Dear Shareholders,

We left a challenging year behind as we felt the economic slowdown significantly throughout 2009. Globally, wide-ranging public intervention applied nearly everywhere to support demand and lower uncertainty and systemic risk in financial markets. As a result, the world economies have emerged from the deepest recession of the recent history and the recovery process has begun by mid-year. However, rising fiscal deficits and high unemployment, unsolved problems in financial systems, ongoing uncertainties regarding the exit strategies from accommodative fiscal and monetary policies and households unwilling to borrow more in economies that suffered asset price busts suggest that it would take a long time for the global economy to completely recover and the recovery is going to be slow.

The global shock caused a deep recession in Turkey and the economy contracted by 8.4% in the first three quarters. But in the final quarter of the year it is expected that growth turned positive partly reflecting base effects but also the impact of counter-cyclical fiscal and monetary policies and stabilized global and domestic financial conditions. Nevertheless, in 2009 Turkish GDP declined by 4.7%. Despite the deep recession, Turkey did not require economic assistance from the IMF nor aid to its well capitalized banking sector. Thanks to reforms made after the 2001 banking crisis, the Turkish financial sector remained stable throughout last year’s economic crisis. There has also been no significant pick-up in dollarization or capital outflows. Sharp contraction in total demand and harsh decline in commodity prices led to a rapid decline in the rate of inflation and current account deficit. Inflation fell to a new low of 6.5% in 2009, compared to 10.1% in the previous year. Current account deficit narrowed to 2.3% of GDP in 2009 versus 5.7% in 2008. Interest rates fell to single digits for the first time in recent history. With its resilience in global crisis Turkey has succeeded to be among the few countries whose credit ratings were raised this year by international credit rating agencies.

Risk management rose to high priority last year. We significantly reduced inventory and debt levels through effective working capital management. This emphasis will continue in 2010. The high financial market volatility demands that we pay great attention to foreign currency risk. Accordingly, we prefer “Natural Hedging” as it is the most effective and efficient method, while we also utilize different hedging instruments wherever necessary. 

“Selectivity” was key in our investment decisions to implement our strategies. Planning our investments, “Necessity” and “Priority” were the main criteria in the short-term. 

We were more prudent than ever in cost management. We continuously made cost-cutting improvements and maintained our competitive position. We reviewed our processes, improved and widened the synergy implementations throughout the Group.

“Sustainability” has become an important concept for everyone. After Kyoto, where Turkey will make some commitments about carbon emissions, industrial and energy sectors will be permanently affected in the medium and long-term. We gained a competitive advantage in managing these risks by proactively customizing our reporting system accordingly as a pioneer in Turkey. Starting from 2010, identifying the targets, taking necessary steps and integrating “sustainability” concept to our corporate culture will gain priority in our agenda. 

We began 2009 with cautious expectations and conservative budgets. With our strong balance sheet, effective management approach taking the required steps in a timely manner and strong productivity culture, we are happy to see that we achieved a much better performance than the budgeted figures, especially in terms of profitability. 

We are pleased to report you the following results for the year 2009: 

• Consolidated revenues of US$ 12.2 billion,
• Consolidated EBITDA of US$ 2.6 billion with a 24% increase and
• Consolidated net income of US$ 813 million.

In 2009, we continued to invest in high-growth core businesses as energy and retail and the total investments of the Group was US$ 1,119 million. The following were main developments throughout 2009:

• Enerjisa Generation Co. continued its Phase 1 investments including Bandırma natural gas power plant with a 920 MW capacity which is planned to be operational by third quarter 2010, and nine hydroelectric and a wind power plant with a total capacity of 1,030 MW.  
  
  
• Enerjisa Generation Co. acquired three hydroelectric power plant projects with a total capacity of 563 MW to start as part of Phase 2 investments. Total Phase 2 investments capacity reached approximately at 2,000 MW.
  
  
• Enerjisa Distribution Co. completed the acquisition of Başkent Electricity Distribution Co. from Privatization Administration for US$ 1,225 in January 2009.
  
  
• We completed the spin-off of participations of Aksigorta, the non-life insurance subsidiary and  Exsa A.Ş., the trading subsidiary. Sabancı Holding increased its direct ownership in Akbank to 40.75% and also received a 49.83% ownership position in Avivasa, the life and pension business shares. Aksigorta, now a pure insurance business, is ready for any strategic alternatives.
  
  
• In line with our strategy to focus on our core businesses, we sold our 65% equity stake in Toyotasa, our passenger car distribution subsidiary, for US$ 85 million.
  
  
• Teknosa, the electronics retail subsidiary, increased its market share from 12% to 15% in spite of the decreasing market size and increasing competition. The number of stores reached at 244 and net sales area at 81.000 m2. 
  
  
• Temsa Global presented the new identity and logo of the “Temsa” brand to public with a launch event organized at Busworld Kortrijk.  
  
  
• As part of its strategy to become a regional player, Çimsa, our cement subsidiary, acquired 60% equity stake in Medcon, an Italian cement company which has premises in Trieste port, for € 3.5 million. 

As the leading Group in Turkey, we continued to improve corporate governance practices:

• Identifying our main policies that will create long-term value for our stakeholders and provide sustainability for the society and environment, we organized a search conference, “Sabancı Holding Corporate Sustainability,” with participation of our corporate management. 
  
  
• We provided important input for our medium to long-term plans, continuing the strategy formulation studies that plan for a multi-scenario future. 
  
  
• “Sabancı Golden Collar Awards” were organized in six different categories, in order to reward the Sabancı Group companies and employees, share the best practices and motivate the development of the Group.
  
  
• Total savings within the Group through “Lean 6 Sigma” implementations increased more than 70% compared to a year ago to TL 21 million. 

We have to consider that as we expect a slow recovery to start in 2010, risks will als continue along with high volatility at financial markets. Therefore prudency with effective working capital and risk management, meanwhile following the upcoming opportunities will remain our priority. Our vast management experience under uncertainty gives us a strength implementing our plans of multi-scenario future. We believe that, with our strong management team, our successful business track record for more than half of a century, our strong financial structure and the Sabancı brand and reputation that now extends beyond Turkey, we will continue to create value for our sharehol ders. We are confident that we will achieve higher growth with a well-balanced business portfolio and further strengthen our leadership position.

We are grateful to all our staff, business partners, customers and shareholders for their faith in our vision and contribution to our success.

Best regards,