April 2012

Leasing Sector, Turkey

Bülent Tasar Chairman – Turkish Leasing Assosciation (FIDER)CEO - Siemens Finansal Kiralama A.S. - Turkey

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April 2012

Changing dynamics of the emerging markets & the potential for their leasing industries

Special Reference: Turkish Leasing Industry

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April 2012

Shifting Balances

*Emerging Economies as % of total World, 2010; Source: IMF

Emerging Economies

Advanced Economies

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April 2012

EM: Strong Human CapitalProjected Growth of Working Age Population (Ages 10-65), 2005-2030

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April 2012

They are growing faster than the advanced economies

GDP Growth

Advanced Economies

Emerging Economies

2010 2011 2012

3.0 2.4 2.6

7.3 6.5 7.0

Source: IMF

Contribution to Global Growth

Emerging EconomiesAdvanced Economies

Source: HSBC

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April 2012

Source: Goldman Sachs, PriceWaterHouseCoopers

By 2050…

E7 countries, which comprise of Turkey, China, India, Brazil, Russia, Indonesia and Mexico are expected to outperform the growth rates in the US, EU, G7 and OECD countries.

E7 countries are expected to attract the highest levels of capital inflow in addition to the strong increase in their trade volumes.

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April 2012

They invest heavily in sectors where leasing industry is the most active

Energy Infrastructure

Transportation

Telecommunications

Health

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April 2012

…but their access to financial servicesremains severely

constrained

Share of SMEs in GDP & employment

is very high…

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April 2012

Key Take Away: Emerging Markes will provide significant growth prospect for their leasing industries…

Larger and relatively stronger

Offering significant growth potential

Under-capitalized

Under-leveraged

Providing compelling sector/company-specific stories

Under-owned & under-valued

Under-penetrated

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April 2012

…& significant value-added for global players

Margins are higher

Returns are stronger

Strong M&A activity and search for partnerships

Scope for know-how transfer and value add

Penetration levels are low

Presence of captive parents

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April 2012

Special Reference: Turkish Leasing Sector

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April 2012

What can Turkey offer different than other Emerging Markets

…enjoys a very special location at the crossroads between East & West, overlapping Europe & Asia geographically

…occupies an area approximately equivalent to the quarter of the size of the EU

…strategically located on critical energy corridors

…is the leading investor in Caucasian and Central Asian Turkic Republics

Unique Geographical Location…

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April 2012

Consecutive High Growth RatesUS$bn %

1970US$ 13 bn

2000US$ 200 bn

2011US$ 776 bn

GDPFast growing

economy

Source: TURKSTAT

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April 2012

Net Public Debt / GDP %

Declining Budget Deficit & Net Public Debt

Budget Balance / GDP %

Source: TURKSTAT

Source: TURKSTAT

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April 2012

Increasing Trade Volumes

1970US$ 1.5 bn

2000US$ 81 bn

2011US$ 382 bn

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April 2012

Stronger FDI flows

over US$20bn per year

in 2005-2008

compared to only

less than US$1bn historically

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April 2012

Promising for Higher Growth Rates due to Low Penetration Levels

Car ownership per ‘000

Automotive

Loans + Deposits / GDP, %

Finance

Per capita consumption (toe)

Energy

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April 2012

Financial Leasing can be applied in the form of domestic lease, cross - border lease. Currently No

operational leasing.

Main medium-long term equipment financing instrument, especially for SME’s.

31 companies of which 26 are member of the association.

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

4 Participation islamic 11 Investment Banks

Contracts : Almost all full payout - mostly fixed interest rate

Average term: 3 years

Average growth rate: 35% in real terms.

2011 growth 55% in US$ terms.

Turkish Leasing Industry in a Nutshell

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April 2012

Legislative Framework

Leasing Law (No: 3226) governs only Financial Lease. (since June 1985).

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

Lessor change is permitted.

Sub Leasing is not allowed.

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

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

Lessor is the legal owner of the asset.

Leasing sector is governed by the Banking Regulation and Supervision Agency (BRSA).

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.

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 2.7 million).

Cross -border leasing contracts should be registered with the BRSA. 20

April 2012

Accounting & Taxation in Turkish Leasing Industry

LE

SSO

R

LE

SSE

E

IFRS since 2007 for all enterprises.Corporate tax: 20% 0.5% withholding tax on Cross-border rental payments.No stamp duty or any tax on the lease contracts.Investment incentives for special sectors and/or regions with 0% VAT allowances.

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April 2012

6,712 19,373 28,58124,250 37,239 42,963 19,87851,519 6,197 10,186 11,195

1st Phase 2nd Phase 3rd Phase 4th Phase 5th Phase

Sharp decline due to tax changes coupled with global financial

turmoilStrong growth rates:CAGR: 50.23%

Another growth phase

Strong Growth Rates of the Past are expected to Return with New Legislation and Tax Reform

Dec 2007-Jan 2012June 1985 – June 2003 July 2003 – Dec 2005 Jan 2006 – Dec 2007 current

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April 2012

Draft Leasing Law

What will Change?

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).

No time restriction

The voluntary-based Leasing Association will become obligatory, covering all lessors and strengthening its status.

Registration of lease contract with the Association will be less bureaucratic compared to the ex Notary Public application

Higher volumes

New Products

Less Bureaucracy

More Efficiency

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April 2012

Future Prospects

Penetration levels will increase in line with strong growth rates in Turkish GDP, increasing per capita income and higher level of private investments.

New financial openings like operating leasing, sale and leaseback, sub leasing, software leasing will also increase the growth rate and fuel higher levels of penetration.

Margins will improve via taking asset/RV risks (operation leasing, techfresh etc.)

Asset management and risk management will be crucial (Basel II to be applied within 2 years).

Technology investments will be used to create competitive advantages (IT, software, web base applications etc.)

Brokership will increase.

Specialization/Value Creation/ Innovation will differentiate the lessors. Benchmarking will be key.

Learning organizations will be formed. (Dynamic and ongoing trainings).

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Siemens Finansal Kiralama A.S.BÜLENT TASARManaging Director/CEOMeclisi 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.comwebsite : www.siemensleasing.com.tr

Thank you for your kind attention.

Finansal Kiralama Dernegi (FIDER)BÜLENT TASARChairmanNisbetiye Cad. Ayyildiz Is Merkezi No. 2/234300 1.Levent / Istanbul Tel : +90 (0 212) 284 53 10 Fax : +90 (0 212) 281 66 47

website : www.fider.org.tr

Future Prospects