OFFERING MEMORANDUM CONFIDENTIAL - Coca Cola İçecek

quarters. Bad weather conditions, including unusually cold or rainy periods, in any of our markets or decreased levels of tourismin Turkey during the peak season could adversely affect sales volume, profit from operations and cash flow and could thereforehave a disproportionate impact on our operating results for the entire year.We also experience increased demand for our beverages during Ramadan, which is the holy month of fasting in theIslamic calendar. The dates of Ramadan are determined according to a lunar calendar, meaning that Ramadan generally occurs10 days earlier each year.Exchange RatesWe report our financial results in New Turkish Lira. We have foreign currency denominated revenues, expenses, assetsand liabilities. As a consequence, movements in exchange rates can affect our profitability, the comparability of our resultsbetween periods and the carrying value of our assets and liabilities.Our revenues are generated in the local currencies of the countries in which we operate. When we incur expenses thatare not denominated in the same currency as the related revenues, foreign exchange rate fluctuations could affect ourprofitability. Raw materials purchased in currencies such as the U.S. dollar can lead to higher cost of sales if those currenciesstrengthen against the local currencies in which revenues are generated, which, if not recovered through price increases, wouldlead, in turn, to a reduction in our gross profit margins. In 2003, 2004 and 2005, 44.7%, 46.1% and 45.0%, respectively, of ourpurchases of raw and packaging materials were denominated in U.S. dollars. As of December 31, 2005, the cost of all of ourconcentrate, which represented 39.5% of our raw material costs in 2005, was denominated in U.S. dollars. Since 2002, TheCoca-Cola Company has determined concentrate prices for most of our CSDs in Turkey by reference to a percentage of our U.S.dollar net sales as calculated in accordance with U.S. GAAP, which has had the effect of hedging these concentrate pricesagainst possible devaluations of the Turkish Lira. With respect to our international operations, The Coca-Cola Company has seta fixed price in U.S. dollars for concentrate and our expenses for PET resin, sugar, glass bottles and cans are denominated inU.S. dollars.In addition, even where revenues and expenses are matched, we must translate non-New Turkish Lira denominatedresults of operations, assets and liabilities into New Turkish Lira in our consolidated financial statements. To do so, balancesheet items are translated from their source currency into New Turkish Lira using fiscal year-end exchange rates and incomestatement and cash flow items are translated into New Turkish Lira using average exchange rates during the relevant period.Consequently, increases and decreases in the value of the New Turkish Lira versus the currencies used by our internationaloperations will affect our reported results of operations and the value of our assets and liabilities in our consolidated balancesheet, even if our results of operations or the value of those assets and liabilities has not changed in their original currency. Thesetranslations could significantly affect the comparability of our results between financial periods or result in significant changes tothe carrying value of our assets, liabilities and shareholders' equity.Impact of InflationExchange rates for the New Turkish Lira can be highly volatile. Although until February 2001 it was the stated policyof the Central Bank of the Republic of Turkey to devalue the Turkish Lira in line with inflation, in recent years the devaluationof the Turkish Lira has not been consistent with inflation rates. The annual inflation rates in Turkey as measured by the averagepercentage changes in the Turkish consumer price index for 2000, 2001, 2002, 2003, 2004 and 2005 were 64.9%, 54.9%, 54.4%,45.0%, 25.3%, 8.6% and 8.2%, respectively. Historically, we have been able to increase our local currency selling pricesapproximately in line with inflation in each of these years. See "Risk Factors—Risks Relating to Operating in Turkey—Thelevel of inflation in Turkey could adversely affect our business" and " —Application of IAS 29."TaxationUnder the Turkish Taxation Code, a company that has its head office or place of business in Turkey is subject to acorporate tax that is levied at a rate of 30% on the corporation's taxable income. During the fiscal years ended December 31,2001 and 2002, corporations were also obligated to make a mandatory contribution to the Turkish state funds equal to 10% ofcorporate taxes, resulting in an overall effective tax rate for these corporations of 33% for 2001 and 2002, compared to aneffective tax rate of 30% for fiscal 2003. For fiscal year 2004 only our statutory financial statements were required to be adjustedto account for the effects of inflation, but they continued to be prepared on an unconsolidated basis.In addition, the Turkish government offers investment incentives to companies that make certain qualifying capitalinvestments in Turkey. Prior to April 24, 2003, the total amount of qualifying capital investments was deducted from taxableincome and the remainder of taxable income, if any, was taxed at the corporate tax rate. A withholding tax of 19.8% was applied