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Credit Analysis

E

International Sub-Sovereign

Government-Related Issuer

February 2008

Moody's

Table of Contents:

Summary Rating Rationale Rating Outlook Issuer Overview Key Rating Considerations Institutional Framework Financial Position and Performance Debt & Liquidity Governance and Management Factors Appendix 1 ­ Partnership Companies Moody's Related Research Company Annual Statistics 1 2 2 3 3 4 6 7 8 8 9

Toplu Konut Idaresi Baskanligi (TOKI)

Ankara, Turkey Summary Rating Rationale

The issuer ratings of Ba3 (Global Scale, local and foreign currency) and Baa1.tr (Turkey National Scale) of the Housing Development Administration of Turkey (Toplu Konut daresi Bakanlii, or TOKI) primarily reflect its public status and strategic role in executing the government's housing policy. Established with Mass Housing Law n.2985 in 1984, TOKI is a State Agency affiliated with the Turkish Prime Ministry. As such, its rating is closely tied to that of the Turkish Republic. The ratings also take into account TOKI's financial fundamentals and improving financial performance, although large investments have led to a narrowing liquidity position. The ratings incorporates TOKI's business model, which entails good operational efficiency and management of risks associated with a building-for-sale model. TOKI has managed its financial exposure to date, although its large investment programme is expected to require external sources of funding. According to Moody's rating methodology for Government-Related Issuers (GRIs), TOKI's rating is composed of two principal inputs on the global rating scale: a Baseline Credit Assessment of 13 on a scale of 1 to 21 (where 1 represents the lowest credit risk) and a high likelihood of extraordinary support from the national government (Ba3, stable). High support primarily reflects TOKI's legislative framework, which regulates its public status and integration into the government's institutions. TOKI performs its mission ­ which forms a strategic component of the incumbent government's social policy ­ under a central government mandate and direction from the prime minister's office.

Analyst Contacts:

Milan

16 Francesco Soldi Analyst

39.02.9148.1100

London

13 Thomas Amenta

44.20.7772.5454

VP - Senior Credit Officer

New York

0 Yves Lemay Managing Director

1.212.553.1653

This Credit Analysis provides an in-depth discussion of credit rating(s) for Toplu Konut Idaresi Baskanligi and should be read in conjunction with Moody's most recent Credit Opinion and rating information available on Moody's website. Click here to link.

Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

Rating Outlook

The stable rating outlook factors in Moody's expectation that TOKI will manage the execution of its large investment programme without substantially increasing its financial leverage. The stable outlook also factors in the stability in the legal framework that regulates TOKI's role and status. Any change in Turkey's sovereign rating or rating outlook may be reflected in TOKI's rating or rating outlook.

Issuer Overview

A government institution with a broad range of powers and duties in the housing sector...

TOKI is a not-for-profit public-sector entity affiliated with the Turkish Prime Ministry. It operates under a mandate from the national government to implement housing policies, and its three major areas of activity are as follows: Housing construction: (i) building ­ but not operate - or promoting the construction of social housing, as well as social and economic infrastructures (70% of TOKI's business); and (ii) promoting luxury housing projects on its own lands through a revenue-sharing model (30%), with the purpose of assuring funding sources for social housing projects. Credit support: (i) providing housing loans to low- and middle-income individuals or co-operatives; and (ii) promoting the participation of banks in housing finance. Strategic planning: (i) supporting renewal projects and rehabilitation of squatter areas, in co-operation with the municipalities and local authorities; and (ii) coordinating the development of rural settlements, with the aim of preventing rural-to-urban migration and market speculation. Headquartered in Turkey's capital city, Ankara, TOKI operates through a number of local subsidiaries spread across the country, and its 550 employees (as of October 2007) are civil servants. In the country, TOKI has to date been instrumental in building about 325,000 housing units and a large number of social and economic facilities, including hospitals and schools, in line with the investment target of 500,000 units by 2012 set by the national government. In addition, TOKI had provided credit support to around one million individuals since its foundation in 1984, primarily through public banks. TOKI is also involved in housing development projects abroad, in particular in CEE countries.

...coordinating the government's response to housing demand

The Turkish economy has grown strongly since the 2001 financial crisis. During 2002-2006, Turkey's economy posted 7.2% average annual real growth and the country's population increased rapidly to 73.6 million inhabitants. Such solid growth rates have, however, been accompanied by significant disparities in terms of income distribution amongst households. In Moody's view, the associated social pressures have affected the government's policies in the social sector, including those on public housing, and are expected to continue to have an impact. Rapidly increasing population ­ especially in urban areas ­ and tight conditions for accessing bank financing explain the demand for social residential housing. Inflation fell to 9.7% in 2006 from an average of 65% between 1996 and 2002, and extensive structural reforms over the past seven years have made Turkey's economy much more resilient. The three-year Standby Agreement with the IMF, which runs until 2008, and Turkey's drive to enter the EU have helped to stimulate political and economic reform. All these factors have contributed to the acceleration of investment and modernisation over recent years and have helped to stabilise the operating environment. However, typical of an emerging-market economy, Turkey's operating environment is characterised by a high level of systemic risk, and the national economy may still be vulnerable to structural instability. The improved economic conditions of households and acceleration of foreign investments boosted the performance of the construction sector to 19.5% growth in 2006 from 4.6% in 2004. Going forward, Moody's

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

expects the construction sector to continue to grow ­ albeit potentially at a lower pace ­ driven by the still considerable need for housing units in the country territory and a growing interest of foreign real estate investors in developing economies. TOKI is well placed to benefit from increasing construction activities and to support economic growth through infrastructure projects, although it remains exposed to potential volatility in the housing market.

Key Rating Considerations

Institutional Framework

A public-sector entity, strongly integrated into the government's institutions

TOKI is a not-for-profit state agency subject to public law (i.e. it is not a state-owned enterprise, or SOE). As such, it has no shareholders and is exempt from corporate tax. By law, it cannot be liquidated or declared bankrupt and its assets are immune from attachment, but TOKI can grant voluntary security. Although unlikely in the near term, any change in status, including a potential privatisation, should be approved by law. In this regard, Moody's notes that TOKI is not listed by the government as an SOE in the Privatisation Administration's portfolio. 1 The Turkish government's policy for public housing has its legislative foundation in the Mass Housing Law 2985 of 1984. In line with the principles set out by the 1982 Constitution of the Republic of Turkey, 2 this framework law ­ introduced in conjunction with the reorganisation of the Turkish Prime Ministry ­ established the creation of a new legal entity (TOKI) to administer social housing, and allowed for retention of the Housing Development Administration Fund established in 1981 (Law 2487) outside of the state budget. Shrinking public funds, however, acted as a constraint on the development of public housing until the early 2000s, when legislative refinements and a closer political focus expanded TOKI's operations. In 2001, an additional source of income was destined to finance housing policies 3 and TOKI's portfolio of land increased significantly due to its acquisition of real assets and properties from public bank Emlak Kredi Bankasi (in liquidation). 4 With the implementation of the Emergency Action Plan of the newly elected government in 2002, public housing assumed a priority role and TOKI was affiliated to the Turkish Ministry of Public Works and Settlement. Finally, in 2004, TOKI was affiliated with the Turkish Prime Ministry and the Turkey's Urban Land Office activities and assets were combined with TOKI's organisation. 5

Close relationship with and strategic role to the Turkish government

TOKI's management structure and governance clearly point to a high degree of operational integration with the government, as well as its budgeting process and auditing procedures. The prime minister appoints TOKI's president and ultimately oversees the agency's operations. TOKI's budget proposal is drafted in collaboration with the Prime Minister's Office and the Ministry of Finance. The inclusion of TOKI's investment projects in the Strategic Plan drafted by the State Planning Organisation (SPO) indicates that TOKI's activities are recognised as strategically important to national development. Auditing of TOKI's accounts is performed by the High Audit Council of Turkey. In addition to such regular controls, the prime minister retains powers of inspection over TOKI's accounts and operations. The current legislation does not contemplate the introduction of independent auditing for government institutions. Going forward, the expected revision of accounting standards for public-sector entities promoted at national level should not impact TOKI, as the agency's accounts are not consolidated in the state's budget.

1 2

3

4

5

See Law 4046, adopted on 27 November 1994, concerning arrangements for the implementation of privatisation (http://www.oib.gov.tr/). Articles 56 and 57 of the Constitution of the Republic of Turkey passed in 1982 establish the right to housing and the instrumental role of the state in meeting housing needs and promoting mass housing projects. With Law 4705, passed in 2001, the government introduced a special exit levy of US$50 for Turkish citizens travelling abroad. This levy, which accounted for a modest proportion of TOKI's budget, was recently reduced to US$10. The liquidation of Emlak Bankasi (Eximbank) was part of an agreement between the Republic of Turkey and the International Monetary Fund (IMF) further to the IMF's request for the liquidation of the third-largest state bank as a measure for granting continued assistance to Turkey. At the time of its liquidation in 2001, Emlak Bankasi had land holdings valued at around US$2 billion, as well as a considerable stock of housing units. In 2004, TOKI received about 64.5 million square metres of public land as a result of the integration of the Urban Land Office (Law 5273).

February 2008 Credit Analysis Moody's International Sub-Sovereign - Toplu Konut Idaresi Baskanligi

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

The government recognises that housing plays a strategic role in its welfare policies. Housing development is included in the government's programme amongst drivers to enhance the investment environment in Turkey together with financial and economic stability. In this respect, political stability at the national level ­ the ruling Justice and Development Party (AKP) won its second consecutive mandate in the July 2007 parliamentary election ­ should support policy continuity. TOKI's activity also plays a strategic role for local authorities. However, this close link with the government might also have an impact on TOKI's operational autonomy and its planning capacity. Whilst government funding represents a low proportion of TOKI's revenue sources, Moody's understands that the agency's financial performance is ultimately affected by the government's strategy in terms of the allocation of public land or investment targets. Most of TOKI's 161.4 million square metres of land (as of 2007) has been transferred from the state and other public institutions or co-operatives, whilst a minor proportion has been purchased at a preferential price or expropriated. TOKI's authority to make amendments to urban planning schemes developed by municipalities somewhat protects it from the risk of administrative interference. TOKI derives financial means for its social mission primarily from the sale of houses built on its own land ­ including social housing but also profitable projects in the open market ­ and from interest and repayments on housing loans provided to individuals or on credit to municipalities engaged in renovation projects. To perform its duties, TOKI can establish or involve companies active in the construction sector. Partnerships are primarily the result of the government's strategy to expand its portfolio of assets, but also of the agency's operational decisions. Although TOKI is not subject to specific borrowing limits, treasury approval is required for borrowings in both foreign and domestic currency, whether or not these benefit from a treasury guarantee.

Increased public-sector borrowing autonomy needs to be supported by prudent financial management

The credit history of public-sector entities in Turkey is mixed, but Moody's recognises the national government's interest in building a firm foundation for creditworthiness as part of its modernisation efforts. The government has to date limited the access of sub-sovereigns to the capital market in order to control macro finances and preserve financial stability, particularly in the context of high inflation. In this regard, Moody's acknowledges that an increase in borrowing autonomy for public-sector entities needs to be accompanied by robust budgetary accountability and financial management standards. In countries characterised by a relatively high cost of funding, Moody's cautions that the use of leverage should consider the expected returns from those investments being financed with the debt, whenever possible. Volatility in financial market conditions ­ due to variable monetary, credit and liquidity conditions - and relatively short debt maturities should inspire prudent debt and cash flow management practices, particularly when short-term financing cannot be well hedged.

Financial Position and Performance

Key Indicators

TOKI - Financial Statistics

(as of 31 December)

Total Assets (TRY million) Operating Margin (%) (1) Surplus (Deficit) / Total Income (%) Total Debt / Total Assets (%) Gearing (%) (2) Cash and Deposits / Total Debt (%) Current Assets / Current Liabilities (x)

2002

2,145.7 19.5 45.2 54.6 173.3 18.4 4.4

2003

2,664.3 -5.1 38.3 43.6 140.0 38.5 10.7

2004

3,693.1 2.7 53.6 36.8 133.1 36.0 15.7

2005

5,731.6 43.2 55.9 23.7 75.1 18.2 6.3

2006

10,214.3 41.7 42.3 13.3 43.1 11.5 8.3

2007F

13,657.3 57.2 58.8 10.0 22.3 3.7 8.7

Note: (1) Operating Surplus (Deficit) / Gross Business Income. (2) Total Debt / Total Equity. F ­ forecast.

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

Positive financial fundamentals, with improving margins

Realised accounts show that TOKI has been able to manage its rapidly increasing budget and to maintain positive financial fundamentals. The expansion of its portfolio of assets ­ primarily land transferred from the treasury and other public institutions ­ has prompted the agency's substantial investment activity over the past five years. Over the past five years, increased housing sales have reduced reliance on government grants as a source of revenue, reflecting the government's attitude to support TOKI's operations through land allocation rather than grants.

Revenue Composition 2002-2006

2006 2005 2004 2003 2002 0% 20% 40% 60% 80% 100%

Net sales proceeds Net general budget appropriations

Source: Moody's elaboration from TOKI's table of income

Net interest income on loans Other income (e.g. rents, commissions)

For social housing projects, the increase in sales has been supported by a substantial amount of housing loans provided to low- and middle- income owners, as reflected by the rapid accumulation of long-term receivables in the balance sheets. As part of its social mission, TOKI has been instrumental in providing credit to a large proportion of households excluded from the housing market because of tight conditions for accessing bank financing. 6 To date, TOKI has reported very low delinquency rates or delayed payments on housing loans provided. This has been primarily favoured by the credit-protection measures embedded in the loan indenture. Regular collection of receivables from beneficiaries of housing loans has also been favoured by falling inflation rates, as reflected in progressively lower revaluation rates applied to loan installments (around 3% in 2007, down from 50% in 2001). According to budget estimates for 2008-2010, collections from receivables should exceed housing loans provided by TOKI. Improving operating margins reflect its business model and increasing returns from revenue-sharing projects in the open market. Large investments have not had a significant impact on TOKI's expenditure profile, thanks to its low fixed costs compared to budget volumes and adequate management of operational risks. Under the current business model, the construction risk is carried by the private contractor selected through a tender process, whilst the surplus of housing demand over supply adequately protects TOKI from commercial risk for social housing projects. However, it is Moody's belief that TOKI could develop housing projects autonomously

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TOKI provides housing loans through banks for the amount residual from the up-front payment made by beneficiaries (between 10% and 40% of the property value). Eligible applicants should never have purchased a house produced by TOKI or benefited from TOKI loans in the past. The bank is responsible for performing analysis of a debtor and his repayment capacity. Such loans are made at variable rates, for a maturity of between five and 20 years, and equal monthly instalments are adjusted semi-annually according to the variation of the Consumer Price Index or the official growth rate for public-sector wages. Loan indentures may allow for early redemption. Delayed payments are subject to interests on arrears (30%) and regulate the enforcement procedures to be taken in an event of default (i.e. when two or more consecutive payments are missed). Property rights of the underlying asset belong to TOKI until the debt has been entirely repaid. The underlying properties are insured and insurance premiums are paid by the buyer. Payments of loan instalments are deposited by the bank (acting also as servicing agent), which also collects real estate taxes and insurance premiums on behalf of TOKI, and sums collected are transferred to TOKI (the lender) usually within five days. The bank shall retain commissions from up-front payments made by buyers and transfers procedures. Rights and liabilities of the owner can be transferred during the loan period and the transferee (if eligible for public housing) assumes the original obligation.

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Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

should the private sector show low interest in participating in development projects that are considered strategic to the government.

Revenue-sharing activities have a key role in managing financing requirements

Increasing returns from revenue-sharing activities combined with its own cash position have helped TOKI to manage the reduction in government funding and to finance its substantial investments in social housing. In particular, revenue-sharing activities have allowed the agency to manage cash requirements arising from the mismatch between the short investment period for social housing (14-16 months) and the long-term repayment schedule for housing credits provided (ten years on average). During the past five years, TOKI derived 30% of sale income from revenue-sharing projects. Going forward, Moody's expects revenue-sharing projects to remain an important source of funding for TOKI's large investment plans. TOKI retains shares in six private companies that operate in the construction sector, and these companies are the preferred partners for profit-sharing projects. Reportedly, TOKI has no financial connections with its six partnership companies, which have autonomous administrative and financial structures, although some of them can be considered as extensions of TOKI. Partnership companies show favourable financial performance, and they should not represent a potential source of off-balance-sheet financial pressure for the agency (see Appendix 1). In addition, TOKI's responsibility over the companies' liabilities is limited to its capital share.

Debt & Liquidity

Financial exposure is manageable

TOKI's financial exposure as of year-end 2006 comprised a TRY1.36 billion borrowing bill issued in connection with the acquisition of assets and construction-related properties from Emlak Kredi Bankasi. This governmentto-government obligation has never materialised as a real financial obligation for TOKI to date. In May 2006, the government authorised a rescheduling of this interest-rate-free debenture absorbing 43% of TOKI's equity, in order to give relief to TOKI's budget and free resources to finance housing projects. As a result of the extended maturity (to 2022 from 2014) and grace period (to seven from five years) the first instalment is expected in August 2009. TOKI does not report any other financial exposure in foreign or domestic currency.

Expected use of leverage to finance its large investment programme

Despite favourable financial performance projected for 2008-2010, TOKI's large investment programme for social housing is expected to require external funding. According to the latest projections for 2008-2010, Moody's calculates an aggregate financing requirement of TRY1.8 billion, or 16% of total investments. Such new borrowings can be supported by the agency's capacity for leverage, as reflected by the low debt-to-assets ratio (13% in 2006). For 2008, the agency estimates a borrowing need of around TRY522 million. The borrowing type (e.g. bank financing, bond issuance, securitization with pledge of receivables) and the currency will be decided in accordance with the Turkish treasury, which oversees the public sector's financial activity. In this respect, TOKI received the authorisation in 2005 to undertake foreign currency borrowings of up to US$350 million without Treasury guarantee, but has not made use of this facility to date. Moody's notes that borrowing in foreign currency should be combined with a prudent hedging strategy to protect debt service disbursements from fluctuations in the exchange rate.

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi Investment projections

(TRY million)

Investment Expenditures (1) Borrowing authorisations

2008

3698.7 522.0

2009

3961.4 745.7

2010

4020.7 745.7

Note: (1) Includes capital expenditures for construction activities and related costs (e.g. sales expenditures, commissions, advertisements, etc.). Source: TOKI, Statement of Revenues and Expenditures (2008-2010)

Large investments have led to a narrowing liquidity position

During the past four years, TOKI has increasingly depleted its cash reserves to help finance is expanded operations. As a result, cash reserves decreased to TRY51 million in 2006 from TRY490 million in 2004, although this level still adequately covers TOKI's fixed expenditures. Substantial investment efforts combined with liquidity strains also explain the accumulation of commercial debts. Including commercial debt, the debtto-equity ratio had increased to 61% in 2006. Going forward, Moody's identifies the challenge to maintain a regular cash flow profile, with adequate reserves, especially in view of the forthcoming debt service commitments. Should terms and conditions of the borrowing bill with the treasury remain unchanged, Moody's estimates annual debt service requirements amounting to over TRY100 million each year from 2009 to 2022. If required, TOKI might benefit from two separate credit lines from Vakiflar Bankasi and Halk Bankasi in domestic and foreign currency (US dollars), 7 for a total amount equivalent to about TRY1 billion. This facility should provide comfort as regards TOKI's ability to service its obligations in a timely fashion. Reportedly, TOKI has never made recourse to such facility in the recent past.

Governance and Management Factors

TOKI's management practices are oriented towards improving operational efficiency, within limits and principles embedded in its social mission. TOKI has developed innovative financial mechanisms and adequately managed operational risks. A continued prudent financial management, combined with continued support from the government, will be core to supporting TOKI's ability to implement its large investment programme without substantially increasing its debt leverage. TOKI operates under a central government mandate and direction of the prime minister's office. TOKI's president - Mr. Erdoan Bayraktar - was appointed in 2002 with no fixed term of mandate, and directly reports to the prime minister. Regular oversight is an indication of the government's interest in TOKI's operations.

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Halk Bankasi is listed by the Turkish government as an SOE in the Privatisation Administration's portfolio. To date, the privatisation process has resulted in a public offering in May 2007 for US$1.8 billion.

February 2008 Credit Analysis Moody's International Sub-Sovereign - Toplu Konut Idaresi Baskanligi

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Toplu Konut Idaresi Baskanligi Appendix 1 ­ Partnership Companies TOKI - Partnerships

Company (TRY million; as of 31 December 2006)

EMLAK KONUT Real Estate Investment Trust Real Estate Marketing, Construction, Project Management & Trading Co. Inc. Real Estate Appraisal Valuation Co. Inc. TOBAS Company VAKIF Real Estate Trust VAKIF Construction Restoration and Trading

Source: Financial figures provided by TOKI.

TOKI's share

39.0% 49.0% 49.0% 49.9% 14.0% 50.0%

Capital

649.1 65.0 0.5 10.0 16.8 10.0

Profit/ (Loss)

168.0 1.1 (0.3) (1.1) 4.5 0.3

Short-Term Liabilities

10.9 8.6 0.1 0.0 0.0 0.1

Long-Term Liabilities

90.4 4.7 0.0 0.0 0.0 0.5

Moody's Related Research

Analyses:

Turkey, February 2007 Istanbul, Metropolitan Municipality, September 2007 (104611) PfP Homes, October 2007 (103959)

Credit Opinions:

Turkey, August 2007 Gaziantep, Metropolitan Municipality, July 2007 EMAAR Properties PJSC, August 2007

Special Comments:

Turkey's Parliamentary Election Signals Continued Reform, July 2007 (103939) The Application of Joint Default Analysis to Government Related Issuers, April 2005 (99025) Rating Sub-Sovereign Government-Related Issuers in Americas and EMEA Region, June 2005 (93333) Turkey: On The Path To Fiscal Stabilization?, December 1999 (51880) National Scale Ratings in Turkey, February 2006 (96805)

Banking System Outlook:

Turkey, September 2007 (104922)

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

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Credit Analysis

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Toplu Konut Idaresi Baskanligi

Company Annual Statistics

Toplu Konut Idaresi Baskanligi (TOKI)

31-Dec-02 BALANCE SHEET (TRY million)

Current Assets Inventory ST Receivables Cash and Cash Equivalents Other Current Assets Non-Current Assets Managed Accounts LT Receivables LT Investments & Other Fixed Assets Total Assets Current Liabilities Trade and Other Payables Financial Liabilities Non-Current Liabilities Borrowings Other Creditors Provisions Net Assets Equity Capital Reserves Total Liabilities & Equity

31-Dec-03 Realized

1,315.4 542.6 189.6 447.5 135.7 1,348.9 83.8 1,008.8 256.2 2,664.3 123.0 77.6 45.4 1,711.4 1,116.5 369.0 226.0 829.9 829.8 811.6 18.3 2,664.2

31-Dec-04 Realized

1,736.9 484.6 309.8 490.0 452.5 1,956.2 94.8 1,604.0 257.4 3,693.1 110.4 110.4 0.0 2,561.1 1,360.2 639.3 561.6 1,021.7 1,021.7 993.6 28.1 3,693.1

31-Dec-05 Realized

2,865.9 511.4 571.6 247.1 1,535.8 2,865.7 78.0 2,476.7 311.0 5,731.6 457.5 208.0 249.5 3,462.5 1,110.6 1,349.2 1,002.7 1,811.6 1,811.6 1,714.8 96.9 5,731.7

31-Dec-06 Realized

4,611.5 796.1 1,277.4 155.9 2,382.1 5,602.8 89.0 5,227.7 286.1 10,214.3 554.1 554.1 0.0 6,505.9 1,360.2 3,543.8 1,601.9 3,154.3 3,154.3 3,058.3 96.0 10,214.3

31-Dec-07 Forecasts

6,098.1 853.1 1,464.3 50.9 3,729.7 7,559.3 89.0 7,179.1 291.2 13,657.3 699.4 699.4 0.0 6,854.8 1,360.2 3,813.7 1,681.0 6,103.1 6,103.1 6,007.0 96.0 13,657.3

Realized

1,229.0 522.3 111.4 215.3 379.9 916.7 27.7 633.3 255.7 2,145.7 278.8 12.2 266.6 1,190.4 905.4 285.0 0.0 676.4 676.3 662.0 14.3 2,145.5

INCOME STATEMENT (TRY million)

Gross Business Income Net Sales Proceeds Net Interest Income on Loans Other Interest Income & Commissions Operating Costs Ordinary Expenditures Business Costs (excl. Personnel) Personnel Expenditures Operating Surplus (Deficit) Net Income from Other Activities Dividend Income Net General Budget Appropriations Rental Income Other Income Surplus (Deficit) before Extraordinary Items Net Finance Income (Costs) Extraordinary Items Surplus (Deficit) for the Year 213.0 105.1 107.8 0.2 171.4 163.2 2.8 5.4 41.6 68.1 0.0 63.9 1.5 2.7 109.7 19.1 -1.9 127.0 337.5 212.1 90.4 35.0 354.8 332.3 15.3 7.2 -17.3 53.1 5.3 42.5 4.7 0.6 35.9 113.8 0.0 149.6 290.0 200.1 54.5 35.4 282.0 261.0 11.9 9.1 8.0 49.7 0.0 35.2 3.7 10.8 57.7 122.6 1.7 182.0 1,126.3 1,011.7 45.2 69.4 639.2 619.4 7.3 12.6 487.1 164.2 1.2 63.3 3.8 95.9 651.3 70.8 -0.6 721.5 3,031.1 2,932.9 51.1 47.1 1,767.7 1,739.7 11.7 16.2 1,263.4 144.3 0.3 20.0 6.0 118.0 1,407.8 31.1 -95.4 1,343.5 4,906.0 4,581.3 73.5 251.2 2,100.5 2,055.3 17.2 28.0 2,805.6 109.2 0.0 0.0 3.5 105.7 2,914.8 34.6 -0.5 2,948.8

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi Toplu Konut Idaresi Baskanligi (TOKI)

31-Dec-02 RATIOS & ANALYSIS

Total Assets growth rate (%) Operating Margin (%) (1) Personnel / Operating costs (%) Surplus (Deficit) for the Year / Total Income (%) Current Assets / Current Liabilities (x) Surplus (Deficit) for the Year / Total Assets (%) Cash and Deposits / Total Assets (%) Cash and Deposits / Total Debt (%) Total Debt / Operating Surplus or Deficit(x) Total Debt / Total Assets (%) Gearing (%) (2) Efficiency index (x) (3) Notes:

(1) Operating Surplus (Deficit) / Gross Business Income. (2) Total Debt / Total Equity. (3) Short-term Credits / Short-term Debts.

31-Dec-03 Realized

24.2 -5.1 2.0 38.3 10.7 5.6 16.8 38.5 neg 43.6 140.0 2.6

31-Dec-04 Realized

38.6 2.7 3.2 53.6 15.7 4.9 13.3 36.0 170.9 36.8 133.1 2.7

31-Dec-05 Realized

55.2 43.2 2.0 55.9 6.3 12.6 4.3 18.2 2.8 23.7 75.1 1.6

31-Dec-06 Realized

78.2 41.7 0.9 42.3 8.3 13.2 1.5 11.5 1.1 13.3 43.1 1.3

31-Dec-07 Forecasts

33.7 57.2 1.3 58.8 8.7 21.6 0.4 3.7 0.5 10.0 22.3 0.9

Realized

n.a. 19.5 3.2 45.2 4.4 5.9 10.0 18.4 28.2 54.6 173.3 7.2

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Credit Analysis

Moody's International Sub-Sovereign

Toplu Konut Idaresi Baskanligi

Report Number: 106384 Author Francesco M. Soldi Editor Marion Kerfoot Senior Production Associate Tara Cheparev

© Copyright 2008, Moody's Investors Service, Inc. and/or its licensors and affiliates (together, "MOODY'S"). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,400,000. Moody's Corporation (MCO) and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

11

February 2008

Credit Analysis

Moody's International Sub-Sovereign - Toplu Konut Idaresi Baskanligi

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