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Vestel Elektronik (VESD)

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Monday 30 September, 2002

Vestel Elektronik

Interim Results

Vestel Elektronik Sanayi Ve Ticaret
27 September 2002


VESTEL ELEKTRONIK SANAYI VE TICARET ANONIM SIRKETI AND ITS SUBSIDIARIES
INFLATION ADJUSTED CONSOLIDATED FINANCIAL STATEMENTS AT 30 JUNE 2002


To the Board of Directors of 
Vestel Elektronik Sanayi ve 
Ticaret Anonim Sirketi

1. We have audited the accompanying consolidated balance sheet of Vestel
Elektronik Sanayi ve Ticaret Anonim Sirketi (a Turkish corporation) and its
subsidiaries at 30 June 2002 and the related consolidated income statement,
shareholders' equity movements and cash flows for the period then ended.  These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

2. We conducted our audit in accordance with International Standards on
Auditing. These standards require us to plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
an assessment of the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our
opinion.

3. The Company is unable to provide revenue from transactions with other
segments, segment results, carrying amounts of segment assets, segment
liabilities, cost of property, plant, equipment and intangibles and depreciation
and amortisation by business segment as required by IAS 14.

4. In our opinion, except for non compliance with IAS 14 mentioned above, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Vestel Elektronik Sanayi ve Ticaret
Anonim Sirketi and its subsidiaries at 30 June 2002 and the consolidated results
of their operations and cash flows for the period then ended, in accordance with
International Accounting Standards. 

               ERGIN Uluslararasi Denetim ve Yeminli Mali Musavirlik A.S.
                      Member Firm of Grant Thornton International


                            Aykut Halit                 Nazim Hikmet
                          Managing Partner           Engagement Partner 


Istanbul
26 September 2002


   
                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                        CONSOLIDATED BALANCE SHEETS
                     AT 30 JUNE 2002 AND 31 DECEMBER 2001
                  (Currency: billions of Turkish Lira in 
                equivalent purchasing power at 30 June 2002)

                                             Note       30.06.2002   31.12.2001
CURRENT ASSETS
Cash and Banks                                             296,059      108,749
Marketable securities                         4             63,104       90,986
Trade receivables                             5            500,304      445,193
Due from group companies                      6             57,132       46,371
Inventories                                   7            415,477      372,087
Other current assets                          8            108,780      144,050

Total current assets                                     1,440,856    1,207,436


NON CURRENT ASSETS
Long-Term trade receivables and deposits      9             32,895       31,591
Investments                                  10             23,917       24,091
Property, plant and equipment, net           11            245,195      250,294
Intangible assets, net                       12             77,814       73,679
Deferred tax asset                           16             23,553       19,119

Total non current assets                                   403,374      398,774


TOTAL ASSETS                                             1,844,230    1,606,210


CURRENT LIABILITIES
Short-term bank borrowings                   13            173,077      305,399
Trade payables                               14            481,796      464,211
Due to group companies                        6                  4            5
Other payables and accrued expenses          15             47,455       42,805
Taxation on income                           16              4,927       23,912

Total current liabilities                                  707,259      836,332


NON CURRENT LIABILITIES
Long-Term bank borrowings                    13            408,253       86,618
Long-Term payables                                           1,877        2,863
Reserve for retirement pay                   17             10,429       10,579
Deferred tax liability                       16             47,630       32,745

Total non current liabilities                              468,189      132,805


Minority Interest                                              788        2,143


COMMITMENTS AND CONTINGENCIES                20

SHAREHOLDERS' EQUITY

Share capital                                18            365,851      365,851
General reserve                              19            270,603      228,505
Not income for the year                                     31,540       40,574

Total shareholders' equity                                 667,994      634,930


TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                     1,844,230    1,606,210


The accompanying notes are an integral part of these statements.



                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                       CONSOLIDATED INCOME STATEMENTS
                FOR THE SIX MONTHS ENDING 30 JUNE 2002 AND 2001
                    (Currency: billions of Turkish Lira in 
                  equivalent purchasing power at 30 June 2002)

                                             01.01-30.06.2002   01.01-30.06.2001

NET SALES                                          962,248           947,539
      
COST OF SALES                                     (737,782)         (574,989)

Gross profit                                       224,466           372,550


SELLING EXPENSES                                   (62,529)          (55,211)
      
GENERAL AND ADMINISTRATIVE EXPENSES                (28,122)          (24,403)

WARRANTY EXPENSES                                   (8,256)           (3,918)

NET OTHER INCOME                                     5,819            22,525

Income from operations                             131,378           311,543


FINANCIAL EXPENSES                                 (67,294)         (251,075)

Income before taxation                              64,084            60,468


TAXATION CHARGE
Current                                             (8,226)           (1,534)
Deferred                                           (10,451)          (16,101)
Prior year (under)/over-provision                        -                 -

Taxation on income                                 (18,677)          (17,635)

Income before minority interest                     45,407            42,833


MINORITY INTEREST                                     (172)            1,057

Income before monetary gain/(loss)                  45,235            43,890


MONETARY GAIN/(LOSS)                               (13,695)          (11,452)

Net income for the year                             31,540            32,438


Weighted average number ('000s) of shares
 with face value of TL 1,000 each               159,100,000      159,099,887
Basic and fully diluted earnings per share 
 (in full TL)                                           198              204
Dividends per share (in full TL)                          -                -
Earnings before interest, tax, depreciation and
 amortisation (EBITDA) 
 (in billions of Turkish Lira)                      160,390          331,844


The accompanying notes are an integral part of these statements.



             VESTEL ELEKTRONIK SANAYI VE TICARET ANONIM SIRKETI
                             CASH FLOW STATEMENTS
                FOR THE SIX MONTHS ENDING 30 JUNE 2002 AND 2001
                    (Currency: Billions of Turkish Lira in 
                  equivalent purchasing power at 30 June 2002)

                                             01.01-30.06.2002   01.01-30.06.2001

CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                           31,540           32,438
Adjustments to reconcile net income to net 
cash provided
By operating activities:
  Depreciation and amortisation                      29,012           20,301
  Provision for retirement pay                          915           (1,260)
  Deferred taxation, net                             10,451           16,098
  Transfer of minority interest                       1,524                -
  Discounting of notes receivable and payable, net    1,092            1,149


Changes in operating assets and liabilities
Trade receivables                                   (56,203)        (145,212)
Receivables from related parties                    (10,761)         (19,348)
Inventories                                         (43,390)         (30,692)
Prepayments and other current assets                 35,270          (86,347)
Other non-current assets                             (1,304)          14,106
Trade payables                                       17,585           97,617
Payable to related parties                               (1)             (18)
Other payables and accrued liabilities                4,650           (3,406)
Other long term liabilities                          (2,051)          24,856
Taxation on income                                  (18,985)         (12,835)

  Net cash generated from (used for) operating 
  activities                                           (656)         (92,553)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in short-term bank borrowings  (132,322)          77,645
Increase/(decrease) in long-term debt and current
 portion of long-term debt                          321,635           24,715
Increase/(decrease) in minority interest             (1,355)          (1,057)

  Net cash (used for) provided from financing 
  activities                                        187,958          101,303


CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment and 
intangible assets                                   (28,048)         (76,305)
Increase in investments                                 174             (418)
Disposal of/(investment in) marketable securities    27,882           46,784

  Net cash used for investing activities                  8          (29,939)


NET INCREASE IN CASH AND CASH EQUIVALENTS           187,310          (21,189)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR      108,749          144,693

CASH AND CASH EQUIVALENTS AT END OF YEAR            296,059          123,504


The accompanying notes are an integral part of these statements.



             VESTEL ELEKTRONIK SANAYI VE TICARET ANONIM SIRKETI 
                STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 
             FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 AND 2001 
                    (Currency: billions of Turkish Lira in 
                  equivalent purchasing power at 30 June 2002)
 

                                   Share   General   Net income           Total
                                 Capital   Reserve      for the   Shareholders'
                                                         period          Equity

Balances at 31 December 2000      365,851   154,167       74,338         594,356

Distribution of income
- Transfer to reserves                      74,338      (74,338)              -

Net income/(loss) for the year                           32,438          32,438

Balances at 30 June 2001         365,851   228,505       32,438         626,794



Balances at 31 December 2001     365,851   228,505       40,574         634,930

Distribution of income
- Transfer to reserves                       40,574     (40,574)              -
Transfer of minority interest                 1,524                       1,524
Net income/(loss) for the period                         31,540          31,540

Balances at 30 June 2002         365,851    270,603      31,540         667,994


The accompanying notes are an integral part of these statements.




                                       1

                   VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                       NOTES TO FINANCIAL STATEMENTS 
                 FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                   AND FOR THE YEAR ENDED 31 DECEMBER 2001
   (Currency shown in billions of Turkish Lira unless otherwise indicated)


1    Organisation and nature of activities

Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi (the Company) was founded in
March 1983 under the name of Ferguson Elektronik Sanayi ve Ticaret AS under the
Turkish Commercial Code and is registered in Istanbul, Turkey. The name was
changed to Star Elektronik Sanayi ve Ticaret AS during the same year. In April
1984 Polly Peck Group acquired the Company and changed its name to Vestel
Elektronik Sanayi ve Ticaret Anonim Sirketi which is its current name. In 1990
18% of the Company's shares were issued to the public at the Istanbul Stock
Exchange. The Company has been operating under Law 6224 (Foreign Capital
Incentive Law) since July 1985. In 1991 Polly Peck Group transferred all of its
shares to one of its subsidiaries named Collar Holding BV based in the
Netherlands and in the same year, following the collapse of the Polly Peck
Group, the Company was placed in administration. In November 1994 Ahmet
Nazif Zorlu acquired the Company from the administrator of the Polly Peck Group
by buying the entire share capital of Collar Holding BV which at the time held
82% of the Company's issued share capital.

The Company is mainly engaged in the production of colour televisions and
computer monitors and the trade of brown and white durable consumer goods. The
Company's production facilities are located in Manisa. At 30 June 2002 the
Company's production capacity for colour televisions and monitors was 7,500,000,
(2001: 6,500,000) units and 1,000,000, (2000: 1,000,000) units per year
respectively.

Vestel Group is made up of Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi
and its subsidiaries Vestel Dayanikli Tuketim Mallari Pazarlama Anonim Sirketi
(Vestel Marketing), Vestel Bilisim Teknolojileri Ticareti Anonim Sirketi (Vestel
Information), Vestel Komunikasyon Sanayi ve Ticareti Anonim Sirketi (Vestelkom),
Vestel Dis Ticaret Anonim Sirketi (Vestel Foreign Trade) and Vestelnet
Elektronik Iletisim ve Bilgilendirme Anonim Sirketi (Vestelnet). The Company
has always exercised effective control over the management of each of these
companies and at 31 December 1999 held nearly all of their shares.



                                       2

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                        NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
    (Currency shown in billions of Turkish Lira unless otherwise indicated)


The companies included in the group consolidation, and the direct and indirect 
shareholding of Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi in their 
capital, are:

                                                  30.06.2002      31.12.2001 

Vestel Dayanikli Tuketim 
 Mallari Pazarlama AS (Marketing) (Istanbul)         99.88%          97.22%

Vestel Bilisim Teknolojileri Ticaret AS
 (Information) (Istanbul)                            99.74%          98.10%

Vestel Komunikasyon Sanayi ve Ticaret AS 
 (Izmir)                                             98.72%          97.97%

Vestel Dis Ticaret AS (Foreign Trade) (Manisa)       99.66%          98.20%

Vestelnet Elektronik Iletisim ve 
 Bilgilendirme AS (Istanbul)                         98.75%          99.67%



2   Basis of presentation of the financial statements

The Company, which is quoted on the Istanbul Stock Exchange, maintains its books
of account and prepares its statutory financial statements in accordance with
the Turkish Commercial Code, accounting policies prescribed by the Turkish
Capital Markets Board and tax legislation and since 1994 has adopted the Uniform
Chart of Accounts issued by the Ministry of Finance (collectively 'Turkish
Practices'). The accompanying financial statements (the 'IAS Financial
Statements') are based on the statutory records, which are maintained under the
historical cost convention, with adjustments and reclassifications and
restatement for the changes in the general purchasing power of Turkish Lira, for
the purpose of fair presentation in accordance with Statements of International
Accounting Standards ('IAS') issued by the International Accounting Standards
Committee.


                                       3

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)


Restatement for changes in the general purchasing power of Turkish Lira at 30
June 2002 is based on IAS 29, which requires financial statements prepared in
the currency of a highly inflationary economy to be stated in terms of the
measuring unit current at the balance sheet date. Corresponding figures for the
previous period must be restated on the same basis. One measure of the
applicability of IAS 29 is a cumulative three year inflation rate approaching or
exceeding 100%. The restatement was calculated by means of conversion factors
derived from the national wholesale price index published by the State Institute
of Statistics. The relevant conversion factors for the current and prior years
are as follows:


                                                 Conversion 
                       Date           Index        factor

                31 December 1999     1979.5         2.815 
                31 December 2000       2626         2.122 
                31 December 2001     4951.7         1.125 
                    30 June 2002     5572.0         1.000


The method of restatement is as follows:

- The financial statements of prior years, including monetary assets and 
liabilities, which were previously reported in terms of the measuring unit
current at the end of those years are restated in their entirety to the
measuring unit current at 30 June 2002.

- Monetary assets and liabilities shown in the balance sheet at the year end do
not need to be restated, as they are already expressed in terms of the monetary
unit current at the balance sheet date.

- Non-monetary assets and liabilities and components of shareholders' equity are
restated by applying the relevant conversion factors.

- All items shown in the income statement are restated by applying the relevant
conversion factors.

- The effects of general inflation on the Company's net monetary position are
included in the income statement as a net monetary gain or loss.


Adoption of IAS 39

The Company adopted IAS 39, Financial Instruments: Recognition and Measurement,
on 31 December 2001. The financial effects of adopting IAS 39 as of 30 June 2001
are not material and therefore no adjustment is reflected in the accompanying
consolidated income statement for the six months ended 30 June 2001.



                                       4

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)


3  Principles of consolidation and summary of significant accounting policies

(i) Principles of consolidation - The principles of consolidation followed in
the preparation of the accompanying financial statements are as follows:

   (a) The balance sheet and income statement of the subsidiaries are 
   consolidated on a line by line basis, and the carrying value of the 
   investment held by the Company is eliminated against the related 
   shareholders' equity accounts.

   (b) All significant intercompany transactions and balances between the 
   Company and the subsidiaries have been eliminated.

   (c) Goodwill arising on consolidation is written off over 20 years on a 
   straight-line basis.

   (d) Minority interest is calculated as part of the net results of operations 
   and net assets of subsidiaries which are not owned by Vestel Elektronik 
   Sanayi ve Ticaret AS (the parent).

   (e) Certain companies in which the Company has a controlling interest or 
   significant influence are not consolidated or equity accounted as they are 
   immaterial individually and in aggregate to the results and financial 
   position of the group.


(ii) Summary of significant accounting policies:

The significant accounting policies followed in the preparation of the
accompanying financial statements are summarised below:

Related parties - For the purpose of the accompanying financial statements, the
shareholders of the Company, its directors and the companies identified by the
Company as being controlled by/affiliated with them are considered and referred
to as related parties. A number of transactions are entered into with related
parties in the normal course of business (see note 6).

Marketable securities - Marketable securities include Turkish government bonds
and treasury bills acquired under reverse repurchase agreements with
predetermined sales prices at fixed future dates (repo transactions), inflation
indexed government bonds (classified under other non-current assets) and
Eurobonds issued by the Turkish government denominated in US$. For marketable
securities traded in active markets, fair value is determined by reference to
stock exchange quoted bid prices. For other marketable securities fair value is
estimated by reference to the current market value of similar instruments or by
reference to the discounted cash flows of the underlying net asset.

Allowance for unearned interest expense on notes receivable and unrealised
interest income on notes payable (discounting to present value at year end) -
Unearned interest is calculated on all the notes receivable and post dated
cheques at the balance sheet date, at the rate of 64% (2001: 70%) per annum,
which is the statutory rate determined by the Central Bank of Turkey, to set an
allowance for unearned interest expense on notes receivable and post dated
cheques.


                                       5

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)


At 30 June 2002 the Company provided for unrealised interest income on notes
payable at the rate of 64% (2001: 70%).

Allowance for doubtful receivables - The allowance for doubtful receivables
represents specific provisions charged to expenses. The allowance is an
estimated amount that management believes will be adequate to absorb possible
future losses on existing receivables that may become uncollectable due to
current economic conditions and inherent risks in the receivables.

Inventory valuation - Inventories (including finished goods and imported raw
material inventories) are valued at the lower of weighted average cost, restated
at the equivalent purchasing power at 30 June 2002, and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of
business, less the cost of completion and selling expenses. Cost elements
included in inventory are materials, labour and an apportionment of factory
overheads.

Investments - These consist of participations in the share capital of
subsidiaries, associated companies and other investments not included in the
consolidation. They are shown at cost, restated at the equivalent purchasing
power of Turkish lira at 30 June 2002, unless the market value is known, in
which case they are restated at market value.

Leases - The Company acquired machinery, equipment and motor vehicles under
finance lease agreements. These finance leases are capitalised at the inception
of the lease at the lower of the fair value of the leased asset or, if lower,
the present value of the minimum lease payments. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant rate on
the financial balance outstanding. The assets acquired under finance leases are
depreciated over the useful lives of the assets as there is reasonable
certainty, that the Company will obtain ownership at the end of the lease terms.

Property, plant and equipment and related depreciation and amortisation -
Property, plant and equipment are carried at cost, restated in equivalent
purchasing power at 30 June 2002. Depreciation and amortisation are provided on
the restated amounts of property, plant and equipment on a straight-line basis.

The depreciation and amortisation periods for property, plant and equipment,
which approximate the useful economic lives of these assets, are as follows:

                                                            Years 

Buildings                                                    50
Machinery, equipment, installations and moulds               12.5
Furniture, fixtures and office equipment                     5-12.5
Motor vehicles                                               5-12.5



                                       6

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)


Deferred income taxes - Deferred income tax is provided in full, using the
liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements
(note 16). Tax rates enacted or substantively enacted by the balance sheet date
are used to determine deferred income tax.

In previous years the Company did not make any deferred tax liability provision
in respect of its property, plant and equipment and inventories restatements
pursuant to IAS 29 for the years ended 31 December 1999 and 2000 and accordingly
the auditors' opinion was qualified. However, on 31 December 2001 the Company
adopted a policy of creating a deferred tax liability on the effects of
restatement pursuant to IAS 29 and this liability is shown in the balance sheets
as of 30 June 2002 and 31 December 2001. The amount of the correction (deferred
tax charge of TL 1,505 billion) relating to six months period of 1 January to 30
June 2001 is not however reflected in the relevant period income statement.

Reserve for retirement pay - Under Turkish labour law, the Company is required
to pay termination benefits to each employee who has completed one year of
service and whose employment is terminated without due cause, or who retires,
completes 25 years of service (20 years for women) or is called up for military
service or dies. The reserve for retirement pay is made for the maximum amount
payable to employees, based on their accumulated period of service at the 
balance sheet date (note 17).

Foreign currency transactions and translation - Transactions in foreign
currencies during the periods have been translated at the exchange rates
prevailing at the dates of these transactions. Balance sheet items denominated
in foreign currencies have been translated at the exchange rates prevailing at
the balance sheet dates. Exchange gains or losses arising from settlement and
translation of foreign currency items have been included in the income or
expense accounts as appropriate.

Revenue recognition - Revenue is recognised on the accrual basis at the time
deliveries are made, at the invoiced values. Net sales reflect gross sales, net
of sales discounts and returns, all restated in equivalent purchasing power at
30 June 2002. All gains and losses, both realised and unrealised, go through the
statements of income.

Warranty - The Company recognises the estimated liability to repair or replace
products still under warranty at the balance sheet date. The provision is
calculated based on past history of level of repairs and replacements.

Repair and maintenance expenditure - Repair and maintenance expenditure is
charged to income as it is incurred.



                                       7

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

Research and development costs - Research expenditure is recognised as an
expense as incurred. Costs incurred on development projects (relating to the
design and testing of new or improved products) are recognised as intangible
assets to the extent that the expenditure is expected to generate future
economic benefits. Development costs that have been capitalised are amortised
over five years.

Borrowing costs - Borrowing costs are recognised as an expense in the period in
which they are incurred.

Fair value of financial instruments - Fair value is the amount at which a
financial instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation, and is best evidenced by a
quoted market price, if one exists. The estimated fair values of financial
instruments have been determined by the Company using available market
information, management's judgement and appropriate valuation methodologies. 
The following disclosure of the estimated fair value of financial instruments is
made with the requirements of IAS 32. To the extent relevant and reliable
information is available from the financial markets in Turkey, the fair value of
the financial instruments of the Company is based on such market data. The fair
values of the remaining financial instruments of the Company can only be
estimated. The estimates presented herein are not necessarily indicative of the
amounts the Company could realise in a current market exchange. The following
methods and assumptions were used to estimate the fair value of the Company's
financial instruments:

Financial Assets
Monetary assets for which fair value approximates carrying value: 
- Balances denominated in foreign currencies are translated at year-end 
  exchange rates. 
- The fair value of certain financial assets carried at coat, including cash and
  amounts due from banks, are considered to approximate their respective 
  carrying values.

Financial Liabilities
Monetary liabilities for which fair value approximates carrying value: 
- The fair value of short-term bank loans and other monetary liabilities are 
  considered to approximate their respective carrying values due to their short-
  term nature. 
- The fair values of long-term bank borrowings, which are denominated in foreign
  currencies and translated at year-end exchange rates, are considered to
  approximate their carrying values.

Financial risk factors - The Company's activities expose it to a variety of
financial risks including the effects of: foreign exchange rates and interest
rates.

Foreign exchange risk - The Company operates internationally and matches its
foreign currency commitments primarily from its foreign currency trade
receivables.



                                       8

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

Interest rate risk - The Company's operating income and operating cash flows are
substantially independent from changes in market interest rates. The Company
borrows short term at variable rates. At the period end long term borrowings are
at fixed interest rates.

Credit risk - The Company's credit risk is primarily attributable to its trade
receivables which are insured by Turkish Eximbank and export credit agencies.
The amounts presented in the balance sheet are net of allowances for doubtful
receivables, estimated by the Company's management based on prior experience and
the current economic environment.

Liquidity risk - The Company raises funds by liquidating its short term
financial instruments, eg. by collecting receivables and disposing of marketable
securities. The Company's proceeds from these instruments generally approximate
their fair values.

Securities under repurchase agreements - The carrying amount is a reasonable
estimate of fair value.

Use of estimates - The preparation of consolidated financial statements in
conformity with IAS requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates. These estimates are reviewed periodically
and, as adjustments become necessary, they are reported in earnings in the
periods in which they become known.

Commitments and contingencies - Transactions that may give rise to contingencies
and commitments are those where the outcome and the performance of which will be
ultimately confirmed only on the occurrence or non-occurrence of certain future
events, unless the expected performance is remote.   Accordingly, contingent
losses are recognised in the financial statements if a reasonable estimate of
the amount of the resulting loss can be made. Contingent gains are reflected
only if it is probable that the gain will be realised.

Cash flow statement - Cash and cash equivalents include cash and deposits with
banks.

Earnings per share - Earnings per share ('EPS') disclosed in the income
statements are determined by dividing net income by the weighted average number
of shares that have been outstanding during the related year or period and
taking into account bonus issues and right issues. There is no difference
between basic and diluted earnings per share for any class of shares for any of
the years.

EBITDA - EBITDA is defined as earnings before interest expense, income tax
expense (benefit), depreciation and amortisation. This information should be
read with the statements of cash flows contained in the accompanying financial
statements.



                                       9

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)


4   Marketable securities

These comprised the following:

                                                 30.06.2002      31.12.2001
 
Treasury bills                                            -          52,928
Eurobonds                                            28,028          16,545
Repurchase transactions                              35,076          21,513
 
                                                     63,104          90,986

At 30 June 2002 and 31 December 2001 the cost of marketable securities together
with accrued interest were equal to their market value. Marketable securities
were held on a short term basis.

At 30 June 2002 foreign currency denominated marketable securities bear annual
interest 12.38% (2001 : 12,38%) and at 31 December 2001 Turkish Lira marketable
securities bear annual interest at the rates of 70% and 119%.


5 Trade receivables

These comprised the following:

                                                 30.06.2002      31.12.2001
 
Trade receivables                                   442,699         362,111
Notes and cheques receivable                         61,346          85,588
Allowance for doubtful receivables                   (4,904)         (1,778)
Allowance for unearned interest income               (2,839)         (4,678)
Others                                                4,002           3,950

                                                    500,304         445,193




                                      10

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

Trade receivables include TL 185,944 billion and TL 156,837 billion owed by 
related parties at 30 June 2002 and 31 December 2001 respectively:

                                                 30.06.2002      31.12.2001

Vestel Beyaz Esya 
(Vestel White Goods Company)                          3,911           2,858
Deksar                                                8,721               -
Zorlu Linen Dok ve Emp Konf AS                           27              29
Zorlu Dis Ticaret                                         2               1
Zorlu Enerji                                             16              16
Zorlu Tekstil                                             -              14
Zorlu O&M Enerji Tesisleri                                -               2
Korteks                                                  42               -
Denizbank                                                86               -
Zorlu Air                                                 -               -
Vestel Danismanlik                                        -               -
Vestel France                                        18,867          18,834
Vestel Holland                                       88,557          75,239
Collar Holding                                            -               -
Veseg GmbH                                           24,215          29,838
Vestel Italia SRL                                    10,269               -
Debis Bilisim Teknolojileri                               -               7
Deniz Leasing                                             -               -
Deniz Yatirim                                             1               1
Vestel Iberia                                        28,408          26,514
Vescolor                                                  -               2
Zorlu Ev Tekstil Urunleri                                 1               -
Vinpa Pazarlama                                         565             947
Vestel Iletisim ve Bil Hiz. A.S.
(Vestel Customer Services Company)                    2,254           2,534
Other group companies                                     2               1

                                                    185,944         156,837



                                            11

                     VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

6    Balances with related parties

These comprised the following:

                                                 30.06.2002      31.12.2001
Due from related parties
Vestel USA                                           13,847          14,134 
Deksar                                               17,175          14,586 
Zorlu Holding AS                                          -               -
Vestel Holland                                        3,810             438 
Veseg GmbH                                              479           1,854 
Cabot Communications Ltd.                             4,873             138 
Collar Holding                                          123               -
Vestel Danismanlik                                        -             316
Vestel Beyaz Esya 
(Vestel White Goods Company)                         16,825          14,905

                                                     57,132          46,371

Vestel USA and Cabot Technologies UK are research and development companies. 
Receivables from Vestel USA and Cabot Technologies UK will in future be 
capitalised as investments.

Due to related parties
Vescolor Tup                                              -               -
Due to shareholders                                       4               5

                                                          4               5



                                        12

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

7    Inventories

These comprised the following :

                                                 30.06.2002      31.12.2001 

Raw materials                                       133,183         130,230
Work-in-process                                      31,054          11,481
Finished goods                                      120,158         104,100
Merchandise                                          13,552          13,248
Spares and supplies                                  18,414           5,196
Goods-in-transit                                     99,116         107,832

                                                    415,477         372,087


8   Other current assets

Other current assets comprised the following :

                                                 30.06.2002      31.12.2001
Prepaid lease expenses relating to 
Vestelnet VeezyGo Campaign                           50,324          43,569
Prepaid Expenses                                      8,857           5,141
Income Accruals                                      34,724          87,967 
VAT Receivable                                        5,286           3,351
Work Advances                                         8,852           3,253
Due from Personnel                                      196             257
Personnel Advances                                      131              16
Count & Delivery Shortages                                -               -
Other Current Assets                                    410             496

                                                    108,780         144,050



                                       13

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

9   Long term trade receivables and deposits

                                                 30.06.2002     31.12.2001
Prepaid lease expenses relating to 
Vestelnet VeezyGo Campaign                           26,827         25,223
Various prepaid expenses                              6,068          6,333 
Deposits and guarantees given                             -             35

                                                     32,895         31,591

Vestelnet (a consolidated subsidiary) first introduced the VeezyGo campaign in
June 1999. Subsequently Vestelnet introduced similar campaigns in 2000. For an
upfront fee of US$99 and 36 monthly payment instalments of US$30, a VeezyGo
subscriber receives a free PC, Veezy Card (a mastercard) and three years' free
unlimited internet usage. In respect of these campaigns, Vestelnet leases
VeezyGo PCs and monitors from various leasing companies and delivers the VeezyGo
PCs to its subscribers.

Within this framework at 30 June 2002 the Company had capitalised 
TL 50,324billion (2001: TL 43,569 billion) of lease contracts in other current
assets (which will be expensed in the income statement over the next 12 months)
and TL 26,827 billion (2001: TL 25,223 billion) in long term receivables and
deposits (which will be expensed in the income statement after 12 months) as set
out above.
 


                                     14
                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)
 
10    Investments

The Company's investments at 30 June 2002 and 31 December 2001-were as follows:

                            Percentage   30.06.2002    Percentage     31.12.2001

Vescolor Tup ve Komponent       
Sanayi veTicaret AS (Turkey)    100.0%        3,639        100.0%          3,639 
Deksar Multimedya Telekom
AS (Turkey)                      99.9%       10,903         99.9%         10,903
Vestpro Electronics SA
(Romania)                        52.0%          190         52.0%            190
Zorlu Enerji Elektrik Uretimi
Otoproduktor Grubu
AS (Turkey)               Less than 1%        1.783  Less than 1%          2,074
Vestel Beyaz Esya Sanayi
ve Ticaret AS (Turkey)           10.0%        3,937         10.0%          3,937
Teralogic Inc USA                 1.5%          882          1.5%            882
Tursoft A.S. (Turkey)             7.1%            7          7.1%             24
Vestel France                    99.9%          131         99.9%            131
Vestel Holland                  100.0%          135          0.0%              -
Veseg Video Handelsgesellschaft
GmbH                             51.0%          107         51.0%            108
Vestel Danismanlik (Turkey)       0.0%            -          0.0%              -
Vestel Iberia LTD (Spain)        95.0%           21         95.0%             21
Vestel Musteri lletisim AS. 
(Turkey)                         99.9%        2,123         99.9%          2,123
Zorlu End. Enerji A.S. (Turkey)   1.0%            1          1.0%              1
Sanalnet Internet Pazarlama ve
Ticaret A.S. (Turkey)            80.0%            7         80.0%              7
Noktakom Internet Reklamcilik
ve Gelistirmc A.S. (Turkey)      20.0%            7         20.0%              7
Vestel Italy S.R.L               51.0%           43         51.0%             43
Vinpa Pazarlama Ticaret A.S.
(Turkey)                        100.0%            1        100.0%              1
                                             23.917                       24.091

- Investments are shown net of called up share capital unpaid. At 30 June 2002
and 31 December 2001 the Company had no commitments to invest.

- Deksar Multimedya Telekom AS (subsidiary) was established in December 1998 as
an Internet service provider via satellite.

- Vestel Beyaz Esya Sanayi ve Ticaret AS (investment) was established in
November 1997 for the manufacture of white durable goods.

- Teralogic Inc USA (investment) was established in May 1996 for the purpose of
providing components for digital televisions.

- Both Vestpro Electronics SA (subsidiary) and Vescolor Tup ve Komponent Sanayi
ve Ticaret Anonim Sirketi (subsidiary) have been inactive in 2002 and 2001.

- The Company's balances under related parties with Vestel USA and Cabot
Technologies are currently shown under 'balances with related parties' but will
in future be capitalised as an investment.

- Vestel Musteri Iletisim ve Bilgi Merkezi Paz. Ve Tic. AS. (subsidiary) was
established in 2000 for customer services.

- Sanalnet Internet (subsidiary) was established in 2000 as a producer of web
page content.

- Noktakom (associated company) was established in 2000 as a monitor of web site
advertising.

- Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu AS (investment) shares are
quoted at the Istanbul Stock Exchange and are shown at market value by reference
to the average of the closing bid prices of the last five days preceding 30 June
2002, in line with changes required by IAS 39.



 
                                       15
                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

No consolidation or equity basis accounting has been applied to the Company's 
investment in subsidiaries and associated companies as explained in note 3.

Except Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A.S., the shares of the 
Company's subsidiaries and affiliates are not quoted on the Istanbul Stock 
Exchange or any other recognised market

11  Property, plant and equipment

Property, plant and equipment comprised the following:

                           Land and       Machinery                     Furniture Construction            Work
                          Buildings   and equipment  Motor vehicles  and fixtures  in progress           advances  Total
                                                                                                          given
COST
Balance at 
31 December 2000             44,557         325,314          2,958        28,607       14,360                -   415,796
Additions/(disposals)         3,256          50,871         (1,899)        6,881      (11,245)           1,942    49,806
Balance at 31 December 2001  47,813         376,185          1,059        35,488        3,115            1,942   465,602
Additions/(disposals)         1,791           8,495              -           181        4,054           (1,918)   12,603
Balance at 30 June 2002      49,604         384,680          1,059        35,669        7,169               24   478,205

ACCUMULATED DEPRECIATION
Balance at 31 December 2000   3,881         167,965          1,303        13,471            -                -   186,620
Additions/(disposals)           921          25,837           (886)        2,816            -                -    28,688
Balance at 31 December 2001   4,802         193,802            417        16,287            -                -   215,308
Additions/(disposals)           489          15,769             41         1,403            -                -    17,702
Balance at 30 June 2002       5,291         209,571            458        17,690            -                -   233,010
 
NET BOOK VALUE
Balance at 31 December 2000                                                                                      229,176
Balance at 31 December 2001                                                                                      250,294
Balance at 30 June 2002                                                                                          245,195


At 30 June 2002 the construction-in-progress balance represented investment made
by the Company during 2002 and 2001 to increase its production capacity.

The net book value of fixed assets held under finance leases (which mainly
comprise machinery and equipment) amounted to TL 5,345 billion at 30 June 2002
(31 December 2001:TL 5,349 billion).

Property, plant and equipment have been mortgaged to the extent of TL 45,000
billion (31 December 2001: TL 45,000 billion) as collateral against bank loans
and bank guarantees on letters of credit.

                                    16

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

12   Intangible assets

These comprised the following:
 
                                                 Goodwill         Research and   Other Intangible        Total
                                                              Development cost             assets    

 
COST 
Balance at 31 December 2000                        22,086              18,697              42,490       83,273 
Additions/(disposals)                                   -              26,168              12,000       38,168 
Balance at 31 December 2001                        22,086              44,865              54,490      121,441 
Additions/(disposals)                                   -               6,807               9,390       16,197 
Balance at 30 June 2002                            22,086              51,672              63,880      137,638

ACCUMULATED DEPRECIATION 
Balance at 31 December 2000                         2,197               7,297              17,599       27,093 
Additions/((Disposals)                              1,105               8,466              11,098       20,669 
Balance at 31 December 2001                         3,302              15,763              28,697       47,762 
Additions/((Disposals)                                553               5,129               6,380       12,062 
Balance at 30 June 2002                             3,855              20,892              35,077       59,824

NET BOOK VALUE

Balance at 31 December 2000                                                                             56,180
Balance at 31 December 2001                                                                             73,679
Balance at 30 June 2002                                                                                 77,814
 

 
Goodwill arose on the acquisition of Vestel Dayanikli Tuketim Mallari Pazarlama
(Marketing), Vestel Bilisim (Information), Vestel Komunikasyon (Vestelkom) and
Vestel Dis Ticaret (Vestel Foreign Trade Company) in 1999. The Company paid TL
22,259 billion in cash for the acquisition of 66.95% in Vestel Marketing, 62.15%
in Vestel Information, 54.0% in Vestelkom and 53.42% in Vestel Foreign Trade
Company.

Other intangible assets mainly comprise leasehold improvements and computer
software licences.

Other intangible assets and development costs are amortised over five years.
Goodwill is amortised over 20 years. 

Development costs are in respect of the following major projects: Integrated
Digital TV(DTV), DLP TV. Digital Sattelite Receiver, Hybrid TV, Digital TV, TV-
DVD, Large Digital TV and Large Flat Screen TV.

Research expenditure expensed amounted to TL 1,946 billion for the six months to
30 June 2002 (year to 31 December 2001: TL 466 billion).

During the six months to 30 June 2002 Vestel USA issued no invoices to Vestel
and for the year to 31 December 2001 invoices amounting to US$10,993,000 were
issued in respect of development expenditure. Development expenditure for the
year 2001 were capitalised as noted above.

 
                                     17

                    VESTEL ELEKTRONIK SANAYI VE TICARET AS
                         NOTES TO FINANCIAL STATEMENTS 
                  FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                    AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

13  Bank borrowings

At 30 June 2002 and 31 December 2001 the breakdown of the Company's bank 
borrowings was:
 
                                                         30.06.2002                31.12.2001
                                                     Balance      Balance     Balance        Balance
                                                     Foreign                  foreign
                                                     currency    TL billion   currency      TL billion
                   
          
Foreign currency borrowings
- US Dollars                                      252,548,534    396,284    125,014,676      202,512
- German Marks                                                               15,843,263       11,559
- Euro                                            104,127,115    162,476    112,056,428      159,902
                                                                 558,760                     373,973

Turkish Lira borrowings and 
accrued interest on bank borrowings                               22,570                      18,044

                                                                 581,330                     392,017
Long term portion
- US Dollars                                     (210,455,969) (330,235)       (723,083)      (1,171)
- Euro                                            (50,000,000)  (78,018)    (59,879,093)     (85,447)

Total short term bank borrowings                                173,077                      305,399

 
The effective interest rates of foreign currency loans and Turkish Lira loans 
vary between 4% and 9% (2001: 12% and 20%), and between 40% and 60% (2001: 48%
and 110%) respectively.

Letters of guarantee and notes amounting to US$ 10,648,000, EURO 3,132,145 and 
TL 451 billion have been given as collateral for Turkish Eximbank and other 
credits (2001: letters of guarantee amounting to US$ 10,635,103, EURO 1,249,500 
and TL 7,323). At 30 June 2002 and 31 December 2001 a short-term loan of 
EURO 40,000,000 was secured by Vestel Holland.


                                    18

                         VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                              NOTES TO FINANCIAL STATEMENTS 
                      FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002
                        AND FOR THE YEAR ENDED 31 DECEMBER 2001 
        (Currency shown in billions of Turkish Lira unless otherwise indicated)

14 Trade payables

These comprised the following:

                                                30.06.2002    31.12.2001

Trade payables                                     192,107       111,421 
Letters of credit                                  245,504       304,389
Lease payables
  -Principal amount                                 22,512        33,271
  -Interest (-)                                     (4,366)       (5,883)
Notes payable                                       26,480        24,283
Allowance for unearned interest income                (441)       (3,270)

                                                   481,796       464,211

Notes payable represent promissory notes which are payable within 1 year, are 
unsecured and bear no interest.

15 Other payables and accrued expenses

These comprised the following;

                                                30.06.2002    31.12.2001

Income tax and social security payables             11,741         7,753
Advances received                                    5,766         3,592 
Warranty expense provision                          15,340        14,681 
Accrued expenses                                    13,166        15,642 
Other payables                                       1,442         1,137

                                                    47,455        42,805



                                      19

                     VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                       NOTES TO FINANCIAL STATEMENTS 
                   FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                      AND FOR THE YEAR ENDED 31 DECEMBER 2001 
         (Currency shown in billions of Turkish Lira unless otherwise indicated)

16  Taxation on income

The group is subject to Turkish corporation and income withholding taxes on its 
taxable income. The effective corporation tax rate is 33% (including a 10% 
surcharge over the corporation tax rate) applicable to the fiscal periods 
starting 1 January 2000.

Withholding taxes are payable on the portion of the distributed profits, at the
effective rate of 5.5% for publicly quoted and 16.5% for unquoted entities.  No 
corporate withholding tax is payable in respect of profits added to share 
capital. Accordingly for an entity that does not distribute profit, the 
effective tax rate is computed as 33%.

Dividend income is exempt from Corporation Tax. Income earned from the sale of 
fixed assets and participation shares within the context of Corporation Tax Law,
Transitory Article No.28, although exempt from corporation tax, are subject to a
corporation withholding tax at the rate of 11%, provided that such income is 
added to share capital.

During 2000, under Law 4369 advance Corporation tax became payable, computed on 
the quarterly taxable profits at the rate of 25%. This tax may be offset against
the corporation tax payable later on. With changes made under Law 4444 
(effective from 1 January 2000), the advance taxes had to be paid on a six 
monthly basis at the rate of 20% applicable for the period from 1 January to 
30 June 2001. In accordance with Ministry Decree 2001/329 (dated 25 April 2001),
advance tax has become payable on a quarterly basis from 1 July to 31 December 
2001. With effect from 1 January 2001, the advance tax rate has been increased 
to 25%.

Tax losses that are reported in the corporation tax return may be carried 
forward and deducted from the corporation tax base for a maximum of five 
consecutive years.

A percentage of up to 100% of the value of tangible fixed assets acquired under 
on Investment Incentive Certificate from the Government may be deducted from the 
taxable profits. Such deductions are known as Investment Allowances. Investment 
Allowances are exempt from Corporation Tax but subject to Withholding Tax of 18%
plus surcharge of 10% thereon (effectively taxed at 19.8%) both for public and 
non public companies. Investment allowances of one year may be carried forward 
to future years indefinitely and the balance carried forward may be adjusted for
inflation.


                                       20

               VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                    NOTES TO FINANCIAL STATEMENTS 
              FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                AND FOR THE YEAR ENDED 31 DECEMBER 2001 
     (Currency shown in billions of Turkish Lira unless otherwise indicated)

Accordingly, the Company's corporation and income tax liability is:

                                         2002          2001
Corporation and income tax
charge on current period income          8,226        30,458
Prepaid corporation tax                 (3,299)       (6,546)

Taxes payable                            4,927        23,912

The Company recognises deferred tax assets and liabilities based upon temporary 
differences between its financial statements as reported for IAS purposes and 
its statutory tax financial statements. These differences usually result in the 
recognition of revenue and expenses in different reporting periods for IAS and 
tax purposes.



                                        21

                      VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                           NOTES TO FINANCIAL STATEMENTS 
                    FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                       AND FOR THE YEAR ENDED 31 DECEMBER 2001 
        (Currency shown in billions of Turkish Lira unless otherwise indicated)

The composition of cumulative temporary differences and the related deferred tax
assets/liabilities in respect of items for which deferred tax has been provided 
at 30 June 2002 and 31 December 2001 using the expected future tax rates were 
as follows:

                                      30.06.2002                    31.12.2001
 
                               Cumulative                      Cumulative
                               timing           Deferred       timing        Deferred
                               difference       Tax            difference    Tax

Deferred tax asset  

Warranty expense provision         4,366           1,441          3,080        1,016
Retirement pay provision           1,244             411            886          293
Unearned interest expense on
notes receivable                   2,839             937          4,678        1,544
Capitalised interest on 
inventory written off              4,566           1,507          3,260        1,076
Capitalised interest on 
intangible assets written off      5,466           1,804          5,626        1,857
Net effect of adjustments 
related to leased assets          21,132           6,974         19,872        6,558
Doubtful receivable provision      3,995           1,318          1,626          537
Interest income on marketable 
securities                           883             291            667          221
Expense accruals                  14,345           4,734          3,053        1,007
Others                            12,533           4,136         15,180        5,010

                                  71,369          23,553         57,928       19,119


Deferred tax liability (current) 

Restatement differences on:
- Inventory                       40,335          13,311         42,995       14,189
- Prepaid expenses                 3,945           1,302          1,080          357
- Investments                     13,245           1,457         13,238        1,454
- Property plant and equipment
and intangibles                  150,161          16,518        145,589       16,015
Income accruals                   42,221          13,933          1,811          598
Unearned interest income on 
notes payable and cheques 
payable                              441             146             46           15
Others;                            2,918             963            351          117

                                 253,266          47,630        205,110       32,745


                                             22

                           VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                               NOTES TO FINANCIAL STATEMENTS 
                        FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                          AND FOR THE YEAR ENDED 31 DECEMBER 2001 
        (Currency shown in billions of Turkish Lira unless otherwise indicated)


As of 30 June 2002 and 31 December 2001 taxes on income comprised:

                                          30.06.2002            31.12.2001

Current taxes                                (8,226)                    -
Net deferred tax asset/(liability)          (24,077)              (13,626)
Cancellation of prior year deferred tax      13,626                 1,519

                                            (18,677)              (12,107)

The Turkish Tax Procedural Law does not include a procedure for formally 
agreeing tax assessments. Tax returns must be filed within four months of the 
year-end and may be subject to investigation, together with their underlying 
accounting records, by the tax authorities at any stage during the following 
five years.

17  Reserve for retirement pay

The Company's reserve for retirement pay is calculated as explained in note 3. 
Payments are calculated on the basis of 30 days' pay, limited to a maximum of 
TL 1,103.5 (2001: TL 978.0 million) million per person per year of employment, 
at the rate of pay applicable at the date of retirement or termination.

With effect from 1 July 2002 the ceiling for retirement pay has been increased 
to TL 1,160.2 million.

The liability is not funded, as there is no funding requirement.

IAS 19 (Employee Benefits) requires actuarial valuation methods to be adopted to 
calculate the company's obligations under defined benefit plans. The Company has
not adopted actuarial assumptions because of the impracticality in the 
hyperinflationary environment and the unpredictability of future government-
specified increases in the limit of the rate of pay.

The difference between the application of the above method and the actuarial 
basis required under IAS 19 is considered immaterial both to shareholders' 
equity and net income.

The Company does not provide any other employee benefit than the reserve for 
retirement pay described above.

                                         23

                        VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                           NOTES TO FINANCIAL STATEMENTS 
                     FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                         AND FOR THE YEAR ENDED 31 DECEMBER 2001 
        (Currency shown in billions of Turkish Lira unless otherwise indicated)


Movements of the reserve for retirement pay during the years are as follows:
 
1 January 2001                     11,946

Charge of the period                3,771
Disposal                                -
Monetary Gain                      (5,138)

31 December 2001                   10,579

Charge of the period                1,276
Disposal                                -
Monetary Gain                      (1,426)

30 June 2002                       10,429

 
The number of personnel at 30 June 2002 was 3,705 (2001; 4,052).

Wages and salaries paid for the six month period ended 30 June 2002 amounted to
TL 23,308 (year ended 31 December 2001: TL 52,332).

                                       24

                      VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                          NOTES TO FINANCIAL STATEMENTS 
                   FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                     AND FOR THE YEAR ENDED 31 DECEMBER 2001 
       (Currency shown in billions of Turkish Lira unless otherwise indicated)

18   Share capital

The authorised share capital of the Company comprised 220,000,0000 shares of par
value TL 1,000 each at 30 June 2002. The issued and paid up share capital of the
Company comprised 159,100,000,000 shares of par value TL 1,000 each at 30 June 
2002.

Based on the register held at the last annual general meeting dated 28 May 2002 
the shareholders of the Company and their percentage shareholdings were as 
below. Subsequent to 30 June 2002 Credit Agricole sold its shares in the stock 
market. Accordingly the shareholders of the Company and their percentage 
shareholdings at 30 June 2002 and 31 December 2001 were:

                                   30.06.2002                  31.12.2001
                                  Shareholding                Shareholding

                             Amount     Percentage      Amount    Percentage

Collar Holding BV            82,082        51.6%        82,082      51.6%
Credit Agricole              11,185         7.0%        11,185       7.0%
Other shareholders           65,833        41.4%        65,833      41.4%

                            159,100       100.0%       159,100     100.0%

Inflation adjustment to 
share capital               206,751                    206,751

                            365,851                    365,851

The ultimate parent of the Company is Collar Holding BV which is located at 
Park Laan 1 3016 BA Rotterdam, Netherlands.

                                          25

                     VESTEL ELEKTRONIK SANAYI VE TICARET AS 
                         NOTES TO FINANCIAL STATEMENTS 
                   FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2002 
                     AND FOR THE YEAR ENDED 31 DECEMBER 2001 
        (Currency shown in billions of Turkish Lira unless otherwise indicated)

19  General reserve

General reserves comprise legal reserves and retained earnings.

At 30 June 2002 the legal reserves amounted to TL 6,551 billion (historic cost 
per statutory records).  Legal reserves are appropriated based on statutory 
profits and dividend distribution and are not available for distribution unless 
they exceed 50% of share capital, but they may be used to offset losses in the 
event that the general reserve is exhausted.

The retained earnings are available for distribution.  However, if this reserve 
is distributed as dividends, a further legal reserve is required to be provided 
equal to 10% of dividends declared, reduced by an amount equal to 5% of share 
capital.

20  Commitments and contingencies

(a)  At 30 June 2002 the Company had contingent liabilities of TL 102,660 
     billion (31 December 2001: TL 60,618 billion) in respect of letters of 
     guarantee obtained from local banks and submitted to various customs and 
     state authorities for import and Turkish Eximbank credits.

(b)  Due to the export and investment incentive certificates obtained, the 
     Company has committed to realise exports amounting to US$ 162,715,372 at 
     the date of our report.

(c)  Under the terms of the Customs Union Agreement with the European Union, 
     with effect from 1 January 1998 television tubes (a major component of 
     television sets) became subject to Customs Tax of 14.2% when sourced from 
     countries outside the European Union or certain specified underdeveloped 
     countries.

(d)  Property, plant and equipment have been mortgaged to the extent of TL 
     45,000 billion (31 December 2001: TL 45,000 billion) as collateral against 
     bank loans and bank guarantees on letters of credit.

(e)  In December 1999 Collar Holding BV sold 320 million shares of Vestel 
     Elektronik to Credit Agricole at a price of Euro 0.229537. In respect of 
     this sale Collar Holding BV has given guarantees to Credit Agricole that if
     the share price of Vestel Elektronik falls below the purchase price the 
     Collar Holding BV will compensate Credit Agricole Vestel Elektronik 
     provided a secondary guarantee to Credit Agricole in support of this 
     arrangement. Subsequent to 30 June 2002 Credit Agricole sold its shares in 
     Vestel Elektronik and accordingly the Company's contingent liability under 
     this transaction is removed.
    


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