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İŞ INVESTMENT Financial Results & Performance for the First Half of 2007

İŞ INVESTMENT Financial Results & Performance for the First Half of 2007. İŞ INVESTMENT.

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İŞ INVESTMENT Financial Results & Performance for the First Half of 2007

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  1. İŞ INVESTMENT Financial Results & Performance for the First Half of 2007

  2. İŞ INVESTMENT İşInvestment is the investment arm of İş Bank and the leading investment banking institution in Turkey. İş Investment stands out as the only listed brokerage house in the country offering variety of services, such as; • Brokerage (Trading securities including domestic and international equities, fixed income and derivatives) • Investment Advisory • Asset Management • Corporate Finance (Public offerings, M&As and strategic consultancy) • Research

  3. Best Equity House in Turkey . İş Investmentrewarded as the “Best Equity House in Turkey” within the frame of Euromoney 2007 Awards for Excellence

  4. Overview of Turkish Capital Markets - 1 EQUITY MARKET (TRY) TURKISH DERIVATIVE EXCHANGE (TRY) 380,5 bn 344,5 bn 70,2 bn 12,2 bn 2006/1H 2007/1H 2007/1H 2006/1H • Falling short of expectations, equity market remained relatively weaker in 2007/1H compared to its performance attained in the first half of 2006. The evolving derivative market also cannibalized some part of trading volume from the equity market. • In the process, the derivative market displayed an outstanding performance, beating almost all estimates with 475% annual surge in 2007/IH.The actual trading volumes reached in this market in the first half of 2007 has surpassed our year-end target.

  5. Overview of Turkish Capital Markets - 2 BILLS & BONDS MARKET (TRY) • High volatility and uncertainties in the markets lead to a visible drop in the trading volume in the Bills and Bonds Market 420 bn 401 bn 2006/1H 2007/1H PENSION FUNDS – PORTFOLIO SIZE (USD) • Pensionfunds will become the main driving force of the fund management business. The portfoliosize of pension funds reached USD 2.900mn as of IH/07 from USD 2.048 mn at the endof 2006 in the market,growing 41% with respect to 2006. Note thatthe AUM from the pension fund businesswas merely US$38 mn back in 2003. 2.900 mn 2.048 mn 913 mn 2005 08/10/2007 2006

  6. Market Share in Equity Market EQUITY MARKET – İŞ INVESTMENT (TRY) Improving and solidifying our leadership position 6,37% 6,27% 21,9 bn 23,8 bn 2006/1H 2007/1H • We strengthened our leadership position in the first half of 2007, increasing our market share to 6,37% from 6,27% compared to the same period of 2006 while our trading volume decreased to TRY 21.9 bn from TRY 23.8 bn parallel to the contraction in overall market. • The results we achieved in the first half is in line with our targets.

  7. Market Share in Bills & Bonds Market BILLS & BONDS MARKET – İŞ INVESTMENT (TRY) Holding one of the first two seats for more than 16 consecutive quarters. 13,8% 12,8 % 13,1 bn 8,1 bn 2007/1H 2006/1H • Our market share declined to 12,8% from 13,8% while our trading volume decreased to TRY 8,1 bn from TRY 13,1 bn thanks to the sheer contraction in overall market. • Meanwhile, we have been maintaining our leading positions among the brokerage houses in the market for more than 4 years.

  8. Market Share in Derivative Market New derivative instruments are in the pipeline DERIVATIVE MARKET – İŞ INVESTMENT 17% TRY 12 bn 29% TRY 3,6 bn 2007/1H 2006/1H • Our derivative trading volume surged toTRY 12 bn with over 252% rise over the same period of 2006. Our market share retreated to 17% as many players joined to the market. Still, our leadership is uncontested. • Our first half trading volume in the derivatives market is quite close to the target figure (TRY 14 bn.) we had set for the full year. • Our trading volume will continue to elevate as morenew instruments will start trading in the market iş Investment, as pioneer of the new products, will bolster its leadership via those products. • Our client base in derivative products is getting wider in each quarter (foreign & domestic).

  9. Trading Volume in International Capital Markets TRADING VOLUME IN INTERNATIONAL CAPITAL MARKETS (USD Million) 3.088 893 2007/1H 2006/1H • Our trading volume in international capital markets reached USD 3 bn , surging by246% with respect to the same period of 2006. • The share of international derivatives is getting larger portion of the overall volume. • The new instruments will likely give breadth and depth to our increasing volumes in this market.

  10. Asset Management ASSET UNDER MANAGEMENT - PORTFOLIO SIZE • We experienced a notable recovery in mutual fund business in IH/2007 following the major shake out in 2006, which had resulted in majorredemptions from the mutual funds. • Pension funds surged by 32% on YTD basis in IH/07. (TRY Million) 6.484 7.043 5.734 5.247 • 50% of İş Asset Management shares were purchased from İş Bank at the pre-determinedprice (TRY 30,5 mn). Now, İş Investment has 70% direct stake in İş Asset Management. • İş Asset Management -as 70% affiliate- will be consolidated to İş Investment’s results starting from Q3/2007. İş Investment’s IH/07 results includes merely 20% consolidation of İş Asset Management. 2007/1H 2005 2006/1H 2006 PENSION FUND – PORTFOLIO SIZE (TRY Million) 682 516 306 173 2006/1H 2006 2005 2007/1H

  11. ISDJE – Exchange Traded Fund (ETF) www.isbyf.com İş Yatırım Dow Jones Turkey Equal Weighted 15 A Type Exchange Traded Fund - founded by İş Investment- was listed at Istanbul Stock Exchange on 25th May, 2007 with code of ISDJE.

  12. Corporate Finance (Public Offerings – M&As) The largest privatization offering in the ISE: HALKBANK PUBLIC OFFERING SIZE (USD Million) 640 • We performed the largest privatization offering in the Turkish capital markets with Halkbank. • We became the only listed brokerage house at the ISE. • We executed USD 90,4 mn amounted 2 M&As while it was USD 34,9 mn in the same period of 2006. • Our corporate finance revenues quadruppled to TRY 3.671 mn in QII, jumping 473,6% compared to 1Q/2007 figure. 1.911 708 2007/1H 2006/1H M&As (USD Million) 90,4 34,9 2006/1H 2007/1H

  13. Subsidiaries

  14. Income Statement İş Investment 2006/1H 2007/1H YoY ▲% TRY (000) Operating Income: Interest and trading income 1.812 35.567 1,862% Commission revenues 21.353 22.744 6% Income from corporate finance 6.120 3.672 -40% Other income 5.402 2.820 -47% Total Operating Revenues 34.687 64.803 86% Operating Expense -19.028 - 26.900 41% Net Operating Profit 15.659 37.903 142% Other Expenses -5.454 -2.464 -54% Financial Expenses -6.291 - 3.126 - 50% Minority Expense 8.360 - 18.157 n.m. EBT 12.274 14.156 15,3% Tax -1.899 - 2.659 40% Net Profit 10.375 11.497 11%

  15. Operating Revenues TRY (000) 2.819 35.567 5.402 2007/1H 22.744 2006/1H 3.671 21.353 6.120 23.112 21.353 6.120 5.402 3.672 2.820 1.812 33.493 Corporate Finance Other Interest and Trading Commissions • İş Investment’s total revenues amounted to TRY 64.803 mn in 2007/1H, up by 86% on YoY basis. • Interest and trading revenues displayed a sharp growth, increasing to TRY 35.567 mn from TRY 1.812 mn. The dismal 2006/IH results could be attributed to the low credit volumes and the negative impact of the turmoil. • Commission revenues reached TRY 22.744 mn, surging by 173% over QI/07 figure, the commissions had totaled TRY 21.353 in the first half of 2006. • Other revenues amounted to TRY 2.819 mn down from TRY 5.402 mn due to the mainly decline in marked to market value of İş Private Equity.

  16. Brokerage & Trading Commissions (YoY) (TRY Million) 2007/1H 2006/1H 17,2 15,1 1 4,8 3,2 2,9 0,7 Brokerage Other Asset Management 5.064 2.910 3.291 • Brokerage commissions jumped to TRY 17.2 mn, recording roughly 1.5 x rise in QII over its QI performance. YoYincrease is 14%. • Commissions on derivatives rocketed by five-folds on YoY basis in 2007/1H, reaching TRY 3.153 mn vs TRY 619K in 2006/1H. • Fees on asset management rose to TRY 4.8 mn due to the effect of İş Asset Management consolidation.This account will likely post better results as 70% of İş Asset Management will be consolidated 1.014

  17. Brokerage & Trading Commissions (QoQ) (TRY Million) (TRY Million) BROKERAGE ASSET MANAGEMENT 17.2 4,8 7.5 0,57 2007/1Q 2007/2Q 2007/2Q 2007/1Q (TRY Million) OTHER 0.7 0.25 2007/2Q 2007/1Q

  18. Margin Trading INTEREST ON LOANS EXTENDED TO CLIENTS (TRY 000) OUTSTANDING LOANS (TRY Million) YoY Growth149 % 69.8 6.454 54.7 49.3 35.2 31.5 2.586 21 2.586 2007/1H 2006/1H 3Q/06 2006 1Q/07 2Q/07 1Q/06 2Q/06 • Interest income on margin accounts recorded 149% YoY growth, reaching TRY 6.5 mn in the first half of the year, surging by TRY 3.9 mn with respect to the same period of 2006. • Loans to clients reached TRY 69,8 mn as of 2007/1H, surgingby 231% with respect to the same period of 2006.

  19. Operating Expenses TRY (000) 2006/1H 2007/1H YoY▲ Employee Costs 8.998 12.782 42% Severance 96 133 39% Depreciation 617 609 -1,3% Goodwill -163 -728 347% Consultancy 778 337 -57% Operating Costs 3.744 7.040 88% Sundry Taxes 330 277 -16% Advertisement 698 298 -57% Marketing and Dist. 615 2.193 257% Other 3.315 3.959 19% Total 19.028 26.900 41% • Operating costs recorded 41% rise on YoY basis. • The cost structure includes several one-off expenses such as IPO expenditures. • Foreign marketable security transaction shares and other marketing, selling and distribution expenses also emerged as important cost components of operating expenses in the first half. • A rise in employee expenses was observed in 2007/1H as indicated in 1Q/2007.

  20. Private equity activities have increased considerably over the last two years in Turkey. Completed exits of İşPrivate Equity areCinemars, 30.25% annual yield in USD terms and Tuyap, 45.75% annual yield in USD terms. İşPrivate Equity’s most recent investment in July was in Ode Insulation, a building materials company. The equity investment was $5 mn for a 17.24% stake. New projects are in the pipeline to be finalized in the second half of the year. Private Equity İşPrivate EquityH1/2007 Results Developing Private Equity Business • İşPrivate Equity announced a net income of $0.7 mn in H1/2007. • Revenues of $12.6 mn in H1/2007 include mostly the sales proceeds from the Tuyap exit in February 2007 (at a price of $10.8 mn). The remaining revenue comes from Nevotek (a leading IP telephony application software developer), the only company İşPrivate Equity currently fully consolidates. İşPrivate Capital Track Record Investments Exits Firm Firm Investment Exit Price IRR(1) İşPrivate Equity is the leader with profitable investments in the fast growing private equity market 20

  21. Maxis Securities • Maxis Securities was established in one of the world financial centers London, UK with in the target of expanding its business lines to international capital markets. • We expect the company to be fully in operation in QIII/07 as all the legal procedures have recently been completed. • Maxis started to open new client accounts, which will likely expedite in the periods to come

  22. Comments on Profit • The first half profit confirms our year-end profit estimate. • Full consolidation of İş Asset Management that started in QII/07 (merely 20% was consolidated) led the portfolio commissions to jump to TRY 4.8 mn in IH/07. The effect of 70% consolidation will be seen in next quarter. • İş REIT shares amounted to nominal TRY 6.63 mn (TRY 13.3 mn in market value), which are held in our accounts, form a potential profit for İş Investment. • There are numerous corporate finance related projects in the pipeline that might significantly elevate our corporate finance revenues in the second half. • We have been waiting for the legal approval for our new mutual funds.

  23. İŞ INVESTMENT www.isyatirim.com.tr www.isinvestment.com 23

  24. The information in this report is prepared by “İŞ YATIRIM MENKUL DEGERLER A.Ş.” (İş Investment) and it is not to be construed as an offer or solicitation for the purchase or sale of any financial instrument or the provision of an offer to provide investment services. Information, opinions and comments contained in this material are not under the scope of investment advisory services. Investment advisory services are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks and the clients. Opinions and comments contained in this report reflect the personal views of the analysts who supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors. Therefore, making decisions with respect to the information in this reportcause inappropriate results. All prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any form of reproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this report is strictly prohibited. The information presented in this report has been obtained from sources believed to be reliable. Is Investment cannot be held responsible for any errors or omissions or for results obtained from the use of such information.

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