PRIVATE EQUITY IN TURKEY İlhami Koç June 2008

2 SMEs are having trouble in finding the sources to finance their growth. 2 MAJOR CHARACTERISTICS OF TURKISH FINANCIAL SECTOR Significant Savings Deficit Dominated by Banks Credits are Mainly Short-Term Public Offering is The Only Financing Source of Capital Markets

3 Private Equity Investments in Turkey ( ) Source: Mergermarket, as of 6 June %*6.9%3.2%0.2%2.1%7.2%7.2% PE’s Share in M&A Market Industry is growing despite unfavourable market conditions TURKISH PE INDUSTRY GROWTH Number of Exits

4 4 Office in Turkey with a dedicated fund Opportunistic / Regional with an office in Turkey Does not have an office in Turkey  Bubble size indicates the number of deals done by the fund Only 5 years ago, number of active players in Turkish PE market was limited to 5 TURKISH PE INDUSTRY GROWTH – Market Position of PE Funds 2002

5 5 Turkish private equity market is increasingly attracting significant attention (*) Not drawn to exact scale Office in Turkey with a dedicated fund Opportunistic / Regional with an office in Turkey Does not have an office in Turkey  Bubble size indicates the number of deals done by the fund TURKISH PE INDUSTRY GROWTH – Market Position of PE Funds 2008

6 6 PE FundNumber of Deals% in total 1.Is Private Equity1023% 2.Turkven716%16% 3.Citi Venture Capital International (“CVCI”)37%7% 4.Kobi Private Equity37%7% Remaining3244% TOTAL43100% PE Funds’ Activity – Total Number of Deals ( ) PE Funds’ Activity – Total Deal Volume ( ) TOTAL7,300100% Is Private Equity is the market leader in terms of number of deals whereas BC Partners has made the largest investment in Turkish market history. * Excluding transactions completed by consortiums with strategic players, including leverage TURKISH PE INDUSTRY GROWTH – Most Active Players PE Fund * Deal Volume (000 US$) % in total 1.Moonlight Capital (BC Partners&Turkven)1,67523%23% 2.Kohlberg Kravis Roberts (“KKR”)1,25217% 3.Texas Pacific Group (“TPG”)81011% Remaining3,56349%

7 7 TURKISH PE INDUSTRY GROWTH – Transactions in 2007 Entrance of big players increased size and changed the type of deals

8 14 Feb 2008Migros Turk T.A.Ş.RetailMoonlight Capital1, Sep 2007UN Ro-RoLogistics Kohlberg Kravis Roberts & Co. 1, Apr 2006Mey Icki Sanayi ve Tic. A.S.ConsumerTexas Pacific Group Jan 2008Acıbadem Sağlık HizmetleriHealthcareAbraaj Capital Mar 2008Başkent DoğalgazEnergyABN AMRO Capital Dec 2006TAV Havalimanlari Hold.A.S. Airport Babcock And Brown Inc ; Goldman Sachs Oct 2005DigiturkMediaProvidence Equity Partners Nov 2006Biofarma PharmaceuticalsPharmaCitibank Venture Capital May 2006Deva HoldingPharmaGEM Global Equities Man May 2007BeymenRetail Citigroup Venture Capital International Source: Mergermarket Date TargetSector Buyer Size ($mn) Stake (%) TURKISH PE INDUSTRY GROWTH– Top 10 Deals

9 INDUSTRY EXIT OPTIONS INVESTMENT SIZE EXPECTED RETURN PARTNERSHIP STRUCTURE TRENDS IN THE MARKETS

10 TRENDS IN THE MARKET – Industry 1995 – – 2008 Source: Private Equity Report in Turkey,2007 Investments have been focused on mainly consumer goods, services and health industries

Thanks to newcomers, ticket sizes are growing. TRENDS IN THE MARKET – Investment Size

– – 2008 TRENDS IN THE MARKET– Partnership Structure Majority investments become more popular Source: Private Equity Report in Turkey,2007

13 Private Equity investments in Turkey generally seek for 15-25% returns on USD terms TRENDS IN THE MARKET – Expected Returns InvestmentDuration Invt. (mn$) Return (%)   EBITDA multiples are around 5-8.   During the last a few years, PE funds decreased their IRR expectation. Examples 19,72%*3,54 yearsStep Halı 45,75%26,014 monthsTüyap 30,25%11,53 yearsCinemars 64,64%*4,019 months Beyaz Fleet Leasing * Beyaz Fleet Leasing and Step Halı returns have been calculated from ISE data.

14 TRENDS IN THE MARKET – Exit Options Public Offering Strategic Sale Financial Sale Management / Owner Buyout All exit options are available in the market

15   As a result of recent global economic developments, financing cost is increasing. FINANCING NEWCOMERS TRANSACTION VOLUME EXPECTED RETURN   Despite market conditions, new funds are coming   Ticket sizes will remain high.   An internal rate of return will be around 15%-25%. EXPECTATIONS EXITS   Because of market conditions, exit will be harder than before.

16   Accessing Proprietary Deal Flow   Foreign funds’ need to utilize intermediaries to generate deal flow  creates an “auction” environment, high competition resulting in increase in entry prices   Deal Structuring   PE funds’ requirement for risk control mechanisms (exit priorities, drag-along, tag-along rights) and capital protection clauses (dividend privileges, minimum return guarantees) not well understood by founding shareholders   Determining Past Performance of Companies – Due Diligence   Macroeconomic history of high inflation, fluctuating FX rates and volatility   Lack of accounting and IT infrastructure   Business Culture, Corporate Governance and Transparency   Family owned companies reluctant to have an outside shareholder   Complicated shareholding structures, hard to identify “related-parties”   Management Recruiting and Retaining   Scarcity of result-oriented management talent that can deliver PE expectations   Management backgrounds relatively difficult to reference LOCAL CHALLENGES TO CONSIDER

17 İŞ Kuleleri Kule-2 Kat:12 4. Levent İstanbul Turkey Tel: (+90212) Fax: (+90212) Fenerbahçe, Fener Kalamış Cad. Tibaş-Belvü Sitesi A2 Blok Daire:3 Kadıköy İstanbul Turkey Tel: (+90216) Fax: (+90216) HEAD OFFICE KALAMIŞ BRANCH ANKARA BRANCH Tahran Cad. No:3/8 Kavaklıdere Ankara Turkey Tel: (+90312) Fax: (+90312) İZMİR BRANCH Akdeniz Cad. No:14 Birsel İş Merkezi Daire:501 Alsancak İzmir Turkey Tel: (+90232) Fax: (+90232) Jeltozbekova Street 97 Block A2 Floor:2 Almaata Kazakhstan Tel: (+7727) Fax: (+7727) ALMA ATA REPRESENTATIVE OFFICE MAXIS SECURITIES LTD. 8 Princes Street London EC2R 8HL U.K. Tel: (+44207) Fax: (+44207) SUBSIDIARY Köybaşı Caddesi İskele Çıkmazı No:277 Yeniköy İstanbul Turkey Tel: (+90212) Fax: (+90212) YENİKÖY BRANCH Süleyman Seba Cad. No:44 B1 Blok Daire:10 Akaretler İstanbul Turkey Tel: (+90212) Fax: (+90212) AKARETLER BRANCH Havalimanı Kavşağı EGS Business Park B3 Blok No:470 Yeşilköy İstanbul Turkey Tel: (+90212) Fax: (+90212) YEŞİLKÖY BRANCH Yapı Kredi Plaza C Blok K:9 Bölüm 25/B 4. Levent İstanbul Turkey Tel: (+90212) Fax: (+90212) İSTANBUL REPRESENTATIVE OFFICE IS INVESTMENT

18 Turkish PE industry promises a significant growth potential with 7% weight of PE deals in total deal volume compared to global figure of 45%. 18 Sounce: Mergermarket, Dealwatch TURKISH vs. GLOBAL PE INDUSTRY – Share in Total Deal Volume* Global PE Activity Turkish PE Activity