Snapshot and Achieved Milestones Growth Potential Strategic Roadmap

2017 October

Snapshot

History Affiliations

1873 1985 2013 2017

DERSAADET BOND EXCHANGE 24.43% Montenegro 16.33% 4.76% Exchange Kyrgyz Stock Baku Exchange 2.04% 16.61% LCH.Clearnet Sarajevo Stock Shareholder Structure Exchange

63.04% Takas 1.3% 1.3% 6.8%0% 71.01% (Turkish CCP) Merkezi Kayıt İstanbul (CSD) 7% 30.83% Energy 10% 34.08% Exchange Istanbul Licencing & Training Agency 51.00% Istanbul Gemology Inst.

50.00% BİTÜ Technology 0.01% 73.6% Istanbul Gold Refinery 50.00% 19.93% Finans ELİDAŞ Licensed Turkiye Wealth Fund Teknopark Warehouse EBRD Nasdaq Turkish Capital Markets Association Union of Chambers and Commodity Exchanges of Other (including 0.79% shares owned by Borsa İstanbul A.Ş.)

SNAPSHOT AND ACHIEVED MILESTONES

1 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 Member in Capital Markets Board (2012-2016) Deputy Chairman in Capital Markets Board (2016)

Yunus Erişah İhsan ARICAN, PhD DURDU ARINCI Member Deputy Chairman of the Board Member

20 years of experience in Prime Ministry More than 25 years of experience in Marmara University. More than 27 years of public sector experience, Banking and Insurance Institute Banking Department councellor in Prime Ministry. Chairman of the State Supervisory Council since 2015 Chairman and Board member since 2015

İlhami Işınsu Metin KOÇ KESTELLİ AYIŞIK Member Member Member

More than 30 years of experience in banking and More than 20 years of experience in İzmir Commodity More than 30 years of experience in banking and capital markets. Exchange, Chairperson since 2009. capital markets. Chairman of İş Invest Securities , CEO of Anadolu She is founding partner in Agrilink Agricultural Products. CEO of Gedik Yatırım since 2013 Anonim Türk Sigorta .

Nicola Murat Oral ERDOĞAN, PhD Jane Member ÇETİNKAYA Board Member, Türkiye Wealth Fund BEATTIE CEO, Member Member Chairman of the Board, Takasbank

More than 25 years of capital markets experience. More than 25 years of banking and capital markets More than 20 years of experience in Financial Management Founder and CEO of Market Structure Partners. experience. & International Finance Board Member (2012-2016) CEO of Halk Yatırım between 2010-2017 President of Piri Reis University

2 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 224.9 bn

BORSA İSTANBUL MARKETS

Debt Securities Derivatives Precious Metals and Equity Market

Market Market Diamond Market HORIZONTAL INTEGRATION

CLEARING & SETTLEMENT CUSTODY

Takas İstanbul Merkezi Kayıt İstanbul (Istanbul Settlement and Custody Bank) (Central Securities Depository Institution)

VERTICAL VERTICAL CCP of Turkish Capital Markets Central securities depository INTEGRATION Borsa İstanbul’s : 63.04% Borsa İstanbul’s share: 30.1 % (with indirect ownership: 71.01%)

MARKET DATA & INDICES

- 278k subscriptions for market data products

- 381 index types (equity indices, debt securities indices, risk- control indices, leveraged and short indices)

SNAPSHOT AND ACHIEVED MILESTONES

Achieved milestones in capital markets and Borsa İstanbul

Fully compliant with Conventional New Capital Market Law Regulation MiFID

Mutualized / Unit of Corporate Structure & New Board Joint Stock Company Governance Treasury

Horizontal Integration Acquired TurkDEX Cash-only Full-range & Product Diversification Acquired IGE

Majority stake in Low-Level Control all Post-Trade Vertical Integration Takasbank & MKK

EBRD, LSE, Nasdaq, POP @ London, EDDN, Global International Domestic International Connectivity Network Reach via infrastructure providers

Limited Room for Further Borsa İstanbul - Nasdaq Technology State of Art BISTECH Growth Strategic Partnership

SNAPSHOT AND ACHIEVED MILESTONES

3 Landmark strategic partnerships

WORLD CLASS MARKET LEADING TECHNOLOGIES

2013 TRANSFER OF KNOW HOW AND EXPERTISE

BRAND VALUE

CORPORATE GOVERNANCE 2015

PRESTIGE AND VISIBILITY

SNAPSHOT AND ACHIEVED MILESTONES

Integrated business model with robust growth

Operational Revenues (Mn TL, 2014-2016) Operational Profit (EBIT) (Mn TL, 2014-2016, IFRS)

40% CAGR 878 (2014-2016) Other 783 76 Operational 52% 49 Profit Margin 74 51 Market Data 632 47 Revenue 47% 46 162 69 Listing Revenue 31 142 36 37% 120 246 Post Trade Services Revenue 454 239 365 197 Trading Revenue 232 294 Post Trade 234 179 Financial Revenue

2014 2015 2016 2014 2015 2016

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 High trading volume, strong liquidity

Equity Market Trading Volume (Billion TL) Debt Securities Market Trading Volume (Billion TL) Equities, pre-emptive rights, exchange traded funds, warrants and certificates Public and private sector debt securities, Eurobond, sukuk, repo, liquidity certificates 7% CAGR 18% CAGR (2013-2016) (2013-2016) 11,367 1,153 10,267 1,026 1,014 873 7,645 817 6,898

4,142

2013 2014 2015 2016 10/2017 2013 2014 2015 2016 10/2017

Derivatives Market Trading Volume (Billion TL) Precious Metals and Diamonds Market Trading Volume (Billion TL)

Options contracts written on single , index, and currency, and futures Gold, silver, palladium, platinum, precious stones trading as well as gold and silver contracts written on single stocks, index, currency, electricity, commodities, custody services precious metals, foreign indices, metals, overnight repo, and ETFs 13% CAGR -7% CAGR (2013-2016) (2013-2016) 57 688 607 575 38 436 31 417 26 22

2013 2014 2015 2016 10/2017 2013 2014 2015 2016 10/2017

Source: Borsa İstanbul

GROWTH POTENTIAL

High trading volume, strong liquidity

Value of Equity Trading (EOB, Bn USD) Value of Bond Trading (EOB, Bn USD)

NYSE BATS Global M. Shenzhen SE Shanghai SE Nasdaq - US LSE Group Shanghai SE Tel-Aviv SE Japan Exch Group BATS Chi-x Europe BME Spanish Exch LSE Group BV de Colombia Borsa Istanbul 117 World’s 7th largest Korea Exch debt securities market Hong Kong Exch. BC de Santiago Deutsche Boerse Moscow Exch TMX Group SIX Swiss Exch BC Buenos Aires Australian SE Shenzhen SE Exch NSE of India BME Spanish Exch Turnover Velocity of Domestic Shares (%) BM&FBOVESPA Taiwan SE Shenzhen SE Johannesburg SE The SE of Thailand 23rd in the world, 7th among Shanghai SE emerging markets in share Borsa Istanbul 327 Taipei Exch Saudi SE () traded value Singapore Exch Borsa Istanbul 169% Taipei Exch Korea Exchange Among the most liquid markets Moscow Exch in the world Bolsa Mexicana Japan Exch. Group Oslo Bors BME Spanish Exch BSE India SE of Thailand Indonesia SE BM&FBOVESPA Tel-Aviv SE Warsaw SE Saudi SE (Tadawul)

USD/TL Currency Exchange Rate: 3,02 Source: WFE, Annual Statistics Guide 2016 GROWTH POTENTIAL

5 Growth potential in capital markets

Istanbul: a strong candidate to fill the financial center gap… …with expanding Turkish Institutional Investor Base

Pension & Mutual Funds, USD Bn (2016) 35 Frankfurt 30 Toronto London 14.3 21.5 17.2 11.9 Chicago Boston Zurich 25 New York Seul 19.8 14.1 11.4 6.6 Washington İstanbul Tokyo 20 15.9 San Francisco 15.7 Hong Kong 15 10 Singapore 5 1.8 16.2 14.7 16.9 4.2 6.1 7.8 7.5 11.4 12.4 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 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 Low number of listed companies Banking Sector vs. Capital Markets in Turkey 105% ~40% ~17% 24% ~12%

Banking Assets / GDP Market Cap / GDP Top 50 Top 500 Top 1000 companies companies companies Source: Capital Markets Board of Turkey, Banking Regulation and Supervision Agency, 2016

GROWTH POTENTIAL

Fast-growing economy...

GDP, 2016 (Bn USD) Increasing Real GDP per Capita ($PPP)…

25000 USA 18,037 China 11,088 20000 Japan 4,123 15000 GDP Growth Germany 3,363 10000 2016 : 2.9% UK 2,858 2017 (e): 5.1% 5000 France 2,419

0

India 2,095

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Italy 1,822 2001 Brasil 1,775 Source: IMF, Worldbank Canada 1,551 …decreasing Inflation and Interest Rates South Korea 1,378 11.20% Australia 1,340 Weighted Average 20% Interest Rate Russia 1,331 18% 16% Inflation (YoY % Change) Spain 1,199 14% Mexico 1,144 12% 10% Indonesia 862 8% 17th Largest Economy 6% Turkey 856 4% in the World Netherlands 750 2%

0%

07 08 09 10 11 12 13 14 15 16

09 10 11 12 13 14 15 16 17

Sweden 671 08

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Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct

Apr Apr Apr Apr Apr Apr Apr Apr Apr Saudi Arabia 646 Apr Source: IMF, Worldbank Source: TUİK, CBRT

GROWTH POTENTIAL

6 ... appreciated by foreign investors

An important market for global investments Higher foreign participation

Foreign Direct Investment (USD Bn) Share of Government Debt Held By Non-Residents, %

27.0% 25.4% 22.0 22.7% 23.3% 20.2 19.9 20.8% 17.5 16.2 13.3 12.9 12.8 12.1 10.0 8.6 9.1

2.8 1.1 1.7

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Source: Ministry of Economy Source: CBRT

Companies with foreign capital has significantly increased A global marketplace

No. of Companies with Foreign Capital (Thousand) Foreign participation in Borsa İstanbul market cap - free float (%) 53.2 46.8 72.4 41.4 66.3 67.3 65.8 40.1 62.1 64.0 63.4 36.3 57.0 32 27.7 65.3 67.5 66.2 24.4 52.2 62.5 62.4 21.6 18.6 15 11.6 8.8 5.6 6.7 43.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Ministry of Economy Source: Central Registry Agency

GROWTH POTENTIAL

Accessible, liquid and deep markets for investors

Sustainable Income 2018 Operational Efficiency Inorganic Growth & 2023 Flow and Structure Subsidiary Management

. Product and service . Strategic cooperations . Fintech investments diversity and partnerships . Other investment . Expansion of the . Intragroup integration opportunities in value chain institutional and . Organizational and cost individual investor base efficiency

. Increased income from . Regional gold custody technology, derivatives center market, equity market and data

STRATEGIC ROADMAP

7 New products and initiatives...

Real Estate Certificates Securitization with PPP Products International Interest-free Finance Advisory Board Certificates to share revenue streams A financing opportunity for real estate of large infrastructure projects such projects in cooperation with An International board on Shariah Standards in as bridges, highways, airports, TOKİ (Housing Development Administration) cooperation with other capital market and hospitals etc. financial institutions.

International Custody OIC Gold Trading Platform Strategic Cooperation with Center IDB Group A platform to trade spot and forward and The capacity of the precious metals Collaboration in several fields with IDB Group store gold, among the OIC countries custody center has been increased from which represent one-fifths of the gold 100 tonnes to 1600 tonnes to act as the mine supplies in the world. International Custody Center.

STRATEGIC ROADMAP

Gold Bond & Gold Indexed Ijara Sukuk Turkish Experience

November, 2017

Hakan AYTEKIN Borsa ISTANBUL–Precious Metals Dept.

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8 Gold Demand by Local Investors

 Gold 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 2.200 tones (100 billion USD).

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Sukuk Issuances by the Treasury

 The Treasury started to issue sukuks in local and international markets in 2012  In local market, between 2012-2016 : 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 ‘Gold Indexed Ijara Sukuk’

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9 Gold Bond & Gold 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 , all over the country  The type of accepted physical gold is determined by Treasury ( only 22K and 24K gold)

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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 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. 20

10 Issuance Procedure of Gold Bond

Investor Borsa Istanbul Standard Physical Gold 1 Gold 4 Intermediary Bank The Treasury 5 2 3

Issuance Physical Standard of Bond Gold Gold

Refinery

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Issuance Procedure of Sukuk

Investor Borsa Istanbul

Standard 1 Physical Standard Gold Gold Gold Standard Gold 4 5 Intermediary Bank

The SPV of The Treasury Treasury 2 3 6 Physical Standard 5 Gold Gold Issuance Takeover of the of Sukuk gold Refinery

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11 At the Maturity Date

Investor Borsa Istanbul

Gold coin or Standard 4 Gold kilo bar

1 The Treasury / Intermediary SPV of The Bank Treasury

Standard 2 3 Gold coin or Gold kilo bar

Turkish State Mint

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Methodology of Payments

Principal: Physical "Physical Gold Delivery Option"

Local Local Local Local Currency Currency Currency Currency Payment Payment Payment 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 Gold Price)

Calculation of TRY Gold 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 Issuance Result:

 Total amount of gold collected (bond&sukuk): 2,5 tonnes (100 million USD)  %53 of investors demand sukuk  Total number of investors 12.800  The number of women higher than men.  37% of investors between 18-34 years old.

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