Memorandum On The Implementation Instruction Regarding Investment-Committed Advance Loan/Financing

I. INTRODUCTION

This memorandum has been prepared to inform our clients regarding the "Implementation Instruction on Investment-Committed Advance Loan/Financing" (the "Instruction"), which was first published by the Central Bank of the Republic of Türkiye (the "CBRT") on 05/06/2020 and incorporates the amendments made until 01/08/2025. The purpose of the Instruction is to regulate the details of transactions relating to investment-committed advance loans/financings to be extended through the acceptance of negotiable instruments denominated in Turkish lira as advance, and it sets forth the procedures and principles concerning such loans/financings to be provided through banks for the financing of investments by companies.

Within this framework, companies deliver negotiable instruments denominated in Turkish lira to banks that act as intermediaries in the extension of loans/financings and that have a specialized unit in the field of project finance (the "Intermediary Banks"), and such negotiable instruments are accepted as collateral. The negotiable instruments taken as collateral by the Intermediary Banks are submitted to CBRT, and investment-committed advance loans/financings are extended to the companies by CBRT in line with the principles set forth by it. Where deemed necessary by CBRT, in addition to the said negotiable instruments, an aval from a bank other than the Intermediary Bank or a transferable unconditional letter of guarantee may also be required as supplementary collateral. In this way, companies can access long-term financing under favorable conditions to realize their investments, and the loan/financing relationship is secured through the negotiable instruments delivered.

Investment-committed advance loans/financing provide companies with access to resources of up to TRY 10 billion. This amount is generally disbursed in two equal tranches of TRY 5 billion each, subject to reporting obligations both prior to and following disbursement, and includes a maximum grace period of two years. Repayments are to be made at intervals not exceeding 6 months. The principal criterion for the assessment of investments is the Technology/Strategy Score (the "TSS") assigned by the Ministry of Industry and Technology of the Republic of Türkiye (the "Ministry") based on the technological and strategic value of the project.

Projects with a TSP of 85 or above benefit from more favorable interest/profit-share conditions, with additional deductions foreseen. Where the share of foreign-sourced financing amounts to 20% or more of the project size, a further reduction is applied to the base interest/profit share. Notwithstanding the foregoing, the applicable rate may in no event fall below 10%. Complementary to these conditions, the credit/financing limits allocated to companies are determined in proportion to the scale of the investment. The amount disbursed per company shall not exceed TRY 5 billion and is capped at 70% of the project size as recorded in the TSP certificate. In addition, for projects with a higher TSP rating, an additional allowance of up to TRY 5 billion may be granted.

In light of this summary information, the remainder of this memorandum will set forth in detail the procedures and principles governing investment-committed advance loans/financing.

II. FUNDAMENTAL PRINCIPLES

1. Features, Transfer and Delivery of Negotiable Instruments to Be Accepted as Advance

The negotiable instruments to be accepted as advance must bear the following features. Specifically, such negotiable instruments must:

• Bear at least two signatures, including the signature of the drawer and that of the Intermediary Bank as the last endorser.
• Be issued as an order instrument denominated in Turkish lira.
• Have a maximum remaining maturity of 10 years.
• Contain the formal requirements stipulated under the legislation in force both in the country where they are accepted or avalized and in Türkiye.
• Not include any clauses such as prohibition of protest or similar reservations, and the chain of endorsements must be unbroken.
• Be issued by companies whose creditworthiness is deemed satisfactory.
• Not exceed the maximum limits allocated to the company and the Intermediary Bank.
• Be issued on a recourse basis to the borrowing company.
• Be transferred to the CBRT through indorsement of pawn.

2. Principles for the Examination of Negotiable Instruments by the Intermediary Bank

Whether the negotiable instruments comply with the conditions set forth in the Instruction is examined by the Intermediary Bank in accordance with the following procedures and principles.

a. The Intermediary Bank shall ascertain compliance with the following requirements in respect of the negotiable instruments to be accepted as advance:

• Bills of exchange and promissory notes must bear handwritten signatures, endorsements must be unconditional, and signatures together with name stamps must be affixed in accordance with the representation authorities of companies.
• Bills of exchange and promissory notes must contain the formal requirements set forth under Articles 671 and 776 of the Turkish Commercial Code No. 6102 (the "TCC").
• Bills of exchange and promissory notes must include (i) the term bill of exchange or promissory notes (note payable to order), (ii) the amount payable, (iii) the maturity date, (iv) the place of payment, (v) the name and surname of the cessionary, (vi) the date and place of issuance, and (vii) the signature of the drawer, and in addition, in bills of exchange, the name and surname of the drawee must also be included.
• Negotiable instruments to be accepted as advance must not contain an installment payment clause.
• Negotiable instruments to be accepted as advance must not stipulate more than one maturity date with different dates, and the maturities indicated must not fall outside the four types of maturity specified under Article 703 of the TCC.
• In the aval clause, the company on whose behalf the aval is given must be expressly stated.

b. A negotiable instrument issued to order shall be transferred by the Intermediary Bank to CBRT through an indorsement of pawn.

c. The Intermediary Bank shall deliver the negotiable instruments to the Istanbul branch of the CBRT (the "Istanbul Branch"), and in case of any deficiencies in the notes, the Istanbul Branch shall return them to the Intermediary Bank, which shall in turn provide new negotiable instruments in their place.

d. If any discrepancy is identified between the application information and the negotiable instrument information, the utilization of the loan/financing shall be cancelled by CBRT. (The verification of the signatures, legal capacity, and representation authorities of the negotiable instrument debtors, as well as their creditworthiness, together with the monitoring, consequences, and liability for any disputes that may arise in this regard, shall rest with the Intermediary Bank.)

3. Criteria Regarding the Creditworthiness of Companies

Under the Instruction, companies assessed as having "high financial soundness" (the "Companies with High Financial Soundness") are those that have obtained a local long-term credit rating of high credit quality or above (A or higher) from credit rating agencies authorized to conduct credit assessments. Within the scope of the Instruction, for a company's creditworthiness to be deemed sufficient, it is essential that the relevant company meets the following criteria. Accordingly, the company must:

• Throughout the term of utilization of the loan/financing, not have any debt classified by banks, financial leasing, factoring, and financing companies as loans and other receivables with limited collectability, doubtful loans and other receivables, loans and other receivables to be liquidated, and loans and other receivables of a loss nature.
• Not have any protests that remain in force within the last three-year period.
• Not be subject to enforcement proceedings or attachment to an extent that would affect its operations.
• Not have suspended its payments; and if it has applied for concordat, at least one year must have passed since the conclusion of such application.
• Not be subject to bankruptcy proceedings or have any bankruptcy postponement status.
• Not be subject to prohibitions on issuing checks or opening check accounts, either as the company itself or through its authorized representatives whose signatures appear on the negotiable instrument.

4. Features of Investment-Committed Advance Loans/Financings and Conditions for Loan/Financing Utilization

Features of the Loans/Financings

• The principal repayment grace period shall be a maximum of 2 years from the loan/financing utilization date, during which only accrued interest/profit share payments shall be made.
• Repayments shall be carried out in periods of no more than 6 months.

Features of the Investments

• The TSS certificate, issued by the Ministry of Industry and Technology of the Republic of Türkiye (the "Ministry") in relation to the technological and strategic value of the investment, must be at least 1 billion Turkish lira.
• An investment incentive certificate (the "IIC") must be obtained, and the TSS assessment must be at least 70 points or higher. (For applications concerning investments without an IIC, a letter of conformity must be obtained from the Ministry.)

• At least 20% of the total investment amount must be financed through equity. (Exception: For investments where the utilized loan/financing amount does not exceed 20% of the total investment amount, loan/financing may be extended provided that, including the utilized loan/financing amount, it does not exceed a total of 5 billion TL and 50% of the project size recorded in the TSS certificate.)
• No loan/financing shall be extended for investments in respect of which the application to the CBRT has not been submitted within 1 year from the issuance date of the TSS certificate.

Applicable Interest/Profit Share

• The interest rate applicable to the loans/financings, after the relevant discounts, shall not be lower than 10%.The base interest/profit share is determined by means of a comparison between 20% and 70% of the policy rate, with the lower of the two serving as the applicable benchmark.
• For investments with a TSS of 85 or above, a reduction at the rate of seven-thirtieths of the base interest/profit share shall be applied.

• For investments in which the share of foreign-sourced financing amounts to 20% or more of the project size recorded in the TSS certificate, a reduction of five-thirtieths of the base interest/profit share shall be applied.
• There is no restriction preventing investment-committed advance loans/financings from being charged on a variable interest/profit share basis.
• In loan/financing utilization and repayment transactions, value dates are taken as the basis, and the number of days between such dates is considered in the calculation of interest/profit share. Accordingly, for each transaction, the interest/profit share is determined based on the period between the utilization and repayment dates.
• For investments in which the share of foreign-sourced financing amounts to 20% or more of the project size recorded in the TSS certificate, a reduction of five-thirtieths of the base interest/profit share shall be applied.
• There is no restriction preventing investment-committed advance loans/financings from being charged on a variable interest/profit share basis.

• In loan/financing utilization and repayment transactions, value dates are taken as the basis, and the number of days between such dates is considered in the calculation of interest/profit share. Accordingly, for each transaction, the interest/profit share is determined based on the period between the utilization and repayment dates.

Loan/Financing Limits

• The loan/financing utilization limit per company shall not exceed 5 billion Turkish lira.
• The loan/financing utilization limit per company shall be limited to 70% of the project size recorded in the TSS certificate.
• For investment projects with a TSS score of 85 or above, a separate loan/financing utilization limit of up to 5 billion Turkish liras shall be granted, in addition to the above-mentioned limit, provided that it does not exceed 70% of the project size recorded in the TSS certificate.
• The loan/financing limit that may be allocated for a single investment project shall not exceed 5 billion Turkish lira, and the loan/financing utilization limit per company shall not exceed 10 billion Turkish lira.

Within the scope of the loan/financing, companies are required to submit the financial statement form set forth in Annex-4 of the Instruction, and the relevant companies must also undertake the following:

✓The net foreign exchange position is below 5.0% of total assets.

✓No account balance exists that is supported by CBRT with exchange rate/price protection.

✓All contracts and pricing to be executed with residents in Türkiye in relation to the investment subject to the loan/financing shall be made in Turkish lira. (Excluded are companies operating in the defense industry sector, as well as taxpayers falling within the scope of Provisional Article 12 of the Corporate Tax Law No. 5520, dated 13 June 2006, that intends to utilize investment-committed advance loans/financing for the production of electric motor vehicles.)

✓Following the investment, the pricing and sale of the goods to be produced domestically, or of the services to be rendered to residents within the country, shall be conducted exclusively in Turkish Lira. (Excluded are companies operating in the defense industry sector, as well as taxpayers falling within the scope of Provisional Article 12 of the Corporate Tax Law No. 5520, dated 13 June 2006, that intends to utilize investment-committed advance loans/financing for the production of electric motor vehicles.)

5. Obligations of Intermediary Banks in the Utilization of Loans/Financings through Intermediary Banks

Intermediary Banks are obliged to verify the compliance of applications for investment-committed advance loans/financings with the provisions of Instruction, to analyze the technical and financial feasibility of the investment as well as the adequacy of the companies, and to submit to CBRT only those applications they deem appropriate. From the application stage until the maturity of the loan/financing, Intermediary Banks are responsible for monitoring and verifying matters such as the creditworthiness of the companies, the compliance of the investment with the Instruction, the conformity of the amounts to be extended with the prescribed limits, and the follow-up of the undertakings.

In addition, Intermediary Banks are required to transfer the loan/financing amounts allocated to them by CBRT into a blocked account to be opened in the name of the company on the same day. Such amounts are not released directly to the companies; they may only be utilized upon submission of supporting documents for expenditures to be made within the scope of the investment. Upon submission of such expenditure documents, payments are transferred directly to the account of the company's relevant goods or service supplier. In cases where direct transfer is not possible, the payment amount is directed at the supplier's account through another bank. In this process, the account details of the cessionary are notified to the bank by the company.

For the purpose of evidencing the expenditure, invoices duly issued in compliance with the legislation, or pro-form invoices supported by contracts and subject to subsequent verification by invoice, are accepted. Furthermore, for the loan/financing amount to be transferred to the company's account, documents proving that the expenditure has been incurred must be submitted to the bank. However, expenditures relating to the purchase of land and buildings are not covered under the investment-committed advance loan/financing.

Moreover, in cases where the Intermediary Bank is a participation bank, special provisions apply. In such cases, participation banks ensure the transfer of funds under a framework investment agency agreement to be executed with the CBRT and extend such funds to their clients in their own name and on their own account, in accordance with the methods prescribed under the applicable legislation. This practice does not constitute utilization by proxy on behalf of CBRT, and the independent liabilities of the Intermediary Banks remain unaffected.

On the other hand, in cases where loan/financing repayments are not made at maturity or where obligations, including penalties and sanctions, are not fulfilled, the Istanbul Branch is authorized to directly collect such amounts from the Turkish lira or foreign currency accounts of the Intermediary Banks held with the CBRT, or from their other receivables.

Finally, prior to the disbursement of loan/financing tranches, verification of the public debt status of the companies is required. Within this scope, companies must submit to the Intermediary Banks tax and social security debt status certificates issued within the last 15 days. If the submitted documents indicate overdue debts, such debts must first be settled from the loan/financing amount or a current certificate evidencing that the debt has been discharged must be presented; only after this condition is fulfilled may the remaining amount be utilized for investment expenditures.

6. Documents Required to Be Submitted in Loan/Financing Applications

For the completion of companies' loan/financing applications, the head offices of the Intermediary Banks are required to submit the following documents to the General Directorate of Banking and Financial Institutions of the CBRT (the "General Directorate"). Where deemed necessary, the General Directorate may request additional information and documents from the Intermediary Bank in connection with the loan/financing application.

7. Allocation and Utilization of Loans/Financings
Allocation of Loans/Financings

✓The allocation of the loan/financing shall be made by means of a letter of conformity to be sent by the General Directorate to the Intermediary Bank, provided that the documents stipulated under the heading "6. Documents Required to Be Submitted in Loan/Financing Applications" above are submitted in full. At this stage, the assessment and representations made by the Intermediary Bank shall be taken as basis.

✓At least 10% of the allocated loan/financing amount must be utilized within 6 months from the allocation date. In the event of failure complying with this requirement, the allocated limit shall be cancelled. In addition, the entire allocated amount must be utilized within 3 years, and if this period is exceeded, an additional period of 1.5 years may be granted only once, upon a reasoned application by the Intermediary Bank. At the end of the additional period, any unused portion shall be cancelled.

Utilization of Loans/Financings

✓As a rule, the loan/financing is envisaged to be disbursed in 5 equal tranches. However, requests for lump-sum utilization may be submitted to the CBRT through the Intermediary Bank, provided that they are supported by expenditure documents covering the requested amount, and such requests shall be evaluated by the General Directorate. A blockage is imposed on the loan/financing limit for the total amount requested.

✓For a new tranche utilization request, the Intermediary Bank must submit to the CBRT a monitoring report showing the progress level of the investment, a signed repayment plan for the relevant tranche, and documents evidencing the company's current tax and social security debt status obtained within the last 15 days. If, upon evaluation of the report, CBRT determines that sufficient progress has not been achieved in the investment, it may reject new tranche utilization requests.

✓In variable interest/profit share loans, it is the responsibility of the Intermediary Bank to ensure that the current loan/financing balance is consistent with the amount of the deposited negotiable instruments. If the balance exceeds the negotiable instrument amount, the Intermediary Bank is obliged to deposit an additional negotiable instrument with the same maturity to the Istanbul Branch. If CBRT identifies a discrepancy, the Intermediary Bank must deposit this additional negotiable instrument within 5 business days from the date of notification. In case of delay, an additional period may be granted only once upon a reasoned written application; if the obligation is not fulfilled within this additional period, the provisions regarding the recall of the loan/financing shall apply.

✓Following the completion of the final repayment transactions, the negotiable instrument or negotiable instruments in the portfolio shall be returned to the Intermediary Bank.

8. Repayments of Loans/Financings and Fulfillment of the Investment Commitment

Repayments of Loans/Financings
✓The amount recorded on the negotiable instrument shall be paid at maturity.
✓After the negotiable instrument amount is paid to the CBRT, Intermediary Banks are authorized to present the negotiable instruments, return the paid negotiable instruments to the debtor, issue receipts for payments, draw a protest in the event of non-payment, and, where necessary, initiate enforcement or court proceedings.
✓The negotiable instrument amount shall be paid to CBRT on the maturity date without any deduction; if the maturity falls on a holiday, payment shall be made on the first business day following the holiday. The repayment transactions carried out shall be reported to CBRT on the same day.
✓If payment is not made by the Intermediary Bank on the maturity date, the CBRT may collect the negotiable instrument amounts ex officio and may also resort to protest and legal recovery. All costs and collection commissions arising in this context shall be charged to the Intermediary Bank.
✓Early repayment of the loan/financing is possible only by closing the entire outstanding balance; partial early repayment is not permitted

✓In the case of early repayment, only the accrued interest/profit share shall be collected. Intermediary Banks may not charge companies any additional expense, commission, or interest/profit share due to this transaction.
✓Early repayment does not eliminate the obligation to fulfill the investment commitment. Moreover, where early repayment has been made in respect of a transaction, a new investment-committed advance loan/financing may not be extended under the same investment.
✓If the loan/financing repayment cannot be made at the negotiable instrument's maturity, the Intermediary Bank shall, upon obtaining confirmation from the General Directorate, protest the debtor company on the second business day following maturity and notify the Risk Center of the Banks Association of Türkiye.
Fulfillment of the Investment Commitment
✓The investment commitment subject to the loan/financing shall, in principle, be concluded upon the closure of the IIC (Investment Incentive Certificate) of the relevant investment. If the IIC has not been closed by the maturity date, documents evidencing the realization of the investment must be submitted no later than 6 months. In transactions where the IIC expires prior to maturity, the Intermediary Bank shall notify CBRT of the completion rate of the investment. If an extension has been granted by the Ministry, the period for fulfilling the commitment shall be extended accordingly.

✓If the IIC closure procedures have been completed, the fulfillment of the investment commitment shall be determined by submission to the Intermediary Bank of the letter obtained by the company from the Ministry.
✓If the closure procedures of IIC have not been finalized by the maturity of the loan/financing, the realization status of the investment shall, for those investments covered by an IIC prior to the entry into force of the Communiqué on the Implementation of the Decision on State Aids in Investments (Communiqué No: 2025/1), published in the Official Gazette No. 32933 dated 21 June 2025, be submitted to the Intermediary Bank through reports prepared by sworn financial advisors in accordance with the annexes of the Communiqué on the Implementation of the Decision on State Aids in Investments (Communiqué No: 2012/1), published in the Official Gazette No. 28329 dated 20 June 2012, and shall be confirmed by an appraisal/valuation to be carried out by the Intermediary Bank.
✓For loans/financings where, after the acceptance of the negotiable instrument as advance, the investment features stipulated under the Instruction and the undertakings required to be made by the companies are not met, the investment commitment shall not be monitored.

9. Recall of Loans/Financings, Sanctions and Penalties

CBRT's Authority of Recall

CBRT, where it is necessary, shall have the right to recall the loans/financings disbursed prior to their maturity, by also seeking the opinion of the Intermediary Bank.

Calculation of Default Interest/Penalty

In this case, default interest/penalties shall be calculated by multiplying the highest overnight lending rate announced by the CBRT by a factor of 1.5.

Recall in Case of Failure to Meet Conditions

If, after the acceptance of the negotiable instrument as advance, it is determined that the investment features stipulated under the Instruction and the undertakings required to be made by the companies are not fulfilled:

✓The loan/financing disbursed shall be recalled and the allocation shall be cancelled.
✓CBRT shall send a written instruction to the Intermediary Bank for the one-time payment of the remaining principal, commission, taxes, and expenses.
✓All such amounts shall be paid no later than 5 business days from the date of dispatch of the instruction and reported to CBRT on the same day.
✓Upon payment and notification, the negotiable instruments shall be withdrawn from the portfolio prior to maturity and returned to the Intermediary Bank.
✓Only accrued interest/profit shares shall be collected in this context.
✓Sanctions shall be applied at the specified rate until the repayment date.
✓Further loan/financing applications to be made through the same Intermediary Bank on behalf of the company that used the recalled loan shall not be accepted.

Loss of Creditworthiness

If the Intermediary Bank reports the loss of creditworthiness, CBRT shall decide on the recall.

If a recall decision is made, an instruction shall be sent to the Intermediary Bank for the outstanding balance.

The balance shall be paid within 2 business days from the date the instruction is received and reported to CBRT on the same day.

Upon payment and notification, the negotiable instruments shall be withdrawn from the portfolio prior to maturity and returned to the Intermediary Bank.

Non-Payment at Negotiable Instrument Maturities

If the investment commitment is not fulfilled in whole or in part in accordance with the procedure set forth in Article 18 of the Instruction:

✓Sanctions shall be applied on the principal amount, in proportion to the unfulfilled commitment, from the utilization date until the repayment date.
✓The sanction amount shall be calculated based on the highest overnight lending rate announced by CBRT as of the relevant installment payment dates.
✓The calculated amount shall be collected from the Intermediary Bank together with the BITT.
✓In loans that have not yet matured, sanction payments shall be collected in installments; for installments already repaid, sanctions shall be collected in a lump sum.
✓For sanctions to be collected in a lump sum, a period of 5 business days shall be granted from the date of notification for payment.
✓The General Directorate may grant an extension upon a reasoned application.
✓New loan/financing applications of companies that have failed to fulfill the investment commitment shall not be accepted for a period of 5 years from the date of the breach.

Failure to Comply with Interest/Profit Share Differentiation

In the event that any of the interest/profit share differentiation conditions stipulated under Article 11 of the Instruction are not met, a sanction shall be imposed on the utilized loan/financing in an amount equal to 1.5 times the difference between the interest/profit share benefited from and the interest/profit share that should have been applied.

10. Matters Related to Legislation

The negotiable instruments issued by companies benefiting from loans or financing in connection with their investment activities are submitted to CBRT through Intermediary Banks and are accepted as advances. Within this framework, it shall be the responsibility of the Intermediary Banks to carry out all monitoring, reporting, notification, and similar procedures prescribed under, or that may in the future be prescribed under, the legislation on the Protection of the Value of the Turkish Currency, the investment incentives regime, and other relevant regulations.

In addition, pursuant to Stamp Tax Law No. 488, negotiable instruments are not subject to stamp tax. Accordingly, no stamp tax shall be collected from the negotiable instruments delivered to the CBRT under the investment-committed advance loan/financing framework. The same exemption also applies to undertakings and assignments issued by the Intermediary Banks.

The Implementation Instruction is also in compliance with national and international sanctions regulations. Within this scope, it is prohibited to extend loans or financing to companies included in the lists of MASAK, the United States Office of Foreign Assets Control (OFAC), the United Nations Security Council, the United Kingdom Office of Financial Sanctions Implementation, or the European Union Financial Sanctions. This prohibition also covers companies that are directly or indirectly owned, partnered, or controlled by people included in these lists.

Likewise, commercial activities carried out with persons and entities included in the sanction lists, or transactions relating to goods and services covered by such lists, may not be supported within the scope of loans/financings. Documents relating to such activities shall not be deemed valid in the commitment closure procedures of investment-committed loans/financings.

It is the responsibility of the Intermediary Banks to verify whether the companies to which loans/financings are extended, as well as the people directly or indirectly owning, partnering with, or controlling them, are included in the relevant sanction lists. In addition, Intermediary Banks are also responsible for checking whether the goods or services subject to the loan are covered by the sanction lists. If such verifications are not carried out or are conducted incompletely, all legal liability shall rest entirely with the Intermediary Banks.

On the other hand, non-payment of the negotiable instruments at maturity and the protest drawn by the Intermediary Bank entitled CBRT to pursue the drawer. Transactions that are not paid at maturity or cannot be collected ex officio by the Istanbul Branch due to insufficient funds in the accounts of the Intermediary Bank shall be separately monitored by the Istanbul Branch. Pursuant to Articles 714 and 778 of the TCC, in negotiable instruments with a fixed maturity, the protest for non-payment must be made within 2 business days following the payment date, whereas in negotiable instruments payable at sight, it must be made within the period granted for their presentation. Therefore, it is of critical importance not to miss the protest period in such cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.