Turkish Leasing Market: Latest Developmentsand

Prospects

Bülent TasarChairman – Turkish Leasing Association (FIDER)

Managing Director - Siemens Finansal Kiralama A.S. - Turkey

Turkish Leasing Market:Latest Developments and Prospects2-3 April, 2009Istanbul-Turkey

April, 2009

SIEMENS FINANCIAL SERVICES AT A GLANCE

Siemens Financial Services (SFS):A Siemens Group

Nearly 1,900 employeesInternational network of affiliatescoordinated by

Siemens Financial Services GmbH,

Munich

SFS – a provider of financial solutions

- Combination of international financial expertise and

comprehensive technology and industrial know-how

- Financial solutions uniquely targeted to the requirements of its customers

SFS is a niche player in target markets: sales and investment financing, treasury services, fund management, insurance solutions

FY 2008 FY 2007 FY 2006 FY 2005

Total assets 11,328 8,912 10,522 10,148

Pretax profit 286 329 307 319

Employees1,933 1,783 1,764 1,672worldwide

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April, 2009

MAIN ECONOMICAL INDICATORS

TURKEYMAIN ECONOMIC INDICATORS

2001 2002 2003 2004 2005 2006 2007 2008

GNP (Million US$) 145,700 180,900 239,200 299,500 361,400 399,673 658,700 748,000

GNP Growth % -9,5 7,9 5,9 9,9 7,6 6,0 4,5 1,5

Per Capita GNP $ 2,123 2,598 3,383 4,172 5,008 5,477 9,333 10,733

Population (Million) 68,6 69,7 70,9 71,5 72,0 73,4 70,5 71,5

Inflation Rate (CPI) % 54,4 45,0 25,3 10,6 8,2 9,7 8,4 10,1

Inflation Rate (WPI) % 61,6 50,1 25,6 11,1 5,9 11,6 5,9 8,1

Exports (Million US$) 31,334 36,059 47,253 63,167 73,476 85,478 107,200 132,003

Imports (Million US$) 41,399 51,553 69,340 97.540 116,774 138,290 170,100 201,823

Source: Turkish Statistical Institute(*) Central Bank of the Republic of Turkey

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April, 2009

LEASING STATISTICS

Source: FIDER

7,707,646,87,726,724,25Equipment Penetration %

42.96337.27828.61524.23319.3836.712Number of Contracts

5270.04262,12920,32164,81327,2Total

71,242,670,755,646,146,9Others384,6343,9196,9144,168,766,6Real estate

317263209,1185,3137,8126,4Office equipment and computers152,2134,9104,956,538,324,6Printing equipment191,1150,4144,475,950,329,7Electronic and optical equipment96,459,642,442,93616Tourism equipment355351,9371,2413,3310,887,8Textile machinery

245,9197,1122,1100,342,728,8Medical equipment14161175781,6547,9278,5156,8Manufacturing machinery and equipment

1363,8986446201,799,672,1Construction Machinery24,475,76,8171,3Marine vehicles11,325,85,2061,4Air transportation vehicles

641,1524,9420,1334,5195,472,6Vehicles

200620052004200320022001Equipment

Source: FIDER

7,707,646,87,726,724,25Equipment Penetration %

42.96337.27828.61524.23319.3836.712Number of Contracts

4262,12920,32164,81327,2731Total

71,242,670,755,646,146,9Others384,6343,9196,9144,168,766,6Real estate

317263209,1185,3137,8126,4Office equipment and computers152,2134,9104,956,538,324,6Printing equipment191,1150,4144,475,950,329,7Electronic and optical equipment96,459,642,442,93616Tourism equipment355351,9371,2413,3310,887,8Textile machinery

245,9197,1122,1100,342,728,8Medical equipment14161175781,6547,9278,5Manufacturing machinery and equipment

1363,8986446201,799,6Construction Machinery24,475,76,817Marine vehicles11,325,85,206Air transportation vehicles

641,1524,9420,1334,5195,4Vehicles

20062005200420032002Equipment

7,07,70

19,878

5301,58203,3

24,6119,880,2919,5

584,1465,1289,9230,1146,1298,9180,8195,7136,5651,3367,9368,6

1433,81921,91081,31931,1113,8138,498,596,8

485,8866,1

20082007

51.519

Distribution of Domestic Leasing according to asset typeNew Equipment cost in USD million

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April, 2009

LEASING STATISTICS

Leasing in Turkey by Asset Type ( 2008)

Vehicles; 9%

Air transportation vehicles; 2%

Marine vehicles; 2%

Construction machinery; 20%

Medical equipment; 7%Manufacturing machinery

and equipment; 26%

Textile equipment; 6%

Tourism equipment; 3%

Electronic and optical equipment ; 3%

Printing equipment ; 3%Others; 2% Real estate ; 8%

Office equipment and computers ; 6%

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April, 2009

ABOUT LEASING ASSOCIATION (FIDER)

• Roots in 1989 with four companies namely Lease Club.FIDER officially established in 1994. Today 36 members which creates appx. 90% of the lease volume (dominated by first 15 companies, mostly bank subsidiaries).

• Own ethical codes signed by all members.

• Very active committees such as legal, accounting and tax etc. to be pro-active.

• Well acceptance and good relations by the government authorities as well as international institutions like World Bank,IFC,Leaseurope Leasing Associations.

• Experienced professional staff.

• Carries a well established library for the leasing studies or any other inquiries (for internal and external demand).

• Arrange extensive local and international training programs.

• Arrange promotional and motivational social activities in the sector.• More info can be taken from Web site www.fider.org.tr

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April, 2009

SECTOR SUMMARIES

• 74 registered companies (including 10 investment banks, 4 Participation Banks/ Islamic Banks and 3 Captives)Presently around 40 active players.

• First 15 players dominate the market (mainly bank subsidiaries).

• Contracts 95% full payout and average term is around three years.

• In general fixed interest rate.

• Low bad debt around 1% end 2007 (uncollected amounts around 6%). Increased to 3% in 2008 and still goes up.

• Appx. 7% (average last 5 years) of total private fixed capital investments.

• Cross border leases to Turkey only for high-tech.

• Average growth rate is around 40% in real terms although in some crisis years negative growth. (in 2007 38%).Unfortunately in 2008, 35% decrease because of VAT Law changes and worldwide economical unstability.

• Still one of the prior medium-long term equipment financing instrument, especially for SME’s.

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April, 2009

LEGISLATIVE FRAMEWORK (I)

• Leasing Law (No: 3226) governs only Financial Lease.

• New Tax Law (No: 4842) allows Operating Lease but harmonization between these two laws are still needed.

• Uncancellable period is four years (some exceptions such as cars, computers, photocopiers, constructionmachineries, buses, trucks, medical equipments, aircraft and vessels for two years).

• Lessor change is permitted.

• Sub Leasing is not allowed.

• Movables and immovables can be leased (except industrial rights such as patent rights, software etc).

• Lease rentals can be fixed or floating and can be in TL and/or FX.

• Lessor is the legal owner of the asset.

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April, 2009

LEGISLATIVE FRAMEWORK (II)

• Leasing sector is governed Banking Regulation and Supervision Agency (BRSA) since January, 2006.

• Contracts should be registered with notary public to secure the ownership rights of Lessor.

• Lessor is obliged to take out insurance, Lessee should pay the insurance premium.

• In case of default 30 or 60 days’ grace.

• Total book value of the leased assets can not exceed 30 times of the shareholders’ equity.

• Minimum capital requirement is TL 5 million (appx. USD 3 mio.).

• Cross Border Leasing contracts should be registered with the BRSA.

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April, 2009

ACCOUNTING AND TAXATION (STILL ON)

• IFRS since 2007 for all enterprises.

• VAT 18% (8% in trucks and commercial vehicles, medical equipments some industrial machineries andconstruction machineries). VAT has been increased from 1% to 8% and 18% since January 2008.

• 0.5% witholding tax on Cross-border rental payments.

• No stamp duty or any tax on the lease contracts. Only small fix cost for notary public .

• Corporation tax 20% (decreased from 30%).

• Investment Incentives for special sectors and/or regions with 0% VAT allowance.

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April, 2009

DRAFT NEW LEASING LAW

• Operating Leasing.

• Sale and Lease Back.

• Sub Leasing.

• Software Leasing.

• Improvement in legal cases (i.e. Get equipment quicker, more severe trade/civil law articles against fraud).

• Association to cover all leasing companies (obligatory).

• Registration of lease contract with Association meaning less bureaucracy than ex Notary Public application (but maybe less legal strength).

• General and specific provision guidlines (similar to banks).

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April, 2009

TURKEY’S GENERAL POSITION DURING AND AFTER THE CRISIS(+)

(-)

• No subprime mortgage credit in Turkish finance sector.• Rating of the credits are prudent.• There is no bank ≤ 12% primary capital ratio.• Transparency is very high comparing the other countries. Thank to BRSA.• Acceptable level of risk for repayment or roll the existing loans in the finance sector.• Political stability.

Although many positive and strong position in the market there are and expected some negative developments;(i.e. No direct effect but expected indirect effects).

• Liquidity problem because of credit crunch. Higher spreads, shorter maturities.• Problem in reel sector with USD 75 bio. FX debt(open position risk as well).Presently current account deficit is 3% of GDP, amounting appx. USD 41 bio. end 2008. Increase in oil andenergy prices might worsen the deficit(presently no problem).

• Decrease in portfolio quality, collection and default problems.• GDP plans , inflation plans , FDI’s

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April, 2009

TURKISH LEASING SECTOR BEFORE - DURING AND AFTER CRISIS

Turkish Leasing Sector Before Crisis Turkish Leasing Sector During and After Crisis

• Financial Sector consolidated (mainly banks and consequently leasing and factoring companies).

• FDI in financial and insurance sector.

• Partnership ≤ 50% (AK-Citi, TEB-Paribas, Garanti-GE).• Partnership > 50% (Dis-Fortis, Finans-NBG, Deniz-Dexia,Abank-Alpha).

• Country rating still low but improved from B stagnant to BBpositive.

• Rapid margins decreases. Severe competition. Returns do not justify thecustomers risk rating.

• There is a demand for small ticket. Considerable Flow Business andRenting potential .

• New Leasing law draft is under consideration and sent to State Ministryfrom BRSA (Organizational issues have been circulated in January, 2007).New Mortgage Law has been introduced, leasing companies can financehouses via Mortgage for individuals.

• Low bad debt.

• New consolidation in finance sector including leasing. Some foreigninvestors might leave the country.

• More captive lessors to come to market (Volvo, Man, Hitachi/Enka,Caterpillar recently came).

• Country rating l came down to BB neutral from BB positive i.e. CDSincreased meaning expensive borrowing.

• Competition edge is on long term funding. Spread seems second priority.In shorter terms (up to 1 year) severe competition comes from the Banks.

• Small-mid ticket vendor programs almost zero.No demand.

• New Leasing law Draft is under consideration and sent to Prime Ministryfrom Satate Minsitry.New Mortgage Law has been introduced, leasing companies can financehouses via Mortgage for individuals.

• Collection becomes problem. Higher bad debt.

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April, 2009

PROSPECTS

• Improve margin via taking asset/RV risks (operating leasing,techfresh etc.).

• Asset Management and Risk Management will be crucial (Basel II to be applied within 3 years) (2008 postponed).

• We might see bigger deals via syndication.

• New financial openings like operating leasing, sale and leaseback, sub leasing, software leasing will increase the growth rate and penetration.

• Learning organizations (Dynamic and ongoing trainings).

• Technology investments (IT,software).

• Brokership will increase.

• Longer term funding /Specialization/Value Creation/ Innovation will differentiate the lessors.

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April, 2009

THE MOST POWERFUL SECTORS OF TURKEY

World’s 2nd largest manufacturer of flat glass

World’s 6th largest producer of cement and cotton

One of the world’s 5 largest jewellery manufacturer

The biggest textile manufacturer in Europe

The biggest TV manufacturer in Europe

The biggest fertilizer manufacturer in Europe

6th largest manufacturer of refrigerators in Europe

7th largest iron and steel manufacturer in Europe

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‘’TURKEY WELCOMES YOU’’

Thank you for your attention.

Siemens Finansal Kiralama A.S.BÜLENT TASARManaging DirectorMeclisi Mebusan Cad. No:4534427 Findikli / IstanbulTel : +90 (0 212) 251 02 07/08Tel (Direct) +90 (0 212) 252 92 09 Fax : +90 (0 212) 293 35 30e-mail: bulent.tasar@siemens.com

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