With the exception of shares in foreign mutual funds, the public offering of any foreign capital market instruments including depository receipts issued outside Turkey is governed by the relevant provisions of Communiqué Serial III 20 Regarding the Registration and Sales of the Foreign Capital Market Instruments (published in the Official Gazette dated March 20 1996, number 22586) issued by the Capital Markets Board of Turkey (CMB). In addition, Communiqué Serial III Number 20 regulates the private placement of foreign capital market instruments.

Public offering

Article 3 of the Communiqué provides that no public offer of foreign capital market instruments to Turkish residents can be made without pre-registration of the instruments with the CMB.

According to Article 4, foreign capital market instruments offered in Turkey prior to their registration with the CMB are required to meet certain criteria and pre-conditions, below. If such conditions are met, then the public offering procedure shall be effectuated.

• With the exception of foreign mutual funds shares, all foreign capital market instruments that are offered to public in Turkey are required to be listed on a stock exchange approved by the CMB and located in the country where such instruments are issued. In case there is no stock exchange in this particular country, the CMB is entitled to waive and not to require such listing requirements;
• foreign capital market instruments are required to be denominated in Turkish lira or foreign currencies whose daily exchange rates are announced by the Central Bank of Turkey;
• For public offering of the foreign stocks through depository receipts:
  - at least two years should have expired following the incorporation of the issuer and it should have gained profit according to its latest audited financial tables (audited and prepared in accordance with international accounting standards), and
  - stocks issued previously by the issuer should have been quoted on a stock exchange at least one year before the application to the CMB, and such stocks should have been traded for at least 100 days;
• If the issuer is an investment company, its capital cannot be less than the amount determined by the CMB for investment companies in Turkey;
• If the issuer issues foreign bonds and other debt instruments that are publicly offered in Turkey, it must have a rating at a "medium grade" to be granted by the rating institutions approved by the CMB. In addition, such a rating report may not be older than three months; and
• A public offering must to be carried out through Turkish intermediary institutions that are authorized and licensed under the CMB.
• Moreover, according to Article 3 of the Communiqué, the public offering of foreign stocks must be carried out through depository receipts.

Application process

According to Communiqué Serial III 20, the steps below are required to be followed for the public offer, sale and registration of foreign capital market instruments with the CMB in Turkey.

Pre-application

Prior to the application for registration, the intermediary that is making the public offer may consult with the CMB to verify whether the instruments including the depository receipts and the issuers meet the pre-condition listed above. The intermediary shall then submit the documents below to the CMB:

1. Descriptive information about the legal system of the country to which the issuer and the foreign capital market instruments are subject (laws, communiqués and similar arrangements) and the documents evidencing such information as may be the case;
2. Information describing the capital market instrument including the rights arising from the same and the taxes that the instrument may be subject to;
3. An exemplary form of the foreign capital market instruments;
4. Documents certifying that no restrictions exist in the country of the issuer as to the sale of the foreign capital market instruments in Turkey and also to effecting transactions and payments in Turkey relating to the financial rights provided by such instruments;
5. A list of foreign stock exchanges, if any, where such instruments are already listed or will be listed, introductory information regarding such stock exchanges, and the rules of listing, operations and price assessment;
6. In case of the public offering through depository receipts, information in relation to the custodian where the foreign capital market instruments shall be kept safe;
7. Information in relation to the transactions to be carried out until the sale in Turkey, the agreements to be executed and the intermediary institutions with respect to the same (leader arranger or quotation agents); and
8. All other information and documents that the CMB may request.

Execution of the representative agreement

The issuer and the intermediary institution are required to enter into a representative agreement that covers at least the relevant topics and issues determined in Communiqué Serial III 20. The duration of such agreement cannot be less than the maturity of the foreign capital market instruments which are publicly offered in Turkey.

Registration and public-sale procedures

The intermediary institution is required, either following the consultation with the CMB or directly, apply to the CMB together with the required documents listed in appendix two of the Communiqué, which are listed below and the documents listed in pre-application section of this article, and to have the foreign capital market instruments registered with the CMB.

The following are the documents to be submitted to the CMB with the application:

• Descriptive information about the legal system of the country to which the issuer and the foreign capital market instruments are subject (laws, communiqués and similar arrangements);
• An exemplary form of the certificate representing the instruments;
• A document certifying that no restrictions exist in the country of the issuer as to the sale of the instruments in Turkey and also to effecting transactions and payments in Turkey relating to the financial rights provided by such instruments;
• List of foreign stock exchanges, if any, where such instruments are already listed or will be listed, introductory information regarding such stock exchanges, and the rules of listing, operations and price assessment;
• Documents certifying that the issuer is in good standing and authorized and qualified for incorporation, operation and issuance of the instruments (obtained from the relevant country);
• Information regarding the activities, type and structure and board of directors of the issuer;
• A copy of the articles of association of the issuer;
• Copies of the representative agreement between the issuer and the intermediary and other agreements in relation to public offering, together with the signature circular of the authorized signatories;
• A document certifying that there are no restrictions existing in the country of the issuer as to the transfer or conversion of the instruments or to holders to use their rights including usufruct rights, if any, that arise from holding such instruments;
• Audited reports, balance sheets and income statements of the issuer, are issued and prepared in accordance with international accounting standards for the last three years and the account statements for the last three months;
• Those reports reissued and approved in accordance with international accounting standards;
• Rating reports in relation to the issuer and the foreign capital market instruments;
• Envisaged purchase price and the procedures for determination of the same;
• Descriptive information regarding the rationale for the sale of foreign capital market instruments and the place where the funds arising from them are used;
• Documents showing the performance of the foreign capital market instruments on other stock exchanges;
• For the registration of the depository receipts, a notarized copy of the document must be obtained from the custodian where all of the instruments are delivered, as well as copies of the custodian agreement, and a specimen of the depository receipt;
• Any prospectuses and circulars that have already been issued outside Turkey for the foreign capital market instruments; and
• All other information and documents that the CMB may request.

The CMB requires that the listed documents are translated into Turkish and submitted in notarized and apostilled form. The standards of prospectuses and circulars published in Turkey is determined by the CMB at the time of the application, based on whether the foreign capital market instruments are stocks, notes or bonds, or any other debt instrument.

Following the application, the CMB will review all the documents and, if it finds them to be in appropriate shape issue its registration approval.

Application to the stock exchange

Upon obtaining the approval, the intermediary must apply to the relevant Turkish stock exchange, with the documents requested by the same to have the foreign capital market instruments listed. The application must be carried out within 15 days, starting from the end of the public-offering period.

According to Article 8 of the Communiqué Serial III 20, the foreign capital market instruments registered with the CMB are listed on and traded in the related market of the Turkish stock exchange if they comply with the quotation requirements of the same.

Timing

Subject to the compliance of the documents submitted to the CMB, and provided that there aren't any issues that cause unexpected delays, the registration and public offering process is finalized within three to three-and-a-half months after the application date. This period may be longer depending on the structure and type of the instruments.

Private placements

Under Article 19 of the Communiqué, private placements of the foreign capital market instruments through intermediaries to pre-defined investors are also subject to registration requirements of the CMB. However in this case, the CMB requires less strict documentation.

For the private placement of the foreign capital instruments, the intermediary institution must apply to the CMB with the documents indicated below together with the documents listed in the pre-application section above.

Below are the documents to be registered with the CMB for the private placement of foreign capital market instruments:

• Documents certifying that the issuer is in good standing and authorized and qualified for incorporation, operation and issuance of the instruments (obtained from the relevant country);
• Information regarding the activities, type and structure and board of directors of the issuer;
• A copy of the articles of association of the issuer;
• A document certifying that there are no restrictions in the country of the issuer as to the transfer or conversion of the instruments or to their holders to use their rights (including usufruct rights) that arise from holding such instruments; and
• Copies of the agreements executed between the issuer and the persons to whom the instruments are sold via private placement.

Furthermore, sale of the foreign capital market instruments through private placements must be completed within 15 days following registration with the CMB.