Hüseyin ERKAN Chairman & CEO Istanbul Stock Exchange (ISE) HOW CAN WE INCREASE THE ATTRACTIVENESS OF THE REGION AS AN AREA FOR INVESTMENT? Hüseyin ERKAN Chairman & CEO Istanbul Stock Exchange (ISE) Conference on the Prospects for Capital Markets in Southeast Europe Sofia, 16 September 2008 İMKB Vadeli İşlemler Piyasası Müdürlüğü

Key Trends in Global Markets High volatility in the financial markets More strict regulatory standards Increasing role of governments (liquidity injection) Closer coordination among international institutions International risk surveillance More accurate and timely disclosure (Financial Stability Forum - 100 day plan of G-7 Countries) Sovereign Wealth Funds (Gulf & Far East Countries) İMKB Vadeli İşlemler Piyasası Müdürlüğü

Trends in Stock Exchanges’ Industry Demutualization OM Group Euronext Mergers and Acquisitions NASDAQ- OM NYSE-Euronext Consolidation With the sustained economic growth, Turkey has a big potential among the number of companies and investors. Exchanges vs Dark Liquidity Pools Fragmentation * MiFID *ECN İMKB Vadeli İşlemler Piyasası Müdürlüğü

Emerging Markets vs Developed Markets Market Capitalization Traded Value Emerging markets Source: WFE İMKB Vadeli İşlemler Piyasası Müdürlüğü

Strong Potential for Growth in Emerging Markets Until now, emerging market exchanges enjoyed rapid growth based on the expansion of cash equities market Increasingly, emerging markets exchanges are exploring revenue diversification opportunities as the market structure becomes more mature and competition amongst exchanges intensifies With the sustained economic growth, Turkey has a big potential among the number of companies and investors. Source: Credit Suisse İMKB Vadeli İşlemler Piyasası Müdürlüğü

Improving Alliances ISE and ASE are about to launch a common index ETFs on this index will be traded in both exchanges Creating fair, efficient and transparent market environment with little or no barriers to trade between the exchanges operating in the same region Organizing joint training and staff exchange program

ISE’s International Standing President of the “Federation of Euro-Asian Stock Exchanges” (FEAS) Coordinator of the “OIC Member States Stock Exchanges Forum” Participation to Regional Exchanges Baku Stock Exchange (5.5%) Kyrgyz Stock Exchange (24.52%)

FEAS - FEDERATION OF EURO-ASIAN STOCK EXCHANGES 29 Countries 32 Member Exchanges 8 Affiliate Members TURKMENISTAN TURKEY UKRAINE UNITED ARAB EMIRATES UZBEKISTAN BULGARIA CROATIA EGYPT GEORGIA IRAN IRAQ MEMBER EXCHANGES OMAN PAKISTAN (2) PALESTINE ROMANIA SERBIA MONTENEGRO ALBANIA AZERBAIJAN (2) ARMENIA BAHRAIN BELARUS BOSNIA HERZEGOVINA (2) JORDAN KAZAKHSTAN KYRGYZ REPUBLIC MACEDONIA MOLDOVA MONGOLIA İMKB Vadeli İşlemler Piyasası Müdürlüğü

FEAS Region Statistics

How FEAS Serves to the Needs of Member Stock Exchanges ? Promotes mechanisms for reliable, transparent and continuous trading and settlement Creates greater awareness and visibility for the region’s stocks and investment opportunities Helps to promote the listing of home market investment grade companies in the regional markets and encourages them to be included in regional indexes (i.e. Dow Jones) Provides network and updated information to the new members in the region, with meetings, web applications & publications (with the joint work of FEAS, ISE, WFE and OECD) “Best Practices for the Development of Stock Exchanges in Transition Economises” “Alternative Sources of Finance for SMEs”

How FEAS Serves to the Needs of Member Stock Exchanges ? Create linkages among: The regions’ intermediaries The regions’ data providers The regions’ settlement and custody institutions Create a centeralized training hub for FEAS members in order to encourage research and regulatory implementation via bilateral exchange program Promote Corporate Governance

FEAS Task Forces MEDIA (Awareness, Information and Marketing) REGIONAL INDICES (Dow Jones Indexes) CORPORATE GOVERNANCE (Common Principles) AFFILIATE MEMBERS (Regional CSD Membership) FEAS DATA CENTER XBRL (Extensible Business Reporting Language) RESEARCH & DEVELOPMENT

Turkey: Gateway to Europe, Asia and the Middle East Turkish economy has a growing potential in different sectors Property projects Telecommunication & Technology Infrastructure Projects (utilities, ports, highways) Turkey stands to be a corridor in the middle of the GCC countries, Europe and Asia Net FDI to Turkey in 2006-2007 is US$ 20 billion in each year (1/3 of the net FDI comes through the ISE) The Turkish capital markets are highly liquid and appeal to foreign investors (high level of investor confidence) Enhanced market infrastructure Legal framework in harmony with the international standards Technological infrastructure is strong and competitive

Investment Opportunities in Turkey   Investors' Preference What Turkey Offers A well-developed banking sector 46 local commercial and investment banks 4 participation banks Free movement of funds Investment-friendly policies 100 % foreign ownership allowed Tax treaties with 86 countries Booming property market Profitable investment opportunities Development of the energy industry for the region Growing need for infrastructure development Project financing for fast growing companies  World's 5th largest bond market A wide-range of capital market investment ETF market is growing instruments New regulations for structured warrants and asset backed securities are on the way İMKB Vadeli İşlemler Piyasası Müdürlüğü

Clearing settlement: T+3,....,T+15 132 Members (Total) 91 Brokerage Houses 12 Inv. & Develop. Banks 29 Commercial Banks 132 Members (Total) 91 Brokerage Houses 12 Inv. & Develop. Banks 29 Commercial Banks Clearing settlement: T+3,....,T+15 Clearing settlement T,... ,T+90 Stock Market Price Margins:  10% per session 104 Members (Total) 104 Brokerage Houses Clearing settlement T+2 ISE Settlement & Custody Bank (Takasbank) Central Registry Agency

ISE’s Market Performance İMKB Vadeli İşlemler Piyasası Müdürlüğü

ISE Markets Total Trading Volume (Billion USD) 6 times Turkey’s GDP

ISE Stock Market Trading Volume (Million USD) stocks per day

Scale of ISE Companies (as of August 29, 2008)

Stock Market Capitalization By Sector (as of August 29, 2008) İMKB Vadeli İşlemler Piyasası Müdürlüğü

Market Capitalization 2008/7 (Billion USD) Source: WFE

Market Traded Value 2008/7 (Billion USD) Source: WFE

Number of Listed Companies 2008/7 Source: WFE

Foreign Participation in the IPOs   Total Revenue (Million USD) Foreign Participation (Million USD) Foreign Participation (%) 1998 383.35 280.96 73% 1999 90.72 10.06 11% 2000 2,806.22 1,930.01 69% 2001 0.24 0.02 8% 2002 53.95 20.63 38% 2003 11.37 - 0% 2004 482.58 181.61 2005 1,743.96 1,284.05 74% 2006 930.50 579.36 62% 2007 3,298.31 2,019.57 61% 2008/7 1,900.00 1,150.00 Source: ISE Foreign participation in IPOs is about 66% on average in the last 3 years İMKB Vadeli İşlemler Piyasası Müdürlüğü

Foreign Participation in the ISE Stock Market (as of % of free float market capitalization) Source: CRA

Istanbul attracts and appeal to Major International Financial Institutions Citigroup Deutsche Group Merrill Lynch Morgan Stanley Lehman Brothers Credit Suisse UBS EFG Eurobank Credit Agricole Cheuvreux Unicorn Investment Bank

Comparison of ISE-100 with MSCI Indices (2005/8=100 USD based) Source: Bloomberg, Morgan Stanley

ISE National 100 Index vs. ISE Corporate Governance Index The firms having a CG rating at the ISE-100 index has a total weight of 11.74 % in the ISE-100 index İMKB Vadeli İşlemler Piyasası Müdürlüğü

P/E Ratios Source: Bloomberg İMKB Vadeli İşlemler Piyasası Müdürlüğü

Future Outlook Road map for co-operation and common projects Cooperation among SEE countries’ stock exchanges should be supported by both the governments and the regulatory bodies Regional transformation should be carried out with an international perspective on legal, fiscal, social and regulatory framework as well as in compliance with MIFID