Disclosure on recent media news

It has been learned that the Indictment that has been issued by the Istanbul Chief Public Prosecutor’s Office with regards to an irregularity in the importation of the oil products by POAŞ between 2001-2007, during the period when our Company was a shareholder of Petrol Ofisi A.Ş. ("POAŞ") ("Indictment") has been accepted by the relevant Court.

When the Indictment is examined, it is understood that allegations are made as to the crimes of “breaching the smuggling law”, “fraud in the invoices appended to the Customs Declarations Forms”, “using counterfeit documents knowing such nature thereof”, and “creating organisations with the purpose of committing crimes”, being committed with regards to certain senior executives, some former, and some currently active, who had served at the POAŞ Board of Directors during the abovementioned period.

The allegation that the 47 people indicated in the Indictment obtained unjust revenues, ignoring the facts that the customs duty when importing all fuel oil products in compliance with the Turkish Standards regardless of the origin whether it is from the EU, or countries such as Russia or Ukraine, is zero (“0”), and that the VAT is collected from the end user, is unwarranted.

It is not possible to talk about tax evasion in an imports transaction not subject to customs tax. All documentation with regards to fuel oil imports is available at the Customs Administration, and it is meaningless to falsify a document in order to change a tax that is zero (“0”). Adducing that the POAŞ Board of Directors operating in compliance with the laws is a criminal organisation is not an allegation that can be called rational.

Moreover, including the founder and the Honorary Chairman of our Company, Aydın Doğan, in the Indictment as the “leader of the organisation”, although he never had a seat in the POAŞ Board of Directors is utterly bizarre.

The amount calculated in the Indictment as “incomplete value declaration” is only 6.3 million US Dollars, and it is only one per mil of the total imports amount that was made during the relevant period. Again, the VAT amount alleged as having required to be paid at the customs for the 6.3 million US Dollars, claimed to be an incomplete declaration, is around 1.1 million US Dollars. In a company the size of POAŞ, there is not even the slightest logical reason for committing, allegedly in an organised way, the alleged crimes for such amounts, and no such grounds can be provided in the Indictment either.

On the other hand, it is noticed at the first glance that there is a confusion in the Indictment between the concepts of incomplete value declaration (tax base) and tax paid incompletely, and that they have erred, explaining the amount that should have been the VAT tax base, as the customs duty amount that has been paid incompletely. As we have indicated, the customs duty in the imports transactions that constitute the subject of the claim is zero (“0”). Therefore, it is not possible to talk about neither the occurrence of any tax losses, nor the intent of tax evasion from a standpoint of customs duties.

It is also believed that the Indictment which does not contain any reasonable explanations as to how and in which manner any gains can be obtained from the VAT amount allege to be paid incompletely is unfounded in this respect as well. It is not possible for POAŞ to pay incomplete VAT for the imports from overseas, and to gain unjust earnings by doing so. As, by definition, VAT is a tax paid by the end user. The final VAT paid by POAŞ is calculated taking as the basis the VAT that has occurred upon the sales to the dealerships has taken place. The sum of the VAT payable to the state does not change in any manner whatsoever.

POAŞ and its affiliate Point Company have carried out activities to ensure the provision of fuel oil products under the most suitable conditions, and to meet the domestic demand that Tüpraş could not, and has carried out procedures and transactions via professionals who are experts in their fields. All these transactions have been effected in compliance with the provisions of the Customs Law, and the GATT (General Agreement on Customs and Trade) Customs Value Contract. Nevertheless, the importation transaction in question is a routine practice that is also effected by the other players in the industry as well.

It should also definitely be taken into consideration that POAŞ, one of the leading companies in Europe, and the apple of our country’s eye was subjected to constant supervision and audits by the relevant public authorities and entities during the period in question, that during the abovementioned term, such transactions were examined through the Reports issued within the scope of the Capital Market Board and Tax Inspections, and that nothing against the legislation was found.

Therefore, we would like to present with emphasis for the information of our investors that any and all legal measures will be taken to ensure that a just and legal verdict is reached in the lawsuit filed against our senior executives who have served in the past, and who are currently serving, as the Indictment is void of legal basis, logical foundations, and evidence, that we have full confidence in the Turkish Jurisdiction in this respect, and that the false and misleading news articles that have appeared in certain media outlets must not be heeded.

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