ESTRATEGIA DE PRODUCTO

The Corporate Tax Law was amended by Law No. 5520, dated 13 June 2006. Most of the articles of the new Corporate Tax Law (No.5520) came into force on 1 January 2006. Corporate tax is payable at a rate of 20% (31 December 2010: 20%) on the total income of the Company after adjusting for certain disallowable expenses, exempt income and investment and other allowances (e.g. research and development allowance). No further tax is payable unless the profit is distributed (except for withholding tax at the rate of 19.8%, calculated on an exemption amount if an investment allowance is granted in the scope of Income Tax Law Temporary Article 61).

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding tax at the rate of 15% (31 December 2010: 15%). An increase in capital via issuing bonus shares is not considered as a profit distribution and thus does not incur withholding tax.

Companies are required to pay advance corporate tax quarterly at the rate of 20% on their corporate income in Turkey. Advance tax is payable by the 17th of the second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporate tax liability. If, despite offsetting, there remains a paid advance tax amount, it may be refunded or offset against other liabilities to the government.

There is no such application for the reconciliation of payable taxes with the tax authority. Corporate tax returns are submitted to the related tax office by the 25th day of the fourth month following the month when the accounting period ends.

In tax reviews authorized bodies can review the accounting records for the past five years and if errors are detected, tax amounts may change due to tax assessment.

According to Turkish tax legislation, financial losses on the returns can be offset against period income for up to five years.

There are some exemptions in Corporate Tax Law regarding corporations. Those concerning the Group are explained as follows:

Investment allowance amount that taxpayers had been calculating over 40% of their fixed asset purchases which are above a specific amount is terminated in accordance with Tax Law No: 5479 with the date of 30 March 2006. However, in accordance with the temporary article 69 that has been added to the Income Tax Law with the mentioned law, together with the amounts of investment allowance that tax payers of Income Tax and Corporate Tax cannot deduct from their income as of 31 December 2005 concerning the year of 2005 with the reason of ;

a) Based on the applications done earlier than the date of 24 April 2003, within the context of investment incentives certificates, investments will be done after the date of 1 January 2006 within the context of the documents for started investments as part of Tax Law no: 4842 and before additional articles 1,2,3,4,5 and 6 are repealed and the Income Tax Law no:193 with the date of 9 April 2003,

b) Related investments started earlier than the date of 1 January 2006, within the context of mentioned article 19 of the Income Tax Law no: 193, investments done after that date and offers integrity in terms of technical and economical,

However the investment allowance rights not used yet by 31 December 2008 could not be transferred to next years and became unusable. Regarding this issue companies have made claims to the Constitutional Court with the legal ground of “this implementation’s being against the principles of judicial security, definiteness of taxation and equality”.

The Constitutional Court abolished the provisions of Temporary Article 69 of the Income Tax Law regarding the time limitation to the investment allowance in its meeting held on 15 October 2009, and published the minutes of the relevant meeting on its website in October 2009. The decision of the Constitutional Court on the cancellation of the time limitation for investment allowance for the years 2006, 2007 and 2008 came into force with its promulgation in the Official Gazette, dated 8 January 2010, and thereby the time limitation regarding investment allowance was removed.

After the decision of the Constitutional Court in 2010, enterprises are qualified for using investment allowance for 25% of their taxable profits in relation with the changes in Law No. 6009. The remaining 75% of taxable profit is taxable with the tax rate of 20%, which is the current applicable tax

The total tax income/ (expense) as of 31 December 2011 and 2010 are summarized as follows:

31 December 2011 31 December 2010

Current - -

Deferred 500.996 (265.969)

Total tax income/(expense) 500.996 (265.969)

Deferred income taxes

The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between the financial statements prepared in accordance with the CMB Financial Reporting Standards and their statutory financial statements, using the currently enacted tax rates. These temporary differences result in the recognition of revenue and expenses in different reporting periods for CMB Financial Reporting Standards and tax purposes. The currently enacted tax rate for deferred tax assets and liabilities is 20% (2010: 20%).

According to the Constitutional Court decision mentioned above, the Group management, calculated deferred income tax on the total investment allowance amounting to TL8.060.362 (2010: TL7.112.293). This amount is calculated on the capital expenditure by the management in relation with operational leasing transactions between 1 January - 8 April 2006. According to mentioned law, 40% of investment allowance without the incentive certificate can be deducted from corporate income. As of 31 December 2011 and 2010, as there is no corporate income, the Group, calculated deferred tax asset over 20% of the total investment allowance without incentive certificate.

Tax loss carry forward

According to Turkish tax legislation, financial losses on the returns can be offset against income for the period for up to 5 years. However, financial losses cannot be offset against previous years’ profits. Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through the future taxable profits is probable. The maturity of carry forward tax losses over which deferred tax asset recognized is as follows:

31 December 2011 31 December 2010

31 December 2013 - 2.959.555

31 December 2014 - 820.804

31 December 2015 4.618.092 8.203.077

The breakdown of cumulative temporary differences and the resulting deferred income tax assets/(liabilities) as of 31 December 2011 and 2010 , using enacted tax rate of 20% at the balance sheet date, are as follows:

Cumulative Deferred income tax temporary differences assets/(liabilities) 31 December 31 December 31 December 31 December

2011 2010 2011 2010

Deferred income tax asset Effects of restatement of assets used

in operational lease, property and

equipment and intangible assets (38.377.591) (22.187.586) 7.675.518 4.437.517 Unused investment incentive allowance (8.060.362) (7.112.293) 1.612.072 1.422.459 Carry-forward tax losses (4.618.092) (11.983.436) 923.618 2.396.687

Deferred revenue (1.752.921) (1.406.797) 350.584 281.360

Provision for inventory impairment (741.693) (520.531) 148.339 104.106

Provision for doubtful receivables - (286.742) - 57.348

Provision for employment

termination benefits (135.754) (169.152) 27.151 33.830

Provision for unused vacations (108.456) (76.668) 21.691 15.334

Unearned financial expenses (83.865) (74.266) 16.773 14.853

Other (245.305) - 49.062 -

10.824.808 8.763.494