Purpose and Content

Article 1.– The purpose of this Law is to regulate the principles for the privatization, which aims to improve productivity in the economy and to reduce public expenditures, of:

A. Establishments to be placed under the scope of privatization are listed in this article and will be referred to as "Organizations" herein after in the implementation of this Law;

a) The State Economic Enterprises (SEEs,) their enterprises, associated corporations, operations, operational units and assets, as well as the public shares in their participations;

b) Public shares in commercial organizations that are not under the status of State Economic Enterprises but which are owned in full or by more than 50 % by the state and/or by other public legal entities, and the public shares in the organizations, operations, operational units and assets belonging to these organizations, and in participations;

c) Public shares and shares that belong to the Treasury in participations of the State;

d) Administrations with national and supplemental budgets and the other subordinate organizations with revolving funds and assets of the State Economic Enterprises which are not directly related to public services provided by the Public Economic Organizations (PEOs) and their shares in their respective participations;

e) Commercial organizations and shares in their every type of participations without taking into consideration the amount of their respective shares, that belong to the Municipalities and to the Provincial Directorates;

f) Properties and the goods and services production units of the organizations with national and supplemental budgets and assets (dams, lagoons, highways, hospitals, ports and other similar goods and services production units) of the organizations with revolving capital belonging to those above mentioned and the rights of operating appropriate goods and services production units in accordance to the principle establishment purposes of the Public Economic Organizations as referred to in Article 35, paragraph (B) of this Law;

B. This Law, in accordance with the purpose stated above, contains the provisions related to:

a) The establishment of the "Privatization High Council" and the "Privatization Administration" and the determination of their duties, responsibilities, and rights,

b) The establishment of the "Privatization Fund" and the "Public Participation Fund" and the determination of the resources and utilization fields of such funds,

c) "Privatization Implementations",

e) The supply of financial and social rights to the personnel contracted at organizations included under the scope of privatization who might become unemployed as a result of privatization,

f) The personal and social rights of the public employees working for the organizations included within the scope of privatization.

Grant or lease of the operational rights of the goods and services production units and assets (dams, lagoons, highways, hospitals, ports and other similar goods and services production units) of the organizations with national and supplemental budgets and their other organizations with revolving capital and the privatization of the Public Economic Organizations that are included among the "State Economic Enterprises" and are defined in the Decree no 233 with the Force of Law and of their subsidiaries, associates, operations, operational units, and assets by methods other than the transfer and/or assignment of ownership, is subject to the provisions of this Law. However, the transfer of ownership's must be drafted by separate laws depending on the nature and characteristics of public services provided by these organizations.

Principles

Article 2. – In the Privatization Implementations, the principles are as follows;

a) Paying “Special Job Loss Compensation” in addition to other indemnities foreseen in the collective bargaining agreements and/or in the existing laws in relation with potential employment reductions that may occur,

b) Determining the methods of privatization in line with the terms and conditions of these organizations and in accordance to their respective characteristics,

c) Not using the proceeds of privatization for general budget expenditures and/or investments,

d) Preventing the negative effects resulting from a monopolistic structure that may occur,

e) Procuring of a shareholders' group capable of undertaking the responsibility and authority of management, as well as the expansion of the ownership,

f) Including public banks in the organizations having priority in privatization within the framework of the privatization process and having them privatized as promptly as possible,

g) Creating privileged State shares for strategic fields,

h) Having natural resources privatized only for a certain period of time, through granting operational rights,

i) Not allowing for transfers to public institutions, organizations and to the local administrations during privatization, unless the necessitated by the sake of national security and/or the best interest of the public.

Priorities on decisions to be taken in accordance with the principles and the purposes defined herein above, and the principles and the methods of privatization of which such priorities will be subject to, are determined by the Privatization High Council on the basis of the qualifications of such organizations and taking into consideration conditions required by the country's economy.

Duties of the Privatization High Council

Article 3. – (Amended by Law No: 4232 of 3.4.1997) The Privatization High Council, under the chairmanship of the Prime Minister, with the members comprised of the Deputy Prime Minister (in case of a coalition of more than one party, the Deputy Prime Minister belonging to the other ruling party having the highest number of votes in the Turkish Grand National Assembly), State Minister to be designated by the Prime Minister, a State Minister responsible for privatization (if there is no State Minister assigned to this position, then another State Minister will be designated by the Prime Minister), the Minister of Finance and the Minister of Industry and Commerce has been established. The Council will meet in full attendance and all decisions will be taken on full consensus. The secretariat of the Council will be conducted by the Privatization Administration.

Duties of the Council are listed herein below:

a) To take decisions to include the organizations referred to in Article 1 of this Law within the scope of privatization; to execute the financial and legal restructuring of those organizations which are not deemed ready for privatization to include those organizations whose initial preparations have been completed and/or the ones for which an initial preparation was not deemed necessary, to directly include in the "privatization program"; and to determine time periods for the finalization of the privatization process for the organizations within the scope of privatization,

b) To decide to restore organizations back to their former status by removing those which are deemed ineligible out of the scope of privatization and/or to decide to prepare those organizations already in the privatization program and for which the process is deemed necessary,

c) To decide on the method of privatization in the transfer of ownership of the organizations whether through sale, lease, transfer of operational rights, granting of property rights other than ownership, and other legal dispositions conforming to the particular transaction by the Privatization Administration;

d) To approve the final transfer procedures of the organizations in the privatization program to "actual persons and/or legal entities at private law, through sale, lease, transfer of operational rights, granting of property rights other than ownership, and other legal dispositions conforming to the particular transaction realized by the Privatization Administration;

e) To decide to reduce the size of, terminate activities permanently or temporarily, close or liquidate those organizations as deemed necessary under the scope of privatization;

f) To decide to borrow funds from domestic and/or foreign sources for use by the Privatization Fund and to this end, to issue government-guaranteed or unguaranteed bonds in local and international markets and if required, to issue all kinds of securities and other negotiable instruments;

g) If and when required, to decide to purchase and resell shares, securities and other negotiable instruments of the organizations in the privatization program;

h) To discuss and approve the income and expenditure programs of the Privatization Fund and the Privatization Administration,

i) To take decisions on other tasks assigned by laws and other legislation.

The Council may authorize the Presidency of the Privatization Administration concerning subjects cited in paragraphs (d) and (g) of this article where it sees beneficial for the execution of the service, provided that financial limitations, as well as the procedures and principles of such authorization shall be clearly identified.

The establishment and the responsibilities of the Privatization Administration

Article 4. – The Privatization Administration (The "Administration") possessing public legal entity and an exclusive budget, reporting directly to the Prime Minister has been established. The Prime Minister can use his/her powers deriving from this law via a State Minister he/she will designate responsible for privatization. The Administration is a temporary establishment and when the task of privatization is completed, the employees of the establishment will be transferred to related organizations based on their qualifications.

Duties of the Administration are stated herein below;

a) To execute the decisions of the Council,

b) To make decisions on pertinent issues and to implement the necessary procedures in line with the rights and duties granted and delegated by the Council,

c) To present proposals to the Council for the inclusion of organizations into the scope of the privatization or returning the organizations that have been included in the scope of privatization back to their former status, or orienting the preparation of those organizations that are in the privatization program when required,

e) To decide whether or not to transform those organizations in the privatization program which do not maintain the status of an incorporation into joint-stock companies,

f) To determine the amount of stock capital of organizations in the privatization program, to make necessary arrangements for their establishment, merger or division; to determine the principles for the properties and the rights and obligations; to make all arrangements for the accounts and activities of the organizations that are under the status of an incorporation or transformed into a joint-stock company and to take necessary precautions to ease such procedures until such time that public shares in those organizations drop below 50% (Fifty Percent) and to do the same for others until the date of assignment and/or transfer as a result of the privatization,

g) To conduct and to implement every type of procedural operations related to privatization that are essential for privatization,

h) Within legal limitations, to make arrangements for the financial, administrative and legal structures of organizations,

overseas, for those organizations that are in the privatization program,

i) To present proposals to the Prime Minister for assignments and appointments to and for the withdrawal from the chairmanship and membership of the board of directors of organizations, of auditing and liquidation committees, and from general managerial positions for those organizations under the privatization program separately from the organizations to which they belong and not deemed necessary for transformation into an incorporated company, and of the managerial positions in their administrative units thereof.( A four year university degree is a prerequisite to be eligible to receive appointment to these positions),

j) To determine the quantity and value of every type of securities and any other negotiable instruments to be issued through the Council's decision,

k) In the event of investing capital in kind in organizations, to evaluate or have evaluated/appraised such capital,

l) To manage the Privatization Fund,

m) To conduct all types of research activities, project studies, advertisements, promotion, public relations, financial auditing and legal, technical, administrative and financial evaluations and/or to have such works conducted by assigned consultants as and, when needed.

n) To provide loans to organizations in the scope of privatization when required for privatization and to determine the interest rates and the terms and conditions for such financing provided by the Privatization Fund under the condition that the interest applicable to such funding shall not be in excess of the highest interest rate applied by public banks,

o) To perform other duties defined by the laws and other legislation.

The Administration may authorize the organizations in the privatization program in subjects referred to in paragraphs (a), (b), (h), and (i) where it is deemed necessary and beneficial by the Administration, provided a clear definition of principles and methods of such authorization be outlined.

Administration Service Units

Article 5. – a) The main service units of the Administration consist of; the Capital Markets Department, Finance and Fund Management Department, Project Evaluation and Preparations Department, Employment and Social Services Department, Consultancy Services Department, and Contract Services Department.

b) The Consultancy Units of the Administration consist of; the Department of Legal Consultancy; Research, Planning and Coordination Department; Consultants to the President, and Press and Public Relations Department .

c) Supplementary Units of the Administration consist of; Personnel and Education Department, Administrative and Financial Department, and Defense Expertise Department.

The president and the units defined in paragraphs (b) and (c) of this Article perform the tasks defined in Law 3046 dated 27, September 1984. The positions for the head-quarters and Istanbul liaison office of the Administration are listed in the enclosed schedules (1) and (2).

Personnel Regime

Article 6. – The personnel of the Administration is subject to the provisions of Law No 657 on Civil Servants. The President and other managers of the Administration in every level may delegate some of their powers to their subordinates, provided that the limitations of such power assignment shall be clearly defined in writing. The President of the Administration will be appointed by joint decree, the Vice-Presidents through a proposal by the President of the Administration to be approved by the Prime Minister, and other personnel of the Administration will be appointed by the President. The President, Vice Presidents, Advisor to the President, Department and Project Group Heads must be graduates of a 4-year institution of higher education as well as having the sufficient knowledge and experience needed to carry out their duties. The President and the Vice Presidents are subject to the provisions applicable to the Undersecretaries and Deputy Undersecretaries of the Undersecretariats reporting to the Prime Ministry in respect of their salary, additional fringe benefits, pay increases and compensations.

The Administration can employ personnel on individual employment contracts for the positions of the President, Vice Presidents, Advisor to the President., First Legal Consultant, Legal Consultant, Department Head, Head of Project Group, Lawyer, Expert (Branch Manager), Expert, Assistant Expert and Department Doctor. They can be enrolled to the Turkish Pension Fund upon demand.

Employees of the organizations with national and supplemental budgets can be

recruited by the Administration on the basis of individual employment contracts with the approval of the organizations for which they work. Such Administration requirements are finalized by the related organization(s) on priority. Such personnel are deemed to be on unpaid leave and during this period, their personal rights are maintained as if they would be employed at their respective organizations. Such periods will be taken into account in regards to their promotions and retirement benefits, and will receive promotions when so entitled without the need for formal procedural applications. No compulsory service obligations are required from these employees from their own organizations for the period they serve in the Administration.

The terms and conditions of employment contracts for those employed on contractual basis and their financial entitlement, shall be determined by the Council of Ministers.

The personnel employed by the State Economic Enterprises and by their subsidiaries and by enterprises who are in the scope of privatization, whose services are required by the Administration, can be retained by the Administration through the sole decision of the Administration, under the condition that their personal rights and entitlement and wages, shall be met by their own organizations. These personnel are deemed to be on unpaid leave from their organizations for the period they will be serving in the Administration.

Overtime will be paid both to the personnel actually working at the headquarters organization of the Administration, and to the personnel placed on duty in accordance with the provisions of this Article in respect to the principles and methods to be defined and determined by the Administration, provided that such overtime rates shall not be in excess of the rates and the amounts defined in the amended Article 31 of the Law No. 3056, dated 10 October, 1984.

The provisions of Law No. 657 on Civil Servants and Law No. 1389, dated 2 February, 1929 will be applied in the distribution of the attorney's fees collected from the losing party as a result of decisions issued by the Courts and by the Bailiff's Offices in favor for the Administration,

Determination, assignment, utilization and the cancellation of positions in the Administration and the other matters in relation to the positions will be governed in accordance to the provisions of the Decree No. 190 with the Force of Law on General Staff Positions and Procedures.

Prohibitions and Penal Clauses

Article 7. – As for organizations in the privatization program which are subject to the provisions of the Capital Market Law and whose stocks are traded on the stock exchange, the Chairman and members of the Board of Directors, the internal auditors and other personnel, the personnel of the Administration, the President and members of the Council may not disclose any non-public information or dates they learn during their function on accounts, operations, and enterprises of their organizations.

They are not allowed to use such information for their own benefit or for the benefit of third parties or to trade securities of such organizations on or off the stock exchange for pecuniary benefits or in such manner so as to disrupt the equality of opportunities among traders. They may not further be beneficiaries of transactions realized through methods of privatization under this Law as or in the capacity of a buyer or a lessee. This prohibition shall be applicable also to the spouses and children of persons mentioned herein. The President and the members of the Privatization High Council and the President of the Privatization Administration, Vice Presidents, Heads of the Departments and Legal Consultants to the Administration and the Head and members of the Value Assessment Commissions, may not take office in privatized organizations for two years following their date of privatization.

Persons who violate these prohibitions will be sentenced to six month to two years' imprisonment and a fine equal to three times the unjust enrichment, jointly or separately, depending on the nature and importance of the act.

Permanent personnel and personnel under contract of the Administration and the organizations in the privatization program are deemed to be civil servants described in Article 279 of the Turkish Criminal Code and any offense of these personnel in respect to privatization funds, documents, promissory notes and assets, or on balance sheets, memoranda, reports and other similar documents and books, or offenses in relation to their functions, will be governed by the provisions of the third and sixth sections of volume two of the Turkish Criminal Code.

Administration Budget

Article 8. – The expenditures of the Administration are met by the administration budget, to be determined by the Council under the condition that such expenditures shall not exceed the 5% of the Privatization Fund. The exchequer of the administration budget is the President of the Administration.

Privatization Fund and its sources

Article 9. – All proceeds obtained from the privatization process and all dividends obtained from the organizations transferred to the Administration as well as proceeds obtained from the sales of securities and other negotiable instruments and documentation, income obtained from the funding supplied to the organizations transferred to the Administration, and other resources and earnings allocated by other legislation, are credited to the Privatization Fund account to be opened at the Turkish Ziraat Bank, separate from the budgets of the related organizations.

Utilization Fields of the Privatization Fund

Article 10. – Privatization Fund shall be used for:

a) Special Job Loss Compansation payments and for the payments, when and where necessary, for transfers in amounts determined by the Council to the account that will be opened for the purpose of meeting such expenditures of education and training services as career development, vocational and apprenticeship training, from the privatization revenues,

b) Payment of monthly salaries, fringe benefits and all kinds of personal rights for employees who will be transferred in accordance with the provisions of Article 22 of this Law for the period from their appointment to the termination of their contract with their previous organization,

c) In payments, in accordance with Article 24 of this Law,

d) Meeting preparatory expenditures of organizations included in the scope of privatization, in order to facilitate their privatization,

e) Meeting expenditures required for financial, administrative and legal preparatory work in organizations transferred to the Administration,

f) Contributing to the capital increase in the shareholdings of the Administration,

g) If required, to purchase (shares), all kinds of securities and negotiable instruments of organizations in the Privatization Program,

h) Procuring all kinds of goods and services that are necessary for the implementation of the privatization process,

ı) Providing debt financing for organizations that are transferred to the Administration under the terms and procedures to be determined by the Administration,

i) Allocating the necessary funds for the budget of the Administration,

j) The liquidation of the outstanding debts and obligations of organizations that have been privatized,

k) The payment of fringe benefits and of its increases pursuant to Supplemental Article 24 of the Social Security Law, dated 17 July, 1954, No. 506, within the framework of Article 23 of this Law, and

l) Performing other duties that are assigned to the Administration under the Legislation.

In utilization of revenues accumulated in the Privatization Fund: priority shall be forwarded to special job loss compensation, supply of other related services and for the payments to meet the administrative, financial and legal expenditures for preparatory work of organizations in the scope of privatization,

No resource can be transferred from the Privatization Fund to the general budget. In addition, other than the transfer of funds to the Public Participation Fund pursuant to Temporary Article 8 of this Law, no transfer can be made from the Privatization Fund to any other fund.

Accounting and utilization terms and procedures of the Fund and the terms and principles for the accrual of interest to the fund balances, will be determined through the regulations to be drafted by the Administration and approved by the Council.

The excess resources from the Privatization Fund can be transferred to the Treasury accounts for payment of domestic and international debts. No transfer can be made from the Privatization Fund to any other fund.

Accounting and utilization terms and procedures of the Fund and the terms and principles for the accrual of interest to the fund balances, will be determined through the regulations to be drafted by the Administration and approved by the Council.

Audit

Article 11. – The Administration's budget will be audited by the Exchequer and Audit Court pursuant to Law No. 832 dated 21 February, 1967. Activities of the Privatization Administration and the utilization of the Privatization Fund, as well as every type of services and applications at the time of privatization, are audited in accordance with the provisions and principles of the Decree No. 72 with the Force of Law concerning the Prime Ministry High Auditing Board and of Law No. 3346, dated 2 April, 1987.

Organizations in the privatization program are audited in accordance with the provisions and principles of the Decree No. 72 with the Force of Law concerning the Prime Ministry High Auditing Board dated 24 June, 1983, and of Law No. 3346, dated 2 April, 1987 until the public share in their stock capital drops below 50%.

Provisions not to be applied

Article 12. – Transactions under this Law will not be subject to the provisions of Law No. 2886 concerning State Tenders, Law No. 1050 concerning General Accounting, or the provisions of Exchequer and Audit Court Law No. 832 related to visas and registrations.

Article 13. – In relation to organizations in the privatization program, the Council is authorized:

a) To determine strategic subjects and organizations;

b) In the event that the state's shareholdings in organizations determined to be strategic under paragraph (a) above falls below 50%, and for the purposes of preventing monopolization and of protecting national economic and security interests, to determine the number of preference shares granting special management and approval rights in the management bodies of the organizations and the rights attaching to those shares which the state shall enjoy; to change the quantity of these shares and the rights attaching there to; and to remove such sectors and organizations determined to be strategic from the scope of this program.

Provided, however, that if and when more than 49% of the capital shares of the organizations listed below are decided to be privatized, preference shares must be established in them:

• Turkish Airlines (THY)

• Turkish Ziraat Bank

• Turkish Halk Bank

• TMO (Soil Products Office) Alcoholid Factory

• Turkish Petroleum (TPAO refineries).

Sale of Real Estate to Foreigners

Article 14. – Sale and transfer of real estate to foreign actual persons and/or legal entities within the framework of the privatization process to be conducted in accordance with the provisions of this Law are subject to the provisions of the Legislation in force on the basis of rules of reciprocity.

Privatization of Public Services

Article 15. – Notwithstanding the provisions of Article 1 hereof, providing that separate laws will be adopted for privatization of public service organizations through transfer of ownership,

a) Administrations with national and supplemental budgets and properties, goods and services production units and assets (dams, lagoons, highways, hospitals, ports and other similar goods and services production units) of their affiliate organizations with revolving capital,

b) The Public Economic Organizations and their subsidiaries, associates, operations and operational units offering public services and producing goods and services as a monopoly as described in paragraph (B) of Article 35 hereof, shall be privatized under the provisions of this Law through the transfer of operational rights, leases or similar methods not requiring transfer of ownership.

The goods and services production of organizations with national and supplemental budgets and of their associated organizations with revolving funds that are in the form of a monopoly only and the goods and services production of Public Economic Organizations that are in line with their original establishment tasks, will be accepted as concessionary activities. Activities falling outside of those stated herein above are deemed to be concessionary activities. Agreements and contracts to be executed in relation with the activities deemed as concessionary in accordance with the provisions of this Article, are in the form of concessionary agreements and contracts, with the special provisions of other Laws pertaining to these issues being reserved.

Duration of rights to be granted under this Article through transfer of operational rights, lease or other similar methods, may not exceed 49 years.

Protection of Competition following the Privatization Process

Article 16. – As a result of the privatization process in accordance with the provisions of this Law and with regards to the protection of the health and security as well as the economic benefits for consumers in accordance with the operation of the goods and services markets, economic necessities and public benefits, including monopolies within the boundaries of the Republic of Turkey, the following shall be prohibited:

a) Dividing up of good and services markets and sharing and/or controlling every type of market resources and units,

b) Creation of barriers or limitations for the activities of competitors or the prevention of new players from entering into the market,

c) Applying different conditions on contestants with equivalent status for equal rights, obligations and liabilities,

d) Obliging buyers to purchase other goods and services in conjunction with certain goods and services, or to make compulsory the sale of certain goods and services demanded by wholesalers or intermediaries on display of other goods and services or to place forth conditions for the resale of certain goods and services already supplied.

Necessary precautions are taken by the Ministry of Industry and Commerce safeguarding against the existence of any type of legal operations and acts in the form of mergers or takeovers through certain agreements, applications and decisions in a manner directly or indirectly, seriously preventing, disrupting or restricting competition and causing creation of monopolies, are observed.

The procedures and principles for the application of this Article are determined through the regulations prepared by the Ministry of Industry and Commerce and approved by the Council of Ministers. Exemptions and legal and criminal sanctions applicable to circumstances mentioned in paragraphs (a), (b), (c) and (d) of this Article are subject to provisions of the relevant Legislation.

Provisions related to the Privatization Process

Article 17. – In accordance with this Law;

A. Under this law, upon the proposal of the Administrartion, the Council will decide to include the following in the scope of privatization together and/or separately:

a) State Economic Enterprises, their subsidiaries, associates, operations, operational units, assets and the public shares in their participations,

b) Public shares in the commercial organizations which are not in the nature of State Economic Enterprises but whose capital are fully or by more than 50% owned by the State or by other public legal entities and their subsidiaries, associates, operations, operational units, assets and the public shares in their participations,

c) Public shares in other participations of the State and the shares belonging to the Treasury,

d) Properties and shares of organizations with national and supplemental budgets and of their subsidiaries with revolving capital and the shares in their participations that are not directly related to the public services supplied by these organizations.

The decision of the Council with regards to the inclusion of organizations into the scope of privatization shall also state which organizations will undergo financial and legal preparatory work, which shall be directly taken into the privatization program and which methods will be employed in privatizing and in what time frame their privatizations will be finalized.

B. Organizations in the scope of privatization which are to undergo financial and legal preparatory work for privatization will retain their existing status and remain associated to the related ministries or institutions until the completion of the restructuring process. The related financial and legal restructuring process for privatization will be carried out by the organization(s) to be designated by the Council. Upon completion of restructuring for privatization, organizations will then be included in the privatization program through a new decision of the Council. Organizations that are taken directly in the privatization program and organizations that are restructured for privatization (excluding the capital shares and assets of their subsidiaries and the capital shares and assets of the organizations which are not in the nature of a subsidiary, but have a majority of the capital owned by the state) will be deemed to have been transferred to the Administration as of the date of the Council's decision without any further transaction or payment of any consideration. Organizations taken in the privatization program and transferred to the Administration will be deemed to have been disassociated from their related ministry or organization and brought within the range of the Administration, as of the date of the Council's decision.

C. As for the organizations with national and supplemental budgets and the goods and services production units and assets of their associated organizations with revolving funds referred to in paragraph (a) of Article 15 and the Public Economic Organizations and their subsidiaries, associates, operations, operational units, and assets, the decisions to take them in the privatization program will be taken by the Council.

Privatization of these entities by methods other than transfer of ownership will be carried out by the Administration. However, they will retain their existing status and remain associated with the institutions and/or organizations owning them.

D. If any organizations in the scope of privatization is subsequently removed from the scope of privatization due to changing conditions, its former status shall be restored by a decision of the Council.

E. Prices and tariffs of the goods and services produced and /or sold by joint-stock companies in the privatization program is determined by their board of directors, and in other organizations through their authorized management bodies.

F. Decisions to include organizations in the privatization program and approval of the final transfer at the conclusion of privatization shall be published in the Official Gazette.

Privatization Methods, Value Assessment, Tender Methods

Article 18. – (Amended by Law No: 4232 of 3.4.1997) The privatization methods, value assessments and the tender methods with regards to the privatization of organizations in the privatization program are stated herein below:

A. Privatization Methods:

Organizations in the privatization program are privatized through the use of one or more of the methods mentioned below.

a) Sales: Transfer of the ownership of goods and services units in the assets of organizations in full or partially for consideration, or transfer of all or some of the shares of these organizations through domestic or international public offerings, block sales to actual persons and/or legal entities, block sales including deferred public offerings, sales to employees, sales on the stock exchange by standard or special orders, sales to securities investment funds and/or securities investment partnerships, or any combination thereof, by taking into consideration the prevailing conditions of the organizations.

b) Lease: Grant of the right of use of all or some of the assets of organizations for consideration and for a designated period of time.

c) Grant of Operational Rights: Grant of a right of operation of organizations as a whole or of their goods and services production units in their assets for consideration for a designated period of time, with retention of ownership rights.

d) Establishment of Property Rights Other Than Ownership: Restriction of the goods and services production units and assets of organizations with certain property rights, whereby the owner consents to dispositions of the assignee on the rights of facility thereon or the owner renounces from the use of these ownership rights, in the format and under the conditions specified in the Turkish Civil Code, with retention of ownership by the owner institution.

e) Profit Sharing Model and other legal dispositions depending on the nature of the business: Other methods defined in general provisions of law and/or special laws which are not included in the aforementioned privatization methods and which take into account the particular characteristics and structures of the relevant organizations.

The Council shall determine which methods of privatization described above will be used in each case depending on the particular requirements of the transaction.

B. Value Assessment ( Amended by Law No: 4232 of 3.4.1997 )

Value assessment of organizations in the scope of the privatization program will be performed by Value Assessment Commission formed within the Administration pursuant to this Law.

a) Formation of the Value Assessment Commission:

The Value Assessment Commission consists of five members chaired by the Head of the Project Group responsible for privatization proceedings of the organization in the scope of privatization and having as members an expert of the project group responsible for the privatization proceedings, Head of the Department of Project Evaluation and Preparation or an expert of this department, Head of the Department of Capital Markets or an expert of this department and Head of the Project Group responsible for Property Affairs Group Head or an expert of this group. The Commission resumes its duty upon proposal of the President of Administration and approval of the Prime Minister. Alternate members are appointed to the positions as described hereabove in the same number and method.

b) Proceedings of the Commission:

The Commission convenes with the presence of all members and resolves by absolute majority. Abstentions are not allowed in decisions. If deemed necessary by the commission, a sufficient number of local and/or foreign advisors may be appointed by the Administration for assistance to the value assessment proceedings without being allowed to vote for or against decisions.

c) Functions of the Commission

The Commission, through the application of at least three of the internationally recognized methods as: discounted cash flow (net present value), book value, net asset value, depreciated replacement value, break-up (liquidation) value, price/profit ratio, market capitalization value, market/book value, expertise value and price/cash flow ratio ; shall undertake value assessments and tender method with regards to attribute, service distinction, potential future cash flow, sector and market specifications, industrial, commercial and social features, machinery, vehicles, equipment, goods and row materials, finished and unfinished material stocks, all movable and immovable properties owned by the organization, virtues and current conditions, receivables and payable accounts and bills and all rights and obligations of those establishments within the scope of privatization. The Administration will make public upon approval the tender outcome and value assessment results.

Provided that the privatization procedures of an establishment in the privatization program is carried out based on the last paragraph of Article 4 of this Law, value assessment shall be realized within the parameters as dictated in this paragraph under the guidance of a commission established through the judgment of the official decision making bodies and chaired by the exchequer of the establishment at hand.

C. Formation of Tender Commissions and Tendering Methods :

Bidding proceedings related to the application of the tender methods described in paragraph (A) of this Article are carried out by tender commission established pursuant to this Law.

a) Formation of the Commission:

The Tender Commission consists of five members, chaired by the Vice President in charge of the project group responsible for the privatization proceedings of the organization in the privatization portfolio and having as members the Head of the Project Group, an expert of the group, Head of the Department of Tender Services or an expert therefrom and a legal consultant or a lawyer from the Legal Consultancy Department. The Commission shall resume duties upon proposal of the President of the Administration and approval of the Prime Minister. Alternates are appointed to the positions in the Commission as described hereabove in the same number and method.

b) Proceedings and duties of the Commission:

The Commission convenes with the presence of all of members and sanctions decisions through an absolute majority. Abstentions are not allowed in decisions. Any member objecting to the decision must justify opposing views and record it beneath the decision with his / her endorsement. Each meeting of the Commission and the discussions between the Committee and bidders are recorded in memoranda which are endorsed by the commission members and/or the present bidders.

c) Tender Methods:

The tender methods consist of the closed bidding, bargaining, public auction and closed bidding among designated bidders.

Closed Bidding Method: Proposals shall be received in written form. The proposal is sealed in an envelope on which name, surname and notice address of the bidder are cited. The bidder stamps or signs the envelope flap at the sealing place. Together with receipt of the temporary bid bond or bank guarantee letter and other required submittals, this envelope is placed in a second envelope and sealed. The name, surname and open address of the bidder and title of the tender are cited on the second envelope. The bidder must quote the offer price in letters and numbers, sign the proposal and state in writing that all specifications and appendices thereto have been read and understood.

Any proposal which does not comply with any of the above provisions or which contains erasures, scrapings or corrections on the outer surface shall be rejected and considered non-submitted. The proposal envelopes are delivered to the Administration against signed receipts until deadline of the date and hour for proposal submission. All other matters are stated on the tender specifications. The submitted proposals may not be withdrawn for any reason whatsoever. The outer proposal envelopes are opened in the order received at the predetermined date and hour, and all received proposals are listed in a memorandum, followed by determination of existence of all the required submittals and the required temporary bid bond. The receipt reference on the outer envelope is also inscribed on the inner envelope. If submittals and temporary bid bond found in the outer envelopes are not complete and in compliance, the inner envelopes are not opened but returned together with all related documents to its bidder or its representative who shall not be permitted to participate in the tender. Prior to the opening of the inner envelopes containing the proposals, all persons related directly with the tender are asked to leave . The envelopes are then opened in serial sequence , read aloud by the commission chairman or an assignee and recorded as a list which is later signed by the chairman and members. Non-complying or conditional proposals shall not be accepted. Should more than one bidder proposes the same price and all are determined to comply written second proposals are requested from