ECONOMY & MARKET POLITIC, DOMESTIC & INTERNATIONAL AFFAIR. anticipated purchasing power for the next period improved strongly.

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1 Terence Singh ECONOMY & MARKET MARKETS At Monday s close, market situation was: O/N for ISE Repo market YTL/USD & TLR Interbank market 14.74% Most actively traded T-Bills Date Maturity C/Rate 05/12/05 27/06/ % ISE-100 index ISE- 100 Ref $ 39, Unemployment rate climbed slightly to 9.4% in August 05 from 9.1% in July 05. However, the relative increase in the unemployment rate is seasonal and stems mainly from the decline in seasonal agricultural employment. Inflation: in November the PPI fell 0.95% and CPI registered a 1.4% surge, mainly due to higher than expected increase in food prices. As a result, YoY CPI rose to 7.61% while YoY PPI declined to 1.60%. Year end 8% target on both fronts will most likely be met. The following table depicts the results of auctions held in the last 2 weeks: Issue Mat. Date 22/11/ 05 22/11/ 05 5/12/0 5 4/10/0 6 27/06/ 07 6/12/0 6 Mat. Month Bid Sales Cov % Net Sales Ann. Comp Yield (%) 10 1,353 1, , ,446 1, , ,971 1, , Consumer confidence index rose by 2.6 points to 98.1 throughout October 05. The improvement in consumer confidence could be attributed to the formal start of negotiations on October 3, which reduced yields and strengthened TRY. The purchasing power was reported to improve slightly, while the terence.singh@bnpparibas.com anticipated purchasing power for the next period improved strongly. Real Exchange Rate: CPI based Real Effective Exchange Rate (REER) rose to level in November from level in October while the WPI based REER increased to level from in the same period. As a result, the CPI and WPI based REER appreciated 18.9% and 11.6% Year-to-Day, respectively. Trade deficit: Turkey s trade deficit declined to USD 3.5bn in October from the USD 3.6bn of the previous month. With this figure, the cumulative trade deficit in January-October period reached USD 22.3bn, up by 29% compared to the same period last year. The YoY increase reached 22% for imports while exports rose 9% YoY to USD 6.4bn level in October. Corporate tax rate cut: PM Erdogan announced the tax-cuts for Accordingly: - Corporate tax will be lowered to 20% from the current 30%. - Exceptions to investment allowance are lifted. - Total tax burden falls to 34% from 44% for Turkish investors and to 28% from 37% for their global counterparts. - Number of income tax brackets is lowered to 4 from 5 while the lowest rate will be 15% and the highest 35% Sovereign rating: Fitch Ratings has changed Turkey's rating Outlook to Positive from Stable. The Long-term foreign currency and local currency ratings are affirmed at 'BB-' (BB minus). The Short-term rating is also affirmed at 'B' as is the Country Ceiling of 'BB-' (BB minus). POLITIC, DOMESTIC & INTERNATIONAL AFFAIR The CBT held a conference on inflation targeting and 2006 Monetary Policy. Highlights were: - inflation targeting will begin in 2006 and the point targets are set as 5% for 2006 and 4% each in the following 2 years. - For 2006, the band will be 2% points in both directions. Thus the CPI will remain in a band of 3% to 7%. - Inflation reports will be issued every three months: in January, April, July and October. 1

2 - In case of exorbitant rises in global oil prices, 2006 target of 5% can be disregarded. - The spread between lending and borrowing will be 300 bps while the CBT will no longer announce 1-week borrowing rate as of January 2, SECTOR NEWS & PRIVATISATION Telsim: Out of the 12 eligible parties, only 7 companies/consortia gave a bid: Vodafone (UK), Sistema (Russia), Uluslararasi Yatirim Telekom (EMAAR-Dubai), MTC (Kuwait), Endeks Telekom (Otto GmbH & co KG Germany), Etisalat (Dubai), Orascom (Egypt). Sabanci and France Telcom both withdrew from the tender. On December 13 th the open auction will be held. Banking Sector: The new Credit Card Law draft has been sent to the parliament. (For further details on the regulations it includes please refer to TNL October 5 th 2005). Head of the Privat Administration Kilci maintained that the privatization process for Halkbank was expected to be revealed by the Treasury within a few weeks. Denizbank denied being in talks with Societe Generale. Sale of Shopping Centers: Fiba Group, parent of Finansbank, bought 4 shopping centers in Kartal-Istanbul, Gaziantep, Konya and Adana from Tepe Group. Negotiations for Tepe Nautilus, which is the most valuable among Tepe s malls, is still continuing. Akkok- Corio Group, who currently owns Akmerkez, Fiba and a Belgian Group are reported to be among bidders. Tupras: Koc Holding announced the revised shareholder structure of the consortium, which acquired 51% of Tupras. Initial and revised shareholder structure is as follows: Initial Revised Koc Holding 80% 75% Aygaz 7% 20% Opet 3% 3% Shell 10% 2% Koc Holding Shell consortium authorized Unicredit Banca Mobiliare S.P.A., Akbank, Garanti Bank- Luxembourg Branch, Standard Bank Plc and Vakifbank to obtain a loan amounting up to USD 1.8bn. Botas s natural gas transfer tenders received bids for only 16 lots out of 64 lots of natural gas. 4 bidders (Shell Enerji for 3 lots, Bosphorus Gas for 10 lots, Enerko for 10 lots and Avrasya Gas for 5 lots) were deemed eligible with their respective bids of USD 1.81, USD 1.6 and USD 910,000 for each lot. Erdemir s sale: the Competition Board approved the sale of 49.3% of Erdemir to OYAK Group at USD 2.96bn. Following the approval of the Competition Board, the Supreme Privatisation Administration Board will also give its approval. Then, the Privatisation Administration allows OYAK Group to clear out the details regarding the financing structure and set a date for signing sales agreement. Reportedly Oyak Group agreed to transfer 49% of Oyak s 49.3% share in Erdemir to world s second largest steel producer Arcelor. It is stated that following the share transfer a new company established by Oyak and Arcelor under a 51%-49% ownership structure will hold 49% of Erdemir. Privatization of Ports: Akfen Group s Chairman of the Executive Board Hamdi Akin expressed concern over a possible new owner of Iskenderun Port as the Competition Board did not approve transfer of Iskenderun Port to TFAAkfen consortium which also won the tender for Mersin Port with a USD 755 bid and signaled that the consortium might withdraw its bid. Akin also expressed interest in Izmir Port in such a case. The consortium has 10 more days to pay USD 755 for the transfer. 2

3 COMPANY NEWS Isbank the first private Turkish bank, announced its BRSA 9M05 consolidated financials. Accordingly, the bank reported net earnings of USD 632 in 9M05 vs USD 543 on a 9M04R basis (restated to yearend 2004). The bank reported an ROAE of 13.8% in 9M05 on BRSA consolidated basis. Isbank s total assets and shareholders equity stood at USD 45,997 and USD 6,387, respectively, as of the end of 3Q05. has announced that it authorized a consortium of 29 banks on 1 December with regards to obtaining a USD 400 loan via club deal with a maturity of one year. Akbank reported net earnings of USD 853 in 9M05 on BRSA consolidated basis vs USD 678 in 9M04, indicating a 26% YoY increase. The bank s BRSA consolidated 1H05 net earnings was USD 594. The bank s consolidated assets and book value stood at USD 38.0bn and USD 4.5bn, respectively, on BRSA basis. Meanwhile, the bank s BRSA consolidated ROAE declined to 25% in 9M05 from 27% in 1H05. Garanti Bank reported net earnings of USD 426 in 9M05 on BRSA consolidated basis vs USD 307 in 9M04, registering a 39% YoY increase in US terms. The bank s consolidated assets expanded by 21% Year-to-Day, reaching USD 27.2bn, while book value stood at USD 2.8bn on BRSA basis. Meanwhile, the bank s BRSA consolidated ROAE came out as 22% in 9M05. Garanti Bank secured a USD 525 securitization loan in three tranches. The USD 150 first tranche has a maturity of 7 years and is insured by CIFG, while the USD 250 second tranche has a maturity of 8 years and is insured by XL Capital Assurance. Garanti Bank secured a USD 700 syndicated loan with a maturity of one-year (with an option to extend it one more year) and a cost of Libor %. Yapi Kredi revealed a USD 1,876bn loss in its 9M05 financials. The bank booked total net provisions and write-offs of approx. USD 1.9bn in 3Q05 (reported under provision expenses and opex), bringing September-end book value to USD 1,540 from USD 3,328 at the end of 1H05, also taking into account net profit of USD 91 before all provisions and write offs. Vakifbank announced its BRSA 9M05 consolidated (financial companies only) financials. Accordingly, the bank reported net earnings of USD in 9M05 vs USD on a 9M04R basis (restated to yearend 2004). The bank reported an ROAE of 27% in 9M05 on BRSA consolidated basis (vs. 22% on a bank-only basis). Vakifbank s total assets and shareholders equity stood at USD 22,325 and USD 1,849. Turkcell: 3Q05 net earnings rose 53% QoQ (117% YoY) to USD 327, mainly as a result of the positive impact of seasonality combined with customer-focused campaign initiatives, including volumebased offers and segment-based retention efforts. Hence 9M05 net earnings reached USD 669. Turkcell recorded USD 1,249 revenues in 3Q05, up by 19% QoQ. Furthermore Turkcell added net new subscribers in 3Q05 reaching a figure of 5.3 million post-paid and 21.4 million prepaid subscribers as of end-3q05. In Q3, reported EBITDA rose 32% QoQ to USD due to an increase in sales in a context of stable advertising and operating expenses. Cukurova Group (CG) and Turkey s Savings Deposit Insurance Fund (SDIF) have signed an early repayment agreement and CG has paid USD to SDIF related with its Pamukbank exposure. Prior to today s payment, CG had thus far paid USD 1.035bn out of its USD 2.145bn debt to SDIF (including interest). Following the removal of the restriction on Cukurova s right to sell Turkcell shares, CG has exercised its option to purchase 3

4 2,94% of Turkcell and 20,02% Turkcell Holding shares held by YKB at USD 1,213 (representing a 13,15% stake). Alfa group converted its USD 1,593 bond to 13,22% indirect Turkcell shares. The new shareholding structure of Turkcell: - Cukurova Group 27.1% - TeliaSonera 37.0% - Alfa Group 13.2% - MV Group Companies 6.1% - Others 0.1% - Float 16.6% Dogan Holding announced its 9M05 revenues at USD 4,549, up by 52%, 74% of the top-line was contributed by the energy segment, i.e. Petrol Ofisi. The media sector rose by 39% YoY. It s 3Q05 net earnings settled at USD 390, up by 427% QoQ. The 3Q05 earnings include a one-off windfall gain of USD 264 arising from the sale of Disbank shares to Fortis and USD 83 of negative goodwill arising from the acquisition of 44.06% stake in Petrol Ofisi shares from Isbank. Dogan Yayin Holding: Consolidated revenues came at USD 893, scoring a 39% YoY growth, levelling the 1H growth level. DYH's ad revenues surged by 40% YoY in 3Q, cumulating to USD 402, continuing to outperform the overall ad market growth of 36% in 9M2005. Sabanci Holding reported consolidated net earnings of USD 467 in the first nine months of the year, 34% higher than USD 349 a year ago. Higher revenue and lack of monetary position item have appeared to be the major drivers of the rise at the bottom line despite margin squeeze. Net earnings in the third quarter alone were also up 28% YoY to USD 167 from USD 130. Turkish Airlines performed well in 9M05 recording revenues of USD 1,768, up by 23% YoY and a net profit at USD 106, up by 30% YoY. The main explanatory factors are (1) the increase in the number of passengers carried (despite a drop of market share in domestic flights) (2) YoY and QoQ increase of the revenue per passenger due to the surcharge fees. However the higher fuel costs and and personnel expenses caused the EBITDAR margin to decrease YoY. Vestel: - recorded net earnings of USD 35m in 9M05, down 33% compared to USD 52 a year earlier, though revenues were up 10%. Price wars in the highly competitive TV market and consumer durables, increased raw material costs (plastics in particular) and rise in administrative and marketing expenses were the major reasons for the margin squeezes. Furthermore, the strength of TL against Euro continued to hurt profitability of Vestel, which generates most of its revenues from the Euro-zone. - Obtained a USD 28 loan agreement with 6.5 years maturity from EBRD to finance its white goods plant investment in Russia. Aygaz: 9M05 revenues settled at USD 2,322, up by 24% YoY and the bottom line rose by 172% YoY, generating net earnings of USD 54. Taking advantage of the strong season in Aygaz LPG and increasing distributor profitability in Opet along with lower operating expenses, the Group s consolidated EBITDA margin improved by 23% YoY to 5.6% from 4.5%. IOC: Reportedly India's state-owned leading oil company Indian Oil Corporation (IOC) stated its intention to build a refinery in Turkey with a 6 tons/year capacity, which would naturally undermine Tupras s luxury position in both the local and the Mediterranean market. Tupras posted USD 403 in net earnings for 9M2005, 48% above last year s USD 273. Following the USD 370 bottom-line released in the financials for the tax purposes & USD 10.3/bbl September refining margins at historical peaks, the robust earnings growth came in line with expectations. The revenues came at USD 8.01bn, implying a strong 52% growth over 9M2004. Although bulky portion of the top-line growth not surprisingly comes from the higher product prices in parallel to the crude-oil hike, volumes also improved: total sales are up by 5.1%, YoY, reaching 18.6 tons. Enka raised its stake in Izmir, Gebze and Adapazari power plants to 100%, by completing the final share transfer of 10% from Intergen and paid USD 51. This is the realization of an already announced action plan in December

5 Sources: Anadolu Agency, Turkish Daily News, Merrill Lynch, Dışbank, Bender, Garanti Bank, Detay, MEED, DİE, Undersecretary of Treasury, CBRT, Yapı Kredi Yatırım, FinansIn vest, Hurriyet, Sabah, Radikal, Akşam, Financial Times, Ege Yatırım, TEB Yatırım, EBA newsletter, Cumhuriyet. 1 1 This report has been prepared by the Representative Office of BNP Paribas in Istanbul. The information and data contained in this report has been acquired from sources believed to be reliable, however its accuracy and completeness can not be guaranteed. This report is published solely for information purposes, neither the information nor the opinions expressed herein is to be interpreted as an offer to sell or a solicitation of any offer to buy securities. BNP Paribas accepts no liabilities for any direct loss arising from the use of this report. This report may not be reproduced, distributed or published completely or partly by any other party without the prior written consent of BNP Paribas. 5