2017 October. Snapshot DERSAADET BOND EXCHANGE 24.43% Sarajevo Stock. Merkezi Kayıt İstanbul (CSD) Licencing & Training Agency.

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1 Snapshot and Achieved Milestones Growth Potential Strategic Roadmap 2017 October Snapshot History Affiliations DERSAADET BOND EXCHANGE 24.43% Montenegro 16.33% 4.76% Baku Stock Stock Exchange Kyrgyz Stock Exchange Exchange Shareholder Structure 1.3% 1.3% 6.8% 0% 7% 10% 16.61% Sarajevo Stock Exchange 71.01% Merkezi Kayıt İstanbul (CSD) 34.08% Licencing & Training Agency 2.04% LCH.Clearnet 63.04% Takas Istanbul (Turkish CCP) 30.83% Energy Exchange Istanbul 51.00% Istanbul Gemology Inst. Turkiye Wealth Fund EBRD Nasdaq Turkish Capital Markets Association 73.6% 50.00% BİTÜ Technology 50.00% Finans Teknopark 19.93% ELİDAŞ Licensed Warehouse 0.01% Istanbul Refinery Union of Chambers and Commodity Exchanges of Turkey Other (including 0.79% shares owned by Borsa İstanbul A.Ş.) SNAPSHOT AND ACHIEVED MILESTONES 1

2 Business Overview VISION To be the leading integrated marketplace bringing together investors and ideas MISSION To create an efficient marketplace that provides stability and confidence for investors, to promote an international business structure including Islamic finance products, to lead digital transformation and innovation, and to support economic growth The main purpose and field of activity of Borsa İstanbul to ensure that capital markets instruments, foreign currencies, precious metals and gems, and other contracts, documents, and assets approved by the Capital Markets Board of Turkey are traded subject to free trade conditions in a facile and secure manner, in a transparent, efficient, competitive, fair and stable environment, to create, establish and develop markets, sub-markets, platforms, systems and other organized market places for the purpose of matching or facilitating the matching of the buy and sell orders for the above mentioned assets to determine and announce the discovered prices, to manage and/or operate the aforementioned or other exchanges or markets of other exchanges, and to carry out the other activities listed in its Articles of Association. SNAPSHOT AND ACHIEVED MILESTONES Borsa İstanbul Board of Directors Himmet KARADAĞ Chairman of the Board Acting Chairman of the Board, Turkiye Wealth Fund 14 years of experience in Ministry of Finance. Board in Capital Markets Board ( ) Deputy Chairman in Capital Markets Board (2016) Yunus ARINCI Deputy Chairman of the Board 20 years of experience in Prime Ministry Chairman of the State Supervisory Council since 2015 Erişah ARICAN, PhD More than 25 years of experience in Marmara University. Banking and Insurance Institute Banking Department Chairman and Board member since 2015 İhsan DURDU More than 27 years of public sector experience, councellor in Prime Ministry. İlhami KOÇ More than 30 years of experience in banking and capital markets. Chairman of İş Invest Securities, CEO of Anadolu Anonim Türk Sigorta. Işınsu KESTELLİ More than 20 years of experience in İzmir Commodity Exchange, Chairperson since She is founding partner in Agrilink Agricultural Products. Metin AYIŞIK More than 30 years of experience in banking and capital markets. CEO of Gedik Yatırım since 2013 Nicola Jane BEATTIE More than 25 years of capital markets experience. Founder and CEO of Market Structure Partners. Moscow Exchange Board ( ) Murat ÇETİNKAYA CEO, Chairman of the Board, Takasbank More than 25 years of banking and capital markets experience. CEO of Halk Yatırım between Oral ERDOĞAN, PhD Board, Türkiye Wealth Fund More than 20 years of experience in Financial Management & International Finance President of Piri Reis University 2

3 VERTICAL INTEGRATION HORIZONTAL INTEGRATION A fully integrated business model Primary cash markets: LISTINGS Domestic and foreign IPOs/SPOs Debt securities (e.g., corporate bonds, sukuk) 401 listed companies USD bn market capitalization BORSA İSTANBUL MARKETS Equity Market Debt Securities Market Derivatives Market Precious Metals and Diamond Market CLEARING & SETTLEMENT CUSTODY Takas İstanbul (Istanbul Settlement and Custody Bank) CCP of Turkish Capital Markets Borsa İstanbul s share: 63.04% Merkezi Kayıt İstanbul (Central Securities Depository Institution) Central securities depository Borsa İstanbul s share: 30.1 % (with indirect ownership: 71.01%) MARKET DATA & INDICES - 278k subscriptions for market data products index types (equity indices, debt securities indices, riskcontrol indices, leveraged and short indices) SNAPSHOT AND ACHIEVED MILESTONES Achieved milestones in capital markets and Borsa İstanbul Regulation Conventional New Capital Market Law Fully compliant with MiFID Corporate Structure & Governance Mutualized / Unit of Treasury New Board Joint Stock Company Horizontal Integration & Product Diversification Cash-only Acquired TurkDEX Acquired IGE Full-range Vertical Integration Low-Level Majority stake in Takasbank & MKK Control all Post-Trade International Connectivity Domestic EBRD, LSE, Nasdaq, London, EDDN, Global Network Reach via infrastructure providers International Technology BISTECH Limited Room for Further Growth Borsa İstanbul - Nasdaq Strategic Partnership State of Art SNAPSHOT AND ACHIEVED MILESTONES 3

4 Landmark strategic partnerships WORLD CLASS MARKET LEADING TECHNOLOGIES 2013 TRANSFER OF KNOW HOW AND EXPERTISE BRAND VALUE 2015 CORPORATE GOVERNANCE PRESTIGE AND VISIBILITY SNAPSHOT AND ACHIEVED MILESTONES Integrated business model with robust growth Operational Revenues (Mn TL, ) Operational Profit (EBIT) (Mn TL, , IFRS) Other Market Data Revenue Listing Revenue Post Trade Services Revenue Trading Revenue Post Trade Financial Revenue 37% % CAGR ( ) Operational Profit Margin 47% % Borsa İstanbul s fully-integrated platform offers a full spectrum of services, allowing to leverage its trading platform across the value chain. GROWTH POTENTIAL 4

5 High trading volume, strong liquidity Equity Market Trading Volume (Billion TL) Equities, pre-emptive rights, exchange traded funds, warrants and certificates 7% CAGR ( ) 1,026 1,014 1,153 6,898 Debt Securities Market Trading Volume (Billion TL) Public and private sector debt securities, Eurobond, sukuk, repo, liquidity certificates 18% CAGR ( ) 11,367 10,267 7,645 4, / /2017 Derivatives Market Trading Volume (Billion TL) Options contracts written on single stocks, index, and currency, and futures contracts written on single stocks, index, currency, electricity, commodities, precious metals, foreign indices, metals, overnight repo, and ETFs % CAGR ( ) Precious Metals and Diamonds Market Trading Volume (Billion TL), silver, palladium, platinum, precious stones trading as well as gold and silver custody services % CAGR ( ) / /2017 Source: Borsa İstanbul GROWTH POTENTIAL NYSE BATS Global M. Shenzhen SE Nasdaq - US Shanghai SE Japan Exch Group BATS Chi-x Europe LSE Group Euronext Korea Exch Hong Kong Exch. Deutsche Boerse TMX Group SIX Swiss Exch Australian SE Nasdaq Nordic Exch NSE of India BME Spanish Exch BM&FBOVESPA Taiwan SE Johannesburg SE The SE of Thailand Borsa Istanbul Saudi SE (Tadawul) Singapore Exch Taipei Exch Moscow Exch Bolsa Mexicana Oslo Bors BSE India Bursa Malaysia Indonesia SE Tel-Aviv SE Warsaw SE High trading volume, strong liquidity Value of Equity Trading (EOB, Bn USD) rd in the world, 7th among emerging markets in share traded value Korea Exchange Shanghai SE LSE Group Tel-Aviv SE BME Spanish Exch BV de Colombia Borsa Istanbul BC de Santiago Moscow Exch BC Buenos Aires Shenzhen SE Shenzhen SE Shanghai SE Taipei Exch Borsa Istanbul Korea Exchange Japan Exch. Group BME Spanish Exch SE of Thailand BM&FBOVESPA Saudi SE (Tadawul) Value of Bond Trading (EOB, Bn USD) % World s 7th largest debt securities market Turnover Velocity of Domestic Shares (%) Among the most liquid markets in the world USD/TL Currency Exchange Rate: 3,02 Source: WFE, Annual Statistics Guide 2016 GROWTH POTENTIAL 5

6 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr Growth potential in capital markets Istanbul: a strong candidate to fill the financial center gap with expanding Turkish Institutional Investor Base Chicago San Francisco Toronto Boston New York Washington Frankfurt London Zurich İstanbul Seul Tokyo Hong Kong Pension & Mutual Funds, USD Bn (2016) Singapore Sidney Pension Funds Net Asset Value Pension Funds/GDP 5.5% Mutual Funds Net Asset Value (2015) Participants in Private Pension System (Million Persons) Source: Pension Monitoring System, CMB and room for Growth in Capital Markets Banking Sector vs. Capital Markets in Turkey 105% ~40% Low number of listed companies 24% ~17% ~12% Banking Assets / GDP Market Cap / GDP Source: Capital Markets Board of Turkey, Banking Regulation and Supervision Agency, 2016 Top 50 companies Top 500 companies Top 1000 companies GROWTH POTENTIAL Fast-growing economy... GDP, 2016 (Bn USD) Increasing Real GDP per Capita ($PPP) USA China 11,088 18, Japan Germany UK France India 4,123 3,363 2,858 2,419 2, GDP Growth 2016 : 2.9% 2017 (e): 5.1% Italy Brasil 1,822 1,775 Source: IMF, Worldbank Canada South Korea Australia Russia Spain Mexico Indonesia Turkey Netherlands Sweden 1,551 1,378 1,340 1,331 1,199 1, th Largest Economy in the World 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% decreasing Inflation and Interest Rates Weighted Average Interest Rate Inflation (YoY % Change) 11.20% Saudi Arabia 646 Source: IMF, Worldbank Source: TUİK, CBRT GROWTH POTENTIAL 6

7 ... appreciated by foreign investors An important market for global investments Foreign Direct Investment (USD Bn) Higher foreign participation Share of Government Debt Held By Non-Residents, % % 27.0% 25.4% 23.3% 20.8% Source: Ministry of Economy Source: CBRT Companies with foreign capital has significantly increased No. of Companies with Foreign Capital (Thousand) A global marketplace Foreign participation in Borsa İstanbul market cap - free float (%) Source: Ministry of Economy Source: Central Registry Agency GROWTH POTENTIAL Accessible, liquid and deep markets for investors Sustainable Income 2018 Operational Efficiency Inorganic Growth & Flow and Structure 2023 Subsidiary Management Product and service diversity Expansion of the institutional and individual investor base Increased income from technology, derivatives market, equity market and data Strategic cooperations and partnerships Intragroup integration Organizational and cost efficiency Regional gold custody center Fintech investments Other investment opportunities in value chain STRATEGIC ROADMAP 7

8 New products and initiatives... Real Estate Certificates A financing opportunity for real estate projects in cooperation with TOKİ (Housing Development Administration) Securitization with PPP Products Certificates to share revenue streams of large infrastructure projects such as bridges, highways, airports, hospitals etc. International Interest-free Finance Advisory Board An International board on Shariah s in cooperation with other capital market and financial institutions. International Custody Center The capacity of the precious metals custody center has been increased from 100 tonnes to 1600 tonnes to act as the International Custody Center. OIC Trading Platform A platform to trade spot and forward and store gold, among the OIC countries which represent one-fifths of the gold mine supplies in the world. Strategic Cooperation with IDB Group Collaboration in several fields with IDB Group STRATEGIC ROADMAP Bond & Indexed Ijara Sukuk Turkish Experience November, 2017 Hakan AYTEKIN Borsa ISTANBUL Precious Metals Dept. 16 8

9 Demand by Local Investors is an important traditional investment instrument. Also, gold is used as an gift. However, physical gold is hold out of financial system by individual investors. The total amount of gold which is held out of financial system is estimated around tones (100 billion USD). 17 Sukuk Issuances by the Treasury The Treasury started to issue sukuks in local and international markets in 2012 In local market, between : 2 years - fixed lease rate ijara sukuk Since 2016, both 2 and 5 years Both fixed lease rate and CPI indexed ijara sukuk In 2017 Indexed Ijara Sukuk 18 9

10 Bond & Indexed Ijara Sukuk (GIIS) The aim is to provide a new investment intsrument to the individual investors and to bring idle gold into the economy. Only retail investors can invest to the GIIS. Sukuk Model: Ijara based sukuk. Physical gold payment at the maturity (optional). Investors could invest via intermediary bank: 344 branches of Ziraat Bank, all over the country The type of accepted physical gold is determined by Treasury ( only 22K and 24K gold) 19 Key Features: Maturity: 728 days (2 years) Coupon/Lease Period: 6 months Periodic Coupon/Lease Rate : 1,20% Annual Coupon/ Lease Rate: 2,40% The coupon/rent payments are indexed to the gold prices and paid in local currency. Withholding tax rate 0% Investors can sell back the security to the intermediary bank before the maturity. But they can receive principal + accrued return in local currency. Investors can transfer the security to another individual investor via bank account

11 Issuance Procedure of Bond Investor Borsa Istanbul The Treasury Physical Intermediary Bank 2 3 Issuance of Bond Physical Refinery 21 Issuance Procedure of Sukuk Borsa Istanbul Investor Physical Intermediary Bank The Treasury 5 Takeover of the gold SPV of The Treasury 6 Issuance of Sukuk Physical 2 3 Refinery 22 11

12 At the Maturity Date Borsa Istanbul Investor 4 coin or kilo bar The Treasury / SPV of The Treasury 1 Intermediary Bank 2 3 coin or kilo bar Turkish State Mint 23 Methodology of Payments Physical Principal: "Physical Delivery Option" Local Currency Payment Local Currency Payment Local Currency Payment Local Currency Payment Coupon/Lease payments are paid in local currency, indexed to gold prices. Calculation of TRY Coupon/Lease Payment = (Amount of bond in the account) x (Coupon/Lease Rate) x (TRY Price) Calculation of TRY Price = (LBMA USD/ounce gold fixing price on the business day before the payment date) / (31,1035) x (Benchmark USD/TRY exchange rate announced by the Central Bank of Turkey on the business day before the payment date) 24 12

13 Issuance Result: Total amount of gold collected (bond&sukuk): 2,5 tonnes (100 million USD) %53 of investors demand sukuk Total number of investors The number of women higher than men. 37% of investors between years old