1. Entrepreneurship in Turkey Finance Perspective September 2009

2. 2 Table of Contents 1.Companies established in Turkey (# and paid-in capital) 2.Sources of finance 3.Private Equity in Turkey 4.Brief info on Is Private Equity 5.Projects evaluated by Sector 6.Investment criteria 7.Challenges faced at Pre-investment stage

3. 3 Companies established in Turkey Source: Turkish Statistical Institute  A total of 664.592 companies established since 1995, with US$59,6 billion paid-in capital  Paid-in capital per company increased to US$194K in 2008 (US$154K in 01-08/2009)

4. Internal and external sources are inadequate to finance the desired growth for private companies in Turkey  Private Equity becoming an increasingly viable financing alternative 4 Financing Private Sector – Sources of Finance Internal SourcesExternal Sources Shareholders’ Equity P oo r Internal Cash Generation Fa ir Generally, limited internal cash generation ability due to: -Lack of operationally sound business models and strategies to sustain profitable growth -Poor working capital management ability; unfavorable trade credit conditions Companies usually established with limited equity short term working capital loans are available; however Turkish banks are reluctant to provide long-term loans with favorable conditions to finance investments for growth  Hard collateral requirement ISE is not equipped for SMEs; SME stock exchange underway  outcome is unknown Government Bonds with high interest rates cannibalize the market Relatively new concept Loan Fa ir Capital Markets P oo r Corporate Bonds P oo r Mezzanine P oo r

5. 5 Private Equity in Turkey Private Equity: Equity investment in companies with high growth and return potential Private Equity Funds in Turkey: Domestically established funds governed by the Capital Market Board Exempt from corporate and income tax Minimum 50% of portfolio to be invested in investee companies Exit within 10 years International funds Investment from abroad PE Industry Evolution in Turkey: 5 Funds in 2002 More than 30 funds currently in Turkey

6. 6 Is Private Equity Fund Structure US$87m capital under management Shareholding Structure Investments www.isinvestment.com/ www.tskb.com www.ttgv.org.tr/en www.anadolusigorta.com.tr/en www.millire.com/english www.isfactoring.com.tr Is Bank Group 57.67 TTGV 11.11 www.ise.org/ Public 31.22 Technology ServicesHealthcare Construction Materials Retail Total equity investment amount: US$61 m Total equity and debt placement: US$300 m 29.006.6716.67 4.440.89 MCap@IPO: US$57.8mio MCap@15/04/2009: US$27.0mio

7. 7 Projects evaluated by Sector  Is Private Equity evaluated 1.390 projects since its establishment in 2002  invested in 11 projects SectorNo. Of ProjectsShare Technology19914,3 % Food14510,4 % Healthcare1248,9 % Retail926,6 % Logistics604,3 % Construction & Material795,7 % Energy584,2 % Automotive553,9 % Textile553,9 % Tourism523,8 % Chemistry332,4 % Entertainment322,3 % Telecom261,9 % Electronics221,6 % Security161,2 % Other34224,6 % TOTAL1.390100,0 %

8. 8 Investment Decision Criteria  Attractive returns  An aggressive but realistic business plan for high growth – organic & inorganic, domestic & international  Operational profitability In current situation Room for development by identifying opportunities to add value through operational improvements  Strong, experienced, innovative and dedicated management team with a sense of urgency, driven by high energy and high integrity  Sustainable competitive edge, differentiation A leading and defensible market share Well recognized brand name Scalable and hard to replicate business model with defensible margins Strong, dominant and defensible distribution channel Propriety concept / products with competitive advantages Patents  Clear exit opportunities Exit to financial / strategic buyer IPO prospects Exit to founding shareholders

9. 9 Challenges: Pre-Investment Challenges / RisksExplanation Determining Past Performance of Companies – Due Diligence Macroeconomic history of high inflation, fluctuating FX rates and volatility Lack of accounting and IT infrastructure Accessing accurate company data Business Culture SME’s usually over diversified, lacking focus Weak feasibility studies Willingness to diversify industry risk Lack of long term vision and sound growth plans Industry Information Immature market research and intelligence industry Accessing reliable industry information Scarcity of result-oriented management talent that can deliver expectations Management backgrounds relatively difficult to reference Management Recruiting and Retaining Corporate Governance and Transparency Complicated shareholding structures Hard to identify “related parties” Creative accounting practices Shareholders are usually also in the management team Endangering arm’s length transactions Deteriorated internal control mechanisms SME’s that lack vision have not come to the need of result- oriented and top-quality management talent. SME’s usually do not rely on recruiting firms

10. 10 Summary Both internal and external funding sources are limited for Turkish entrepreneurs Private Equity is becoming a viable alternative There are good projects available at a variety of sectors Sound and comprehensive business plans are necessary to evaluate these projects Lack of reliable company and sector data, lack of business plans create challenges in analyzing the projects