accordance with the percentage of completion method. The portion of the total contract revenue corresponding to the completion rate is recognised as contract revenue in the relevant period. 28

F-33 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Banking

Interest income and expenses are recognised in the income statement on an accrual basis. When loans and advances to customers are considered doubtful of collection by management, they are written down to their recoverable amount, and interest income is thereafter recognised based in the rate of interest that was used to discount the future cash flows for the purpose of measuring the recoverable amount. Interest income includes coupons earned on fixed income investment securities and amortised discount and premium on treasury bills and government bonds.

Banking service income is registered as income in the period during which it is collected, other fee and commission income and expenses are recognised on an accrual basis. Fees and commissions received as a result of the service agreements or arising from negotiating or participating in the negotiation of a transaction on behalf of a third party are recognized either in the period when the transaction is realized or deferred based on the type of the underlying transaction.

Insurance

Premium income represents the net remaining amount of premiums on policies written during the year after ceded premiums to reinsurers and reserves for unearned premiums and the cancellation.

2.4.25 Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.4.26 Dividends

Dividend income is recognised by the Group at the date the right to collect the dividend is realised. Dividend payables are recognised as liability in the consolidated financial statements in the period they are declared as a part of profit distribution.

2.4.27 Research and development costs

Research costs are recognised and expensed in the income statement in the period in which they are incurred. Costs incurred on development projects relating to the design and testing of new or improved products are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense cannot be recognised as an asset in subsequent periods. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over their estimated useful lives (2-10 years).

2.4.28 Warranties

Warranty expenses are recorded as a result of repair and maintenance expenses for products produced and sold, authorised services’ labour and material costs for products under the scope of the warranty terms without any charge to the customers, initial maintenance costs and estimated costs based on statistical information for possible future warranty services and returns of products with respect to the products sold during the period.

2.4.29 Government grants

Government grants along with investment, research and development grants are accounted for on an accrual basis for estimated amounts expected to be realised under grant claims filed by the Group. These grants are accounted for as deferred income in the consolidated balance sheet and are credited to consolidated income statement on a straight-line basis over the expected lives of related assets. Government grants allowing reduced corporate tax payment are evaluated within the scope of IAS-12 Income Taxes standard (Note 2.4.18).

F-34 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.30 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, one that takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset in the period in which the asset is prepared for its intended use or sale. Borrowing costs that are not in this scope are recognised directly in the income statement.

2.4.31 Derivative financial instruments and hedging activities

Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The derivative instruments of the Group mainly consist of foreign exchange forward contracts and currency/interest rate swap instruments. These derivative transactions, even though providing effective economic hedges under the Group risk management position, do not generally qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for trading in the consolidated financial statements. The fair value changes for these derivatives are recognised in the consolidated income statement.

The hedging transactions of the Group that qualify for hedge accounting are accounted for as follows:

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of hedged asset or liability attributable to the hedged risk is recorded as part of the carrying value of the hedged asset or liability during the effective hedging relationship. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortised using a recalculated effective interest rate. In the case of a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities, the adjustment is amortised using a straight-line method.

Cash flow hedge

Hedges of exposures to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit and loss are designated as cash flow hedges by the Group.

Changes in the fair value of derivatives, designated as cash flow hedges and qualified as effective, are recognised in equity as “hedging reserves”. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously recognised under equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Otherwise, amounts recognised under equity are transferred to the consolidated income statement in the period in which the hedged firm commitment or forecasted transaction affects the consolidated income statement.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or losses previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

F-35 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign currency hedge of net investments in foreign operations

Gains or losses on the hedging instrument relating to the effective portion of the foreign currency hedge of net investments in foreign operations are recognised as other comprehensive income while any gains or losses relating to the ineffective portion are recognised in the income statement.

On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement.

2.4.32 Earnings per share

Earnings per share disclosed in the consolidated income statement are determined by dividing net income attributable to equity holders of the parent by the weighted average number of shares outstanding during the period concerned.

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 to equity. 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 in which they were issued and each earlier period as if the event had occurred at the beginning of the earliest period reported.

2.4.33 Events after the balance sheet date

The Group adjusts the amounts recognised in its financial statements to reflect the adjusting events after the balance sheet date. If non-adjusting events after the balance sheet date have material influence on the economic decisions of users of the financial statements, they are disclosed in the notes to the consolidated financial statements.

2.4.34 Statement of 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 (tangible and intangible assets and financial assets).

Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

2.5 Significant Accounting Estimates and Assumptions

Preparation of consolidated financial statements requires the usage of estimations and assumptions which may affect the reported amounts of assets and liabilities as of the balance sheet date, disclosure of contingent assets and liabilities and reported amounts of income and expenses during the financial period. The accounting assessments, forecasts and assumptions are reviewed continuously considering the past experiences, other factors and the reasonable expectations about the future events under current conditions. Although the estimations and assumptions are based on the best estimates of the management’s existing incidents and operations, they may differ from the actual results.

2.6 Convenience Translation into English of the Consolidated Financial Statements

The accounting principles described in Note 2.1 to consolidated financial statements (defined as CMB Financial Reporting Standards) differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January and 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS. 31

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS

The business combinations of the Group realised in 2012 are as follows: a) AES Entek, a Joint Venture of the Group which is controlled by 49,62%, has acquired 50% shares of Ayas Enerji Üretim ve Ticaret A.ù. (“Ayas Enerji”) for a consideration of USD74,1 million from Ordu YardÕmlaúma Kurumu on 22 May 2012. As of the acquisition date, Ayas Enerji has not yet started its sales operations and continues its coal fired power plant investment in Adana.

The details of the goodwill calculation, total acquisition consideration and the net assets acquired are as follows:

Total consideration 66.977 Net assets acquired (31.304)

Goodwill (Note 17) 35.673

The fair values of identifiable assets and liabilities, within the scope of IFRS 3, arising from the acquisition are as follows:

Cash and cash equivalents 142 Property, plant and equipment (Note 15) 11.935 Intangible assets (Note 16) 294 Other assets 19.081 Trade payables and other payables (148)

Net assets acquired 31.304

The details of cash outflow due to acquisition are as follows:

Total consideration 66.977 Cash and cash equivalents - acquired (142)

Cash outflow due to acquisition (net) 66.835 b) AES Entek, a Joint Venture of the Group which is controlled by 49,62%, has acquired all of the shares of AES Enerji Limited ùirketi (“AES Enerji”) and its subsidiaries Cenay Elektrik Üretim, ønúaat, Sanayi ve Ticaret Limited ùirketi, Kumköy Enerji Üretim A.ù. and Selen Elektrik Üretim A.ù. for a consideration of TL294 million from AES Maastricht Holding B.V. and AES Mont Blanc Holdings B.V. on 20 December 2012.

Each subsidiary of AES Enerji, the parent company, individually operates a hydroelectric plant and is engaged in electricity generation.

The details of the goodwill calculation, total acquisition consideration and the net assets acquired are as follows:

Total consideration 145.887 Net assets acquired (89.962)

Goodwill (Note 17) 55.925

F-37 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS (Continued)

The fair values of the identifiable assets and liabilities, within the scope of IFRS 3, arising from the acquisition, are as follows:

Cash and cash equivalents 9.648 Trade receivables 2.061 Property, plant and equipment (Note 15) 93.392 Intangible assets (Note 16) 73.217 Other assets 10.112 Financial liabilities (74.245) Trade payables and other payables (510) Tax provision and other provisions (18.695) Deferred tax liabilities (Note 20) (4.358) Other liabilities (660)

Net assets acquired 89.962

The details of cash outflow due to acquisition are as follows:

Total consideration 145.887 Cash and cash equivalents - acquired (9.648)

Cash outflow due to acquisition (net) 136.239

The business combinations of the Group realised in 2011 are as follows: a) On 30 November 2011 Arçelik, a Subsidiary of the Group, acquired 100% of the shares of Defy which owns 100% of the shares of Defy Namibia, Defy Trust Two, Defy Kindoc, Defy Ocean, Defy Carron (together referred to as “Defy Group”). Defy Group is located in South Africa and its main activities are production of refrigerators, freezers, dryers, ovens, cooking appliances and selling and marketing of all kinds of durable home appliances.

Arçelik aims to achieve a substantial market share in Sub-Saharan Africa that will contribute to Arçelik’s goal of growing in emerging markets by the acquisition. The consideration for the acquisition includes the synergy that will be created, revenue increase and future benefits to be obtained as a result of growth in market and labor force. These benefits were not recorded separately from goodwill as they do not meet the criteria of identifiable asset. Since the acquisition also resulted in the transfer of control, goodwill has been recognised.

The details of the goodwill calculation, total acquisition consideration and the net assets acquired are as follows:

Total consideration 525.613 Net assets acquired (346.218)

Goodwill (Note 17) 179.395

Consideration - in cash 351.854 Consideration paid against the payables to former shareholders of Defy Group - cash 150.096 Contingent consideration 2.698

Total consideration transferred 504.648 The effect of cash flow hedges - effective portion 20.965

Total consideration 525.613

F-38 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS (Continued)

The fair values of identifiable assets and liabilities arising from the acquisition are as follows:

Cash and cash equivalents 20.515 Derivative financial instruments 974 Trade receivables 131.493 Inventories 88.179 Property, plant and equipment 51.716 Intangible assets 230.046 Deferred tax assets 96 Other assets 971 Trade payables and other payables (71.074) Tax provision and other provisions (19.517) Deferred tax liabilities (67.916) Provision for employment termination benefits (433) Other liabilities (18.832)

Net assets acquired 346.218

The details of cash outflow due to acquisition are as follows:

Total consideration 522.915 Cash and cash equivalents - acquired (20.515)

Cash outflow due to acquisition (net) 502.400 b) According to the resolution of the Board of Directors of Aygaz, a Subsidiary of the Group, held on 30 November 2010, it was agreed to sell 49,62% of Aygaz shares in AES Entek (with a nominal value of TL49.079 thousand) to AES Mont Blanc Holdings B.V. for a consideration of USD136.455.000 to be paid in cash at the date when the share transfer transaction is completed.

The assets and liabilities of the Subsidiary intended for sale have been classified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” in the consolidated financial statements as of 31 December 2010. Following the permissions of the Competition Board and the Energy Market Regulation Authority (“EMRA”), the transfer of AES Entek shares was completed on 28 February 2011 and the total share transfer price of USD136.455.000 was paid in cash. As stated in the public announcement of Aygaz dated 1 December 2010, the consideration was adjusted according to the financial statements of AES Entek dated 28 February 2011 and the sale price was revised to USD149.581.000 after the finalization of the process.

Since, the sale transaction is considered as a “loss of control” under IAS 27 “Consolidated and Separate Financial Statements”, the gain on sale of 49,62% of AES Entek shares amounting to TL112.159 thousand has been accounted for under “other income” in the consolidated financial statements as of 31 December 2011. In addition, the Group’s remaining 36,47% investment in AES Entek, at the date when control was lost, is accounted for at its fair value which is calculated according to the sales price. The difference amounting to TL82.470 thousand has also been accounted for under “other income” as part of the sales transaction.

Following the completion of the share transfer, AES Entek is considered as a “joint venture” by the 49,62% voting right of Koç Holding and consolidated in the Group’s financial statements by using proportionate consolidation method as of 31 December 2011. The fair value of 36,47% Entek investment of the Group, is recognised as the cost value of the investment in the joint venture used in initial recognition. In accordance with IFRS 3 “Business Combinations”, the difference between the cost value of the investment in joint venture and 36,47% of the net asset value of the joint venture is accounted for as goodwill in the consolidated financial statements as of 31 December 2011 (Note 17).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS (Continued)

The details of the goodwill calculation and the net assets acquired are as follows:

Acquisition cost (*) 174.824 Net assets acquired (127.747)

Goodwill (Note 17) 47.077

(*) Represents the fair value of the investment in joint venture.

The fair values of the identifiable assets and liabilities (49,62%), arising from the acquisition, are as follows:

Cash and cash equivalents 25.241 Trade receivables 16.942 Property, plant and equipment 169.673 Intangible assets 1.911 Other assets 5.892 Financial liabilities (10.456) Trade payables (15.802) Deferred tax liabilities (17.107) Other liabilities (2.485)

Net assets controlled (49,62%) 173.809

Non-controlling interest (46.062)

Net assets acquired (36,47%) 127.747

Inter group share transfer and transactions with non-controlling interests:

According to the resolution of the Board of Directors meeting of Koç Holding held on 2 August 2011, it was agreed to acquire 24,81% of share capital (with a total nominal value of TL24.540 thousand) of AES Entek, the Joint Venture of the Group, held by Temel Ticaret A.ù. (8,24%), Aygaz (8,39%), Mogaz (3,27%) and Koç Family members (4,90%) for a total consideration of USD74.784.069.

Following the fulfilment of procedures required by the energy market legislation and other related regulations, the share purchase transactions were completed on 7 October 2011. As a result of the related share purchase transaction, total voting right of Koç Holding in AES Entek remained as 49,62%, whereas the effective ownership interest is increased to 34,90% from 14,84%. Related share purchase transaction was treated as transactions between equity holders of the Group and accordingly, the difference between the consideration paid and the carrying value of the net assets of the joint venture held by non-controlling interests is accounted for as “transactions with non-controlling interests” in equity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 4 - JOINT VENTURES

The amounts of assets, liabilities and profit/loss of the Joint Ventures, which are proportionately consolidated in the consolidated financial statements, before consolidation adjustments (multiplied by related ownership interest) are as follows:

2012 2011

Current assets 38.629.709 31.790.297 Non-current assets 34.148.803 33.386.134

Total assets 72.778.512 65.176.431

Current liabilities 52.293.682 49.056.453 Non-current liabilities 9.091.414 6.893.040 Equity 11.393.416 9.226.938

Total liabilities and equity 72.778.512 65.176.431

2012 2011

Revenue 23.261.389 21.398.611 Operating profit (net) 2.271.444 2.325.206 Profit for the period (net) 1.648.768 1.661.899

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING

Segment information, prepared under the managerial approach, is presented below:

2012 2011 a) Revenue

Energy 53.312.206 46.743.731 Automotive 9.836.498 10.233.258 Consumer durables 10.503.228 8.433.900 Finance 7.297.729 5.973.720 Other 3.883.671 3.558.498

84.833.332 74.943.107 b) Operating profit

Energy 1.246.189 2.413.864 Automotive 779.869 773.698 Consumer durables 785.900 665.306 Finance 1.503.669 1.517.780 Other 52.459 22.109

4.368.086 5.392.757

Inter segment eliminations 96.152 97.182

4.464.238 5.489.939 c) Depreciation and amortisation

Energy 415.148 393.678 Automotive 258.475 225.813 Consumer durables 265.848 222.673 Finance 119.568 108.391 Other 90.178 84.496

1.149.217 1.035.051 d) Profit before tax

Energy 1.582.706 1.618.976 Automotive 727.367 780.732 Consumer durables 614.341 621.341 Finance 1.512.565 1.524.990 Other 80.519 161.429

4.517.498 4.707.468 e) Capital expenditures

Energy 2.076.891 946.052 Automotive 941.852 602.759 Consumer durables 484.526 367.253 Finance 159.563 126.096 Other 166.221 190.376

3.829.053 2.232.536 37

F-42 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) f) Assets and liabilities 2012 2011

Total assets

Energy 23.176.929 21.739.483 Automotive 6.001.520 5.496.977 Consumer durables 9.104.837 8.359.661 Finance 67.117.597 59.449.650 Other 3.640.652 3.569.156

Segment assets 109.041.535 98.614.927

Assets held for sale (Note 24) 25.491 6.160

109.067.026 98.621.087

Total liabilities

Energy 14.304.288 13.216.092 Automotive 4.010.909 3.871.067 Consumer durables 5.916.597 5.172.083 Finance 56.306.794 51.211.406 Other 1.773.214 1.874.098

Segment liabilities 82.311.802 75.344.746

Liabilities held for sale (Note 24) 3.979 5.517

82.315.781 75.350.263

F-43 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) g) Segment analysis

Inter 1 January - Consumer segment 31 December 2012 Energy Automotive durables Finance Other elimination Total

External revenue 53.312.206 9.836.498 10.503.228 7.297.729 3.883.671 - 84.833.332 Inter segment revenue 173.620 302.752 161.740 33.493 595.048 (1.266.653) -

Total revenue 53.485.826 10.139.250 10.664.968 7.331.222 4.478.719 (1.266.653) 84.833.332

Total costs (50.900.621) (8.773.040) (7.577.670) (3.750.969) (3.452.905) 1.316.684 (73.138.521)

Gross profit 2.585.205 1.366.210 3.087.298 3.580.253 1.025.814 50.031 11.694.811

Operating expenses Marketing, selling and distribution (594.792) (363.844) (1.841.236) (66.436) (306.670) - (3.172.978) General administrative (745.464) (190.125) (398.441) (1.442.366) (621.276) 57.398 (3.340.274) Research and development (19.222) (72.188) (75.074) - (23) - (166.507) Other income/expenses (net)(*) 20.462 39.816 13.353 (567.782) (45.386) (11.277) (550.814)

Operating profit 1.246.189 779.869 785.900 1.503.669 52.459 96.152 4.464.238

Income from associates - - - 8.896 - - 8.896 Financial income/expense (net)336.517 (52.502) (171.559) - 28.060 (96.152) 44.364

Profit before tax 1.582.706 727.367 614.341 1.512.565 80.519 - 4.517.498

(*) Provision for loan impairment in finance sector has been accounted for under “other expenses” (Note 28).

F-44 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued)

Inter 1 January Consumer segment 31 December 2011 Energy Automotive durables Finance Other elimination Total

External revenue 46.743.731 10.233.258 8.433.900 5.973.720 3.558.498 - 74.943.107 Inter segment revenue 239.312 170.373 153.585 26.454 593.505 (1.183.229) -

Total revenue 46.983.043 10.403.631 8.587.485 6.000.174 4.152.003 (1.183.229) 74.943.107

Total costs (43.675.338) (9.028.735) (5.992.900) (3.077.474) (3.255.768) 1.246.996 (63.783.219)

Gross profit 3.307.705 1.374.896 2.594.585 2.922.700 896.235 63.767 11.159.888

Operating expenses Marketing, selling and distribution (513.747) (373.712) (1.503.024) (55.343) (252.762) - (2.698.588) General administrative (672.864) (170.606) (349.240) (1.263.151) (570.963) 45.679 (2.981.145) Research and development (13.588) (60.092) (67.873) - (9) - (141.562) Other income/expenses (net) (*) 306.358 3.212 (9.142) (86.426) (50.392) (12.264) 151.346

Operating profit 2.413.864 773.698 665.306 1.517.780 22.109 97.182 5.489.939

Income from associates - - - 7.210 - - 7.210 Financial income/expense (net) (794.888) 7.034 (43.965) - 139.320 (97.182) (789.681)

Profit before tax 1.618.976 780.732 621.341 1.524.990 161.429 - 4.707.468

(*) Gain on sale of AES Entek shares of Aygaz, a Subsidiary of the Group, amounting to TL194.629 thousand and Tüpraú’s scrap items (platinum) sales income, amounting to TL39.482 thousand have been accounted for under “other income” in Energy segment (Note 28).

Penalties of TL28.609 thousand issued by the Competition Authority to Ford Otosan and Tofaú, Joint Ventures of the Group, have been accounted for under “Other expenses” in Automotive segment (Note 28).

Expenses incurred by Arçelik in 2011 amounting to TL30.459 thousand, which arose from the voluntary recall of certain refrigerator models, a limited number of which had been sold between 2000 and 2006 in England and Ireland with expired warranties, have been accounted for under “other expenses” in Consumer Durables segment (Note 28).

F-45 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) h) Finance sector operating results 2012 2011 Net profit finance

Interest income 2.360.033 1.774.479 Fee and commission income 964.474 1.063.511 Income from insurance business 108.705 78.683 Other operating income 243.193 103.209

3.676.405 3.019.882

Inter segment eliminations (96.152) (97.182)

3.580.253 2.922.700

Operating expenses

Marketing, selling and distribution expenses (66.436) (55.343) General administrative expenses (1.442.366) (1.263.151) Provision for loan impairment (Note 28) (429.446) (173.914) Other operating income/expenses (net) (138.336) 87.488

(2.076.584) (1.404.920)

Operating profit 1.503.669 1.517.780

Details of the income from insurance business for the years ended 31 December 2012 and 2011 are as follows:

2012 2011

Earned premiums (net of reinsurance) 512.327 409.567 Claims incurred (net of reinsurance) (373.230) (308.951) Commissions, net 3.811 (4.706) Other income/(expense), net (34.203) (17.227)

108.705 78.683

F-46 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 6 - CASH AND CASH EQUIVALENTS

2012 2011 Finance Non-Finance Total Finance Non-Finance Total

Cash in hand 773.387 2.216 775.603 516.510 3.654 520.164 Cheques received 78 62.529 62.607 86 39.750 39.836 Banks - Demand deposits 880.115 229.506 1.109.621 266.389 196.751 463.140 - Time deposits 1.425.756 5.029.600 6.455.356 913.635 3.545.820 4.459.455 - Reverse repo receivables 466.197 - 466.197 1.060.863 - 1.060.863 Bonds and bills 593.175 - 593.175 134.798 - 134.798 Money market placements 920.419 - 920.419 25.917 - 25.917 Other - 91.247 91.247 - 92.071 92.071

5.059.127 5.415.098 10.474.225 2.918.198 3.878.046 6.796.244

As of 31 December 2012, total blocked deposits amount to TL555.033 thousand (2011: TL477.484 thousand). TL480.809 thousand of the related amount consists of the revenue shares collected by Tüpraú, a Subsidiary of the Group, as indicated in the Petroleum Market License Regulation (2011: TL397.725 thousand) (Note 23).

Group companies operating in the non-finance sector have deposit balances, amounting to TL2.623.668 thousand (2011: TL1.821.470 thousand) held at YapÕ Kredi BankasÕ, a Joint Venture of the Group, which are eliminated during the preparation of consolidated financial statements.

NOTE 7 - BALANCES WITH CENTRAL BANKS 2012 2011 Central banks -Reserve deposits 4.795.862 4.489.247 -Other balances 174.651 35.009

4.970.513 4.524.256

In accordance with the “Communiqué Regarding the Reserve Requirements” numbered 2005/1, banks operating in Turkey must place reserves in the CBRT for their TL and foreign currency liabilities.

As of 31 December 2012, TL4.780.436 thousand of reserve deposits is held in CBRT (2011: TL4.356.392 thousand).

These funds cannot be used to finance the daily operations of the banks.

F-47 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - FINANCIAL ASSETS

2012 2011 Short-term Long-term Total Short-term Long-term Total Financial assets at fair value through profit or loss 307.808 - 307.808 159.863 - 159.863 Available-for-sale financial assets 183.893 7.188.567 7.372.460 588.399 3.404.686 3.993.085 Held-to-maturity financial assets 35.617 2.878.621 2.914.238 136.406 6.219.723 6.356.129 Time deposits 401.591 - 401.591 339.002 - 339.002

928.909 10.067.188 10.996.097 1.223.670 9.624.409 10.848.079 a) Financial assets at fair value through profit or loss

2012 2011 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Government bonds 191.711 - 191.711 100.094 - 100.094 Eurobond 55.287 16.520 71.807 13.450 18.757 32.207 Investment funds 19.891 - 19.891 20.519 - 20.519 Other 6.860 - 6.860 7.043 - 7.043

273.749 16.520 290.269 141.106 18.757 159.863 Equity securities: Listed 17.539 - 17.539 - - -

291.288 16.520 307.808 141.106 18.757 159.863 b) Available-for-sale financial assets 2012 2011 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Eurobond 3.606.140 - 3.606.140 541.562 - 541.562 Goverment bond 3.257.486 - 3.257.486 2.572.305 - 2.572.305 Private sector bonds 315.485 - 315.485 698.593 12.943 711.536 Investment funds 40.470 - 40.470 43.710 - 43.710 Tearsury bills 3.155 - 3.155 5.957 - 5.957

7.222.736 - 7.222.736 3.862.127 12.943 3.875.070 Equity securities: Listed - 35.792 35.792 - 37.803 37.803 Unlisted 12.537 101.395 113.932 11.934 68.278 80.212

7.235.273 137.187 7.372.460 3.874.061 119.024 3.993.085

F-48 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - FINANCIAL ASSETS (Continued)

The list of equity securities and the shareholding rates are as follows:

2012 2011 (%) (%) Listed: AltÕnyunus Çeúme Turistik Tesisler A.ù. 35.792 30,00 37.803 30,00

35.792 37.803

Unlisted: Makmarin Kaú Marina øúletmecili÷i Turizm ve Ticaret A.ù. 23.642 50,00 - - TanÕ Pazarlama ve øletiúim Hizmetleri A.ù. 17.579 88,00 16.421 88,00 Opet Fuchs Madeni Ya÷lar 14.464 25,00 1.987 25,00 Beldesan Otomotiv Yan San. ve Tic. A.ù 13.066 91,82 13.066 91,82 Takas ve Saklama BankasÕ A.ù. 6.190 2,43 6.190 2,43 Akdeniz AkaryakÕt Dep. ve Nakliyat A.ù. 5.239 16,67 6.385 16,67 Promena Elektronik Ticaret A.ù. 5.000 50,00 5.000 50,00 Setair 4.037 70,00 1.950 70,00 Körfez Hava UlaútÕrma A.ù. 4.000 100,00 4.000 100,00 Ultra Kablolu Televizyon ve Telekom. San. ve Tic. A.ù 1.604 50,00 1.857 50,00 Bozkurt TarÕm ve GÕda San. ve Tic. A.ù 911 83,89 911 83,89 Koç Bilgi ve Savunma Teknolojileri A.ù. - 92,23 5.180 92,23 Other 18.200 - 17.265 -

113.932 80.212

Available-for-sale equity securities that do not have quoted fair values or for which fair values cannot be reliably measured through alternative methods, are measured at cost less any impairment.

Subsidiaries, joint ventures and associates, in which the Group, together with Koç Family members, have attributable interests of 20% or more but are not material for the consolidated financial statements or the Group does not have a significant influence, are not included in the scope of consolidation and classified as available-for- sale financial assets. These financial assets are measured at fair value or carried at cost less any impairment when fair values cannot be reliably measured.

Total assets, revenues and net profit of the unconsolidated subsidiaries and joint ventures are below 1% of the total consolidated assets, revenues and net profit of the Group.

Provision for impairment of unlisted financial assets (equity securities) amounts to TL95.682 thousand as of 31 December 2012 (2011: TL104.065 thousand).

F-49 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - FINANCIAL ASSETS (Continued) c) Held-to-maturity financial assets 2012 2011 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Government bonds 1.669.792 - 1.669.792 1.824.982 - 1.824.982 Eurobond 1.213.284 - 1.213.284 4.530.909 - 4.530.909 Private sector bonds 31.018 - 31.018 - - - Treasury bills 144 - 144 238 - 238

2.914.238 - 2.914.238 6.356.129 - 6.356.129

Movement of held-to-maturity financial assets is as follows:

2012 2011

As of 1 January 6.356.129 6.488.232

Additions during the year 25.554 281.924 Disposals through sales and redemption (*) (3.180.243) (1.250.791) Foreign exchange losses/gains arising on monetary assets (287.202) 869.113 Provision for impairment - (32.349)

As of 31 December 2.914.238 6.356.129

(*) As per the legislation on capital adequacy (Basel II) effective from 1 July 2012, the risk weight of securities in foreign currencies issued by the Turkish Treasury increased from 0% to 50%. Accordingly, in the current period in accordance with the requirements of IAS 39, YapÕ Kredi BankasÕ, a Joint Venture of the Group, sold part of its foreign currency securities issued by the Turkish Treasury with a total nominal value of USD189.200 thousand and classified to available for sale portfolio with a total nominal value of USD1.484.812 thousand from its held-to-maturity portfolio as a result of increase in the risk weights of held-to-maturity investments used for regulatory risk-based capital purposes. d) Time deposits 2012 2011 Finance Non-Finance Total Finance Non-Finance Total

Time deposits 395.209 6.382 401.591 317.250 21.752 339.002

F-50 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 9 - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD 2012 2011 (%) (%)

Banque de Commerce et de Placements S.A. 96.967 15,34 91.970 15,34 YapÕ Kredi Koray Gayrimenkul YatÕrÕm OrtaklÕ÷Õ A.ù. (*) 9.230 15,22 9.825 15,22

106.197 101.795

(*) YapÕ Kredi Koray, a Joint Venture of the Group, has been included in the scope of the consolidation using the equity method, due to its immaterial effect on the financial statement line items individually.

The movements of investments accounted for using the equity method for the years ended 31 December 2012 and 2011 are as follows:

2012 2011

As of 1 January 101.795 47.087 Share of income/loss 8.896 7.210 Dividends received (1.035) (1.245) Currency translation differences (*) (3.459) 48.743

As of 31 December 106.197 101.795

(*) Includes the effect of updating equity accounting by an amount of TL41.823 thousand based on 2011 year-end financial statements of Banque de Commerce et de Placements S.A. prepared in accordance with International Financial Reporting Standards.

Share of income/loss of investments accounted for using the equity method:

2012 2011

Banque de Commerce et de Placements S.A. 9.491 8.517 YapÕ Kredi Koray Gayrimenkul YatÕrÕm OrtaklÕ÷Õ A.ù. (595) (1.307)

8.896 7.210

Aggregated summary figures of the financial statements of investments accounted for using the equity method:

2012 2011

Total assets 4.187.475 4.604.634 Total liabilities 3.486.261 3.923.926 Total revenues 219.259 208.456

F-51 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS

Certain derivative transactions, even though providing effective economic hedges under the Group risk management position, do not qualify for hedge accounting under the specific rules, and are therefore accounted for as derivatives held for trading in the consolidated financial statements.

Derivative transactions, that meet specified hedge accounting requirements, are accounted for as derivatives held for hedging.

Within this context, the breakdown of the Group’s derivative financial instruments is as follows:

2012 2011 Asset Liability Asset Liability

Derivatives held for trading 210.306 199.370 151.488 269.278 Derivatives held for hedging 54.164 471.108 226.868 284.012

264.470 670.478 378.356 553.290

Finance: 2012 2011 Contract Fair values Contract Fair values amount (*) Asset Liability amount (*) Asset Liability

Derivatives held for trading:

Currency swaps 13.359.853 97.026 66.461 9.545.990 6.764 47.272 Option agreements 7.018.460 15.665 21.825 5.372.624 29.774 29.929 Currency forwards 3.952.258 32.655 46.813 5.298.801 55.259 51.272 Interest rate swaps 1.847.886 32.553 29.330 2.289.675 39.902 135.362 Cross-currency interest rate swaps 937.147 19.339 23.795 22.803 923 967 Credit derivatives 844.074 10.237 4.951 823.223 3.749 4.125

27.959.678 207.475 193.175 23.353.116 136.371 268.927

Derivatives held for hedging:

Interest rate swaps 18.479.953 81 407.229 16.218.599 3.795 241.941 Cross-currency interest rate swaps 1.910.905 47.002 45.116 3.103.427 184.873 9.480 Currency swaps 317.895 - 2.410 594.882 16.474 - Currency forwards 19.375 - 186 19.128 341 -

20.728.128 47.083 454.941 19.936.036 205.483 251.421

F-52 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued) a. Fair value hedge:

Effective from 1 March 2009, YapÕ Kredi BankasÕ, a Joint Venture of the Group, started to hedge the possible fair value effects of changes in market interest rates on part of its fixed interest TL mortgage and car loan portfolios as well as the fair value effects of changes in foreign exchange rates on part of its foreign currency denominated funds borrowed using cross-currency interest rate swaps.

Net carrying value of the hedging instruments (cross-currency interest rate swaps) at 31 December 2012 is an asset amounting to TL1.886 thousand (2011: TL175.393 thousand asset). Net carrying value of the related derivatives includes the effect of exchange rate changes and net linear interest accruals on derivatives.

As of 31 December 2012, the fair value difference of the hedged item against changes in market interest rates (fixed interest TL mortgage and car loans) is TL74.318 thousand (2011: TL53.602 thousand). The mark to market difference amounting to TL20.716 thousand (2011: TL58.613 thousand) is accounted for as an expense in the operating results of Finance segment. The ineffective portion of the related hedging relationship is TL2.845 thousand.

Foreign exchange gains/losses on hedged item (foreign currency denominated funds) and the hedging instrument (cross-currency interest rate swaps) are also reflected in the operating results of Finance Segment. b. Cash flow hedges:

In order to hedge its cash flow risk arising from floating rate liabilities, YapÕ Kredi BankasÕ, a Joint Venture of the Group, started to apply cash flow hedge accounting effective from 1 January 2010. Hedging instruments are USD, EUR and TL interest rate swaps with floating receive, fixed pay legs, and the hedged item is the cash outflows due to financing of interests of repricing USD, EUR and TL customer deposits, repos and borrowings.

Net interest expense after tax on the cash flow hedge, which is reclassified to the statement of income of 2012, amounted to TL83.986 thousand (2011: TL74.398 thousand interest expense). Net interest expense after tax accounted for under “Cumulative gain/losses on hedging” in the statement of other comprehensive income of 2012 is TL210.126 thousand (2011: TL178.143 thousand interest expense). The net expense of the ineffective portion of the related hedging relationship is TL1.152 thousand (2011: TL538 thousand net expense).

Koç Tüketici FinansmanÕ, a Subsidiary of the Group, funds its long term fixed interest rate TL loan portfolio with long term foreign currency funds obtained from international markets. The Company hedges its exchange rate risk arising on the principal repayments of foreign currency denominated borrowings at maturity by using currency swaps and currency forwards.

Net foreign exchange gain after tax on the cash flow hedge, which is reclassified to the statement of income of 2012, amounted to TL12.278 thousand (2011: TL10.766 thousand foreign exchange gain). Net foreign exchange gain after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2012 is TL15.614 thousand (2011: TL13.252 thousand foreign exchange gain). c. Net investment hedges in foreign operations:

YapÕ Kredi BankasÕ, a Joint Venture of the Group, hedges part of the currency translation risk of net investments in foreign operations through foreign currency borrowings. EUR denominated borrowing of YapÕ Kredi BankasÕ is designated as a hedge of the net investment in YapÕ Kredi BankasÕ’s certain EUR denominated subsidiaries. The total amount of the borrowing designated as a hedge of the net investment at 31 December 2012 is EUR132 million (2011: EUR119 million). Foreign exchange gain after tax amounting to TL8.022 thousand (2011: TL35.583 thousand foreign exchange loss) on translation of the borrowing to TL is accounted for under “Cumulative gains/losses on hedging” in 2012 statement of comprehensive income.

F-53 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

Non-Finance: 2012 2011 Contract Fair values Contract Fair values amount (*) Asset Liability amount (*) Asset Liability

Derivatives held for trading:

Currency forwards 895.100 393 4.645 958.706 11.617 148 Currency swaps 426.718 1.851 1.192 255.788 1.807 61 Option agreements 51.300 550 - - - - Interest rate swaps 43.292 - 36 - - - Commodity futures 20.653 37 322 92.721 1.693 142

1.437.063 2.831 6.195 1.307.215 15.117 351

Derivatives held for hedging:

Interest rate swaps 1.107.839 - 16.167 1.425.283 - 32.591 Receivables from operating leases 212.723 7.081 - 220.520 21.385 -

1.320.562 7.081 16.167 1.645.803 21.385 32.591

Otokoç, a Subsidiary of the Group, hedges its foreign exchange risk on commitments to provide operational leasing services resulting from off balance sheet foreign currency denominated operating lease receivables (hedged item) with foreign currency denominated loans (hedging instrument). Fair value changes resulting from the exchange risk of the hedged item has been accounted for under “derivatives held for hedging” as an asset or liability on the balance sheet and in foreign exchange gain/losses in the statement of income. b. Cash flow hedges:

In order to hedge the cash flow risk resulting from the floating rate loan obtained for the acquisition of 51% of the shares of Tüpraú; EYAù, a Subsidiary of the Group, has entered into an interest rate swap agreement amounting to USD289.080 thousand (2011: USD356.040 thousand). Net interest expense after tax on the cash flow hedge, which is reclassified to the statement of income of 2012, amounted to TL14.250 thousand (2011: TL10.165 thousand interest expense). Net interest income after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2012 is TL2.690 thousand (2011: TL14.132 thousand interest expense).

Tofaú, a Joint Venture of the Group, hedges its currency risk resulting from realised and forecast sales of light commercial vehicles (hedged item) by obtaining foreign currency denominated loans (hedging instrument). Net foreign exchange losses after tax within the cash flow hedge, which is reclassified to the statement of income of 2012, amounted to TL16.117 thousand (2011: TL17.674 thousand foreign exchange losses). Net foreign exchange gains after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2012 is TL12.070 thousand (2011: TL70.929 thousand foreign exchange losses). c. Net investment hedges in a foreign operation:

Arçelik, a Subsidiary of the Group, designated some portion of its EUR denominated bank loans as a hedging instrument in order to hedge the foreign currency risk arising from the translation of net assets of part of its subsidiaries operating in Europe from EUR to Turkish Lira. As of 31 December 2012, EUR328,8 million of bank borrowings was designated as a net investment hedging instrument (31 December 2011: EUR150 million). Net foreign exchange gains after tax accounted for under “cumulative gains/losses on hedging” in the statement of other comprehensive income of 2012 is TL127 thousand (2011: TL47.364 thousand foreign exchange losses). 49

F-54 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 11 - TRADE RECEIVABLES AND PAYABLES

Trade receivables 2012 2011

Trade receivables 6.336.076 7.247.319 Notes and cheques receivables 2.053.345 2.021.176 Less: Provision for doubtful receivables (212.950) (203.295) Less: Unearned finance income (31.440) (51.145)

8.145.031 9.014.055 Due from related parties (Note 30) 195.715 368.361

8.340.746 9.382.416

Short-term trade receivables 8.184.716 9.262.692 Long-term trade receivables 156.030 119.724

8.340.746 9.382.416

Tüpraú, a Subsidiary of the Group, has offset TL1.496.173 thousand (31 December 2011: TL149.223 thousand) from its trade receivables that are collected from factoring companies as a part of irrevocable factoring agreements as of 31 December 2012.

Movement in the provision for doubtful receivables is as follows: 2012 2011

Beginning of the period - 1 January 203.295 214.900

Increases during the period 45.993 43.692 Collections (9.963) (10.635) Write-offs (1) (24.645) (46.328) Acquisitions - 241 Sale of subsidiary (2) - (6.112) Currency translation differences (1.730) 7.537

End of the period - 31 December 212.950 203.295

(1) Doubtful receivables, for which no possibility of collection is foreseen, are written off from the records along with their related provisions. (2) Due to the sale of Koçnet shares in 2011.

Trade payables 2012 2011

Trade payables 8.080.914 8.960.614 Less: Unearned finance expense (8.556) (18.548)

8.072.358 8.942.066 Due to related parties (Note 30) 282.878 244.606

8.355.236 9.186.672

F-55 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS

2012 2011 Short-term Long-term Total Short-term Long-term Total Loans and advances to customers 22.853.196 20.050.339 42.903.535 18.172.872 20.015.698 38.188.570 Receivables from insurance business 182.328 28.468 210.796 105.841 20.988 126.829

23.035.524 20.078.807 43.114.331 18.278.713 20.036.686 38.315.399

Loans and advances to customers:

Corporate and Financial commercial Consumer Credit card leasing Factoring 2012 loans loans receivables receivables receivables Total

Performing loans 22.975.613 9.139.414 7.071.610 1.421.340 763.660 41.371.637 Watch listed loans 597.660 555.458 143.604 65.634 43.379 1.405.735 Loans under legal follow-up 748.225 330.157 214.273 125.717 31.023 1.449.395

Gross 24.321.498 10.025.029 7.429.487 1.612.691 838.062 44.226.767

Less: Provision for impairment (770.285) (249.397) (195.188) (78.890) (29.472) (1.323.232)

Net 23.551.213 9.775.632 7.234.299 1.533.801 808.590 42.903.535

Corporate and Financial commercial Consumer Credit card leasing Factoring 2011 loans loans receivables receivables receivables Total

Performing loans 21.898.044 8.248.089 5.073.918 1.268.355 892.849 37.381.255 Watch listed loans 360.311 262.295 123.176 65.749 - 811.531 Loans under legal follow-up 684.352 201.295 184.009 132.060 11.418 1.213.134

Gross 22.942.707 8.711.679 5.381.103 1.466.164 904.267 39.405.920

Less: Provision for impairment (750.492) (173.970) (197.730) (82.155) (13.003) (1.217.350)

Net 22.192.215 8.537.709 5.183.373 1.384.009 891.264 38.188.570

F-56 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS (Continued)

Movement of provision for impairment is as follows:

2012 2011

Beginning of the period - 1 January 1.217.350 1.257.288

Increase in provisions for loan impairment 601.205 467.735 Recoveries of amounts previously provisioned (152.376) (330.524) Write-offs during the period as uncollectible (*) (290.901) (128.553) Changes in estimates (Note 2.3) (51.123) (53.230) Currency translation differences (923) 4.634

End of the period - 31 December 1.323.232 1.217.350

(*) Includes the releases from the provision due to the sale of non-performing loan portfolio.

Net investment in finance leases is as follows: 2012 2011

Gross investment in finance leases 1.670.928 1.520.536 Less: Unearned finance income (249.588) (252.181)

1.421.340 1.268.355

Leasing receivables consist of rentals over the terms of leases. The rentals according to their maturities are as follows:

2012 2011

Less than a year 764.749 515.091 1-5 years 906.179 1.005.445 Less: Unearned finance income (249.588) (252.181)

1.421.340 1.268.355

NOTE 13 - INVENTORIES 2012 2011

Raw materials and supplies 2.020.972 1.804.171 Finished goods 1.996.995 1.929.578 Merchandise 931.887 973.853 Goods in transit 931.641 1.265.365 Work in progress 761.252 829.713 Other inventories 87.297 60.742 Less: Provision for impairment (73.065) (73.350)

6.656.979 6.790.072

F-57 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 13 - INVENTORIES (Continued)

Details of goods in transit are as follows: 2012 2011

Raw materials and supplies 645.172 1.087.464 Work in progress 105.248 111.366 Merchandise 180.968 66.175 Other inventories 253 360

931.641 1.265.365

Movement of provision for impairment on inventories is as follows: 2012 2011

Beginning of the period - 1 January 73.350 80.610

Increase during the period 8.393 5.754 Reversal of provisions due to sales of inventories (6.861) (13.822) Write-offs (1.261) (1.565) Acquisitions - 802 Currency translation differences (556) 1.571

End of the period - 31 December 73.065 73.350

NOTE 14 - INVESTMENT PROPERTIES

2012 2011 As of 1 January Cost 171.482 126.844 Accumulated depreciation (80.727) (47.024)

Net book value 90.755 79.820

Net book value at the beginning of the period 90.755 79.820

Additions 1.281 8.453 Disposals - (539) Transfers (*) 4.547 3.529 Currency translation differences (258) 1.105 Current period depreciation (1.618) (1.613) Provision for impairment (941) -

Net book value at the end of the period 93.766 90.755

As of 31 December Cost 175.824 171.482 Accumulated depreciation (82.058) (80.727)

Net book value 93.766 90.755

(*) Transferred from property, plant and equipment.

The fair values of investment properties have been determined as TL136.711 thousand as of 31 December 2012, according to the related valuations performed (2011: TL131.771 thousand).

F-58 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - PROPERTY, PLANT AND EQUIPMENT

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

As of 1 January 2012 Cost 2.888.695 2.706.242 11.065.911 1.369.205 1.414.289 745.290 471.780 20.661.412 Accumulated depreciation (356.779) (1.315.028) (5.833.208) (451.837) (931.651) - (236.259) (9.124.762)

Net book value 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

Net book value at the beginning of the period 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

Acquisitions (Note 3) 54.061 6.736 32.377 76 141 11.936 - 105.327 Additions 60.349 21.966 422.985 590.108 141.462 2.220.623 48.740 3.506.233 Disposals (1.393) (9.337) (17.554) (258.640) (1.470) (13.241) (3.016) (304.651) Transfers (*) 126.990 43.341 321.135 8.075 69.621 (222.400) 25.110 371.872 Currency translation differences (227) (4.779) (6.884) (461) (1.190) (2.502) (357) (16.400) Current period depreciation (70.008) (69.408) (536.276) (75.412) (136.478) - (44.578) (932.160)

Net book value at the end of the period 2.701.688 1.379.733 5.448.486 1.181.114 554.724 2.739.706 261.420 14.266.871

31 December 2012 Cost 3.126.416 2.751.683 11.669.607 1.610.645 1.586.223 2.739.706 517.879 24.002.159 Accumulated depreciation (424.728) (1.371.950) (6.221.121) (429.531) (1.031.499) - (256.459) (9.735.288)

Net book value 2.701.688 1.379.733 5.448.486 1.181.114 554.724 2.739.706 261.420 14.266.871

(*) Includes transfers amounting to TL437.700 thousand (Note 23.b) from other non-current assets, TL31.103 thousand (Note 16) to intangible assets, TL30.178 thousand (Note 24) to assets held for sale and TL4.547 thousand (Note 14) to investment properties.

F-59 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

As of 1 January 2011 Cost 2.825.880 2.320.465 10.565.591 1.006.080 1.201.933 380.633 425.354 18.725.936 Accumulated depreciation (300.518) (1.069.344) (5.542.519) (349.862) (795.554) - (222.287) (8.280.084)

Net book value 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

Net book value at the beginning of the period 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

Acquisitions (Note 3) 13.630 27.729 172.348 44 4.652 2.490 496 221.389 Additions 31.609 7.821 132.128 393.041 150.453 1.200.018 44.244 1.959.314 Disposals (94.912) (178) (45.568) (85.584) (44.836) (22.421) - (293.499) Transfers (1) 90.304 128.477 450.612 15.776 78.233 (816.189) 26.763 (26.024) Sale of subsidiary (2) - (36) (22.859) - (171) - (960) (24.026) Currency translation differences 646 23.056 21.857 1.133 1.244 759 1.316 50.011 Reversal of impairment 35.102 15.887 - - - - - 50.989 Current period depreciation (69.825) (62.663) (498.887) (63.260) (113.316) - (39.405) (847.356)

Net book value at the end of the period 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

31 December 2011 Cost 2.888.695 2.706.242 11.065.911 1.369.205 1.414.289 745.290 471.780 20.661.412 Accumulated depreciation (356.779) (1.315.028) (5.833.208) (451.837) (931.651) - (236.259) (9.124.762)

Net book value 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

(1) Includes transfers amounting to TL3.529 thousand to investment properties, TL20.219 thousand to intangible assets and TL2.276 thousand to other non-current assets. (2) Due to the sale of Koçnet shares.

F-60 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - INTANGIBLE ASSETS Development Rights Brand costs Other Total

As of 1 January 2012

Cost 851.530 548.952 1.179.695 142.524 2.722.701 Accumulated amortisation (343.288) (50.975) (523.578) (68.045) (985.886)

Net book value 508.242 497.977 656.117 74.479 1.736.815

Acquisitions (Note 3) - - - 73.511 73.511 Additions 36.007 - 190.023 95.509 321.539 Disposals (4.410) - (7.986) 445 (11.951) Transfers (*) 8.760 - 45.274 (22.931) 31.103 Provision for impairment - - - (182) (182) Currency translation differences (429) (33.143) - (292) (33.864) Current period amortisation (62.763) (8.172) (144.358) (25.006) (240.299)

Net book value at the end of the period 485.407 456.662 739.070 195.533 1.876.672

31 December 2012

Cost 879.847 515.809 1.400.741 283.372 3.079.769 Accumulated amortisation (394.440) (59.147) (661.671) (87.839) (1.203.097)

Net book value 485.407 456.662 739.070 195.533 1.876.672

(*) Includes transfers from property, plant and equipment.

Total research and development expenditures incurred in 2012 excluding amortisation amounts to TL281.660 thousand (2011: TL230.707 thousand).

The net book value of intangible assets with indefinite useful lives amounts to TL434.267 thousand and consists of brands (2011: TL467.410 thousand). The useful lives of the related brands are assessed as indefinite, since there is no foreseeable limit to the period over which they are expected to generate net cash inflows for the Group. The change in the net book value of the related brands arise only from currency translation difference. The original currency amounts of the related brands are identical with the prior year.

Brand impairment test

As of 31 December 2012, the brands of Arçelik, a Subsidiary of the Group, with indefinite useful lives have been tested for impairment using the royalty relief method. Sales forecasts, considered in the determination of the brand value, are based on the financial plans approved by the management covering a three to five year period. Beyond the three to five year period, sales forecasts are extrapolated with a 1% to 3% expected growth rate. The royalty income is estimated using these sales forecasts and royalty rates of 2% to 3%. Estimated royalty income with the aforementioned method has been discounted using 7,4% to 9,7% discount rates.

F-61 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - INTANGIBLE ASSETS (Continued)

Development Rights Brand costs Other Total

As of 1 January 2011

Cost 792.433 267.167 1.012.580 123.350 2.195.530 Accumulated amortisation (302.914) (42.831) (405.379) (60.248) (811.372)

Net book value 489.519 224.336 607.201 63.102 1.384.158

Acquisitions (Note 3) 1.726 230.046 - 185 231.957 Additions 75.000 - 140.225 49.544 264.769 Disposals (2.422) - (1.418) (5) (3.845) Transfers (1) 12.528 - 28.342 (20.651) 20.219 Sale of subsidiary (2) (13.230) - - - (13.230) Currency translation differences 1.457 51.761 - 2.965 56.183 Current period amortisation (56.336) (8.166) (118.233) (20.661) (203.396)

Net book value at the end of the period 508.242 497.977 656.117 74.479 1.736.815

31 December 2011

Cost 851.530 548.952 1.179.695 142.524 2.722.701 Accumulated amortisation (343.288) (50.975) (523.578) (68.045) (985.886)

Net book value 508.242 497.977 656.117 74.479 1.736.815

(1) Includes transfers from property, plant and equipment. (2) Due to the sale of Koçnet shares.

F-62 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 17 - GOODWILL 2012 2011

Net book value at the beginning of the period- 1 January 3.761.648 3.526.351

Additions (Note 3) 91.598 226.472 Disposals (1.116) (757) Change in contingent liabilities (*) - (1.596) Currency translation differences (19.087) 11.178

Net book value at the end of the period- 31 December 3.833.043 3.761.648

(*) Contingent liabilities that were booked as of the acquisition date have been settled by taking into account the actual results. The resulting decreases/increases are adjusted reciprocally in goodwill in accordance with IFRS 3, effective for the business combinations carried out before 1 January 2011.

The allocation of the goodwill is as follows:

2012 2011 Cash generating unit Tüpraú 2.736.463 2.736.463 YapÕ Kredi BankasÕ 641.841 642.957 Defy Group (Note 3) 171.160 187.472 Opet 138.984 138.984 AES Entek (Note 3) (*) 138.675 47.077 Other 5.920 8.695

3.833.043 3.761.648

(*) Includes the goodwill arisen from the acquisition of Ayas Enerji and AES Enerji in 2012.

Goodwill impairment tests:

The Group assesses goodwill allocated to cash-generating units for impairment annually or more frequently when there is an indication of impairment as indicated in Note 2.4.17. The recoverable amount of a cash generating unit is determined by calculating the value in use or fair value less costs to sell calculations.

As specified below in details, no impairment has been identified as of 31 December 2012 as a result of impairment tests made on the basis of cash generating units. a) Tüpraú:

The recoverable amount of the cash generating unit is determined using discounted cash flow analyses based on fair value less costs to sell calculations. These fair value calculations include shareholders cash flow projections denominated in USD and are based on the financial plans approved by Tüpraú management covering fourteen years period. The Group considers analysis covering a period longer than five years is more appropriate as to evaluation of operating results and prospective assumptions in the sector and therefore impairment test is based on fourteen years plans. The cash flows for the periods beyond fourteen years are extrapolated using the long term growth rate of 2%.

Other key assumptions used in the fair value calculation model are stated below:

Gross profit margin 4,6% - 8,1% Discount rate (cost of equity) 8,8% - 13,2%

F-63 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 17 – GOODWILL (Continued) b) YapÕ Kredi BankasÕ:

The recoverable amount of the goodwill have been determined based on value in use calculations. Value in use has been calculated by discounting shareholders cash flows with cost of equity. The calculation of value in use is based on projections approved by management covering five years period. The calculation of value in use is most sensitive to net interest margin, discount rates, market share, projected growth rates and local economic indicators.

Discount rates used in the calculations reflect the current market assessment of the Bank's operations. The method for determining the pre-tax discount rate is to first calculate the value in use using post tax cash flows and discount rates, then solving for the pre-tax discount rate which gives the same value in use as in the post-tax calculation.

Discount rate (cost of equity) is assumed to be 13,75%. Terminal value is calculated with a fixed long term growth rate of 4%. c) Defy Group:

The recoverable amount of the goodwill have been determined based on value in use calculations. Value in use is determined by discounting the expected future cash flows to be generated by the cash-generating unit. The projection period for the purposes of goodwill impairment testing is taken as 5 years between 1 January 2013 and 31 December 2017. Cash flows for further periods were extrapolated using a constant growth rate of 3,0% which does not exceed the estimated average growth rate of economy of the country. Weighted average cost of capital rate of 9% - 9,5% is used as after tax discount rate in order to calculate the recoverable amount of the unit. The post-tax rate was adjusted considering the tax cash outflows, other future tax cash flows and differences between the cost of the assets and their tax bases. d) Opet:

The recoverable amount of the cash generating unit is determined using discounted cash flow analyses based on fair value less costs to sell calculations. These fair value calculations include post-tax cash flow projections denominated in USD and are based on the financial plans approved by Opet management covering a 10 year period. The Group considers analysis covering a period longer than five years is more appropriate as to evaluation of operating results and prospective assumptions in the sector and therefore impairment test is based on ten years plans. The cash flows for the periods beyond 10 years are extrapolated using the long term growth rate of 2%.

Other key assumptions used in the fair value calculation model are stated below:

Gross profit margin 3,9% - 5,4% Discount rate (weighted average cost of capital rate) 8,9% e) AES Entek:

The recoverable amount is determined using the value in use based on discounted cash flow analyses. Fair value calculations include post-tax cash flow projections denominated in USD are based on the financial plans approved by management and calculated over the lives of related assets (approximately between 20 - 40 years). Since related assets have definite lives and due to the dynamics of the electricity market, cash flow analysis is based on the related long-term plans.

The recoverable amount calculation is sensitive to the electricity price and discount rate assumptions. Electricity prices are assumed by taking market dynamics/expectations into consideration until the end of 2035, and the electricity prices for the following years are determined by using 1% long term growth rate. 9% weighted average cost of capital rate was used as the post-tax discount rate.

F-64 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 18 - PAYABLES OF FINANCE SECTOR OPERATIONS

2012 2011 Short-term Long-term Total Short-term Long-term Total

Deposits 34.840.837 523.455 35.364.292 33.572.493 695.755 34.268.248 Insurance technical reserves 336.784 252.824 589.608 270.842 261.040 531.882 Other payables of insurance business 78.739 2.684 81.423 54.889 - 54.889

35.256.360 778.963 36.035.323 33.898.224 956.795 34.855.019

Deposits: 2012 2011 Demand Time Total Demand Time Total TL deposits Saving deposits 994.627 11.055.235 12.049.862 970.210 9.684.107 10.654.317 Commercial deposits 1.848.881 5.359.285 7.208.166 1.577.547 4.396.340 5.973.887 Deposits from banks 74.518 178.640 253.158 66.014 146.300 212.314 Funds deposited under repurchase agreements - 855.504 855.504 - 451.878 451.878

2.918.026 17.448.664 20.366.690 2.613.771 14.678.625 17.292.396

Foreign currency deposits Saving deposits 1.260.562 5.436.357 6.696.919 1.293.615 5.071.281 6.364.896 Commercial deposits 1.583.048 4.692.225 6.275.273 1.546.056 5.985.114 7.531.170 Deposits from banks 83.069 388.415 471.484 23.356 549.424 572.780 Funds deposited under repurchase agreements - 1.553.926 1.553.926 - 2.507.006 2.507.006

2.926.679 12.070.923 14.997.602 2.863.027 14.112.825 16.975.852

35.364.292 34.268.248

F-65 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 18 - PAYABLES OF FINANCE SECTOR OPERATIONS (Continued)

Insurance technical reserves: 2012 2011

Mathematical reserve 153.710 161.339 Reserve for unearned premiums 224.174 179.042 Profit share reserve 126.781 121.829 Outstanding claim reserve 68.712 56.897 Insurance IBNR reserve 16.231 12.775

589.608 531.882

Insurance liabilities and reinsurance shares

Gross insurance liabilities

Life mathematical reserves 280.490 283.169 Reserve for unearned premiums 305.963 241.361 Claims provision 140.690 127.565

727.143 652.095

Reinsurance shares

Reserve for unearned premiums (81.789) (62.319) Claims provision (55.746) (57.894)

(137.535) (120.213)

Net insurance technical reserves

Life mathematical reserves 280.490 283.169 Reserve for unearned premiums 224.174 179.042 Claims provision 84.944 69.671

589.608 531.882

F-66 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - FINANCIAL LIABILITIES

2012 2011 Finance Non-Finance Total Finance Non-Finance Total Short-term financial liabilities: Bank borrowings 6.734.292 4.152.678 10.886.970 6.727.112 3.971.759 10.698.871 Debt securities in issue 1.084.425 56.217 1.140.642 1.197.198 - 1.197.198 Factoring payables - 207.750 207.750 - 729 729 Financial leasing payables - 3.448 3.448 - 3.898 3.898 7.818.717 4.420.093 12.238.810 7.924.310 3.976.386 11.900.696

Long-term financial liabilities: Bank borrowings 4.788.025 6.774.324 11.562.349 3.174.071 5.515.965 8.690.036 Debt securities in issue 1.723.522 1.292.405 3.015.927 1.066.232 - 1.066.232 Financial leasing payables - 5.095 5.095 - 7.010 7.010 6.511.547 8.071.824 14.583.371 4.240.303 5.522.975 9.763.278

14.330.264 12.491.917 26.822.181 12.164.613 9.499.361 21.663.974

Group companies operating in the Non-Finance sector have financial liabilities, amounting to TL448.433 thousand (2011: TL390.920 thousand) extended by YapÕ Kredi BankasÕ, a Joint Venture of the Group, which are eliminated during the preparation of consolidated financial statements.

Finance:

On 6 December 2012, YapÕ Kredi BankasÕ, a Joint Venture of the Group, finalised a subordinated debt issuance of USD500 million with 10 years maturity and at a 5,50% coupon rate. The proceeds of the issuance have been qualified for Tier 2 capital treatment.

YapÕ Kredi BankasÕ, obtained a syndication loan amounting to USD557.000.000 from participation of 37 international banks of 16 different countries, consisting 2 credit tranches with 1 year maturity; one tranche amounting to USD161.000.000 with total cost of Libor + 1,35% and other tranche amounting to EUR309.000.000 with total cost of Euribor + 1,35%. The agreement was signed on 27 September 2012.

YapÕ Kredi BankasÕ, obtained a syndication loan amounting to USD703.000.000 from participation of 44 international banks of 21 different countries, consisting 2 credit tranches with 1 year maturity; one tranche amounting to USD132.000.000 with total cost of Libor + 1,45% and other tranche amounting to EUR432.250.000 with total cost of Euribor + 1,45%. The agreement was signed on 27 April 2012.

According to the resolution of the Board of Directors dated 22 February 2012, YapÕ Kredi BankasÕ signed a subordinated loan agreement with UniCredit Bank Austria AG amounting to USD292,5 million, with 10 years maturity and a repayment option by the borrower at the end of 5 years, at an interest rate of 3 months Libor + 8,30%. Aforementioned loan has been restructured after the balance sheet date (Note 37).

On 8 February 2012, YapÕ Kredi BankasÕ, finalised a bond issuance of USD250 million with 5 years maturity and a coupon rate of 6,75% managed by J.P. Morgan Securities Ltd., Standard Chartered Bank and UniCredit Bank AG.

F-67 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - FINANCIAL LIABILITIES (Continued)

The details of the bonds / bills issued in 2011 by YapÕ Kredi BankasÕ are as follows:

- Bonds of TL75.000 thousand (nominal) with an interest rate of 9,08% with 368 days maturity and coupon payment within period of 92 days, - Domestic bills of TL500.000 thousand (nominal) with an interest rate of 10,62% and maturity of 168 days.

The details of the bonds / bills issued in 2012 by YapÕ Kredi BankasÕ are as follows:

- Domestic bills of TL269.299 thousand (nominal) with an interest rate of 9,95% and maturity of 161 days - Bonds of TL75.000 thousand (nominal) with an interest rate of 10,50% with 374 days maturity - Bonds of TL100.000 thousand (nominal) with an interest rate of 10,39% with 406 days maturity - Domestic bills of TL408.265 thousand (nominal) with an interest rate of 10,38% and maturity of 175 days - Domestic bills of TL100.000 thousand (nominal) with an interest rate of 8,81% and maturity of 179 days - Domestic bills of TL75.000 thousand (nominal) with an interest rate of 7,25% and maturity of 172 days - Domestic bills of TL253.610 thousand (nominal) with an interest rate of 6,36% and maturity of 178 days

These bonds and bills can be re-purchased and re-sold in compliance with the relevant legislation. Net outstanding balances are reflected on the balance sheet. In 2012, bonds with a nominal value of TL500.000 thousand, TL269.299 thousand and TL408.265 thousand and bills with a nominal value of TL75.000 thousand have been repaid.

YapÕ Kredi BankasÕ obtained securitisation borrowing in August and September 2011, from Standard Chartered Bank, Wells Fargo, West LB and SMBC amounting to USD112.500.000 and EUR102.500.000, through YapÕ Kredi Diversified Payment Rights Finance Company (“Special Purpose Entity”). The borrowing has floating interest rates based on Euribor / Libor and the maturity is between 2016 and 2023.

In 2006 and 2007, YapÕ Kredi BankasÕ obtained 3 subordinated loans amounting to EUR525.000.000, with 10 years maturity and a repayment option at the end of 5 years. The loan amounts are EUR250.000.000, EUR175.000.000 and EUR100.000.000 and were obtained from Merrill Lynch Capital Corporation, Goldman Sachs International Bank and Citibank, respectively. The interest rates for the loans are Euribor+2%, Euribor+2,25% and Euribor+1,85% respectively, for the first 5 year of the loans.

YapÕ Kredi BankasÕ has securitisation borrowing deal from Standard Chartered Bank and Unicredit Markets and Investment Banking amounting to USD132.000.000 and EUR69.500.000. The borrowing has floating interest rates based on Euribor/Libor, maturity is between 2014 and 2015 and the repayments commenced in 2010.

On 11 October 2010, YapÕ Kredi BankasÕ, signed a loan agreement with UniCredit Luxembourg amounting to USD375.000.000 with 5 years maturity and an interest rate of 5,19%.

Non-Finance:

Tüpraú, a Subsidiary of the Group, signed three different loan agreements regarding the financing of the Fuel Oil Conversion Project in 2011. Tüpraú commenced to utilize the related loans in 2011 and continued to utilize in 2012. The two tranches of the financing package; USD1.111,8 million insured by the Spanish export credit Agency (CESCE) and USD624,3 million insured by the Italian export credit agency (SACE) are non-recourse loans for 4 years (interest accruals of related loans are added on their principal balances) and with a maximum 12 years maturity date. The third tranche, USD359 million, is also a non-recourse loan for 4 years with a maximum 7 years maturity date. As of 31 December 2012, the amount of loan utilized within the scope of the total loan package for insurance payments and capital expenditures is USD1.085,4 million (31 December 2011: USD367,5 million).

F-68 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - FINANCIAL LIABILITIES (Continued)

Details of the loans obtained in 2006 in order to finance the acquisition cost of Tüpraú shares and to re-structure the Group’s existing loans are presented below:

- A loan of USD950.000.000 from a consortium, comprising of JP Morgan Europe Limited and JP Morgan Chase Bank N.A. with a maturity of 7 years and bearing an interest rate of Libor+1,9;

- A loan of USD1.800.000.000 from a consortium comprising of Akbank T.A.ù. Malta Branch, Türkiye Garanti BankasÕ A.ù. Luxembourg Branch, Türkiye øú BankasÕ A.ù. Bahrain Offshore Branch, Standard Bank Plc., Türkiye VakÕflar BankasÕ T.A.O. Bahrain Offshore Branch and Türkiye Halk BankasÕ A.ù. with a maturity of 10 years and bearing an interest rate of Libor+2,3 until 2013 and an interest rate of Libor+2,8 thereafter.

Following the principal repayments of the loans detailed above, the outstanding balance of the related loans decreased to USD666.323.088 as of 31 December 2012.

Koç Holding obtained a loan of USD425.000.000, comprising two tranches of USD120.000.000 and EUR211.500.000 from a consortium comprising 21 financial institutions. Following the principal repayments of USD43.000.000 and EUR211.500.000, the total amount of the related loan has decreased to USD77.000.000 as of 31 December 2012. Interest rate for the remaining portion of USD loan was re-determined as Libor+2,25%.

The details of collaterals, mortgages and pledges given related to the loans of the Group are disclosed in Note 32.

The redemption schedule of long-term bank borrowings is as follows:

2012 2011

1-2 years 2.696.665 3.221.698 2-3 years 2.865.345 1.794.711 3-4 years 1.618.991 1.963.052 4-5 years 1.892.124 1.597.367 5 years and over 5.510.246 1.186.450

14.583.371 9.763.278

F-69 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES

2012 2011 Current income tax liabilities Domestic 879.757 761.107 Foreign 24.950 23.715

Less: Prepaid income tax (699.685) (573.913)

Current income tax liabilities (net) 205.022 210.909

Deferred tax liabilities Domestic 329.990 691.763 Foreign 122.171 127.345

452.161 819.108

Deferred tax assets Domestic (304.460) (363.107) Foreign (66.156) (46.107)

(370.616) (409.214)

Deferred tax liabilities (net) 81.545 409.894

Turkish tax legislation does not permit a parent company, its subsidiaries, joint ventures and associates to file a consolidated tax return. Therefore, tax liabilities, as reflected in consolidated financial statements, have been calculated on a separate-entity basis.

The corporation tax rate is 20% in Turkey. Corporation tax is payable on the total income of the company after adjusting for certain disallowable expenses, income not subject to tax and allowances.

Income tax expenses in the consolidated income statements are summarised as follows: 2012 2011

Current period tax expense 904.707 796.303 Deferred tax expense / (income) (net) (488.916) 60.812

415.791 857.115

Profit before tax 4.517.498 4.707.468

Domestic tax rate 20% 20% Tax calculated at domestic tax rate 903.500 941.494

Income not subject to tax (124.807) (207.598) Investment tax credit (*) (438.993) (23.844) Non-deductible expenses 82.666 79.347 Carry forward tax losses (net effect) (16.411) 55.480 Tax rate differences 6.771 8.356 Other 3.065 3.880

Tax expense 415.791 857.115

(*) TL356.441 thousand and TL60.519 thousand investment tax credits of Tüpraú, a Subsidiary of the Group, and Ford Otosan, a Joint Venture of the Group, respectively; within the scope of investment incentives to be utilized in future periods, have been accounted for as deferred tax income under consolidated income statement in 2012. 65

F-70 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES (Continued)

“The Decree on Government Subsidies for Incentives” regulating investment incentives was published in the Official Gazette and became effective on 16 July 2009. Within the scope of this decree, Tüpraú, a Subsidiary of the Group, was granted a Large-Scaled Investment Incentive Certificate amounting to TL3.966.845 thousand for the Residuum Upgrading Project investment on 7 March 2011. According to the investment incentive regulations, related investment is located in the 1st Region and has a 30% rate of contribution to investment. Furthermore, the incentive requires a minimum expenditure of TL1 billion for refined petroleum products investment. Within this scope, as of 4th quarter of 2012, Tüpraú met the minimum level by investing an amount of TL1.188.137 thousand.

Additionally, Ford Otosan, a Joint Venture of the Group, was granted a Large-Scaled Investment Incentive Certificate amounting to TL550.847 thousand for the modernization of its Transit model on 13 December 2010 and for the new model investment in the lightweight commercial vehicle segment amounting to TL150.983 thousand on 31 December 2010. As of the balance sheet date, within the scope of related investment incentive certificates, an investment amounting to TL218.264 thousand has been realized.

Koç Holding, its Subsidiaries and Joint Ventures, recognise deferred tax assets and liabilities based upon temporary differences arising between their financial statements prepared in accordance with CMB Financial Reporting Standards and the Turkish tax legislations. These temporary differences usually result in the recognition of revenue and expenses in different reporting periods for CMB Financial Reporting Standards and Tax Legislation.

The breakdown of cumulative temporary differences and deferred tax assets and liabilities provided using principal tax rates, are as follows:

Cumulative temporary Deferred tax differences assets/(liabilities) 2012 2011 2012 2011 Property, plant and equipment and intangible assets 5.205.359 4.950.912 (1.057.104) (1.012.501) Investment incentives (2.618.325) (1.418.979) 492.298 122.437 Impairment provision for loans (586.992) (511.448) 116.716 101.677 Provision for employment termination benefits (454.801) (396.312) 91.197 79.605 Provision for the Pension Fund (413.589) (387.643) 82.718 77.529 Carryforward tax losses (391.021) (244.073) 80.079 55.332 Derivative financial instruments (264.420) (70.616) 55.010 13.673 Warranty and assembly provisions (251.791) (261.161) 50.684 52.119 Inventories (111.236) (122.614) 22.326 24.574 Provision for unused vacation (97.267) (85.997) 19.336 17.105 Impairment of financial assets (61.955) (88.908) 12.391 17.781 Expense accruals (net) (47.487) (57.427) 9.498 11.485 Provision for lawsuits (41.444) (41.261) 8.289 8.253 Deferred income (22.543) (13.133) 4.509 2.627 Provision for credit card bonus (18.354) (16.953) 3.671 3.391 Unearned finance income / expense (net) 22.973 26.510 (4.595) (5.320) Research and development incentives - (15.770) - 3.154 Other (net) 350.869 (56.885) (68.568) 17.185

Deferred tax assets / (liabilities) (net) (81.545) (409.894)

Net deferred tax assets and liabilities recognised in the Subsidiaries’ and Joint Ventures’ financial statements prepared in accordance with CMB Financial Reporting Standards, are separately classified under deferred tax assets and liabilities accounts in Koç Holding’s consolidated balance sheet. Temporary differences and deferred tax assets and liabilities presented above, which are prepared on the basis of gross amounts, present the net deferred tax position.

F-71 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES (Continued)

The redemption schedule of carry forward tax losses which are not considered in deferred tax calculation is as follows:

2012 2011

Up to 1 year 613.968 42.719 Up to 2 years 144.126 640.775 Up to 3 years 153.582 161.161 Up to 4 years 368.678 215.134 5 years and above 260.632 655.827

1.540.986 1.715.616

The Group’s investment incentives that can be utilised in the following periods but not considered in the deferred tax calculation amounts to TL300.791 thousand (subject to withholding) (2011: TL273.380 thousand) and TL1.101 thousand (not subject to withholding) (2011: TL1.074 thousand).

Movements in deferred tax assets / (liabilities) are as follows:

2012 2011

Beginning of the period - 1 January (409.894) (313.935)

Charge to the income statement 488.916 (60.812) Charge to equity: - Financial assets fair value reserve (199.819) 25.871 - Hedging reserve 23.415 47.462 - Non-current asset revaluation fund 422 423 Acquisitions (Note 3) (4.358) (84.927) Sale of subsidiary (*) - (10.075) Currency translation differences 19.773 (13.901)

End of the period - 31 December (81.545) (409.894)

(*) Due to the sales of Koçnet shares in 2011.

NOTE 21 - OTHER PAYABLES 2012 2011

Taxes and duties payable 1.929.349 1.865.049 Social security premiums payable 49.653 67.621 Other 121 101

1.979.123 1.932.771

F-72 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS

Short-term employee benefits 2012 2011

Provision for unused vacation 97.751 87.208

Long-term employee benefits 2012 2011

Provision for employment termination benefits 464.308 404.058 Provision for the Pension Fund 413.589 387.643

877.897 791.701

Provision for employment termination benefits:

- Domestic 457.736 398.344 - Foreign 6.572 5.714

464.308 404.058

Under Turkish Labour Law, Koç Holding and its Turkish Subsidiaries and Joint Ventures are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 for women and 60 for men).

As of 31 December 2012, the amount payable consists of one month’s salary limited to a maximum of TL3.033,98 (2011: TL2.731,85) for each year of service.

The liability is not funded as there is no funding requirement.

The provision has been calculated by estimating the present value of the future probable obligation of Koç Holding and its Subsidiaries and Joint Ventures registered in Turkey arising from the retirement of employees.

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. As the maximum liability is revised semi-annually, the maximum amount of TL3.129,25 effective from 1 January 2013 (1 January 2012: TL2.805,04) has been taken into consideration in calculating the reserve for employment termination benefit of the Group.

CMB Financial Reporting Standards require actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly the following actuarial assumptions have been used in the calculation of the total liability. Related rates have been presented by considering the weighted average of actuarial assumptions of the Subsidiaries and Joint Ventures within the scope of consolidation.

2012 2011

Net discount rate (%) 3,86 4,65 Turnover rate to estimate the probability of retirement (%) 97,0 97,5

F-73 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS (Continued)

Movements in the provision for employment termination benefits are as follows: 2012 2011

Beginning of the period - 1 January 404.058 369.839

Interest expense 23.005 15.671 Actuarial losses 11.587 19.896 Increase during the period 108.270 68.374 Payments during the period (82.293) (70.236) Currency translation differences (319) 843 Acquisitions - 747 Sale of subsidiary (*) - (1.076)

End of the period - 31 December 464.308 404.058

(*) Due to the sales of Koçnet shares in 2011.

Provision for the Pension Fund: YapÕ Kredi BankasÕ, a Joint Venture of the Group, accounted for a provision amounting to TL413.589 thousand (Note 2.4.21) for the technical deficit based on the report prepared by a registered actuary in accordance with the technical interest rate of 9,8% determined by the New Law and CSO 1980 mortality table (2011: TL387.643 thousand).

The amounts recognised in the income statement: 2012 2011

Provision (expense)/income for the Pension Fund (Note 28) (25.946) 31.375

Provision for the Pension Fund is determined as follows: 2012 2011

Transferrable pension benefits 782.206 625.288 Transferrable post-employment benefits (12.823) 21.266

Present value of funded obligations 769.383 646.554 Fair value of plan assets (355.794) (258.911)

413.589 387.643

Movements in the provision for the Pension Fund are as follows: Post-employment Pension benefit plans medical benefits 2012 2011 2012 2011

1 January 625.288 591.766 21.266 48.017

Service cost 39.679 35.696 26.792 24.140 Interest cost 61.278 57.993 2.084 4.706 Contributions by plan participants 33.667 30.288 17.861 16.093 Actuarial losses/(gains) 89.625 (22.179) (63.775) (68.406) Benefits paid (67.331) (68.276) (17.051) (3.284)

31 December 782.206 625.288 (12.823) 21.266

F-74 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS (Continued)

Movements in the fair value of the Pension Fund assets are as follows: 2012 2011

Beginning of the period - 1 January 258.911 220.765

Return on plan assets 90.867 40.437 Employer contributions 39.680 35.697 Employee contributions 33.667 30.288 Benefits paid (67.331) (68.276)

End of the period - 31 December 355.794 258.911

The fair value of pension assets are comprised as follows: 2012 2011 Amount (%) Amount (%)

Government bonds and treasury bills 86.646 24 97.728 38 Property, plant and equipment 58.031 16 58.028 22 Bank placements 132.673 38 83.858 32 Short term receivables 9.500 3 9.684 4 Other 68.944 19 9.613 4

355.794 100 258.911 100

The principal actuarial assumptions used are as follows: 2012 2011

Discount rate (%) 9,80 9,80

Mortality rate:

Based on statistical data, the average life expectancy for men and women retiring at the ages of 66 and 64, respectively, is 13 years for men and 18 years for women.

F-75 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - OTHER ASSETS AND LIABILITIES a) Other current assets 2012 2011

VAT receivables 518.247 506.772 Deposits and guarantees given 442.871 295.230 Prepaid expenses 305.624 245.481 Inter-banking clearing account 297.462 3.408 Advances given 273.013 307.668 Taxes and funds deductible 202.918 322.968 Precious metals 85.895 301.694 Assets obtained as loan and receivable collaterals (*) 84.264 62.380 Payments for credit card settlements 67.831 52.178 Biological assets - 31.354 Other 247.551 186.352

2.525.676 2.315.485

(*) Includes assets obtained in exchange of impaired loans and advances given to customers and trade receivables.

b) Other non-current assets 2012 2011

Prepaid expenses 447.963 481.288 Spare parts and other materials 374.591 339.490 Advances given (*) 274.487 726.746 Other 54.292 80.219

1.151.333 1.627.743

(*) Advances given for constructions in progress of Tüpraú, a Subsidiary of the Group, amounting to TL437.700 thousand which was classified under advances given account as of 31 December 2011, were transferred to construction in progress account in 2012 (Note 15).

F-76 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - OTHER ASSETS AND LIABILITIES (Continued) c) Short-term provisions and other current liabilities 2012 2011 Provisions: Cost accruals of construction contracts 294.786 240.836 Provision for warranty and assembly 231.470 239.407 Provision for lawsuits 136.735 113.835 Provision for losses related with loan commitments (Note 32.c) 136.635 107.944 Provision for Energy Market Regulation Authority participation share 19.241 18.495 Provision for credit card campaigns 18.354 16.953 Provision for the advertising publication agreement 8.259 8.547 Other 227.570 143.145

1.073.050 889.162

Other current liabilities:

Credit card payables 2.085.463 1.675.103 Inter-banking clearing account 652.208 128.033 Revenue share (*) 483.236 - Expected receipt of bank transactions 411.520 104.327 Blocked accounts 317.515 291.903 Payables to personnel and premium accruals 301.067 274.840 Advances received 228.229 329.752 Deferred income 177.467 107.770 Accruals for sales and other marketing expenses 175.481 136.128 Import deposits and transfer orders 88.452 62.898 Transitory accounts 64.006 55.934 Collaterals obtained for derivative transactions 50.797 33.721 Deposits and guarantees received 41.776 33.611 Accruals for license expenses 24.255 21.621 Export commitment accruals 19.053 18.626 Other 351.376 418.421

5.471.901 3.692.688

6.544.951 4.581.850

(*) In accordance with the Petroleum Market License Regulation and Liquefied Petroleum Gas (“LPG”) Market Regulation, revenue shares collected by Tüpraú, but not recognised in the statement of comprehensive income, have been recorded as revenue share within “Other short-term liabilities” and blocked in banks as demand deposits with special interest rates within “Cash and cash equivalents” according to the decision of National Petroleum Reserves Commission.

F-77 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - OTHER ASSETS AND LIABILITIES (Continued) d) Long-term provisions and other non-current liabilities

2012 2011 Provisions: Warranty provision 115.557 112.935

Other non-current liabilities: Deposits and guarantees received 74.464 70.981 Government grants 23.335 31.781 Revenue share (*) - 400.086 Other 58.323 46.461

271.679 662.244

(*) Following the “Draft Complementary Petroleum Stock Law” that is prepared in 2012 and will regulate the requirements to keep the national petroleum stocks; Tüpraú, a Subsidiary of the Group, classified the revenue share in other current liabilities as of balance sheet date, which was recorded under other non-current liabilities in prior period.

The movements of provisions for warranty and assembly, cost accruals of construction contracts and provision for lawsuits are as follows for the year ended 31 December 2012:

Provisions for Cost accruals of warranty and construction Provision for assembly contracts lawsuits

As of 1 January 2012 352.342 240.836 113.835

Additions 511.023 66.260 44.878 Disposals / Payments (513.018) - (22.018) Currency valuation - (12.310) - Currency translation differences (3.320) - 40

As of 31 December 2012 347.027 294.786 136.735

As of 1 January 2011 275.269 146.382 285.380

Additions 476.615 62.165 27.616 Disposals / Payments (*) (422.395) - (199.344) Acquisitions 8.175 - - Currency valuation - 32.289 - Currency translation differences 14.678 - 183

As of 31 December 2011 352.342 240.836 113.835

(*) The movement of provision for lawsuits includes the payment of Tüpraú, a Subsidiary of the Group, on 30 June 2011 regarding the tax penalty amounting to TL175 million.

F-78 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 24 - ASSETS HELD FOR SALE

According to the resolution dated 29 June 2012 of the Board of Directors of Tat Konserve, a Subsidiary of the Group, Harranova Besi ve TarÕm Ürünleri A.ù., a subsidiary of the Company, decided to terminate purchasing livestock assets and to cease its livestock business. In accordance with the contract signed on 7 December 2012 between Tat Konserve and CMB licensed independent valuation company, a valuation has been performed regarding fixed assets of the livestock business and impairment amounting to TL15.187 thousand has been identified. Since the mentioned fixed assets are available for immediate sale and the sale is highly probable, the related assets were presented as assets held for sale as of the balance sheet date. The sale of the aforementioned assets was approved on 21 February 2013 by the Company’s General Assembly and the Competition Authority subsequent to the balance sheet date (Note 37).

Due to the liquidation of Otoyol Sanayi, a Subsidiary of the Group, assets and liabilities of the related subsidiary have been classified as held for sale in accordance with IFRS 5 in the consolidated financial statements as of 31 December 2012 and 2011.

A summary of information regarding assets and liabilities held for sale is as follows:

Assets held for sale 2012 2011

Cash and cash equivalents 9.943 5.612 Trade receivables 248 93 Property, plant and equipment 30.178 44 Other assets 309 411

Provision for impairment (15.187) -

25.491 6.160

Liabilities held for sale 2012 2011

Trade payables 185 183 Provision for employment termination benefits 111 92 Other liabilities 3.683 5.242

3.979 5.517

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY

Share Capital

Koç Holding adopted the registered share capital system available to companies registered with the CMB and set a limit on its registered share capital representing registered type shares with a nominal value of 1 Kr. Koç Holding’s registered and issued share capital is as follows:

2012

Limit on registered share capital (historical) 3.000.000 Issued share capital in nominal value 2.535.898

Companies in Turkey may exceed the limit on registered share capital in the event of the issuance of free capital shares to existing shareholders.

The shareholding structure of Koç Holding is as follows:

2012 2011 Share % Amount Share % Amount

Temel Ticaret ve YatÕrÕm A.ù. 42,59 1.079.984 42,39 1.023.794 Koç Family Members 25,82 654.608 26,02 628.196 Rahmi M. Koç ve MahdumlarÕ Maden, ønúaat, Turizm, UlaútÕrma, YatÕrÕm ve Ticaret A.ù. 0,10 2.659 0,10 2.532

Total Koç Family members and companies owned by Koç Family members 68,51 1.737.251 68,51 1.654.522

Vehbi Koç VakfÕ 7,15 181.405 7,15 172.767 Koç Holding Emekli ve YardÕm SandÕ÷Õ VakfÕ 1,99 50.452 1,99 48.049 Other 22,35 566.790 22,35 539.803

Paid-in share capital 100,00 2.535.898 100,00 2.415.141

Adjustment to share capital (*) 967.288 967.288

Total share capital 3.503.186 3.382.429

(*) Adjustment to share capital represents the restatement effect of cash and cash equivalent contributions to share capital measured in accordance with the CMB Financial Reporting Standards. Adjustment to share capital has no use other than being transferred to paid-in share capital.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY (Continued)

The analysis of shares by group is as follows:

Group Unit of shares TL’000 Nature of shares

A 67.877.342.230 678.773 Registered B 185.712.462.770 1.857.125 Registered

253.589.805.000 2.535.898

In the Articles of Association (“the Articles”) Koç Holding sets out the following privileges for A-group shares:

1. In accordance with Article 11, pre-emptive rights are used in purchase of new shares issued for their own groups; however, pre-emptive rights not used by B-group shareholders, can be used by A-group shareholders within the terms of CMB Legislation.

2. In accordance with Article 25, A-group shareholders have two voting rights for each share owned at the General Assembly meeting (except for resolutions to change the Articles).

Revaluation Funds

Increases/decreases of carrying amounts as a result of revaluations recognised directly in the equity are as follows:

2012 2011

Financial assets fair value reserve 521.913 (4.244) Hedging reserve: - Cash flow hedges (248.540) (205.197) - Net investment hedges (58.363) (63.691) Non-current assets revaluation fund 23.913 27.815

Total revaluation fund 238.923 (245.317)

The movements in the revaluation funds are presented in the statement of comprehensive income and statement of changes in equity.

Restricted Reserves

The details of the restricted reserves are as follows: 2012 2011

Legal reserves 197.229 170.535 Special reserves 2.139.103 2.139.103

2.336.332 2.309.638

Within the scope of the Exemption for Sale of Participation Shares, the 75% portion of gains in statutory financial statements arising from the sale of investments was transferred to “Special Reserves”. As a result of the expiration of the five year period stated in the related exemption, TL394.334 thousand portion of the special reserves balance became distributable as of 31 December 2012.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY (Continued)

Dividend Distribution

Listed companies are subject to dividend requirements regulated by the CMB as follows:

According to Article 19 of the Capital Market Law numbered 6362 effective from 30 December 2012, listed 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 related regulation. Regarding the profit distribution policies of listed companies, CMB may set different principles on companies with similar qualifications.

Unless setting aside the reserves required by law and the profit share for shareholders as determined in Articles of Association; no decision can be given to set aside profits for other reserves, to transfer profits to the following year or to distribute share from the profits to the holders of the usufruct right certificates, to the members of the board of directors or to the employees. Furthermore no dividend can be distributed to the members of the aforementioned group unless the determined dividend shares are paid.

In listed companies, dividend distribution is held evenly to all existing shares as of the date of dividend distribution without considering the dates of issuance and acquisition of the shares.

In accordance with the current regulations, profit distribution should be in accordance with Communiqué Serial: IV No:27 issued by CMB regarding allocation basis of profit of listed companies, the companies’ Articles of Association and the publicly announced dividend distribution policy of the companies. Depending on the General Assembly’s decision the distribution of the relevant amount may be realised as cash, as bonus shares, partly as cash and bonus shares or the relevant amount can be retained within the company.

In addition, it is stipulated that companies which have the obligation to prepare consolidated financial statements, calculate the net distributable profit amount by taking into account the net profits for the period in the consolidated financial statements that will be prepared and announced to the public in accordance with the Communiqué XI No: 29, “Principles of Financial Reporting in Capital Markets” issued by CMB providing the profits can be met by the sources in their statutory records.

In accordance with Article 32 of the Company’s Articles of Association, a contribution of a maximum 2% (according to the decision of the General Assembly) of the amount remaining after the first legal reserves set aside over income before tax, financial obligations and initial dividends, is paid to Koç Holding Emekli ve YardÕm SandÕ÷Õ VakfÕ. In addition, save for the first dividend determined according to the Capital Markets Law, 3% of the amount remaining after the first legal reserves, financial obligations and 5% of the paid-in capital are deducted from the income before tax, is allocated to share certificate owners. However, the share to be paid to the owners of the dividend shares may not be more than 1/10 of the amount remaining after the first legal reserves and first dividend calculated according to CMB regulations are deducted from the net profit.

As of 31 December 2012, the total amount of net income after the deduction of accumulated losses at statutory records and inflation adjustment difference that can be subject to dividend distribution is TL2.597.032 thousand.

It was resolved at Koç Holding’s Ordinary General Assembly Meeting held on 10 April 2012 to distribute TL306.000 thousand of the total first level dividend amounting to TL419.589 thousand as cash; remainder of TL113.589 thousand and second level dividend amounting to TL7.168 thousand, together with a total amount of TL120.757 thousand, to be paid as bonus shares by increasing the share capital and to distribute TL7.500 thousand (gross=net) to Koç Holding Emekli ve YardÕm SandÕ÷Õ VakfÕ and TL59.311 thousand to the holders of usufruct right certificates as cash dividends.

In accordance with the resolution of General Assembly, it was resolved at Koç Holding’s Board of Directors Meeting held on 4 May 2012, to increase issued capital of TL2.415.141 thousand to TL2.535.898 thousand by adding TL120.757 thousand from 2011 current year profit to the capital and to distribute bonus shares to the shareholders at the rate of 5%.

Within the scope of the relevant resolutions, total TL372.811 thousand cash dividend payment were completed as of April 2012 and issued capital increase of Koç Holding from TL2.415.141 thousand to TL2.535.898 thousand were registered as of 1 June 2012.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 26 - REVENUE 2012 2011

Domestic revenue 56.283.320 52.359.052 Foreign revenue 23.851.635 18.719.300

Gross revenue 80.134.955 71.078.352

Less: Discounts (2.599.352) (2.108.965)

Revenue 77.535.603 68.969.387

Sales of goods 76.228.680 67.953.591 Sales of services 1.306.923 1.015.796

Revenue 77.535.603 68.969.387

Finance sector operating revenue is disclosed in Note 5.

NOTE 27 - EXPENSES BY NATURE

Expense by nature includes cost of goods sold, marketing, selling and distribution expenses, general administrative expenses and research and development expenses.

2012 2011

Raw materials and supplies 54.177.587 47.704.633 Changes in work in progress, finished goods 1.044 (1.205.133) Cost of merchandise sold 10.975.819 10.481.173 Personnel expenses 3.771.411 3.333.312 Depreciation and amortisation charges 1.149.217 1.035.051 Transportation, distribution and storage expenses 1.109.446 857.355 Energy and utility expenses 988.890 815.095 Warranty and assembly costs 508.985 487.595 Advertisement and promotion expenses 530.301 476.609 Rent expenses 440.401 429.804 Maintenance and repair expenses 365.600 309.046 Outsourcing expenses 281.436 230.940 Taxes, duties and charges 193.021 176.954 Litigation and consultancy expenses 118.397 126.378 Information systems and communication expenses 141.144 118.848 Insurance expenses 108.285 97.050 Travel expenses 110.196 93.393 Royalty and license expenses 85.799 68.692 Grants and donations 48.306 49.333 Sales, incentives and premium expenses 95.915 46.223 Other 995.757 918.325

76.196.957 66.650.676

F-83 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 27 - EXPENSES BY NATURE (Continued)

The functional breakdown of amortisation, depreciation and personnel expenses is as follows:

2012 2011 Depreciation and amortisation charges Cost of sales 748.985 691.361 Marketing, selling and distribution expenses 75.326 61.015 General administrative expenses 250.036 231.595 Research and development expenses 74.870 51.080

1.149.217 1.035.051

Total depreciation charges capitalised in 2012 is TL24.860 thousand (2011: TL17.314 thousand).

Personnel expenses Cost of sales 1.394.825 1.209.553 Marketing, selling and distribution expenses 546.969 450.616 General administrative expenses 1.777.638 1.621.786 Research and development expenses 51.979 51.357

3.771.411 3.333.312

NOTE 28 - OTHER INCOME/EXPENSES 2012 2011 Other income Income from incentives 47.133 37.383 Gain on sale of property, plant and equipment and scraps 35.344 112.169 Reversal of provisions 22.810 49.043 Rent income 17.227 14.746 Gain on sale of subsidiary - 194.629 Other 147.504 191.149

270.018 599.119

Other expenses Provision for loan impairment (429.446) (173.914) Provision for lawsuits and other provision expenses (194.387) (83.183) Provision for YapÕ Kredi BankasÕ Worldcard points (66.369) (55.521) Provisions expenses for the Pension Fund (Note 22) (25.946) 31.375 Loss on sale of property, plant and equipment (16.181) (9.178) Provision for impairment on asset held for sale (15.187) - Product recall expenses (14.734) (30.459) Loss on sale of subsidiary (3.697) (43.665) Competition authority penalty (Automotive segment) - (28.609) Other (54.885) (54.619)

(820.832) (447.773)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 29 - FINANCIAL INCOME/EXPENSES

2012 2011 Financial income Foreign exchange gains 1.646.783 1.674.624 Interest income 288.715 353.228 Credit finance income 304.573 302.846 Gains on derivative financial instruments 49.505 68.307 Other financial income 4.117 4.535

2.293.693 2.403.540

Financial expenses Foreign exchange losses (1.470.899) (2.580.837) Interest expenses (551.663) (411.957) Credit finance charges (119.393) (140.244) Losses on derivative financial instruments (78.854) (34.765) Other financial expenses (28.520) (25.418)

(2.249.329) (3.193.221)

NOTE 30 - RELATED PARTY DISCLOSURES a) Related party balances

2012 2011 Joint Ventures Other Total Joint Ventures Other Total

Cash and cash equivalents 2.318.934 - 2.318.934 1.366.004 - 1.366.004 Trade receivables 152.319 43.396 195.715 351.733 16.628 368.361 Trade payables 233.613 49.265 282.878 205.802 38.804 244.606 Loans and advances to customers 34.574 22.655 57.229 44.726 17.495 62.221 Deposits 82.676 1.438.528 1.521.204 120.302 1.082.548 1.202.850 Financial liabilities 311.868 - 311.868 358.675 - 358.675 b) Related party transactions

2012 2011 Joint Ventures Other Total Joint Ventures Other Total

Sales of goods and services 4.797.908 68.842 4.866.750 3.393.399 43.753 3.437.152 Purchases of goods and services 1.728.607 341.582 2.070.189 1.701.543 210.305 1.911.848 Interest income 113.602 - 113.602 101.361 - 101.361 Interest expense (-) 23.702 - 23.702 18.242 - 18.242

Presents post elimination balances and transactions with the “Joint Ventures” of the Group, which are accounted through proportionate consolidation.

As of 31 December 2012, cash and cash equivalents, loans and advances to customers, deposits and financial liabilities balances include post elimination balances of the Group with YapÕ Kredi BankasÕ. TL74.649 thousand of trade receivables is composed of post elimination balances due to the petroleum products sales of Tüpraú to Opet and THY Opet. TL177.526 thousand of trade payables is composed of post elimination balances due to vehicle purchases of Otokoç from Ford Otosan and Tofaú.

TL4.327.153 thousand (2011: TL3.002.929 thousand) of sales of goods and services is composed of post elimination balances arising on sales of Tüpraú’s petroleum products to Opet and THY Opet for the year ended 31 December 2012. TL1.305.061 thousand (2011: TL1.332.471 thousand) of purchases of goods and services is composed of post elimination balances due to Otokoç’s vehicle purchases from Ford Otosan and Tofaú. 80

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - RELATED PARTY DISCLOSURES (Continued) c) Key management compensation

The key management of Koç Holding is identified as the members of the Board of Directors (including the President) and Group Presidents. Total compensation provided to key management personnel of Koç Holding in 2012 amounted to TL66.097 thousand (2011: TL55.211 thousand). The amount is comprised of short-term employee benefits.

NOTE 31 - GOVERNMENT GRANTS

The Group is entitled to the following incentives and rights: a) 100% exemption from customs duty on machinery and equipment imported, b) Exemption from VAT on investment goods supplied from home and abroad, c) Incentives under the jurisdiction of the research and development law (100% corporate tax exemption, Social Security Institution incentives, etc.), d) Inward processing permission certificates, e) Cash refund from Tübitak-Teydeb for research and development expenditures, f) Exemption from taxes, duties and charges, g) Discounted corporate tax incentive, h) Insurance premium employer share incentive, i) Corporate tax incentive within the scope of investment incentive exemption (Note 20), j) Brand supporting government grants given by the Undersecretariat of Foreign Trade (Turquality), k) Incentive of environmental costs support by law 9715, l) Patent incentives.

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES a) Contingent Liabilities:

As a result of preliminary research conducted in the banking sector regarding the interest rates, an investigation process is initiated on some banks including YapÕ Kredi BankasÕ, a Joint Venture of the Group, according to the Competition Board decision dated 2 November 2011 and numbered 11-55/1438-M to determine whether there is a violation of the article 4 of the Protection of the Competition Law No. 4054.

In addition, in the letter of Competition Board dated 11 July 2012 notified to Tüpraú, a Subsidiary of the Group, with reference to the decision taken by Competition Board dated 4 July 2012, numbered 12-36/1040-M(2), it is stated that an investigation process has been initiated on Tüpraú and Opet, a Joint Venture of the Group, to determine whether there is a violation of articles 4 and 6 of the Protection of Competition Act, No. 4054.

As of 8 March 2013, Competition Board has not yet resolved any penal sanction within the scope of related investigations. b) Guarantees:

Finance:

The debt securities subject to repurchase agreements:

As of 31 December 2012, debt securities subject to re-purchase agreements total TL2.812.791 thousand (31 December 2011: TL3.586.563 thousand).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

Debt securities pledged as collateral:

As of 31 December 2012, debt securities, amounting to TL1.464.588 thousand (2011: TL1.686.325 thousand) included in the financial assets are pledged;

Non - Finance:

The summary of guarantees received and given regarding the non-finance sector companies is as follows;

Guarantees given: 2012 2011

Letters of guarantee (*) 2.412.499 2.131.902 Letters of credit 1.479.065 2.665.571 Equity shares (**) 159.314 202.714 Guarantee notes 137.260 408.384 Other 8.255 65.698

4.196.393 5.474.269

(*) The amount of letters of guarantee given in connection with the bank borrowings of Ford Otosan, a Joint Venture of the Group and Arçelik, a Subsidiary of the Group is TL281.360 thousand and TL161.265 thousand, respectively.

(*) The Group’s equity shares in Arçelik and Tüpraú with a nominal value of TL31.600 thousand and TL127.714 thousand, respectively, (2011: TL75.000 thousand Arçelik - TL127.714 thousand Tüpraú) are pledged as collateral (without prejudice to voting and dividend rights associated with these shares) against the loans obtained in 2006 to finance the cost of the Tüpraú acquisition and to refinance the Group’s existing loans (Note 19).

Guarantees received: 2012 2011

Letter of guarantee 3.571.897 3.297.857 Mortgages 2.071.880 1.884.363 Direct crediting limit 813.655 674.203 Bill of guarantees 326.522 320.159 Guarantee notes 249.313 261.516 Other commitments 204.610 202.725

7.237.877 6.640.823

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Collaterals/pledges/mortgages (“CPM”) of the Group, except finance sector, as of 31 December 2012 and 2011 are as follows (Total amounts in the table below also contains TL denominated CPM balances. Foreign currency CPMs are presented by their TL equivalents): 2012 2011

A. Total amount of CPM’s given in the name of its own legal personality 4.027.157 5.014.955 -TL 867.792 1.591.906 -USD 2.346.272 2.769.219 -EUR 803.309 603.276 -Other 9.784 50.554 B. Total amount of CPM’s given on behalf of the fully consolidated companies (*) 58.714 263.990 -TL 381 36.339 -USD 57.935 70.834 -EUR 398 156.817 C. Total amount of CPM’s given on behalf of third parties for ordinary course of business (*) 110.522 195.324 -USD 110.522 117.122 -EUR - 78.202 D. Total amount of other CPM’s given - - i) Total amount of CPM’s given on behalf of the majority shareholder - - ii) Total amount of CPM’s given to on behalf of other group companies which are not in scope of B and C. - - iii) Total amount of CPM’s given on behalf of third parties which are not in scope of C. - -

4.196.393 5.474.269

(*) As of 31 December 2012, TL137.260 thousand (31 December 2011: TL408.384 thousand) of the total balance is related with bills of guarantees provided for the loan obtained from a consortium including 21 financial institutions to meet various financing needs of Koç Group companies (Subsidiaries and Joint Ventures) within the main operations of the parent company Koç Holding (Note 19). c) Commitments:

Finance:

Custody services:

The Group’s Joint Ventures in the finance sector provide custody services to third parties. The assets held in a fiduciary capacity are not included in these consolidated financial statements. As of 31 December 2012, the Group has custody accounts amounting to TL12.268.171 thousand (2011: TL15.662.739 thousand).

Credit related commitments: 2012 2011 Letters of guarantee - TL 5.636.169 4.971.996 - Foreign currency 4.674.000 4.435.575 Letter of credits 2.891.963 2.503.492 Acceptance credits 60.661 79.458 Other 1.059.600 1.195.949

14.322.393 13.186.470

Less: Provisions (Note 23.c) (136.635) (107.944)

14.185.758 13.078.526 83

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Non - finance:

Energy i) Several financial and non-financial covenants exist with respect to the loans obtained in 2006 in order to finance the acquisition cost of Tüpraú and to re-finance the Group’s existing loans. In the event that these covenants are not fulfilled, the aforementioned creditors have the right to recall the outstanding loans (Note 19). ii) National petroleum stock is provided under the obligation of refinery; fuel and LPG distribution licensees to keep a minimum of twenty times the average daily product supplied in their own storages or licensed storage facilities, whether as a whole or separately according to their status. According to the Petroleum Market Law, in order to ensure a sustainable oil market, to prevent risks arising from crisis or extraordinary cases, and to meet the requirements of international agreements, it is required to keep petroleum stock at an amount equal to at least ninety days of the net import in the previous year’s average daily consumption, and refineries have been obliged to retain the complementary portion of the national petroleum stock.

Automotive i) In the scope of the borrowing agreements, Ford Otosan, a Joint Venture of the Group, committed to deposit its proceeds on exports by the amounts of EUR61.560.000, EUR8.208.000, EUR24.624.000 and EUR15.595.200 through deposit accounts at Garanti BankasÕ A.ù., TC. Ziraat BankasÕ A.ù., VakÕflar BankasÕ T.A.O. and Türkiye øhracat Kredi BankasÕ A.ù. (“Eximbank”) , respectively. The Company has fulfilled these commitments as of 31 December 2012. Additionally, Ford Otosan committed to realize an export of EUR15.595.200 in connection with the 4 months-term borrowing agreement amounting to EUR15.361.272 obtained from Eximbank in November 2012. ii) As of 31 December 2012, Tofaú, a Joint Venture of the Group, carried out an export sales amounting to USD291.356.552 within the scope of an export incentive certificate, requiring an export commitment of USD569.793.000 to be fulfilled by 15 March 2013 (By 2011, Group carried out an export transaction amounting to USD436.904.400 within the scope of an export incentive certificate, requiring an export commitment of USD718.961.400 to be fulfilled by 3 May 2012.)

Consumer durable i) Arçelik, a Subsidiary of the Group, has export commitments of USD968.510.365 (2011: USD1.244.265.732) within the context of the export incentive certificates as of 31 December 2012.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial Instruments and Financial Risk Management

Financial Risk Management

The Group is exposed to variety of financial risks due to its operations. These risks include credit risk, market risk (foreign exchange risk and interest rate risk) and liquidity risk. The Group’s overall risk management strategy focuses on the unpredictability of financial markets and targets to minimise potential adverse effects on the Group’s financial performance. The Group also uses derivative financial instruments to hedge risk exposures.

Financial risk management is carried out by the Subsidiaries and Joint Ventures of the Group under policies approved by their own Boards of Directors.

A) Credit Risk

Credit risk is the risk that a counterparty cannot fulfill its obligations in the agreements that the Group is party to. The Group monitors the credit risk by credit ratings and limitations to the total risk of a single counterparty. The credit risk is diversified as a result of large number of entities comprising the customer bases and the penetration to different business segments.

Credit risk management procedures

Finance:

Credit risk which is inherent in all products ranging from loans to customers and commitments to letters of credit is monitored through detailed credit policies and procedures by the management of companies operating in the finance sector.

YapÕ Kredi BankasÕ identifies loan limits for each customer considering statutory regulations, the internal scoring system, financial analysis reports and geographical and industry concentration and considering credit policies determined by the Board of the Directors each year. The limits defined by the Board of Directors for each correspondent bank are followed up daily by Treasury Management for the transactions related with placements with domestic and correspondent banks or treasury operations such as forward buy and sell transactions. Moreover, daily positions and limit controls for each Treasury and Fund Management employee authorised for market transactions are followed by the system. In the loan granting process, liquid collaterals are obtained to the greatest extent possible. Long-term projections of the companies are analysed both by financial analysis specialists and head office when granting long-term and project finance loans. Since credit and interest risks are higher in long-term commitments, their pricing is coordinated with Treasury Management.

Corporate and commercial credit customers are followed up by the related system of YapÕ Kredi BankasÕ by their corresponding credit ratings. Furthermore, by the use of the credit rating systems developed for customers with different characteristics, counterparty default risk is calculated.

Non - Finance:

The Group’s non-finance sector companies are exposed to credit risk arising from their trade receivables, financial assets, derivative instruments and bank deposits.

Major portion of trade receivables stem from the dealers over which the Group exerts a significant control mechanism. Credit risk by dealer is followed up by taking into account the relevant customers’ financial position, past experience and other related factors; and guarantees are obtained to the greatest extent possible. Moreover, the risk management program (E-risk), which enables the follow-up of credit risk of trade receivables arising from the Group’s activities, aims to minimise the potential adverse effects of market fluctuations.

In financial asset management, it is ensured that investments are made in highly liquid instruments with low level of volatility and financially strong banks are selected for transactions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Credit risk details

The maximum exposure of the Group’s financial assets to credit risk is as follows:

Loans and Cash Derivative Trade advances to and cash Financial financial 31 December 2012 receivables customers equivalents assets instruments

Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 8.340.746 42.903.535 9.698.622 10.828.834 264.470 A. Net book value of neither past due nor impaired financial assets (*) 7.292.445 40.124.108 9.698.622 10.828.834 264.470 B. Net book value of restructured financial assets 30.392 204.301 - - - C. Net book value of past due but not impaired financial assets 958.065 2.448.963 - - - D. Net book value of impaired assets 59.844 469.372 - - - - Past due 59.844 469.372 - - - - Gross amount 266.048 1.449.395 - - - - Impairment (206.204) (980.023) - - - - Secured with guarantees 59.005 235.102 - - - - Not past due ------Gross amount 6.746 - - - - - Impairment (6.746) - - - - - Secured with guarantees - - - - - E. Collective provision for impairment (-) - (343.209) - - -

Loans and Cash Derivative Trade advances to and cash Financial financial 31 December 2011 receivables customers equivalents assets instruments

Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 9.382.416 38.188.570 6.276.080 10.730.064 378.356 A. Net book value of neither past due nor impaired financial assets (*) 8.046.407 36.061.293 6.276.080 10.722.739 378.356 B. Net book value of restructured financial assets 55.446 175.104 - - - C. Net book value of past due but not impaired financial assets 1.218.537 1.956.389 - - - D. Net book value of impaired assets 62.026 370.393 - 7.325 - - Past due 62.026 370.393 - - - - Gross amount 256.893 1.213.134 - - - - Impairment (194.867) (842.741) - - - - Secured with guarantees 62.026 235.497 - - - - Not past due - - - 7.325 - - Gross amount 8.428 - - 31.610 - - Impairment (8.428) - - (24.285) - - Secured with guarantees - - - - - E. Collective provision for impairment (-) - (374.609) - - -

(*) Includes receivables from related parties.

As of 31 December 2012 the Finance segment is exposed to credit risk arising from credit related commitments in the amount of TL14.322.393 thousand (2011: TL13.186.470 thousand) (Note 32). By taking the related risk into consideration, the maximum credit risk amount, to which the Group is exposed, is TL86.358.600 thousand (2011: TL78.141.956 thousand). 86

F-91 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Trade receivables a) Details of neither past due nor impaired or restructured trade receivables’ credit quality:

2012 2011

New customers (less than 3 months) 402.479 539.803 Public institutions and corporations 115.895 148.976 Other customers with no payment defaults 6.490.868 7.177.636 Customers with prior collection delays 283.203 179.992

7.292.445 8.046.407

As of 31 December 2012, trade receivables that are not due and not impaired amounting to TL4.473.504 thousand are secured with guarantees (2011: TL4.488.933 thousand). b) Analysis of past due trade receivables:

Not impaired 2012 2011

Past due up to 1 month 306.221 356.861 Past due 1 - 3 months 554.280 806.081 Past due 3 - 12 months 72.679 35.093 Past due over 1 year 24.885 20.502

958.065 1.218.537

As of 31 December 2012, past due but not impaired trade receivables amounting to TL554.380 thousand are secured by guarantee (2011: TL176.564 thousand).

Major portion of overdue receivables that are past due but not impaired are related to Tüpraú, a subsidiary of the Group. The Group management does not estimate a collection risk for these receivables as the significant portion of these receivables is due from government entities to which sales are made regularly.

Impaired 2012 2011

Past due up to 3 months 31.766 27.927 Past due 3 - 6 months 12.744 13.663 Past due over 6 months 221.538 215.303

Less: Impairment (206.204) (194.867)

59.844 62.026

As of 31 December 2012, impaired receivables amounting to TL59.005 thousand are secured by guarantees (2011: TL62.026 thousand).

F-92 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Loans and advances to customers a) As of 31 December 2012, the details of neither past due nor impaired or restructured corporate and commercial loans’ credit quality are as follows: Rating Class Concentration Level

Above average 1 – 4 43,7% Average 5+ - 6 49,4% Below average 7+ - 9 6,9% b) Details of past due but not impaired loans and advances to customers:

Corporate and Financial commercial Consumer Credit card Factoring leasing 31 December 2012 loans loans receivables receivables(*) receivables Total

Past due up to 1 month 776.841 424.000 288.142 230.454 3.663 1.723.100 Past due 1-2 months 230.398 143.909 103.146 34.130 2.677 514.260 Past due 2-3 months 105.261 56.102 35.564 9.250 5.426 211.603

Total 1.112.500 624.011 426.852 273.834 11.766 2.448.963

Corportate and Financial commercial Consumer Credit card Factoring leasing 31 December 2011 loans loans receivables receivables receivables Total

Past due up to 1 month 1.141.360 3.737 269.068 - 3.599 1.417.764 Past due 1-2 months 222.328 80.755 87.217 - 3.705 394.005 Past due 2-3 months 74.945 30.420 35.958 - 3.297 144.620

1.438.633 114.912 392.243 - 10.601 1.956.389

(*) Factoring receivables was included in the related analysis beginning from 2012. c) Sectoral breakdown of loans and advances to customers:

2012 % 2011 %

Production 8.498.143 20 8.369.849 22 Consumer loans 9.775.632 23 8.537.709 22 Credit card receivables 7.234.299 17 5.183.373 14 Food and retail 2.057.787 5 1.647.941 4 Public sector 576.953 1 735.686 2 Financial institutions 1.313.072 3 514.901 1 Real estate 218.257 1 209.224 1 Other sectors 13.229.392 30 12.989.887 34

42.903.535 100 38.188.570 100

F-93 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Cash and cash equivalents

As of 31 December 2012 and 2011, total cash and cash equivalents are neither past due nor impaired. A significant portion of the bank deposits that are classified under cash and cash equivalents are held in banks operating in Turkey.

Financial assets

As of 31 December 2012, total debt securities classified under financial assets are neither past due nor impaired (As of 31 December 2011, YapÕ Kredi BankasÕ, a Joint Venture of the Group, has booked provision regarding the impairment for foreign securities amounting to TL24.285 thousand).

B) Market Risk a) Foreign Exchange Risk

The difference between the foreign currency denominated and foreign currency indexed assets and liabilities of the Group are defined as the “Net foreign currency position” and it is the basis of currency risk. Another important dimension of the currency risk is the changes of the exchange rates of different foreign currencies in “Net Foreign Currency Position” (cross currency risk).

YapÕ Kredi BankasÕ, a joint venture of the Group, keeps the currency risk exposure within the related legal limits, follows the currency risk on a daily basis and presents the results to the Asset and Liability Committee. Other Subsidiaries and Joint Ventures of the Group keep the currency risk exposure within the limits approved by Koç Holding, the parent company, and by their Board of Directors. Koç Holding, the parent company, continuously reviews the risk limits of the Subsidiaries and Joint Ventures, taking into account the overall economic conditions and developments in the market and determine new limits, when necessary. Derivative contracts such as swaps, options and forwards are also used as instruments for currency risk management for hedging purposes, when needed.

Assets and liabilities denominated in foreign currency held by the Group before consolidation adjustments are as follows: 2012 2011

Assets 34.510.986 31.890.331 Liabilities (42.966.093) (40.639.404)

Net balance sheet position (8.455.107) (8.749.073)

Off-balance sheet derivative instruments net position 2.613.518 3.121.175

Net foreign currency position (5.841.589) (5.627.898)

Tüpraú, a Subsidiary of the Group, manages its foreign currency risk resulting from its net financial liabilities by reflecting the effects of the changes in foreign currencies to its selling prices of petroleum products. As of 31 December 2012, Tüpraú has raw materials and petroleum products amounting to TL3.049.562 thousand (2011: TL3.409.851 thousand).

In addition, Tüpraú has USD1.085 million outstanding borrowing regarding the financing of the ongoing Fuel Oil Conversion Project (Note 19), for which finance costs (including also foreign exchange losses to a certain extent) are capitilized.

The repayment obligation related to the loans of Tofaú, a joint venture of the Group, obtained for investment purposes, is guaranteed by Fiat Auto S.p.A and Peugeot Citroen Automobiles S.A. (the “Purchasers”) through future purchases. Accordingly, the exposure to foreign exchange and interest rate risks are undertaken by the Purchasers. Therefore, the net foreign currency liability position should be considered lower by TL378.995 thousand when assessing foreign exchange risk (2011: TL492.825 thousand).

F-94 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

As of 31 December 2012 and 2011, if EUR and USD had appreciated/depreciated by 10% against TL with all other variables held constant, profit before tax would have been TL546.259 thousand (2011: TL513.507 thousand) lower/higher, mainly as a result of foreign exchange losses/gains on the translation of the foreign exchange position as presented in detail in the table below. The net effect of the related foreign exchange losses/gains on the net profit (equity holders) is approximately TL191.000 thousand.

The impact of 10% exchange increase in income statement (pre-tax profit):

USD EUR Other Total 31 December 2012

Foreign currency net position (*) (546.335) (28.556) 28.632 (546.259)

31 December 2011

Foreign currency net position (*) (557.861) 24.389 19.965 (513.507)

(*) Related balances do not include the foreign exchange impacts of hedged items.

The impact of 10% exchange increase in comprehensive income statement (pre-tax profit):

USD EUR Other Total 31 December 2012

Hedged items (*) (6.952) (154.720) - (161.672)

31 December 2011

Hedged items (*) (8.141) (137.284) - (145.425)

(*) Related balances include foreign exchange impacts that are within the scope of cash flow hedge and hedge of net investments in foreign operations.

F-95 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

31 December 2012 USD (*) EUR (*) Other Total (TL Equivalent) (TL Equivalent) Assets: Cash and cash equivalents 3.706.666 1.086.752 1.043.913 10.207.130 Financial assets 2.686.235 143.658 115.025 5.241.349 Trade receivables 288.872 719.212 720.270 2.926.585 Receivables from finance sector operations 5.129.528 2.248.513 520.882 14.952.607 Inventories 45.747 40.121 1.251 177.151 Other assets 350.747 97.621 151.347 1.006.164

Total assets 12.207.795 4.335.877 2.552.688 34.510.986

Liabilities: Payables from finance sector operations 5.857.801 2.246.228 1.040.979 16.765.550 Financial liabilities 6.406.754 3.546.494 336.348 20.097.318 Trade payables 1.979.408 371.281 17.228 4.418.862 Other liabilities 560.624 278.597 29.818 1.684.363

Total liabilities 14.804.587 6.442.600 1.424.373 42.966.093

Net balance sheet position (2.596.792) (2.106.723) 1.128.315 (8.455.107)

Derivative financial assets 7.131.403 3.123.831 584.265 20.643.019 Derivative financial liabilities (7.599.429) (1.299.698) (1.426.259) (18.029.501)

Off-balance sheet derivative instruments net position (468.026) 1.824.133 (841.994) 2.613.518

Net foreign currency position (3.064.818) (282.590) 286.321 (5.841.989)

Net foreign currency position of monetary items (3.110.565) (322.711) 285.070 (6.018.740) Fair value of derivative instruments held for hedging (118.920) (19.577) - (258.026)

(*) Presented in original currencies.

F-96 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

31 December 2011 USD (*) EUR (*) Other Total (TL Equivalent) (TL Equivalent) Assets: Cash and cash equivalents 1.334.708 1.261.435 366.886 5.970.711 Financial assets 2.646.330 171.290 120.843 5.538.094 Trade receivables 235.768 782.592 617.167 2.975.009 Receivables from finance sector operations 5.265.862 2.266.451 486.765 15.972.205 Inventories 47.554 60.426 363 237.856 Other assets 325.157 111.098 310.768 1.196.456

Total assets 9.855.379 4.653.292 1.902.792 31.890.331

Liabilities: Payables from finance sector operations 6.467.907 2.049.927 1.003.398 18.230.237 Financial liabilities 4.065.090 3.601.268 369.084 16.848.410 Trade payables 1.619.833 426.173 45.781 4.146.964 Other liabilities 485.583 198.524 11.423 1.413.793

Total liabilities 12.638.413 6.275.892 1.429.686 40.639.404

Net balance sheet position (2.783.034) (1.622.600) 473.106 (8.749.073)

Derivative financial assets 6.715.246 2.766.193 267.735 19.712.184 Derivative financial liabilities (6.885.578) (1.245.459) (541.189) (16.591.009)

Off-balance sheet derivative instruments net position (170.332) 1.520.734 (273.454) 3.121.175

Net foreign currency position (2.953.366) (101.866) 199.652 (5.627.898)

Net foreign currency position of monetary items (3.000.920) (162.292) 199.289 (5.865.754) Fair value of derivative instruments held for hedging (111.494) (1.473) - (214.200)

(*) Presented in original currencies.

F-97 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Import and export details (TL Equivalent)

Export 2012 2011

USD 11.478.615 8.929.752 EUR 7.116.546 6.715.770 Other 1.210.886 930.288

19.806.047 16.575.810

Import

USD 42.945.373 35.718.777 EUR 4.807.653 5.050.652 Other 35.583 57.461

47.788.609 40.826.890 b) Interest Rate Risk

The Group is exposed to interest rate risk arising from the rate changes on interest-bearing liabilities and assets. The Group manages this risk by offsetting the residual repricing terms of interest-bearing assets and liabilities and by using derivative instruments for hedging purposes.

The monitoring of interest rate sensitive assets and liabilities and sensitivity analysis of YapÕ Kredi BankasÕ, a joint venture of the Group, regarding the effect of interest rate fluctuations on the financial statements are performed by the Risk Management Department for all interest sensitive instruments. The results are presented to the Board of Directors in the context of Asset and Liability Management function. By using sensitivity and scenario analyses, the possible loss effects on the equity are analysed due to the interest rate volatility not only within current year but also for the future periods. The effects of the volatility of market interest rates on positions and on cash flows are also closely monitored.

The weighted average effective annual interest rates (%) for the financial assets and liabilities of the Group are as follows:

2012 2011 USD EUR TL USD EUR TL Assets Cash and cash equivalents 2,56 1,25 7,61 5,00 2,52 11,11 Financial assets - At fair value through profit or loss 4,30 0,88 6,81 8,00 5,75 8,32 - Available-for-sale financial assets 7,05 4,49 9,20 6,80 5,83 9,84 - Held-to-maturity financial assets 5,50 4,68 8,97 6,70 4,70 9,92 Loans and advances to customers 5,23 5,41 12,52 5,04 5,87 13,72

Liabilities Financial liabilities 3,34 2,67 8,57 2,49 3,05 9,35 Deposits 2,71 3,88 8,19 4,13 3,88 10,72

F-98 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Group’s financial assets and liabilities in carrying amounts classified in terms of periods remaining to contractual repricing dates are as follows:

Up to 3 months - 1 year - 5 years Non-interest 31 December 2012 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 8.498.709 - - - 1.975.516 10.474.225 Balances with Central Banks - - - - 4.970.513 4.970.513 Financial assets - At fair value through profit or loss 37.620 47.073 39.926 145.759 37.430 307.808 - Available-for-sale financial assets 1.054.719 1.227.707 1.600.761 3.339.549 149.724 7.372.460 - Held-to-maturity financial assets 816.347 731.087 163.440 1.203.364 - 2.914.238 - Time deposits - 283.136 118.455 - - 401.591 Loans and advances to customers 18.949.322 10.922.156 9.126.944 2.434.980 1.470.133 42.903.535

29.356.717 13.211.159 11.049.526 7.123.652 8.603.316 69.344.370

Liabilities Deposits 26.877.170 2.206.496 397.343 37.711 5.845.572 35.364.292 Financial liabilities 11.830.442 6.252.867 6.188.263 2.532.163 18.446 26.822.181

38.707.612 8.459.363 6.585.606 2.569.874 5.864.018 62.186.473

Up to 3 months - 1 year - 5 years Non-interest 31 December 2011 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 5.685.012 - - - 1.111.232 6.796.244 Balances with Central Banks - - - - 4.524.256 4.524.256 Financial assets - At fair value through profit or loss 13.365 84.457 32.650 8.902 20.489 159.863 - Available-for-sale financial assets 417.801 1.204.744 894.345 1.358.180 118.015 3.993.085 - Held-to-maturity financial assets 1.048.324 606.225 1.360.692 3.340.888 - 6.356.129 - Time deposits - 339.002 - - - 339.002 Loans and advances to customers 9.087.166 8.744.442 12.003.384 7.099.472 1.254.106 38.188.570

16.251.668 10.978.870 14.291.071 11.807.442 7.028.098 60.357.149

Liabilities Deposits 26.440.975 1.992.989 299.746 57.747 5.476.791 34.268.248 Financial liabilities 9.372.573 7.056.582 4.367.173 846.919 20.727 21.663.974

35.813.548 9.049.571 4.666.919 904.666 5.497.518 55.932.222

F-99 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The interest rate position is as follows:

2012 2011 Fixed interest rate financial instruments

Financial assets Cash and cash equivalents 7.873.608 5.065.591 Financial assets at fair value through profit or loss 262.681 116.903 Available for sale financial assets 5.119.203 3.190.473 Loans and advances to customers 29.112.857 28.458.863

42.368.349 36.831.830

Financial liabilities Deposits 29.375.917 28.202.380 Financial liabilities 9.548.510 5.219.609

38.924.427 33.421.989

Floating interest rate financial instruments

Financial assets Cash and cash equivalents 625.101 619.421 Financial assets at fair value through profit or loss 7.697 22.471 Available for sale financial assets 2.103.533 684.597 Loans and advances to customers 12.320.545 8.475.601

15.056.876 9.802.090

Financial liabilities Deposits 142.803 589.077 Financial liabilities 17.255.225 16.423.638

17.398.028 17.012.715

As of 31 December 2012, if the annual interest rate on TL basis were 100 base points higher/lower, and all other variables remained constant, due to the changes in the carrying values of financial assets; profit before tax would be TL12.471 thousand (2011: TL1.969 thousand) and due to its direct effect on equity, equity would be TL245.984 thousand (2011: TL82.168 thousand) lower/higher.

F-100 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued) c) Liquidity Risk

Liquidity risk comprises the risks arising from the inability to fund the increase in the assets, the inability to cover the liabilities due and the operations performed in illiquid markets. In the framework of liquidity risk management, funding sources are being diversified and sufficient cash and cash equivalents are held. In order to meet instant cash necessities it is ensured that the level of cash and cash equivalent assets does not fall below a predetermined portion of the short term liabilities.

Undiscounted contractual cash flows of the financial liabilities of the Group as of 31 December 2012 and 2011 are as follows:

Total Book contractual Up to 3 months - 5 years 31 December 2012 value cash outflow 3 months 1 year 1 - 5 years and over

Financial liabilities: Financial liabilities 26.822.181 29.457.310 4.046.515 9.030.314 11.403.104 4.977.377 Deposits 35.364.292 35.850.665 33.253.239 1.608.052 515.668 473.706 Trade payables 8.355.236 8.365.684 7.778.664 587.020 - -

Derivative financial instruments: Cash inflows - 27.584.161 9.489.777 6.460.109 10.814.002 820.273 Cash outflows - (28.555.785) (9.483.792) (6.424.092) (11.685.402) (962.499)

Total Book contractual Up to 3 months - 5 years 31 December 2011 value cash outflow 3 months 1 year 1 - 5 years and over

Financial liabilities: Financial liabilities 21.663.974 22.841.653 4.223.502 8.549.301 8.861.912 1.206.938 Deposits 34.268.248 35.065.345 31.936.354 2.375.592 680.884 72.515 Trade payables 9.186.672 9.199.509 9.018.586 180.923 - -

Derivative financial instruments: Cash inflows - 25.478.732 7.669.981 3.660.338 13.385.214 763.199 Cash outflows - (25.991.221) (7.662.152) (3.630.924) (13.869.059) (829.086)

F-101 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The redemption schedule of Finance sector’s credit related commitments according to their original maturities are as follows:

5 years 31 December 2012 Indefinite Up to 1 year 1 - 5 years and over Total

Letters of guarantee (*) 4.809.717 1.675.578 3.298.374 526.500 10.310.169 Letters credit 1.684.577 1.102.064 105.322 - 2.891.963 Acceptance credits 60.661 - - - 60.661 Other 125.932 407.431 442.230 84.007 1.059.600

6.680.887 3.185.073 3.845.926 610.507 14.322.393

5 years 31 December 2011 Indefinite Up to 1 year 1 - 5 years and over Total

Letters of guarantee (*) 4.582.561 1.591.824 2.734.079 499.107 9.407.571 Letters credit 1.363.537 901.128 238.827 - 2.503.492 Acceptance credits 79.458 - - - 79.458 Other 456.961 323.873 407.644 7.471 1.195.949

6.482.517 2.816.825 3.380.550 506.578 13.186.470

(*) Letters of guarantees are presented above based on contractual expiry dates and can be called at an earlier date.

Capital Risk Management

The Group’s main objectives for capital management are to keep the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may decide on the amount of dividends paid to shareholders, issue of new shares or sell assets to decrease net financial debt.

The Group monitors capital on the basis of the net financial debt/total equity ratio. Net financial debt is calculated as total financial liabilities less cash and cash equivalents (excluding blocked deposits).

Net financial debt/total equity ratio as of 31 December 2012 and 2011 is as follows:

2012 2011

Total financial liabilities 26.822.181 21.663.974 Cash and cash equivalents (9.919.192) (6.318.760)

Net financial debt 16.902.989 15.345.214 Equity 26.751.245 23.270.824

Net financial debt/total equity ratio 63% 66%

F-102 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 34 - FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES

Fair value of financial instruments

Estimated fair values of financial instruments have been determined by the Group by using available market information and appropriate valuation methodologies. However, judgment is necessarily required to interpret market data. Accordingly, estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange.

The following methods and assumptions are used to estimate the fair values of financial instruments:

Financial assets

Carrying values of significant portion of cash and cash equivalents are assumed to reflect their fair values due to their short-term nature.

Carrying values of trade receivables are assumed to approximate their fair values.

Fair values of held to maturity financial assets are determined based on market price, or in the case where the price cannot be determined, on market prices quoted for the securities of the same nature in terms of interest, maturity and other similar conditions.

Estimated fair values of loans and advances to customers are determined by calculating the discounted cash flows using the current market interest rates for loans with fixed interest rates. For loans with floating interest rates, it is assumed that the carrying values approximate the fair values.

Financial liabilities

Fair values of short term borrowings and trade payables are assumed to approximate their carrying values due to their short-term nature. Estimated fair values of long-term financial liabilities are determined by calculating the discounted cash flows, using the current market interest rates for borrowings with fixed interest rates.

Estimated fair values of demand deposits indicate the amount to be paid at the withdrawal; and therefore equal to their book values. Estimated fair values of deposits with fixed interest rates are determined by calculating the discounted cash flows, using the market interest rates applied to similar deposits and other debts. In case where the maturities are short, the carrying values are assumed to reflect the fair values.

In the framework of the methods and assumptions explained above, carrying and fair values of financial assets and liabilities as of 31 December 2012 and 2011 are presented in the following table:

2012 2011 Carrying Fair Carrying Fair value value value value Assets Cash and cash equivalents 10.474.225 10.474.225 6.796.244 6.877.276 Held-to-maturity financial assets (*) 3.315.829 3.562.815 6.695.131 6.840.434 Loans and advances to customers 42.903.535 43.704.530 38.188.570 39.224.870

Liabilities Deposits 35.364.292 35.553.227 34.268.248 34.430.757 Financial liabilities 26.822.181 26.903.754 21.663.974 21.640.877

(*) Includes time deposits with a maturity of over 3 months.

F-103 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 34 - FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES (Continued)

Fair Value Estimation

The classification of the Group’s financial assets and liabilities at fair value is as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); Level 3: Inputs for the asset or liability that is not based on observable market data

The Group’s assets and liabilities measured at fair value as of 31 December 2012 and 2011 are as follows:

31 December 2012 Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 300.948 6.860 - 307.808 Available-for-sale financial assets - Debt securities 6.401.852 820.884 - 7.222.736 - Equity securities 35.792 - - 35.792 Derivative financial instruments - 264.470 - 264.470

Total assets 6.738.592 1.092.214 - 7.830.806

Derivative financial instruments - 670.478 - 670.478

Total liabilities - 670.478 - 670.478

31 December 2011 Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 152.820 7.042 - 159.863 Available-for-sale financial assets - Debt securities 3.054.500 820.570 - 3.875.070 - Equity securities 37.803 - - 37.803 Derivative financial instruments - 378.356 - 378.356

Total assets 3.245.123 1.205.968 - 4.451.092

Derivative financial instruments - 553.290 - 553.290

Total liabilities - 553.290 - 553.290

NOTE 35 - EARNINGS PER SHARE

2012 2011 Earnings per share: Profit for the period 4.101.707 3.850.353 Profit attributable to non-controlling interest (1.786.827) (1.725.884)

Profit attributable to equity holders of the parent 2.314.880 2.124.469 Weighted average number of shares with nominal value Kr 1 each 253.589.805.000 241.589.805.000

Earnings per share (Kr) 0,913 0,838

F-104 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 36 - SUPPLEMENTARY CASH FLOW INFORMATION

As of 31 December 2012 and 2011, supplementary information for the details included in the consolidated cash flow statements:

2012 2011 Changes in provisions: Provision for lawsuits 22.900 41.882 Provision for warranty and assembly (5.315) 54.220 Cost accruals for construction contracts 53.950 62.165 Insurance technical reserves 57.726 66.714 Provision for loans and doubtful receivables 647.198 511.427 Provision for employment termination benefits and Pension Fund 86.196 2.844 Provision for impairment on inventories (285) (7.260) Provision for impairment on property, plant and equipment 1.123 (50.989) Provision for impairment on assets held for sale 15.187 - Other provisions 125.047 9.463

1.003.727 690.466

Add back net interest income: Interest income from non-finance sector (Note 29) (288.715) (353.228) Interest income from finance sector (Note 5) (5.278.570) (4.123.943) Interest expense from non-finance sector (Note 29) 551.663 411.957 Interest expense from finance sector (Note 5) 2.918.537 2.349.464

(2.097.085) (1.715.750)

Net changes in the operating assets and liabilities:

Finance: Reserve deposits with central banks (306.615) (1.861.631) Receivables from finance sector operations (4.473.085) (8.984.211) Payables from finance sector operations 1.040.622 7.356.531 Financial assets 855.539 (736.818) Associates (4.402) (54.708)

(2.887.941) (4.280.837)

Non-Finance: Inventories 133.378 (2.502.091) Trade receivables 997.583 (4.119.275) Other assets (216.921) (1.295.204) Trade payables (832.083) 1.552.114 Other liabilities 1.534.553 1.005.580

1.616.510 (5.358.876)

Currency translation differences (42.980) (139.573)

(1.314.411) (9.779.286)

Cash and cash equivalents: Cash and cash equivalents (Note 6) 10.474.225 6.796.244 Other balances with Central Banks (Note 7) 174.651 35.009 Cash and cash equivalents held for sale (Note 24) 9.943 5.612 Less: Blocked deposits (Note 6) (555.033) (477.484)

10.103.786 6.359.381

100

F-105 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDøNG A.ù.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 37 - EVENTS AFTER THE BALANCE SHEET DATE i) In relation to the authorization granted with the article 17 of the Articles of Association of Koç Holding, on 1 March 2013, the Board of Directors of the Company has resolved to issue bonds, financial bills or similar debt instruments for a total amount up to USD1 billion or an equivalent foreign currency or equivalent Turkish Lira amount within one year, and to be sold to real or legal entities established outside Turkey through one or more issuance. It is also resolved to authorize Company Management for making related applications to the Capital Markets Board and other authorities; determining the sale, the currency, Turkish Lira and/or foreign currency amounts, the terms and interest rates of the debt instruments to be issued according to the market conditions as of the date of issuance that will be realized within one year following the date of the approval of CMB; and completing all necessary domestic and overseas actions including the listing on foreign markets. ii) Arçelik, a Subsidiary of the Group, applied to Capital Markets Board of Turkey on 24 January 2013 for an approval of a bond issuance, up to USD1 billion or its equivalent in any other foreign currency to be sold to investors in financial markets outside of Turkey. The application for the related bond issuance is approved by the Board. iii) The merger of Aygaz, a Subsidiary of the Group, with its 100% owned subsidiary Mogaz Petrol GazlarÕ A.ù., by transferring all assets and liabilities based on closing balance sheet dated 30 June 2012, was registered on 22 January 2013 and the merger process has been completed. iv) On 22 January 2013, YapÕ Kredi BankasÕ, a Joint Venture of the Group, issued Eurobond for non-Turkish resident real person and corporate entities amounting to USD250 million nominal value with a semiannual coupon payment at an interest rate of 4% and with a maturity of 22 January 2020. v) By utilizing its early payment option, YapÕ Kredi BankasÕ, a Joint Venture of the Group, repaid the subordinated loan amounting to USD292,5 million on 9 January 2013 which was obtained from UniCredit Bank Austria AG on 22 February 2012; and obtained a new subordinated loan from UniCredit Bank Austria AG amounting to USD 292,5 million with 10 years maturity and 5,5% fixed interest rate and a repayment option by the borrower at the end of 5 years. vi) In accordance with the resolution of the Board of Directors of Tat Konserve, a Subsidiary of the Group, dated 3 January 2013; due to cessation of livestock business, the related fixed assets of Harranova Besi were decided to be sold to Namet GÕda Sanayi ve Ticaret A.ù. for a consideration of TL15.500 thousand. The transaction was approved by the General Assembly and Competition Authority on 21 February 2013.

………………………..

101

F-106 KOÇ HOLDİNG A.Ş.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011 TOGETHER WITH THE INDEPENDENT AUDITORS’ REPORT

(CONVENIENCE TRANSLATION INTO ENGLISH OF THE INDEPENDENT AUDITORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

F-107 F-108 F-109 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011

CONTENTS INDEX

CONSOLIDATED BALANCE SHEETS ...... 1-2

CONSOLIDATED STATEMENTS OF INCOME ...... 3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ...... 4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ...... 5

CONSOLIDATED STATEMENTS OF CASH FLOW ...... 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 7-93

NOTE 1 GROUP’S ORGANISATION AND NATURE OF OPERATIONS...... 7-11 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ...... 12-30 NOTE 3 BUSINESS COMBINATIONS ...... 31-33 NOTE 4 JOINT VENTURES ...... 33 NOTE 5 SEGMENT REPORTING ...... 34-38 NOTE 6 CASH AND CASH EQUIVALENTS ...... 39 NOTE 7 BALANCES WITH CENTRAL BANKS ...... 39 NOTE 8 FINANCIAL ASSETS ...... 40-41 NOTE 9 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...... 42 NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS ...... 43-45 NOTE 11 TRADE RECEIVABLES AND PAYABLES ...... 46 NOTE 12 RECEIVABLES FROM FINANCE SECTOR OPERATIONS ...... 47-48 NOTE 13 INVENTORIES ...... 48-49 NOTE 14 INVESTMENT PROPERTIES ...... 49 NOTE 15 PROPERT, PLANT AND EQUIPMENT ...... 50-51 NOTE 16 INTANGIBLE ASSETS ...... 52-53 NOTE 17 GOODWILL...... 54 NOTE 18 PAYABLES OF FINANCE SECTOR OPERATIONS ...... 55-56 NOTE 19 FINANCIAL LIABILITIES ...... 57-58 NOTE 20 TAX ASSETS AND LIABILITIES ...... 59-61 NOTE 21 OTHER PAYABLES ...... 61 NOTE 22 PROVISIONS FOR EMPLOYEE BENEFITS ...... 62-64 NOTE 23 OTHER ASSETS AND LIABILITIES ...... 64-66 NOTE 24 ASSETS HELD FOR SALE ...... 67 NOTE 25 EQUITY ...... 68-70 NOTE 26 REVENUE ...... 70 NOTE 27 EXPENSES BY NATURE ...... 71 NOTE 28 OTHER INCOME/EXPENSES ...... 72 NOTE 29 FINANCIAL INCOME/EXPENSES ...... 72 NOTE 30 RELATED PARTY DISCLOSURES ...... 73 NOTE 31 GOVERNMENT GRANTS ...... 74 NOTE 32 COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES ...... 74-76 NOTE 33 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT ...... 77-89 NOTE 34 FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES ...... 90-91 NOTE 35 EARNINGS PER SHARE ...... 91 NOTE 36 SUPPLEMENTARY CASH FLOW INFORMATION ...... 92 NOTE 37 EVENTS AFTER THE BALANCE SHEET DATE ...... 93

F-110 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2011 2011 2011 2010 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

ASSETS

Current Assets: Cash and cash equivalents 6 2.781.015 3.597.990 6.796.244 9.937.525 Balances with central banks 7 1.851.320 2.395.180 4.524.256 2.666.100 Financial assets 8 500.724 647.821 1.223.670 1.957.543 Derivative financial instruments 10 86.246 111.582 210.768 334.260 Trade receivables 11 3.790.282 4.903.749 9.262.692 5.098.243 Receivables from finance sector operations 12 7.479.627 9.676.909 18.278.713 15.298.856 Inventories 13 2.778.489 3.594.723 6.790.072 4.193.098 Other current assets 23 947.494 1.225.838 2.315.485 1.812.804

Assets held for sale 24 2.521 3.261 6.160 356.755

Total current assets 20.217.718 26.157.053 49.408.060 41.655.184

Non-current assets: Financial assets 8 3.938.297 5.095.245 9.624.409 8.323.212 Investments accounted for using the equity method 9 41.654 53.891 101.795 47.087 Derivative financial instruments 10 68.577 88.723 167.588 33.721 Trade receivables 11 48.991 63.383 119.724 91.259 Receivables from finance sector operations 12 8.198.987 10.607.595 20.036.686 14.379.808 Investment properties 14 37.137 48.046 90.755 79.820 Property, plant and equipment 15 4.720.783 6.107.602 11.536.650 10.445.852 Intangible assets 16 710.703 919.485 1.736.815 1.384.158 Goodwill 17 1.539.262 1.991.449 3.761.648 3.526.351 Deferred tax assets 20 167.450 216.641 409.214 351.226 Other non-current assets 23 666.070 861.741 1.627.743 824.839

Total non-current assets 20.137.911 26.053.801 49.213.027 39.487.333

Total assets 40.355.629 52.210.854 98.621.087 81.142.517

(*) Euro (“EUR”) and US Dollar (“USD”) amounts presented above have been translated from Turkish Lira (“TL”) for convenience purposes only, at the official TL bid rate announced by the Central Bank of the Republic of Turkey (“CBRT”) at 31 December 2011, and therefore do not form part of these consolidated financial statements (Note 2.1.3).

These consolidated financial statements as of and for the year ended 31 December 2011 have been approved for issue by the Board of Directors (“BOD”) on 9 March 2012 and signed on behalf of the BOD by the CFO (Chief Financial Officer), Ahmet F. Ashaboğlu and by Accounting Director, Emine Alangoya. These consolidated financial statements will be finalised following their approval in the General Assembly.

The accompanying notes form an integral part of these consolidated financial statements.

F-111 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2011 2011 2011 2010 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000 LIABILITIES Current liabilities: Payables of finance sector operations 18 13.871.112 17.946.013 33.898.224 26.789.839 Financial liabilities 19 4.869.750 6.300.331 11.900.696 8.845.844 Derivative financial instruments 10 93.143 120.506 227.624 104.680 Trade payables 11 3.759.175 4.863.504 9.186.672 7.549.368 Other payables 21 790.888 1.023.226 1.932.771 1.545.288 Current income tax liabilities 20 86.304 111.657 210.909 209.867 Provisions for employee benefits 22 35.685 46.169 87.208 76.296 Other current liabilities 23 1.874.887 2.425.668 4.581.850 4.034.661

Liabilities held for sale 24 2.258 2.921 5.517 124.184

Total current liabilities 25.383.202 32.839.995 62.031.471 49.280.027

Non-current liabilities: Payables of finance sector operations 18 391.519 506.536 956.795 534.770 Financial liabilities 19 3.995.122 5.168.764 9.763.278 8.032.450 Derivative financial instruments 10 133.262 172.410 325.666 332.599 Provisions for employee benefits 22 323.963 419.133 791.701 788.857 Deferred tax liabilities 20 335.178 433.643 819.108 665.161 Other non-current liabilities 23 270.989 350.598 662.244 530.739

Total non-current liabilities 5.450.033 7.051.084 13.318.792 10.884.576

Total liabilities 30.833.235 39.891.079 75.350.263 60.164.603

Equity: Paid-in share capital 25 988.273 1.278.597 2.415.141 2.415.141 Adjustment to share capital 25 395.813 512.091 967.288 967.288

Total share capital 1.384.086 1.790.688 3.382.429 3.382.429 Share premium 3.800 4.916 9.286 9.286 Revaluation funds 25 (100.383) (129.873) (245.317) 19.803 Currency translation differences 58.337 75.474 142.563 47.210 Restricted reserves 25 945.101 1.222.742 2.309.638 2.291.920 Prior years’ income 2.526.263 3.268.400 6.173.681 5.089.065 Profit for the period 869.330 1.124.712 2.124.469 1.734.479

Equity holders of the parent 5.686.534 7.357.059 13.896.749 12.574.192 Non-controlling interest 3.835.860 4.962.716 9.374.075 8.403.722

Total equity 9.522.394 12.319.775 23.270.824 20.977.914

Total liabilities and equity 40.355.629 52.210.854 98.621.087 81.142.517

Commitments and contingent liabilities 32 (*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the official TL bid rate announced by the CBRT on 31 December 2011, and therefore do not form part of these consolidated financial statements (Note 2.1.3). The accompanying notes form an integral part of these consolidated financial statements.

F-112 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2011 2011 2011 2010 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Revenue 26 30.040.967 41.776.731 69.767.141 48.822.282 Interest, fee, commission and similar income 5 2.572.218 3.577.078 5.973.720 4.990.154

Total revenue 5 32.613.185 45.353.809 75.740.861 53.812.436

Cost of sales (-) 27 (26.535.969) (36.902.476) (61.627.135) (42.468.261) Interest, fee, commission and similar expenses (-) (1.271.890) (1.768.765) (2.953.838) (2.152.528)

Total costs 5 (27.807.859) (38.671.241) (64.580.973) (44.620.789)

Gross profit non-finance 3.504.998 4.874.255 8.140.006 6.354.021 Gross profit finance 5 1.300.328 1.808.313 3.019.882 2.837.626

Gross profit 5 4.805.326 6.682.568 11.159.888 9.191.647

Marketing, selling and distribution expenses (-) 27 (1.161.982) (1.615.921) (2.698.588) (2.198.669) General administrative expenses (-) 27 (1.283.648) (1.785.117) (2.981.145) (2.604.373) Research and development expenses (-) 27 (60.955) (84.768) (141.562) (123.864) Other income 28 257.974 358.754 599.119 463.978 Other expense (-) 28 (192.806) (268.128) (447.773) (627.008)

Operating profit 5 2.363.909 3.287.388 5.489.939 4.101.711

Share of profit/(loss) of investments accounted for using the equity method 9 3.105 4.317 7.210 3.163

Financial income 29 1.034.938 1.439.246 2.403.540 1.919.901 Financial expense (-) 29 (1.374.966) (1.912.108) (3.193.221) (2.138.824)

Profit before tax 5 2.026.986 2.818.843 4.707.468 3.885.951

Tax expense (369.064) (513.242) (857.115) (747.551) - Current income tax expense (-) 20 (342.879) (476.828) (796.303) (747.629) - Deferred tax income/(expense) 20 (26.185) (36.414) (60.812) 78

Profit for the period 1.657.922 2.305.601 3.850.353 3.138.400

Attributable to: Non-controlling interest 743.147 1.033.463 1.725.884 1.403.921 Equity holders of the parent 914.775 1.272.138 2.124.469 1.734.479

Earnings per share (Kr) 35 0,880 0,718

(*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the EUR and USD average CBRT bid rates for the year ended 31 December 2011, and therefore do not form part of these consolidated financial statements (Note 2.1.3).

The accompanying notes form an integral part of these consolidated financial statements.

F-113 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2011 2011 2011 2010 (*) EUR’000 (*) USD’000 TL’000 TL’000

Profit for the period 1.657.922 2.305.601 3.850.353 3.138.400

Other comprehensive income:

Financial assets fair value reserve Fair value gains/losses on financial assets (80.009) (111.266) (185.814) 77.925 Reclassification to the statement of income (181) (252) (421) (280) Tax effect 11.140 15.492 25.871 (13.368) (69.050) (96.026) (160.364) 64.277 Hedging reserve Cumulative gains/losses on hedging (186.720) (259.663) (433.638) (88.523) Reclassification to carrying amount of hedged item (Note 3) 9.027 12.554 20.965 - Reclassification to the statement of income 48.023 66.784 111.529 60.774 Tax effect 25.535 35.511 59.303 (1.176) (104.135) (144.814) (241.841) (28.925) Non-current assets revaluation fund Tax effect 182 253 423 363 182 253 423 363

Currency translation differences 105.529 146.757 245.087 (19.415)

Other comprehensive income (after tax) (67.474) (93.830) (156.695) 16.300

Total comprehensive income 1.590.448 2.211.771 3.693.658 3.154.700

Attributable to: Non-controlling interest 748.487 1.040.890 1.738.287 1.390.154 Equity holders of the parent 841.961 1.170.881 1.955.371 1.764.546

The accompanying notes form an integral part of these consolidated financial statements.

F-114 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Balances at 1 January 2010 2.415.141 967.288 9.286 52.509 (85.152) 18.460 51.707 2.269.812 1.429.210 4.041.695 11.169.956 7.612.090 18.782.046

Transfers ------22.108 (1.429.210) 1.407.102 -- - Capital increases ------10.153 10.153 Dividends paid ------(359.714) (359.714) (602.343) (962.057) Transactions with non-controlling interests ------(596) (596) (5.010) (5.606) Changes in scope of consolidation ------(1.322) (1.322) Total comprehensive income - - - 57.117 (18.333) (4.798) (4.497) - 1.734.479 578 1.764.546 1.390.154 3.154.700

Balances at 31 December 2010 2.415.141 967.288 9.286 109.626 (103.485) 13.662 47.210 2.291.920 1.734.479 5.089.065 12.574.192 8.403.722 20.977.914

Balances at 1 January 2011 2.415.141 967.288 9.286 109.626 (103.485) 13.662 47.210 2.291.920 1.734.479 5.089.065 12.574.192 8.403.722 20.977.914

Transfers ------17.718 (1.734.479) 1.716.761 - - - Capital increases ------11.882 11.882 Dividends paid (Note 25) ------(604.380) (604.380) (746.292) (1.350.672) Effect of business combinations ------10.832 10.832 Transactions with non-controlling interests ------(28.434) (28.434) (44.356) (72.790) Total comprehensive income - - - (113.870) (165.403) 14.153 95.353 - 2.124.469 669 1.955.371 1.738.287 3.693.658

Balances at 31 December 2011 2.415.141 967.288 9.286 (4.244) (268.888) 27.815 142.563 2.309.638 2.124.469 6.173.681 13.896.749 9.374.075 23.270.824

The accompanying notes form an integral part of these consolidated financial statements.

F-115 CONVENIENCE TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6) KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Audited Audited 2011 2011 2011 2010 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Operating activities: Profit before tax 2.026.986 2.818.843 4.707.468 3.885.951

Adjustments to reconcile net cash generated: Depreciation and amortisation 5 445.682 619.791 1.035.051 964.490 Changes in provisions 36 297.307 413.453 690.466 968.914 Net interest income 36 (738.783) (1.027.395) (1.715.750) (1.696.338) Finance sector interest received 1.723.942 2.397.415 4.003.683 3.292.487 Finance sector interest paid (965.509) (1.342.694) (2.242.299) (1.659.491) Exchange losses on borrowings 495.502 689.074 1.150.754 331.857 Exchange gains on cash and cash equivalents (204.613) (284.547) (475.193) (133.001) Gain on sale of subsidiaries (net) 28 (65.003) (90.398) (150.964) - Gain on sale of property, plant and equipment and scraps (net) 28 (44.347) (61.671) (102.991) (85.885)

2.971.164 4.131.871 6.900.225 5.868.984

Net changes in operating assets and liabilities 36 (4.210.853) (5.855.860) (9.779.286) (3.091.056) Income taxes paid (342.431) (476.204) (795.261) (681.821)

Cash flows from operating activities (1.582.120) (2.200.193) (3.674.322) 2.096.107

Investing activities: Purchases of property, plant and equipment and intangible assets 5 (961.306) (1.336.848) (2.232.536) (1.245.646) Sale of property, plant and equipment and intangible assets 172.612 240.044 400.874 284.765 Cash outflow due to acquisition of subsidiary (net) 3 (216.328) (300.838) (502.400) - Cash inflow due to sale of subsidiaries (net) 101.635 141.340 236.037 - Increase in financial assets (9.804) (13.634) (22.769) (14.091) Non-finance sector interest received 160.016 222.528 371.621 531.160 Transactions with non-controlling interests (net) (31.343) (43.587) (72.790) (5.606)

Cash flows from investing activities (784.518) (1.090.995) (1.821.963) (449.418)

Financing activities: Share capital increases 5.116 7.115 11.882 10.153 Dividend payments (581.585) (808.786) (1.350.672) (962.057) Increase in short-term borrowings (net) 1.034.663 1.438.863 2.402.902 263.338 Increase in long-term borrowings (net) 429.580 597.399 997.656 1.414.764 Non-finance sector interest paid (167.909) (233.504) (389.950) (587.545)

Cash flows from financing activities 719.865 1.001.087 1.671.818 138.653

Effects of foreign exchange rate changes on cash and cash equivalents 204.613 284.547 475.193 133.001

Net increase/(decrease) in cash and cash equivalents (1.442.160) (2.005.554) (3.349.274) 1.918.343 Cash and cash equivalents at the beginning of the period 4.180.440 5.813.566 9.708.655 7.790.312

Cash and cash equivalents at the end of the period 36 2.738.280 3.808.012 6.359.381 9.708.655

The accompanying notes form an integral part of these consolidated financial statements.

6 F-116 CONVENIENCE TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6) KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS

Koç Holding A.Ş. (“Koç Holding”) was established on 11 December 1963 in Turkey. Koç Holding’s business activities include acquisition, disposal and exchanging of shares of domestic and foreign corporations and limited liability companies which are established or will be established for all types of commercial, industrial, agricultural and financial activities, buy, sell and exchange securities without brokerage and portfolio management purposes and to increase, decrease or cease its participation to these companies.

As of 31 December 2011, the number of personnel employed by Koç Holding, Subsidiaries and Joint Ventures (collectively referred as the “Group”) is 80.987 (31 December 2010: 73.063).

The registered address of Koç Holding is as follows: Nakkaştepe Azizbey Sok. No: 1 Kuzguncuk-İSTANBUL

Koç Holding is registered to the Capital Markets Board (“CMB”) and its shares have been quoted on the Istanbul Stock Exchange (“ISE”) since 10 January 1986. As of 31 December 2011, the principal shareholders and their respective shareholding rates in Koç Holding are as follows:

Companies owned by Koç Family members 42,49 Koç Family members 26,02 Vehbi Koç Vakfı 7,15 Koç Holding Emekli ve Yardım Sandığı Vakfı 1,99 Other 22,35

100,00

Koç Holding is organised mainly in Turkey under five core business segments: x Energy x Automotive x Consumer durables x Finance (1) x Other (2)

(2) Other operations of Koç Holding mainly comprise of food, retail, tourism, information technologies and construction, none of which are of a sufficient size to be reported separately.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

The subsidiaries (“Subsidiaries”), the joint ventures (“Joint Ventures”) and the associates (“Associates”) included in the consolidation scope of Koç Holding, their country of incorporation, nature of business and their respective business segments are as follows: Energy Sector Country of Nature of Subsidiaries incorporation business Akpa Dayanıklı Tüketim LPG ve Akaryakıt Ürünleri Pazarlama A.Ş. (“Akpa”) Turkey Trading Anadoluhisarı Tankercilik A.Ş (“Anadoluhisarı Tankercilik”) Turkey Shipping Aygaz A.Ş. (“Aygaz”) Turkey LPG Aygaz Doğal Gaz İletim A.Ş. (“Aygaz İletim”) Turkey LNG Aygaz Doğal Gaz Toptan Satış A.Ş. (“Aygaz Toptan Satış”) Turkey LNG Beykoz Tankercilik A.Ş. (“Beykoz Tankercilik”) Turkey Petroleum Shipping Damla Denizcilik A.Ş. (“Damla Denizcilik”) Turkey Petroleum Shipping Demir Export A.Ş. (“Demir Export”) Turkey Mining Deniz İşletmeciliği ve Tic. A.Ş. (“Ditaş”) Turkey Petroleum Shipping Enerji Yatırımları A.Ş. (“Enerji Yatırımları”) Turkey Investment Kadıköy Tankercilik A.Ş. (“Kadıköy Tankercilik”) Turkey Petroleum Shipping Kandilli Tankercilik A.Ş. (“Kandilli Tankercilik”) Turkey Shipping Kuleli Tankercilik A.Ş. (“Kuleli Tankercilik”) Turkey Shipping Kuzguncuk Tankercilik A.Ş. (“Kuzguncuk Tankercilik”) Turkey Shipping Mogaz Petrol Gazları A.Ş. (“Mogaz”) Turkey LPG Sarıyer Tankercilik A.Ş. (“Sarıyer Tankercilik”) (1) Turkey Shipping Türkiye Petrol Rafinerileri A.Ş. (“Tüpraş”) Turkey Production and Trading of Petroleum Products Üsküdar Tankercilik A.Ş. (“Üsküdar Tankercilik”) Turkey Petroleum Shipping Country of Nature of Joint Ventures Joint Venture Partner incorporation business AES Entek Elektrik Üretimi A.Ş. (“AES Entek”) (2) (3) AES Mont Blanc Holdings B.V. Turkey Power Generation Eltek Elektrik Enerjisi İthalat İhracat ve Toptan Ticaret A.Ş. (“Eltek”) (2) AES Mont Blanc Holdings B.V. Turkey Trading Opet Gıda ve İhtiyaç Mad. Tur. San. İç ve Dış Ticaret A.Ş. (“Opet Gıda”) (4) Öztürk Family Turkey Food Distribution Opet International Limited (“Opet International”) Öztürk Family The UK Petroleum Products Trading Opet Petrolcülük A.Ş. (“Opet”) Öztürk Family Turkey Petroleum Products Trading Opet Trade B.V. (“Opet Trade BV”) Öztürk Family The Netherlands Petroleum Products Trading Opet Trade (Singapore) Pte. Ltd. (“Opet Singapore”) Öztürk Family Singapore Petroleum Products Trading THY Opet Havacılık Yakıtları A.Ş. (“THY Opet”) Türk Hava Yolları Turkey Petroleum Products Trading Automotive Sector Country of Nature of Subsidiaries incorporation business Otokar Otobüs Karoseri Sanayi A.Ş. (“Otokar”) Turkey Production Otokoç Otomotiv Tic. ve San. A.Ş. (“Otokoç”) Turkey Trading Otokoç Sigorta Aracılık Hizmetleri A.Ş. (“Otokoç Sigorta”) Turkey Insurance Tasfiye Halinde Otoyol Sanayi A.Ş. (“Otoyol”) (4) Turkey Trading Country of Nature of Joint Ventures Joint Venture Partner incorporation business Fer Mas Oto Ticaret A.Ş. (“Fer-Mas”) Fiat Auto S.p.A. Turkey Trading Ford Otomotiv Sanayi A.Ş. (“Ford Otosan”) Ford Motor Co. Turkey Production Platform Araştırma Geliştirme Tasarım ve Tic. A.Ş. (“Platform”) Fiat Auto S.p.A. Turkey Research and Development Tofaş Türk Otomobil Fabrikası A.Ş. (“Tofaş”) Fiat Auto S.p.A. Turkey Production Türk Traktör ve Ziraat Makinaları A.Ş. (“Türk Traktör”) CNH Osterreich Gmbh Turkey Production (1) Established in 2011. (2) Accounted for as a Joint Venture in the consolidated financial statements, starting from 28 February 2011 (Note 3). (3) Legal title of the subsidiary has been revised as AES Entek Elektrik Üretimi A.Ş. from Entek Elektrik Üretimi A.Ş. (“Entek”) following the completion of the share transfer. (4) In the process of liquidation. 8

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NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Consumer Durables Sector

Country of Nature of Subsidiaries incorporation business

Archin Limited (“Archin”) (1) Hong Kong, China Trading Arçelik A.Ş. (“Arçelik”) Turkey Production/Sales ArcticPro SRL (“ArcticPro”) (1) Romania Service Ardutch B.V. (“Ardutch”) The Netherlands Holding Ardutch B.V. Taiwan (“Ardutch Taiwan”) (2) Taiwan Procurement Beko A and NZ Pty Ltd. (“Beko Australia”) (2) Australia Trading Beko Cesko (“Beko Cesko”) (1) Czech Republic Trading Beko Deutschland GmbH (“Beko Deutschland”) Germany Trading Beko Electronics Espãna S.L. (“Beko Espana”) Spain Trading Beko France S.A.S. (“Beko France”) France Trading Beko Italy SRL (“Beko Italy”) Italy Trading Beko Llc (“Beko Russia”) Russia Production/Sales Beko Magyarorszag K.F.T. (“Beko Magyarorszag”) (1) Hungary Trading Beko Plc. (“Beko UK”) The UK Trading Beko Shanghai Trading Company Ltd. (“Beko Shanghai”) China Trading Beko Slovakia S.R.O. (“Beko Slovakia”) Slovakia Trading Beko S.A. (“Beko Polska”) Poland Trading Beko S.A. Czech Republic (“Beko Czech”) Czech Republic Trading Beko S.A. Hungary (“Beko Hungary”) (1) Hungary Trading Blomberg Vertriebsgesellschaft GmbH (“Blomberg Vertrieb”) (1) Germany Trading Blomberg Werke GmbH (“Blomberg Werke”) (1) Germany Production Carron SA (Proprietary) Limited (“Defy Carron”) (1) (3) Republic of South Africa Trading Changzhou Beko Electrical Appliances Co. Ltd. (“Beko China”) China Production/Sales Defy Appliances (Proprietary) Limited (“Defy”) (3) Republic of South Africa Production/Sales Defy Namibia (Proprietary) Limited (“Defy Namibia”) (3) Namibia Trading Defy Trust Two (Proprietary) Limited (“Defy Trust Two”) (3) Republic of South Africa Investment Elektra Bregenz AG (“Elektra Bregenz”) Austria Trading Grundig Ceska Republika S.r.o (“Grundig Czech Republic”) (1) Czech Republic Trading Grundig Intermedia Ges.m.b.H (“Grundig Austria”) (1) Austria Trading Grundig Intermedia GmbH (“Grundig Intermedia”) Germany Trading Grundig Italiana S.p.A. (“Grundig Italy”) (1) Italy Trading Grundig Magyarország Kft. (“Grundig Hungary”) (1) Hungary Trading Grundig Multimedia B.V. (“Grundig Multimedia”) The Netherlands Holding Grundig Nordic AB. (“Grundig Sweden”) Sweden Trading Grundig Nordic No AS (“Grundig Norway”) Norway Trading Grundig Polska Sp. z o.o. (“Grundig Polska”) (1) Poland Trading Grundig Portuguesa Lda (“Grundig Portugal”) (1) Portugal Trading Grundig Slovakia s.r.o. (“Grundig Slovakia”) (1) Slovakia Trading Kindoc Park (Proprietary) Limited (“Defy Kindoc”) (3) Republic of South Africa Investment Ocean Appliances Limited. (“Defy Ocean”) (1) (3) Republic of South Africa Trading Raupach Wollert GmbH (“Raupach”) Germany Holding SC Arctic SA (“Arctic”) Romania Production/Sales Bekodutch B.V. (“Bekodutch”) merged with Ardutch as of 31 March 2011. Beko Elektronik Llc (“Beko Elektronik Russia”) merged with Beko Russia at 24 January 2011. Grundig Nordic Fin OY (“Grundig Finland”) was liquidated in 2011. Grundig Schweiz AG (“Grundig Switzerland”) was liquidated in 2011. Grundig Nordic Danmark A/S (“Grundig Denmark”) was liquidated in 2011. Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Arçelik-LG Klima San. ve Tic. A.Ş. (“Arçelik LG”) LG Electronics Inc. Turkey Air Conditioner Production

(1) Ceased its operations as of the balance sheet date. (2) Established in 2011. (3) Acquired in 2011 (Note 3). 9

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Finance Sector

Country of Nature of Subsidiaries incorporation business

Koç Tüketici Finansmanı A.Ş. (“Koç Finans”) Turkey Consumer Finance

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Koç Fiat Kredi Tüketici Finansmanı A.Ş. (“Fiat Finans”) Fiat Auto S.p.A. Turkey Consumer Finance Koç Finansal Hizmetler A.Ş. (“Koç Finansal Hizmetler” or “KFS”) UniCredit S.p.A. Turkey Holding Stiching Custody Services YKB (“Stiching Custody”) UniCredit S.p.A. The Netherlands Custody UniCredit Menkul Değerler A.Ş. (“UniCredit Menkul”) UniCredit S.p.A. Turkey Brokerage Yapı Kredi Azerbaijan C.J.S.C. (“Yapı Kredi Azerbaycan”) UniCredit S.p.A. Azerbaijan Banking Yapı Kredi B Tipi Yatırım Ortaklığı A.Ş. (“Yapı Kredi Yatırım”) UniCredit S.p.A. Turkey Investment Trust Yapı Kredi Bank Nederland N.V. (“Yapı Kredi Nederland”) UniCredit S.p.A. The Netherlands Banking Yapı Kredi Bank Moscow (“Yapı Kredi Moscow”) UniCredit S.p.A. Russia Banking Yapı Kredi Diversified Payment Rights Special Purpose Finance Company (“Yapı Kredi SPC”) (*) UniCredit S.p.A. Cayman Islands Company Yapı Kredi Emeklilik A.Ş. (“Yapı Kredi Emeklilik”) UniCredit S.p.A. Turkey Life Insurance Yapı Kredi Faktoring A.Ş. (“Yapı Kredi Faktoring”) UniCredit S.p.A. Turkey Factoring Yapı Kredi Finansal Kiralama A.O. (“Yapı Kredi Finansal Kiralama”) UniCredit S.p.A. Turkey Leasing Yapı Kredi Holding B.V. (“Yapı Kredi Holding”) UniCredit S.p.A. The Netherlands Financial Consulting Yapı Kredi Invest LLC. (“Yapı Kredi Invest”) UniCredit S.p.A. Azerbaijan Brokerage Yapı Kredi Koray Gayrimenkul Yatırım Ortaklığı A.Ş. (“Yapı Kredi Koray”) Koray Group Companies Turkey Real Estate Yapı Kredi Portföy Yönetimi A.Ş. (“Yapı Kredi Portföy”) UniCredit S.p.A. Turkey Portfolio Management Yapı Kredi Sigorta A.Ş. (“Yapı Kredi Sigorta”) UniCredit S.p.A. Turkey Insurance Yapı Kredi Yatırım Menkul Değerler A.Ş. (“Yapı Kredi Menkul”) UniCredit S.p.A. Turkey Brokerage Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) UniCredit S.p.A. Turkey Banking

(*) Although Yapı Kredi Bankası has no shareholding interest, the special purpose company established for securitisation transactions is included in the scope of consolidation.

Country of Nature of Associates incorporation business

Banque de Commerce et de Placements S.A. (“Banque de Commerce”) Switzerland Banking

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Other Sectors Country of Nature of Subsidiaries incorporation business

Ayvalık Marina ve Yat İşletmeciliği San. ve Tic. A.Ş. (“Ayvalık Marina”) Turkey Tourism Bilkom Bilişim Hizmetleri A.Ş. (“Bilkom”) Turkey Trading Düzey Tüketim Malları Sanayi Pazarlama A.Ş. (“Düzey”) Turkey Trading Harranova Besi ve Tarım Ürünleri A.Ş. (“Harranova Besi”) Turkey Agriculture and Food Koçnet Haberleşme Teknoloji ve İletişim Hizm. A.Ş. (“Koçnet”) (1) Turkey Information Technology Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. (“Koç Sistem”) Turkey Technology Koç Yapı Malzemeleri Ticaret A.Ş. (“Koç Yapı Malzeme”) Turkey Trading Marmaris Altınyunus Turistik Tesisleri A.Ş. (“Mares”) Turkey Tourism Palmira Turizm Ticaret A.Ş. (“Palmira”) Turkey Tourism Ram Dış Ticaret A.Ş. (“Ram Dış Ticaret”) (2) Turkey Foreign Trade RMK Marine Gemi Yapım Sanayi ve Deniz Taş. İşl. A.Ş. (“RMK Marine”) Turkey Ship Construction Setur Servis Turistik A.Ş. (“Setur”) Turkey Tourism Setur Yalova Marina İşletmeciliği A.Ş. (“Yalova Marina”) Turkey Tourism Tat Konserve Sanayi A.Ş. (“Tat Konserve”) Turkey Food Tat Tohumculuk A.Ş. (“Tat Tohumculuk”) Turkey Agriculture Tek-Art Kalamış ve Fenerbahçe Marmara Turizm Tesisleri A.Ş. (“Tek-Art Marina”) Turkey Tourism Zer Merkezi Hizmetler ve Ticaret A.Ş. (“Zer Ticaret”) Turkey Trading Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Koçtaş Yapı Marketleri Ticaret A.Ş. (“Koçtaş Yapı Market”) Kingfisher Plc Turkey Retail Netsel Turizm Yatırımları A.Ş. (“Netsel”) Torunlar GYO A.Ş. Turkey Tourism

(1) Upon the completion of the sales transaction on 30 November 2011, Koçnet has been excluded from the scope of consolidation. (2) Reclassified from “Other” segment to “Consumer Durables” segment in 2011.

For the purpose of segment presentation in these consolidated financial statements, Koç Holding’s stand-alone financial statements have been included in the “Other” segment (Note 5).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS 2.1 Basis of presentation 2.1.1 Financial reporting standards The CMB regulated the principles and procedures of preparation, presentation and announcement of financial statements prepared by the entities with the Communiqué No: XI-29, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”). According to the Communiqué, entities shall prepare their financial statements in accordance with International Financial Reporting Standards (“IAS/IFRS”) endorsed by the European Union. Until the differences of the IAS/IFRS as endorsed by the European Union between the ones issued by the International Accounting Standards Board (“IASB”) are announced by the Turkish Accounting Standards Board (“TASB”), IAS/IFRS issued by the IASB shall be applied. Accordingly, the Turkish Accounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”) issued by the TASB which are in line with the aforementioned standards shall be considered. With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey and preparing their financial statements in accordance with the CMB Financial Reporting Standards. Accordingly, IAS 29, “Financial Reporting in Hyperinflationary Economies”, issued by the IASB, has not been applied in the financial statements for the accounting year commencing 1 January 2005. The consolidated financial statements are prepared within the framework of Communiqué XI, No:29 and the related promulgations to this Communiqué as issued by the CMB, in accordance with the financial reporting standards accepted by the CMB (“CMB Financial Reporting Standards”) which are based on the IAS/IFRS. The consolidated financial statements and the related notes are presented in accordance with the formats recommended by the CMB including the compulsory disclosures. Koç Holding and its Subsidiaries and Joint Ventures registered in Turkey maintain their books of account and prepare their statutory financial statements (“Statutory Financial Statements”) in TL in accordance with the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts (“UCA”), issued by the Ministry of Finance, applicable Turkish insurance laws for insurance companies and banking law, accounting principles and instructions promulgated by the Banking Regulation and the Supervision Agency (“BRSA”) for banks. Foreign Subsidiaries, Joint Ventures and Associates maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. These consolidated financial statements have been prepared under the historical cost conversion except for financial assets and liabilities which are presented at fair values and revaluations related to differences between the carrying value and fair value of the non-current assets recognised during business combinations. 2.1.2 Comparatives and adjustment of prior periods’ financial statements The consolidated financial statements of the Group include comparative financial information to enable the determination of the financial position and performance. Comparative figures are reclassified, where necessary, to conform to the changes in the presentation in the current period consolidated financial statements. The reclassifications performed in the financial statements as of 31 December 2010 at the Group level are as follows: a) “Balances with central banks” amounting to TL2.666.100 thousand which was classified under “Cash and cash equivalents” in the consolidated balance sheet as of 31 December 2010 has been presented as a separate line item in the consolidated balance sheet. b) “Investments accounted for using the equity method” amounting to TL47.087 thousand which was classified under non-current “Financial Assets” in the consolidated balance sheet as of 31 December 2010 has been presented as a separate line item in the consolidated balance sheet. Income from the related investments amounting to TL3.163 thousand which was classified under “Other income” in the consolidated statement of income for the year ended 31 December 2010 has been reclassified to “Share of profit/(loss) of investments accounted for using the equity method”. c) Real estate amounting to TL35.593 thousand relating to construction agreements, in which Koç Holding is a party, was classified under “investment properties” as of 31 December 2010. The real estate has been reclassified to “long term advances given”. 12

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2- BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) d) Provision for unused vacation amounting to TL79.296 thousand which was classified under “Other current liabilities” in the consolidated balance sheet as of 31 December 2010, has been reclassified to “Provisions for employee benefits”. e) Financial statement information of Ram which was classified under the “Consumer Durables” segment in segment reporting footnote in 31 December 2010, has been reclassified to the “Other” segment (Note 5). f) “Other balances with the central banks” amounting to TL432.627 thousand, which are in nature reserve requirements, were classified under “cash and cash equivalents at the end of the period” in consolidated statement of cash flow as of 31 December 2010. These balances have been reclassified to “Reserve deposits at the central banks”. 2.1.3 EUR and USD amounts presented in the financial statements EUR and USD amounts shown in the consolidated balance sheet prepared in accordance with the CMB Financial Reporting Standards have been translated from TL, as a matter of arithmetic computation only, at the official EUR and USD bid rates announced by the CBRT on 31 December 2011 of TL 2,4438 = EUR1 and TL 1,8889 = USD1, respectively and EUR and USD amounts shown in the consolidated income, comprehensive income and cash flow statements have been translated from TL, as a matter of arithmetic computation only, at the average EUR and USD bid rates calculated from the official daily bid rates announced by the CBRT for the year ended 31 December 2011 of TL 2,3224 = EUR1 and TL 1,6700 = USD1, respectively, and do not form part of these consolidated financial statements. 2.2 Amendments in International Financial Reporting Standards The accounting policies adopted in the preparation of the financial statements for the year ended and as of 31 December 2011 are consistent with the financial statements dated 31 December 2010 except for the new and amended IFRS and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations summarised below. Standards, amendments and interpretations effective as of 1 January 2011: - IFRIC 14 “IAS 19” - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction - Prepayments of a Minimum Funding Requirement (Amended), - IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, - IAS 32 Financial Instruments: Presentation - Classification on Rights Issues (Amended), - IAS 24 Related Party Disclosures (Amended), - Improvements to IFRS’s (May 2010). The aforementioned amendments, improvements and interpretations had no significant effect on the accounting policies, financial position and performance of the Group. Standards, amendments and interpretations issued but not yet effective: - IAS 1 Presentation of Financial Statements (Amended) - Presentation of Comprehensive Income Statement Elements, - IAS 12 Income Taxes - Recovery of Underlying Assets (Amended), - IAS 19 Employee Benefits (Amended), - IAS 27 Separate Financial Statements (Amended), - IAS 28 Investments in Associates and Joint Ventures (Amended), - IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended), - IFRS 7 Financial Instruments - Disclosures as part of its comprehensive review of off balance sheet activities (Amended), - IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amended), - IFRS 9 Financial Instruments - Classification and measurement, - IFRS 10 Consolidated Financial Statements, - IFRS 11 Joint Arrangements, - IFRS 12 Disclosure of Interests in Other Entities, - IFRS 13 Fair Value Measurement, - IFRIC 20 Stripping Cost in the Production Phase of a Surface Mine. 13

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2- BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) Among the aforementioned changes and interpretations, “IFRS 11 Joint Arrangements” standard is expected to have the most significant impact on the financial statements of the Group. This standard deals with the accounting for joint ventures and joint operations. According to the new standard, proportionate consolidation is not permitted for joint ventures; only equity method can be applied. This standard has not yet been endorsed by the European Union. The aforementioned amendments and interpretations have not been early adopted by the Group. The Group is in the process of assessing the impacts of the amendments on the consolidated financial statements. 2.3 Restatement and Errors in the Accounting Policies and Estimates Any change in accounting policies resulting from the first time adoption of a new TAS/TFRS is made either retrospectively or prospectively in accordance with the transition requirements of TAS/TFRS. Changes without any transition requirement, material changes in accounting policies or material errors are corrected, retrospectively by restating the prior period consolidated financial statements. The accounting policies used in the preparation of these consolidated financial statements for the year ended 31 December 2011 are consistent with those used in the preparation of the consolidated financial statements for the year ended 31 December 2010, except for the reclassifications explained in Note 2.1.2. If changes in accounting estimates are related to only one period, they are recognised in the period when the changes are applied; if changes in estimates are related to future periods, they are recognised both in the period where the change is applied and in future periods prospectively. The estimates used in the preparation of these consolidated financial statements are consistent with those used in the preparation of consolidated financial statements for the year ended 31 December 2010, except for the change explained below. Yapı Kredi Bankası, a Joint Venture of the Group, calculates collective provision for loans with intrinsic elements such as loss confirmation periods, probability of default and loss given defaults along with expert views. Taking into consideration the historical loss experience, Yapı Kredi Bankası has reassessed the parameters for different segments. As a result of such reassessment, TL53.230 thousand of income is recorded in “Other expense” in the consolidated statement of income for the year ended 31 December 2011. 2.4 Summary of Significant Accounting Policies Accounting policies used in the preparation of consolidated financial statements, consistent with the prior periods, are summarised below: 2.4.1 Group accounting a) The consolidated financial statements include the accounts of the parent company, Koç Holding, its Subsidiaries, its Joint Ventures and its Associates on the basis set out in sections (b) to (g) below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements with adjustments and reclassifications for the purpose of fair presentation in accordance with CMB Financial Reporting Standards and the application of uniform accounting policies and presentation. b) Subsidiaries are companies over which Koç Holding has the power to control the financial and operating policies for the benefit of Koç Holding, either (a) through the power to exercise more than 50% of voting rights relating to the shares in the companies as a result of the ownership interest owned directly and indirectly by itself, and/or as a result of agreements by certain Koç Family members and companies owned by them whereby Koç Holding exercises control over the ownership interest of the shares held by them; or (b) although not having the power to exercise more than 50% of the ownership interest, through the power to exercise control over the financial and operating policies.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 -BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsidiaries included in the scope of the consolidation and their effective interests (%):

Akpa 40,68 40,68 100,00 100,00 - - 100,00 100,00 Anadoluhisarı Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 Archin 40,51 40,51 100,00 100,00 - - 100,00 100,00 Arctic 39,18 39,18 96,71 96,71 - - 96,71 96,71 Arctic Pro 40,51 40,51 100,00 100,00 - - 100,00 100,00 Arçelik 40,51 40,51 40,51 40,51 11,42 11,42 51,93 51,93 Ardutch 40,51 40,51 100,00 100,00 - - 100,00 100,00 Ardutch Taiwan (1) 40,51 - 100,00 - - - 100,00 - Aygaz 40,68 40,68 40,68 40,68 10,53 10,53 51,21 51,21 Aygaz İletim 40,30 40,30 100,00 100,00 - - 100,00 100,00 Aygaz Toptan Satış 40,30 40,30 100,00 100,00 - - 100,00 100,00 Ayvalık Marina (2) 48,41 49,34 95,57 95,57 4,43 4,43 100,00 100,00 Bekodutch (3) - 40,51 - 100,00 - - - 100,00 Beko Australia (1) 40,51 - 100,00 - - - 100,00 - Beko Cesko 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko China 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Czech 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Deutschland 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Elektronik Llc (3) - 40,51 - 100,00 - - - 100,00 Beko Espana 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko France 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Italy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Magyarorszag 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Plc 20,26 20,26 50,00 50,00 50,00 50,00 100,00 100,00 Beko Polska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Russia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Shangai 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beykoz Tankercilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Bilkom 82,29 82,29 99,94 99,94 0,06 0,06 100,00 100,00 Blomberg Vertrieb 40,51 40,51 100,00 100,00 - - 100,00 100,00 Blomberg Werke 40,51 40,51 100,00 100,00 - - 100,00 100,00 Damla Denizcilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Demir Export 2,34 2,34 2,34 2,34 97,46 97,46 99,80 99,80 Defy (4) 40,51 - 100,00 - - - 100,00 - Defy Namibia (4) 40,51 - 100,00 - - - 100,00 - Defy Carron (4) 40,51 - 100,00 - - - 100,00 - Defy Kindoc (4) 40,51 - 100,00 - - - 100,00 - Defy Ocean (4) 40,51 - 100,00 - - - 100,00 - Defy Trust Two (4) 40,51 - 100,00 - - - 100,00 - Ditaş 34,13 34,13 80,00 80,00 - - 80,00 80,00 Düzey 31,65 31,65 32,28 32,28 61,28 61,11 93,56 93,39 Elektra Bregenz 40,51 40,51 100,00 100,00 - - 100,00 100,00 Enerji Yatırımları 83,66 83,66 96,50 96,50 - - 96,50 96,50 Grundig Austria 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Czech Republic 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Denmark (5) - 40,51 - 100,00 - - - 100,00

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 -BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Grundig Finland (5) - 40,51 - 100,00 - - - 100,00 Grundig Intermadia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Italy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Multimedia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Norway 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Polska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Portugal 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Sweden 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Switzerland (5) - 40,51 - 100,00 - - - 100,00 Harranova Besi 41,95 41,95 74,62 74,62 15,38 15,38 90,00 90,00 Kadıköy Tankercilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Kandilli Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 Koçnet (6) - 100,00 - 100,00 - - - 100,00 Koç Finans 64,71 64,71 94,50 94,50 5,50 5,50 100,00 100,00 Koç Sistem 41,11 41,11 41,11 41,11 53,17 53,17 94,28 94,28 Koç Yapı Malzeme 43,18 43,18 43,18 43,18 47,62 47,62 90,81 90,81 Kuleli Tankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 KuzguncukTankercilik 40,68 40,68 100,00 100,00 - - 100,00 100,00 Mares 36,81 36,81 36,81 36,81 33,46 33,46 70,27 70,27 Mogaz 40,68 40,68 100,00 100,00 - - 100,00 100,00 Otokar (7) 44,90 44,90 44,92 44,92 2,70 2,70 47,62 47,62 Otokoç 96,42 96,42 96,57 96,57 3,43 3,43 100,00 100,00 Otokoç Sigorta 48,22 48,22 50,02 50,02 49,98 49,98 100,00 100,00 Otoyol 53,95 53,95 53,95 53,95 10,18 10,18 64,13 64,13 Palmira (2) 9,63 9,85 20,78 20,78 79,22 79,22 100,00 100,00 Ram Dış Ticaret 57,70 57,70 83,44 83,44 14,66 14,66 98,10 98,10 Raupach 40,51 40,51 100,00 100,00 - - 100,00 100,00 RMK Marine (2) 53,81 53,82 66,84 66,84 33,16 33,12 100,00 99,96 Sarıyer Tankercilik (1) 34,13 - 80,00 - - - 80,00 - Setur 46,32 47,38 81,07 81,07 18,87 18,87 99,94 99,94 Tat Konserve 43,82 43,82 44,07 44,07 7,12 7,12 51,19 51,19 Tat Tohumculuk (7) 16,15 16,15 33,00 33,00 3,00 3,00 36,00 36,00 Tek-Art Marina (2) 50,48 50,51 51,94 51,94 47,46 47,46 99,40 99,40 Tüpraş 42,67 42,67 51,00 51,00 - - 51,00 51,00 Üsküdar Tankercilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Yalova Marina (2) 46,64 47,63 100,00 100,00 - - 100,00 100,00 Zer Ticaret 39,00 39,00 39,00 39,00 60,05 60,05 99,05 99,05

(1) Established in 2011. (2) Due to the sale of Setur shares owned by Koçnet to Zer Ticaret. The effects of related rate changes are accounted for under “Transaction with non-controlling interests” in equity. (3) Bekodutch was merged with Ardutch on 31 March 2011 and Beko Electronik Llc. was merged with Beko Russia on 24 January 2011. (4) Acquired in 2011 (Note 3). (5) Liquidated in 2011. (6) Upon the completion of the sales transaction on 30 November 2011, Koçnet has been excluded from the scope of consolidation. (7) Although the total ownership interest of Koç Holding in these Subsidiaries is less than 50%, Koç Holding has the power to exercise control over the financial and operating policies of these companies.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Voting rights of the Joint Ventures and their effective interests (%):

Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Joint Ventures 2011 2010 2011 2010 2011 2010 2011 2010

AES Entek (1) 34,90 35,03 49,62 86,09 - 13,14 49,62 99,24 Arçelik LG Klima 23,23 23,23 50,00 50,00 - - 50,00 50,00 Eltek (1) 34,90 35,03 49,62 100,00 - - 49,62 100,00 Fer-Mas 37,37 37,37 37,86 37,86 - - 37,86 37,86 Fiat Finans 37,59 37,59 37,86 37,86 - - 37,86 37,86 Ford Otosan 38,46 38,46 38,46 38,46 2,58 2,58 41,04 41,04 Koç Finansal Hizmetler 40,21 40,21 44,12 44,12 5,88 5,88 50,00 50,00 Koçtaş Yapı Market 42,64 42,64 49,92 49,92 0,08 0,08 50,00 50,00 Netsel (2) 27,76 27,78 55,00 55,00 - - 55,00 55,00 Opet 17,59 17,59 41,33 41,33 8,67 8,67 50,00 50,00 Opet Gıda 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet International 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade BV 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade Singapore 17,59 17,59 50,00 50,00 - - 50,00 50,00 Platform 37,21 37,21 37,86 37,86 - - 37,86 37,86 Stiching Custody 32,89 32,89 50,00 50,00 - - 50,00 50,00 THY Opet 8,79 8,79 50,00 50,00 - - 50,00 50,00 Tofaş 37,59 37,59 37,59 37,59 0,27 0,27 37,86 37,86 Türk Traktör 37,50 37,50 37,50 37,50 - - 37,50 37,50 UniCredit Menkul 40,21 40,21 50,00 50,00 - - 50,00 50,00 Yapı Kredi Azerbaycan 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Bankası 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Emeklilik 30,90 30,90 50,00 50,00 - - 50,00 50,00 Yapı Kredi Faktoring 32,88 32,88 50,00 50,00 - - 50,00 50,00 Yapı Kredi Fin.Kiralama 32,80 32,80 50,00 50,00 - - 50,00 50,00 Yapı Kredi Holding 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Invest 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Koray 10,01 10,01 30,45 30,45 - - 30,45 30,45 Yapı Kredi Menkul 32,88 32,88 50,00 50,00 - - 50,00 50,00 Yapı Kredi Moscow 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Nederland 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Portföy 32,87 32,87 50,00 50,00 - - 50,00 50,00 Yapı Kredi Sigorta 30,90 30,90 50,00 50,00 - - 50,00 50,00 Yapı Kredi Yatırım 18,44 18,44 50,00 50,00 - - 50,00 50,00

(1) Accounted for as a Joint Venture in the consolidated financial statements, starting from 28 February 2011 (Note 3). (2) Due to the sale of Setur shares owned by Koçnet to Zer Ticaret. The effects of related rate changes are accounted for under “Transaction with non-controlling interests” in equity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Voting rights of the Associates and their effective interests (%):

2.4.2 Segment reporting

In the segment reporting, intra segment transactions are eliminated at the segment level, whereas the elimination of inter segment transactions are presented as “Inter-segment elimination” at the consolidated level.

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.4.3 Foreign currency translation Functional and presentation currency Items included in the consolidated financial statements of the Subsidiaries, Joint Ventures and Associates of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in TL, which is Koç Holding’s functional and presentation currency. Foreign currency transactions and balances Foreign currency transactions are translated using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates at the balance sheet date. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated financial statement as interest, fee, commission and similar income by the Group companies operating in the finance sector and as financial income/expense by the Group companies operating in non-finance sectors. Non monetary items that are measured in terms of historical cost in a foreign currency are translated to functional currency using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Financial statements of foreign subsidiaries, joint ventures and associates The assets and liabilities, presented in the financial statements of the foreign Subsidiaries, Joint Ventures and Associates prepared in accordance with the Group’s accounting policies, are translated into TL at the exchange rate at the date of the balance sheet whereas income and expenses are translated at the average exchange rates for the respective periods. Exchange differences resulting from using the exchange rates at the balance sheet date and the average exchange rates are recognised in the “currency translation differences” under the equity. 2.4.4 Discontinued operations and non-current assets (or disposal groups) held for sale Discontinued operation is a major line of business or geographical area of operations that is part of a single coordinated plan to be disposed of or is held-for-sale. A single amount on the face of the income statements comprising the total of the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognised by the disposal of the assets constituting the discontinued operation is disclosed. Also, the net cash flows of the discontinued operations associated with the operating, investment and financing activities are specified in the related note. Group of non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. Liabilities directly associated with those assets are also classified similarly. Non-current assets or asset groups that meet the criteria of asset held for sale are measured at the lower of its carrying amount and fair value less cost to sell. These assets are not depreciated. 2.4.5 Related parties For the purpose of these consolidated financial statements, shareholders, Koç Holding A.Ş. key management personnel and BOD members, their close family members and the legal entities over which these related parties exercise control and significant influence, subsidiaries and joint ventures excluded from the scope of consolidation are considered and expressed as “related parties”.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.4.6 Financial assets

The appropriate classification of financial assets is determined at the time of the purchase and re-evaluated by management on a regular basis.

Interest and dividends associated to the available-for-sale financial assets are accounted under corresponding interest income and dividend income accounts.

2.4.7 Repurchase and resale transactions

Securities purchased under agreements to resell (“reverse repurchase agreements”) are recorded as 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.

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.8 Cash and cash equivalents

2.4.9 Trade receivables

If the amount of the impairment subsequently decreases due to partial/full collection, the release of the provision is credited to other income.

2.4.10 Loans and advances to customers

Financial assets generated as a result of lending money or providing a loan are classified as loans and advances to customers and are carried at amortised cost, less any impairment.

All loans and advances are recognised in the consolidated financial statements when cash is transferred to customers.

2.4.11 Credit finance income/expenses

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.12 Inventories

2.4.13 Investment property

2.4.14 Property, plant and equipment and related depreciation

The depreciation periods for property, plant and equipment, which approximate the economic useful lives of such assets, are as follows:

Buildings 5 - 50 years Land improvements 3 - 50 years Machinery and equipment 3 - 50 years Furniture and fixtures 2 - 50 years Motor vehicles 4 - 30 years Leasehold improvements 1 - 10 years

Machinery and equipment are capitalised and amortised when their capacity is fully available for use and their physical situations meet the determined production capacities.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.15 Intangible assets and related amortisation

Intangible assets comprise usage rights, brands, development costs, information systems and other identified rights. They are initially recognised at acquisition cost and amortised on a straight-line basis over their estimated useful lives. Intangible assets with indefinite useful lives are not amortised, however are tested for impairment annually. Whenever there is an indication that the intangible is impaired, the carrying amount of the intangible asset is reduced to its recoverable amount and the impairment loss is recognised as an expense.

The amortisation periods for intangible assets, which approximate the economic useful lives of such assets, are as follows:

Rights 3 - 15 years Brands 10 years Development costs 2 - 10 years Other intangible assets 5 - 14 years

2.4.16 Leases a) The Group as the lessee

Finance leases

Operating leases

Finance leases

Operating leases

Assets leased out under operating leases are included in property, plant and equipment in the consolidated balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income is recognised in the consolidated income statement on a straight- line basis over the lease term.

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.17 Business combinations and goodwill

A business combination is evaluated as the bringing together of separate entities or businesses into one reporting entity.

Fair value changes of contingent consideration that arise from business combinations realised before 1 January 2010 are adjusted against goodwill.

The Group applied revised IFRS 3 “Business Combinations”, which is effective for the periods beginning 1 January 2010 for the business combinations realised in 2011.

Transactions with non-controlling interests

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.18 Taxes on income

Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised.

The tax effects of the transactions that are accounted directly in the equity are also reflected to the equity.

When the deferred tax assets and deferred tax liabilities relate to income taxes 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.

2.4.19 Financial liabilities and deposits

2.4.20 Trade payables

2.4.21 Provisions for employee benefits a) Provision for employment termination benefits

The personnel of Yapı Kredi Bankası, a joint venture of the Group, are members of the Yapı ve Kredi Bankası Anonim Şirketi Mensupları Yardım ve Emekli Sandığı Vakfı (“the Fund”) which was established in accordance with the 20th temporary article of the Social Security Law numbered 506. The technical financial statements of the Fund are audited in accordance with Article 38 of the Insurance Supervision Law and with “Regulation regarding the Actuaries” by a registered independent actuary.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) Law article related to the transfer was cancelled (pursuant application by the President on 2 November 2005) by the decision of Constitutional Court (decision no: E.2005/39, K. 2007/33 dated 22 March 2007) published in the Official Gazette No. 26479 dated 31 March 2007, and the effect of the law article ceased at the date of the publication of the decision. The reasoning of the Constitutional Court regarding the abrogation of the corresponding article was published in the Official Gazette dated 15 December 2007, numbered 26372. With the publication of the reasoning of the decision, the Grand National Assembly of Turkey (“GNAT”) started to work on new legal arrangements regarding the transfer of the fund members to SSI and the related articles of the “Law Regarding the Changes in Social Insurance and General Health Insurance Law and Other Related Laws and Regulations” numbered 5754 (“the New Law”) regulating the transfer of the funds were approved by the GNAT on 17 April 2008. The New Law was published in the Official Gazette dated 8 May 2008, numbered 26870 and came into force. The New Law requires that the employee funds of the bank are transferred to the SSI in three years periods starting from the issuance date of the related article and this period can be extended for maximum two years with the decision of the Council of Ministers. The transfer period is extended for another two years with the decision of the Council of Ministers No. 2011/1559 published in the Official Gazette dated 9 April 2011.

Under the New Law, a committee is decided to be formed, whose members are the representatives of the SSI, the Ministry of Finance, Turkish Treasury, State Planning Organisation, BRSA and Saving Deposit Insurance Fund representing the Fund and one member representing the Fund members. This committee is in charge of the calculation of the value of the payment that would need to be made to SSI to settle the obligation using a technical interest rate of 9,8% taking into consideration the excess of salaries and income in accordance with the SSI arrangements over the income and expense of the insurance branches of the Funds related to the members of the Fund as of the date of the transfer including the members who have left the scheme and salaries and income of whom were paid by the Funds. In accordance with the New Law, the social rights and payments of Fund members and their beneficiaries, which are not provided although they are included in the Fund Title Deed, will be provided by the Fund and the employers of the Fund members. The main opposition party has applied to the Constitutional Court at 19 June 2008 for cancellation of some articles and requested them to be ineffective until the case of abrogation is finalised. The Constitutional Court announced that cancellation request was rejected with the decision taken in the meeting dated 30 March 2011 and the decision with reasoning was published in the Official Gazette No. 28156 on 28 December 2011. Yapı Kredi Bankası accounts for a provision for the technical deficit based on the report prepared by a registered actuary in accordance with the rates determined by the New Law. c) Defined benefit plans The Group has to pay contributions to the Social Security Institution on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. These contributions are recognised as an employee benefit expense when they are accrued. d) Short term employee benefits

Liabilities arising from unused vacations of the employees are classified under short term employee benefits. These liabilities are accrued in the period when the unused vacations are qualified and are not discounted. 2.4.22 Insurance technical reserves

Life mathematical reserves Life mathematical reserves consist of actuarial mathematical reserves (with minimum income guarantee to the policyholders) and life profit share reserves and represent the total liability of the Subsidiaries and Joint Ventures of the Group in the insurance sector to the policyholders in the life branch.

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Life mathematical reserves are provided for future compensations the payments of which are guaranteed by the Subsidiary and Joint Venture of the Group operating in the life insurance branch. In accordance with the Insurance Law, the remaining amount of life branch premiums that are collected in accordance with life insurance agreements, after deduction of expense charges, mortality risk premium and commissions are accounted for as life mathematical reserves. The approval of mathematical reserves is made by the actuaries based on current mortality tables that are valid for Turkish insurance companies and prepared by considering the mortality statistics prepared abroad. The life profit share, calculated in accordance with collections from life insurance premiums, is reserved in respect of the income generated from investments financed with these reserves. Outstanding claims provision Full outstanding claims provision is recorded for the estimated ultimate cost of settling claims incurred as of the balance sheet date, less amounts already paid in respect of these claims. Claim provisions are accounted for based on reports of experts or initial assessments of policyholders and experts. Additional outstanding claims provision is booked for all claims that are notified after, but occurred before the balance sheet date (IBNR). Unearned premium reserve Unearned premium reserve is calculated as the unearned portion of the premiums on a daily basis in respect of all policies in force as of balance sheet date. 2.4.23 Provisions, contingent assets and liabilities Provisions are recognised when the Group has a present legal or constructive obligation as a result 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.

Revenues include the invoiced amounts of goods and services sold. Revenues are recognised on an accrual basis at the time deliveries are made, risks and benefits related to the product are transferred, income amount is reliably measured and when it is highly probable that the Group will obtain future economic benefits. Interest income is realised according to the cut-off basis and accrued income is determined through taking into consideration the effective interest rate and the rate effective until maturity date. Net sales represent the invoiced value of goods shipped less sales returns and discounts. 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 the fair value and the nominal amount of the consideration is recognised on an accrual basis as financial income. Contract revenue and costs related to the projects are recognised when the amount of revenue can be reliably measured and the increase in the revenue due to change in the scope of the contract related with the project is probable. Contract revenue is measured at the fair value of the consideration received or receivable. Projects are fixed price contracts and revenue is recognised in accordance with the percentage of completion method. The portion of the total contract revenue corresponding to the completion rate is recognised as contract revenue in the relevant period. 27

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Banking

Banking service income is registered as income in the period during which it is collected, other fee and commission income and expenses are recognised on an accrual basis.

Insurance

Premium income represents the net remaining amount of premiums on policies written during the year after ceded premiums to reinsurers and reserves for unearned premiums and the cancellation.

2.4.25 Offsetting

2.4.26 Dividends

2.4.27 Research and development costs

Research costs are recognised and expensed in the income statement in the period in which they are incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense cannot be recognised as an asset in subsequent periods. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over their estimated useful lives (2-10 years).

2.4.28 Warranties

2.4.29 Government grants

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.30 Borrowing costs

2.4.31 Derivative financial instruments and hedging activities

Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The derivative instruments of the Group mainly consist of foreign exchange forward contracts and currency / interest rate swap instruments. These derivative transactions, even though providing effective economic hedges under the Group risk management position, do not generally qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for trading in the consolidated financial statements. The fair value changes for these derivatives are recognised in the consolidated income statement.

The hedging transactions of the Group that qualify for hedge accounting are accounted for as follows:

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of hedged asset or liability attributable to the hedged risk is recorded as part of the carrying value of the hedged asset or liability during the effective hedging relationship. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used, is amortised to the income statement over the period to maturity.

Cash flow hedge

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) Foreign currency hedge of net investments in foreign operations Gains or losses on the hedging instrument relating to the effective portion of the foreign currency hedge of net investments in foreign operations are recognised as other comprehensive income while any gains or losses relating to the ineffective portion are recognised in the income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement. 2.4.32 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. 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 to equity. 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 in which they were issued and each earlier period as if the event had occurred at the beginning of the earliest period reported. 2.4.33 Events after the balance sheet date The Group adjusts the amounts recognised in its financial statements to reflect the adjusting events after the balance sheet date. If non-adjusting events after the balance sheet date have material influence on the economic decisions of users of the financial statements, they are disclosed in the notes to the consolidated financial statements. 2.4.34 Statement of 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 (tangible and intangible assets and financial assets). Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds. 2.5 Significant Accounting Estimates and Assumptions Preparation of consolidated financial statements requires the usage of estimations and assumptions which may affect the reported amounts of assets and liabilities as of the balance sheet date, disclosure of contingent assets and liabilities and reported amounts of income and expenses during the financial period. The accounting assessments, forecasts and assumptions are reviewed continuously considering the past experiences, other factors and the reasonable expectations about the future events under current conditions. Although the estimations and assumptions are based on the best estimates of the management’s existing incidents and operations, they may differ from the actual results. 2.6 Convenience Translation into English of the Consolidated Financial Statements The accounting principles described in Note 2.1 to consolidated financial statements (defined as CMB Financial Reporting Standards) differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January and 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS The business combinations of the Group realised in 2011 are as follows (2010: None): a) On 30 November 2011 Arçelik, a Subsidiary of the Group, acquired 100% of the shares of Defy which owns 100% of the shares of Defy Namibia, Defy Trust Two, Defy Kindoc, Defy Ocean, Defy Carron (together referred to as “Defy Group”). Defy Group is located in South Africa and its main activities are production of refrigerators, freezers, dryers, ovens, cooking appliances and selling and marketing of all kinds of durable home appliances.

The details of the goodwill calculation, total acquisition consideration and the net assets acquired are as follows:

Total consideration 525.613 Net assets acquired (346.218)

Goodwill (Note 17) 179.395

Consideration in cash 351.854 Consideration paid against the payables to former shareholders of Defy Group 150.096 Contingent consideration 2.698

Total consideration transferred 504.648 The effect of cash flow hedges - effective portion 20.965

Total consideration 525.613

The fair values of identifiable assets and liabilities arising from the acquisition are as follows:

Net assets acquired 346.218

The details of cash outflow due to acquisition are as follows: Total consideration 522.915 Cash and cash equivalents - acquired (20.515)

Cash outflow due to acquisition (net) 502.400

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS (Continued)

The contribution of Defy Group to revenue is TL62.641 thousand in the consolidated statement of income following the date of acquisition. In the same period, excluding the effects of profitability due to inter company sales, the contribution of Defy Group to consolidated net profit after non-controlling interest amounts to TL231 thousand.

Had the financial statements of Defy Group been consolidated from 1 January 2011, Defy Group’s contribution to consolidated revenue would have amounted to TL610.243 thousand.

As of 31 December 2011, the total amount of acquisition costs included in general and administrative expenses is TL6.498 thousand. b) According to the resolution of the Board of Directors of Aygaz, a subsidiary of the Group, held on 30 November 2010, it was agrerd to sell 49,62% of Aygaz shares in AES Entek (with a nominal value of TL49.079 thousand) to AES Mont Blanc Holdings B.V. for a consideration of USD136.455.000 to be paid in cash at the date when the share transfer transaction is completed.

The assets and liabilities of the Subsidiary intended for sale have been classified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” in the consolidated financial statements as of 31 December 2010 (Note 24). Following the permissions of the Competition Board and the Energy Market Regulation Authority (“EMRA”), the transfer of AES Entek shares was completed on 28 February 2011 and the total share transfer price of USD136.455.000 was paid in cash. As stated in the public announcement of Aygaz dated 1 December 2010, the consideration was adjusted according to the financial statements of AES Entek dated 28 February 2011 and the sale price was revised to USD149.581.000 after the finalization of the process.

The details of the goodwill calculation and the net assets acquired are as follows:

Acquisition cost (*) 174.824 Net assets acquired (127.747)

Goodwill (Note 17) 47.077

(*) Represents the fair value of the investment in joint venture.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 3 - BUSINESS COMBINATIONS (Continued) The fair values of the identifiable assets and liabilities (49,62%), arising from the acquisition, are as follows: Cash and cash equivalents 25.241 Trade receivables 16.942 Property, plant and equipment 169.673 Intangible assets 1.911 Other assets 5.892 Financial liabilities (10.456) Trade payables (15.802) Deferred tax liabilities (17.107) Other liabilities (2.485) Net assets controlled (49,62%) 173.809 Non-controlling interest (46.062) Net assets acquired (36,47%) 127.747

Inter group share transfer and transactions with non-controlling interests: According to the resolution of the Board of Directors meeting of Koç Holding held on 2 August 2011, it was agreed to acquire 24,81% of share capital (with a total nominal value of TL24.540 thousand) of AES Entek, the Joint Venture of the Group, held by Temel Ticaret A.Ş. (8,24%), Aygaz A.Ş. (8,39%), Mogaz Petrol Gazları A.Ş. (3,27%) and Koç Family members (4,90%) for a total consideration of USD74.784.069. Following the fulfilment of procedures required by the energy market legislation and other related regulations, the share purchase transactions were completed on 7 October 2011. As a result of the related share purchase transaction, total voting right of Koç Holding in AES Entek remained as 49,62%, whereas the effective ownership interest is increased to 34,90% from 14,84%. Related share purchase transaction was treated as transactions between equity holders of the Group and accordingly, the difference between the consideration paid and the carrying value of the net assets of the joint venture held by non-controlling interests is accounted for as “transactions with non-controlling interests” in equity.

NOTE 4 - JOINT VENTURES The amounts of assets, liabilities and profit/loss of the Joint Ventures, which are proportionately consolidated in the consolidated financial statements, before consolidation adjustments (multiplied by related ownership interest) are as follows: 2011 2010 Current assets 31.790.297 25.524.609 Non-current assets 33.386.134 25.976.382

Total assets 65.176.431 51.500.991

Current liabilities 49.056.453 38.361.369 Non-current liabilities 6.893.040 5.294.997 Equity 9.226.938 7.844.625

Total liabilities and equity 65.176.431 51.500.991 2011 2010 Revenue 22.196.365 16.639.651 Operating profit (net) 2.325.206 2.075.050 Profit for the period (net) 1.661.899 1.456.420

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING Segment information, prepared under the managerial approach, is presented below: 2011 2010 a) Revenue Energy 47.541.485 31.411.542 Automotive 10.233.258 7.766.786 Consumer durables 8.433.900 6.834.305 Finance 5.973.720 4.990.154 Other 3.558.498 2.809.649

75.740.861 53.812.436 b) Operating profit Energy 2.413.864 1.284.814 Automotive 773.698 563.968 Consumer durables 665.306 641.381 Finance 1.517.780 1.429.611 Other 22.109 150.114

5.392.757 4.069.888

Inter segment eliminations 97.182 31.823

5.489.939 4.101.711 c) Depreciation and amortisation Energy 393.678 384.202 Automotive 225.813 213.220 Consumer durables 222.673 197.358 Finance 108.391 95.126 Other 84.496 74.584

1.035.051 964.490 d) Profit before tax Energy 1.618.976 1.072.776 Automotive 780.732 558.276 Consumer durables 621.341 654.502 Finance 1.524.990 1.432.774 Other 161.429 167.623

4.707.468 3.885.951 e) Capital expenditures Energy 946.052 390.007 Automotive 602.759 357.418 Consumer durables 367.253 257.100 Finance 126.096 120.597 Other 190.376 120.524

2.232.536 1.245.646 34

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) f) Assets and liabilities 2011 2010

Total assets

Energy 21.739.483 19.788.267 Automotive 5.496.977 4.450.887 Consumer durables 8.359.661 6.323.536 Finance 59.449.650 46.829.941 Other 3.569.156 3.393.131

Segment assets 98.614.927 80.785.762

Assets held for sale (Note 24) 6.160 356.755

98.621.087 81.142.517

Total liabilities

Energy 13.216.092 12.878.157 Automotive 3.871.067 2.855.181 Consumer durables 5.172.083 3.729.686 Finance 51.211.406 39.241.418 Other 1.874.098 1.335.977

Segment liabilities 75.344.746 60.040.419

Liabilities held for sale (Note 24) 5.517 124.184

75.350.263 60.164.603

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) g) Segment analysis

Inter 1 January - Consumer segment 31 December 2011 Energy Automotive durables Finance Other elimination Total

External revenue 47.541.485 10.233.258 8.433.900 5.973.720 3.558.498 - 75.740.861 Inter segment revenue 239.312 170.373 153.585 26.454 593.505 (1.183.229) -

Total revenue 47.780.797 10.403.631 8.587.485 6.000.174 4.152.003 (1.183.229) 75.740.861

Total costs (44.473.092) (9.028.735) (5.992.900) (3.077.474) (3.255.768) 1.246.996 (64.580.973)

Gross profit 3.307.705 1.374.896 2.594.585 2.922.700 896.235 63.767 11.159.888

Operating expenses Marketing, selling and distribution (513.747) (373.712) (1.503.024) (55.343) (252.762) - (2.698.588) General administrative (672.864) (170.606) (349.240) (1.263.151) (570.963) 45.679 (2.981.145) Research and development (13.588) (60.092) (67.873) - (9) - (141.562) Other income/expenses (net)(*) 306.358 3.212 (9.142) (86.426) (50.392) (12.264) 151.346

Operating profit 2.413.864 773.698 665.306 1.517.780 22.109 97.182 5.489.939

Income from associates - - - 7.210 - - 7.210 Financial income/expense (794.888) 7.034 (43.965) - 139.320 (97.182) (789.681)

Profit before tax 1.618.976 780.732 621.341 1.524.990 161.429 - 4.707.468

(*) Gain on sale of Entek shares of Aygaz, a Subsidiary of the Group, amounting to TL194.629 thousand and Tüpraş’s scrap items (platinum) sales incomes, amounting to TL39.482 thousand have been accounted for under “Other income” in Energy Segment (Note 28). Penalties of TL28.609 thousand issued by the Competition Authority to Ford Otosan and Tofaş, Joint Ventures of the Group, have been accounted for under “Other expenses” in Automotive Segment (Note 28). Expenses incurred by Arçelik in 2011 amounting to TL30.459 thousand, which arose from the voluntary recall of certain refrigerator models, a limited number of which had been sold between 2000 and 2006 in England and Ireland with expired warranties, have been accounted for under “Other expenses” in Consumer Durables Segment (Note 28). The loss on the sale of Koçnet shares held by Koç Holding amounting to TL43.665 thousand has been accounted for under “Other expenses” in Other Segment (Note 28).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) g) Segment analysis (continued) Inter 1 January Consumer segment 31 December 2010 Energy Automotive durables Finance Other elimination Total

External revenue 31.411.542 7.766.786 6.834.305 4.990.154 2.809.649 - 53.812.436 Inter segment revenue 178.216 90.681 200.426 46.641 464.750 (980.714) -

Total revenue 31.589.758 7.857.467 7.034.731 5.036.795 3.274.399 (980.714) 53.812.436

Total costs (29.133.575) (6.831.302) (4.925.586) (2.230.993) (2.482.068) 982.735 (44.620.789)

Gross profit 2.456.183 1.026.165 2.109.145 2.805.802 792.331 2.021 9.191.647

Operating expenses Marketing, selling and distribution (463.635) (273.463) (1.192.457) (53.370) (215.744) - (2.198.669) General administrative (592.071) (158.856) (286.538) (1.166.385) (440.275) 39.752 (2.604.373) Research and development (13.264) (47.104) (63.431) - (65) - (123.864) Other income/expenses(net)(*) (102.399) 17.226 74.662 (156.436) 13.867 (9.950) (163.030)

Operating profit 1.284.814 563.968 641.381 1.429.611 150.114 31.823 4.101.711

Income from associates - - - 3.163 - - 3.163 Financial income/expenses (net)(212.038) (5.692) 13.121 - 17.509 (31.823) (218.923)

Profit before tax 1.072.776 558.276 654.502 1.432.774 167.623 - 3.885.951

(*) Tax penalty provision expense amounting to TL181.235 thousand of Tüpraş, a Subsidiary of the Group, which was calculated in accordance with “Law on Amendments of Restructuring of Several Types of Receivables and Social Security and General Health Insurance Law and Other Several Law and Executive Orders” has been accounted for under “Other expenses” in Energy Segment.

Gain on sale of factory buildings and annexes of Arçelik, a Subsidiary of the Group, located in Topkapı, Istanbul, to Koç University amounting to TL40.055 thousand has been accounted for under “Other income” in Consumer Durables Segment.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - SEGMENT REPORTING (Continued) h) Finance sector operating results 2011 2010 Net profit finance

Interest income 1.774.479 1.734.690 Fee and commission income 1.063.511 963.138 Income from insurance business 78.683 58.083 Other operating income 103.209 81.714

3.019.882 2.837.625

Inter segment eliminations (97.182) (31.823)

2.922.700 2.805.802

Operating expenses

Sales, marketing and distribution expenses (55.343) (53.370) General administrative expenses (1.263.151) (1.166.385) Provision for loan impairment (Note 28) (173.914) (217.460) Other operating income/expenses (net) 87.488 61.024

(1.404.920) (1.376.191)

Operating profit 1.517.780 1.429.611

Details of the income from insurance business for the years ended 31December 2011 and 2010 are as follows:

2011 2010

Earned premiums (net of reinsurance) 409.567 329.182 Claims incurred (net of reinsurance) (308.951) (271.301) Commissions, net (4.706) (3.138) Other income/(expense), net (17.227) 3.340

78.683 58.083

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 6 - CASH AND CASH EQUIVALENTS 2011 2010 Finance Non-Finance Total Finance Non-Finance Total Cash in hand 511.550 3.654 515.204 349.702 2.245 351.947 Cheques received 86 39.750 39.836 179 31.370 31.549 Banks - Demand deposits 266.389 196.751 463.140 153.380 495.135 648.515 - Time deposits 913.635 3.545.820 4.459.455 610.959 7.706.212 8.317.171 - Reverse repo receivables 1.060.863 - 1.060.863 485.485 - 485.485 Bonds and bills 134.798 - 134.798 38.754 - 38.754 Money market placements 25.917 - 25.917 1.552 - 1.552 Other 4.960 92.071 97.031 1.230 61.322 62.552

2.918.198 3.878.046 6.796.244 1.641.241 8.296.284 9.937.525 As of 31 December 2011, total blocked deposits amount to TL477.484 thousand (2010: TL359.309 thousand). TL397.725 thousand of the related amount consists of the revenue shares collected by Tüpraş, a Subsidiary of the Group, as indicated in the Petroleum Market License Regulation (2010: TL326.633 thousand) (Note 23.d). Group companies operating in the non-finance sector have deposit balances, amounting to TL1.821.470 thousand (2010: TL2.334.796 thousand) held at Yapı Kredi Bankası, a Joint Venture of the Group, which are eliminated during the preparation of consolidated financial statements. NOTE 7 - BALANCES WITH CENTRAL BANKS 2011 2010 Central banks -Reserve deposits 4.489.247 2.627.616 -Other balances 35.009 38.484

4.524.256 2.666.100 As of 31 December 2011, TL4.356.392 thousand of reserve deposits is held in CBRT (2010: TL2.608.380 thousand). In accordance with the “Communiqué Regarding the Reserve Requirements” numbered 2005/1, banks operating in Turkey must place reserves in the CBRT for their TL and foreign currency liabilities as of 31 December 2011 according to the ratios stated below. a) TL liabilities: - Demand, notice deposits and private current accounts 11%, - Up to1 month and 3 months time deposit accounts (1 month and 3 months included) 11%, - Up to 6 months time deposit accounts (6 months included) 8%, - Up to 1 year time deposit accounts 6%, - 1 year and over 1 year time deposit accounts and accumulating deposit accounts 5%, - Up to 1 year liabilities excluding deposit (1 year included) 11%, - Up to 3 year liabilities excluding deposit (3 year included) 8%, - Over 3 year liabilities excluding deposit 5%, b) Foreign currency liabilities: - Demand, notice FC deposits and private current accounts and up to 1 month, up to 3 months, up to 6 months, and up to 1 year time FC deposits 11%, - 1 year time and more than 1 year time FC deposits 9%, - Up to 1 year FC liabilities excluding deposit (1 year included) 11%, - Up to 3 years FC liabilities excluding deposit (3 years included) 9%, - Over 3 years FC liabilities excluding deposit 6%. In 2010, the aforementioned ratios for TL and foreign currency liabilities are 6% and 11%, respectively. These funds cannot be used to finance the daily operations of the banks. 39

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - FINANCIAL ASSETS

2011 2010 Short-term Long-term Total Short-term Long-term Total Financial assets at fair value through profit or loss 159.863 - 159.863 204.928 - 204.928 Available-for-sale financial assets 575.456 3.404.686 3.980.142 90.959 2.945.045 3.036.004 Held-to-maturity financial assets 488.351 6.219.723 6.708.074 1.661.656 5.378.167 7.039.823

1.223.670 9.624.409 10.848.079 1.957.543 8.323.212 10.280.755 a) Financial assets at fair value through profit or loss

2011 2010 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Government bonds 100.094 - 100.094 100.750 - 100.750 Eurobond 13.450 18.757 32.207 30.049 16.633 46.682 Treasury bills - - - 19.477 - 19.477 Investment funds 20.519 - 20.519 28.975 - 28.975 Other 7.043 - 7.043 6.635 - 6.635

141.106 18.757 159.863 185.886 16.633 202.519 Equity securities: Listed - - - 2.409 - 2.409

141.106 18.757 159.863 188.295 16.633 204.928 b) Available-for-sale financial assets 2011 2010 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Government bonds 2.572.305 - 2.572.305 1.805.765 - 1.805.765 Eurobond 541.562 - 541.562 395.871 - 395.871 Treasury bills 5.957 - 5.957 1.924 - 1.924 Private sector bonds 698.593 - 698.593 658.885 - 658.885 Investment funds 43.710 - 43.710 26.483 - 26.483 Other - - - 2.009 - 2.009

3.862.127 - 3.862.127 2.890.937 - 2.890.937 Equity securities: Listed - 37.803 37.803 120 63.592 63.712 Unlisted 11.934 68.278 80.212 11.125 70.230 81.355

3.874.061 106.081 3.980.142 2.902.182 133.822 3.036.004

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - FINANCIAL ASSETS (Continued)

The list of equity securities and the shareholding rates are as follows:

2011 2010 (%) (%) Listed: Altınyunus Çeşme Turistik Tesisler A.Ş. 37.803 30,00 63.592 30,00 Other - - 120-

37.803 63.712

Unlisted: Tanı Pazarlama ve İletişim Hizmetleri A.Ş. 16.421 88,00 12.366 88,00 Beldesan Otomotiv Yan San. ve Tic. A.Ş 13.066 91,82 13.066 91,82 Akdeniz Akaryakıt Dep. ve Nakliyat A.Ş. 6.385 16,67 8.350 16,67 Takas ve Saklama Bankası A.Ş. 6.190 2,43 6.190 2,43 Koç Bilgi ve Savunma Teknolojileri A.Ş. 5.180 92,23 5.180 92,23 Promena Elektronik Ticaret A.Ş. 5.000 50,00 5.000 50,00 Körfez Hava Ulaştırma A.Ş. 4.000 100,00 4.000 100,00 Ultra Kablolu Televizyon ve Telekom. San. ve Tic. A.Ş 1.857 50,00 1.857 50,00 Bozkurt Tarım ve Gıda San. ve Tic. A.Ş 911 83,89 911 83,89 Other 21.202 - 24.435 -

80.212 81.355

Available-for-sale equity securities that do not have quoted fair values or for which fair values cannot be reliably measured through alternative methods, are measured at cost less any impairment.

Total assets, revenues and net profit of the unconsolidated subsidiaries and joint ventures are below 1% of the total consolidated assets, revenues and net profit of the Group.

Provision for impairment of unlisted financial assets (equity securities) amounts to TL104.065 thousand as of 31 December 2011 (2010: TL77.270 thousand). c) Held-to-maturity financial assets 2011 2010 Finance Non-Finance Total Finance Non-Finance Total Debt securities: Eurobond 4.530.909 - 4.530.909 3.701.223 - 3.701.223 Government bonds 1.824.982 - 1.824.982 2.709.860 - 2.709.860 Treasury bills 238 - 238 760 - 760 Other - 12.943 12.943 76.389 - 76.389

6.356.129 12.943 6.369.072 6.488.232 - 6.488.232

Time deposits 317.250 21.752 339.002 533.465 18.126 551.591

6.673.379 34.695 6.708.074 7.021.697 18.126 7.039.823

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 9 - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD 2011 2010 (%) (%)

Banque de Commerce et de Placements S.A. 91.970 15,34 35.954 15,34 Yapı Kredi Koray Gayrimenkul Yatırım Ortaklığı A.Ş. (*) 9.825 15,22 11.133 15,22

101.795 47.087

(*) Yapı Kredi Koray, a Joint Venture of the Group, has been included in the scope of the consolidation using the equity method, due to its immaterial effect on the financial statement line items individually.

The movements of investments accounted for using the equity method for the years ended 31 December 2011 and 2010 are as follows:

2011 2010

As of 1 January 47.087 41.811 Share of income/loss 7.210 3.163 Dividends received (1.245) (1.035) Currency translation differences (*) 48.743 3.148

As of 31 December 101.795 47.087

Share of income/loss of investments accounted for using the equity method:

2011 2010

Banque de Commerce et de Placements S.A. 8.517 4.372 Yapı Kredi Koray Gayrimenkul Yatırım Ortaklığı A.Ş. (1.307) (1.209)

7.210 3.163

Aggregated summary figures of the financial statements of investments accounted for using the equity method:

2011 2010

Total assets 4.604.634 2.654.655 Total liabilities 3.923.926 2.434.997 Total revenues 208.456 176.918

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS

Certain derivative transactions, even though providing effective economic hedges under the Group risk management position, do not qualify for hedge accounting under the specific rules in IAS 39, and are therefore accounted for as derivatives held for trading in the consolidated financial statements.

Derivative transactions, that meet specified hedge accounting requirements, are accounted for as derivatives held for hedging.

Within this context, the breakdown of the Group’s derivative financial instruments is as follows:

2011 2010 Asset Liability Asset Liability

Derivatives held for trading 151.488 269.278 348.183 181.995 Derivatives held for hedging 226.868 284.012 19.798 255.284

378.356 553.290 367.981 437.279

Finance: 2011 2010 Contract Fair values Contract Fair values amount (*) Asset Liability amount (*) Asset Liability

Derivatives held for trading:

Currency swaps 9.545.990 6.764 47.272 11.568.113 151.418 97.240 Option agreements 5.372.624 29.774 29.929 5.210.238 42.301 42.415 Currency forwards 5.298.801 55.259 51.272 2.581.641 12.128 16.831 Interest rate swaps 2.312.478 40.825 136.329 3.346.226 135.006 22.765 Credit derivatives 823.223 3.749 4.125 450.065 5.990 335

23.353.116 136.371 268.927 23.156.283 346.843 179.586

Derivatives held for hedging:

Interest rate swaps 16.218.599 3.795 241.941 4.263.510 1.871 69.876 Cross-currency interest rate swaps 3.103.427 184.873 9.480 2.158.619 17.231 156.958 Currency swaps 594.882 16.474 - 107.615 343 - Currency forwards 19.128 341 - 4.327 15 -

19.936.036 205.483 251.421 6.534.071 19.460 226.834

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued) a. Fair value hedge:

Effective from 1 March 2009, Yapı Kredi Bankası, a Joint Venture of the Group, started to hedge the possible fair value effects of changes in market interest rates on part of its fixed interest TL mortgage and car loan portfolios as well as the fair value effects of changes in foreign exchange rates on part of its foreign currency denominated funds borrowed using cross-currency interest rate swaps.

Net carrying value of the hedging instruments (cross-currency interest rate swaps) at 31 December 2011 is an asset amounting to TL175.393 thousand (2010: TL139.727 thousand liability). Net carrying value of the related derivatives includes the effect of exchange rate changes and net linear interest accruals on derivatives.

As of 31 December 2011, the fair value difference of the hedged item against changes in market interest rates (fixed interest TL mortgage and car loans) is TL53.602 thousand (2010: TL112.215 thousand). The mark to market difference amounting to TL58.613 thousand (2010: TL42.146 thousand) is accounted for as an expense in the operating results of Finance Segment. The ineffective portion of the related hedging relationship is TL2.213 thousand.

In order to hedge its cash flow risk arising from floating rate liabilities, Yapı Kredi Bankası, a Joint Venture of the Group, started to apply cash flow hedge accounting effective from 1 January 2010. Hedging instruments are USD, EUR and TL interest rate swaps with floating receive, fixed pay legs, and the hedged item is the cash outflows due to financing of interests of repricing USD, EUR and TL customer deposits, repos and borrowings.

Net interest expense after tax on the cash flow hedge, which is reclassified to the statement of income of 2011, amounted to TL74.398 thousand (2010: TL26.025 thousand interest expense). Net interest expense after tax accounted for under “Cumulative gain/losses on hedging” in the statement of other comprehensive income of 2011 is TL178.143 thousand (2010: TL67.670 thousand interest expense). The net expense of the ineffective portion of the related hedging relationship is TL538 thousand (2010: TL2.104 thousand).

Koç Tüketici Finansmanı, a Subsidiary of the Group, funds its long term fixed interest rate TL loan portfolio with long term foreign currency funds obtained from international markets. The Company hedges its exchange rate risk arising on the principal repayments of foreign currency denominated borrowings at maturity by using currency swaps and currency forwards.

Net foreign exchange gain after tax on the cash flow hedge, which is reclassified to the statement of income of 2011, amounted to TL10.766 thousand (2010: TL627 thousand foreign exchange gain). Net foreign exchange gain after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2011 is TL13.252 thousand (2010: TL288 thousand foreign exchange gain). c. Net investment hedges in foreign operations:

Yapı Kredi Bankası, a Joint Venture of the Group, hedges part of the currency translation risk of net investments in foreign operations through foreign currency borrowings. EUR denominated borrowing of Yapı Kredi Bankası is designated as a hedge of the net investment in Yapı Kredi Bankası’s certain EUR denominated subsidiaries. The total amount of the borrowing designated as a hedge of the net investment at 31 December 2011 is EUR119 million (2010: EUR102 million). Foreign exchange loss after tax amounting to TL35.583 thousand (2010: TL7.794 thousand foreign exchange gain) on translation of the borrowing to TL is accounted for under “Cumulative gains/losses on hedging” in 2011 statement of comprehensive income.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued) Non-Finance: 2011 2010 Contract Fair values Contract Fair values amount (*) Asset Liability amount (*) Asset Liability Derivatives held for trading:

Currency forwards 958.706 11.617 148 458.586 1.309 651 Currency swaps 255.788 1.807 61 219.276 31 596 Commodity futures 92.721 1.693 142 72.532 - 1.162

1.307.215 15.117 351 750.394 1.340 2.409 Derivatives held for hedging:

Interest rate swaps 1.425.283 - 32.591 1.296.784 - 28.450 Receivables from operating leases 220.520 21.385 - 157.257 - - Commodity futures - - - 1.414 338 - 1.645.803 21.385 32.591 1.455.455 338 28.450

(*) Refers to the aggregate of buy and sell legs of the related derivative financial instruments. Contract amounts of intra- group derivative financial instruments have been eliminated for consolidation purposes. a. Fair value hedge: Otokoç, a Subsidiary of the Group, hedges its foreign exchange risk on commitments to provide operational leasing services resulting from off balance sheet foreign currency denominated operating lease receivables (hedged item) with foreign currency denominated loans (hedging instrument). Fair value changes resulting from the exchange risk of the hedged item has been accounted for under “derivatives held for hedging” as an asset or liability on the balance sheet and in foreign exchange gain/losses in the statement of income. b. Cash flow hedges: In order to hedge the cash flow risk resulting from the floating rate loan obtained for the acquisition of 51% of the shares of Tüpraş; EYAŞ, a Subsidiary of the Group, has entered into an interest rate swap agreement amounting to USD356.040 thousand. Net interest expense after tax on the cash flow hedge, which is reclassified to the statement of income of 2011, amounted to TL10.165 thousand (2010: TL26.351 thousand interest expense). Net interest expense after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2011 is TL14.132 thousand (2010: TL22.881 thousand interest expense). Tofaş, a Joint Venture of the Group, hedges its currency risk resulting from realised and forecast sales of light commercial vehicles (hedged item) by obtaining foreign currency denominated loans (hedging instrument). Net foreign exchange losses after tax within the cash flow hedge, which is reclassified to the statement of income of 2011, amounted to TL17.674 thousand (2010: TL2.232 thousand foreign exchange losses). Net foreign exchange losses after tax accounted for under “Cumulative gains/losses on hedging” in the statement of other comprehensive income of 2011 is TL70.929 thousand (2010: TL8.863 thousand foreign exchange losses). c. Net investment hedges in a foreign operation: Arçelik, a Subsidiary of the Group, designated some portion of its EUR denominated bank loans as a hedging instrument in order to hedge the foreign currency risk arising from the translation of net assets of part of its subsidiaries operating in Europe from EUR to Turkish Lira. As of 31 December 2011, EUR150 million of bank borrowings was designated as a net investment hedging instrument (31 December 2010: EUR87,5 million). Net foreign exchange losses after tax accounted for under “cumulative gains/losses on hedging” in the statement of other comprehensive income of 2011 is TL47.364 thousand (2010: TL9.737 thousand foreign exchange losses).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 11 - TRADE RECEIVABLES AND PAYABLES

Trade receivables 2011 2010

Trade receivables 7.247.319 3.906.024 Notes and cheques receivables 2.021.176 1.484.389 Less: Provision for doubtful receivables (203.295) (214.900) Less: Unearned finance income (51.145) (69.034)

9.014.055 5.106.479 Due from related parties (Note 30) 368.361 83.023

9.382.416 5.189.502

Short-term trade receivables 9.262.692 5.098.243 Long-term trade receivables 119.724 91.259

9.382.416 5.189.502

Movement in the provision for doubtful receivables is as follows: 2011 2010

Beginning of the period - 1 January 214.900 191.094

Increases during the period 43.692 47.198 Collections (10.635) (13.316) Acquisitions 241 - Sale of subsidiary (1) (6.112) - Changes in the scope of consolidation (2) - (1.782) Write-offs (3) (46.328) (8.504) Currency translation differences 7.537 210

End of the period - 31 December 203.295 214.900

(1) Due to the sale of Koçnet shares in 2011. (2) Beldesan, Beldeyama, Bozkurt and Ultra Kablo were excluded from the scope of consolidation in 2010. (3) Doubtful receivables, for which no possibility of collection is foreseen and no further cash inflow is expected, are written off from the records along with their related provisions.

Trade payables 2011 2010

Trade payables 8.960.402 7.308.840 Notes payables 212 1.447 Less: Unearned finance expense (18.548) (8.644)

8.942.066 7.301.643 Due to related parties (Note 30) 244.606 247.725

9.186.672 7.549.368

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS

2011 2010 Short-term Long-term Total Short-term Long-term Total Loans and advances to customers 18.172.872 20.015.698 38.188.570 15.205.731 14.375.629 29.581.360 Receivables from insurance business 105.841 20.988 126.829 93.125 4.179 97.304

18.278.713 20.036.686 38.315.399 15.298.856 14.379.808 29.678.664

Loans and advances to customers:

Corporate and Financial commercial Consumer Credit card leasing Factoring 2011 loans loans receivables receivables receivables Total

Gross 22.942.707 8.711.679 5.381.103 1.466.164 904.267 39.405.920

Less: Provision for impairment (750.492) (173.970) (197.730) (82.155) (13.003) (1.217.350)

Net 22.192.215 8.537.709 5.183.373 1.384.009 891.264 38.188.570

Corporate and Financial commercial Consumer Credit card leasing Factoring 2010 loans loans receivables receivables receivables Total

Performing loans 17.011.630 5.856.980 4.122.234 835.777 906.615 28.733.236 Watch listed loans 463.885 222.916 152.508 96.901 - 936.210 Loans under legal follow-up 486.947 280.603 235.740 156.890 9.022 1.169.202

Gross 17.962.462 6.360.499 4.510.482 1.089.568 915.637 30.838.648

Less: Provision for impairment (659.741) (219.570) (264.335) (101.699) (11.943) (1.257.288)

Net 17.302.721 6.140.929 4.246.147 987.869 903.694 29.581.360

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS (Continued)

Movement of provision for impairment is as follows:

2011 2010

Beginning of the period - 1 January 1.257.288 1.600.059

Increase in provisions for loan impairment 467.735 665.246 Recoveries of amounts previously provisioned (330.524) (450.724) Changes in estimates (Note 2.3) (53.230) - Write-offs during the period as uncollectible (*) (128.553) (557.835) Currency translation differences 4.634 542

End of the period - 31 December 1.217.350 1.257.288

(*) Includes the releases from the provision due to the sale of non-performing loan portfolio.

Net investment in finance leases is as follows: 2011 2010

Gross investment in finance leases 1.520.536 1.006.697 Less: Unearned finance income (252.181) (170.920)

1.268.355 835.777

Leasing receivables consist of rentals over the terms of leases. The rentals according to their maturities are as follows:

2011 2010

Less than a year 515.091 409.111 1-5 years 1.005.445 597.586 Less: Unearned finance income (252.181) (170.920)

1.268.355 835.777

NOTE 13 - INVENTORIES 2011 2010

Raw materials and supplies 1.814.850 1.382.850 Finished goods 1.929.578 1.104.966 Goods in transit 1.265.365 600.229 Merchandise 973.853 674.694 Work in progress 829.713 449.192 Other inventories 50.063 61.777 Less: Provision for impairment (73.350) (80.610)

6.790.072 4.193.098

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 13 - INVENTORIES (Continued)

Details of goods in transit are as follows: 2011 2010

Raw materials and supplies 1.087.464 369.369 Work in progress 111.366 287 Merchandise 66.175 230.491 Other inventories 360 82

1.265.365 600.229

Movement of provision for impairment on inventories is as follows: 2011 2010

Beginning of the period - 1 January 80.610 105.796

Increase during the period 5.754 9.000 Reversal of provisions due to sales of inventories (13.822) (29.786) Write-offs (1.565) (2.393) Acquisitions 802 - Currency translation differences 1.571 (2.007)

End of the period - 31 December 73.350 80.610

NOTE 14 - INVESTMENT PROPERTIES

2011 2010 As of 1 January Cost 126.844 136.237 Accumulated depreciation (47.024) (51.486)

Net book value 79.820 84.751

Net book value at the beginning of the period 79.820 84.751

Additions 8.453 - Disposals (539) (3.326) Transfers (*) 3.529 - Currency translation differences 1.105 (327) Current period depreciation (1.613) (1.278)

Net book value at the end of the period 90.755 79.820

As of 31 December Cost 171.482 126.844 Accumulated depreciation (80.727) (47.024)

Net book value 90.755 79.820

(*) Transferred from property, plant and equipment.

The fair values of investment properties has been determined as TL131.771 thousand as of 31 December 2011, according to the related valuations performed (2010: TL112.157 thousand).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - PROPERTY, PLANT AND EQUIPMENT

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

Net book value 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

Net book value at the beginning of the period 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

Net book value at the end of the period 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

Net book value 2.531.916 1.391.214 5.232.703 917.368 482.638 745.290 235.521 11.536.650

(1) Includes transfers amounting to TL3.529 thousand to investment properties, TL20.219 thousand to intangible assets and TL2.276 thousand to other assets. (2) Due to the sale of Koçnet shares.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

As of 1 January 2010 Cost 2.753.981 2.375.064 10.776.745 934.765 1.100.254 329.044 383.634 18.653.487 Accumulated depreciation (245.260) (1.103.408) (5.433.275) (318.328) (731.039) - (192.638) (8.023.948)

Net book value 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

Net book value at the beginning of the period 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

Additions 12.520 18.393 101.864 185.055 106.300 557.283 37.286 1.018.701 Disposals (10.886) (43.744) (30.971) (95.496) (2.788) (13.037) (575) (197.497) Transfers (1) 76.800 39.632 100.482 7.672 26.433 (501.259) 10.672 (239.568) Changes in the scope of consolidation (2) (570) (2.673) 487 2.354 199 8.737 331 8.865 Currency translation differences (201) 57 (100) (412) (134) (135) 47 (878) Reversal of impairment - 25.849 - - 623 - - 26.472 Current period depreciation (61.022) (58.049) (492.160) (59.392) (93.469) - (35.690) (799.782)

Net book value at the end of the period 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

31 December 2010 Cost 2.825.880 2.320.465 10.565.591 1.006.080 1.201.933 380.633 425.354 18.725.936 Accumulated depreciation (300.518) (1.069.344) (5.542.519) (349.862) (795.554) - (222.287) (8.280.084)

Net book value 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

(1) Includes transfers amounting to TL220.344 thousand to assets held for sale and TL19.224 to intangible assets. (2) Due to the inclusion of Eltek and THY Opet in the scope of consolidation and the exclusion of Beldesan, Beldeyama and Bozkurt from the scope of consolidation.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - INTANGIBLE ASSETS Development Rights Brand costs Other Total

As of 1 January 2011

Cost 792.433 267.167 1.012.580 123.350 2.195.530 Accumulated amortisation (302.914) (42.831) (405.379) (60.248) (811.372)

Net book value 489.519 224.336 607.201 63.102 1.384.158

Net book value at the end of the period 508.242 497.977 656.117 74.479 1.736.815

31 December 2011

Cost 851.530 548.952 1.179.695 142.524 2.722.701 Accumulated amortisation (343.288) (50.975) (523.578) (68.045) (985.886)

Net book value 508.242 497.977 656.117 74.479 1.736.815

(1) Includes transfers from property, plant and equipment. (2) Due to the sale of Koçnet shares.

Total research and development expenditures incurred in 2011 excluding amortisation amounts to TL230.707 thousand (2010: TL243.491 thousand).

The net book value of intangible assets with indefinite useful lives amounts to TL467.710 thousand and consists of brands (2010: TL184.275 thousand). The useful lives of the related brands are assessed as indefinite, since there is no foreseeable limit to the period over which they are expected to generate net cash inflows for the Group.

Brand impairment test

As of 31 December 2011, the brands of Arçelik, a Subsidiary of the Group, with indefinite useful lives have been tested for impairment using the royalty relief method. Sales forecasts, considered in the determination of the brand value, are based on the financial plans approved by the management covering a three to five year period. Beyond the three to five year period, sales forecasts are extrapolated with a 2,5% expected growth rate. The royalty income is estimated using these sales forecasts and royalty rates of 2% to 3%. Estimated royalty income with the aforementioned method has been discounted using 9% to 11% discount rates.

F-162 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - INTANGIBLE ASSETS (Continued)

Development Rights Brand costs Other Total

As of 1 January 2010

Cost 821.079 278.816 798.341 86.784 1.985.020 Accumulated amortisation (326.727) (34.655) (251.225) (52.520) (665.127)

Net book value 494.352 244.161 547.116 34.264 1.319.893

Additions 43.536 - 160.414 22.995 226.945 Disposals (6.447) - (86) (15) (6.548) Transfers (1) 8.072 (1.221) (3.279) 16.318 19.890 Changes in the scope of consolidation (2) (401) - - 150 (251) Currency translation differences 309 (10.427) - (124) (10.242) Current period amortisation (49.902) (8.177) (96.964) (11.871) (166.914) Reversal of impairment - - - 1.385 1.385

Net book value at the end of the period 489.519 224.336 607.201 63.102 1.384.158

31 December 2010

Cost 792.433 267.167 1.012.580 123.350 2.195.530 Accumulated amortisation (302.914) (42.831) (405.379) (60.248) (811.372)

Net book value 489.519 224.336 607.201 63.102 1.384.158

(1) Includes transfers from property, plant and equipment of TL19.224 thousand, from other non-current assets of TL1.015 thousand and transfers to assets held for sale of TL349 thousand. (2) Due to the inclusion of Eltek and THY Opet in the scope of the consolidation and exclusion of Beldesan, Beldeyama and Bozkurt from the scope of consolidation.

F-163 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 17 - GOODWILL 2011 2010

Net book value at the beginning of the period- 1 January 3.526.351 3.517.860

Acquisitions (Note 3) 226.472 - Change in contingent liabilities (*) (1.596) 8.704 Disposals (757) - Currency translation differences 11.178 (213)

Net book value at the end of the period- 31 December 3.761.648 3.526.351

The allocation of the goodwill is as follows:

2011 2010

Tüpraş 2.736.463 2.736.463 Yapı Kredi Bankası 642.957 643.714 Defy Group (Note 3) 179.395 - Opet 138.984 138.984 AES Entek (Note 3) 47.077 - Other 16.772 7.190

3.761.648 3.526.351

The recoverable amount of a cash generating unit is determined using the value in use or fair value less costs to sell calculations. These calculations use cash flow projections based on financial budgets approved by the management. The cash flow projections beyond the budgeted period are extrapolated using the estimated growth rates and discounted with the ratios stated below.

The budget period and key assumptions used in the calculations of recoverable amount are as follows:

Cash-generating unit Method used Period Ratio 1 Ratio 2 Ratio 3

Tüpraş Fair value, USD 14 years 4,4 - 9,3% 2% 10,8 - 15,3% Yapı Kredi Bankası Value in use, TL 5 years 2,5 - 3,0% 3% 12,9 - 15,9% Opet Fair value, USD 10 years 4,2 - 5,1% 2% 9,1%

Ratio 1: Budgeted gross profit / budgeted net interest margin Ratio 2: Growth rate used to extrapolate cash flows beyond the budget period Ratio 3: Discount rate applied to the cash flow projections (*)

(*) For Tüpraş and Yapı Kredi Bankası free cash flows to equityholders are used and discounted by the cost of equity. For Opet free cash flows to firm are used and discounted by the weighted average cost of capital (WACC).

F-164 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 18 - PAYABLES OF FINANCE SECTOR OPERATIONS

2011 2010 Short-term Long-term Total Short-term Long-term Total

Deposits 33.572.493 695.755 34.268.248 26.530.200 291.923 26.822.123 Insurance technical reserves 270.842 261.040 531.882 228.711 236.457 465.168 Other payables of insurance business 54.889 - 54.889 30.928 6.390 37.318

33.898.224 956.795 34.855.019 26.789.839 534.770 27.324.609

Deposits: 2011 2010 Demand Time Total Demand Time Total TL deposits Saving deposits 970.210 9.684.107 10.654.317 906.379 7.921.605 8.827.984 Commercial deposits 1.577.547 4.396.340 5.973.887 1.357.091 4.225.557 5.582.648 Deposits from banks 66.014 146.300 212.314 79.344 189.766 269.110 Funds deposited under repurchase agreements - 451.878 451.878 - 33.920 33.920

2.613.771 14.678.625 17.292.396 2.342.814 12.370.848 14.713.662

Foreign currency deposits Saving deposits 1.293.615 5.071.281 6.364.896 983.601 3.770.979 4.754.580 Commercial deposits 1.546.056 5.985.114 7.531.170 1.368.793 3.786.460 5.155.253 Deposits from banks 23.356 549.424 572.780 17.169 634.630 651.799 Funds deposited under repurchase agreements - 2.507.006 2.507.006 - 1.546.829 1.546.829

2.863.027 14.112.825 16.975.852 2.369.563 9.738.898 12.108.461

34.268.248 26.822.123

F-165 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 18 - PAYABLES OF FINANCE SECTOR OPERATIONS (Continued)

Insurance technical reserves: 2011 2010

Mathematical reserve 161.339 139.292 Reserve for unearned premiums 179.042 140.256 Profit share reserve 121.829 125.236 Outstanding claim reserve 56.897 47.096 Insurance IBNR reserve 12.775 13.288

531.882 465.168

Insurance liabilities and reinsurance shares

Gross insurance liabilities

Life mathematical reserves 283.169 264.529 Reserve for unearned premiums 241.361 168.388 Claims provision 127.565 97.710

652.095 530.627

Reinsurance shares

Reserve for unearned premiums (62.319) (28.133) Claims provision (57.894) (37.326)

(120.213) (65.459)

Net insurance technical reserves

Life mathematical reserves 283.169 264.529 Reserve for unearned premiums 179.042 140.255 Claims provision 69.671 60.384

531.882 465.168

F-166 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - FINANCIAL LIABILITIES 2011 2010 Finance Non-Finance Total Finance Non-Finance Total Short-term financial liabilities: Bank borrowings 6.727.112 3.971.759 10.698.871 4.367.499 3.995.468 8.362.967 Debt securities in issue 1.197.198 - 1.197.198 355.220 - 355.220 Financial leasing payables - 3.898 3.898 - 3.257 3.257 Factoring payables - 729 729 - 124.400 124.400 7.924.310 3.976.386 11.900.696 4.722.719 4.123.125 8.845.844

Long-term financial liabilities: Bank borrowings 3.174.071 5.515.965 8.690.036 2.524.416 4.578.764 7.103.180 Debt securities in issue 1.066.232 - 1.066.232 927.674 - 927.674 Financial leasing payables - 7.010 7.010 - 1.596 1.596 4.240.303 5.522.975 9.763.278 3.452.090 4.580.360 8.032.450

12.164.613 9.499.361 21.663.974 8.174.809 8.703.485 16.878.294 Group companies operating in the non-finance sector have financial liabilities, amounting to TL390.902 thousand (2010: TL511.463 thousand) extended by Yapı Kredi Bankası, a Joint Venture of the Group, which are eliminated during the preparation of consolidated financial statements. Finance: a) Major financial liabilities obtained in 2011: The details of the bonds/bills issued in 2011 by Yapı Kredi Bankası, a Joint Venture of the Group, are as follows: - Bonds of TL75.000 thousand (nominal) with an interest rate of 9,08% with 368 days maturity and coupon payment within period of 92 days. - Domestic bills of TL500.000 thousand (nominal) with an interest rate of 10,62% and maturity of 168 days. These bonds and bills can be re-purchased and re-sold according to the relevant legislation and net outstanding balances are reflected on the balance sheet. Yapı Kredi Bankası obtained securitisation borrowing in August and September 2011, from Standard Chartered Bank, Wells Fargo, West LB and SMBC amounting to USD112.500.000 and EUR103.000.000, using Yapı Kredi Diversified Payment Rights Finance Company (“Special Purpose Entity”). The borrowing has floating interest rates based on Euribor/Libor and the maturity is between 2016 and 2023. In April 2011, Yapı Kredi Bankası obtained a syndication loan from international banks from 19 countries, 47 banks, consisting of 2 credit tranches with 1 year maturity; one tranche amounting to USD150.500.000 with total cost of Libor+1,10% and the other tranche amounting to EUR397.500.000 with total cost of Euribor+1,10%, in total the syndication credit is approximately USD725.000.000. b) Major financial liabilities obtained before 2011: In 2006 and 2007, Yapı Kredi Bankası obtained three subordinated loans amounting to EUR525.000.000, with 10 years maturity and a repayment option at the end of 5 years. The loan amounts are EUR250.000.000, EUR175.000.000 and EUR100.000.000 and were obtained from Merrill Lynch Capital Corporation, Goldman Sachs International Bank and Citibank, respectively. The interest rates for the loans are Euribor+2%, Euribor+2,25% and Euribor+1,85% respectively, for the first 5 year of the loans. Yapı Kredi Bankası has securitisation borrowing deal from Standard Chartered Bank and Unicredit Markets and Investment Banking amounting to USD203.000.000 and EUR104.000.000. The borrowing has floating interest rates based on Euribor/Libor, maturity is between 2014 and 2015 and the repayments commenced in 2010. 57

F-167 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - FINANCIAL LIABILITIES (Continued) On 11 October 2010, Yapı Kredi Bankası, signed a loan agreement with UniCredit Luxembourg amounting to USD375.000.000 with a 5 year maturity and an interest rate of 5,19%.

Non-Finance: a) Major financial liabilities obtained in 2011: Tüpraş, a Subsidiary of the Group, signed three different loan agreements regarding the financing of the Fuel Oil Conversion Project in 2011 and commenced to utilize the related loans. The two tranches of the financing package; USD1.111,8 million insured by the Spanish export credit Agency (CESCE) and USD624,3 million insured by the Italian export credit agency (SACE) are non-recourse loans for 4 years and with a maximum 12 years maturity date. The third tranche, USD359 million, is also a non-recourse loan for 4 years with a maximum 7 years maturity date. As of 31 December 2011, the amount of loan utilized within the scope of the total loan package for insurance payments and capital expenditures is USD367,5 million. b) Major financial liabilities obtained before 2011: Details of the loans obtained in 2006 in order to finance the acquisition cost of Tüpraş shares and to re-structure the Group’s existing loans are presented below: - a loan of USD950.000.000 from a consortium, comprising of JP Morgan Europe Limited and JP Morgan Chase Bank N.A. with a maturity of 7 years and bearing an interest rate of Libor+1,9%; - a loan of USD1.800.000.000 from a consortium comprising of Akbank T.A.Ş. Malta Branch, Türkiye Garanti Bankası A.Ş. Luxembourg Branch, Türkiye İş Bankası A.Ş. Bahrain Offshore Branch, Standard Bank Plc, Türkiye Vakıflar Bankası T.A.O. Bahrain Offshore Branch and Türkiye Halk Bankası A.Ş. with a maturity of 10 years and bearing an interest rate of Libor+2,3% until 2013 and an interest rate of Libor+2,8% thereafter. Following the principal repayments of the loans detailed above, the outstanding balance of the related loans decreased to USD993.126.687 as of 31 December 2011. Koç Holding obtained a loan of USD425.000.000, comprising two tranches of USD120.000.000 and EUR211.500.000 from a consortium comprising 21 financial institutions. Following the principal repayments of USD28.000.000 and EUR115.500.000, the total amount of the related loans has decreased to USD216.200.000 as of 31 December 2011. Interest rates for the remaining portions of USD and EUR loans were re-determined as Libor+2,25% and Euribor+1,75%, respectively.

In 2010, Arçelik, a Subsidiary of the Group, has obtained loans of approximately TL1.000.000 thousand in different currencies with maturities of 2 to 3 years in order to finance its due loans. The interest rates of the loans with 2 years maturity are determined as Euribor+1,70% and Tribor+0,70% for EUR and TL parts, respectively. The interest rates of the loans with 3 years maturity are determined as Euribor+1,80%, Libor+1,90% and Tribor+0,75% for EUR, GBP and TL parts, respectively. The details of collaterals, mortgages and pledges given related to the loans of the Group are disclosed in Note 32. The redemption schedule of long-term bank borrowings is as follows:

2011 2010 1-2 years 3.221.698 2.725.090 2-3 years 1.794.711 1.668.451 3-4 years 1.963.052 752.984 4-5 years 1.597.367 1.337.057 5years and over 1.186.450 1.548.868

9.763.278 8.032.450

F-168 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES

2011 2010 Current income tax liabilities Domestic 761.107 728.569 Foreign 23.715 19.060

Less: Prepaid income tax (573.913) (537.762)

Current income tax liabilities (net) 210.909 209.867

Deferred tax liabilities Domestic 691.763 617.845 Foreign 127.345 47.316

819.108 665.161

Deferred tax assets Domestic (363.107) (331.512) Foreign (46.107) (19.714)

(409.214) (351.226)

Deferred tax liabilities (net) 409.894 313.935

The corporation tax rate is 20% in Turkey. Corporation tax is payable on the total income of the company after adjusting for certain disallowable expenses, income not subject to tax and allowances.

Income tax expenses in the consolidated income statements are summarised as follows:

2011 2010

Current period tax expense 796.303 747.629 Deferred tax expense / (income) (net) 60.812 (78)

857.115 747.551

Profit before tax 4.707.468 3.885.951

Domestic tax rate 20% 20% Tax calculated at domestic tax rate 941.494 777.190

Income not subject to tax (231.442) (118.790) Non-deductible expenses 79.347 43.737 Carry forward tax losses (net effect) 55.480 38.194 Tax rate differences 8.356 7.691 Other 3.880 (471)

Tax expense 857.115 747.551

F-169 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES (Continued)

The breakdown of cumulative temporary differences and deferred tax assets and liabilities provided using principal tax rates, are as follows:

Cumulative temporary Deferred tax differences assets/(liabilities) 2011 2010 2011 2010 Property, plant and equipment and intangible assets 4.950.912 4.320.177 (1.012.501) (893.515) Investment incentives (1.418.979) (1.180.519) 122.437 90.876 Impairment provision for loans (511.448) (490.801) 101.677 97.892 Provision for employment termination benefits (396.312) (359.113) 79.605 71.861 Provision for the Pension Fund (387.643) (419.018) 77.529 83.804 Carryforward tax losses (244.073) (174.038) 55.332 34.809 Warranty and assembly provisions (261.161) (204.473) 52.119 40.574 Inventories (122.614) (103.488) 24.574 20.705 Impairment of financial assets (88.908) (61.703) 17.781 12.341 Provision for unused vacation (85.997) (71.554) 17.105 14.242 Derivative financial instruments (70.616) 72.906 13.673 (14.326) Expense accruals (net) (57.427) (63.145) 11.485 12.629 Provision for lawsuits (41.261) (181.023) 8.253 36.204 Unearned finance income / (expense) (net) 26.510 (17.587) (5.320) 3.490 Provision for credit card bonus (16.953) (19.849) 3.391 3.970 Research and development incentives (15.770) (72.371) 3.154 14.474 Deferred income (13.133) (33.122) 2.627 6.625 Other (net) (56.885) (200.634) 17.185 49.410

Deferred tax assets / (liabilities) (net) (409.894) (313.935)

F-170 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - TAX ASSETS AND LIABILITIES (Continued)

The redemption schedule of carry forward tax losses which are not considered in deferred tax calculation is as follows:

2011 2010

Up to 1 year 42.719 123.887 Up to 2 years 640.775 40.666 Up to 3 years 161.161 641.113 Up to 4 years 215.134 175.158 5 years and above 655.827 523.468

1.715.616 1.504.292

The Group’s investment incentives that can be utilised in the following periods but not considered in the deferred tax calculation amounts to TL272.380 thousand (subject to withholding) (2010: TL292.573 thousand) and TL1.074 thousand (not subject to withholding) (2010: TL922 thousand).

Movements in deferred tax assets / (liabilities) are as follows:

2011 2010

Beginning of the period - 1 January (313.935) (310.319)

Charge to the income statement: (60.812) 78 Charge to equity: - Financial assets fair value reserve 25.871 (13.368) - Hedging reserve 47.462 (1.176) - Non-current asset revaluation fund 423 363 Acquisitions (Note 3) (84.927) - Sale of subsidiary (1) (10.075) - Changes in the scope of consolidation (2) - 674 Transfers (3) - 10.494 Currency translation differences (13.901) (681)

End of the period - 31 December (409.894) (313.935)

(1) Due to the sales of Koçnet shares in 2011. (2) Due to the exclusion of Beldesan, Beldeyama, Bozkurt and Ultra Kablo from the scope of consolidation. (3) Transferred to assets held for sale.

NOTE 21 - OTHER PAYABLES 2011 2010

Taxes and duties payable 1.865.049 1.505.104 Social security premiums payable 67.621 40.076 Other 101 108

1.932.771 1.545.288

F-171 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS

Short-term employee benefits 2011 2010

Provision for unused vacation 87.208 76.296

Long-term employee benefits 2011 2010

Provision for employment termination benefits 404.058 369.839 Provision for the Pension Fund 387.643 419.018

791.701 788.857

Provision for employment termination benefits:

- Domestic 398.344 365.375 - Foreign 5.714 4.464

404.058 369.839

Under Turkish Labour Law, the Company and its Turkish Subsidiaries and Joint Ventures are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 for women and 60 for men).

As of 31 December 2011, the amount payable consists of one month’s salary limited to a maximum of TL2.731,85 (2010: TL2.517,01) for each year of service.

The liability is not funded as there is no funding requirement.

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. As the maximum liability is revised semi-annually, the maximum amount of TL2.805,04 effective from 1 January 2012 (1 January 2011: TL2.623,23) has been taken into consideration in calculating the reserve for employment termination benefit of the Group.

2011 2010

Net discount rate (%) 4,65 4,66 Turnover rate to estimate the probability of retirement (%) 97,5 97,5

F-172 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS (Continued) Movements in the provision for employment termination benefits are as follows: 2011 2010 Beginning of the period - 1 January 369.839 331.634 Interest expense 15.671 16.680 Actuarial losses 19.896 14.363 Increase during the period 68.374 57.147 Payments during the period (70.236) (48.763) Currency translation differences 843 (182) Acquisitions 747 - Sale of subsidiary (1) (1.076) - Changes in the scope of consolidation (2) - (431) Transfers (3) - (609) End of the period - 31 December 404.058 369.839

(1) Due to the sales of Koçnet shares in 2011. (2) Due to the exclusion of Beldesan, Beldeyama, Bozkurt and Ultra Kablo from the scope of consolidation; inclusion of Eltek and THY Opet to the scope of consolidation in 2010. (3) Transferred to assets held for sales.

Provision for the Pension Fund: Yapı Kredi Bankası, a Joint Venture of the Group, accounted for a provision amounting to TL387.643 thousand (Note 2.4.21) for the technical deficit based on the report prepared by a registered actuary in accordance with the technical interest rate of 9,8% determined by the New Law and CSO 1980 mortality table (2010: TL419.018 thousand).

The amounts recognised in the income statement: 2011 2010 Provision income for the Pension Fund (Note 28) 31.375 13.012 Provision for the Pension Fund is determined as follows: 2011 2010 Transferrable pension benefits 625.288 591.766 Transferrable post-employment benefits 21.266 48.017 Present value of funded obligations 646.554 639.783 Fair value of plan assets (258.911) (220.765) 387.643 419.018 Movements in the provision for the Pension Fund are as follows: Post-employment Pension benefit plans medical benefits 2011 2010 2011 2010 1 January 591.766 538.982 48.017 80.585 Service cost 35.696 32.055 24.140 21.704 Interest cost 57.993 52.820 4.706 7.897 Contributions by plan participants 30.288 27.198 16.093 14.470 Actuarial losses/(gains) (22.179) 959 (68.406) (61.389) Benefits paid (68.276) (60.248) (3.284) (15.250)

31 December 625.288 591.766 21.266 48.017

F-173 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 22 - PROVISIONS FOR EMPLOYEE BENEFITS (Continued)

Movements in the fair value of the Pension Fund assets are as follows: 2011 2010

Beginning of the period - 1 January 220.765 187.537

Return on plan assets 40.438 34.223 Employer contributions 35.697 32.055 Employee contributions 30.289 27.198 Benefits paid (68.278) (60.248)

End of the period - 31 December 258.911 220.765

The fair value of pension assets are comprised as follows: 2011 2010 Amount (%) Amount (%)

Government bonds and treasury bills 97.728 38 77.451 35 Property, plant and equipment 58.028 22 58.197 26 Bank placements 83.858 32 66.716 30 Short term receivables 9.684 4 9.747 5 Other 9.613 4 8.654 4

258.911 100 220.765 100

The principal actuarial assumptions used are as follows: 2011 2010

Discount rate (%) 9,80 9,80

Mortality rate:

Based on statistical data, the average life expectancy for men and women retiring at the ages of 65 and 64, respectively, is 14 years for men and 18 years for women.

NOTE 23 - OTHER ASSETS AND LIABILITIES a) Other current assets 2011 2010

VAT receivables 506.772 376.382 Taxes and funds deductible 322.968 151.328 Advances given 307.668 291.577 Precious metals 301.694 124.886 Deposits and guarantees given 295.230 270.654 Prepaid expenses 245.481 208.508 Assets obtained as loan collaterals 62.380 50.512 Payments for credit card settlements 52.178 33.916 Biological assets 31.354 42.850 Interbank cheque clearing account 3.408 4.149 Other 186.352 258.042

2.315.485 1.812.804

F-174 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - OTHER ASSETS AND LIABILITIES (Continued) b) Other non-current assets 2011 2010

Advances given 726.746 143.374 Prepaid expenses 481.288 331.296 Spare parts and other materials 339.490 329.518 Other 80.219 20.651

1.627.743 824.839 c) Short-term provisions and other current liabilities 2011 2010 Provisions: Cost accruals of construction contracts 240.836 146.382 Provision for warranty and assembly 239.407 218.057 Provision for lawsuits (*) 128.101 285.380 Provision for losses related with loan commitments (Note 32.b) 107.944 100.855 Provision for Energy Market Regulation Authority participation share 18.495 14.682 Provision for credit card campaigns 16.953 19.849 Provision for the advertising publication agreement 8.547 13.611 Provision for the non-core assets option agreement - 15.273 Other 128.879 124.026

889.162 938.115

Other current liabilities: Credit card payables 1.675.103 1.458.820 Advances received 329.752 288.606 Blocked accounts 291.903 270.689 Payables to personnel and premium accruals 274.840 215.035 Deferred income 107.770 56.095 Interbank cheque clearing account 104.327 140.396 Accruals for sales and other marketing expenses 136.128 74.285 Import deposits and transfer orders 62.898 61.404 Transitory accounts 55.934 65.428 Collaterals obtained for derivative transactions 33.721 80.251 Deposits and guarantees received 33.611 30.793 Accruals for license expenses 21.621 22.656 Export commitment accruals 18.626 19.743 Other 546.454 312.345

3.692.688 3.096.546

4.581.850 4.034.661

(*) The amount includes the provision accounted for in 2010 for the tax/penalty notice issued to Tüpraş, a Subsidiary of the Group, on 9 November 2010. The related provision amounts to TL181 million and was calculated in accordance with Law No 6111 (Law on Amendments of Restructuring of Several Types of Receivables and Social Security and General Health Insurance Law and Other Several Law and Executive Orders” published in the Official Gazette, numbered 25857 and dated 25 February 2011). The tax penalty amounting to TL175 million, which was calculated by the related public administration, was paid by Tüpraş on 30 June 2011.

F-175 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - OTHER ASSETS AND LIABILITIES (Continued) d) Long-term provisions and other non-current liabilities

2011 2010 Provisions: Warranty provision 112.935 57.212

Other non-current liabilities: Revenue share (*) 400.086 328.716 Deposits and guarantees received 70.981 57.446 Government grants 31.781 48.668 Other 46.461 38.697

662.244 530.739

(*) In accordance with the Petroleum Market License Regulation and Liquefied Petroleum Gas (“LPG”) Market Regulation, revenue shares collected by Tüpraş, but not recognised in the statement of comprehensive income, have been recorded as revenue share within “Other long-term liabilities” and blocked in banks as demand deposits with special interest rates within “Cash and cash equivalents” according to the decision of National Petroleum Reserves Commission.

The movements of provisions for warranty and assembly, cost accruals of construction contracts and provision for lawsuits are as follows for the year ended 31 December 2011:

Provisions for Cost accruals of warranty and construction Provision for assembly contracts lawsuits

As of 1 January 2011 275.269 146.382 285.380

Additions 476.615 62.165 41.882 Disposals / Payments (*) (422.395) - (199.344) Acquisitions 8.175 - - Currency valuation - 32.289 - Currency translation differences 14.678 - 183

As of 31 December 2011 352.342 240.836 128.101

(*) The movement of provision for lawsuits includes the payment of Tüpraş, a Subsidiary of the Group, on 30 June 2011 regarding the tax penalty amounting to TL175 million (Note 23.c).

F-176 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 24 - ASSETS HELD FOR SALE a) Assets and liabilities held for sale

Due to the liquidation of Otoyol Sanayi, a Subsidiary of the Group, assets and liabilities of the related subsidiary have been classified in the consolidated financial statements as of 31 December 2011 and 2010 as held for sale in accordance with IFRS 5.

According to the resolution of the Board of Directors of Aygaz, a Subsidiary of the Group, on 30 November 2010, it was agreed to sell Aygaz’s 49,62% share (with a nominal value of TL49.079 thousand) in Entek to AES Mont Blanc Holdings B.V. for a consideration of USD136.455 thousand, to be paid in cash at the share transfer completion date. In the consolidated financial statements dated 31 December 2010, the assets and liabilities of the mentioned subsidiary have been classified as held for sale in accordance with IFRS 5. Following the completion of the share transfer, Entek has been accounted for as a joint venture in the consolidated financial statements by proportionate consolidation in 2011 (Note 3).

A summary of information regarding assets and liabilities held for sale is as follows:

Assets held for sale 2011 2010

Cash and cash equivalents 5.612 91.955 Trade receivables 93 30.687 Property, plant and equipment 44 221.331 Intangible assets - 349 Other assets 411 12.433

6.160 356.755

Liabilities held for sale 2011 2010

Financial liabilities - 64.295 Trade payables 183 34.879 Provision for employment termination benefits 92 686 Deferred tax liability - 12.587 Other liabilities 5.242 11.737

5.517 124.184 b) Income statement related to the assets and liabilities held for sale 2011 2010

Revenue (net) - 400.986 Cost of sales (-) - (389.031)

Gross profit - 11.955 General administrative expenses (-) (922) (14.155) Other income/expense (net) (759) 2.835

Operating profit (1.681) 635 Financial income/expense (net) 1.041 3.427

Profit before tax (640) 4.062 Taxes on income (net) - 44

Profit for the period (640) 4.106

F-177 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY

Share Capital

2011

Limit on registered share capital (historical) 3.000.000 Issued share capital in nominal value 2.415.141

Companies in Turkey may exceed the limit on registered share capital in the event of the issuance of free capital shares to existing shareholders.

The shareholding structure of Koç Holding is as follows:

2011 2010 Share % Amount Share % Amount

Temel Ticaret ve Yatırım A.Ş. 42,39 1.023.794 42,39 1.023.794 Koç Family Members 26,02 628.196 26,02 628.196 Rahmi M. Koç ve Mahdumları Maden, İnşaat, Turizm, Ulaştırma, Yatırım ve Ticaret A.Ş. 0,10 2.532 0,10 2.532

Total Koç Family members and companies owned by Koç Family members 68,51 1.654.522 68,51 1.654.522

Vehbi Koç Vakfı 7,15 172.767 7,15 172.767 Koç Holding Emekli ve Yardım Sandığı Vakfı 1,99 48.049 1,99 48.049 Other 22,35 539.803 22,35 539.803

Paid-in share capital 100,00 2.415.141 100,00 2.415.141

Adjustment to share capital (*) 967.288 967.288

Total share capital 3.382.429 3.382.429

F-178 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY (Continued)

The analysis of shares by group is as follows:

Group Unit of shares TL’000 Nature of shares

A 64.645.087.838 646.451 Registered B 176.869.012.162 1.768.690 Registered

241.514.100.000 2.415.141

In the Articles of Association (“the Articles”) Koç Holding sets out the following privileges for A-group shares:

1. In accordance with Article 11, pre-emptive rights not used by B-group shareholders, can be used by A-group shareholders within the terms of CMB Legislation.

2. In accordance with Article 25, A-group shareholders have two voting rights for each share owned at the General Assembly meeting (except for resolutions to change the Articles).

Revaluation Funds

Increases/decreases of carrying amounts as a result of revaluations recognised directly in the equity are as follows:

2011 2010

Financial assets fair value reserve (4.244) 109.626 Hedging reserve: - Cash flow hedges (205.197) (82.388) - Net investment hedges (63.691) (21.097) Non-current assets revaluation fund 27.815 13.662

Total revaluation fund (245.317) 19.803

The movements in the revaluation funds are presented in the statement of comprehensive income and statement of changes in equity.

Restricted Reserves

The details of the restricted reserves are as follows: 2011 2010

Legal reserves 170.535 152.817 Special reserves 2.139.103 2.139.103

2.309.638 2.291.920

F-179 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 25 - EQUITY (Continued)

Dividend Distribution

Listed companies are subject to dividend requirements regulated by the CMB as follows:

In accordance with the CMB Decision dated 27 January 2010, concerning allocation basis of profit, starting in 2010, and minimum profit distribution obligation will not be applied for listed companies. According to the Board’s decision and Communiqué Serial: IV No:27 issued by CMB regarding allocation basis of profit of listed companies, the distribution of the relevant amount may be realised as cash, as bonus shares, partly as cash and bonus shares or the relevant amount can be retained within the company.

In addition, according to aforementioned Board Decision, it is stipulated that companies which have the obligation to prepare consolidated financial statements, calculate the net distributable profit amount by taking into account the net profits for the period in the consolidated financial statements that will be prepared and announced to the public in accordance with the Communiqué XI No: 29, “Principles of Financial Reporting in Capital Markets” issued by CMB providing the profits can be met by the sources in their statutory records.

In accordance with Article 32 of the Company’s Articles of Association, a contribution of a maximum 2% (according to the decision of the General Assembly) of the amount remaining after the first legal reserves set aside over income before tax, financial obligations and initial dividends, is paid to Koç Holding Emekli ve Yardım Sandığı Vakfı. In addition, save for the first dividend determined according to the Capital Markets Law, 3% of the amount remaining after the first legal reserves, financial obligations and 5% of the paid-in capital are deducted from the income before tax, is allocated to share certificate owners. However, the share to be paid to the owners of the dividend shares may not be more than 1/10 of the amount remaining after the first legal reserves and first dividend calculated according to CMB regulations are deducted from the net profit.

The total amount of net income after the deduction of accumulated losses at statutory records and inflation adjustment difference that can be subject to dividend distribution is TL1.438.415 thousand.

It was resolved at Koç Holding’s Ordinary General Assembly Meeting held on 7 April 2011 to distribute TL1.734.479 thousand from the consolidated net profit of 2010 in the amount of TL550.000 thousand as first and second level dividends to shareholders (dividend per share TL0,2277), TL6.500 thousand to Koç Holding Emekli ve Yardım Sandığı Vakfı, and TL47.880 thousand to the holders of dividend right certificates as cash dividends (gross=net). Related cash dividend payments were completed as of 18 April 2011.

NOTE 26 - REVENUE 2011 2010

Domestic revenue 53.527.198 38.113.939 Foreign revenue 18.579.328 12.797.849

Gross revenue 72.106.526 50.911.788

Less: Discounts (2.339.385) (2.089.506)

Revenue 69.767.141 48.822.282

Sales of goods 68.751.345 47.917.608 Sales of services 1.015.796 904.674

Revenue 69.767.141 48.822.282

Finance sector operating revenue is disclosed in Note 5.

F-180 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 27 - EXPENSES BY NATURE

Expense by nature includes cost of goods sold, marketing, selling and distribution expenses, general administrative expenses and research and development expenses.

2011 2010

Raw materials and supplies 47.704.633 31.031.025 Changes in work in progress, finished goods (1.205.133) (188.867) Cost of merchandise sold 11.278.927 8.370.323 Personnel expenses 3.333.312 2.852.173 Depreciation and amortisation charges 1.035.051 964.490 Transportation, distribution and storage expenses 857.355 634.819 Energy and utility expenses 815.095 635.304 Warranty and assembly costs 487.595 399.331 Advertisement and promotion expenses 476.609 417.095 Rent expenses 429.804 339.767 Maintenance and repair expenses 309.046 226.172 Outsourcing expenses 230.940 212.460 Taxes, duties and charges 176.954 171.291 Litigation and consultancy expenses 126.378 90.769 Information systems and communication expenses 118.848 100.746 Insurance expenses 97.050 83.312 Travel expenses 93.393 71.858 Royalty and license expenses 68.692 48.594 Grants and donations 49.333 40.563 Sales, incentives and premium expenses 46.223 69.339 Other 918.325 824.603

67.448.430 47.395.167

The functional breakdown of amortisation, depreciation and personnel expenses is as follows:

2011 2010 Depreciation and amortisation charges Cost of sales 691.361 688.921 Marketing, selling and distribution expenses 61.015 50.945 General administrative expenses 231.595 183.837 Research and development expenses 51.080 40.787

1.035.051 964.490

Total depreciation charges capitalised in 2011 is TL17.314 thousand (2010:TL3.484 thousand).

Personnel expenses Cost of sales 1.209.553 1.044.895 Marketing, selling and distribution expenses 450.616 382.866 General administrative expenses 1.621.786 1.375.664 Research and development expenses 51.357 48.748

3.333.312 2.852.173

F-181 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 28 - OTHER INCOME/EXPENSES

2011 2010 Other income Gain on sale of subsidiary 194.629 - Gain on sale of property, plant and equipment and scraps 112.169 113.952 Reversal of provisions 49.043 60.953 Income from incentives 37.383 55.025 Rent income 14.746 28.779 Gain on sale of non-performing loans 6.513 36.760 Other 184.636 168.509

599.119 463.978

Other expenses Provision for loan impairment (173.914) (217.460) Other provision expenses (138.704) (307.061) Provisions expenses for the Pension Fund (Note 22) 31.375 13.012 Loss on sale of subsidiary (43.665) - Product recall expenses (30.459) - Competition authority penalty (Automotive segment) (28.609) (6.156) Loss on sale of property, plant and equipment (9.178) (28.067) Other (54.619) (81.276)

(447.773) (627.008)

NOTE 29 - FINANCIAL INCOME/EXPENSES

2011 2010 Financial income Foreign exchange gains 1.674.624 1.128.295 Interest income 353.228 537.719 Credit finance income 302.846 204.429 Gains on derivative financial instruments 68.307 39.663 Other financial income 4.535 9.795

2.403.540 1.919.901

Financial expenses Foreign exchange losses (2.580.837) (1.393.550) Interest expenses (411.957) (576.071) Credit finance charges (140.244) (115.566) Losses on derivative financial instruments (34.765) (23.340) Other financial expenses (25.418) (30.297)

(3.193.221) (2.138.824)

F-182 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - RELATED PARTY DISCLOSURES a) Related party balances

2011 2010 Joint Ventures Other Total Joint Ventures Other Total

Cash and cash equivalents 1.366.004 - 1.366.004 2.143.670 - 2.143.670 Trade receivables 351.733 16.628 368.361 58.537 24.486 83.023 Trade payables 205.802 38.804 244.606 220.168 27.557 247.725 Loans and advances to customers 44.726 17.495 62.221 21.508 19.405 40.913 Deposits 120.302 1.082.548 1.202.850 69.555 864.878 934.433 Financial liabilities 358.675 - 358.675 463.783 - 463.783 b) Related party transactions

2011 2010 Joint Ventures Other Total Joint Ventures Other Total

Sales of goods and services 3.393.399 43.753 3.437.152 1.482.320 32.920 1.515.240 Purchases of goods and services 1.701.543 210.305 1.911.848 1.418.648 127.792 1.546.440 Gain on sale of property, plant and equipment (net) - 6.322 6.322 - 40.055 40.055 Interest income 101.361 - 101.361 71.097 - 71.097 Interest expense (-) 18.242 - 18.242 42.752 - 42.752

Presents post elimination balances and transactions with the “Joint Ventures” of the Group, which are accounted through proportionate consolidation.

As of 31 December 2011, cash and cash equivalents, loans and advances to customers, deposits and financial liabilities balances include post elimination balances of the Group with Yapı Kredi Bankası. TL255.232 thousand of trade receivables is composed of post elimination balances due to the petroleum products sales of Tüpraş to Opet and THY Opet. TL173.615 thousand of trade payables is composed of post elimination balances due to vehicle purchases of Otokoç from Ford Otosan and Tofaş.

TL3.002.929 thousand of sales of goods and services is composed of post elimination balances arising on sales of Tüpraş’s petroleum products to Opet and THY Opet for the year ended 31 December 2011. TL1.332.471 thousand of purchases of goods and services is composed of post elimination balances due to Otokoç’s vehicle purchases from Ford Otosan and Tofaş. c) Key management compensation

The key management of Koç Holding is identified as the the members of the Board of Directors (including the President) and Group Presidents. Total compensation provided to key management personnel by Koç Holding in 2011 amounted to TL17.116 thousand (2010: TL20.162 thousand). The amount is comprised of short-term employee benefits.

F-183 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 31 - GOVERNMENT GRANTS

The Group is entitled to the following incentives and rights: a) 100% exemption from customs duty on machinery and equipment imported, b) Exemption from VAT on investment goods supplied from home and abroad, c) Incentives under the jurisdiction of the research and development law (100% corporate tax exemption, Social Security Institution incentives, etc.), d) Inward processing permission certificates, e) Cash refund from Tübitak-Teydeb for research and development expenditures, f) Exemption from taxes, duties and charges, g) Discounted corporate tax incentive, h) Insurance premium employer share incentive, i) Investment incentive allowance (Note 20), j) Brand supporting government grants given by the Undersecretariat of Foreign Trade (Turquality), k) Incentive of environmental costs support by law 9715, l) Patent incentives.

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES a) GUARANTEES

Finance:

The debt securities subject to repurchase agreements: As of 31 December 2011, debt securities subject to re-purchase agreements total TL3.586.563 thousand (31 December 2010: TL1.945.199 thousand). Debt securities pledged as collateral: As of 31 December 2011, debt securities, amounting to TL1.686.325 thousand (2010: TL1.283.170 thousand) included in the financial assets are pledged;

- to the CBRT and Undersecretariat of Treasury due to legal requirements, - to Istanbul Stock Exchange and Settlement Custody Bank Incorporation due to stock exchange and money market operations and, - to various banks, due to loan agreements as guarantees. Non - Finance: The summary of guarantees received and given regarding the non-finance sector companies is as follows; Guarantees given: 2011 2010 Letters of credit 2.665.571 1.949.590 Letters of guarantee 2.131.902 1.531.396 Guarantee notes 408.384 649.664 Equity shares (*) 202.714 219.414 Other 65.698 56.179

5.474.269 4.406.243

(*) The Group’s equity shares in Arçelik and Tüpraş with a nominal value of TL75.000 thousand and TL127.714 thousand, respectively, (2010: TL91.700 thousand Arçelik - TL127.714 thousand Tüpraş) are pledged as collateral (without prejudice to voting and dividend rights associated with these shares) against the loans obtained in 2006 to finance the cost of the Tüpraş acquisition and to refinance the Group’s existing loans (Note 19).

F-184 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Guarantees received: 2011 2010

Letter of guarantee 3.297.857 1.626.063 Mortgages 1.884.363 1.627.273 Direct crediting limit 674.203 434.313 Bill of guarantees 320.159 305.138 Guarantee notes 261.516 205.809 Other commitments 202.725 121.294

6.640.823 4.319.890

Collaterals/pledges/mortgages (“CPM”) of the Group, except finance sector, as of 31 December 2011 and 2010 are as follows (Total amounts in the table below also contains TL denominated CPM balances. Foreign currency CPMs are presented by their TL equivalents):

2011 2010

A. Total amount of CPM’s given in the name of its own legal personality 5.014.955 3.561.056 -TL 1.591.906 591.270 -USD 2.769.219 2.369.569 -EUR 603.276 529.120 -Other 50.554 71.097 B. Total amount of CPM’s given on behalf of the fully consolidated companies (*) 263.990 589.432 -TL 36.339 128.218 -USD 70.834 144.628 -EUR 156.817 316.586 C. Total amount of CPM’s given on behalf of third parties for ordinary course of business (*) 195.234 255.755 -USD 117.112 108.220 -EUR 78.202 147.535 D. Total amount of other CPM’s given - - i) Total amount of CPM’s given on behalf of the majority shareholder - - ii) Total amount of CPM’s given to on behalf of other group companies which are not in scope of B and C. - - iii) Total amount of CPM’s given on behalf of third parties which are not in scope of C. - -

5.474.269 4.406.243

(*) As of 31 December 2011, TL408.384 thousand of the total balance is related with bills of guarantees provided for the loan obtained from a consortium including 21 financial institutions to meet various financing needs of Koç Group companies (Subsidiaries and Joint Ventures) within the main operations of the parent company Koç Holding (Note 19).

F-185 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 32 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued) b) COMMITMENTS Finance: Custody services: The Group’s Joint Ventures in the finance sector provide custody services to third parties. The assets held in a fiduciary capacity are not included in these consolidated financial statements. As of 31 December 2011, the Group has custody accounts amounting to TL15.662.739 thousand (2010: TL13.259.444 thousand). Credit related commitments: 2011 2010 Letters of guarantee - TL 4.971.996 3.890.362 - Foreign currency 4.435.575 3.583.683 Letter of credits 2.503.492 1.999.937 Acceptance credits 79.458 82.899 Other 1.195.949 289.719 13.186.470 9.846.600 Less: Provisions (Note 23.c) (107.944) (100.855) 13.078.526 9.745.745

Non - finance: Energy i) Several financial and non-financial covenants exist with respect to the loans obtained in 2006 in order to finance the acquisition cost of Tüpraş and to re-finance the Group’s existing loans. In the event that these covenants are not fulfilled, the aforementioned creditors have the right to recall the outstanding loans (Note 19). ii) National petroleum stock is provided under the obligation of refinery; fuel and LPG distribution licensees to keep a minimum of twenty times the average daily product supplied in their own storages or licensed storage facilities, whether as a whole or separately according to their status. According to the Petroleum Market Law, in order to ensure a sustainable oil market, to prevent risks arising from crisis or extraordinary cases, and to meet the requirements of international agreements, it is required to keep petroleum stock at an amount equal to at least ninety days of the net import in the previous year’s average daily consumption, and refineries have been obliged to retain the complementary portion of the national petroleum stock. Automotive i) In the scope of the borrowing agreements, Ford Otosan, a Joint Venture of the Group, is required to deposit its proceeds on exports up to an amount EUR61.560.000, EUR36.525.600, EUR12.312.000, EUR8.208.000 and EUR24.624.000 through deposit accounts at Garanti Bankası A.Ş., Akbank T.A.Ş., İş Bankası A.Ş., T.C Ziraat Bankası A.Ş. and Vakıflar Bankası T.A.O, respectively for the year 2011. Additionally, Ford Otosan committed to realize exports of EUR6.074.000 within the context of the loan received from Türkiye İhracat Kredi Bankası A.Ş. (Eximbank). As of 31 December 2011 the Company has fulfilled these commitments. ii) As of 31 December 2011, Tofaş, a Voint Venture of the Group, carried out an export sales amounting to USD436.904.400 within the scope of an export incentive certificate, requiring an export commitment of USD718.961.400 to be fulfilled by 3 May 2012 (By 2010, Group carried out an export transaction amounting to USD458.106.000 within the scope of an export incentive certificate, requiring an export commitment of USD546.319.800 to be fulfilled by 27 October 2011.) Consumer durable i) Arçelik, a Subsidiary of the Group, has export commitments of USD1.244.265.732 (2010: USD480.534.762) within the context of the export incentive certificates of the subsidiary as of 31 December 2011.

F-186 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial Instruments and Financial Risk Management

Financial Risk Management

Financial risk management is carried out by the Subsidiaries and Joint Ventures of the Group under policies approved by their own Boards of Directors.

A) Credit Risk

Credit risk is the risk that a counterparty cannot fulfil its obligations in the agreements that the Group is party to. The Group monitors the credit risk by credit ratings and limitations to the total risk of a single counterparty. The credit risk is diversified as a result of large number of entities comprising the customer bases and the penetration to different business segments.

Credit risk management procedures

Finance:

Yapı Kredi Bankası identifies loan limits for each customer considering statutory regulations, the internal scoring system, financial analysis reports and geographical and industry concentration and considering credit policies determined by the Board of the Directors each year. The limits defined by the Board of Directors for each correspondent bank are followed up daily by Treasury Management for the transactions related with placements with domestic and correspondent banks or treasury operations such as forward buy and sell transactions. Moreover, daily positions and limit controls for each Treasury and Fund Management employee authorised for market transactions are followed by the system. In the loan granting process, liquid collaterals are obtained to the greatest extent possible. Long-term projections of the companies are analysed both by financial analysis specialists and head office when granting long-term and project finance loans. Since credit and interest risks are higher in long-term commitments, their pricing is coordinated with Treasury Management.

Corporate and commercial credit customers are followed up by the related system of the Bank by their corresponding credit ratings. Furthermore, by the use of the credit rating systems developed for customers with different characteristics, counterparty default risk is calculated.

Non - Finance:

The Group’s non-finance sector companies are exposed to credit risk arising from their trade receivables, financial assets, derivative instruments and bank deposits.

In financial asset management, it is ensured that investments are made in highly liquid instruments with low level of volatility and financially strong banks are selected for transactions.

F-187 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued) Credit risk details The maximum exposure of the Group’s financial assets to credit risk is as follows: Loans and Cash Derivative Trade advances to and cash Financial financial 31 December 2011 receivables customers equivalents assets instruments Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 9.382.416 38.188.570 6.281.040 10.730.064 378.356 A. Net book value of neither past due nor impaired financial assets (*) 8.046.407 36.061.293 6.281.040 10.722.739 378.356 B. Net book value of restructured financial assets 55.446 175.104 - - - C. Net book value of past due but not impaired financial assets 1.218.537 1.956.389 - - - D. Net book value of impaired assets 62.026 370.393 - 7.325 - - Past due 62.026 370.393 - - - - Gross amount 256.893 1.213.134 - - - - Impairment (194.867) (842.741) - - - - Secured with guarantees 62.026 235.497 - - - - Not past due - - - 7.325 - - Gross amount 8.428 - - 31.610 - - Impairment (8.428) - - (24.285) - - Secured with guarantees - - - - - E. Collective provision for impairment (-) - (374.609) - - -

Loans and Cash Derivative Trade advances to and cash Financial financial 31 December 2010 receivables customers equivalents assets instruments Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 5.189.502 29.581.360 9.585.578 10.133.279 367.981 A. Net book value of neither past due nor impaired financial assets (*) 4.843.928 28.082.502 9.585.578 10.133.279 367.981 B. Net book value of restructured financial assets 31.134 40.215 - - - C. Net book value of past due but not impaired financial assets 260.333 1.546.729 - - - D. Net book value of impaired assets 54.107 249.156 - - - - Past due 54.107 249.156 - - - - Gross amount 260.829 1.169.202 - - - - Impairment (206.722) (920.046) - - - - Secured with guarantees 51.783 213.306 - - - - Not past due ------Gross amount 8.178 - - - - - Impairment (8.178) - - - - - Secured with guarantees - - - - - E. Collective provision for impairment (-) - (337.242) - - - (*) Includes receivables from related parties. As of 31 December 2011 the Finance Segment is exposed to credit risk arising from credit related commitments in the amount of TL13.186.470 thousand (2010: TL9.846.600 thousand) (Note 32). By taking the related risk into consideration, the maximum credit risk amount, to which the Group is exposed, is TL78.146.916 thousand (2010: TL64.704.300 thousand). 78

F-188 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Trade receivables a) Details of neither past due nor impaired or restructured trade receivables’ credit quality:

2011 2010

New customers (less than 3 months) 539.803 240.626 Public institutions and corporations 148.976 56.138 Other customers with no payment defaults 7.177.636 4.198.053 Customers with prior collection delays 179.992 349.111

8.046.407 4.843.928

As of 31 December 2011, trade receivables that are not due and not impaired amounting to TL4.488.933 thousand are secured with guarantees (2010: TL2.723.398 thousand). b) Analysis of past due trade receivables:

Not impaired 2011 2010

Past due up to 1 month 356.861 115.104 Past due 1 - 3 months 806.081 87.586 Past due 3 - 12 months 35.093 36.604 Past due over 1 year 20.502 21.039

1.218.537 260.333

As of 31 December 2011, past due but not impaired trade receivables amounting to TL176.564 thousand are secured by guarantee (2010: TL199.497 thousand).

TL920.025 thousand of overdue receivables that are past due but not impaired are related to Tüpraş, a subsidiary of the Group. The Group management does not estimate a collection risk for these receivables as the significant portion of these receivables is due from government entities to which sales are made regularly.

Impaired 2011 2010

Past due up to 3 months 27.927 61.515 Past due 3 - 6 months 13.663 4.313 Past due over 6 months 215.303 195.001

Less: Impairment (194.867) (206.722)

62.026 54.107

As of 31 December 2011, impaired receivables amounting to TL62.137 thousand are secured by guarantees. (2010: TL51.783 thousand).

F-189 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Loans and advances to customers a) As of 31 December 2011, the details of neither past due nor impaired or restructured corporate and commercial loans’ credit quality are as follows: Rating Class Concentration Level

Above average 1 - 4 35,9% Average 5+ - 6 51,0% Below average 7+ - 9 13,1% b) Details of past due but not impaired loans and advances:

Corporate and Financial commercial Consumer Credit card leasing 31 December 2011 loans loans receivables receivables Total

Past due up to 1 month 1.141.360 3.737 269.068 3.599 1.417.764 Past due 1-2 months 222.328 80.755 87.217 3.705 394.005 Past due 2-3 months 74.945 30.420 35.958 3.297 144.620

1.438.633 114.912 392.243 10.601 1.956.389

Corporate and Financial commercial Consumer Credit card leasing 31 December 2010 loans loans receivables receivables Total

Past due up to 1 month 226.961 220.974 272.028 2.517 722.480 Past due 1-2 months 20.014 82.446 85.128 2.413 190.001 Past due 2-3 months 486.732 78.232 67.381 1.903 634.248

733.707 381.652 424.537 6.833 1.546.729 c) Sectoral breakdown of loans and advances to customers:

2011 % 2010 %

Production 8.369.849 22 6.319.692 21 Consumer loans 8.537.709 22 6.140.929 21 Credit card receivables 5.183.373 14 4.246.147 14 Food and retail 1.647.941 4 1.303.614 4 Public sector 735.686 2 646.116 2 Financial institutions 514.901 1 720.279 2 Real estate 209.224 1 176.526 1 Other sectors 12.989.887 34 10.028.057 35

38.188.570 100 29.581.360 100

F-190 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Cash and cash equivalents

As of 31 December 2011 and 2010, total cash and cash equivalents are neither past due nor impaired. A significant portion of the bank deposits that are classified under cash and cash equivalents are held in banks operating in Turkey.

Financial assets

As of 31 December 2011, Yapı Kredi Bankası, a Joint Venture of the Group, has booked provision regarding the impairment for foreign securities amounting to TL24.285 thousand. As of 31 December 2010, total debt securities classified under financial assets are neither past due nor impaired.

The rating of debt securities is as follows: 2011 2010 Moody’s Credit Rating

Aaa 46.630 35.155 Aa1 22.533 - Aa2 16.579 13.733 Aa3 216.013 228.650 A1 72.067 - A2 293.173 152.493 A3 - 81.605 Baa1 17.232 45.655 Baa2 114.966 94.937 Baa3 39.019 16.865 Ba1 10.324 16.046 Ba2 (*) 9.434.786 8.732.533 Ba3 7.572 20.927 Ca 7.325 - Unrated 92.844 143.089

10.391.063 9.581.688

(*) Securities consist of Republic of Turkey government bonds and treasury bills.

B) Market Risk a) Foreign Exchange Risk

The difference between the foreign currency denominated and foreign currency indexed assets and liabilities of the Group are defined as the “Net Foreign Currency Position” and it is the basis of currency risk. Another important dimension of the currency risk is the changes of the exchange rates of different foreign currencies in “Net Foreign Currency Position” (cross currency risk).

Yapı Kredi Bankası, a joint venture of the Group, keeps the currency risk exposure within the related legal limits, follows the currency risk on a daily basis and presents the results to the Asset and Liability Committee. Other Subsidiaries and Joint Ventures of the Group keep the currency risk exposure within the limits approved by Koç Holding, the parent company, and by their Board of Directors. Koç Holding, the parent company, continuously reviews the risk limits of the Subsidiaries and Joint Ventures, taking into account the overall economic conditions and developments in the market and determine new limits, when necessary. Derivative contracts such as swaps, options and forwards are also used as instruments for currency risk management for hedging purposes, when needed.

F-191 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Assets and liabilities denominated in foreign currency held by the Group before consolidation adjustments are as follows: 2011 2010

Assets 31.890.331 26.065.224 Liabilities (40.639.404) (30.550.152)

Net balance sheet position (8.749.073) (4.484.928)

Off-balance sheet derivative instruments net position 3.121.175 64.686

Net foreign currency position (5.627.898) (4.420.242)

Tüpraş, a Subsidiary of the Group, manages its foreign currency risk resulting from its net financial liabilities by reflecting the effects of the changes in foreign currencies to its selling prices of petroleum products. As of 31 December 2011, Tüpraş has raw materials and petroleum products amounting to TL3.409.851 thousand (2010: TL1.797.120 thousand).

In addition, the repayment obligation related to the loans of Tofaş, a joint venture of the Group, obtained for investment purposes, is guaranteed by Fiat Auto S.p.A and Peugeot Citroen Automobiles S.A. (the “Purchasers”) through future purchases. Accordingly, the exposure to foreign exchange and interest rate risks are undertaken by the Purchasers. Therefore, the net foreign currency liability position should be considered lower by TL492.825 thousand when assessing foreign exchange risk (2010: TL374.148 thousand).

As of 31 December 2011 and 2010, if EUR and USD had appreciated/depreciated by 10% against TL with all other variables held constant, profit before tax would have been TL513.507 thousand (2010: TL404.609 thousand) lower/higher, mainly as a result of foreign exchange losses/gains on the translation of the foreign exchange position as presented in detail in the table below. The net effect of the related foreign exchange losses/gains on the net profit (equity holders) is approximately TL188.000 thousand.

The impact of 10% exchange increase in income statement (pre-tax profit):

USD EUR Other Total 31 December 2011 Foreign currency net position (*) (557.861) 24.389 19.965 (513.507) 31 December 2010 Foreign currency net position (*) (427.638) 12.098 10.931 (404.609)

(*) Related balances do not include the foreign exchange impacts of hedged items.

The impact of 10% exchange increase in comprehensive income statement (pre-tax profit):

USD EUR Other Total 31 December 2011 Hedged items (*) (8.141) (137.284) - (145.425) 31 December 2010 Hedged items (*) (5.705) (76.245) - (81.950)

(*) Related balances include foreign exchange impacts that are within the scope of cash flow hedge and hedge of net investments in foreign operations.

F-192 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Total assets 9.855.379 4.653.292 1.902.792 31.890.331

Liabilities: Payables from finance sector operations 6.397.178 2.036.522 1.003.391 18.063.872 Financial liabilities 4.065.090 3.601.268 369.084 16.848.410 Trade payables 1.619.833 426.173 45.781 4.146.964 Current income tax liabilities - - 257 257 Provisions for employee benefits - 857 - 2.094 Other liabilities 556.312 211.072 11.173 1.577.807

Total liabilities 12.638.413 6.275.892 1.429.686 40.639.404

Net balance sheet position (2.783.034) (1.622.600) 473.106 (8.749.073)

Derivative financial assets 6.715.246 2.766.193 267.735 19.712.184 Derivative financial liabilities (6.885.578) (1.245.459) (541.189) (16.591.009)

Off-balance sheet derivative instruments net position (170.332) 1.520.734 (273.454) 3.121.175

Net foreign currency position (2.953.366) (101.866) 199.652 (5.627.898)

Net foreign currency position of monetary items (3.000.920) (162.292) 199.289 (5.865.754) Fair value of derivative instruments held for hedging (111.494) (1.473) - (214.200)

(*) Presented in original currencies.

F-193 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

31 December 2010 USD (*) EUR (*) Other Total (TL Equivalent) (TL Equivalent) Assets: Cash and cash equivalents 2.428.461 1.069.257 86.852 6.032.268 Financial assets 2.667.331 228.397 64.397 4.656.098 Trade receivables 329.775 748.607 287.517 2.331.320 Receivables from finance sector operations 4.871.965 2.072.704 341.400 12.120.636 Inventories 42.844 49.106 394 167.255 Deferred tax assets - - 795 795 Other assets 212.148 144.476 132.827 756.852

Total assets 10.552.524 4.312.547 914.182 26.065.224

Liabilities: Payables from finance sector operations 5.455.340 2.085.078 500.145 13.206.634 Financial liabilities 3.788.783 2.849.838 148.868 11.845.930 Trade payables 2.248.241 417.655 11.408 4.343.005 Current income tax liabilities - 44 - 90 Provisions for employee benefits - 668 - 1.369 Deferred tax liabilities - 520 - 1.066 Other liabilities 430.064 231.217 13.393 1.152.058

Total liabilities 11.922.428 5.585.020 673.814 30.550.152

Net balance sheet position (1.369.904) (1.272.473) 240.368 (4.484.928)

Derivative financial assets 4.058.543 2.007.652 280.360 10.668.750 Derivative financial liabilities (5.454.734) (858.729) (411.422) (10.604.064)

Off-balance sheet derivative instruments net position (1.396.191) 1.148.923 (131.062) 64.686

Net foreign currency position (2.766.095) (123.550) 109.306 (4.420.242)

Net foreign currency position of monetary items (2.808.939) (172.656) 108.912 (4.587.497) Fair value of derivative instruments held for hedging purposes (49.833) - - (77.042)

(*) Presented in original currencies.

F-194 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Import and export details (TL Equivalent)

Export 2011 2010

USD 8.929.752 5.547.292 EUR 6.715.770 5.285.552 Other 930.288 631.507

16.575.810 11.464.351

Import

USD 35.718.777 21.432.670 EUR 5.050.652 3.767.205 Other 57.461 50.408

40.826.890 25.250.283 b) Interest Rate Risk

The monitoring of interest rate sensitive assets and liabilities and sensitivity analysis of Yapı Kredi Bankası, a joint venture of the Group, regarding the effect of interest rate fluctuations on the financial statements are performed by the Risk Management Department for all interest sensitive instruments. The results are presented to the Board of Directors in the context of Asset and Liability Management function. By using sensitivity and scenario analyses, the possible loss effects on the equity are analysed due to the interest rate volatility not only within current year but also for the future periods. The effects of the volatility of market interest rates on positions and on cash flows are also closely monitored.

The weighted average effective annual interest rates (%) for the financial assets and liabilities of the Group are as follows:

2011 2010 USD EUR TL USD EUR TL Assets Cash and cash equivalents 5,00 2,52 11,11 2,98 1,95 8,62 Financial assets - At fair value through profit or loss 8,00 5,75 8,32 5,95 7,05 8,11 - Available-for-sale financial assets 6,80 5,83 9,84 6,98 5,94 7,85 - Held-to-maturity financial assets 6,70 4,70 9,92 6,76 5,33 10,05 Loans and advances to customers 5,04 5,87 13,72 4,63 5,14 12,74

Liabilities Financial liabilities 2,49 3,05 9,35 2,61 2,59 8,40 Deposits 4,13 3,88 10,72 2,56 2,33 8,68

F-195 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Group’s financial assets and liabilities in carrying amounts classified in terms of periods remaining to contractual repricing dates are as follows:

Up to 3 months - 1 year - 5 years Non-interest 31 December 2011 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 5.685.012 - - - 1.111.232 6.796.244 Balances with Central Banks - - - - 4.524.256 4.524.256 Financial assets - At fair value through profit or loss 13.365 84.457 32.650 8.902 20.489 159.863 - Available-for-sale financial assets 417.801 1.191.801 894.347 1.358.180 118.013 3.980.142 - Held-to-maturity financial assets 1.048.324 958.170 1.360.692 3.340.888 - 6.708.074 Loans and advances to customers 9.087.166 8.744.442 12.003.384 7.099.472 1.254.106 38.188.570

16.251.668 10.978.870 14.291.073 11.807.442 7.028.096 60.357.149

Liabilities Deposits 26.440.975 1.992.989 299.746 57.747 5.476.791 34.268.248 Financial liabilities 9.372.573 7.056.582 4.367.173 846.919 20.727 21.663.974

35.813.548 9.049.571 4.666.919 904.666 5.497.518 55.932.222

Up to 3 months - 1 year - 5 years Non-interest 31 December 2010 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 8.957.795 - - - 979.730 9.937.525 Balances with Central Banks 1.155.052 - - - 1.511.048 2.666.100 Financial assets - At fair value through profit or loss 61.785 44.524 6.107 62.721 29.791 204.928 - Available-for-sale financial assets 381.975 396.674 1.117.417 994.950 144.988 3.036.004 - Held-to-maturity financial assets 2.097.173 748.928 1.299.372 2.894.350 - 7.039.823 Loans and advances to customers 8.983.607 7.502.688 8.697.047 3.883.283 514.735 29.581.360

21.637.387 8.692.814 11.119.943 7.835.304 3.180.292 52.465.740

Liabilities Deposits 20.928.958 811.063 302.629 67.096 4.712.377 26.822.123 Financial liabilities 8.463.991 4.459.534 3.474.559 394.015 86.195 16.878.294

29.392.949 5.270.597 3.777.188 461.111 4.798.572 43.700.417

F-196 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The interest rate position is as follows:

2011 2010 Fixed interest rate financial instruments

Financial assets Cash and cash equivalents 5.065.591 9.540.507 Financial assets at fair value through profit or loss 116.903 146.947 Available for sale financial assets 3.177.530 2.190.735 Loans and advances to customers 28.458.863 22.430.580

36.818.887 34.308.769

Financial liabilities Deposits 28.202.380 22.107.250 Financial liabilities 5.219.609 7.127.144

33.421.989 29.234.394

Floating interest rate financial instruments

Financial assets Cash and cash equivalents 619.421 572.340 Financial assets at fair value through profit or loss 22.471 28.190 Available for sale financial assets 684.599 700.281 Loans and advances to customers 8.475.601 6.636.045

9.802.092 7.936.856

Financial liabilities Deposits 589.077 2.496 Financial liabilities 16.423.638 9.664.955

17.012.715 9.667.451

As of 31 December 2011, if the annual interest rate on TL basis were 100 base points higher/lower, and all other variables remained constant, due to the changes in the carrying values of financial assets; profit before tax would be TL1.969 thousand (2010: TL3.675 thousand) and due to its direct effect on equity, equity would be TL82.168 thousand (2010: TL68.981 thousand) lower/higher.

F-197 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued) c) Liquidity Risk

Undiscounted contractual cash flows of the financial liabilities of the Group as of 31 December 2011 and 2010 are as follows:

Total Book contractual Up to 3 months - 5 years 31 December 2011 value cash outflow 3 months 1 year 1 - 5 years and over

Financial liabilities: Financial liabilities 21.663.974 22.841.653 4.223.502 8.549.301 8.861.912 1.206.938 Deposits 34.268.248 35.065.345 34.311.946 - 680.884 72.515 Trade payables 9.186.672 9.199.509 9.018.586 180.923 - -

Derivative financial instruments: Cash inflow - 25.478.732 7.669.981 3.660.338 13.385.214 763.199 Cash outflow - (25.991.221) (7.662.152) (3.630.924) (13.869.059) (829.086)

Total Book contractual Up to 3 months - 5 years 31 December 2010 value cash outflow 3 months 1 year 1 - 5 years and over

Financial liabilities: Financial liabilities 16.878.294 17.757.897 7.413.323 1.685.442 7.192.853 1.466.279 Deposits 26.822.123 27.144.843 26.618.189 - 440.958 85.696 Trade payables 7.549.368 7.554.839 7.020.713 534.126 - -

Derivative financial instruments: Cash inflow - 18.697.536 9.004.541 3.285.533 6.027.321 380.141 Cash outflow - (19.530.928) (8.769.688) (3.485.369) (6.761.588) (514.283)

F-198 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The redemption schedule of Finance Sector’s credit related commitments according to their original maturities are as follows:

5 years 31 December 2011 Indefinite Up to 1 year 1 - 5 years and over Total

Letters of guarantee 4.582.561 1.591.824 2.734.079 499.107 9.407.571 Letters credit 1.363.537 901.128 238.827 - 2.503.492 Acceptance credits 79.458 - - - 79.458 Other 456.961 323.873 407.644 7.471 1.195.949

6.482.517 2.816.825 3.380.550 506.578 13.186.470

5 years 31 December 2010 Indefinite Up to 1 year 1 - 5 years and over Total

Letters of guarantee 3.908.745 1.355.601 1.810.373 399.326 7.474.045 Letters credit 967.174 854.046 178.717 - 1.999.937 Acceptance credits 82.899 - - - 82.899 Other 71.370 72.227 136.322 9.800 289.719

5.030.188 2.281.874 2.125.412 409.126 9.846.600

Capital Risk Management

In order to maintain or adjust the capital structure, the Group may decide on the amount of dividends paid to shareholders, issue of new shares or sell assets to decrease net financial debt.

Net financial debt/total equity ratio as of 31 December 2011 and 2010 is as follows:

2011 2010

Total financial liabilities 21.663.974 16.878.294 Cash and cash equivalents (6.318.760) (9.578.216)

Net financial debt 15.345.214 7.300.078 Equity 23.270.824 20.977.914

Net financial debt/total equity ratio %66 35%

F-199 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 34 - FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES

Fair value of financial instruments

Estimated fair values of financial instruments have been determined by the Group by using available market information and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data. Accordingly, estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange.

The following methods and assumptions are used to estimate the fair values of financial instruments:

Financial assets

Carrying values of significant portion of cash and cash equivalents are assumed to reflect their fair values due to their short-term nature.

Carrying values of trade receivables are assumed to approximate their fair values.

Financial liabilities

In the framework of the methods and assumptions explained above, carrying and fair values of financial assets and liabilities as of 31 December 2011 and 2010 are presented in the following table:

2011 2010 Carrying Fair Carrying Fair value value value value Assets Cash and cash equivalents 6.796.244 6.877.276 9.937.525 9.947.433 Held-to-maturity financial assets 6.708.074 6.840.434 7.039.823 7.423.094 Loans and advances to customers 38.188.570 39.224.870 29.581.360 30.311.697

Liabilities Deposits 34.268.248 34.430.757 26.822.123 26.711.547 Financial liabilities 21.663.974 21.640.877 16.878.294 16.896.244

F-200 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 34 - FINANCIAL INSTRUMENTS - FAIR VALUE DISCLOSURES (Continued)

Fair Value Estimation

The classification of the Group’s financial assets and liabilities at fair value is as follows:

The Group’s assets and liabilities measured at fair value as of 31 December 2011 and 2010 are as follows:

31 December 2011 Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 152.821 7.042 - 159.863 Available-for-sale financial assets - Debt securities 3.041.557 820.570 - 3.862.127 - Equity securities 37.803 - - 37.803 Derivative financial instruments - 378.356 - 378.356

Total assets 3.232.181 1.205.968 - 4.438.149

Derivative financial instruments - 553.290 - 553.290

Total liabilities - 553.290 - 553.290

31 December 2010 Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 204.928 - - 204.928 Available-for-sale financial assets - Debt securities 2.254.171 636.766 - 2.890.937 - Equity securities 63.592 - - 63.592 Derivative financial instruments - 367.981 - 367.981

Total assets 2.522.691 1.004.747 - 3.527.438

Derivative financial instruments - 437.279 - 437.279

Total liabilities - 437.279 - 437.279

NOTE 35 - EARNINGS PER SHARE

2011 2010 Earnings per share: Profit for the period 3.850.353 3.138.400 Profit attributable to non-controlling interest (1.725.884) (1.403.921)

Profit attributable to equity holders of the parent 2.124.469 1.734.479 Weighted average number of shares with nominal value Kr 1 each 241.514.100.000 241.514.100.000

Earnings per share (Kr) 0,880 0,718

F-201 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 36 - SUPPLEMENTARY CASH FLOW INFORMATION

As of 31 December 2011 and 2010, supplementary information for the details included in the consolidated cash flow statements:

2011 2010 Changes in provisions: Provision for lawsuits 41.882 173.444 Provision for warranty and assembly 54.220 13.752 Cost accruals for construction contracts 62.165 62.687 Insurance technical reserves 66.714 31.765 Provision for loans and doubtful receivables 511.427 712.444 Provision for employment termination benefits and Pension Fund 2.844 25.193 Provision for impairment on inventories (7.260) (25.186) Provision for impairment on property, plant and equipment (50.989) (27.857) Other provisions 9.463 2.672

690.466 968.914

Add back net interest income: Interest income from non-finance sector (Note 29) (353.228) (537.719) Interest income from finance sector (Note 5) (4.123.943) (3.418.065) Interest expense from non-finance sector (Note 29) 411.957 576.071 Interest expense from finance sector (Note 5) 2.349.464 1.683.375

(1.715.750) (1.696.338)

Net changes in the operating assets and liabilities: Finance: Reserve deposits with central banks (1.861.631) (859.210) Receivables from finance sector operations (8.984.211) (8.540.915) Payables from finance sector operations 7.356.531 5.856.706 Financial assets (736.818) (2.102.038) Associates (54.708) (6.527)

(4.280.837) (5.651.984)

Non-Finance: Inventories (2.502.091) (806.912) Trade receivables (4.119.275) (434.519) Other assets (1.434.777) (651.448) Trade payables 1.552.114 3.500.521 Other liabilities 1.005.580 953.286

(5.498.449) 2.560.928

(9.779.286) (3.091.056)

Cash and cash equivalents: Cash and cash equivalents (Note 6) 6.796.244 9.937.525 Other balances with Central Banks (Note 7) 35.009 38.484 Cash and cash equivalents held for sale (Note 24) 5.612 91.955 Less: Blocked deposits (Note 6) (477.484) (359.309)

6.359.381 9.708.655

F-202 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 37 - EVENTS AFTER THE BALANCE SHEET DATE i) On 8 February 2012, Yapı Kredi Bankası, a Joint Venture of the Group, finalised a bond issuance of USD250 million with 5 years maturity and a fixed semi-annual coupon rate of 6,75% managed by J.P. Morgan Securities Ltd., Standard Chartered Bank and UniCredit Bank AG. ii) According to the resolution of the Board of Directors dated 22 February 2012, Yapı Kredi Bankası signed a subordinated loan agreement with UniCredit Bank Austria AG amounting to USD292,5 million, with 10 years maturity and a repayment option by the borrower at the end of five years, at an interest rate of 3 months Libor+8,30%.

………………………..

F-203 KOÇ HOLDİNG A.Ş.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010 TOGETHER WITH THE INDEPENDENT AUDITOR’S REPORT

(CONVENIENCE TRANSLATION INTO ENGLISH OF THE INDEPENDENT AUDITOR’S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

F-204 F-205 F-206 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010

CONTENTS INDEX

CONSOLIDATED BALANCE SHEETS ...... 1-2

CONSOLIDATED INCOME STATEMENTS ...... 3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ...... 4

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ...... 5

CONSOLIDATED CASH FLOW STATEMENTS ...... 6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 7-87

NOTE 1 GROUP’S ORGANISATION AND NATURE OF OPERATIONS ...... 7-10 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ...... 11-32 NOTE 3 INTEREST IN JOINT VENTURES ...... 32 NOTE 4 SEGMENT REPORTING ...... 33-36 NOTE 5 CASH AND CASH EQUIVALENTS ...... 36-37 NOTE 6 FINANCIAL ASSETS ...... 37-39 NOTE 7 TRADE RECEIVABLES AND PAYABLES ...... 40 NOTE 8 RECEIVABLES FROM FINANCE SECTOR OPERATIONS ...... 41-42 NOTE 9 INVENTORIES ...... 43 NOTE 10 INVESTMENT PROPERTIES...... 43 NOTE 11 PROPERTY, PLANT AND EQUIPMENT ...... 44-45 NOTE 12 INTANGIBLE ASSETS ...... 46-47 NOTE 13 GOODWILL ...... 48 NOTE 14 PAYABLES FROM FINANCE SECTOR OPERATIONS ...... 49-50 NOTE 15 FINANCIAL LIABILITIES ...... 50-52 NOTE 16 TAX ASSETS AND LIABILITIES ...... 52-55 NOTE 17 OTHER PAYABLES ...... 56 NOTE 18 DERIVATIVE FINANCIAL INSTRUMENTS ...... 56 NOTE 19 EMPLOYEE BENEFITS ...... 57-59 NOTE 20 OTHER ASSETS AND LIABILITIES ...... 59-61 NOTE 21 EQUITY ...... 62-64 NOTE 22 REVENUE ...... 64 NOTE 23 EXPENSES BY NATURE ...... 65 NOTE 24 OTHER INCOME/EXPENSES ...... 66 NOTE 25 FINANCIAL INCOME/EXPENSES ...... 66 NOTE 26 RELATED PARTY DISCLOSURES ...... 67 NOTE 27 GOVERNMENT GRANTS ...... 67 NOTE 28 COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES ...... 68-70 NOTE 29 ASSETS HELD FOR SALE ...... 71 NOTE 30 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT ...... 72-84 NOTE 31 FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES) 84-85 NOTE 32 EARNINGS PER SHARE ...... 85 NOTE 33 SUPPLEMENTARY CASH FLOW INFORMATION ...... 86 NOTE 34 EVENTS AFTER THE BALANCE SHEET DATE ...... 87

F-207 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

2010 2010 2010 2009 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

ASSETS

Current assets: Cash and cash equivalents 5 6.150.810 8.152.409 12.603.625 9.835.785 Financial assets 6 955.318 1.266.199 1.957.543 2.123.794 Trade receivables 7 2.488.040 3.297.699 5.098.243 4.747.016 Receivables from finance sector operations 8 7.466.135 9.895.767 15.298.856 11.934.199 Inventories 9 2.046.312 2.712.224 4.193.098 3.361.000 Derivative financial instruments 18 163.125 216.210 334.260 250.163 Other current assets 20 884.683 1.172.577 1.812.804 1.348.614

Assets held for sale 29 174.103 230.760 356.755 15.265

Total current assets 20.328.526 26.943.845 41.655.184 33.615.836

Non-current assets: Financial assets 6 4.084.866 5.414.165 8.370.299 6.034.947 Trade receivables 7 44.536 59.029 91.259 85.641 Receivables from finance sector operations 8 7.017.621 9.301.299 14.379.808 9.743.214 Investment properties 10 56.324 74.653 115.413 120.344 Property, plant and equipment 11 5.097.776 6.756.696 10.445.852 10.629.539 Intangible assets 12 675.496 895.316 1.384.158 1.319.893 Goodwill 13 1.720.927 2.280.951 3.526.351 3.517.860 Deferred tax assets 16 171.405 227.184 351.226 518.509 Derivative financial instruments 18 16.456 21.812 33.721 126.082 Other non-current assets 20 385.167 510.508 789.246 674.567

Total non-current assets 19.270.574 25.541.613 39.487.333 32.770.596

Total assets 39.599.100 52.485.458 81.142.517 66.386.432

(*) Euro (“EUR”) and US Dollar (“USD”) amounts presented above have been translated from Turkish Lira (“TL”) for convenience purposes only, at the official TL bid rate announced by the Central Bank of the Republic of Turkey (“CBRT”) at 31 December 2010, and therefore they do not form part of these consolidated financial statements (Note 2.1.3).

These consolidated financial statements as of and for the year ended 31 December 2010 have been approved for issue by the Board of Directors (“BOD”) on 11 March 2011 and signed on its behalf of the BOD by the CFO (Chief Financial Officer), Ahmet F. Ashaboğlu and by Accounting Director, Emine Alangoya. These consolidated financial statements will become final following their approval in the General Assembly.

The accompanying notes form an integral part of these consolidated financial statements.

F-208 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

2010 2010 2010 2009 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

LIABILITIES Current liabilities: Payables from finance sector operations 14 13.073.953 17.328.485 26.789.839 20.719.836 Financial liabilities 15 4.316.941 5.721.762 8.845.844 8.492.043 Trade payables 7 3.684.236 4.883.162 7.549.368 4.083.434 Other payables 17 754.130 999.539 1.545.288 1.488.466 Derivative financial instruments 18 51.086 67.710 104.680 134.477 Current income tax liabilities 16 102.419 135.748 209.867 144.059 Other current liabilities 20 2.006.226 2.659.092 4.110.957 3.088.086

Liabilities held for sale 29 60.604 80.326 124.184 7.247

Total current liabilities 24.049.595 31.875.824 49.280.027 38.157.648

Non-current liabilities: Payables from finance sector operations 14 260.978 345.906 534.770 716.302 Financial liabilities 15 3.919.989 5.195.634 8.032.450 6.428.177 Derivative financial instruments 18 162.315 215.135 332.599 249.894 Provisions for employee benefits 19 384.977 510.257 788.857 763.664 Deferred tax liabilities 16 324.611 430.246 665.161 828.828 Other non-current liabilities 20 259.012 343.301 530.739 459.873

Total non-current liabilities 5.311.882 7.040.479 10.884.576 9.446.738

Total liabilities 29.361.477 38.916.303 60.164.603 47.604.386

Equity: Paid-in share capital 21 1.178.635 1.562.187 2.415.141 2.415.141 Adjustment to share capital 21 472.055 625.671 967.288 967.288

Total share capital 1.650.690 2.187.858 3.382.429 3.382.429 Share premium 4.532 6.006 9.286 9.286 Revaluation funds 21 9.664 12.809 19.803 (14.183) Currency translation differences 23.039 30.537 47.210 51.707 Restricted reserves 21 1.118.501 1.482.484 2.291.920 2.269.812 Prior years’ income 2.483.561 3.291.763 5.089.065 4.041.695 Profit for the period 846.459 1.121.914 1.734.479 1.429.210

Equity holders of the parent 6.136.446 8.133.371 12.574.192 11.169.956 Non-controlling interest 4.101.177 5.435.784 8.403.722 7.612.090

Total equity 10.237.623 13.569.155 20.977.914 18.782.046

Total liabilities and equity 39.599.100 52.485.458 81.142.517 66.386.432

Commitments and contingent liabilities 28 (*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the official TL bid rate announced by the CBRT on 31 December 2010, and therefore they do not form part of these consolidated financial statements (Note 2.1.3). The accompanying notes form an integral part of these consolidated financial statements.

F-209 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

2010 2010 2010 2009 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Revenue 22 24.541.209 32.539.511 48.822.282 39.458.782 Interest, fee, commission and similar income 4 2.508.371 3.325.882 4.990.154 5.381.772

Total revenue 4 27.049.580 35.865.393 53.812.436 44.840.554

Cost of sales (-) 23 (21.347.271) (28.304.626) (42.468.261) (33.574.597) Interest, fee, commission and similar expenses (-) (1.081.999) (1.434.636) (2.152.528) (2.390.124)

Total costs 4 (22.429.270) (29.739.262) (44.620.789) (35.964.721)

Gross profit non-finance 3.193.938 4.234.885 6.354.021 5.884.185 Gross profit finance 4 1.426.372 1.891.246 2.837.626 2.991.648

Gross profit 4 4.620.310 6.126.131 9.191.647 8.875.833

Marketing, selling and distribution expenses (-) 23 (1.105.192) (1.465.389) (2.198.669) (2.128.403) General administrative expenses (-) 23 (1.309.125) (1.735.786) (2.604.373) (2.303.294) Research and development expenses (-) 23 (62.262) (82.554) (123.864) (93.656) Other income 24 234.815 311.344 467.141 300.754 Other expense (-) 24 (315.174) (417.894) (627.008) (1.175.019)

Operating profit 4 2.063.372 2.735.852 4.104.874 3.476.215

Financial income 25 965.065 1.279.593 1.919.901 1.800.509 Financial expense (-) 25 (1.075.110) (1.425.503) (2.138.824) (2.117.672)

Profit before tax 1.953.327 2.589.942 3.885.951 3.159.052

Tax income/expense (375.767) (498.234) (747.551) (518.464) - Current income tax expense (-) 16 (375.806) (498.286) (747.629) (598.227) - Deferred tax income/(expense) 16 39 52 78 79.763

Profit for the period 1.577.560 2.091.708 3.138.400 2.640.588

Attributable to: Non-controlling interest 705.701 935.698 1.403.921 1.211.378 Equity holders of the parent 871.859 1.156.010 1.734.479 1.429.210

Earnings per share (Kr) 32 0,718 0,592

(*) EUR and USD amounts presented above have been translated from TL for convenience purposes only, at the EUR and USD average CBRT bid rates for the year ended 31 December 2010, and therefore they do not form part of these consolidated financial statements (Note 2.1.3).

The accompanying notes form an integral part of these consolidated financial statements.

F-210 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

2010 2010 2010 2009 (*) EUR’000 (*) USD’000 TL’000 TL’000

Profit for the period 1.577.560 2.091.708 3.138.400 2.640.588

Other comprehensive income: Fair value gains/(losses) on financial assets 39.029 51.750 77.645 65.006 Cumulative gains/(losses) on hedging (13.948) (18.494) (27.749) 30.351 Currency translation differences (9.759) (12.941) (19.415) (6.580)

Other comprehensive income (tax effects) (**) (7.128) (9.451) (14.181) 2.800

Other comprehensive income (after tax) 8.194 10.864 16.300 91.577

Total comprehensive income 1.585.754 2.102.572 3.154.700 2.732.165

Attributable to: Non-controlling interest 698.783 926.522 1.390.154 1.224.175 Equity holders of the parent 886.971 1.176.050 1.764.546 1.507.990

(**) Deferred tax effects of comprehensive income components are presented in Note 16.

The accompanying notes form an integral part of these consolidated financial statements.

F-211 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Capital Revaluation funds Restricted reserves Retained earnings Financial Non-current Paid-in Adjustment assets Cumulative assets Currency Profit Prior Non- share to share Share fair value gains/(losses) revaluation translation Legal Special for the years’ controlling Total capital capital premium reserve on hedging fund differences reserves reserves period income interest equity

Balances at 1 January 2009 2.012.618 967.288 9.286 1.465 (112.566) 18.159 52.312 106.096 395.441 2.023.555 4.275.837 6.382.169 16.131.660

Transfers ------34.121 1.734.154 (2.023.555) 255.280 - - Capital increases 402.523 ------(402.523) 164.589 164.589 Dividends paid ------(71.628) (363.312) (434.940) Transactions with non-controlling interests ------(15.897) 204.469 188.572 Total comprehensive income - - - 51.044 27.414 301 (605) - - 1.429.210 626 1.224.175 2.732.165

Balances at 31 December 2009 2.415.141 967.288 9.286 52.509 (85.152) 18.460 51.707 140.217 2.129.595 1.429.210 4.041.695 7.612.090 18.782.046

Balances at 1 January 2010 2.415.141 967.288 9.286 52.509 (85.152) 18.460 51.707 140.217 2.129.595 1.429.210 4.041.695 7.612.090 18.782.046

Transfers ------12.600 9.508 (1.429.210) 1.407.102 - - Capital increases ------10.153 10.153 Dividends paid (Note 21) ------(359.714) (602.343) (962.057) Transactions with non-controlling interests ------(596) (5.010) (5.606) Changes in the scope of consolidation (Note 2.4.1) ------(1.322) (1.322) Total comprehensive income - - - 57.117 (18.333) (4.798) (4.497) - - 1.734.479 578 1.390.154 3.154.700

Balances at 31 December 2010 2.415.141 967.288 9.286 109.626 (103.485) 13.662 47.210 152.817 2.139.103 1.734.479 5.089.065 8.403.722 20.977.914

The accompanying notes form an integral part of these consolidated financial statements.

F-212 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

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CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

2010 2010 2010 2009 Notes (*) EUR’000 (*) USD’000 TL’000 TL’000

Operating activities: Profit before tax 1.953.327 2.589.942 3.885.951 3.159.052 Adjustments to reconcile net cash generated: Depreciation and amortisation 4 486.566 645.144 967.974 924.658 Changes in provisions 33 487.038 645.770 968.914 1.523.987 Net interest income 33 (852.688) (1.130.591) (1.696.338) (1.627.234) Finance sector interest received 1.655.015 2.194.406 3.292.487 4.077.095 Finance sector interest paid (834.167) (1.106.032) (1.659.491) (2.083.266) Exchange (gains)/losses on borrowings 166.813 221.179 331.857 (15.730) Exchange (gains)/losses on cash and cash equivalents (66.855) (88.644) (133.001) 74.663 Gain on sale of property, plant and equipment (net) 24 (43.171) (57.241) (85.885) (9.385)

2.951.878 3.913.933 5.872.468 6.023.840

Net changes in operating assets and liabilities 33 (1.508.516) (2.000.161) (3.001.042) 1.072.716 Income taxes paid (342.727) (454.426) (681.821) (556.279)

Cash flows from operating activities 1.100.635 1.459.346 2.189.605 6.540.277

Investing activities: Purchases of property, plant and equipment and intangible assets 4 (626.142) (830.209) (1.245.646) (1.443.884) Sales of property, plant and equipment and intangible assets 143.141 189.793 284.765 123.829 Cash outflow from acquisition of subsidiary (net) - - - (14.224) (Increase)/decrease in financial assets (7.083) (9.391) (14.091) 18.371 Non-finance sector interest received 266.995 354.012 531.160 373.656 Transactions with non-controlling interests (net) (2.818) (3.736) (5.606) 201.646

Cash flows from investing activities (225.907) (299.531) (449.418) (740.606)

Financing activities: Share capital increases 5.104 6.767 10.153 164.589 Dividend payments (483.592) (641.200) (962.057) (434.940) Increase/(decrease) in short-term borrowings (net) 132.370 175.512 263.338 (772.325) Increase/(decrease) in long-term borrowings (net) 711.151 942.925 1.414.764 (1.600.497) Non-finance sector interest paid (295.337) (391.592) (587.545) (814.225)

Cash flows from financing activities 69.696 92.412 138.653 (3.457.398)

Effects of foreign exchange rate changes on cash and cash equivalents 66.855 88.644 133.001 (74.663)

Net increase in cash and cash equivalents 1.011.279 1.340.871 2.011.841 2.267.610 Cash and cash equivalents at the beginning of the year 4.086.378 5.418.182 8.129.441 5.861.831

Cash and cash equivalents at the end of the period 33 5.097.657 6.759.053 10.141.282 8.129.441

The accompanying notes form an integral part of these consolidated financial statements.

F-213 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS

As of 31 December 2010, the number of personnel employed by Koç Holding, Subsidiaries and Joint Ventures (collectively referred as the “Group”) is 73.063 (31 December 2009: 68.057).

The registered address of Koç Holding is as follows: Nakkaştepe Azizbey Sok. No: 1 Kuzguncuk-İSTANBUL

Koç Holding is registered to the Capital Markets Board (“CMB”) and its shares have been quoted on the Istanbul Stock Exchange (“ISE”) since 10 January 1986. As of 31 December 2010, the principal shareholders and their respective shareholding rates in Koç Holding are as follows: %

Companies owned by Koç Family members 42,49 Koç Family members 26,02 Vehbi Koç Vakfı 7,15 Koç Holding Emekli ve Yardım Sandığı Vakfı 1,99 Other 22,35

100,00

Koç Holding is organised mainly in Turkey under five core business segments: x Energy x Automotive x Consumer durable x Finance (1) x Other (2)

(2) Other operations of Koç Holding mainly comprise of food, retail, tourism, information technologies and construction, none of which are of a sufficient size to be reported separately.

F-214 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued) The subsidiaries (“Subsidiaries”) and the joint ventures (“Joint Ventures”) included in the consolidation scope of Koç Holding, their country of incorporation, nature of business and their respective business segments are as follows: Energy Sector Country of Nature of Subsidiaries incorporation business Akpa Dayanıklı Tüketim LPG ve Akaryakıt Ürünleri Pazarlama A.Ş. (“Akpa”) Turkey Trading Anadoluhisarı Tankercilik A.Ş (“ Anadoluhisarı Tankercilik”) (1) Turkey Shipping Aygaz A.Ş. (“Aygaz”) Turkey LPG Aygaz Doğal Gaz İletim A.Ş. (“Aygaz İletim”) Turkey LNG Aygaz Doğal Gaz Toptan Satış A.Ş. (“Aygaz Toptan Satış”) Turkey LNG Beykoz Tankercilik A.Ş. (“Beykoz Tankercilik”) Turkey Petroleum Shipping Damla Denizcilik A.Ş. (“Damla Denizcilik”) Turkey Petroleum Shipping Demir Export A.Ş. (“Demir Export”) Turkey Mining Deniz İşletmeciliği ve Tic. A.Ş. (“Ditaş”) Turkey Petroleum Shipping Eltek Elektrik Enerjisi İthalat İhracat ve Toptan Ticaret A.Ş. (“Eltek”) (2) Turkey Power Enerji Yatırımları A.Ş. (“Enerji Yatırımları”) Turkey Investment Entek Elektrik Üretimi A.Ş. (“Entek”) (3) Turkey Power Generation Kadıköy Tankercilik A.Ş. (“Kadıköy Tankercilik”) Turkey Petroleum Shipping Kandilli Tankercilik A.Ş. (“Kandilli Tankercilik”) (1) Turkey Shipping Kuleli Tankercilik A.Ş. (“Kuleli Tankercilik”) (1) Turkey Shipping Kuzguncuk Tankercilik A.Ş. (“Kuzguncuk Tankercilik”) (1) Turkey Shipping Mogaz Petrol Gazları A.Ş. (“Mogaz”) Turkey LPG Türkiye Petrol Rafinerileri A.Ş. (“Tüpraş”) Turkey Production and Trading of Petroleum Products Üsküdar Tankercilik A.Ş. (“Üsküdar Tankercilik”) Turkey Petroleum Shipping Country of Nature of Joint Ventures Joint Venture Partner incorporation business Opet Gıda ve İhtiyaç Mad. Tur. San. İç ve Dış Ticaret A.Ş. (“Opet Gıda”) (4) Öztürk Family Turkey Food Distribution Opet International Limited (“Opet International”) Öztürk Family The UK Petroleum Products Trading Opet Petrolcülük A.Ş. (“Opet”) Öztürk Family Turkey Petroleum Products Trading Opet Trade B.V. (“Opet Trade BV”) Öztürk Family The Netherlands Petroleum Products Trading Opet Trade (Singapore) Pte. Ltd. (“Opet Singapore”) Öztürk Family Singapore Petroleum Products Trading THY Opet Havacılık Yakıtları A.Ş. (“THY Opet”) (2) Türk Hava Yolları Turkey Petroleum Products Trading Liquidation of Opet Trade Ireland (“Opet Trade Ireland”) has been completed in 2010. Automotive Sector Country of Nature of Subsidiaries incorporation business Otokar Otobüs Karoseri Sanayi A.Ş. (“Otokar”) Turkey Production Otokoç Otomotiv Tic. ve San. A.Ş. (“Otokoç”) Turkey Trading Otokoç Sigorta Aracılık Hizmetleri A.Ş. (“Otokoç Sigorta”) Turkey Insurance Tasfiye Halinde Otoyol Sanayi A.Ş. (“Otoyol”) (4) Turkey Trading Country of Nature of Joint Ventures Joint Venture Partner incorporation business Fer Mas Oto Ticaret A.Ş. (“Fer-Mas”) Fiat Auto S.p.A. Turkey Trading Ford Otomotiv Sanayi A.Ş. (“Ford Otosan”) Ford Motor Co. Turkey Production Platform Araştırma Geliştirme Tasarım ve Tic. A.Ş. (“Platform”) Fiat Auto S.p.A. Turkey Research and Development Tofaş Türk Otomobil Fabrikası A.Ş. (“Tofaş”) Fiat Auto S.p.A. Turkey Production Türk Traktör ve Ziraat Makinaları A.Ş. (“Türk Traktör”) CNH Trade NV Turkey Production Beldesan Otomotiv Yan Sanayii ve Tic A.Ş. (“Beldesan”) and Beldeyama Motorlu Vasıtalar San. ve Tic. A.Ş. (“Beldeyama”) are excluded from the scope of consolidation in 2010. Liquidation of Mekatro Araştırma Geliştirme A.Ş. (“Mekatro”) has been completed in 2010. (1) Established in 2010. (2) Included in the scope of consolidation in 2010. (3) Classified as assets held for sale (Note 29). (4) In the process of liquidation. 8

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NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued)

Consumer Durables Sector

Country of Nature of Subsidiaries incorporation business

Archin Limited (“Archin”) (1) Hong Kong, China Trading Arçelik A.Ş. (“Arçelik”) Turkey Production/Sales Arctic Pro SRL (“Arctic Pro”) (1) Romania Service Ardutch B.V. (“Ardutch”) The Netherlands Holding Beko Cesko (“Beko Cesko”) (1) Czech Republic Trading Beko Deutschland GmbH (“Beko Deutschland”) Germany Trading Bekodutch B.V.(“Bekodutch”) The Netherlands Holding Beko Elektronik Llc (“Beko Elektronik Russia”) (1) (2) Russia Production/Sales Beko Electronics Espãna S.L. (“Beko Espana”) Spain Trading Beko France S.A.S. (“Beko France”) (3) France Trading Beko Italy SRL (“Beko Italy”) Italy Trading Beko Llc (“Beko Russia”) Russia Production/Sales Beko Magyarorszag K.F.T. (“Beko Magyarorszag”) (1) Hungary Trading Beko Plc. (“Beko UK”) The UK Trading Beko S.A. (“Beko Polska”) Poland Trading Beko S.A. Czech Republic (“Beko Czech”) Czech Republic Trading Beko Shanghai Trading Company Ltd. (“Beko Shanghai”) China Trading Beko S.A. Hungary (“Beko Hungary”) (1) Hungary Trading Beko Slovakia S.R.O. (“Beko Slovakia”) Slovakia Trading Blomberg Vertriebsgesellschaft GmbH (“Blomberg Vertrieb”) (1) Germany Trading Blomberg Werke GmbH (“Blomberg Werke”) (1) Germany Production Changzhou Beko Electrical Appliances Co. Ltd. (“Beko China”) China Production/Sales Elektra Bregenz AG (“Elektra Bregenz”) Austria Trading Grundig Schweiz AG (“Grundig Switzerland”) (1) Switzerland Trading Grundig Ceska Republika S.r.o (“Grundig Czech Republic”) (1) Czech Republic Trading Grundig Nordic Danmark A/S (“Grundig Denmark”) (1) Denmark Trading Grundig Intermedia Ges.m.b.H (“Grundig Austria”) (1) Austria Trading Grundig Intermedia GmbH (“Grundig Intermedia”) Germany Trading Grundig Italiana S.p.A. (“Grundig Italy”) (1) Italy Trading Grundig Magyarország Kft. (“Grundig Hungary”) (1) Hungary Trading Grundig Multimedia B.V. (“Grundig Multimedia”) The Netherlands Holding Grundig Nordic No AS (“Grundig Norway”) Norway Trading Grundig Nordic Fin OY (“Grundig Finland ”) (1) Finland Trading Grundig Polska Sp. z o.o. (“Grundig Polska”)(1) Poland Trading Grundig Portuguesa Lda (“Grundig Portugal”) (1) Portugal Trading Grundig Slovakia s.r.o. (“Grundig Slovakia”)(1) Slovakia Trading Grundig Nordic AB. (“Grundig Sweden”) Sweden Trading Ram Dış Ticaret A.Ş. (“Ram Dış Ticaret”) Turkey Foreign Trade Raupach Wollert GmbH (“Raupach”) Germany Holding SC Arctic SA (“Arctic”) Romania Production/Sales

Fusion Digital Technology Ltd. (“Fusion Digital”) was liquidated in 10 August 2010. Grundig Benelux B.V. (“Grundig Benelux”) was liquidated in 15 December 2010. Grundig España S.A. (“Grundig Espana”) merged with Beko Espana in 22 December 2010.

Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Arçelik-LG Klima San. ve Tic. A.Ş. (“Arçelik LG”) LG Electronics Inc. Turkey Air Conditioner Production

(1) Ceased its operations. (2) Dissolved through merger with Beko Russia after the balance sheet date. (3) Legal title of the subsidiary has been revised as Beko France S.A.S. from Beko France S.A. as of 30 June 2010.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued) Finance Sector Country of Nature of Subsidiaries incorporation business Koç Tüketici Finansmanı A.Ş. (“Koç Finans”) Turkey Consumer Finance Country of Nature of Joint Ventures Joint Venture Partner incorporation business Koç Fiat Kredi Tüketici Finansmanı A.Ş. (“Fiat Finans”) Fiat Auto S.p.A. Turkey Consumer Finance Koç Finansal Hizmetler A.Ş. (“Koç Finansal Hizmetler” or “KFS”) UniCredit S.p.A. Turkey Holding Stiching Custody Services YKB (“Stiching Custody”) UniCredit S.p.A. The Netherlands Custody UniCredit Menkul Değerler A.Ş. (“UniCredit Menkul”) UniCredit S.p.A. Turkey Brokerage Yapı Kredi Azerbaijan C.J.S.C. (“Yapı Kredi Azerbaycan”) UniCredit S.p.A. Azerbaijan Banking Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) UniCredit S.p.A. Turkey Banking Yapı Kredi Holding B.V. (“Yapı Kredi Holding”) UniCredit S.p.A. The Netherlands Financial Consulting Yapı Kredi Invest LLC. (“Yapı Kredi Invest”) UniCredit S.p.A. Azerbaijan Brokerage Yapı Kredi Nederland N.V. (“Yapı Kredi Nederland”) UniCredit S.p.A. The Netherlands Banking Yapı Kredi Diversified Payment Rights Finance Company Special Purpose (“Yapı Kredi SPC”) (*) UniCredit S.p.A. Cayman Islands Company Yapı Kredi Emeklilik A.Ş. (“Yapı Kredi Emeklilik”) UniCredit S.p.A. Turkey Life Insurance Yapı Kredi Faktoring A.Ş. (“Yapı Kredi Faktoring”) UniCredit S.p.A. Turkey Factoring Yapı Kredi Finansal Kiralama A.O. (“Yapı Kredi Finansal Kiralama”) UniCredit S.p.A. Turkey Leasing Yapı Kredi Bank Moscow (“Yapı Kredi Moscow”) UniCredit S.p.A. Russia Banking Yapı Kredi Portföy Yönetimi A.Ş. (“Yapı Kredi Portföy”) UniCredit S.p.A. Turkey Portfolio Management Yapı Kredi Sigorta A.Ş. (“Yapı Kredi Sigorta”) UniCredit S.p.A. Turkey Insurance Yapı Kredi Yatırım Menkul Değerler A.Ş. (“Yapı Kredi Menkul”) UniCredit S.p.A. Turkey Brokerage Yapı Kredi B Tipi Yatırım Ortaklığı A.Ş.(“Yapı Kredi Yatırım”) UniCredit S.p.A. Turkey Investment Trust (*) Although Yapı Kredi Bankası has no shareholding interest in the company, the special purpose company established for securitisation transactions is included in the scope of consolidation. Other Sectors Country of Nature of Subsidiaries incorporation business Ayvalık Marina ve Yat İşletmeciliği San. ve Tic. A.Ş. (“Ayvalık Marina”) Turkey Tourism Bilkom Bilişim Hizmetleri A.Ş. (“Bilkom”) Turkey Trading Düzey Tüketim Malları Sanayi Pazarlama A.Ş. (“Düzey”) Turkey Trading Harranova Besi ve Tarım Ürünleri A.Ş. (“Harranova Besi”) Turkey Agriculture and Food Koçnet Haberleşme Teknoloji ve İletişim Hizm. A.Ş. (“Koçnet”) Turkey Information Technology Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. (“Koç Sistem”) Turkey Technology Koç Yapı Malzemeleri Ticaret A.Ş. (“Koç Yapı Malzeme”) Turkey Trading Marmaris Altınyunus Turistik Tesisleri A.Ş. (“Mares”) Turkey Tourism Palmira Turizm Ticaret A.Ş. (“Palmira”) Turkey Tourism RMK Marine Gemi Yapım Sanayi ve Deniz Taş. İşl. A.Ş. (“RMK Marine”) Turkey Ship Construction Setur Servis Turistik A.Ş. (“Setur”) Turkey Tourism Setur Yalova Marina İşletmeciliği A.Ş. (“Yalova Marina”) Turkey Tourism Tat Konserve Sanayi A.Ş. (“Tat Konserve”) Turkey Food Tat Tohumculuk A.Ş. (“Tat Tohumculuk”) Turkey Agriculture Tek-Art Kalamış ve Fenerbahçe Marmara Turizm Tesisleri A.Ş. (“Tek-Art Marina”) Turkey Tourism Zer Merkezi Hizmetler ve Ticaret A.Ş. (“Zer Ticaret”) Turkey Trading Bozkurt Tarım ve Gıda San. Ve Tic. A.Ş. (“Bozkurt”) is excluded from the scope of consolidation in 2010. Country of Nature of Joint Ventures Joint Venture Partner incorporation business

Koçtaş Yapı Marketleri Ticaret A.Ş. (“Koçtaş Yapı Market”) Kingfisher Plc Turkey Retail Netsel Turizm Yatırımları A.Ş. (“Netsel”) Torunlar GYO A.Ş. Turkey Tourism Ultra Kablolu Televizyon ve Telekomünikasyon San. ve Tic. A.Ş. (“Ultra Kablo”) is excluded from the scope of consolidation in 2010. For the purpose of segment presentation in these consolidated financial statements, Koç Holding’s stand-alone financial statements have been included in the “Other” segment (Note 4). 10

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of Presentation

2.1.1 Financial reporting standards

The CMB regulated the principles and procedures of preparation, presentation and announcement of financial statements prepared by the entities with the Communiqué No: XI-29, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”). According to the Communiqué, entities shall prepare their financial statements in accordance with International Financial Reporting Standards (“IAS/IFRS”) endorsed by the European Union. Until the differences of the IAS/IFRS as endorsed by the European Union between the ones issued by the International Accounting Standards Board (“IASB”) are announced by the Turkish Accounting Standards Board (“TASB”), IAS/IFRS issued by the IASB shall be applied. Accordingly, the Turkish Accounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”) issued by the TASB which are in line with the aforementioned standards shall be considered.

Koç Holding and its Subsidiaries and Joint Ventures registered in Turkey maintain their books of account and prepare their statutory financial statements (“Statutory Financial Statements”) in TL in accordance with the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts (“UCA”), issued by the Ministry of Finance, applicable Turkish insurance laws for insurance companies and banking law, accounting principles and instructions promulgated by the Banking Regulation and Supervision Agency (“BRSA”) for banks. The foreign Subsidiaries and Joint Ventures maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. These consolidated financial statements have been prepared under the historical cost convension except for the financial assets and liabilities presented at fair values, and the revaluations related to the difference between the carrying value and fair value of the non-current assets recognised in business combinations.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.1.2 Comparatives and adjustment of prior periods’ financial statements

The consolidated financial statements of the Group include comparative financial information to enable the determination of the financial position and performance. Comparative figures are reclassified, where necessary, to conform to the changes in the presentation in the current period consolidated financial statements. The reclassifications performed in the financial statements as of 31 December 2009 at the Group level are as follows: a) Time deposits with maturities over 3 months amounting to TL255.302 thousand were classified under “cash and cash equivalents” on the balance sheet as of 31 December 2009. These items have been reclassified to short term “financial assets”. b) Post dated cheques amounting to TL110.377 thousand were classified under “cash and cash equivalents” on the balance sheet as of 31 December 2009. These items have been reclassified to short-term “trade receivables”. c) Bonds and bills with maturities less than 3 months amounting to TL102.842 thousand were classified under “financial assets” on the balance sheet as of 31 December 2009. These items have been reclassified to “cash and cash equivalents”. d) Receivables from insurance operations amounting to TL78.666 thousand were classified under “trade receivables” on the balance sheet as of 31 December 2009. These items have been reclassified to “receivables from finance sector operations”. e) Idle capacity expenses incurred amounting to TL25.430 thousand were classified under “other income and expenses” on the income statement for the year ended 31 December 2009. These expenses have been reclassified to “cost of sales”.

2.1.3 EUR and USD amounts presented in the financial statements

EUR and USD amounts shown in the consolidated balance sheet prepared in accordance with the CMB Financial Reporting Standards have been translated from TL, as a matter of arithmetic computation only, at the official EUR and USD bid rates announced by the CBRT on 31 December 2010 of TL 2,0491 = EUR1 and TL 1,5460 = USD1, respectively and EUR and USD amounts shown in the consolidated income, comprehensive income and cash flow statements have been translated from TL, as a matter of arithmetic computation only, at the average EUR and USD bid rates calculated from the official daily bid rates announced by the CBRT for the year ended 31 December 2010 of TL 1,9894 = EUR1 and TL 1,5004 = USD1, respectively, and do not form part of these consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.2 Amendments in International Financial Reporting Standards

The accounting policies adopted in the preparation of the financial statements for the year ended and as of 31 December 2010 are consistent with the financial statements dated 31 December 2009 except for the new and amended IFRS and IFRIC interpretations summarised below.

Standards, amendments and interpretations effective as of 1 January 2010: - IFRIC 17 Distributions of Non-cash Assets to Owners, - IAS 39 Financial Instruments: Recognition and Measurement (Amended) - Eligible hedged items, - IFRS 2 Group Cash-settled Share-based Payment Transactions (Amended), - IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended), - IFRS 2 Share-based Payment, - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, - IFRS 8 Operating Segment Information, - IAS 1 Presentation of Financial Statements, - IAS 7 Statement of Cash Flows, - IAS 17 Leases, - IAS 18 Revenue, - IAS 36 Impairment of Assets, - IAS 38 Intangible Assets, - IAS 39 Financial Instruments: Recognition and Measurement - Eligible hedged items, - IFRIC 9 Reassessment of Embedded Derivatives, - IFRIC 16 Hedges of a Net Investment in a Foreign Operation.

The aforementioned changes and interpretations had no significant effect on the accounting policies, financial position and the performance of the Group.

Standards, amendments and interpretations issued but not yet effective:

- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, - IFRIC 14 Prepayments of a Minimum Funding Requirement (Amended), - IFRS 9 Financial Instruments - Phase 1 Financial Assets, Classification and Measurement (has not yet been approved by the European Union), - IAS 32 Classification on Rights Issues (Amended) , - IAS 24 Related Party Disclosures (Revised), - IFRS 7 Financial Instruments: Disclosures as part of its comprehensive review of off balance sheet activities (has not yet been approved by the European Union), - IAS 12 Income Taxes - Deferred Taxes (has not yet been approved by the European Union).

Amendments resulting from improvements to IFRS issued in May 2010 to remove inconsistencies (has not yet been approved by the European Union):

- IFRS 3 Business Combinations, - IFRS 7 Financial Instruments: Disclosures, - IAS 1 Presentation of Financial Statements, - IAS 27 Consolidated and Separate Financial Statements, - IAS 34 Interim Financial Reporting, - IFRIC 13: Customer Loyalty Programmes.

The aforementioned amendments and interpretations have not been early adopted by the Group. The Group evaluates the effects of changes on the consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.3 Restatement and Errors in the Accounting Policies and Estimates

Any change in the accounting policies resulted from first time adoption of a new TAS/TFRS is made either retrospectively or prospectively in accordance with the transition requirements of TAS/TFRS. Changes without any transition requirement, 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 recognised in the current period; the effect of changes in accounting estimates affecting current and future periods is recognised in the current and future periods. No material changes exist in the accounting policies or estimations of the Group in the current period.

2.4 Summary of Significant Accounting Policies

Accounting policies used in the preparation of consolidated financial statements, consistent with the prior periods, are summarised below:

2.4.1 Group accounting a) The consolidated financial statements include the accounts of the parent company, Koç Holding, its Subsidiaries and its Joint Ventures (collectively referred to as the “Group”) on the basis set out in sections (b) to (f) below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements with adjustments and reclassifications for the purpose of fair presentation in accordance with the CMB Financial Reporting Standards and the application of the uniform accounting policies and presentation. b) Subsidiaries are companies over which Koç Holding has the power to control the financial and operating policies for the benefit of Koç Holding, either (a) through the power to exercise more than 50% of voting rights relating to the shares in the companies as a result of the ownership interest owned directly and indirectly by itself, and/or as a result of agreements by certain Koç Family members and companies owned by them whereby Koç Holding exercises control over the ownership interest of the shares held by them; or (b) although not having the power to exercise more than 50% of the ownership interest, otherwise has the power to exercise control over the financial and operating policies.

The balance sheets and income statements of the Subsidiaries are consolidated on line-by-line basis and the carrying value of the investment held by Koç Holding and its Subsidiaries is eliminated against the related equity. Intercompany transactions and balances between Koç Holding and its Subsidiaries are eliminated during the consolidation. The nominal amount of the shares held by Koç Holding in its Subsidiaries and the associated dividends are eliminated from equity and income for the period, respectively.

Subsidiaries are consolidated from the date on which the control is transferred to the Group and are no longer consolidated from the date that the control ceases.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsidiaries included in the scope of the consolidation and their effective interests (%): Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Subsidiaries 2010 2009 2010 2009 2010 2009 2010 2009 Akpa 40,68 40,68 100,00 100,00 - - 100,00 100,00 Anadoluhisarı Tankercilik 40,68 - 100,00 - - - 100,00 - Archin 40,51 40,51 100,00 100,00 - - 100,00 100,00 Arctic 39,18 39,18 96,71 96,71 - - 96,71 96,71 Arctic Pro 40,51 40,51 100,00 100,00 - - 100,00 100,00 Arçelik 40,51 40,51 40,51 40,51 11,42 11,42 51,93 51,93 Ardutch 40,51 40,51 100,00 100,00 - - 100,00 100,00 Aygaz 40,68 40,68 40,68 40,68 10,53 10,53 51,21 51,21 Aygaz İletim(1) 40,30 39,89 100,00 100,00 - - 100,00 100,00 Aygaz Toptan Satış(1) 40,30 39,89 100,00 100,00 - - 100,00 100,00 Ayvalık Marina 49,34 49,34 95,57 95,57 4,43 4,43 100,00 100,00 Bekodutch 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Cesko 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko China 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Czech 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Deutschland 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Espana 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko France 40,51 40,49 100,00 99,96 - - 100,00 99,96 Beko Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Italy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Llc 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Magyarorszag 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Plc 20,26 20,26 50,00 50,00 50,00 50,00 100,00 100,00 Beko Polska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Russia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Shangai 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beko Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Beldesan(1) - 91,77 - 91,81 - 5,34 - 97,15 Beldeyama(1) - 91,77 - 100,00 - - - 100,00 Beykoz Tankercilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Bilkom 82,29 82,29 99,94 99,94 0,06 0,06 100,00 100,00 Blomberg Vertrieb 40,51 40,51 100,00 100,00 - - 100,00 100,00 Blomberg Werke 40,51 40,51 100,00 100,00 - - 100,00 100,00 Bozkurt(1) - 73,99 - 83,89 - 16,11 - 100,00 Damla Denizcilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Demir Export 2,34 2,34 2,34 2,34 97,46 50,48 99,80 52,82 Ditaş 34,13 34,13 80,00 80,00 - - 80,00 80,00 Düzey 31,65 31,65 32,28 32,28 61,11 61,11 93,39 93,39 Elektra Bregenz 40,51 40,51 100,00 100,00 - - 100,00 100,00 Eltek(1) 35,03 39,51 100,00 91,00 - 9,00 100,00 100,00 Enerji Yatırımları 83,66 83,66 96,50 96,50 - - 96,50 96,50 Entek 35,03 34,99 86,09 86,09 13,14 13,14 99,23 99,23 Fusion Digital(2) - 40,51 - 100,00 - - - 100,00 Grundig AG 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Austria 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Benelux(2) - 40,51 - 100,00 - - - 100,00 Grundig Ceska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Denmark 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Espana(2) - 40,51 - 100,00 - - - 100,00 Grundig Finland 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig GmbH 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Hungary 40,51 40,51 100,00 100,00 - - 100,00 100,00 15

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Subsidiaries 2010 2009 2010 2009 2010 2009 2010 2009 Grundig Italy 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Multimedia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Norway 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Polska 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Portugal 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Slovakia 40,51 40,51 100,00 100,00 - - 100,00 100,00 Grundig Sweden 40,51 40,51 100,00 100,00 - - 100,00 100,00 Harranova Besi 41,95 41,95 74,62 74,62 15,38 15,38 90,00 90,00 Kadıköy Tankercilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Kandilli Tankercilik 40,68 - 100,00 - - - 100,00 - Koçnet 100,00 100,00 100,00 100,00 - - 100,00 100,00 Koç Finans 64,71 64,71 94,50 94,50 5,50 5,50 100,00 100,00 Koç Yapı Malzeme 43,18 43,18 43,18 43,18 47,62 46,34 90,81 89,52 Koç Sistem 41,11 41,11 41,11 41,11 53,17 53,17 94,28 94,28 Kuleli Tankercilik 40,68 - 100,00 - - - 100,00 - Kuzguncuk Tankercilik 40,68 - 100,00 - - - 100,00 - Mares 36,81 36,81 36,81 36,81 33,46 33,46 70,27 70,27 Mogaz 40,68 39,83 100,00 97,90 - - 100,00 97,90 Otokar (3) 44,90 44,90 44,92 44,92 2,70 - 47,62 44,92 Otokoç 96,42 96,42 96,57 96,57 3,43 3,43 100,00 100,00 Otokoç Sigorta 48,22 48,22 50,02 50,02 49,98 49,98 100,00 100,00 Otoyol 53,95 53,95 53,95 53,95 10,18 10,18 64,13 64,13 Palmira 9,85 9,85 20,78 20,78 79,22 79,22 100,00 100,00 Ram Dış Ticaret 57,70 57,70 83,44 83,44 14,66 14,66 98,10 98,10 Raupach 40,51 40,51 100,00 100,00 - - 100,00 100,00 RMK Marine 53,82 53,82 66,84 66,84 33,12 33,12 99,96 99,96 Setur 47,38 47,38 81,07 81,07 18,87 18,87 99,94 99,94 Tat Konserve 43,82 43,82 44,07 44,07 7,12 7,12 51,19 51,19 Tat Tohumculuk (3) 16,15 16,15 33,00 33,00 3,00 3,00 36,00 36,00 Tek-Art Marina 50,51 50,51 51,94 51,94 47,46 47,46 99,40 99,40 Tüpraş 42,67 42,67 51,00 51,00 - - 51,00 51,00 Üsküdar Denizcilik 34,13 34,13 80,00 80,00 - - 80,00 80,00 Yalova Marina 47,63 47,63 100,00 100,00 - - 100,00 100,00 Zer Ticaret 39,00 39,00 39,00 39,00 60,05 60,00 99,05 99,00 (1) Changes in the scope of the consolidation - 2010: The Group’s Subsidiaries; Beldesan, Beldeyama and Bozkurt have been excluded from the scope of full consolidation in 2010, on grounds of their immaterial effect on the financial position and financial performance of the Group. These subsidiaries have been accounted in financial assets as of the balance sheet date. According to the resolution of General Assembly of Otokoç, a subsidiary of the Group, held on 29 July 2010, Beldeyama is merged with Otokoç. Eltek, a subsidiary of the Group, has been accounted for under financial assets as of 31 December 2009. Considering the foreseeable significance of its operations, the related company has been included in the scope of full consolidation as of the balance sheet date. Changes in the scope of the consolidation - 2009: Aygaz İletim and Aygaz Toptan Satış, Subsidiaries of the Group, have been included in the scope of consolidation in 2009. (2) Fusion Digital and Grundig Benelux were dissolved on 10 August 2010 and 15 December 2010 respectively. Gruding Espana merged with Beko Espana on 22 December 2010. (3) Although the total ownership interest of Koç Holding in these subsidiaries is less than 50%, Koç Holding has the power to exercise control over financial and operating policies of these companies. 16

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) c) Joint Ventures are companies in respect of which there are contractual arrangements through which an economic activity is undertaken subject to joint control by Koç Holding and one or more other parties. Koç Holding exercises such joint control through the power to exercise the voting rights relating to shares in the companies as a result of ownership interest directly and indirectly by itself and/or as a result of written agreements by certain Koç Family members and companies, whereby Koç Holding exercises control over the voting rights of the shares held by them. The Group’s interest in Joint Ventures is accounted for by way of proportionate consolidation. Under proportionate consolidation method, the Joint Ventures’ assets, liabilities, equity, income and expenses are consolidated by the total ownership interest of the Group. Intercompany transactions and balances with Joint Ventures are eliminated during the consolidation. Voting rights of the Joint Ventures and their effective interests (%): Proportion Direct and indirect Ownership interest Total of effective ownership interest held by Koç ownership interest held by Koç Holding Family members interest Joint Ventures 2010 2009 2010 2009 2010 2009 2010 2009 Arçelik LG Klima 23,23 23,23 50,00 50,00 - - 50,00 50,00 Fer-Mas 37,37 37,36 37,86 37,86 - - 37,86 37,86 Fiat Finans 37,59 37,59 37,86 37,86 - - 37,86 37,86 Ford Otosan 38,46 38,46 38,46 38,46 2,58 2,58 41,04 41,04 Koç Finansal Hizmetler 40,21 40,21 44,12 44,12 5,88 5,88 50,00 50,00 Koçtaş Yapı Market 42,64 42,64 49,92 49,92 0,08 0,08 50,00 50,00 Mekatro - 36,46 - 37,86 - - - 37,86 Netsel 27,78 27,78 55,00 55,00 - - 55,00 55,00 Opet 17,59 17,59 41,33 41,33 8,67 8,67 50,00 50,00 Opet Gıda 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet International 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade BV 17,59 17,59 50,00 50,00 - - 50,00 50,00 Opet Trade Ireland - 17,59 - 50,00 - - - 50,00 Opet Trade Singapore 17,59 17,59 50,00 50,00 - - 50,00 50,00 Platform 37,21 37,21 37,86 37,86 - - 37,86 37,86 Stiching Custody 32,89 32,89 50,00 50,00 - - 50,00 50,00 THY Opet (*) 8,79 - 50,00 - - - 50,00 - Tofaş 37,59 37,59 37,59 37,59 0,27 0,27 37,86 37,86 Türk Traktör 37,50 37,50 37,50 37,50 - - 37,50 37,50 Ultra Kablo (*) - 41,13 - 50,00 - - - 50,00 UniCredit Menkul 40,21 39,42 50,00 50,00 - - 50,00 50,00 Yapı Kredi Azerbaycan 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Bankası 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Emeklilik 30,90 30,90 50,00 50,00 - - 50,00 50,00 Yapı Kredi Faktoring 32,88 32,88 50,00 50,00 - - 50,00 50,00 Yapı Kredi Fin.Kiralama 32,80 32,80 50,00 50,00 - - 50,00 50,00 Yapı Kredi Holding 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Invest 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Menkul 32,88 32,88 50,00 50,00 - - 50,00 50,00 Yapı Kredi Moscow 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Nederland 32,89 32,89 50,00 50,00 - - 50,00 50,00 Yapı Kredi Portföy 32,87 32,87 50,00 50,00 - - 50,00 50,00 Yapı Kredi Sigorta 30,90 30,90 50,00 50,00 - - 50,00 50,00 Yapı Kredi Yatırım 18,44 18,44 50,00 50,00 - - 50,00 50,00 (*) Changes in the scope of the consolidation: Ultra Kablo, a Joint Venture of the Group, has been excluded from the scope of proportional consolidation in 2010, on grounds of its immaterial effect on the financial position and financial performance of the Group. This Joint Venture has been accounted in financial assets as of the balance sheet date. THY Opet, a Joint Venture of the Group, has been accounted for under financial assets as of 31 December 2009. Considering the foreseeable significance of its operations, the related company has been included in the scope of proportionate consolidation as of the balance sheet date. 17

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) d) Available-for-sale financial assets in which the Group together with Koç Family members, have ownership interests below 20%, or over which the Group does not exercise a significant influence or which are immaterial and do not have quoted market prices in active markets and whose fair values cannot be reliably measured, are carried at cost, less any accumulated impairment loss.

Available-for-sale financial assets, in which the Group together with Koç Family members, have ownership interests below 20% or which the Group does not exercise a significant influence and that have quoted market prices in active markets and whose fair values can be reliably measured, are carried at fair value in the consolidated financial statements. e) Non-controlling shares in the net assets and operating results of Subsidiaries are separately classified in the consolidated balance sheets and income statements as “non-controlling interest”. Certain Koç Family members and companies controlled by them have interests in the share capital of certain subsidiaries. In the consolidated financial statements, these interests of Koç Family members and companies controlled by them are treated as non-controlling interest and are not included in the Group's net assets and profits attributable to the shareholders of Koç Holding. f) All balances and transactions of/with the Joint Ventures in the notes to the consolidated financial statements are presented with the total ownership interest of the Group in the Joint Ventures.

2.4.2 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. As the sectors merged under “Other” do not meet the required minimum quantitative thresholds to be a reportable segment, these sectors have been merged for the purpose of segment reporting.

For an operating segment to be identified as a reportable segment, its reported revenue, including both sales to external customers and intersegment sales or transfers, should be 10 percent or more of the combined revenue, internal and external, of all internal and external operating segments; the absolute amount of its reported profit or loss should be 10 percent or more of the combined profit or loss or its total assets are 10 percent or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered as reportable, and separately disclosed, if the management believes that information about the segment would be useful to users of the financial statements.

2.4.3 Foreign currency translation

Functional and presentation currency

Items included in the consolidated financial statements of the Subsidiaries and Joint Ventures of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in TL, which is Koç Holding’s functional and presentation currency.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign currency transactions and balances

Foreign currency transactions are translated using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates at the balance sheet date. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated financial statement as interest, fee, commission and similar income by the Group companies operating in the finance sector and as financial income or expense by the Group companies operating in non-finance sectors.

Financial statements of foreign subsidiaries and joint ventures

The assets and liabilities, presented in the financial statements of the foreign Subsidiaries and Joint Ventures prepared in accordance with the Group’s accounting policies, are translated into TL at the exchange rate at the date of the balance sheet whereas income and expenses are translated at the average exchange rates for the respective periods. Exchange differences resulting from using the exchange rates at the balance sheet date and the average exchange rates are recognised in the “currency translation differences” under the equity.

2.4.4 Discontinued operations and non-current assets (or disposal groups) held for sale

Discontinued operation is a major line of business or geographical area of operations that is part of a single co-ordinated plan to be disposed of or is held-for-sale.

Net assets related with the discontinued operations are measured at the lower of carrying amount and fair value less cost to sell. A single amount on the face of the income statements comprising the total of the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognised by the disposal of the assets constituting the discontinued operation is disclosed. Also, the net cash flows of the discontinued operations associated with the operating, investment and financing activities are specified in the related note.

Group of assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. Liabilities directly associated with those assets are also classified similarly.

2.4.5 Related parties

For the purpose of these consolidated financial statements, shareholders, Koç Holding A.Ş. key management personnel and BOD members, their families and the legal entities over which these related parties exercise control and significant influence, subsidiaries and joint ventures excluded from the scope of consolidation are considered and expressed as “related parties”.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.6 Financial assets

The appropriate classification of financial assets is determined at the time of the purchase and re-evaluated by management on a regular basis.

Non-derivative financial assets with fixed maturities, where management has both the intent and the ability to hold to the maturity excluding the financial assets classified as loans and advances to customers are classified as “held-to-maturity financial assets”. Held-to-maturity financial assets are carried at amortised cost using the effective yield method.

Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are accounted in the equity net of tax under “financial assets fair value reserve”. Unrealised gains and losses arising from changes in the fair value of available-for-sale debt securities are the differences between the fair value of such securities and their amortised costs at the balance sheet date. When available-for-sale securities are sold, collected or otherwise disposed of, related deferred gains and losses in equity are transferred to the consolidated income statement. If the difference between the cost and the fair value of the available-for-sale securities is permanent, gains and losses are transferred to the consolidated income statement.

Interest and dividends associated to the available-for-sale financial assets are accounted under corresponding interest income and dividend income accounts.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.7 Repurchase and resale transactions

2.4.8 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held in banks with maturities of 3 months or less and other short-term liquid investments.

2.4.9 Trade receivables

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income.

2.4.10 Loans and advances to customers

Financial assets generated as a result of lending money or providing a loan are classified as loans and advances to customers and are carried at amortised cost, less any impairment.

All loans and advances are recognised in the consolidated financial statements when cash is transferred to customers.

A credit risk provision for loan impairment is established if there is objective evidence that the Group will not be able to collect all the amounts due. The amount of the provision for impaired loans and loans under legal follow- up is the difference between the carrying amount and the recoverable amount. The recoverable amount is the net present value of the expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of the associated loan.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The provision for loan impairment also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical patterns of losses in each component, the internal credit risk rating of the borrowers and the current economic climate in which the borrowers operate. The level of provision is also in line with the applicable Banking Legislation.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a loan or receivable is uncollectible, it is written off against the allowance account for loans or receivables. Subsequent recoveries of amounts previously written off are credited against the related account in the consolidated income statement.

2.4.11 Credit finance income/expenses

Credit finance income/expenses represent imputed finance charges on credit sales and purchases. Such income and expenses are recognised using the effective yield method over the period of credit sales and purchases, and included under financial income and expenses.

2.4.12 Inventories

Cost elements included in inventories are materials, labour and an appropriate amount of factory overheads. The cost of inventories for merchandise stocks is determined by the weighted average method. Inventories are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

2.4.13 Investment property

2.4.14 Property, plant and equipment and related depreciation

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided for property, plant and equipment on a straight-line basis. Land is not depreciated as it is deemed to have an indefinite useful life.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The depreciation periods for property, plant and equipment, which approximate the economic useful lives of such assets, are as follows:

Buildings 5 - 50 years Land improvements 10 - 50 years Machinery and equipment 3 - 50 years Furniture and fixtures 2 - 50 years Motor vehicles 4 - 30 years Leasehold improvements 1 - 10 years Other property, plant and equipment 4 - 10 years

Machinery and equipment are capitalised and amortised when their capacity is fully available for use and their physical situations meet the determined production capacities.

2.4.15 Intangible assets and related amortisation

Intangible assets comprise of expenditures to acquire usage rights, brands, development costs, information systems and other identified rights. They are initially recognised at acquisition cost and amortised on a straight- line basis over their estimated useful lives. Intangible assets with indefinite useful lives are not amortised, however are tested for impairment annually. Whenever there is an indication that the intangible is impaired, the carrying amount of the intangible asset is reduced to its recoverable amount and the impairment loss is recognised as an expense.

The amortisation periods for intangible assets, which approximate the economic useful lives of such assets, are as follows:

Rights 3 - 15 years Brand 10 years Development costs 2 - 10 years Other intangible assets 5 - 14 years

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.16 Leases a) The Group as the lessee

Finance leases

Leases of property, plant and equipment where the Group substantially assumes all the risks and rewards of ownership are classified as finance leases. Finance leases are included in the property, plant 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. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate. The property, plant and equipment acquired under finance leases are depreciated over the useful life of the asset. An impairment loss is recognised when a decrease in the carrying amount of the leased property is identified. Interest expenses and foreign exchange losses related to the finance lease liabilities are accounted in the income statement. Lease payments are deducted from finance lease liabilities.

Operating leases

Finance leases

Assets held under a finance lease are presented in balance sheet as a receivable at an amount equal to the present value of lease payments. Interest income is determined over the term of the lease using the net investment period, which reflects a constant periodic rate of return and the deferred financial income on the transaction date is recognised as unearned finance income.

Operating leases

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.17 Business combinations and goodwill

A business combination is evaluated as the bringing together of separate entities or businesses into one reporting entity.

Business combinations realized before 1 January 2010 have been accounted for by using the purchase method in the scope of IFRS 3 “Business combinations” prior to the amendment. Under this method, the cost of a business combination is the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree and in addition, any costs directly attributable to the business combination. If a business combination contract includes clauses that enable adjustments in the cost of business combination depending on events after the acquisition date; in case the adjustment is measurable and more probable than not, than cost of business combination at acquisition date is adjusted.

Goodwill recognised in business combinations is tested for impairment annually (as of 31 December) or more frequently if events or changes in circumstances indicate impairment, instead of amortization. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the purpose of impairment testing.

In business combinations involving entities under common control, assets and liabilities subject to a business combination are recognized at their carrying amounts in the consolidated financial statements. In addition, statements of income are consolidated from the beginning of the financial year in which the business combination takes place. Similarly, comparative consolidated financial statements are restated retrospectively for comparison purposes. As a result of these transactions, no goodwill is recognised. The difference arising in the elimination of the carrying value of the investment held and share capital of the acquired company is directly accounted under “effect of transactions under common control” in retained earnings.

The Group has not carried out any business combination in the year ending 31 December 2010. Amended IFRS 3 “Business Combinations”, which is effective for the periods beginning 1 January 2010, will be applied for possible future business combinations.

Amended IFRS 3 may have an effect in the amount of the goodwill recognised, the profit or loss of the period that the business combination takes place and the profit or loss of the future periods. These amendments comprises that the costs associated to the combination and any changes in the fair value of the contingent consideration are reflected to the profit or loss (rather than restatement of the goodwill).

Transactions with non-controlling interests

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.18 Taxes on income

The tax effects of the transactions that are accounted directly in the equity are also reflected to the equity.

2.4.19 Financial liabilities and deposits

Financial liabilities and deposits are measured initially at fair value. Any transaction costs directly attributable to the undertaking of a financial liability are added on the fair value of the financial liability. These financial liabilities are subsequently stated at amortised cost using the effective interest method. Financial liabilities subject to hedging are accounted within the framework of hedge accounting.

2.4.20 Trade payables

2.4.21 Employee benefits a) Provision for employment termination benefits

The provision for employment termination benefits, as required by Turkish Labour Law represents the present value of future probable obligation of the Group arising from the retirement of its employees regarding the actuarial projections. b) Pension rights

Personnel of Yapı Kredi Bankası, a joint venture of the Group, are members of the Yapı ve Kredi Bankası Anonim Şirketi Mensupları Yardım ve Emekli Sandığı Vakfı (“the Fund”) which was established in accordance with the 20th temporary article of the Social Security Law No. 506. The technical financial statements of the Fund are audited in accordance with the Article 38 of the Insurance Supervision Law and the “Regulation regarding the Actuaries” by a registered independent actuary.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Temporary article 23 paragraph one of the Banking Act published in the Official Gazette dated 1 November 2005 numbered 25983 stated that foundations like the Fund are to be transferred to the Social Security Institution (“SSI”) within three years beginning from the published date of the article.

Law article related to the transfer was cancelled (pursuant application by the President on 2 November 2005) by the decision of Constitutional Court (decision no: E.2005/39, K. 2007/33 dated 22 March 2007) published in the Official Gazette No. 26479 dated 31 March 2007, and the effect of the law article stopped from the date of the publication of the decision.

Under the New Law, it has been decided to form a committee whose members are the representatives of the SSI, the Ministry of Finance, Turkish Treasury, State Planning Organisation, BRSA and Saving Deposit Insurance Fund representing the Fund and one member representing the Fund members. This committee is in charge of the calculation of the value of the payment that would need to be made to SSI to settle the obligation using a technical interest rate of 9,8% taking into consideration the excess of salaries and income in accordance with the SSI arrangements over the income and expense of the insurance branches of the Funds related to the members of the Fund as of the date of the transfer including the members who have left the scheme and salaries and income of whom were paid by the Funds.

In accordance with the New Law, the social rights and payments of Fund members and their beneficiaries which are not provided although they are included in the Fund Title Deed will be provided by the Fund and the employers of the Fund members.

The main opposition party has applied to the Constitutional Court at 19 June 2008 for cancellation of some articles and requested them to be ineffective until the case of abrogation is finalised. As of the date of the publication of the financial statements, there is no decision of the Constitutional Court announced regarding the court case of abrogation. Yapı Kredi Bankası provided provision for the technical deficit based on the report prepared by a registered actuary in accordance with the rates determined by the New Law. c) Defined benefit plans

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.22 Insurance technical reserves

Life mathematical reserves

Outstanding claims provision

Unearned premium reserve

Unearned premium reserve is calculated as the unearned portion of the premiums on a daily basis in respect of all policies in force as of balance sheet date.

2.4.23 Provisions, contingent assets and contingent liabilities

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.24 Revenue recognition

Contract revenue and costs related to the projects are recognised when the amount of revenue can be reliably measured and the increase in the revenue due to change in the scope of the contract related with the project is probable. Contract revenue is measured at the fair value of the consideration received or receivable. Projects are fixed priced contracts and revenue is recognised in accordance with the percentage of completion method. The portion of the total contract revenue corresponding to the completion rate is recognised as contract revenue in the relevant period.

Banking

Banking service income is registered as income in the period during which it is collected, other fee and commission income and expenses are recognised on an accrual basis.

Insurance

Premium income represents premiums on policies written during the year, net of cancellations.

2.4.25 Offsetting

2.4.26 Dividends

Dividend income is recognised by the Group at the date the right to collect the dividend is realised. Dividend payables are recognised as a result of profit distribution in the period they are declared.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.27 Research and development costs

Research and development costs are recognised and expensed in the income statement in the period in which they are incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in subsequent periods. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over their estimated useful lives (2-10 years).

2.4.28 Warranties

2.4.29 Government grants

2.4.30 Borrowing costs

2.4.31 Derivative financial instruments, embedded derivatives and hedging activities

Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The derivative instruments of the Group mainly consist of foreign exchange forward contracts and currency / interest rate swap instruments. These derivative transactions, even though providing effective economic hedges under the Group risk management position, do not generally qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for trading in the consolidated financial statements. The fair value changes for these derivatives are recognized in the consolidated income statement.

The hedging transactions of the Group that qualify for hedge accounting are accounted for as follows:

Cash flow hedge

Hedges of exposures to variability in cash flows that are attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit and loss are designated as cash flow hedges by the Group

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in the fair value of derivatives, designated as cash flow hedges and qualified as effective, are recognised in equity as “cumulative loss on hedging”. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously recognised under equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Otherwise, amounts recognized under equity are transferred to the consolidated income statement in the period in which the hedged firm commitment or forecasted transaction affects the consolidated income statement.

When a hedging instrument expires /sold, or a hedge no longer meets the criteria for hedge accounting any cumulative gain or loss existing in equity at that time remains in equity until the committed or forecasted transaction ultimately recognised in the income statement. However, if a committed or forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated income statement.

Foreign currency hedge of net investments in foreign operations

On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of hedged asset or liability attributable to the hedged risk is recorded as part of the carrying value of the hedged asset or liability during the effective hedging relationship. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used, is amortised to the income statement over the period to maturity.

2.4.32 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.

2.4.33 Events after the balance sheet date

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.4.34 Statement of 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 (fixed investments and financial investments).

Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

2.5 Significant Accounting Estimates and Assumptions

2.6 Convenience Translation into English of Consolidated Financial Statements

The accounting principles described in Note 2.1 to the consolidated financial statements (defined as CMB Financial Reporting Standards) differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January and 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.

NOTE 3 - INTEREST IN JOINT VENTURES

The aggregate amounts of assets, liabilities and profit/loss of the Joint Ventures, which are proportionately consolidated in the consolidated financial statements, before consolidation adjustments are as follows:

2010 2009

Current assets 25.524.609 20.974.484 Non-current assets 25.976.382 19.267.879

Total assets 51.500.991 40.242.363

Current liabilities 38.361.369 28.944.324 Non-current liabilities 5.294.997 4.893.507 Equity 7.844.625 6.404.532

Total liabilities and equity 51.500.991 40.242.363

2010 2009

Total revenue 16.639.651 13.727.725 Operating profit (net) 2.075.050 1.451.952 Profit for the period (net) 1.456.420 1.060.968 32

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 4 - SEGMENT REPORTING

Segment information, prepared under the managerial approach, is presented below:

2010 2009 a) Revenue

Energy 31.411.542 24.488.346 Automotive 7.766.786 5.948.139 Consumer durables 7.051.972 6.809.509 Finance 4.990.154 5.381.772 Other 2.591.982 2.212.788

53.812.436 44.840.554 b) Operating profit

Energy 1.284.814 1.347.584 Automotive 563.968 406.010 Consumer durables 651.655 635.429 Finance 1.464.597 953.644 Other 139.840 133.548

4.104.874 3.476.215 c) Depreciation and amortisation

Energy 367.680 353.695 Automotive 224.187 196.310 Consumer durables 201.554 190.294 Finance 95.126 92.122 Other 79.427 92.237

967.974 924.658 d) Capital expenditures

Energy 390.007 497.268 Automotive 357.418 375.456 Consumer durables 257.351 211.633 Finance 120.597 102.643 Other 120.273 256.884

1.245.646 1.443.884

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 4 - SEGMENT REPORTING (Continued) e) Assets and liabilities 2010 2009 Total assets:

Energy 20.137.411 16.857.792 Automotive 4.458.226 3.722.603 Consumer durables 6.414.557 5.951.592 Finance 46.829.941 36.222.512 Other 3.302.382 3.631.933

81.142.517 66.386.432

Total liabilities:

Energy 12.995.739 9.727.045 Automotive 2.861.783 2.312.476 Consumer durables 3.789.799 3.586.453 Finance 39.241.418 30.657.450 Other 1.275.864 1.320.962

60.164.603 47.604.386

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 4 - SEGMENT REPORTING (Continued) f) Segment analysis Inter 1 January - Consumer segment 31 December 2010 Energy Automotive durables Finance Other elimination Total

External revenue 31.411.542 7.766.786 7.051.972 4.990.154 2.591.982 - 53.812.436 Inter segment revenue 178.216 90.681 235.891 46.641 198.590 (750.019) -

Revenue 31.589.758 7.857.467 7.287.863 5.036.795 2.790.572 (750.019) 53.812.436

Total cost (29.133.575) (6.831.302) (5.161.719) (2.199.169) (2.015.030) 720.006 (44.620.789)

Gross profit 2.456.183 1.026.165 2.126.144 2.837.626 775.542 (30.013) 9.191.647

Operating expenses Marketing, selling and distribution (463.635) (273.463) (1.192.476) (53.370) (215.725) - (2.198.669) General administrative (592.071) (158.856) (292.660) (1.166.385) (434.363) 39.962 (2.604.373) Research and development (13.264) (47.104) (63.431) - (65) - (123.864) Other income/expenses (net) (102.399) 17.226 74.078 (153.274) 14.451 (9.949) (159.867)

Operating profit 1.284.814 563.968 651.655 1.464.597 139.840 - 4.104.874

Inter 1 January - Consumer segment 31 December 2009 Energy Automotive durables Finance Other elimination Total

External revenue 24.488.346 5.948.139 6.809.509 5.381.772 2.212.788 - 44.840.554 Inter segment revenue 103.225 174.497 132.498 41.790 139.422 (591.432) -

Revenue 24.591.571 6.122.636 6.942.007 5.423.562 2.352.210 (591.432) 44.840.554

Total cost (22.347.727) (5.325.125) (4.717.755) (2.431.914) (1.703.616) 561.416 (35.964.721)

Gross profit 2.243.844 797.511 2.224.252 2.991.648 648.594 (30.016) 8.875.833

Operating expenses Marketing, selling and distribution (405.793) (225.959) (1.206.026) (37.244) (253.381) - (2.128.403) General administrative (558.138) (144.596) (263.263) (1.104.159) (272.937) 39.799 (2.303.294) Research and development (2.108) (40.547) (50.843) - (158) - (93.656) Other income/expenses (net) 69.779 19.601 (68.691) (896.601) 11.430 (9.783) (874.265)

Operating profit 1.347.584 406.010 635.429 953.644 133.548 - 3.476.215

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 4 - SEGMENT REPORTING (Continued) g) Finance sector operating results 2010 2009 Gross profit finance:

Interest income 1.734.690 1.993.252 Fee and commission income 963.138 834.943 Other operating income 139.798 163.453

2.837.626 2.991.648

Operating expenses:

General administrative expenses (1.166.385) (1.104.159) Sales, marketing and distribution expenses (53.370) (37.244) Provision for loan impairment (Note 24) (217.460) (833.503) Other operating income/expenses (net) 64.186 (63.098)

(1.373.029) (2.038.004)

Operating profit 1.464.597 953.644

NOTE 5 - CASH AND CASH EQUIVALENTS

2010 2009 Finance Other Total Finance Other Total

Cash in hand 349.702 2.245 351.947 326.424 2.114 328.538 Cheques received 179 31.370 31.549 92 39.402 39.494 Banks - Demand deposits 153.380 495.135 648.515 166.000 492.045 658.045 - Time deposits 610.959 7.706.212 8.317.171 770.111 5.302.258 6.072.369 Bonds and bills 38.754 - 38.754 102.841 - 102.841 Money markets 487.037 - 487.037 790.730 - 790.730 Central banks - Reserve deposits 2.194.989 - 2.194.989 1.429.277 - 1.429.277 - Other balances 471.111 - 471.111 357.609 - 357.609 Other 1.230 61.322 62.552 1.265 55.617 56.882

4.307.341 8.296.284 12.603.625 3.944.349 5.891.436 9.835.785

As of 31 December 2010, total blocked deposits amount to TL359.309 thousand (31 December 2009: TL289.945 thousand).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 5 - CASH AND CASH EQUIVALENTS (Continued)

Reserve deposits at the central banks 2010 2009

Central Bank of the Republic of Turkey 2.175.754 1.329.487 Other central banks 19.235 99.790

2.194.989 1.429.277

In accordance with the CBRT regulations, banks operating in Turkey are required to held reserve deposits at the CBRT as 6% of TL liabilities (2009: 5%) and 11% of foreign currency liabilities (2009: 9%). These funds cannot be used for financing the daily operations of banks.

Other balances with the central banks

Balances with the central banks other than reserve requirements represent funds deposited to various central banks in an interest free demand account for liquidity requirements.

NOTE 6 - FINANCIAL ASSETS

2010 2009 Short-term Long-term Total Short-term Long-term Total

Financial assets at fair value through profit or loss 204.928 - 204.928 199.551 - 199.551 Available-for-sale financial assets 90.959 2.992.132 3.083.091 190.769 835.329 1.026.098 Held-to-maturity financial assets 1.661.656 5.378.167 7.039.823 1.733.474 5.199.618 6.933.092

1.957.543 8.370.299 10.327.842 2.123.794 6.034.947 8.158.741 a) Financial assets at fair value through profit or loss

2010 2009 Finance Other Total Finance Other Total Debt securities: Government bonds 100.750 - 100.750 32.857 - 32.857 Eurobond 30.049 16.633 46.682 50.054 16.644 66.698 Treasury bills 19.477 - 19.477 54.031 - 54.031 Investment funds 28.975 - 28.975 26.446 - 26.446 Other 6.635 - 6.635 8.153 - 8.153

185.886 16.633 202.519 171.541 16.644 188.185 Equity securities: Listed 2.409 - 2.409 11.366 - 11.366

188.295 16.633 204.928 182.907 16.644 199.551

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 6 - FINANCIAL ASSETS (Continued) b) Available-for-sale financial assets 2010 2009 Finance Other Total Finance Other Total Debt securities: Government bonds 1.805.765 - 1.805.765 352.699 - 352.699 Eurobond 395.871 - 395.871 468.295 - 468.295 Treasury bills 1.924 - 1.924 24.627 - 24.627 Private sector bonds 658.885 - 658.885 30.335 - 30.335 Investment funds 26.483 - 26.483 22.525 - 22.525 Other 2.009 - 2.009 - - -

2.890.937 - 2.890.937 898.481 - 898.481 Equity securities: Listed 11.253 63.592 74.845 12.142 36.773 48.915 Unlisted 47.079 70.230 117.309 41.869 36.833 78.702

2.949.269 133.822 3.083.091 952.492 73.606 1.026.098

The list of equity securities and the shareholding rates are as follows:

2010 2009 (%) (%) Listed: Altınyunus Çeşme Turistik Tesisler A.Ş. 63.592 30,00 35.692 30,00 Yapı Kredi Koray Gayrimenkul Yatırım Ortaklığı A.Ş. 11.133 15,22 11.090 15,22 Türk Traktör (1) - - 1.081 0,22 Mastercard Incorporated - - 958 0,03 Other 120 - 94-

74.845 48.915

Unlisted: Banque de Commerce et de Placements S.A. 35.954 15,34 29.470 15,34 Beldesan (2) 13.066 91,82 - - Tanı Pazarlama ve İletişim Hizmetleri A.Ş. 12.366 88,00 9.652 88,00 Akdeniz Akaryakıt Dep. Ve Nakliyat A.Ş. 8.350 16,67 - - Takas ve Saklama Bankası A.Ş. 6.190 2,43 6.190 2,43 Koç Bilgi ve Savunma Teknolojileri A.Ş. 5.180 92,23 5.180 92,23 Promena Elektronik Ticaret A.Ş. 5.000 50,00 5.000 50,00 Körfez Hava Ulaştırma A.Ş. 4.000 100,00 4.000 100,00 Ultra Kablo (2) 1.857 50,00 - - Bozkurt (2) 911 83,89 - - Other 24.435 - 19.210 -

117.309 78.702

(1) Following the merger between Türk Traktör, a Joint Venture of the Group, and New Holland Trakmak Traktör A.Ş. in 2008; in order to equalize the shares held by Koç Group and CNH at Türk Traktör, the related shares were sold on 13 October 2010. (2) Excluded from the scope of consolidation in 2010 (Note 2.4.1).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 6 - FINANCIAL ASSETS (Continued)

Available-for-sale equity securities that do not have quoted fair values or for which fair values cannot be reliably measured through alternative methods, are measured at cost less any impairment.

Total assets, revenues and net profit of the unconsolidated subsidiaries and joint ventures are below 1% of the total consolidated assets, revenues and net profit of the Group.

Provision for impairment of unlisted financial assets (equity securities) amounts to TL85.566 thousand as of 31 December 2010 (2009: TL81.198 thousand). c) Held-to-maturity financial assets 2010 2009 Finance Other Total Finance Other Total Debt securities: Eurobond 3.701.223 - 3.701.223 3.126.931 - 3.126.931 Government bonds 2.709.860 - 2.709.860 3.428.381 - 3.428.381 Time deposits 533.465 18.126 551.591 255.301 17.795 273.096 Treasury bills 760 - 760 104.684 - 104.684 Other 76.389 - 76.389 - - -

7.021.697 18.126 7.039.823 6.915.297 17.795 6.933.092

The details of debt securities that are pledged under repurchase agreements are as follows:

2010 2009

Held-to-maturity financial assets 1.817.086 696.718 Available for-sale financial assets 106.246 - Financial assets at fair value through profit or loss 21.867 33.327

1.945.199 730.045

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 7 - TRADE RECEIVABLES AND PAYABLES

Trade receivables 2010 2009

Trade receivables 3.906.024 3.399.945 Notes and cheques receivables 1.484.389 1.552.009 Less: Provision for doubtful receivables (214.900) (191.094) Less: Unearned finance income (69.034) (63.549)

Due from related parties (Note 26) 83.023 135.346

5.189.502 4.832.657

Short-term trade receivables 5.098.243 4.747.016 Long-term trade receivables 91.259 85.641

5.189.502 4.832.657

Movement in the provision for doubtful receivables is as follows: 2010 2009

Beginning of the period - 1 January 191.094 159.180

Increases during the period 47.198 45.888 Collections (13.316) (10.978) Acquisitions - 40 Additions to the scope of consolidation (Note 2.4.1) - 40 Disposals from the scope of consolidation (Note 2.4.1) (1.782) - Write-offs (8.504) - Currency translation differences 210 (3.076)

End of the period - 31 December 214.900 191.094

Trade payables 2010 2009

Trade payables 7.308.840 3.900.992 Notes payables 1.447 16.736 Less: Unearned finance expense (8.644) (5.384)

7.301.643 3.912.344 Due to related parties (Note 26) 247.725 171.090

7.549.368 4.083.434

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS

31 December 2010 31 December 2009 Short-term Long-term Total Short-term Long-term Total Loans and advances to customers 15.205.731 14.375.629 29.581.360 11.855.533 9.743.214 21.598.747 Receivables from insurance business 93.125 4.179 97.304 78.666 - 78.666

15.298.856 14.379.808 29.678.664 11.934.199 9.743.214 21.677.413

Loans and advances to customers:

Corporate and Financial commercial Consumer Credit card leasing Factoring 2010 loans loans receivables receivables receivables Total

Gross 17.962.462 6.360.499 4.510.482 1.089.568 915.637 30.838.648

Less: Provision for impairment (659.741) (219.570) (264.335) (101.699) (11.943) (1.257.288)

Net 17.302.721 6.140.929 4.246.147 987.869 903.694 29.581.360

Corporate and Financial commercial Consumer Credit card leasing Factoring 2009 loans loans receivables receivables receivables Total

Performing loans 11.243.896 4.253.524 3.541.553 855.954 484.979 20.379.906 Watch listed loans 740.949 182.333 205.750 164.333 - 1.293.365 Loans under legal follow-up 620.376 357.011 401.944 142.117 4.087 1.525.535

Gross 12.605.221 4.792.868 4.149.247 1.162.404 489.066 23.198.806

Less: Provision for impairment (731.846) (260.078) (518.632) (80.708) (8.795) (1.600.059)

Net 11.873.375 4.532.790 3.630.615 1.081.696 480.271 21.598.747

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 8 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS (Continued)

Movement of provision for impairment on loans and advances to customers is as follows:

2010 2009

Beginning of the period - 1 January 1.600.059 853.457

Increase in provisions for loan impairment 665.246 1.352.086 Recoveries of amounts previously provided (450.724) (519.487) Write-off during the period as uncollectible (*) (557.835) (85.350) Currency translation differences 542 (647)

End of the period - 31 December 1.257.288 1.600.059

(*) Includes the releases from the provision due to the sale of non-performing loan portfolio.

Net investment in finance leases is as follows: 2010 2009

Gross investment in finance leases 1.006.697 1.062.310 Less: Unearned finance income (170.920) (206.356)

835.777 855.954

Leasing receivables consist of rentals over the terms of leases. The rentals according to their maturities are as follows:

2010 2009

Less than a year 409.111 446.839 1-5 years 597.586 615.471 Less: Unearned finance income (170.920) (206.356)

835.777 855.954

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 9 - INVENTORIES 2010 2009

Raw materials and supplies 1.752.219 1.205.073 Finished goods 1.104.966 1.040.032 Merchandise 905.185 881.598 Work in progress 449.479 326.919 Other inventories 61.859 13.174 Less: Provision for impairment (80.610) (105.796)

4.193.098 3.361.000

Movement of provision for impairment on inventories is as follows: 2010 2009

Beginning of the period - 1 January 105.796 120.508

Increase during the period 9.000 79.050 Reversal of provisions due to sales of inventories (29.786) (93.533) Write-offs (2.393) (581) Currency translation differences (2.007) 352

End of the period - 31 December 80.610 105.796

NOTE 10 - INVESTMENT PROPERTIES

2010 2009 As of 1 January Cost 171.830 115.662 Accumulated depreciation (51.486) (40.234)

Net book value 120.344 75.428

Net book value at the beginning of the period 120.344 75.428

Disposals (3.326) - Transfers(*) - 49.091 Currency translation differences (327) 69 Provision for impairment - (2.777) Current period depreciation (1.278) (1.467)

Net book value at the end of the period 115.413 120.344

As of 31 December Cost 162.437 171.830 Accumulated depreciation (47.024) (51.486)

Net book value 115.413 120.344

(*) Transferred from the property, plant and equipment.

The fair values of investment properties have been determined as TL162.096 thousand as of 31 December 2010, according to the related valuations performed (2009: TL164.275 thousand).

F-250 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

Net book value 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

Net book value at the beginning of the period 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

Additions 12.520 18.393 101.864 185.055 106.300 557.283 37.286 1.018.701 Disposals (10.886) (43.744) (30.971) (95.496) (2.788) (13.037) (575) (197.497) (*) Transfers 76.800 39.632 100.482 7.672 26.433 (501.259) 10.672 (239.568) Addition to the scope of consolidation (Note 2.4.1) 1.384 752 4.137 2.367 287 8.737 333 17.997 Disposals from the scope of consolidation (Note 2.4.1) (1.954) (3.425) (3.650) (13) (88) - (2) (9.132) Currency translation differences (201) 57 (100) (412) (134) (135) 47 (878) Reversal of impairment - 25.849 - - 623 - - 26.472 Current period depreciation (61.022) (58.049) (492.160) (59.392) (93.469) - (35.690) (799.782)

Net book value at the end of the period 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

Net book value 2.525.362 1.251.121 5.023.072 656.218 406.379 380.633 203.067 10.445.852

(*) Includes transfers amounting to TL220.344 thousand to assets held for sale and TL19.224 thousand to intangible assets.

F-251 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Land and land Machinery and Motor Furniture Constructions Leasehold improvements Buildings equipment vehicles and fixtures in progress improvements Total

As of 1 January 2009 Cost 2.623.787 2.429.673 10.269.569 848.551 958.424 485.212 348.288 17.963.504 Accumulated depreciation (193.045) (1.112.399) (5.124.327) (297.619) (681.121) - (171.338) (7.579.849)

Net book value 2.430.742 1.317.274 5.145.242 550.932 277.303 485.212 176.950 10.383.655

Net book value at the beginning of the period 2.430.742 1.317.274 5.145.242 550.932 277.303 485.212 176.950 10.383.655

Acquisitions 535 40 12.386 1.498199 114 433 15.205 Additions 7.701 30.968 186.151 146.658 96.124 675.741 20.155 1.163.498 Disposals (3.176) (17.754) (15.246) (59.726) (13.754) (830) (727) (111.213) Transfers (*) 124.997 9.314 482.703 52.065 85.870 (831.459) 27.419 (49.091) Addition to the scope of consolidation (Note 2.4.1) 535 40 12.386 1.498 199 114 433 15.205 Currency translation differences (179) (3.814) (4.942) (1.015) 695 152 67 (9.036) Impairment - (1.626) - - - - - (1.626) Current period depreciation (52.434) (62.786) (475.210) (75.473) (77.421) - (33.734) (777.058)

Net book value at year-end 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

31 December 2009 Cost 2.753.981 2.375.064 10.776.745 934.765 1.100.254 329.044 383.634 18.653.487 Accumulated depreciation (245.260) (1.103.408) (5.433.275) (318.328) (731.039) - (192.638) (8.023.948)

Net book value 2.508.721 1.271.656 5.343.470 616.437 369.215 329.044 190.996 10.629.539

(*) TL49.091 thousand has been transferred between property, plant and equipment and investment property. Other transfers have been realised between the construction in progress and other line items within property, plant and equipment.

F-252 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - INTANGIBLE ASSETS Development Rights Brand costs Other Total

As of 1 January 2010 Cost 821.079 278.816 798.341 86.784 1.985.020 Accumulated amortisation (326.727) (34.655) (251.225) (52.520) (665.127)

Net book value 494.352 244.161 547.116 34.264 1.319.893

Additions 43.536 - 160.414 22.995 226.945 Disposals (6.447) - (86) (15) (6.548) (*) Transfers 8.072 (1.221) (3.279) 16.318 19.890 Addition to the scope of consolidation (Note 2.4.1) 182 - - 150 332 Disposals from scope of consolidation (Note 2.4.1) (583) - - - (583) Currency translation differences 309 (10.427) - (124) (10.242) Current period amortization (49.902) (8.177) (96.964) (11.871) (166.914) Reversal of impairment - - - 1.385 1.385

Net book value at the end of the period 489.519 224.336 607.201 63.102 1.384.158

31 December 2010 Cost 792.433 267.167 1.012.580 123.350 2.195.530 Accumulated amortisation (302.914) (42.831) (405.379) (60.248) (811.372)

Net book value 489.519 224.336 607.201 63.102 1.384.158

(*) Includes transfers from property, plant and equipment of TL19.224 thousand, from other non-current assets of TL1.015 thousand and transfers to assets held for sale of TL349 thousand.

Total research and development expenditures incurred in 2010 amounts to TL284.278 thousand (2009: TL254.602 thousand).

Intangible assets with indefinite useful lives consist of brands and amount to TL184.275 thousand.

F-253 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 12 - INTANGIBLE ASSETS (Continued)

Development Rights Brand costs Other Total

As of 1 January 2009 Cost 751.220 276.156 619.401 71.116 1.717.893 Accumulated amortisation (263.243) (26.501) (195.845) (46.315) (531.904)

Net book value 487.977 249.655 423.556 24.801 1.185.989

Acquisitions 137 - - - 137 Additions 71.455 - 191.099 17.832 280.386 Disposals (2) - (2.998) (231) (3.231) Addition to the scope of consolidation (Note 2.4.1) 137 - - - 137 Currency translation differences (191) 2.660 - 139 2.608 Current period amortisation (65.161) (8.154) (64.541) (8.277) (146.133)

Net book value at the end of the period 494.352 244.161 547.116 34.264 1.319.893

31 December 2009 Cost 821.079 278.816 798.341 86.784 1.985.020 Accumulated amortisation (326.727) (34.655) (251.225) (52.520) (665.127)

Net book value 494.352 244.161 547.116 34.264 1.319.893

F-254 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 13 - GOODWILL

2010 2009

Net book value at the beginning of the period- 1 January 3.517.860 3.533.680

Disposals (1) - (13.074) Change in contingent liabilities (2) 8.704 (2.807) Currency translation differences (213) 61

Net book value at the end of the period- 31 December 3.526.351 3.517.860

(1) Partial disposals from goodwill are accounted for as a result of transactions with non-controlling interests. (2) Contingent liabilities that are settled at the acquisition date are re-settled by taking into account the actual results. The resulting decreases/increases are adjusted reciprocally with goodwill in accordance with IFRS 3, effective for the business combinations carried out before 1 January 2010.

The allocation of the goodwill is as follows:

2010 2009

Tüpraş 2.736.463 2.736.463 Yapı Kredi Bankası 643.714 633.788 Opet 138.984 138.984 Other 7.190 8.625

3.526.351 3.517.860

The recoverable amount of a cash generating unit is determined based on the value in use or fair value less cost to sell calculations. These calculations use cash flow projections based on financial budgets approved by the management. The cash flow projections beyond the budgeted period are extrapolated using the estimated growth rates and discounted with the ratios stated below.

The budget period and key assumptions used in the calculations of recoverable amount are as follows:

Cash-generating unit Method used Period Ratio 1 Ratio 2 Ratio 3

Tüpraş Fair value, USD 10 years 6,1 - 10,3% 1% 9,4% Yapı Kredi Bankası Value in use, TL 9 years 3,8% 3% 15,9-12,0% Opet Fair value, USD 10 years 5,3-7,3% 2% 9,0%

Ratio 1: Budgeted gross profit / budgeted net interest margin Ratio 2: Growth rate used to extrapolate cash flows beyond the budget period Ratio 3: Discount rate applied to the cash flow projections

F-255 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 14 - PAYABLES FROM FINANCE SECTOR OPERATIONS

31 December 2010 31 December 2009 Short-term Long-term Total Short-term Long-term Total

Deposits 26.530.200 291.923 26.822.123 20.626.473 345.133 20.971.606 Insurance technical reserves 228.711 236.457 465.168 62.234 371.169 433.403 Other payables from insurance business 30.928 6.390 37.318 31.129 - 31.129

26.789.839 534.770 27.324.609 20.719.836 716.302 21.436.138

Deposits: 2010 2009 Demand Time Total Demand Time Total TL deposits Saving deposits 906.379 7.921.605 8.827.984 720.134 6.971.791 7.691.925 Commercial deposits 1.357.091 4.225.557 5.582.648 985.944 2.218.551 3.204.495 Deposits from banks 79.344 189.766 269.110 66.739 143.129 209.868 Funds deposited under repurchase agreements - 33.920 33.920 - 65.054 65.054

2.342.814 12.370.848 14.713.662 1.772.817 9.398.525 11.171.342

Foreign currency deposits Saving deposits 983.601 3.770.979 4.754.580 1.038.468 4.105.931 5.144.399 Commercial deposits 1.368.793 3.786.460 5.155.253 1.088.905 2.560.737 3.649.642 Deposits from banks 17.169 634.630 651.799 71.706 380.226 451.932 Funds deposited under repurchase agreements - 1.546.829 1.546.829 - 554.291 554.291

2.369.563 9.738.898 12.108.461 2.199.079 7.601.185 9.800.264

26.822.123 20.971.606

Insurance technical reserves: 2010 2009

Unearned premium reserve - net of reinsurers’ share 140.201 108.857 Claim provisions - net of reinsurers’ share 60.438 55.815 Life mathematical reserves - net of reinsurers’ share 264.529 268.731

465.168 433.403

F-256 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 14 - PAYABLES FROM FINANCE SECTOR OPERATIONS (Continued)

The movement for insurance technical reserves is as follows: 2010 2009

Beginning of the period - 1 January 433.403 417.600

Change in reserve for unearned premiums - net of reinsurance 31.344 4.591 Paid claims during the period - net of reinsurance (63.111) (27.593) Premium and income earned from life insurance 61.007 84.031 Payments associated with life insurance (53.104) (68.405) Other increases in the provisions 55.629 23.179

End of the period - 31 December 465.168 433.403

NOTE 15 - FINANCIAL LIABILITIES 2010 2009 Short-term financial liabilities Bank borrowings 8.362.967 8.023.304 Debt securities in issue 355.220 440.534 Factoring payables 124.400 25.527 Financial leasing payables 3.257 2.678

8.845.844 8.492.043

Long-term financial liabilities Bank borrowings 7.103.180 5.719.774 Debt securities in issue 927.674 704.443 Financial leasing payables 1.596 3.960

8.032.450 6.428.177

16.878.294 14.920.220

Details of the loans obtained in 2006 in order to finance the acquisition cost of Tüpraş shares and to re-structure the Group’s existing loans are presented below:

- a loan of USD950.000.000 from the consortium, comprising of JP Morgan Europe Limited and JP Morgan Chase Bank N.A. with a maturity of 7 years and bearing an interest rate of Libor+1,9%;

- a loan from the consortium comprising of Akbank T.A.Ş. Malta Branch, Türkiye Garanti Bankası A.Ş. Luxembourg Branch, Türkiye İş Bankası A.Ş. Bahrain Offshore Branch, Standard Bank Plc, Türkiye Vakıflar Bankası T.A.O. Bahrain Offshore Branch, Türkiye Halk Bankası A.Ş. in an amount of USD1.800.000.000 with a maturity of 10 years and bearing an interest rate of Libor+2,3% until 2013 and an interest rate of Libor+2,8% thereafter.

Following the principal repayments of the loans detailed above, the outstanding balance of the related loans decreased to USD1.278.181.182 as of 31 December 2010.

F-257 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - FINANCIAL LIABILITIES (Continued)

As of 31 December 2010, Yapı Kredi Bankası, a joint venture of the Group, has an outstanding securitisation deal from Standard Chartered Bank and Unicredit Markets and Investment Banking amounting to TL704.582 thousand (equivalents of USD273.500.000 and EUR137.500.000) (31 December 2009: TL871.880 thousand). This loan is floating rated and based on Euribor/Libor rates with maturity dates between 7 and 8 years. The repayments are started in the first quarter of 2010.

As of 31 December 2010, Yapı Kredi Bankası, has outstanding subordinated loans amounting to TL1.075.778 thousand, (EUR525.000.000) with 10 years of maturity and repayment option at the end of the 5th year (31 December 2009: TL1.112.012 thousand). These loans were extended by Merrill Lynch Capital Corporation (EUR250.000.000), Goldman Sachs International Bank (EUR175.000.000), and Citibank (EUR100.000.000) with UniCredit S.p.A. as guarantor. For the first 5 years, the interest rates of the loans are determined as Euribor+2%, Euribor +2,25% and Euribor +1,85%, respectively.

In 2010, Yapı Kredi Bankası has obtained two syndicated credit facilities in the amount of TL250.452 thousand (USD162.000.000) and TL528.668 thousand (EUR258.000.000) with interest rates of Libor+1,5% and Euribor+1,5%, respectively.

In 2010, Yapı Kredi Bankası, has obtained a syndicated loan from international banks, consisting of 2 credit tranches with 1 year maturity and a total amount of USD625.000.000; first tranche amounting to USD171.250.000 with an interest rate of Libor+1,30% and the second tranche amounting to EUR335.000.000 with an interest rate of Euribor+1,30%.

In 2010, Yapı Kredi Bankası, has signed a loan agreement with UniCredit Luxembourg amounting to TL579.750 thousand (USD 375.000.000) with a five years of maturity and an interest rate of 5,19%.

In 2010, Koç Holding has obtained a loan in the amount of USD425.000.000, comprising two tranches of USD120.000.000 and EUR211.500.000 from a consortium including 21 financial institutions. The loan is used to meet various financing needs of Koç Group Companies. The principal repayments of the USD denominated part (with 39-month maturity) and the EUR denominated part (with 27-month maturity), will be due at the maturity. For both USD and EUR parts of the loan, interest payment options are available monthly, quarterly or semi-annually and the interest rates, excluding bank charges, are determined as Libor+3,25% for the USD portion and Euribor+2,75% for the EUR portion

In 2010, Arçelik, a subsidiary of the Group, has obtained loans of approximately TL1.000.000 thousand in different currencies with maturities of 2-3 years in order to finance its due loans. The interest rates of the loans with 2 years maturity are determined as Euribor+1,70% and Tribor+0,70% for EUR and TL parts, respectively. The interest rates of the loans with 3 years maturity are determined as Euribor+1,80%, Libor+1,90% and Tribor+0,75% for EUR, GBP and TL parts, respectively.

In 2009, Koç Holding obtained a loan in the amount of approximately USD770.000.000, comprising two tranches of USD320.000.000 and EUR339.000.000, from a consortium including 14 financial institutions. Following the principal repayments, the outstanding balance of the related loans decreased to EUR15.000.000 as of 31December 2010 (31 December 2009: USD742.000.000).

The details of collaterals, mortgages and pledges given related with the loans of the Group are disclosed in Note 28.

F-258 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 15 - FINANCIAL LIABILITIES (Continued)

The redemption schedule of long-term bank borrowings is as follows: 2010 2009

2011 - 1.569.162 2012 2.725.090 1.430.144 2013 1.668.451 761.413 2014 752.984 683.637 2015 and over 2.885.925 1.983.821

8.032.450 6.428.177

NOTE 16 - TAX ASSETS AND LIABILITIES

2010 2009 Current income tax liabilities Domestic 728.569 589.549 Foreign 19.060 8.681

Less: Prepaid income tax (537.762) (454.171)

Current income tax liabilities (net) 209.867 144.059

Deferred tax liabilities Domestic 617.845 782.740 Foreign 47.316 46.088

665.161 828.828

Deferred tax assets Domestic (331.512) (501.145) Foreign (19.714) (17.364)

(351.226) (518.509)

Deferred tax liabilities (net) 313.935 310.319

Turkish tax legislation does not permit a parent company, its subsidiaries and joint ventures to file a consolidated tax return. Therefore, tax liabilities, as reflected in consolidated financial statements, have been calculated on a separate-entity basis.

The corporation tax rate is 20% in Turkey. Corporation tax is payable on the total income of the company after adjusting for certain disallowable expenses, income not subject to tax and allowances.

F-259 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - TAX ASSETS AND LIABILITIES (Continued)

Income tax expenses in the consolidated income statements are summarised as follows:

2010 2009

Current period tax expense 747.629 598.227 Deferred tax income (net) (78) (79.763)

747.551 518.464

Profit before tax 3.885.951 3.159.052

Domestic tax rate 20% 20% Tax calculated at domestic tax rate 777.190 631.810

Income not subject to tax (118.790) (171.969) Non-deductible expenses 43.737 29.329 Carry forward tax losses (net effect) 38.194 31.355 Tax rate differences 7.691 (2.061) Other (471) -

Tax expense 747.551 518.464

F-260 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - TAX ASSETS AND LIABILITIES (Continued)

Koç Holding, its Subsidiaries and Joint Ventures recognise deferred tax assets and liabilities based upon temporary differences arising between their financial statements prepared in accordance with CMB Financial Reporting Standards and the Turkish tax legislations. These temporary differences usually result in the recognition of revenue and expenses in different reporting periods for CMB Financial Reporting Standards and tax purposes.

The breakdown of cumulative temporary differences and deferred tax assets and liabilities provided using principal tax rates, are as follows:

Cumulative temporary Deferred tax differences assets/(liabilities) 2010 2009 2010 2009

Property, plant and equipment and intangible assets 4.320.177 4.492.635 (893.515) (890.922) Impairment provision for loans (490.801) (514.681) 97.892 102.834 Investment incentives (1.180.519) (1.277.235) 90.876 80.207 Provision for the Pension Fund (419.018) (432.030) 83.804 86.406 Provision for employment termination benefits (359.113) (328.002) 71.861 65.625 Warranty and assembly provisions (204.473) (202.809) 40.574 40.244 Provision for lawsuits (181.023) (64.775) 36.204 12.955 Carryforward tax losses (174.038) (334.261) 34.809 67.299 Inventories (103.488) (109.987) 20.705 21.964 Research and development incentives (72.371) (135.067) 14.474 27.012 Provision for unused vacation (71.554) (51.730) 14.242 10.279 Expense accruals (net) (63.145) (51.513) 12.629 10.303 Impairment of financial assets (61.703) (61.873) 12.341 12.230 Deferred income (33.122) (34.550) 6.625 6.910 Provision for credit card bonus (19.849) (24.235) 3.970 4.894 Unearned credit finance income (net) (17.587) (22.430) 3.490 3.723 Derivative financial instruments 72.906 21.753 (14.326) (3.328) Other (net) (200.634) (133.949) 49.410 31.046

Deferred tax assets / (liabilities) (net) (313.935) (310.319)

Net deferred tax assets and liabilities recognized in the Subsidiaries’ and Joint Ventures’ financial statements prepared in accordance with CMB Financial Reporting Standards, are separately classified under deferred tax assets and liabilities accounts in Koç Holding’s consolidated balance sheet. Temporary differences and deferred tax assets and liabilities presented above, which are prepared on the basis of gross amounts, present the net deferred tax position.

F-261 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 16 - TAX ASSETS AND LIABILITIES (Continued)

The redemption schedule of carry forward tax losses for which no deferred taxes calculated is as follows:

2010 2009

2010 - 33.851 2011 137.799 152.971 2012 57.370 49.342 2013 654.229 667.438 2014 183.529 157.442 2015 355.642 -

1.388.569 1.061.044

The Constitutional Court ruled at the meeting held on 15 October 2009 for the cancellation of the expressions “2006, 2007 and 2008” included in the provisional article of the Income Tax Law regarding the investment incentives. In accordance with the related ruling by the court, the expiration of the investment allowance entitled to three years time as of 31 December 2005 was repealed. Accordingly, Group’s unused investment incentives became utilizable. After the change in the related legislation, the Group has prepared its consolidated financial statements by considering the amount of investment incentives that are estimated to be utilized in the following periods in the deferred tax calculations. The Group’s investment incentives that can be utilized in the following periods but not considered in the deferred tax calculation amounts to TL292.573 thousand (subject to withholding) (2009: TL319.765 thousand) and TL922 thousand (not subject to withholding) (2009: TL26.167 thousand).

Movements in deferred tax assets and liabilities are as follows:

2010 2009

Beginning of the period - 1 January (310.319) (391.101)

Charge to the income statement: 78 79.763 Charge to equity: - Financial assets fair value reserve (13.368) (540) - Cumulative gains/losses on hedging (1.176) 2.947 - Non-current asset revaluation fund 363 393 Currency translation differences (681) (653) Acquisitions - (564) Transfers (*) 10.494 - Additions to the scope of consolidation (Note 2.4.1) - (564) Disposals from the scope of consolidation (Note 2.4.1) 674 -

End of the period - 31 December (313.935) (310.319)

(*) Transferred to the assets held for sale.

F-262 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 17 - OTHER PAYABLES 2010 2009

Taxes and duties payable 1.505.104 1.444.928 Social security premiums payable 40.076 41.175 Other 108 2.363

1.545.288 1.488.466

NOTE 18 - DERIVATIVE FINANCIAL INSTRUMENTS

2010 2009 Asset Liability Asset Liability

Derivatives held for trading 348.183 181.995 311.929 161.765 Derivatives held for hedging 19.798 255.284 64.316 222.606

367.981 437.279 376.245 384.371

Derivatives held for trading: 2010 2009 Contract Fair values Contract Fair values amount Asset Liability amount Asset Liability

Currency swaps 12.237.454 157.441 98.171 7.345.368 238.444 23.426 Option agreements 5.210.238 42.301 42.415 2.866.261 15.725 15.907 Interest rate swaps 3.346.226 135.004 22.765 5.148.430 34.567 92.964 Currency forwards 3.040.230 13.437 17.482 2.457.284 23.193 29.401 Commodity futures 72.532 - 1.162 4.062 - 67

23.906.680 348.183 181.995 17.821.405 311.929 161.765

Derivatives held for hedging: 2010 2009 Contract Fair values Contract Fair values amount Asset Liability amount Asset Liability

Interest rate swaps 7.718.913 19.101 255.284 3.833.775 64.316 220.553 Currency swaps 107.615 343 - - - - Currency forwards 4.327 15 - 511.537 - 2.053 Commodity futures 1.414 339 - - - -

7.832.269 19.798 255.284 4.345.312 64.316 222.606

F-263 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - EMPLOYEE BENEFITS

2010 2009

Provision for employment termination benefits 369.839 331.634 Provision for the Pension Fund 419.018 432.030

788.857 763.664

Provision for employment termination benefits:

- Domestic 365.375 328.002 - Foreign 4.464 3.632

369.839 331.634

Under the Turkish Labour Law, the Company and its Turkish Subsidiaries and Joint Ventures are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 for women and 60 for men).

As of 31 December 2010, the amount payable consists of one month’s salary limited to a maximum of TL2.517,01 (2009: TL2.365,16) for each year of service.

The liability is not funded as there is no funding requirement.

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. As the maximum liability is revised semi-annually, the maximum amount of TL2.623,23 effective from 1 January 2011 (1 January 2010: TL2.427,04) has been taken into consideration in calculating the reserve for employment termination benefit of the Group.

Discount rate (%) 4,66 5,92 Turnover rate to estimate the probability of retirement (%) 98 98

F-264 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - EMPLOYEE BENEFITS (Continued)

Movements in the provision for employment termination benefits are as follows: 2010 2009

Beginning of the period - 1 January 331.634 293.206

Interest expense 16.680 15.878 Actuarial losses/(gains) 14.363 9.101 Increase during the period 57.147 75.831 Payments during the period (48.763) (62.400) Currency translation differences (182) 18 Additions to the scope of consolidation (Note 2.4.1) 7 - Disposals from the scope of the consolidation (Note 2.4.1) (438) - Transfers (*) (609) -

End of the period - 31 December 369.839 331.634

(*) Transferred to the liabilities held for sale.

Provision for the Pension Fund:

Yapı Kredi Bankası, a joint venture of the Group, accounted for a provision amounting to TL419.018 thousand (Note 2.4.21) for the technical deficit based on the report prepared by a registered actuary in accordance with the technical interest rate of 9,8% determined by the New Law and CSO 1980 mortality table (2009: TL432.030 thousand).

The amounts recognised in the income statement: 2010 2009

Provision (income) / expense for the Pension Fund (Note 24) (13.012) 44.847

Provision for the Pension Fund is determined as follows: 2010 2009

Transferrable pension benefits 591.766 538.982 Transferrable post-employment benefits 48.017 80.585

Present value of funded obligations 639.783 619.567 Fair value of plan assets (220.765) (187.537)

419.018 432.030

Movements in the provision for the Pension Fund are as follows: Post-employment Pension benefit plans medical benefits 2010 2009 2010 2009 Beginning of the period - 1 January 538.982 518.069 80.585 13.522 Service cost 32.055 28.991 21.704 19.629 Interest cost 52.820 50.771 7.897 1.325 Contributions by plan participants 27.198 24.599 14.470 13.083 Actuarial losses/(gains) 959 (30.229) (61.389) 48.871 Benefits paid (60.248) (53.219) (15.250) (15.845)

End of the period - 31 December 591.766 538.982 48.017 80.585

F-265 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 19 - EMPLOYEE BENEFITS (Continued)

Movements in the fair value of the Pension Fund assets are as follows: 2010 2009

Beginning of the period - 1 January 187.537 144.408

Return on plan assets 34.223 42.758 Employer contributions 32.055 28.991 Employee contributions 27.198 24.599 Benefits paid (60.248) (53.219)

End of the period - 31 December 220.765 187.537

Pension assets are comprised as follows: 2010 2009 Amount (%) Amount (%)

Government bonds and treasury bills 77.451 35 90.259 48 Property, plant and equipment 58.197 26 56.913 30 Bank placements 66.716 30 14.664 8 Short term receivables 9.747 5 13.454 7 Other 8.654 4 12.247 7

220.765 100 187.537 100

The principal actuarial assumptions used are as follows: 2010 2009

Discount rate (%) 9,80 9,80

Mortality rate:

Based on statistical data, the average life expectancy for men and women retiring at the ages of 64 and 63, respectively, is 15 years for men and 19 years for women.

NOTE 20 - OTHER ASSETS AND LIABILITIES a) Other current assets 2010 2009

Value added tax receivables 376.382 285.823 Advances given 291.577 128.676 Deposits and guarantees given 270.654 134.882 Prepaid expenses 208.508 208.570 Taxes and funds deductible 151.328 227.352 Precious metals 124.886 94.460 Assets obtained as loan collaterals 50.512 53.942 Biological assets 42.850 37.710 Payments for credit card settlements 33.916 32.557 Interbank cheque clearing account 4.149 8.977 Other 258.042 135.665

1.812.804 1.348.614

F-266 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - OTHER ASSETS AND LIABILITIES (Continued) b) Other non-current assets 2010 2009

Prepaid expenses 331.296 281.006 Spare parts and other materials 329.518 327.807 Advances given 107.781 54.736 Other 20.651 11.018

789.246 674.567 c) Short-term provisions and other current liabilities 2010 2009 Provisions: Provision for lawsuits (*) 285.380 111.936 Provision for warranty and assembly 218.057 202.547 Cost accruals of construction contracts 146.382 83.695 Provision for losses related with loan commitments (Note 28.a) 100.855 97.717 Provision for unused vacation 76.296 57.306 Provision for credit cards campaigns 19.849 24.235 Provision for the non-core assets option agreement 15.273 18.726 Provision for Energy Market Regulation Authority participation share 14.682 13.407 Provision for the advertising publication agreement 13.611 6.076 Other 124.026 144.453

1.014.411 760.098

Other current liabilities: Credit card payables 1.458.820 1.083.852 Blocked accounts 270.689 138.805 Advances received 288.606 205.914 Payables to personnel and premium accruals 215.035 156.357 Interbank cheque clearing account 140.396 93.938 Collaterals obtained for derivative transactions 80.251 51.279 Accruals for sales and other marketing expenses 74.285 87.100 Transitory accounts 65.428 49.171 Import deposits and transfer orders 61.404 77.336 Deferred income 56.095 81.942 Deposits and guarantees received 30.793 27.848 Accruals for license expenses 22.656 15.567 Export commitment accruals 19.743 19.131 Other 312.345 239.748

3.096.546 2.327.988

4.110.957 3.088.086

(*) The amount includes the provision accounted for in 2010 for the tax/penalty notice issued to Tüpras, a subsidiary of the Group, on 9 November 2010. The related provision amounts to TL181 million and has been calculated in accordance with the Law No 6111 (Law on Amendments of Restructuring of Several Types of Receivables and Social Security and General Health Insurance Law and Other Several Law and Executive Orders” published in the Official Gazette, numbered 25857 and dated 25 February 2011).

F-267 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 20 - OTHER ASSETS AND LIABILITIES (Continued) d) Long-term provisions and other non-current liabilities

2010 2009 Provisions: Warranty provision 57.212 58.970

Other non-current liabilities: Revenue share (*) 328.716 265.853 Deposits and guarantees received 57.446 56.705 Government grants 48.668 56.703 Other 38.697 21.642

530.739 459.873

(*) In accordance with the Petroleum Market License Regulation and Liquefied Petroleum Gas (“LPG”) Market Regulation, the revenue shares collected by Tüpraş, but not recognized in the comprehensive income statement, has been recorded as revenue share within other long-term liabilities and blocked in banks as demand deposits with special interest rates within cash and cash equivalents according to the decision of National Petroleum Reserves Commission.

F-268 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 21 - EQUITY

Share Capital

Koç Holding adopted the registered share capital system available to companies registered with the CMB and set a limit on its registered share capital representing registered type shares with a nominal value of Kr1. Koç Holding’s registered and issued share capital is as follows:

2010

Limit on registered share capital (historical) 3.000.000 Issued share capital in nominal value 2.415.141

Companies in Turkey may exceed the limit on registered share capital in the event of the issuance of free capital shares to existing shareholders.

The shareholding structure of Koç Holding is as follows:

2010 2009 Share % Amount Share % Amount

Temel Ticaret ve Yatırım A.Ş. 42,39 1.023.794 42,39 1.023.794 Semahat Arsel 6,42 154.947 6,42 154.947 Suna Kıraç 5,25 126.764 5,25 126.764 Rahmi M. Koç 5,23 126.311 5,23 126.311 Mustafa V. Koç 3,20 77.271 3,20 77.271 Ali Y. Koç 2,20 53.047 3,05 73.747 İpek Kıraç 1,93 46.558 1,93 46.558 Ömer M.Koç 1,79 43.298 1,79 43.298 Rahmi M. Koç ve Mahdumları Maden, İnşaat, Turizm, Ulaştırma, Yatırım ve Ticaret A.Ş. 0,10 2.532 0,10 2.532

Total Koç Family members and companies owned by Koç Family members 68,51 1.654.522 69,36 1.675.222

Vehbi Koç Vakfı 7,15 172.767 7,15 172.767 Koç Holding Emekli ve Yardım Sandığı Vakfı 1,99 48.049 1,99 48.049 Other 22,35 539.803 21,50 519.103

Paid-in share capital 100,00 2.415.141 100,00 2.415.141

Adjustment to share capital (*) 967.288 967.288

Total share capital 3.382.429 3.382.429

(*) “Adjustment to share capital” represents the restatement effect of cash and cash equivalent contributions to share capital measured in accordance with the CMB Financial Reporting Standards. “Adjustment to share capital” has no use other than being transferred to paid-in share capital.

F-269 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 21 - EQUITY (Continued)

The analysis of shares by group is as follows:

Group Unit of shares TL’000 Nature of shares

A 64.645.087.838 646.451 Registered B 176.869.012.162 1.768.690 Registered

241.514.100.000 2.415.141

In the Articles of Association (“the Articles”) Koç Holding sets out the following privileges for A-group shares:

1. In accordance with Article 11, pre-emptive rights not used by B-group shareholders, can be used by A-group shareholders within the terms of CMB Legislation.

2. In accordance with Article 25, A-group shareholders have two voting rights for each share owned at the General Assembly meeting (except for resolutions to change the Articles).

Revaluation Funds

Increases/decreases of carrying amounts as a result of revaluations recognised directly in the equity are as follows:

2010 2009

Financial assets fair value reserve 109.626 52.509 Cumulative losses on hedging (103.485) (85.152) Non-current assets revaluation fund 13.662 18.460

Total revaluation funds 19.803 (14.183)

The movements in the revaluation funds are presented in the statements of changes in equity.

Restricted Reserves

The details of the restricted reserves are as follows: 2010 2009

Legal reserves 152.817 140.217 Special reserves 2.139.103 2.129.595

Total 2.291.920 2.269.812

F-270 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 21 - EQUITY (Continued)

Dividend Distribution

Listed companies are subject to dividend requirements regulated by the CMB as follows:

In accordance with the CMB Decision dated 27 January 2010, concerning allocation basis of profit, starting in 2009, minimum profit distribution obligation will not be applied for listed companies. According to the Board’s decision and Communiqué No: IV-27 issued by CMB regarding allocation basis of profit of listed companies, the distribution of the relevant amount may be realised as cash, as bonus shares, partly as cash and bonus shares or the relevant amount can be retained within the company.

In accordance with Article 32 of the Company’s Articles of Association, a contribution of a maximum 2% (according to the decision of the General Assembly) of the amount remaining after the first legal reserves set aside over income before tax, financial obligations and initial dividends, is paid to Koç Holding Emekli ve Yardım Sandığı Vakfı. In addition, save for the first dividend determined according to the Capital Markets Law, 3% of the amount remaining after the first legal reserves, financial obligations and 5% of the paid-in capital are deducted from the income before tax, is allocated to share certificate owners. However, the share to be paid to the owners of the dividend shares may not be more than 1/10 of the amount remaining after the first legal reserves and first dividend calculated according to CMB regulations are deducted from the net profit.

The total amount of net income after the deduction of accumulated losses at statutory records and inflation adjustment difference that can be subject to dividend distribution is TL1.534.976 thousand.

It was resolved at Koç Holding’s Ordinary General Assembly Meeting held on 21 April 2010 to distribute TL310.000 thousand (dividend per share TL 0,128) from the consolidated net profit of 2009 in the amount of TL1.429.210 thousand as first and second level dividends to shareholders, TL10.838 thousand to Koç Holding Emekli ve Yardım Sandığı Vakfı, and TL38.876 thousand to the holders of dividend right certificates as cash dividends (gross=net). Related cash dividend payments were completed as of 5 May 2010.

NOTE 22 - REVENUE 2010 2009

Domestic sales 38.113.939 30.090.282 Foreign sales 12.797.849 10.570.259

Gross sales 50.911.788 40.660.541

Less: Discounts (2.089.506) (1.201.759)

Revenue 48.822.282 39.458.782

Sales of goods 47.917.608 38.839.835 Sales of services 904.674 618.947

Revenue 48.822.282 39.458.782

Finance sector operating revenue is disclosed in Note 4.

F-271 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 23 - EXPENSES BY NATURE

Expense by nature includes cost of goods sold, marketing, selling and distribution expenses, general administrative expenses and research and development expenses.

2010 2009

Raw materials and supplies 31.031.025 23.998.007 Changes in work in progress, finished goods (188.867) (72.498) Cost of merchandise sold 8.370.324 6.755.465 Personnel expenses 2.852.173 2.407.676 Depreciation and amortisation charges 964.490 923.100 Energy and utility expenses 635.304 423.455 Transportation, distribution and storage expenses 634.819 570.965 Advertisement and promotion expenses 417.095 350.510 Warranty and assembly costs 399.331 412.604 Rent expenses 339.767 290.259 Maintenance and repair expenses 226.172 197.849 Outsourcing expenses 212.460 106.050 Taxes, duties and charges 171.291 116.579 Information systems and communication expenses 100.746 83.796 Litigation and consultancy expenses 90.769 98.581 Insurance expenses 83.312 74.178 Travel expenses 71.858 59.133 Sales, incentives and premium expenses 69.339 84.946 Royalty and license expenses 48.594 23.807 Grants and donations 40.563 23.324 Other 824.602 1.172.164

47.395.167 38.099.950

The functional breakdown of amortisation, depreciation and personnel expenses is as follows:

2010 2009 Depreciation and amortisation charges Cost of sales 688.921 673.208 Marketing, selling and distribution expenses 50.945 45.465 General administrative expenses 183.837 174.274 Research and development expenses 40.787 30.153

Total 964.490 923.100

Personnel expenses Cost of sales 1.044.895 816.207 Marketing, selling and distribution expenses 382.866 344.748 General administrative expenses 1.375.664 1.211.588 Research and development expenses 48.748 35.133

Total 2.852.173 2.407.676

F-272 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 24 - OTHER INCOME/EXPENSES

2010 2009 Other income Gain on sale of property, plant and equipment 113.952 22.200 Income from incentives 55.025 39.683 Reversal of provisions 60.953 39.055 Gain on sales of non-performing loans 36.760 16.380 Rent income 28.779 31.326 Other 171.672 152.110

467.141 300.754

Other expenses Provision for loan impairment (214.522) (832.599) Other provision expenses (316.155) (230.031) Loss on sale of property, plant and equipment (28.067) (12.815) Provision expenses for the Fund 13.012 (44.847) Other (81.276) (54.727)

(627.008) (1.175.019)

NOTE 25 - FINANCIAL INCOME/EXPENSES

2010 2009 Financial income: Foreign exchange gains 1.128.295 1.136.817 Interest income 537.719 384.489 Credit finance income 204.429 240.538 Gains on derivative financial instruments 39.663 32.104 Other financial income 9.795 6.561

1.919.901 1.800.509

Financial expenses: Foreign exchange losses (1.393.550) (1.201.321) Interest expenses (576.071) (750.507) Credit finance charges (115.566) (60.184) Losses on derivative financial instruments (23.340) (69.515) Other financial expenses (30.297) (36.145)

(2.138.824) (2.117.672)

F-273 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 26 - RELATED PARTY DISCLOSURES

(a) Related party balances

2010 2009 Joint Ventures (*) Other Total Joint Ventures Other Total

Cash and cash equivalents 2.143.670 - 2.143.670 1.103.581 - 1.103.581 Trade receivables 58.537 24.486 83.023 107.427 27.919 135.346 Trade payables 220.168 27.557 247.725 141.968 29.122 171.090 Loans and advances to customers 21.508 19.405 40.913 26.400 13.958 40.358 Deposits 69.555 864.878 934.433 57.613 730.828 788.441 Financial liabilities 463.783 - 463.783 430.496 - 430.496

(b) Related party transactions

2010 2009 Joint Ventures (*) Other Total Joint Ventures Other Total

Sales of goods and services 1.482.320 32.920 1.515.240 1.087.999 133.028 1.221.027 Purchases of goods and services 1.418.648 127.792 1.546.440 1.136.836 99.969 1.236.805 Gain on sale of property, plant and equipment (net) - 40.047 40.047 - - - Interest income 71.097 - 71.097 60.132 - 60.132 Interest expense (-) 42.752 - 42.752 14.317 - 14.317

(*) Presents post elimination balances and transactions with the joint ventures of the Group, which are accounted through proportionate consolidation.

Total compensation provided to key management personnel by Koç Holding in 2010 amounts to TL20.162 thousand (2009: TL16.999 thousand). The amount is comprised of short-term employee benefits.

NOTE 27 - GOVERNMENT GRANTS

The Group is entitled by the following incentives and rights: a) 100 % exemption from customs duty on machinery and equipment imported, b) Exemption from VAT on investment goods supplied from home and abroad, exemption from taxes, duties and charges, c) Incentives under the jurisdiction of the research and development law (100% corporate tax exemption, Social Security Institution incentives, etc.), d) Inward processing permission certificates, e) Cash refund from Tübitak-Teydeb for research and development expenditures, f) Insurance premium employer share incentive, g) Discounted corporate tax incentive, h) Investment incentive allowance (Note 16), i) Brand supporting government grants given by the Undersecretariat of Foreign Trade (Turquality).

F-274 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 28 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

A) GUARANTEES

The summary of guarantees received and given regarding the non-finance sector companies is as follows;

Guarantees given: 2010 2009

Letters of credit 1.949.590 1.199.382 Letters of guarantee 1.531.396 1.340.121 Guarantee notes 649.664 1.173.803 Equity Shares (*) 219.414 298.174 Other 56.179 84.119

4.406.243 4.095.599

(*) The Group’s equity shares in Arçelik and Tüpraş with nominal values of TL91.700 thousand and TL127.714 thousand, respectively, (2009: TL160.460 thousand Arçelik - TL10.000 thousand Aygaz - TL127.714 thousand Tüpraş) are pledged as collateral (without prejudice to voting and dividend rights associated with these shares) against the loans obtained to finance the cost of Tüpraş acquisition and refinence the Group’s existing loans (Note 15).

Guarantees received: 2010 2009

Mortgages 1.627.273 1.608.274 Letters of guarantee 1.626.063 1.397.960 Direct crediting limit 434.313 118.299 Bill of guarantees 305.138 292.047 Letters of credit 205.809 210.686 Other commitments 121.294 128.771

4.319.890 3.756.037

F-275 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 28 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Collaterals/pledges/mortgages (“CPM”) of the Group, except finance sector, as of 31 December 2010 and 2009 are as follows (Total amounts in the table below also contains TL denominated CPM balances. Foreign currency CPMs are presented by their TL equivalents): 2010 2009

A. Total amount of CPM’s given in the name of its own legal personality 3.561.056 2.769.588 -USD 2.369.569 1.357.001 -EUR 529.120 368.801 -Other 71.097 1.089 B. Total amount of CPM’s given on behalf of the fully consolidated companies (*) 589.432 814.329 -USD 144.628 226.071 -EUR 316.586 382.373 C. Total amount of CPM’s given on behalf of third parties for ordinary course of business (*) 255.755 511.682 -USD 108.220 255.969 -EUR 147.535 252.755 D. Total amount of other CPM’s given - - i) Total amount of CPM’s given on behalf of the majority shareholder - - ii) Total amount of CPM’s given to on behalf of other group companies which are not in scope of B and C. - - iii) Total amount of CPM’s given on behalf of third parties which are not in scope of C. - -

4.406.243 4.095.599

(*) The amount includes bills of guarantees, provided for the loan obtained from a consortium including 14 financial institutions to meet various financing needs of Koç Group companies (Subsidiaries and Joint Ventures) (Note 15) as part of Koç Holding’s main operations.

B) COMMITMENTS a) Finance

Debt securities pledged as collateral:

As of 31 December 2010, debt securities, amounting to TL1.283.170 thousand (2009: TL1.077.554 thousand), included in the financial assets are pledged;

Custody services:

The Group’s Joint Ventures in the finance sector provide custody services to third parties. The assets held in a fiduciary capacity are not included in these consolidated financial statements. As of 31 December 2010, the Group has custody accounts amounting to TL13.259.444 thousand (2009: TL12.811.713thousand).

F-276 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 28 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Credit related commitments: 2010 2009 Letters of guarantee - Foreign currency 3.583.683 3.522.557 - TL 3.890.362 3.126.145 Letter of credits 1.999.937 1.369.118 Acceptance credits 82.899 75.835 Other 289.719 199.704

9.846.600 8.293.359 Less: Provisions (Note 20.c) (100.855) (97.717)

9.745.745 8.195.642 b) Energy i) Several financial and non-financial covenants exist with respect to the loans obtained in 2006 in order to finance the acquisition cost of Tüpraş and to re-finance the Group’s existing loans. In the event that these covenants are not fulfilled, the aforementioned creditors have the right to recall the outstanding loans (Note 15). ii) National petroleum stock is provided through the obligation of refinery; fuel and LPG distribution licensees to keep a minimum of twenty times the average daily product supplied in their own storages or licensed storage facilities, whether as a whole or separately according to their status. According to the Petroleum Market Law, in order to ensure a sustainable oil market, to prevent the risks in crisis or extraordinary cases and to meet the requirements of international agreements, it is required to keep petroleum stock at an amount equal to at least ninety days of the net import in the previous year’s average daily consumption, and refineries have been obliged to retain the complementary portion of the national petroleum stock. c) Automotive i) In the scope of the borrowing agreements, Ford Otosan, a joint venture of the Group, is required to process its export proceeds up to an amount EUR69.768.000, EUR10.260.000 and EUR20.109.600 through deposit accounts at Garanti Bankası A.Ş., İş Bankası A.Ş. and Akbank T.A.Ş., respectively for the year 2010.Additionally, Ford Otosan committed to realize exports amounting to EUR6.074.000 within the context of the time loan received from Türkiye İhracat Kredi Bankası A.Ş. (Eximbank). ii) As of 31 December 2010, Tofaş, a joint venture of the Group, carried out an export transaction amounting to USD458.106.000 within the scope of an export incentive certificate, requiring an export commitment of USD546.319.800 to be fulfilled by 3 June 2011. d) Consumer durable i) Arçelik, a subsidiary of the Group, has export commitments amounting to USD480.534.762 within the context of the export incentive certificates of the subsidiary as of 31 December 2010.

F-277 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 29 - ASSETS HELD FOR SALE a) Assets and liabilities held for sale

According to the resolution of the Board of Directors of Aygaz, a subsidiary of the Group, on 30 November 2010, it is agreed to sell 49,62% shares (with a nominal value of TL49.079 thousand) of Aygaz in Entek to AES Mont Blanc Holdings B.V. for a consideration of USD136.455 thousand to be paid in cash at the date when the share transfer transaction is completed.

In addition, due to the liquidation process of Otoyol Sanayi, a subsidiary of the Group; assets and liabilities of the related subsidiary are classified as held for sale in accordance with IFRS 5.

A summary of information regarding assets and liabilities held for sale is as follows:

Assets held for sale 2010 2009

Cash and cash equivalents 91.955 12.878 Trade receivables 30.687 211 Property, plant and equipment 221.331 1.222 Intangible assets 349 - Other assets 12.433 954

356.755 15.265

Liabilities held for sale 2010 2009

Financial liabilities 64.295 - Trade payables 34.879 292 Provision for employment termination benefits 686 83 Deferred tax liability 12.587 - Other liabilities 11.737 6.872

124.184 7.247 b) Income statement related to the assets and liabilities held for sale

2010 2009

Revenue (net) 400.986 376.074 Cost of sales (-) (389.031) (327.567)

Gross profit 11.955 48.507 General administrative expenses (-) (14.155) (29.045) Other income/expense (net) 2.835 (2.787)

Operating profit 635 16.675

Financial income/expense (net) 3.427 22.410

Profit before tax 4.062 39.085

Taxes on income (net) 44 503

Profit for the period 4.106 39.588 71

F-278 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial Instruments and Financial Risk Management

Financial Risk Management

Financial risk management is carried out by the Subsidiaries and Joint Ventures of the Group under policies approved by their own Boards of Directors.

A) Credit Risk

Credit risk management procedures

Finance sector

Commercial and business credit customers are followed up by the related system of the Company by their corresponding credit ratings. Furthermore, by the use of the credit rating systems developed for customers with different characteristics, counterparty default risk is calculated.

Other sectors

The Group’s non-finance sector companies are exposed to credit risk arising from their trade receivables, financial assets, derivative instruments and bank deposits.

In financial asset management, it is ensured that investments are made in highly liquid instruments with low level of volatility and financially strong banks are selected for transactions.

F-279 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Credit risk details

The maximum exposure of the Group’s financial assets to credit risk is as follows:

Loans and Cash and Derivative Trade advances to cash Financial financial 31 December 2010 receivables customers equivalents assets instruments

Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 5.189.502 29.581.360 12.251.678 10.133.279 367.981 A. Net book value of neither past due nor impaired financial assets 4.843.928 28.080.085 12.251.678 10.133.279 367.981 B. Net book value of restructured financial assets 31.134 40.215 - - - C. Net book value of past due but not impaired financial assets 260.333 1.546.729 - - - D. Net book value of impaired assets 54.107 251.573 - - - - Gross amount 269.007 1.169.202 - - - - Impairment (214.900) (917.629) - - - - Secured with guarantees 51.783 213.306 - - - E. Collective provision for impairment (-) - (337.242) - - -

Loans and Cash and Derivative Trade advances to cash Financial financial 31 December 2009 receivables customers equivalents assets instruments

Maximum exposure to credit risk as of reporting date (A+B+C+D+E) 4.832.657 21.598.747 9.507.247 8.019.758 376.245 A. Net book value of neither past due nor impaired financial assets 4.124.668 19.584.535 9.507.247 8.019.758 376.245 B. Net book value of restructured financial assets 124.909 34.743 - - - C. Net book value of past due but not impaired financial assets 539.175 2.053.993 - - - D. Net book value of impaired assets 43.905 233.847 - - - - Gross amount 234.999 1.525.535 - - - - Impairment (191.094) (1.291.688) - - - - Secured with guarantees 43.469 379.075 - - - E. Collective provision for impairment (-) - (308.371) - - -

F-280 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Trade receivables a) Details of neither past due nor impaired or restructured trade receivables’ credit quality:

2010 2009

New customers (less than 3 months) 240.626 165.629 Public institutions and corporations 56.138 117.762 Other customers with no payment defaults 4.198.053 3.555.000 Customers with prior collection delays 349.111 286.277

4.843.928 4.124.668

As of 31 December 2010, trade receivables that are not due and not impaired amounting to TL2.723.398 thousand are secured with guarantees (2009: TL2.179.954 thousand). b) Analysis of past due trade receivables:

Not impaired 2010 2009

Past due up to 1 month 115.104 189.432 Past due 1 - 3 months 87.586 231.972 Past due 3 - 12 months 36.604 81.452 Past due over 1 year 21.039 36.319

260.333 539.175

As of 31 December 2010, past due but not impaired trade receivables amounting to TL199.497 thousand are secured with guarantees (2009: TL211.664 thousand).

Impaired 2010 2009

Past due up to 3 months 69.693 47.695 Past due 3 - 6 months 4.313 7.315 Past due over 6 months 195.001 179.989

Less: Impairment (214.900) (191.094)

54.107 43.905

All the impaired trade receivables of the Group are past due. As of 31 December 2010, impaired receivables amounting to TL51.783 thousand are secured by guarantees (2009: TL43.469 thousand).

F-281 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Loans and advances to customers a) As of 31 December 2010, the details of neither past due nor impaired or restructured corporate and commercial loans credit quality are as follows: Rating Class Concentration Level Above average 1 - 4 31,2% Average 5+ - 6 47,9% Below average 7+ - 9 20,9% b) Details of past due but not impaired loans and advances: Corporate and Financial commercial Consumer Credit card leasing 31 December 2010 loans loans receivables receivables Total

Past due up to 1 month 226.961 220.974 272.028 2.517 722.480 Past due 1-2 months 20.014 82.446 85.128 2.413 190.001 Past due 2-3 months 486.732 78.232 67.381 1.903 634.248

Total 733.707 381.652 424.537 6.833 1.546.729

Corporate and Financial commercial Consumer Credit card leasing 31 December 2009 loans loans receivables receivables Total

Past due up to 1 month 385.215 225.887 299.832 5.199 916.133 Past due 1-2 months 33.881 109.134 95.027 503 238.545 Past due 2-3 months 705.467 82.495 110.750 603 899.315

Total 1.124.563 417.516 505.609 6.305 2.053.993 c) Sectoral breakdown of loans and advances to customers:

2010 % 2009 %

Production 6.319.692 21 4.709.913 22 Consumer loans 6.140.929 21 4.532.790 21 Credit card receivables 4.246.148 14 3.630.616 17 Food and retail 1.303.614 4 959.127 4 Public sector 646.116 2 617.075 3 Financial institutions 720.279 2 655.573 3 Real estate 176.526 1 182.898 1 Other sectors 10.028.056 35 6.310.755 29

29.581.360 100 21.598.747 100

F-282 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Cash and cash equivalents

As of 31 December 2010 and 2009, total cash and cash equivalents are neither past due nor impaired. A significant portion of the bank deposits that are classified under cash and cash equivalents are held in banks operating in Turkey.

Financial assets

As of 31 December 2010 and 2009, total debt securities classified under financial assets are neither past due nor impaired.

The rating of debt securities is as follows: 2010 2009 Moody’s Credit Rating Aaa 35.155 45.262 Aa - 14.404 Aa2 13.733 - Aa3 228.650 - A2 152.493 - A3 81.605 - Baa - 50.451 Baa1 45.655 - Baa2 94.937 - Baa3 16.865 - Ba1 16.046 - Ba2 (*) 8.753.080 7.078.419 Ba3 20.927 581.882 Unrated 647.133 249.340

10.133.279 8.019.758

(*) Securities consist of Republic of Turkey government bonds and treasury bills.

B) Market Risk a) Foreign Exchange Risk

Yapı Kredi Bankası, a joint venture of the Group, keeps the currency risk exposure within the related legal limits, follows the currency risk on a daily basis and presents the results to the Asset and Liability Committee. Other Subsidiaries and Joint Ventures of the Group keep the currency risk exposure within the limits approved by Koç Holding, the parent company, and by their Board of Directors. Koç Holding, the parent company, continuously reviews the risk limits of the Subsidiaries and Joint Ventures, taking into account the overall economic conditions and developments in the market and determines new limits, when necessary. Derivative contracts such as swaps, options and forwards are also used as instruments for currency risk management for hedging purposes, when needed.

F-283 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Assets and liabilities denominated in foreign currency held by the Group before consolidation adjustments are as follows: 2010 2009

Assets 26.065.224 21.619.519 Liabilities (30.550.152) (25.219.656)

Net balance sheet position (4.484.928) (3.600.137)

Off-balance sheet derivative instruments net position 64.686 968.225

Net foreign currency position (4.420.242) (2.631.912)

Tüpraş, a subsidiary of the Group, manages its foreign currency risk resulting from its net financial liabilities by reflecting the effects of the changes in foreign currencies to its selling prices of petroleum products. As of 31 December 2010, Tüpraş has raw materials and petroleum products amounting to TL1.797.120 thousand (2009: TL1.232.460 thousand).

In addition, the repayment obligation related to the loans of Tofaş, a joint venture of the Group, obtained for investment purposes, is guaranteed by Fiat Auto S.p.A and Peugeot Citroen Automobiles S.A. (the “Purchasers”) through future purchases. Accordingly, the exposure to foreign exchange and interest rate risks are undertaken by the Purchasers. Therefore, the net foreign currency liability position should be considered lower by TL374.148 thousand when assessing foreign exchange risk (2009: TL340.223 thousand).

As of 31 December 2010 and 2009, if EUR and USD had appreciated/depreciated by 10% against TL with all other variables held constant, profit before tax would have been TL442.024 thousand (2009: TL263.191 thousand) lower/higher, mainly as a result of foreign exchange losses/gains on the translation of the foreign exchange position as presented in detail in the table below. The net effect of the related foreign exchange losses/gains on the net profit (equity holders)/equity of the parent is approximately TL205.000 thousand.

2010 USD EUR Other Total

Foreign currency net asset/liability 211.787 260.743 (24.037) 448.493 Hedged items 215.851 (235.426) 13.106 (6.469)

427.638 25.317 (10.931) (442.024)

2009 USD EUR Other Total

Foreign currency net asset/liability 183.349 228.930 (52.265) 360.014 Hedged items 70.517 (179.216) 11.876 (96.823)

253.866 49.714 (40.389) 263.191

F-284 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Total assets 10.552.524 4.312.547 914.182 26.065.224

Total liabilities 11.922.428 5.585.020 673.814 30.550.152

Net balance sheet position (1.369.904) (1.272.473) 240.368 (4.484.928)

Derivative financial assets 4.058.543 2.007.652 280.360 10.668.750 Derivative financial liabilities (5.454.734) (858.729) (411.422) (10.604.064)

Off-balance sheet derivative instruments net position (1.396.191) 1.148.923 (131.062) 64.686

Net foreign currency position (2.766.095) (123.550) 109.306 (4.420.242)

Monetary items net foreign currency position (2.808.939) (172.656) 108.912 (4.587.497) Fair value of currency hedge instruments 232 - - 358

(*) Presented in original currencies.

F-285 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

31 December 2009 USD (*) EUR (*) Other Total (TL Equivalent) (TL Equivalent) Assets: Cash and cash equivalents 1.859.854 1.071.297 320.165 5.434.869 Financial assets 2.325.881 335.032 72.042 4.297.891 Trade receivables 266.118 591.436 273.459 1.951.832 Receivables from finance sector operations 3.694.535 1.500.743 293.139 9.098.056 Inventories 29.362 73.382 169.392 372.129 Deferred tax assets - 577 16.117 17.364 Other assets 88.992 91.191 116.383 447.378

Total assets 8.264.742 3.663.658 1.260.697 21.619.519

Liabilities: Payables from finance sector operations 4.305.895 1.770.113 468.559 10.775.920 Financial liabilities 3.303.634 2.510.432 106.337 10.503.906 Trade payables 1.590.021 264.667 57.290 3.023.144 Current income tax liabilities - 512 13.578 14.683 Provisions for employee benefits - 1.147 1.155 3.632 Deferred tax liabilities - 17.507 8.268 46.088 Other liabilities 282.891 158.995 82.856 852.283

Total liabilities 9.482.441 4.723.373 738.043 25.219.656

Net balance sheet position (1.217.699) (1.059.715) 522.654 (3.600.137)

Derivative financial assets 3.724.187 1.022.372 177.119 7.993.257 Derivative financial liabilities (4.192.519) (192.785) (295.883) (7.025.032)

Off-balance sheet derivative instruments net position (468.332) 829.587 (118.764) 968.225

Net foreign currency position (1.686.031) (230.128) 403.890 (2.631.912)

Monetary items net foreign currency position (1.715.392) (303.510) 234.498 (3.004.041) Fair value of currency hedge instruments 1.278 59 - 2.053

(*) Presented in original currencies.

F-286 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Import and export details (TL Equivalent)

Export 2010 2009

USD 5.547.292 3.702.560 EUR 5.285.552 4.849.533 Other 631.507 595.780

11.464.351 9.147.873

Import

USD 21.432.670 16.871.640 EUR 3.767.205 2.943.918 Other 50.408 1.548.414

25.250.283 21.363.972 b) Interest Rate Risk

The weighted average effective annual interest rates (%) for the financial assets and liabilities of the Group are as follows:

2010 2009 USD EUR TL USD EUR TL Assets Cash and cash equivalents 2,80 2,75 8,56 2,42 1,28 8,47 Financial assets - At fair value through profit or loss 5,95 7,05 8,11 7,60 7,51 8,70 - Available-for-sale financial assets 6,98 5,94 7,85 7,40 7,30 11,97 - Held-to-maturity financial assets 6,76 5,33 10,05 6,81 5,40 11,51 Loans and advances to customers 4,63 5,14 12,74 6,04 6,43 17,74

Liabilities Financial liabilities 2,61 2,61 8,40 2,02 2,89 10,10 Deposits 2,56 2,33 8,68 1,90 1,84 7,87

F-287 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Group’s financial assets and liabilities in carrying amounts classified in terms of periods remaining to contractual repricing dates are as follows: Up to 3 months - 1 year - 5 years Non-interest 31 December 2010 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 10.112.847 - - - 2.490.778 12.603.625 Financial assets - At fair value through profit or loss 61.785 44.524 6.107 62.721 29.791 204.928 - Available-for-sale financial assets 381.975 396.674 1.117.417 994.950 192.075 3.083.091 - Held-to-maturity financial assets 2.097.173 748.928 1.299.372 2.894.350 - 7.039.823 Loans and advances to customers 8.983.607 7.502.688 8.697.047 3.883.283 514.735 29.581.360

Total 21.637.387 8.692.814 11.119.943 7.835.304 3.227.379 52.512.827

Liabilities Deposits 20.928.958 811.063 302.629 67.096 4.712.377 26.822.123 Financial liabilities 8.463.991 4.459.534 3.474.559 394.015 86.195 16.878.294

Total 29.392.949 5.270.597 3.777.188 461.111 4.798.572 43.700.417

Up to 3 months - 1 year - 5 years Non-interest 31 December 2009 3 months 1 year 5 years and over bearing Total

Assets Cash and cash equivalents 8.145.382 - - - 1.690.403 9.835.785 Financial assets - At fair value through profit or loss 71.940 41.676 31.512 8.550 45.873 199.551 - Available-for-sale financial assets 225.748 133.904 93.504 443.486 129.456 1.026.098 - Held-to-maturity financial assets 2.481.797 782.048 1.439.666 2.229.581 - 6.933.092 Loans and advances to customers 6.517.197 5.475.157 6.032.893 3.309.368 264.132 21.598.747

Total 17.442.064 6.432.785 7.597.575 5.990.985 2.129.864 39.593.273

Liabilities Deposits 15.564.487 877.841 489.424 67.958 3.971.896 20.971.606 Financial liabilities 7.145.049 6.564.672 1.162.395 36.367 11.737 14.920.220

Total 22.709.536 7.442.513 1.651.819 104.325 3.983.633 35.891.826

F-288 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

The interest rate position is as follows:

2010 2009 Fixed interest rate financial instruments

Financial assets Cash and cash equivalents 9.540.507 8.015.938

At fair value through profit or loss 146.947 139.409 Available for sale 2.190.735 678.911 Loans and advances to customers 22.430.580 15.743.584

Total 34.308.769 24.577.842

Financial liabilities Deposits 22.107.250 16.996.139 Financial liabilities 7.127.144 4.545.202

Total 29.234.394 21.541.341

Floating interest rate financial instruments

Financial assets Cash and cash equivalents 572.340 129.444 At fair value through profit or loss 28.190 14.269 Available for sale 700.281 217.731 Loans and advances to customers 6.636.045 5.591.031

Total 7.936.856 5.952.475

Financial liabilities Deposits 2.496 3.571 Financial liabilities 9.664.955 10.363.281

Total 9.667.451 10.366.852

As of 31 December 2010, if the annual interest rate on TL basis were 100 base points higher/lower, and all other variables remained constant, due to the changes in the carrying values of financial assets; profit before tax would be TL3.675 thousand (2009: TL1.723 thousand) and due to its direct effect on equity, equity would be TL68.981 thousand (2009: TL20.982 thousand) lower/higher.

F-289 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

C) Liquidity Risk

As of 31 December 2010 and 2009 the undiscounted contractual cash flows of the financial liabilities of the Group are as follows:

Total Book contractual Up to 3 months 1 year 5 year and 31 December 2010 value cash outflow 3 months 1 year 5 years above

Derivative financial instruments: Cash inflow - 18.697.536 9.004.541 3.285.533 6.027.321 380.141 Cash Outflow - (19.530.928) (8.769.688) (3.485.369) (6.761.588) (514.283)

Total Book contractual Up to 3 months 1 year 5 year and 31 December 2009 value cash outflow 3 months 1 year 5 years above

Financial Liabilities: Financial liabilities 14.920.220 15.981.271 4.127.263 4.896.258 5.357.169 1.600.581 Deposits 20.971.606 21.094.624 19.626.813 1.078.055 307.388 82.368 Trade Payables 4.083.434 4.213.827 3.925.530 288.297 - -

Derivative financial instruments: Cash inflow - 10.862.378 6.130.178 879.779 3.092.013 760.408 Cash Outflow - (10.350.860) (6.187.300) (561.297) (2.870.766) (731.497)

Capital Risk Management

In order to maintain or adjust the capital structure, the Group may decide on the amount of dividends paid to shareholders, issue of new shares or sell assets to decrease net financial debt.

F-290 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 30 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Net financial debt/total capital ratio as of 31 December 2010 and 2009 is as follows:

2010 2009

Total financial liabilities 16.878.294 14.920.220 Cash and banks (10.049.327) (8.116.563)

Net financial debt 6.828.967 6.803.657 Equity 20.977.914 18.782.046

Net financial debt/total equity ratio 33% 36%

NOTE 31 - FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

Fair value of financial instruments

The following methods and assumptions are used to estimate the fair values of financial instruments:

Financial assets

Carrying values of significant portion of cash and cash equivalents are assumed to reflect their fair values due to their short-term nature.

Carrying values of trade receivables are assumed to approximate their fair values.

Financial liabilities

F-291 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 31 - FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES) (Continued)

In the framework of the methods and assumptions explained above, carrying and fair values of financial assets and liabilities as of 31 December 2010 and 2009 are presented in the following table: 2010 2009 Carrying Fair Carrying Fair value value value value Assets Cash and cash equivalents 12.603.625 12.613.533 9.835.785 9.837.682 Held-to-maturity financial assets 7.039.823 7.423.094 6.933.092 7.009.532 Loans and advances to customers 29.581.360 30.311.697 21.958.747 21.646.954

Liabilities Deposits 26.822.123 26.711.547 20.971.606 21.081.078 Financial liabilities 16.878.294 16.896.244 14.920.220 14.877.542

Fair Value Estimation

The classification of the Group's financial assets and liabilities at fair value is as follows:

The Group's assets and liabilities measured at fair value as of 31 December 2010 are as follows:

Assets Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 204.928 - - 204.928

Available-for-sale financial assets - Debt securities 2.254.171 636.766 - 2.890.937 - Equity securities 63.592 - - 63.592 Derivative financial instruments - 367.981 - 367.981

Total assets 2.522.691 1.004.747 - 3.527.438

Derivative financial instruments - 437.279 - 437.279

Total liabilities - 437.279 - 437.279

NOTE 32 - EARNINGS PER SHARE

2010 2009 Earnings per share: Profit for the period 3.138.400 2.640.588 Profit attributable to non-controlling interest (1.403.921) (1.211.378)

Profit attributable to equity holders of the parent 1.734.479 1.429.210 Weighted average number of shares with nominal value Kr 1 each 241.514.100.000 241.514.100.000

Earnings per share (Kr) 0,718 0,592

F-292 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 33 - SUPPLEMENTARY CASH FLOW INFORMATION

As of 31 December 2010 and 2009, supplementary information for the details included in the consolidated cash flow statements:

2010 2009 Changes in provisions: Provision for lawsuits 173.444 (1.706) Provision for warranty and assembly 13.752 11.219 Cost accruals for construction contracts 62.687 27.570 Insurance technical reserves 31.765 15.803 Provision for loans and doubtful receivables 712.444 1.397.974 Provision for employment termination benefits and Pension Fund 25.193 83.275 Provision for impairment on inventories (25.186) (14.712) Provision for impairment on property, plant and equipment (27.857) 4.403 Other provisions 2.672 161

968.914 1.523.987

Add back net interest income: Interest income from non-finance sector (Note 25) (537.719) (384.489) Interest income from finance sector (Note 4) (3.418.065) (3.954.445) Interest expense from non-finance sector (Note 25) 576.071 750.507 Interest expense from finance sector (Note 4) 1.683.375 1.961.193

(1.696.338) (1.627.234)

Net changes in the operating assets and liabilities: Finance sector: Reserve deposits at the central banks (765.712) 180.760 Receivables from finance sector operations (8.540.915) (976.209) Payables from finance sector operations 5.856.706 79.640 Financial assets (2.108.565) (183.389)

(5.558.486) (899.198)

Other: Inventories (806.912) 300.262 Trade receivables (434.519) 355.373 Blocked deposits (69.364) 108.602 Other assets (582.084) 200.743 Trade payables 3.500.521 646.781 Other liabilities 949.802 360.153

2.557.444 1.971.914

(3.001.042) 1.072.716

Cash and cash equivalents: Cash and cash equivalents (Note 5) 12.603.625 9.835.785 Cash and cash equivalents held for sale (Note 29) 91.955 12.878 Less: Reserve deposits at central banks (Note 5) (2.194.989) (1.429.277) Less: Blocked deposits (Note 5) (359.309) (289.945)

10.141.282 8.129.441 86

F-293 CONVENIENCE TRANSLATION INTO ENGLISH OF THE CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH (NOTE 2.6)

KOÇ HOLDİNG A.Ş.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 (Continued) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

NOTE 34 - EVENTS AFTER THE BALANCE SHEET DATE

USD8.000.000 and EUR100.500.000 portions of the loan obtained by Koç Holding in 2010 from a consortium including 21 financial institutions (Note 15) to meet various financing needs of Koç Group companies were repaid on 28 January 2011 before their maturity. The remaining USD and EUR portions of the related loan are repriced as Libor+2.25 and Euribor+1.75, respectively.

USD15.000.000 (total remaining portion) of the loan obtained by Koç Holding in 2009 from a consortium including 14 financial institutions (Note 15) to meet various financing needs of Koç Group companies was repaid on 19 January 2011 before its maturity.

Following the permissions of the Competition Board and the Energy Market Regulation Authority, transfer of 49,61% shares (with a nominal value of TL49.079 thousand) of Aygaz in Entek, a subsidiary of the Group, to AES Mont Blancs Holding BV, was completed on 28 February 2011. Total share transfer price of USD136.455.000 has been paid in cash to the Group. The related price will be subject to an adjustment in accordance with the net financial debt amount on the closing financial statements.

F-294 PRINCIPAL OFFICE OF THE ISSUER Koç Holding A.S¸. Nakkas¸tepe, Azizbey Sokak No:1 Kuzguncuk 34674, Istanbul Turkey JOINT LEAD MANAGERS BNP Paribas Citigroup Global Markets Limited 10 Harewood Avenue Citigroup Centre London NW1 6AA Canada Square United Kingdom Canary Wharf London E14 5LB United Kingdom Deutsche Bank AG, London Branch Merrill Lynch, Pierce, Winchester House Fenner & Smith Incorporated 1 Great Winchester Street One Bryant Park London EC2N 2DB New York, New York 10036 United Kingdom USA CO-MANAGER UniCredit Bank Austria AG Schottengasse 6-8 A-1010 Vienna Austria FISCAL AGENT, PAYING AGENT AND REGISTRAR TRANSFER AGENT Citigroup Global Markets Deutschland AG Citibank, N.A., London Branch Reuterweg 16 Citigroup Centre 60323 Frankfurt am Main 25 Canada Square Germany London E14 5LB United Kingdom LEGAL COUNSEL TO THE MANAGERS AS LEGAL COUNSEL TO THE MANAGERS AS TO ENGLISH AND TO TURKISH LAW AND TURKISH TAX UNITED STATES LAW COUNSEL Allen & Overy LLP Allen & Overy Danıs¸manlık Paksoy Ortak Avukat Bürosu One Bishops Square Hizmetleri Avukatlık Ortaklıg˘ı Sun Plaza London E1 6AD Büyükdere Cad. No:185 Bilim Sokak No: 5 K:14 United Kingdom Kanyon Ofis Binası Kat: 6, Maslak, 34398 Istanbul Ofis No: 1018-1021 Turkey 34394 Levent, Istanbul Turkey LEGAL COUNSEL TO THE ISSUER LEGAL COUNSEL TO THE ISSUER AS TO ENGLISH AND UNITED STATES LAW AS TO TURKISH LAW Clifford Chance LLP Yegin Avukatlık Bürosu 10 Upper Bank Street Kanyon Ofis Binası Kat. 10 London E14 5JJ Büyükdere Cad. No. 185 United Kingdom Istanbul 34394 Turkey INDEPENDENT AUDITORS OF THE ISSUER Güney Bag˘ımsız Denetim ve Serbest Muhasebeci Mali Müs¸avirlik A.S¸. a member firm of Ernst & Young Global Limited Büyükdere Cad. Beytem Plaza No:22 K:9-10 S¸is¸li 34381 Istanbul Turkey LISTING AGENT Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland Printed by RR Donnelley, 517637