At Koch, compliance is not only an MBM® Guiding Principle, it is a key condition for long-term success.

“Thanks to employee efforts, we’ve come a long way in preventing and mitigating incidents,” said Tom Butz, Koch Industries’ director of compliance and ethics for the past five years. “But striving for 10,000 percent compliance requires that we manage the risks in our businesses that could lead to non-compliance.

“So, for us, compliance goes beyond just completing training on time. We need employees to make good decisions, prioritizing their efforts on those risks with the potential for high consequences,” Butz said.

“Our new Code of Conduct is one of the primary tools for equipping employees to make the right decisions every time.”

CODE OF CONDUCT

It has been seven years since Koch’s Code of Conduct was updated. Since then, there have been numerous changes in laws, compliance standards and policies, as well as updates of the KII Vision and MBM Guiding Principles.

“With the addition of Molex, we were headed toward having five versions of the Code,” said Bethany Ziegler, the commercial compliance leader for KII. “So we saw this as an opportunity to not

THE QUARTERLY NEWSLETTER OF KOCH COMPANIES

Discovery

JUNE 2015

THIS ISSUE...

5 Koch at a glance

7 Bureaucracy in the workplace

9 Koch jobs study

12 Perspective: Charles Koch

The value of compliance

only standardize the code for everyone, but remove waste from the process.

“We also wanted to increase its usefulness and accessibility. That’s why we’re making it available electronically and as a mobile app in more than two dozen languages.”

Rollout of the new Code of Conduct will begin this summer.

THE VALUE OF COMPLIANCE

Recent events illustrate the value of strong compliance performance.

In 2012, the leaders of Georgia-Pacific’s gypsum business noticed that many of its competitors in the wallboard market were sending customers price announcements quite different from those in the past.

The gypsum business management team feared these announcements could give rise to accusations of “price-fixing.”

So, the team worked with GP’s legal and compliance officers, who made sure that GP’s pricing was not only independent, but announced in a way that couldn’t be misconstrued as violating antitrust law.

When a state attorney general’s office began investigating drywall pricing, GP was able to provide ample documentation of its innocence.

Private plaintiff’s lawsuits against the wallboard industry followed. But after

sharing its records with plaintiff’s counsel, GP was ultimately not named as a defendant.

GP’s regard for the Guiding Principles — especially 1 and 2, Integrity and Compliance — saved untold hours of costly litigation and helped prevent damage to the company’s reputation.

MEASURING SUCCESS

“Our compliance programs are designed to help employees identify and mitigate risks,” said Butz. “But our success is ultimately determined by whether or not every employee ‘owns’ compliance.

“All of us need to make sure we understand and manage the compliance risks we face, and know when to stop, think and ask.

“As in all areas of business performance, we are relying on our people for compliance success. They are the key to achieving our best possible compliance performance, which will create the most value for employees, the business and society.”

2

After 40 years and seven months (and four owners), I’ll be retiring from the Camas Mill next week. I’ve seen a lot of change here through the years and am proud that the mill is thriving and vital.

Before I leave, I wanted to thank you for your support of the Camas Mill and also for MBM®. I have learned so much from MBM that has translated into my home life and my relationships.

I am proud to say that I work for Georgia-Pacific at the Camas Mill and will continue being a part of the Service Force as we support the community and the needs of this area.

Thank you, Mr. Koch, for believing in us and for supporting us.

Ann Bulletset

Accounting specialist

GP Consumer Products

Camas, Washington

Letters and other submissions become the property of Koch Industries, Inc. and may be reproduced in whole or in part, including the author’s name, for any purpose and in any manner. Letters may be edited for length or clarity.

EDITORIAL BOARD

Susan Armitage

Melissa Cohlmia

Philip Ellender

Rich Fink

Jeff Gentry

Greg Guest

Charles Koch

Steve Lombardo

Walt Malone

Dave Robertson

QUESTIONS? COMMENTS?

Email us at:

Discovery@kochind.com

DISCOVERY APP

Download the Discovery

newsletter app for news

that comes to you.

www.KOCHind.com

DiscoveryJune 2015

Volume 21 | Number 2

© 2015 Koch Industries, Inc. Koch is an EOE. M/F/D/V.

“According to media reports, the planned price tag for Koch operations in the 2016 elections is going to be $889 million.”

“They’ve already announced that they’re planning to spend almost $1 BILLION on the 2016 elections.”

“Why on earth would you two want to give all that money to the idiots club? You could give every person in America $2 million and still save dollars.”

These comments are excerpts from our opposition’s political fundraising letters and an email sent to Koch Industries. Although they are biased and wildly inaccurate (that figure should be $2 per person, not $2 million), they do raise some interesting questions.

Is it true that Koch is spending “almost $1 billion” on next year’s elections?

I watch a lot of television at night, including the Nature Channel, Discovery and some others. One thing I have noticed is that these shows exist based on the donations of many others, such as David Koch.

I just wanted to take an opportunity to say “thank you” for your generosity and thoughtfulness that allow these fine shows to be created and aired for the general public. It’s greatly appreciated.

David Marchetti

Commerce Security Services

Newtown, Connecticut

Georgia-Pacific has been a long-time supporter of the United Way in its facility communities across the country. But on March 26, it made what may be its most unusual United Way donation ever.

At the United Way of the Mid-South annual meeting in Memphis, Tennessee, in March, GP Cellulose surprised more than 700 attendees by announcing the donation of its 37,000-square-foot Memphis office building.

In addition to the building, valued at $1.3 million, GP Cellulose donated $100,000.

The company had owned the three-story office building since acquiring Buckeye Technologies in 2013. UWMS plans to use the facility as its new headquarters and will move in later this year.

Shannon Brown, UWMS chairman, called it “a historic day [for] our United Way.”

Not even close. Here’s what’s actually happening:

Twice a year, Koch Industries, along with others, helps sponsor a seminar hosted by Freedom Partners for those interested in promoting freedom-based solutions to societal problems. Hundreds of seminar attendees have decided to contribute to these efforts by supporting a wide variety of organizations.

It is their hope to raise $889 million by the end of 2016, about two-thirds of which will help support research and education programs, scholarships and other efforts designed to change policies and promote a culture of freedom in the United States.

That total includes the money that will be donated to efforts such as the United Negro College Fund, Youth Entrepreneurs®, criminal justice reform and other worthy causes that help people improve their lives.

The remaining one-third will help support a variety of electoral efforts, including presidential, congressional, state and local races. The total amount spent on the various elections will be determined by the individual donors.

“Given the control that many politicians want over our day-to-day lives, political spending has become increasingly important to protect the freedoms that Americans have traditionally enjoyed,” said Charles Koch.

“This is true whether we like it or not. That’s why so many people are contributing to this effort.”

Postal Pipeline

3

QUESTIONS? COMMENTS?

Email us at:

Discovery@kochind.com

São Paulo, Brazil – From the Americas to Asia and from Australia to Africa, drought and water shortages have once again become a serious problem. To help share knowledge about ways to combat this recurring global issue, Brazil’s Ministry of Environment recently held an international seminar on water shortage management, conservation strategies and technology.

When Sergio Ribeiro, commercial director for Koch Membrane Systems in Brazil, received an invitation to the event, he quickly contacted the KMS home office in Wilmington, Massachusetts.

In less than three weeks, KMS arranged for Henia Yacubowicz, its process and field service director, to present at the global conference. Yacubowicz explained how KMS’s unique technology can be used for both water and wastewater treatment, helping reduce water demand.

“Here in Brazil — especially in the southeast — we are facing a severe water shortage,” Ribeiro said. “It’s great to know our company can make a real difference in managing this problem.”

Look for an upcoming feature about KMS efforts in São Paulo on WeAreKOCH.com.

Singapore – In 1829, a Scottish literary critic claimed “the sun never sets” on the British empire. Today, the same is true for Koch Business Solutions, which has just expanded and upgraded its service desk capability in Singapore.

“This is part of our ‘follow-the-sun’ global vision for our service desk centers,” said Richard Swan, president of KBS. “We want Koch company employees to be able to get IT help anywhere at any time.”

Until now, most service calls were routed to Wichita, where second- and third-shift workers answered the phones after the office had closed.

“As of March 15, we have been servicing Asia-Pacific calls with employees in those time zones. That has meant a big quality-of-life improvement for employees in Wichita and a more efficient resource for our employees in Asia.”

“This is a big improvement for all concerned. For the first time, we are providing truly global service,” Swan said.

Bangalore, India – In many respects, Molex is the most global of all Koch companies. It operates 52 manufacturing locations in 17 countries and more than 70 percent of its revenue comes from outside of the United States.

With such a worldwide presence, Molex has an almost constant need for technical innovation and support. To help provide the engineering and product development support Molex’s customers require, the company recently opened a Global Technical Center in Bangalore.

More than 100 Molex employees are already working at the site, which has an open, modern design that facilitates improved knowledge sharing and collaboration.

“We made a significant investment in the Global Technical Center’s design and infrastructure, including high-speed networking capabilities and collaborative tools, because it will help support Molex design centers all over the world,” said Martin Slark, CEO of Molex.

“The GTC will provide cost-effective, routine engineering, technical and IT support services that will help Molex accelerate innovation in new products and solutions.”

International News

4

New websites for KochLast year, Koch Industries began an earnest effort to help employees and people outside of Koch better understand the company.

This year, the company has expanded that effort by launching a pair of important websites. One is focused on the employees of Koch companies, the other on sharing news about the company in more engaging ways.

“We want people to not only know who we are, but what we stand for and what we are doing to help people improve their lives,” said Steve Lombardo, chief communications and marketing officer for KII.

WEAREKOCH.COM

WeAreKOCH.com marks the first time Koch Industries has established an external site highlighting individual employees of Koch companies.

The new site follows on the heels of last year’s well-received “We Are Koch” TV campaign, which was seen by millions and generated significant traffic at KOCHcareers.com.

The Koch company employees featured on the site include an Air Force veteran, former NCAA athletes, a fifth-generation Koch cowboy (see page 9) and David Koch himself.

WeAreKOCH.com provides personal stories about Koch products, community projects and people in Koch-supported programs, such as Youth Entrepreneurs (see page 11).

“This is where people get to tell their stories about working at Koch or with Koch,” Lombardo said. “It really personalizes how we’re making the world a better place.”

KOCHNEWS.COM

Big changes are also underway in how Koch Industries shares news about the company online. KOCHnews.com, which debuted June 10, emphasizes visuals and interactivity.

“It’s a visual world and KOCHnews delivers content in a visual way,” said Melissa Cohlmia, managing director of corporate communications for Koch Industries. “Visitors to the site will still find news releases and news stories, but KOCHnews also offers lots of photos, videos, infographics, slide shows and other features. It’s an interesting and engaging site that will be constantly changing.”

“These two new websites — KOCHnews.com and WeAreKOCH.com — are an important part of our enhanced communication efforts,” Lombardo said.

“We’re doing our best to expand Koch’s public presence in a meaningful way.”

As the October 13 publication date for Charles Koch’s new book, “Good Profit,” approaches, Lombardo says the company will be doing even more to help communicate Koch’s corporate vision.

“We want people to understand that our goal is to succeed by creating real value for others,” Lombardo said. “It’s our employees who make that happen, so it makes sense that we put them in the spotlight.”

It’s our employees who make it

happen, so it makes sense that

we put them in the spotlight.

KOCHind.com, the company’s

first website, was registered

on October 28, 1994. D-Net,

the company’s intranet site for

employees, launched June 1, 1995.

5

EXPENDITURES SINCE 2003

AND OTHER CAPITAL

INVESTED IN ACQUISITIONS

$115 BILLION IN ANNUALREVENUE**

What is now Koch Industries, Inc. began

as Wood River Oil and Refining Co.

in 1940. Based in Wichita, Kansas,

Koch Industries is one of the largest

private companies in America.*

REINVESTED INTHE COMPANY

$70 BILLION

APPROX.

KOCH AT A GLANCE2015

GLOBAL PRESENCECOUNTRIES

MORE THAN

60

EMPLOYEES WORLDWIDE

MORE THAN

100,000

9,800 4,900

*According to Forbes Magazine.

**Our revenues fluctuate with the price of commodities. They have been estimated by Forbes as high as $115 billion.

INDUSTRYAREAS

refining, chemicals & biofuels& ingredients

forest & consumer products

fertilizers

polymers & fibers

process & pollution control equipment & technologies

electronic components

commodity trading

minerals

energy

ranching

glass

investments

GRANTED PATENTSPATENTS PENDINGThese inventions cover processes, products and

technologies used in clothing, shelter, consumer goods,

transportation, electronics, energy production and more.

includes design patents

RECOGNIZING

930AWARDSS I N C E 2 0 0 9

MO RE TH AN

SAFETYENVIRONMENTAL EXCELLENCE

CUSTOMER SERVICECOMMUNITY STEWARDSHIP

INNOVATION

60,000IN THE U.S. – 50 STATES AND THE DISTRICT OF COLUMBIA

ABOUT

90 % EARNINGS

EXPENDITURES SINCE 2003

AND OTHER CAPITAL

INVESTED IN ACQUISITIONS

$115 BILLION IN ANNUALREVENUE**

What is now Koch Industries, Inc. began

as Wood River Oil and Refining Co.

in 1940. Based in Wichita, Kansas,

Koch Industries is one of the largest

private companies in America.*

REINVESTED INTHE COMPANY

$70 BILLION

APPROX.

KOCH AT A GLANCE2015

GLOBAL PRESENCECOUNTRIES

MORE THAN

60

EMPLOYEES WORLDWIDE

MORE THAN

100,000

9,800 4,900

*According to Forbes Magazine.

**Our revenues fluctuate with the price of commodities. They have been estimated by Forbes as high as $115 billion.

INDUSTRYAREAS

refining, chemicals & biofuels& ingredients

forest & consumer products

fertilizers

polymers & fibers

process & pollution control equipment & technologies

electronic components

commodity trading

minerals

energy

ranching

glass

investments

GRANTED PATENTSPATENTS PENDINGThese inventions cover processes, products and

technologies used in clothing, shelter, consumer goods,

transportation, electronics, energy production and more.

includes design patents

RECOGNIZING

930AWARDSS I N C E 2 0 0 9

MO RE TH AN

SAFETYENVIRONMENTAL EXCELLENCE

CUSTOMER SERVICECOMMUNITY STEWARDSHIP

INNOVATION

60,000IN THE U.S. – 50 STATES AND THE DISTRICT OF COLUMBIA

ABOUT

90 % EARNINGS

EXPENDITURES SINCE 2003

AND OTHER CAPITAL

INVESTED IN ACQUISITIONS

$115 BILLION IN ANNUALREVENUE**

What is now Koch Industries, Inc. began

as Wood River Oil and Refining Co.

in 1940. Based in Wichita, Kansas,

Koch Industries is one of the largest

private companies in America.*

REINVESTED INTHE COMPANY

$70 BILLION

APPROX.

KOCH AT A GLANCE2015

GLOBAL PRESENCECOUNTRIES

MORE THAN

60

EMPLOYEES WORLDWIDE

MORE THAN

100,000

9,800 4,900

*According to Forbes Magazine.

**Our revenues fluctuate with the price of commodities. They have been estimated by Forbes as high as $115 billion.

INDUSTRYAREAS

refining, chemicals & biofuels& ingredients

forest & consumer products

fertilizers

polymers & fibers

process & pollution control equipment & technologies

electronic components

commodity trading

minerals

energy

ranching

glass

investments

GRANTED PATENTSPATENTS PENDINGThese inventions cover processes, products and

technologies used in clothing, shelter, consumer goods,

transportation, electronics, energy production and more.

includes design patents

RECOGNIZING

930AWARDSS I N C E 2 0 0 9

MO RE TH AN

SAFETYENVIRONMENTAL EXCELLENCE

CUSTOMER SERVICECOMMUNITY STEWARDSHIP

INNOVATION

60,000IN THE U.S. – 50 STATES AND THE DISTRICT OF COLUMBIA

ABOUT

90 % EARNINGS

6

‘06 ‘12

‘07 ‘11 ‘13

‘10

‘05HUNTSMAN CORPORATIONOLEFINS & POLYMERS

COEN COMPANY

FIVE INTERNATIONAL PAPERFACILITIES

FIRST OF SIX ETHANOL PLANTS

GRANT FOREST PRODUCTS ASSETS

PARSONS & WHITTEMOREALABAMA MILL ASSETS

GEORGIA-PACIFIC

SIMPLOT CANADAASSETS

HAMWORTHYCOMBUSTION GROUP

J&H BUNN LIMITED

AGROTAIN INTERNATIONALASSETS

ASHBURN HILL CORPORATIONBUCKEYE TECHNOLOGIESMOLEX TEMPLE-INLAND BUILDING PRODUCTS ASSETS

FRAC-CHEMODESSA-ECTOR POWER PARTNERS

44.4% STAKE INGUARDIAN INDUSTRIES

‘04INVISTA PURON

GP PULP CNC

BP SPECIALTY CHEMICALS ASSETS

‘14PETROLOGISTICS LP

AGRIUM INC. TURF & ORNAMENTAL ASSETS

HUNT FOREST PRODUCTS, INC.LOUISIANA CHIP MILL ASSETS

WESTEC S.R.L.

FLAMAR CAVI ELETTRICI S.R.L.

www.KOCHind.com

Koch Supply & TradingGlobally trades crude oil, refined petroleum products, gas liquids, natural gas, liquefied natural gas, power, renewables, emissions and metals.

Koch MineralsEngages in dry-bulk commodities, exploration and production, oilfield products and services and other investments.

Matador Cattle CompanyOperates three ranches: Beaverhead in Montana, Matador in Texas, and Spring Creek in Kansas. The ranches total more than 460,000 acres of owned or leased land. The ranches wean about 9,500 calves annually and support more than 12,000 cattle.

Koch Chemical Technology GroupDesigns, manufactures, installs and services process and pollution control equipment, and provides engineering services for industries and municipalities worldwide.

INVISTAGlobally produces chemical intermediates, polymers and fibers. The company’s advantaged technologies for nylon, spandex and polyester are used to produce clothing, carpet, car parts and countless other everyday products. Leading brands include LYCRA®, COOLMAX®, CORDURA®, STAINMASTER® and ANTRON®.

Georgia-Pacific Manufactures and markets bath tissue, paper towels and napkins, tableware, paper-based packaging, office papers, cellulose, specialty fibers, nonwoven fabrics, building products and related chemicals. Familiar consumer brands include Quilted Northern®, Angel Soft®, Brawny®, enMotion®, Sparkle®, Vanity Fair®, Mardi Gras® and Dixie®.

Koch Pipeline CompanyOwns or operates more than 4,000 miles of pipelines that transport crude oil, refined petroleum products, natural gas liquids and chemicals.

Flint Hills ResourcesProduces and markets gasoline, diesel, jet fuel, asphalt, ethanol, biodiesel, liquefied natural gas, olefins, polymers, intermediate chemicals, as well as base oils, inedible corn oil and distillers grain.

Molex Manufactures electronic, electrical and fiber optic interconnection systems. Offers about 100,000 products to a number of markets, including mobile devices, infotech, consumer electronics, automotive, telecommunications, industrial, medical, military and aerospace.

Koch Ag & Energy Solutions Provides value-added solutions for the agriculture, turf and ornamental, energy and chemical markets.

PARTIAL LIST OF ACQUISITIONS BY KOCH COMPANIES

‘0350% STAKE INEXCEL PARALUBES

FARMLAND INDUSTRIESFERTILIZER ASSETS

© 2015 Koch Industries, Inc. All rights reserved. 06.2015

7

What are

our biggest

opportunities?

What are our

biggest problems

or issues? What

are we going

to do next?

Focusing on

these things will

reduce wasteful

activities.

Fighting bureaucracy and wasteby Dave Robertson, President and COO, Koch Industries, Inc.

Weight gain is a touchy subject for most people. Many of us put on a few pounds during the winter. Then, if we fail to work off those pounds during the summer months, we add even more pounds the next winter. After a few years of this, the weight gain can be significant.

This is similar to the way bureaucracy can grow in a company.

Bureaucracy is a system or process in which the need to follow rigid protocol or complex procedures impedes efficiency, innovation and effective action.

We think of government agencies as being bureaucratic, which is often true, but our company is not immune. In fact, bureaucracy is continually creeping into all of our Koch businesses.

We tend to complicate things unnecessarily by adding more steps to a procedure, more people to meetings, more charts or pages to a presentation and more modules to training programs.

Such swelling is usually well-intentioned, but the reality is that it is wasteful and slows down effective action. It makes things bigger but not better.

FOR EXAMPLE

We all know the importance of compliance and that training is essential to good performance. But if we keep adding new training elements without eliminating or modifying the old ones, we can end up with dozens of mandatory training modules that are not necessarily effective.

Meetings should cover the information that

leads to better decisions, rather than filling the alotted time with what’s nice to know.

We’re all flooded with information every day. We don’t need more information, we need information that can be turned into knowledge — the kind of information that enables us to improve and make better decisions.

How many of us receive daily or weekly reports that we barely look at or don’t review at all? Why not let the person who produces the report know you are not using it, thus freeing them to do work of higher value?

REALITY CHECK

To fight the tendency toward bureaucracy and waste, let’s continually challenge our own assumptions. Never assume something has to happen just because

“we have always done it that way.”

Instead, ask yourself if the activity helps us achieve our vision of improving the value we create for our customers, society and the company. If we forget the need for customer focus, we end up just doing business with ourselves — which is not profitable!

Needless bureaucratic activity drives up costs while driving down customer satisfaction. Our customers will look elsewhere if we become less efficient, hard to work with, or too slow in anticipating and responding to their wants and needs.

SOLUTIONS

Setting roles and decision rights by comparative advantage is essential for fighting bureaucracy. The failure to do so slows down the decision-making process, leads to poor decisions and is another form of bureaucratic waste.

To help reduce waste, ask yourself: What are our biggest opportunities and what are we going to do to pursue them? What are our biggest problems or issues and what are we going to do about them? What are we going to do next?

In keeping with our challenge culture, I encourage you to speak up whenever our activities are not adding value. Stay focused on opportunities and next steps. Seek information that helps us make better decisions rather than trying to prepare for every question your boss might ask. Don’t just reduce waste, but eliminate it whenever possible.

When it comes

to procedures

and processes,

we often add but

seldom eliminate.

Dave Robertson

during a recent Q&A

session in Wichita.

Every month, Dave

schedules a lunch

meeting with a

cross-section of Koch

company employees.

8

Their home on the rangeJ.D. Russell is not just a cowboy. He’s a fifth-generation cowboy whose mother was born on Koch’s Matador Ranch in Texas.

In 1987, a year after graduating from Texas Tech with a degree in agricultural economics, J.D. married his wife, D’Anna (who also grew up in a ranching family), and was hired at the Matador. He worked at that historic ranch, and as part of the management team for Koch’s feed yards in the early 1990s, before becoming manager of Koch’s Spring Creek Ranch in Kansas.

Managing Spring Creek — the first ranch purchased by Fred Koch and the place where his and Mary Koch’s ashes were scattered — is a special challenge for J.D. and the two full-time cowboys who work there year-round.

Located in the southern range of the Flint Hills, an hour’s drive east of Wichita, it is by far the smallest Koch ranch (about one-tenth the size of the Matador), so the number of cattle it can support is limited. It also has unique challenges.

Spring Creek has a relatively short grass-growing season, which poses a nutritional challenge for the herd. Without a steady

diet of good nutrition, cattle won’t reproduce as readily.

Although he got used to working outdoors as a youngster, Russell admits that Kansas weather was somewhat surprising. “In winter, it stays colder for longer around here than it does in Texas,” Russell said. “I thought it was only windy on the Rolling Plains of Texas, but it can sure blow up here, too.”

COWBOY KNOWLEDGE SHARING

In April, J.D. was invited to make a presentation at the 2015 Beef Conference and Ag Tour hosted by the Texas A&M AgriLife Extension Service in Canadian, Texas.

“There were a lot of cattle producers there from Texas and Oklahoma,” Russell said, “and the other speakers were pretty well known in the cattle industry. My presentation described how we’re using creative destruction at the ranch to develop the right beef cow for today’s consumer.”

As J.D. explained at the conference, Spring Creek Ranch is now the seed stock operation for Matador Cattle Company’s Akaushi business. Akaushi are a Japanese

Find more stories at

breed famous for the superior flavor and heart-healthy qualities of their beef, two features that appeal to many consumers — and that warrant a premium price.

Full-blood Akaushi, Hereford and Angus are bred and raised at Spring Creek before select bulls are shipped to Matador Cattle Company’s other ranches in Montana and Texas. Kyle Hardin and Bob Kilmer, the managers of Koch’s Beaverhead and Matador ranches, make the trip to Kansas personally to select the bulls for those ranches.

“What J.D. and his team are doing at Spring Creek is essential for our success,” said Kyle Hardin, (who also happens to be a high school classmate of Russell’s). “He understands genetics really well and can raise a better bull than we could buy on the open market.”

“It’s our point of view,” Russell said, “that we can produce these breeding animals more economically without having to drive all over the country to try to find and purchase them.

“That’s MBM® in action.”

9

U.S. JOBS & ECONOMIC IMPACT STUDY

KOCH COMPANIES 2014

JOBS COMP

EARNINGS

www.KOCHind.com | www.KOCHcareers.com

EMPLOYEES

50 STATESIN

and the District of Columbia

& BENEFITS

$13 BILLIONTOTAL

200,000MORE THAN

Employees

1 - 399

400 - 1,299

1,300 - 2,999

3,000 +

105

TOP 10 STATESJOBS

Multiplier effects arise from Koch companies’ spending (indirect impacts) and from employees’ payroll expenditures (induced impacts).

Data source: Harrah Analytics, data as of December 31, 2014. Direct jobs include those at Koch companies in 50 U.S. states and the District of Columbia. Total jobs were calculated using RIMS II multipliers produced by the U.S. Department of Commerce, Bureau of Economic Analysis. Shareholders and executives of Koch companies are not included in jobs and compensation and benefits totals.

© 2015 Koch Industries, Inc.

COMP& BENEFITS

TEXAS

GEORGIA

ALABAMA

WISCONSIN

OREGON

ARKANSAS

SOUTH CAROLINA

FLORIDA

LOUISIANA

KANSAS

TEXAS

GEORGIA

KANSAS

ALABAMA

ILLINOIS

WISCONSIN

ARKANSAS

OREGON

FLORIDA

SOUTH CAROLINA3,558

2,377

2,147

3,427

1,846

2,946

2,017

2,632

6,930

7,615

$162M

$193M

$165M

$257M

$239M

$277M

$247M

$452M

$774M

$775M

DIRECT

TOTAL DIRECT, INDIRECT & INDUCED

M Million B Billion

36,462

26,575

12,429

10,356

8,637

8,621

8,435

8,426

8,032

7,410

$2.36B

$1.88B

$716M

$709M

$644M

$572M

$530M

$489M

$472M

$459M

www.KOCHind.com | www.KOCHcareers.com

11

Looking Back

TOP 10 STATESJOBS

Multiplier effects arise from Koch companies’ spending (indirect impacts) and from employees’ payroll expenditures (induced impacts).

Data source: Harrah Analytics, data as of December 31, 2014. Direct jobs include those at Koch companies in 50 U.S. states and the District of Columbia. Total jobs were calculated using RIMS II multipliers produced by the U.S. Department of Commerce, Bureau of Economic Analysis. Shareholders and executives of Koch companies are not included in jobs and compensation and benefits totals.

© 2015 Koch Industries, Inc.

COMP& BENEFITS

TEXAS

GEORGIA

ALABAMA

WISCONSIN

OREGON

ARKANSAS

SOUTH CAROLINA

FLORIDA

LOUISIANA

KANSAS

TEXAS

GEORGIA

KANSAS

ALABAMA

ILLINOIS

WISCONSIN

ARKANSAS

OREGON

FLORIDA

SOUTH CAROLINA3,558

2,377

2,147

3,427

1,846

2,946

2,017

2,632

6,930

7,615

$162M

$193M

$165M

$257M

$239M

$277M

$247M

$452M

$774M

$775M

DIRECT

TOTAL DIRECT, INDIRECT & INDUCED

M Million B Billion

36,462

26,575

12,429

10,356

8,637

8,621

8,435

8,426

8,032

7,410

$2.36B

$1.88B

$716M

$709M

$644M

$572M

$530M

$489M

$472M

$459M

www.KOCHind.com | www.KOCHcareers.com

YE: Opening avenues of opportunityIn 1991, Liz and Charles Koch took a chance by investing in a unique idea: an eight-week business class for high school students developed by the National Foundation for Teaching Entrepreneurship.

“There had never been a class like that in our schools before,” recalls Liz Koch. “It was designed to give students — many of them at-risk — a chance to develop the values, passion and skills needed to succeed in the marketplace and in life.”

The first entrepreneurship class, hosted at North High School in Wichita, Kansas, had just 19 students.

They were taught the fundamentals of economics and starting a business, and got hands-on experience writing and implementing a business plan. In the process, those students learned how to think like entrepreneurs.

For many, the class was a revelation. As one student put it, the program “taught me that no matter what cards you are dealt, you can still change your life if you truly want to.”

Four years later the program was renamed Youth Entrepreneurs of Kansas. In 2011, the name was shortened from YEK to YE.

GROWTH CURVE

By 1997, YEK had produced more than 1,300 graduates and developed an effective alumni program for connecting students with business opportunities. From 1997 to 2000, it doubled in size.

New classes were opened in other Kansas school systems, including Topeka (1998), Kansas City (2005) and Garden City (2010). Expansion into Missouri was next, followed by the launch of YEGeorgia in 2006, the year after the GP acquisition.

Helping fuel much of that growth was Biz Bang, a creative fundraiser chaired by Liz Koch. Last year, the Wichita event generated more than $820,000 for YE programs.

Each spring, it has become a tradition for students to participate in a business plan competition, with categories ranging from service and technology to art and agriculture. Winners have the chance to earn capital for education and personal or business development. (In January 2014, one alumna received funding from ABC TV’s popular show “Shark Tank.”)

EVOLUTION CONTINUES

Today, Youth Entrepreneurs teaches business and entrepreneurial education in 41 schools in Kansas and Missouri, and has more than 13,000 alumni. YEGeorgia is now in every public high school in Atlanta and is attracting a broad base of corporate support for its growing programs.

An online curriculum debuted in 2013 and more than three dozen summer partnerships have been created with various employers. More than 200 business professionals have volunteered to help mentor YE students in the classroom.

“When all this started, our goal was to help students become productive members of society, capable of making their own lives — and the lives of others — better,” said Liz Koch.

“YE has helped thousands of students in three states achieve that goal. Just imagine what it can do when it goes nationwide!”

L-R, from top:

Evander Holyfield

was a special guest

at YEG’s annual

fundraiser in Atlanta.

YE students learn

important lessons in

unique ways.

Liz and Charles Koch

have supported

Youth Entrepreneurs

for almost 25 years.

youthentrepreneurs.org www.yegeorgia.org

Noteworthy

USA vs YOU – The Flood of Criminal Laws Threatening Your Liberty by The Criminal Law Reform Coalition

When 11-year-old Skylar Capo saw a sick woodpecker about to be eaten by a cat, she asked her

mother’s permission to rescue the bird and nurse it back to health.

Skylar’s reward for this thoughtful action was a visit from an undercover U.S. Fish and Wildlife Services agent who delivered a $535 fine notice and told Skylar’s mother she faced up to a year in prison for violating the Migratory Bird Treaty Act.

Ashley Smithwick, a 17-year-old student athlete with a 3.5 GPA, was leaving for school when she mistakenly picked up her father’s lunch sack instead of her own. Because it contained a small paring knife he used to slice apples, she was suspended from school for the remainder of her senior year and charged with a Class 1 misdemeanor.

These are just two examples from an informative booklet detailing the flood of criminal laws that now threaten the liberty of unsuspecting Americans.

Mark Holden, KII’s general counsel, and Charles Koch, KII’s chairman and CEO, are speaking out about the need to reverse this senseless trend.

www.USAvsYOU.com

Let the punishment

match the offense.–Cicero

12

Perspective

Charles KochChairman and CEO, Koch Industries, Inc.

America’s founding fathers had a unique vision for the United States. As the Declaration of Independence famously put it, this country was conceived as a place where people could enjoy “unalienable Rights,” including “Life, Liberty and the pursuit of Happiness.”

These concepts are much more than just words to me. I believe the greatest gift we can receive or pass on is the opportunity to find and pursue our passion, and, in doing so, make a difference by helping others improve their lives.

It seems to me we’re now losing much of the vision our founders fought so hard to establish. Time and time again, government policies have made it tougher for people to realize their potential.

This change creates some serious consequences, especially for the least-advantaged Americans, who now face more obstacles than ever in their struggle to develop and apply their unique talents and abilities.

To remove these obstacles, we need to revise poverty-creating regulations and abolish corporate welfare, reform our approach to education and enact criminal justice reform.

OVERCOMING OBSTACLES

Consider the challenges of starting a small business. Most would-be entrepreneurs have very little capital. To raise money, many will pledge or mortgage whatever assets they have; others will ask for a small business loan.

In the past, community banks usually made such loans. But the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010, put a particular burden on local lenders.

Community banks now face higher compliance costs, more complicated regulations and some strong disincentives to make traditional loans. As Forbes bluntly put it: “Dodd-Frank is killing community banks.”

When small borrowers have no local options, they are forced to turn to bigger banks for help, where they have even less of a chance of getting a loan.

Regressive and anti-competitive regulations are also stalling progress. In particular, licensure requirements (especially at the state and local level) have become a huge obstacle.

Millions are now denied jobs in more than 100 lower-income occupations because of unnecessary licensing requirements, months of mandated training and unaffordable fees.

At the corporate level, excessive permitting requirements (such as a decade-long approval process for a new facility) are very anti-competitive. Such requirements not only prevent the creation of jobs, they protect existing businesses from competition and keep out new entrants, which is a form of corporate welfare.

CORPORATE WELFARE

Even as the little guy is getting stiff-armed, the government has opened its arms to corporate cronyism by subsidizing big banks and corporations through the tax code, mandates, protective tariffs and so on.

I believe this corporate welfare has created a two-tier system with far more “have-nots” than “haves.”

Too many CEOs owe their profits to government “gimmes” rather than the creation of real value by helping others improve their

lives. This is the major cause of so much profit being bad rather than good (the subject of my upcoming book).

Speaking of books, another troubling area is education, which should be a path for overcoming obstacles.

Having an effective education that imparts the skills and values needed to make a contribution in society is essential for success.

But that doesn’t mean we should try to push almost all high school graduates into a four-year liberal arts program where they may collect a lot of debt without getting any usable skills.

Educational choices should reflect aptitude. Many kids with mechanical aptitudes will be much more successful by learning a skilled trade or craft.

RENEWED VISION

America should be a place that encourages and enables people to find opportunities to contribute and succeed, and have meaning and fulfillment in their lives.

Instead, it appears that America has become a two-tiered system, in which those with political connections get favors while obstacles are placed in front of those who are left behind.

A great nation does not treat people according to some group classification, whether it be race, religion, gender or age, instead of on their individual merits.

We need to reform our legal and regulatory system so that it treats everyone equally and doesn’t discriminate against the least-advantaged in our society.

Overcoming obstacles can be a difficult challenge even on a level playing field. We need to change the rigged system that favors the politically connected over the hardworking, honest citizen.

America should be a place

that encourages and

enables people to find

opportunities to succeed.