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Turkey

Throughout late 2003 and early 2004, the Turkish Capital Markets Board (the CMB) promulgated a number of new regulatory acts.

Public offerings

The Communiqué on Sale and Registration of Shares with the Capital Markets Board, Series I 26 has been amended by the Communiqué Series I 32.

According to the Communiqué as amended, in the case of an initial public offering or a secondary public offering through the bookbuilding method, if the demand exceeds the number of shares offered for sale, offerors will be entitled to sell additional shares, provided that the relevant announcement is published in the prospectus. However, the total amount of the additional shares cannot be more than 15% of the shares offered to public before the additional shares were issued.

Upon offering the shares to the public, the Communiqué authorizes the brokers that are listed in the prospectus and involved in the public offering to purchase the offered shares from the Istanbul Stock Exchange (ISE) to establish price stability, provided that the relevant announcements are published in the prospectus.

Brokers are only entitled to realize these purchases for 30 days starting from the date shares are traded on the ISE. Broker companies can initiate the purchase if and when the trading price of the shares is below the public offering price and if they cannot sell those shares below the public offering price within 30 days.

Credit rating activities and agencies

In December 2003, the Communiqué Related to the Rating Activities and Rating Corporations was amended by the Communiqué Series VIII 40.

The Communiqué, as amended, enables credit rating agencies to evaluate the compatibility of a public company's activities with corporate governance principles. However, public companies are not obliged to have their activities rated from a corporate governance point of view. Nevertheless, the CMB may require public companies to have their activities rated.

According to the Communiqué, credit rating agencies are no longer required to obtain the CMB's permission before their establishment. However, they should be included in the approved list prepared by the CMB to carry out rating activities.

In addition, credit rating agencies are not required to obtain the CMB's approval before amending their articles of association, provided that the amendments are notified to the CMB within five business days.

Furthermore, pursuant to the Communiqué, credit rating agencies are required to have a share capital of at least TL200 billion ($130,000). The Communiqué indicates that credit rating agencies must fulfil these requirements within two years of its publication. Therefore, credit rating agencies whose share capital is less than TL200 billion must increase their share capital accordingly.

International Financial Reporting Standards

The Communiqué on Accounting Standards Series XI 25, which is also one of Turkey's undertakings under the Letter of Intent dated July 30 2002 to the IMF, has been issued to comply with the EU directives requiring all listed corporations to prepare their consolidated financial tables in accordance with International Financial Reporting Standards (IFRS) by January 1 2005, at the latest.

The Communiqué will enter into force on January 1 2005. However, corporations are entitled to apply the provisions of this Communiqué and prepare their financials according to IFRS rules starting from their annual or interim accounting year-end as of December 31 2003.

According to the Communiqué, corporations are required to prepare balance sheets, income, cash flow and equity charts together with footnotes. The corporations' mid-year (six months) and annual financial statements must be fully prepared, whereas the quarterly financial statements may be in summary form. Additionally, mid-year financials will be subject to a limited audit, whereas annual financials will be subject to full audit.

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