ISTANBUL STOCK EXCHANGE (ISE)

Inaugurated in the beginning of 1986, the Istanbul Stock Exchange (ISE) is the sole securities market of Turkey established to provide trading in equities, right coupons, Government bonds, Treasury bills, revenue sharing certificates bonds issued by the Privatization Administration and corporate bonds and to carry out repo transactions. The ISE is a semi-autonomous professional public organization whose members are investment banks, commercial banks and brokerage houses. The ISE Members engage in activities such as underwriting new issues, trading for their clients and their own accounts in the secondary market, managing customers' portfolios, providing investment consultancy services and dealing in repo operations, securities lending and margin trading. Currently the ISE Members consist of 131 brokerage houses and 73 banks.

The "National Market" comprises 261 companies, 100 of which are included in the ISE National-100 Index. The ISE members have the opportunity to engage in short-selling transactions in stocks constituting the ISE National-100 Index. Besides the National Market, Regional Markets, New Companies Market and the Watch List Companies Market are available for the trading of companies which do not fulfil the listing requirements and lack the necessary qualifications for trading on the National Market. The daily average traded volume of stocks in April 2000 was USD 1.1 billion, while the market capitalization was USD 125 billion.

The Bonds and Bills Market is the only organized, semi-automated market for both outright purchases and sales, repo/reverse repo transactions, and trading of real estate certificates. The members communicate their orders via telephone to the ISE staff who act as "blind brokers". After an order is integrated into the computer system, it is processed according to price and time priorities. The market operates on a multiple price-continuous trading system and only the best price orders are automatically matched.

The International Market (ISEIM) was established where foreign debt securities and debt securities of the Republic of Turkey and its local administrations issued for trading abroad began to be traded on February 25, 1997. Stocks of foreign companies and foreign mutual funds will be traded as depository receipts. All proceeds (including but not limited to dividends, capital gains and interests) that foreign individual and institutional investors will earn on the market operating in a free zone are exempt from tax. All trading and settlement operations and payments on the Market are carried out in US dollars (or in other convertible currencies approved by the ISE Executive Council). For debt securities, transaction on the Market are conducted in a multiple price, continuos auction system. For equities and mutual fund units/shares traded as depository receipts, transaction in the market shall be conducted in a multiple price, continuos auction quote and order driven system with the support of a market maker for each depository receipt.

In 1993, the ISE was recognized as a "Designated Offshore Securities Market" by the U.S. Securities and Exchange Commission (SEC) and as an "appropriate foreign investment market for the private and institutional Japanese investors" by the Japan Securities Dealers Association (ISDA) on May 9, 1995. There are no restrictions on foreign portfolio investors trading in the Turkish securities market. Hence, the Turkish stock and bond markets are open to foreign investors, without any restrictions on the repatriation of capital and profits.

The ISE is a founding member of the "Federation of EURO-Asian Stock Exchanges" (FEAS) which was established in Ýstanbul, on May 16, 1995. The ISE is also a full member of the "Federation Internationale des Bourses de Valuers" (FIBV), the "International Society of Securities Administrators" (ISSA), the "International Securities Market Association" (ISMA), the "European Capital Market Institute" (ECMI) and the World Economic Forum (WEF).

The ISE Settlement and Custody Bank (TAKASBANK) is an investment bank owned by the ISE and its members. The bank handles the settlement of equities, bonds and repo transactions carried out in the ISE as well as other related services such as excercising of pre-emptive rights, dividend collection, coupon cutting etc... The settlement period for stock transactions is two business days following the trade date. TAKASBANK has been recognized as the sole and exclusive central depository in Turkey by the Capital Markets Board and as an "eligible foreign custodian" by the US Securities and Exchange Commission (SEC).

The legal framework and operational structure of the trading system of the Derivatives Market have been prepared and the ISE will launch the trading of index futures in the last quarter of 1997. The underlying asset of the first derivatives product is the ISE National-30 Index.