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Vestel Elektronik (VESD)

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Monday 07 April, 2003

Vestel Elektronik

Final Results

Vestel Elektronik Sanayi Ve Ticaret
7 April 2003


    VESTEL ELEKTRONIK SANAYI VE TICARET ANONIM SIRKETI AND ITS SUBSIDIARIES
                                INFLATION ADJUSTED
                                   CONSOLIDATED
                              FINANCIAL STATEMENTS AT
                             31 DECEMBER 2002 AND 2001
                           TOGETHER WITH AUDITORS REPORT


 



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


1     We have audited the accompanying consolidated balance sheets of Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi
(a Turkish corporation) and its subsidiaries at 31 December 2002 and 2001 and the related consolidated income 
statements, shareholders' equity movements and cash flows for the years 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.     In our opinion, 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 31 
December 2002 and 2001 and the consolidated results of their operations and cash flows for the years then ended, in 
accordance with International Accounting Standards.



ERGIN Uluslararasi Denetim ve Yeminli Mali Musavirlik AS
Member Firm of Grant Thornton International




     Aykut Halit     Nazim Hikmet
     Managing Partner     Partner


Istanbul
1 April 2003


---------------------------------------------------------------------------------


                                                                                                                      
  VESTEL ELEKTRONYK SANAYY VE TYCARET A.(p). GROUP OF COMPANIES                                                       
  CONSOLIDATED BALANCE SHEETS                                                                                         
  AT 31 DECEMBER 2002 AND 31 DECEMBER 2001                                                                            
  (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2002)                             
                                                                                                                      
                                                                               Notes    31/12/2002        31/12/2001  
  CURRENT ASSETS                                                                                                      
  Cash and Banks                                                                        369,104            126,448     
  Marketable securities                                                        4         36,594            105,793     
  Trade receivables                                                            5        671,313            517,645     
  Due from group companies                                                     6        151,011             53,918      
  Inventories                                                                  7        422,680            432,642     
  Other current assets                                                         8        121,937            167,493     
                                                                                                                      
  Total current assets                                                                1,772,639          1,403,939   
                                                                                                                      
  NON CURRENT ASSETS                                                                                                  
  Long-Term trade receivables and deposits                                     9          7,473             36,732      
  Investments                                                                  10        30,799             28,012      
  Property, plant and equipment, net                                           11       297,213            291,027     
  Intangible assets, net                                                       12        76,707             85,670      
  Deferred tax asset                                                           16        19,540             22,228      
                                                                                                                      
  Total non current assets                                                              431,732            463,669     
                                                                                                                      
  TOTAL ASSETS                                                                        2,204,371          1,867,608   
                                                                                                                      
                                                                                                                      
  CURRENT LIABILITIES                                                                                                 
  Short-term bank borrowings                                                   13        86,559            355,101     
  Trade payables                                                               14       718,220            539,758     
  Due to group companies                                                       6              -                  5      
  Other payables and accrued expenses                                          15        63,803             49,773      
  Taxation on income                                                           16        25,588             27,803      
                                                                                                                      
  Total current liabilities                                                             894,170            972,440     
                                                                                                                      
                                                                                                                      
  NON CURRENT LIABILITIES                                                                                             
  Long-Term bank borrowings                                                    13       471,242            100,714     
  Long-Term payables                                                                          -              3,329      
  Reserve for retirement pay                                                   17        13,144             12,300      
  Deferred tax liability                                                       16        36,404             38,074      
                                                                                                                      
  Total non current liabilities                                                         520,790            154,417     
                                                                                                                      
  Minority Interest                                                                         730              2,491      
                                                                                                                      
  COMMITMENTS AND CONTINGENCIES                                                25                                     
                                                                                                                      
  SHAREHOLDERS' EQUITY                                                                                                
  Share capital                                                                18       425,390            425,390     
  General reserve                                                              19       322,438            265,693     
  Net income for the year                                                                40,853             47,177      
                                                                                                                      
  Total shareholders' equity                                                            788,681            738,260     
                                                                                                                      
  TOTAL LIABILITIES AND                                                                                               
  SHAREHOLDERS' EQUITY                                                                2,204,371          1,867,608   
                                                                                                                      
  The accompanying notes are an integral part of these statements.   

-----------------------------------------------------------------------------------


                                                                                                                      
  VESTEL ELEKTRONYK SANAYY VE TYCARET A.(p). GROUP OF COMPANIES                                                       
  CONSOLIDATED INCOME STATEMENTS                                                                                      
  FOR THE YEARS ENDED 31 DECEMBER 2002 AND 2001                                                                       
  (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2002)                             
                                                                                                                      
                                                   Notes    01.01-31.12.2002                    01.01-31.12.2001  
                                                                                                                      
                                                                                                                      
  NET SALES                                        21.1       2,321,869                           2,106,406         
                                                                                                                      
  COST OF SALES                                              (1,752,619)                         (1,450,192)       
                                                                                                                      
  Gross profit                                     21.3         569,250                             656,214           
                                                                                                                      
                                                                                                                      
  SELLING EXPENSES                                             (149,757)                           (115,852)         
                                                                                                                      
  GENERAL AND ADMINISTRATIVE EXPENSES                           (83,059)                            (75,830)          
  WARRANTY EXPENSES                                             (20,457)                            (13,169)          
  NET OTHER EXPENSE / INCOME                       23            14,180                              34,262            
  LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS      20           (23,307)                                --              
 
  Income from operations                                        306,850                             485,625           
  FINANCIAL EXPENSES                               22          (176,520)                           (312,459)         
                                                                                                                      
  Income before taxation                                        130,330                             173,166           
  TAXATION CHARGE                                  16                                                                 
  Current                                                       (32,467)                            (35,414)          
  Deferred                                                       (1,018)                            (14,247)          
  Prior year (under) / over-provision                               --                                  --              
 
  Taxation on income                                            (33,485)                            (49,661)          
                                                                                                                      
  Income before minority interest                                96,845                             123,505           
                                                                                                                      
  MINORITY INTEREST                                                 (12)                                 (8)            
  
                                                                                                                      
  Income before monetary gain/(loss)                             96,833                             123,497           
                                                                                                                      
  MONETARY LOSS                                    27           (55,980)                            (76,320)          
                                                                                                                      
  Net income for the year                                        40,853                              47,177            
                                                                                                                      
  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                    257                                 297             
  full TL)                                                                                                            
  Dividends per share (in full TL)                                  --                                  --              
 
  Earnings before interest, tax, depreciation                                                                         
  and                                                                                                                 
  amortisation (EBITDA) (in billions of Turkish                 363,528                             543,011           
  Lira)                                                                                                               
                                                                                                                      
                                                                                                                      
                       The accompanying notes are an integral part of these statements.                                 
                  
                                                                                                                      
                                                                                                                     
                                                                                                                      
  VESTEL ELEKTRONYK SANAYY VE TYCARET A.(p). GROUP OF COMPANIES                                                       
  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                                                                       
  FOR THE YEARS ENDED 31 DECEMBER 2002 AND 2001                                                                       
  (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2002)                             
                                                                                                                      
                              Share Capital        General Reserve        Net income for         Total Shareholders'  
                                                                          the period             Equity               
                                                                                                                      
  Balances at 31              425,390              179,425                86,435                 691,250              
  December 2000                                                                                                       
                                                                                                                      
  Effect of adopting             --                   (167)                                         (167)               
  IAS 39                                                                                                              
                                                                                                                      
  Distribution of                                                                                                     
  income                                                                                                              
  - Transfer to                                     86,435               (86,435)                   --                  
  reserves                                                                                                            
                                                                                                                     
  Net income/(loss) for                                                   47,177                 47,177               
  the year                                                                                                            
                                                                                                                      
  Balances at 31              425,390              265,693                47,177                738,260              
  December 2001                                                                                                       
                                                                                                                      
  Distribution of                                                                                                     
  income                                                                                                              
  - Transfer to                                     47,177               (47,177)                   --                  
  reserves                                                                                                            
                                                                                                                      
  Transfer of minority                               1,772                  --                    1,772                
                                                                                                                      
  Transfer of net                                    7,796                (1,506)                 6,290                
  gain/(loss) on                                                                                                      
  discontinued                                                                                                        
  operations                                                                                                          
                                                                                                                      
  Net income for the                                                      42,359                 42,359               
  year on continuing                                                                                                  
  operations                                                                                                          
                                                                                                                      
  Balances at 31             425,390               322,438                40,853                788,681              
  December 2002                                                                                                       
                                                                                                                      
                                                                                                                      
                                                                                                                      
                       The accompanying notes are an integral part of these statements.                                 
                  
                                                                                                                      



                                                                                                                      
  VESTEL ELEKTRONYK SANAYY VE TYCARET A.(p). GROUP OF COMPANIES                                                       
  CASH FLOW STATEMENTS                                                                                                
  FOR THE YEARS ENDED 31 DECEMBER 2002 AND 2001                                                                       
  (Currency - Billions of Turkish Lira in equivalent purchasing power at 31 December 2002)                            
                                                                            01.01-31.12.2002        01.01-31.12.2001  
  CASH FLOWS FROM OPERATING ACTIVITIES                                                                                
  Net income                                                                40,853                  47,177            
  Adjustments to reconcile net income to net cash provided                                                            
  By operating activities:                                                                                            
                                        Depreciation and amortisation       56,678                  57,386            
                                        Provision for retirement pay           844                  (1,590)           
                                        Deferred taxation, net               1,018                  14,247            
                                        Transfer of minority interest        1,772                     --               
                                        Disposal of retained earnings        7,796                     --               
                                        on sale of subsidiary                                                         
                                        Effect of adopting IAS 39              --                     (167)             
                                        Loss on sale of investment          23,307                     --               
                                        Discounting of notes                 1,595                   9,492             
                                        receivable and payable, net                                                   
                                        Others                               1,410                     --               
                                                                                                                      
  Changes in operating assets and liabilities                                                                         
  Trade receivables                                                       (155,263)               (161,747)         
  Receivables from related parties                                         (98,503)                  6,755             
  Inventories                                                                9,962                 (48,239)          
  Prepayments and other current assets                                      45,556                 (42,004)          
  Other non-current assets                                                  29,259                   7,160             
  Trade payables                                                           178,462                  44,428            
  Payable to related parties                                                    (5)                    (14)             
 Other payables and accrued liabilities                                     14,030                 (18,866)          
  Other long term liabilities                                               (3,329)                (15,286)          
  Taxation on income                                                        (2,215)                 17,079            
                                                                                                                      
                                        Net cash generated from (used      153,227                 (84,189)          
                                        for) operating activities                                                     
                                                                                                                      
  CASH FLOWS FROM FINANCING ACTIVITIES                                                                                
  (Decrease)/Increase in short-term bank borrowings                       (268,542)                 55,038            
  Increase in long-term debt and current                                                                              
  portion of long-term debt                                                370,528                  98,180            
  Proceeds from the sale of subsidiary                                     (44,119)                   --                
  Increase/(decrease) in minority interest                                  (1,761)                      9              
  
                                        Net cash (used for) provided        56,106                 153,227           
                                        from financing activities                                                     
                                                                                                                      
                                                                                                                      
  CASH FLOWS FROM INVESTING ACTIVITIES                                                                                
  Purchases of property, plant and equipment and intangible assets         (53,901)               (102,288)         
  Consideration received on disposal of subsidiary                          24,385                    --                
  Increase in investments                                                   (2,787)                 (2,617)           
  Proceeds from the sale of subsidiary                                      (3,573)                   --                
  Disposal of/(investment in)                                               69,199                  (5,927)           
  marketable securities                                                                                               
                                                                                                                      
                                        Net cash used for investing         33,323                (110,832)         
                                        activities                                                                    
                                                                                                                      
  NET INCREASE IN CASH AND CASH EQUIVALENTS                                242,656                 (41,794)          
                                                                                                                      
  CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                           126,448                 168,242           
                                                                                                                      
                                                                                                                      
  CASH AND CASH EQUIVALENTS AT END OF                                      369,104                 126,448           
  YEAR      

                                                                                                          
                        The accompanying notes are an integral part of these statements.   




1     Organisation and nature of activities

Vestel Elektronik Sanayi ve Ticaret Anonim (p)irketi (the Company) was founded in March 1983 under the name of
Ferguson Elektronik Sanayi ve Ticaret A(p) under the Turkish Commercial Code and is registered in Ystanbul, Turkey.
The name was changed to Star Elektronik Sanayi ve Ticaret A(p) during the same year. In April 1984 Polly Peck Group
acquired the Company and changed its name to Vestel Elektronik Sanayi ve Ticaret Anonim (p)irketi 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 in the trade of brown
and white durable consumer goods. The Company's production facilities are located in Manisa. At the end of 2002 the
Company's production capacity for colour televisions and monitors was 7,000,000 (2001-6,500,000) and 1,000,000
(2001-1,000,000)units per year respectively.

Vestel Group is made up of Vestel Elektronik Sanayi ve Ticaret Anonim (p)irketi and its subsidiaries Vestel Dayanykly
Tuketim Mallary Pazarlama Anonim (p)irketi (Vestel Marketing), Vestel Bili(p)im Teknolojileri Ticareti Anonim
(p)irketi (Vestel Information), Vestel Komunikasyon Sanayi ve Ticareti Anonim (p)irketi (Vestelkom) and Vestel Dy(p)
Ticaret Anonim (p)irketi (Vestel Foreign Trade). 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.



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

                                                                                               
                                                                                2002     2001   
                         Vestel Dayanykly Tuketim                                              
                         Mallary Pazarlama A(p) (Marketing) (Ystanbul)         99.88%   97.22% 
                         Vestel Bili(p)im Teknolojileri                                        
                         Ticaret A(p) (Information) (Ystanbul)                 99.74%   98.10% 
                         Vestel Komunikasyon Sanayi                                            
                         ve Ticaret A(p) (Yzmir)                               98.72%   97.97% 
                         Vestel Dy(p) Ticaret A(p) (Foreign Trade) (Manisa)    99.66%   98.20% 
                         Vestelnet Elektronik Yleti(p)im                                       
                         ve Bilgilendirme A(p) (Ystanbul)                      -        99.67% 

     The group was restructured and inter-group shareholdings changed on 30 December 1999. However, the financial
results of newly acquired subsidiaries or shareholdings have been included in the accompanying financial statements
from the beginning of 1999 as, in essence, Vestel Elektronik has had control of the net assets and operations of the
newly acquired subsidiaries from the beginning of 1999.

     As of 31 December 2002, the Group sold its shares in Vestelnet Elektronik Yleti(p)im ve Bilgilendirme A.(p).
except for 2.2% (see note 12 and 20).  
   
2      Basis of presentation of the financial statements
     
     The Company, which is quoted on the Ystanbul 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.

     Restatement for changes in the general purchasing power of Turkish Lira at 31 December 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:

                                                                                    
                                    Date                Index     Conversion factor 
                                    31 December 2000    2626.0    2.467             
                                    31 December 2001    4951.7    1.308             
                                    31 December 2002    6478.8    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 31 December 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 1 January 2001 prospectively.
The financial effects of adopting IAS 39 are reported in the statement of changes in shareholders' equity as an
adjustment to the opening retained earnings at 1 January 2001.

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 A(p) (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.

At 31 December 2002 the Company provided for unrealised interest income on notes payable at the rate of 64% (2000:
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 31 December 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 31 December 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 31 December 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
 
 
 
 
     
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 1 January 2001 the Company adopted a policy of creating
a deferred tax liability on the effects of restatement pursuant to IAS 29. Accordingly, the financial effects of
adopting such a policy resulted in the restatement of comparative information for prior periods as if the fundamental
error had been corrected in the period in which it was made. The amount of the correction relating to periods prior
to 1 January 1999 included in the financial statements is adjusted against the opening balance of retained earnings
at that date (note 16).

     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 31 December 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.

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 cost, 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.

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 year 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.

4     Marketable securities

                                                                                      
                                                            31.12.2002    31.12.2001  
                                  Treasury bills            -             61,542      
                                  Eurobonds                 36,594        19,237      
                                  Repurchase transactions   -             25,014      
                                                            36,594        105,793 
    
     At 31 December 2002, and 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 31 December 2002 and 2001 Turkish Lira marketable securities bear annual interest at the rates of 40% and 70%
(2000: 70% and 119%) for TL denominated securities and 12.4% (2001-12.4%) for foreign currency denominated securities.
     
5      Trade receivables

                                                                                             
                                                                     31.12.2002   31.12.2001 
                            Trade receivables                        595,519      421,042    
                            Notes and cheques receivable              82,201       99,517     
                            Allowance for doubtful receivables        (3,477)      (2,067)    
                            Allowance for unearned interest income    (3,525)      (5,439)    
                            Others                                       595        4,592      
                                                                     671,313      517,645    
     
     Trade receivables include TL 190,593 billion, TL 182,362 billion owed by related parties at 31 December 2002 and
     2001 respectively:

                                                                                                             
                                                                                 31.12.2002   31.12.2002 
          Vestel Beyaz E(o)ya San. Ve Tic. A.(-).                                        59        3,323      
          Deksar Multimedya ve Telekom. A.(-).                                       23,167          -          
          Zorlu Linen Dok ve Emp Konf A(-)                                               25           34         
          Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A:(-).                        10           18         
          Zorluteks Tekstil San. Ve Ticaret A.(-).                                       -            16         
          Korteks Mensucat San. Ve Tic. A.(-).                                          151          -          
          Vestel France S.A.                                                         18,922       21,899     
          Vestel Holland B.V.                                                        74,275       87,483     
          Vestel USA Inc.                                                            11,670          -          
          Veseg GmbH                                                                 32,607       34,694     
          Vestel Italia SRL                                                          10,269          -          
          Deniz Finansal Kiralama                                                       247          -          
          Vestel Iberia S.L.                                                         18,277       30,829     
          Zorlu Holding                                                                 851          -          
          Vinpa Pazarlama Ticaret A.(-).                                                 35        1,102      
          Bel Air Industries S.A. / France                                               16          -          
          Vestel Yleti(p)im ve Bil Hiz. A.(p). (Vestel Customer Services Company)        -         2,947      
          Other group companies                                                          12           17         
                                                                                    190,593      182,362    
 
 
6     Balances with related parties

     Year-end balances with subsidiaries and affiliated companies were:

                                                                                                             
                                                                                     31.12.2002   31.12.2001 
          Due from related parties                                                                           
          Vestelnet Elektronik Iletisim ve Bil. A.S.                                 83,215           -          
          Vestel USA Inc.                                                                11       16,434     
          Deksar Multimedya ve Telekom. A.(-).                                       18,965       16,959     
          Zorlu Holding A(-)                                                             -            -          
          Vestel Holland B.V.                                                         3,147          509        
          Veseg GmbH                                                                    534        2,156      
          Cabot Communications Ltd.                                                   1,824          161        
          Vestel Iberia S.L.                                                            17           -          
          Vestel Yleti(p)im ve Bil Hiz. A.(p). (Vestel Customer Services Company)        -           -          
          Vestel Dany(p)manlyk                                                           -           368        
          Vestel Beyaz E(o)ya (Vestel White Goods Company)                           43,298       17,331     
          Zorlu Financial Services                                                       -            -          
                                                                                    151,011       53,918     
          

                                                                                      
          Due to related parties and shareholders             
          Due to shareholders                                                             -            5  
                                                                                          -            5  
7     Inventories

                                                                                   
                                                        31.12.2002   31.12.2001 
                                     Raw materials         140,563      151,424    
                                     Work-in-process        20,728       13,350     
                                     Finished goods        106,098      121,041    
                                     Merchandises           27,082       15,404     
                                     Spares and supplies     5,396        6,042      
                                     Goods-in-transit      122,813      125,381    
                                                           422,680      432,642    
8     Other current assets
     

                                                                                                        
                                                                             31.12.2002   31.12.2001 
                Prepaid lease expenses relating to Vestelnet VeezyGo Campaign       -         50,660     
                Prepaid Expenses                                                13,399         5,978      
                Income Accruals                                                 96,557       102,283    
                VAT Receivable                                                   2,223         3,896      
                Work Advances                                                    7,054         3,783      
                Due from Personnel                                                 246           298        
                Personnel Advances                                                  53            18         
                Count & Delivery Shortages                                          -             -          
                Other Current Assets                                             2,405           577        
                                                                               121,937       167,493    
9     Long term trade receivables and deposits

                                                                                                        
                                                                            31.12.2002    31.12.2001 
                Prepaid lease expenses relating to Vestelnet VeezyGo Campaign       -         29,328     
                Various prepaid expenses                                         7,452         7,364      
                Deposits and guarantees given                                       21            40         
                                                                                 7,473        36,732     
     
Vestelnet (a discontinued subsidiary sold at 31 December 2002) 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 31 December 2001 the Company had capitalised TL 50,660 billion of lease contracts in other
current assets (which will be expensed in the income statement over the next 12 months) and TL 29,328 in long term
receivables and deposits (which will be expensed in the income statement after 12 months) as set out above.
 
Investments

                                                                                                                      
                                                              Percentage      31.12.2002   Percentage      31.12.2001 
  Vescolor Tup ve Komponent Sanayi ve Ticaret A.(-).          100.0%          4,232        100.0%           4,232      
  (Turkey)                                                                                                            
  Deksar Multimedya Telekom A.(-). (Turkey)                    99.9%         12,677         99.9%          12,677     
  Vestpro Electronics SA(Romania)                             52.00%            221         52.0%             221       
  Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A.(-).     Less than 1%    2,145         Less than 1%    2,416      
  (Turkey)                                                                                                            
  Vestelnet Elektronik Yleti(p)im ve Bilgilendirme A.(p).       2.2%          1,369          0.0%              -        
  (Turkey)                                                                                                            
  Vestel Beyaz E(o)ya Sanayi ve Ticaret A(-) (Turkey)          10.0%          4,578         10.0%           4,578      
  Teralogic Inc USA (USA)                                       1.5%          1,025          1.5%           1,025      
  Tursoft A.(-). (Turkey)                                       7.1%             24          7.1%              24       
  Vestel France S.A. (France)                                  99.9%            153         99.9%             153       
  Vestel Holland BV (Netherlands)                             100.0%            135          0.0%              -        
  Vestel Record Limited (Russia)                               74.0%            763          0.0%              -        
  Vestel USA Inc. (USA)                                       100.0%            172          0.0%              -        
  Cabot Communications Ltd (UK)                                87.5%            492          0.0%              -        
  Veseg Video Handelsgesellschaft GmbH (Germany)               51.0%            125         51.0%             125       
  Vestel Iberia S.L. (Spain)                                   91.1%            161         95.0%              26       
  Vestel Mu(p)teri Yleti(p)im A.(p). (Turkey)                  99.9%          2,466         99.9%           2,466      
  Zorlu End. Enerji A.S. (Turkey)                               1.0%              2          1.0%               2       
  Sanalnet Ynternet Pazarlama ve Ticaret A.(p). (Turkey)       80.0%              8         80.0%               8       
  Noktakom Internet Reklamcylyk ve Geli(p)tirme A.(p).         0.0%               -         20.0%               8       
   (Turkey)                                                                                                            
  Vestel Italy S.R.L. (Italy)                                  51.0%             50         51.0%              50       
  Vinpa Pazarlama Ticaret A.(-). (Turkey)                       5.0%              1        100.0%               1       
                                                                              30,799                       28,012     
 
Investments are shown net of called up share capital unpaid. At 31 December 2002 the Company had commitments to
invest TL 356.8 billion and GBP 87,500 by way of a share capital increase in Vestel Record Ltd. (Russia) and Cabot
Communications Ltd. (UK) respectively.

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

Vestel Beyaz E(p)ya Sanayi ve Ticaret A(p) (investment) was established in November 1997 for the purpose of
manufacturing refrigerators and air conditioning units. The Company's production capacity for refrigerators and room
air conditioning units was 700,000 units and 150,000 units per year respectively.

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

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

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

Vestel Record Ltd. is a television production factory being built in Russia. The factory is expected to commence its
production in July 2003 which will have a production capacity of 500,000 televisions per year.

Vestel France S.A. was established in November 1996 for the purpose of repair, import, distribute and market
electrical household appliances in France which are purchased from Vestel Group.

Vestel Iberia S.L. was established in July 1998 for the purpose of repair, import, distribute and market electrical
household appliances in Spain and Portugal which are purchased from Vestel Group.

Vestel Holland B.V. was established for the purpose of repair, import, distribute and market electrical household
appliances in Netherlands which are purchased from Vestel Group. Vestel Holland has 8.9% of Vestel Ibera S.L shares.

Vestel Italy S.R.L. (Formerly named as Vesdit) was established in August 2001 for the purpose of repair, import,
distribute and market electrical household appliances in Italy which are purchased from Vestel Group.

Veseg Video Handelsgesellschaft GmbH was established in 1995 for the purpose of repair, import, distribute and market
electrical household appliances in Germany which are purchased from Vestel Group.

Cabot Communications Ltd. was acquired for the purpose of software development for household appliances.

Vestel Mu(p)teri Yleti(p)im ve Bilgi Merkezi Pazarlama Ve Ticaret A(p). was established in 2000 for customer
services.
  
Sanalnet Ynternet was established in 2000 as a producer of web page content. 
 
Noktakom was established in 2000 as a monitor of web site advertising.

Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A(p) shares are quoted at the Ystanbul Stock Exchange and are shown
at market value by reference to the average of the closing bid prices of the last five days preceding 31 December
2001, in line with changes required by IAS 39.
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.(p)., 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
 

                                                                                                                      
                    Land and       Machinery          Motor        Furniture    Construction    Work        Total     
                    Buildings      and                vehicles     and          in progress     advances              
                                   equipment                       fixtures                     given                 
  COST                                                                                                                
  Balance at 31     55,594         437,406            1,231        41,263        3,622           2,258       541,374   
  December 2001                                                                                                       
  Additions            848          44,464             -            1,257        3,948             -          50,517    
  Disposal of                       (8,330)                        (2,669)        -                -         (10,999)  
  subsidiary                                                                                                          
  Disposals                         (5,518)            (247)         (811)        -             (2,093)       (8,669)   
  Balance at 31     56,442         468,022              984        39,040       7,570              165       572,223   
  December 2002                                                                                                       
  
  ACCUMULATED DEPRECIATION                                                                                            
  Balance at 31      5,583         225,342              485        18,937                                    250,347   
  December 2001                                                                                                       
  Depreciation         513          26,365               86         4,694                                     31,658    
  charge                                                                                                              
  Disposal of                       (2,641)                          (971)                                    (3,612)   
  subsidiary                                                                                                          
  Disposals             (8)         (2,973)             (30)         (372)                                    (3,383)   
  Balance at 31      6,088          246,093             541        22,288                                    275,010   
  December 2002                                                                                                       
  
  NET BOOK VALUE                                                                                                      
  Balance at 31                                                                                             291,027   
  December 2001                                                                                                       
  Balance at 31                                                                                             297,213   
  December 2002                                                                                                       
 
 
 
At 31 December 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 1,378 billion at 31 December 2002 (2001- TL 6,219 billion).
 
Property, plant and equipment have been mortgaged to the extent of TL 45,000 billion (2001-TL 58,877 billion) as
collateral against bank loans and bank guarantees on letters of credit.
 
Depreciation of property, plant and equipment are allocated to items in the income statement as follows :

                                                                                         
                                                                         2002      2001    
                                Cost of sales                          24,292    25,633  
                                Sales and marketing expenses            4,776     5,213   
                                General and administrative expenses     2,590     2,509   
                                                                       31,658    33,355  
12     Intangible assets

                                                                                                                   
                                   Goodwill    Research and Development cost    Other Intangible assets    Total   
    COST                                                                                                           
    Balance at 31 December 2001    25,680      52,166                           63,358                    141,204 
    Additions                      -           10,040                            9,586                     19,626  
    Disposal of subsidiary         -           -                                  (954)                      (954)   
    Disposals                      -           -                                (3,735)                    (3,735) 
    Balance at 31 December 2002    25,680      62,206                           68,255                    156,141 
    ACCUMULATED DEPRECIATION                                                                                       
    Balance at 31 December 2001     3,839      18,328                           33,367                     55,534  
    Amortisation charge             1,285      12,442                           11,293                     25,020  
    Disposal of subsidiary         -           -                                  (426)                      (426)   
    Disposals                      -           -                                  (694)                      (694)   
    Balance at 31 December 2002     5,124      30,770                           43,540                     79,434  
    NET BOOK VALUE                                                                                                 
    Balance at 31 December 2001                                                                            85,670  
    Balance at 31 December 2002                                                                            76,707 
 
Goodwill arose on the acquisition of Vestel Dayanykly Tuketim Mallary Pazarlama (Marketing), Vestel Bili(p)im
(Information), Vestel Komunikasyon (Vestelkom) and Vestel Dy(p) Ticaret (Vestel Foreign Trade Company) in 1999. The
Company paid TL 25,883 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), Hybrid TV, Digital
TV, TV-DVD, Large Digital TV and Large Flat Screen TV.
     
     Amortisation of goodwill and other intangible assets are allocated to items in the income statement as follows :

                                                                                         
                                             2002      2001    
    Cost of sales                          11,620    8,315   
    Sales and marketing expenses            8,979   15,716  
    General and administrative expenses     4,421     -       
                                           25,020   24,031  
13     Bank borrowings

     At 31 December 2002 and 2001 the breakdown of the Company's bank borrowings was:     

                                                                                                                      
                                                        31.12.2002                      31.12.2001                    
                                                        Balance            Balance      Balance            Balance    
                                                        foreign currency   TL billion   foreign currency   TL billion 
  Foreign currency borrowings                                                                                         
                                       - US Dollars     218,190,637        356,633      125,014,676        235,470    
                                       - German Marks   -                  -             15,843,263         13,440     
                                       - Euro           112,725,789        192,026      112,056,428        185,925    
                                                                           548,659                         434,835    
  Turkish Lira borrowings and accrued interest on                                                                     
  bank borrowings                                             9,142                          20,980                     
  
                                                                           557,801                         455,815    
  Long term portion                                                                                                   
                                       - US Dollars    (210,144,307)      (343,481)        (723,083)        (1,362)    
                                       - Euro           (75,000,000)      (127,761)     (59,879,093)       (99,352)   
  Total short term bank borrowings                                          86,559                          355,101  
  
     The effective interest rates of foreign currency loans and Turkish Lira loans vary between 4.5% and 11.5%
(2001-12% and 20%) and between 48% and 65% (2001- 48% and 110%) respectively.

     Letters of guarantee and notes amounting to EURO 20,414,000 have been given as collateral for Turkish Eximbank
and other credits (2001- US$ 10,635,103, EURO 29,999,500 and TL 8,515 billion).

14     Trade payables

                                                                                             
                                                                     31.12.2002   31.12.2001 
                            Trade payables                           285,707      129,554    
                            Letters of credit                        279,972      188,094    
                            Letters of credit discounted             134,371      165,832    
                            Lease payables                                                   
                            -Principal and interest                      118       38,685     
                            -Interest (-)                                 (8)      (6,840)    
                            Notes payable                             18,353       28,235     
                            Allowance for unearned interest income      (293)      (3,802)    
                                                                     718,220      539,758    


As of 31 December 2002, trade payables include TL 1,404 (2001- nil) owing to Zorlu Holding A.(p). 
Notes payable represent promissory notes which are payable within 1 year, are unsecured and bear no interest.

15     Other payables and accrued expenses

                                                                                             
                                                                    31.12.2002   31.12.2001 
                           Income tax and social security payables    5,439        9,016      
                           Advances received                          7,590        4,176      
                           Warranty expense provision                27,389       17,071     
                           Accrued expenses                          20,502       18,188     
                           Other payables                             2,883        1,322      
                                                                     63,803       49,773  
   
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 11.5%, 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.

     Taxes on income attributable to income from continuing operations differed from the amounts computed by applying
the aggregate income tax rate of 33% (2001: 33%) to pre-tax income from continuing operations as a result of the
following:

                                                                                                                      
                                                                               31.12.2002   31.12.2001 
  Computed tax expense at statutory rate                                          43,009        57,145     
  Increase / (Decrease) in income taxes resulting from:                                                               
                                  Effect of permanent differences arising                               
                                  from:                                                                 
                                  Investment incentives                           (3,138)       (5,960)    
                                  Effect of restatement per IAS 29                (5,249)      (14,467)   
                                  Other                                           (2,155)       (1,304)    
                                                                                  32,467        35,414  
   
     Under the advance corporation tax payment regulations, advance payments during the year are deducted from the
final tax liability computed on the current year's results. Accordingly, the tax charge shown in the income statement
does not equal the final tax liability appearing on the balance sheet.

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

                                                                                                     
                                                                                   2002       2001     
                    Corporation and income tax charge on current period income   32,467     35,414   
                    Prepaid corporation tax                                      (6,879)    (7,611)  
                    Taxes payable                                                25,588     27,803   
 
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.

The Company adopted a policy to create a deferred tax liability on restatements pursuant to IAS 29 and, accordingly,
the financial statements have been revised by the following amounts (note 3(ii)(i)):
                    

                                                                                      
                                                                   2002        2001      
                                  Deferred tax liability, net   (16,864)    (15,846)  
                                  Deferred tax charge            (1,018)    (14,247) 
 
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 31 December using the expected future tax rates were as follows:

                                                                                                                      
                                              31.12.2002                           31.12.2001                         
                                              Cumulative timing    Deferred Tax    Cumulative timing    Deferred Tax  
                                              difference                           difference                         
  Deferred tax asset                                                                                                  
                       Warranty expense       9,981                3,294           3,581                1,181         
                       provision                                                                                      
                       Retirement pay         4,477                1,477           1,030                  340           
                       provision                                                                                      
                       Unearned interest      2,486                  820           5,439                1,795         
                       expense on notes                                                                               
                       receivable                                                                                     
                       Capitalised interest   9,312                3,073           3,790                1,251         
                       on inventory written                                                                           
                       off                                                                                            
                       Capitalised interest   7,832                2,585           6,542                2,159         
                       on intangible assets                                                                           
                       written off                                                                                    
                       Net effect of            132                   44         23,106                 7,625         
                       adjustments related                                                                            
                       to leased assets                                                                               
                       Doubtful receivable    2,566                  847          1,891                   624           
                       provision                                                                                      
                       Interest income on     1,133                  374            776                   256           
                       marketable                                                                                     
                       securities                                                                                     
                       Expense accruals      10,322                3,406          3,550                 1,171         
                       Others                10,970                3,620         17,650                 5,826         
                                             59,211               19,540         67,355                22,228        
  Deferred tax liability (current)                                                                                    
                       Restatement                                                                                    
                       differences on:                                                                                
                       - Inventory           30,211                9,969         49,993                16,499        
                       - Prepaid expenses     3,433                1,133          1,256                   415           
                       - Investments         17,622                1,938         15,392                 1,691         
                       - Property plant and 110,983               12,208        169,282                18,621        
                       equipment and                                                                                  
                       intangibles                                                                                    
                       Income accruals       33,212               10,960          2,105                   695           
                       Unearned interest        441                  146             54                    17           
                       income on notes                                                                                
                       payable and cheques                                                                            
                       payable                                                                                        
                       Others                   152                   50            408                   136           
                                            196,054               36,404        238,490                38,074  

      
     For the years ended 31 December 2002 and 2001 taxes on income comprised:

                                                                                              
                                                                   31.12.2002    31.12.2001  
                          Current taxes                             (32,467)      (35,414)    
                          Net deferred tax asset/(liability)        (16,864)      (15,846)    
                          Cancellation of prior year deferred tax    15,846         1,599       
                                                                    (33,485)      (49,661)  
  
          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 1,260 (2001- TL 978 historic cost) per person per year of
employment, at the rate of pay applicable at the date of retirement or termination.

     With effect from 1 January 2002 the ceiling for retirement pay has been increased to TL 1,364 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.
     Movements of the reserve for retirement pay during the years are as follows:

                                                                            
                                            31 December 2001       12,300   
                                            Charge of the period    3,902    
                                            Disposal               (1,645)  
                                            Monetary Gain          (1,413)  
                                            31 December 2002       13,144   
     
     The number of personnel at 31 December 2002 was 3,780 (2001- 4,052).

     Wages and salaries paid for the year ended 31 December 2002 amounted to TL 66,295 billion (2001-TL 60,863
billion).

18     Share capital

     The authorised share capital of the Company comprised 220,000,0000 shares of par value TL 1,000 each at 31
December 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 31 December 2002 and 2001 and 4,000,000,000 shares of par value TL 1,000 each in 2002.

     The shareholders of the Company and their percentage shareholdings at 31 December 2002 and 2001 were:
     

                                                                                                           
                                                            31.12.2002                  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%       
            Other shareholders                        65,833         48.4%        65,833         41.4%      
                                                     147,915        100.0%       159,100        100.0%     
            Inflation adjustment to share capital    277,475                     266,290                   
                                                     425,390                     425,390 
                  
     The ultimate parent of the Company is Collar Holding BV which is located at Park Laan 1 3016 BA Rotterdam,
     Netherlands.

19     General reserve

     General reserves comprise legal reserves and retained earnings.

     At 31 December 2002 the legal reserves amounted to TL 6,764 (2001-TL 3,045 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     DISCONTINUED OPERATION

     On 31 December 2002 the Company disposed 96.6% of its share holding of 98.8% in Vestelnet Elektronik Yleti(p)im
ve Bilgilendirme A.(-).; this Company is engaged to provide internet services to end users, arrange e-commerce and
web sites through internet and supply electronic communication and on-line connection and is a separate business
segment  

     The results of Vestelnet Elektronik Yleti(p)im ve Bilgilendirme A.(p). for the period until the date of disposal
(31 December 2002) have been included in the consolidated income statement. The income statement and cash flows for
the period to the date of disposal are as follows: 

                                                                                              
                                                                           01.01-31.12.2002                             
                      
                          Sales                                                     63,449     
                          Operating cost                                           (30,521)   
                          Operating profit                                          32,928     
                          Finance cost                                             (40,435)   
                          Loss before taxation                                      (7,507)    
                          Taxation                                                            
                          Current                                                   -          
                          Deferred                                                  (1,195)    
                          Loss after taxation                                       (8,702)    
                          Monetary gain                                              7,177      
                          Net loss for the year                                     (1,525)  
  
                                                                                 31.12.2002 
                          Operating                                                (44,119)   
                          Investing                                                 (3,573)    
                          Net cash (outflow)/inflow                                (47,692)   
                          Net assets disposed of                                              
                          Property, plant and equipment                              7,387      
                          Intangible assets                                            528        
                          Trade and other receivables                               83,222     
                          Inventories                                                2,054      
                          Cash                                                          39         
                                                                                    93,230     
                          Borrowings                                               (11,527)   
                          Trade and other payables                                (132,212)  
                          Deferred income tax                                        2,817      
                                                                                   (47,692)   
                          Consideration received                                              
                          Cash                                                      24,385     
                          Loss on disposal                                         (23,307)   
                          The net cash inflow on disposal is                                  
                          Proceeds from sale                                        24,385     
                          Less: Cash and cash equivalents in subsidiary disposed       (39)       
                          Net cash inflow on sale                                   24,346     
 
21.1     Net sales

The composition of sales volume and amount by principal product groups for the year ended 31 December 2002 and 2001
can be summarised as follows:

                                                                                               
                                                 2002                    2001                  
                                                 Sales       Sales       Sales       Sales     
                                                 amount      volume      amount      volume    
                        Television               1,629,303   6,355,798   1,467,008   4,615,776 
                                     -Domestic     107,608     269,019      93,888     196,994   
                                     -Export     1,521,695   6,086,779   1,373,120   4,418,782 
                        Monitor                     34,491     156,779      41,841     169,500   
                                     -Domestic      31,722     144,191      20,841      87,976    
                                     -Export         2,769      12,588      21,000      81,524    
                        DVD / DVB                  327,808   2,424,861      90,499     399,118   
                                     -Domestic      20,008      57,166         802       1,718     
                                     -Export       307,800   2,367,695      89,697     397,400   
                        Other                      330,267                 507,058               
                                     -Domestic     187,141     -           330,965               
                                     -Export       143,126     -           176,093               
                                     Total       2,321,869               2,106,406 
            
21.2     The breakdown of television exports by country for the periods ended 31 December 2002 and 2001 is as follows:

                                                                                           
                                                     2002                    2001                  
                                             Sales       Sales       Sales       Sales     
                                             amount      volume      amount      volume 
   
                            Germany          342,758     1,371,031     383,238   1,148,000 
                            United Kingdom   243,050       972,201     186,744     527,603   
                            France           204,088       816,352     178,506     544,836   
                            Denmark           19,181        76,725      11,260      35,350    
                            Portugal          15,566        62,264      14,692      51,700    
                            Netherlands       22,474        89,895      14,006      47,723    
                            Spain            156,407       625,627     135,527     452,925   
                            Italy            100,357       401,426      72,776     266,894   
                            Others           417,814     1,671,258     376,371   1,343,751 
                                           1,521,695     6,086,779   1,373,120   4,418,782 
 
The summary of contribution to gross profit and gross margin for the periods ended 31 December 2002 and 2001 is as
follows:

                                                                                         
                                                             2002           2001         
                                                                       %              %  
                              Domestic                                                   
                                               Televisions    46,271    43   61,075     65 
                                               Monitors        5,393    17    3,660     18 
                                               DVD / DVB       6,022    30      283     35 
                                               Others         89,828    48  162,830     49 
                                                                                         
                              Domestic total                 147,514    38  227,848     51 
                              Export                                                     
                                               Televisions   303,240    20  312,247     23 
                                               Monitors          277    10    2,218     11 
                                               DVD / DVB      83,106    27   29,376     33 
                                               Others         35,113    27   84,525     48 
                              Export total                   421,736    22  428,366     26 
                              Total                          569,250    25  656,214     31 


Vestelnet, an internet service provider, is principally involved in the provision of internet services, e-commerce
facilities and web sites. At 31 December 2001 Vestelnet had approximately 100,000 signed contracts.

21.4     The summary of segment assets and liabilities as of 31 December 2002 and 2001 are summarised as follows:
                                         
                                                                                                                      
                                            Television and Monitor              DVD and DVB             Others          
 
                                        2002                     2001       2002          2001      2002      2001    
  Trade receivables                     540,719                  445,174    49,695        20,707    80,899    51,764  
  Inventories                           338,774                  337,461    49,833        60,570    34,073    34,611  
  Property, plant and equipment, net    268,567                  260,056    24,585        28,805     4,060     2,166   
  Intangible assets, net                 51,908                   59,642    18,874        22,006     5,924     4,022   
  Trade payables                        589,520                  453,396    52,806        59,374    75,894    26,988  
     
Property, plant and equipment and inventories are located in Turkey.

At 31 December 2002 66% of trade receivables were from European countries (2001-69%), 30% from Turkish domestic
market (2001- 28%) and the remaining 4% from the rest of the world (2001-3%).

At 31 December 2002 52% of trade payables were to European countries (2001-54%) and 23% to Turkish suppliers (2001-
22%) and the remaining 25% to the rest of the world (2001- 24%).

22     Financial (expenses)/income

     At 31 December 2002 and 2001 financial expenses/income comprised:

                                                                                                                      
                                                                                                 2002         2001      
  Foreign exchange loss on                                                                                            
            a) foreign currency loans                                                         (134,473)    (289,112)  
            b) imports                                                                        (174,702)    (187,146)  
  Foreign exchange gain on foreign currency trade receivables and bank deposits                122,944      209,846    
  Interest expense on loans                                                                    (63,544)     (69,916)   
  Other interest and commission charges                                                        (16,184)     (25,257)   
  Interest on finance leases and factoring                                                     (19,983)     (14,641)   
  Interest income on marketable securities                                                     111,166       65,807     
  Fair value gain on listed investment listed in stock exchange                                    197        1,205     
  Discounting of post dated notes receivable and payable to present value at year end           (1,941)      (3,245)    
                                                                                              (176,520)    (312,459) 
 
23      Other income/(expense), net 
    
The analysis of other income/(expense) was as follows:

                                                                                            
                                                                            2002     2001    
                            Scrap and other sales                          6,562    15,719  
                            Export commission and freight related income   5,100    11,679  
                            Profit on sale of fixed assets                 1,140       304     
                            Miscellaneous                                  1,378     6,560   
                                                                          14,180    34,262  

24     Supplementary cash flow information

                                                                                      
                                                                     2002      2001    
                                  Corporation and income tax paid   35,414    37,126  
                                  Interest and commission paid      85,706    98,205  
                                                                   121,120   135,331 

25     Commitments and contingencies

(a)     At 31 December 2002 the Company had contingent liabilities of TL 89,723 billion (2001- TL 70,481 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$ 100,115,783 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
58,877) as collateral against bank loans and bank guarantees on letters of credit.

26          Post balance sheet event

     A decision has been taken by the management of the Group on 3 January 2003 to merge Vestel Bilisim Teknolojileri
Ticaret A.(p).(consolidated subsidiary) and other Vestel related parties namely Vescolor Tup ve Komponent Sanayi ve
Ticaret A.(p)., Vinpa Pazarlama Ticaret A.(p)., Sanalnet internet Pazarlama ve Ticaret A.(p)., Vestel Mu(p)teri
Yleti(p)im ve Bilgi Merkezi Paz. A.(p). under Vestel Komunikasyon Sanayi ve Ticaret A.(p). (consolidated subsidiary)
by 21 March 2003. 

27          Monetary loss of Vestel Elektronik for the years ending 31 December 2002 and 2001
     In a period of inflation, an enterprise holding an excess of monetary assets over monetary liabilities loses
purchasing power and an enterprise with an excess of monetary liabilities over monetary assets gains purchasing power
to the extent that the assets and liabilities are not linked to a fixed price level. This gain or loss is derived by
applying the change in a general price index to the weighted average for the period of the difference between
monetary assets and monetary liabilities.

                                                                                                         
                                                                             31.12.2002     31.12.2001   
                Opening Working Capital (Working 1)                           (1,143)        (55,114)     
                Cash movements during the year                                                           
                Fixed assets expenditure                                     (53,901)       (102,288)    
                Investments                                                   (2,787)         (2,617)      
                Long-term receivables and deposits                            29,259           7,160        
                Deferred tax asset, net                                        1,018          14,247       
                Increase in long term debt                                   367,199          82,892       
                IAS 39 effect of prior year                                    --               (167)        
                Loss on sale of investment                                    23,307            --           
                Transfer from minority interest                                1,772            --           
                Net assets disposed on sale of subsidiary                    (47,692)           --           
                Disposal of retained earnings on sale of subsidiary            7,796            --           
                Sales                                                      2,321,869       2,106,406    
                Purchases (Working 3)                                     (1,706,745)     (1,466,453)  
                General administration (net off depreciation and reserve                                 
                for employee termination benefits)                           (76,892)        (71,731)     
                Selling expenses (net off depreciation)                     (136,015)       (110,370)    
                Warranty expenses                                            (20,457)        (13,169)     
                Financing expenses                                          (176,520)       (312,459)    
                Other income                                                  14,180          34,262       
                Taxation charge                                              (32,467)        (35,414)     
                Minority Interest                                                (12)             (8)          
                Net Cash Inflow                                              512,912         130,291      
                Closing Working Capital per above                            511,769          75,177       
                Closing Working Capital (working 2)                          455,789          (1,143)      
                Monetary Loss                                                (55,980)        (76,320)     
                                                                                              
                          Working 1: Opening Working Capital        31.12.2002    31.12.2001  

                          Cash and deposits with banks               126,448       168,242     
                          Marketable securities                      105,793        99,866      
                          Trade receivables                          517,645       355,898     
                          Other current assets                       221,411       189,320     
                                                                     971,297       813,326     
                          Short-term bank borrowings                (355,101)     (300,063)   
                          Trade payables                            (539,758)     (488,995)   
                          Other payables and accrued liabilities     (49,778)      (68,657)    
                          Taxation on income                         (27,803)      (10,725)    
                                                                    (972,440)     (868,440)   
                          Working capital (deficit)                   (1,143)      (55,114) 
   
                          Working 2: Closing Working Capital                                  
                          Cash and deposits with banks               369,104       126,448     
                          Marketable securities                       36,594       105,793     
                          Trade receivables                          671,313       517,645     
                          Other current assets                       272,948       221,411     
                                                                   1,349,959       971,297     
                          Short-term bank borrowings                (86,559)      (355,101)   
                          Trade payables                           (718,220)      (539,758)   
                          Other payables and accrued liabilities    (63,803)       (49,778)    
                          Taxation on income                        (25,588)       (27,803)    
                                                                   (894,170)      (972,440)   
                          Working capital (deficit)                 455,789         (1,143)  
   
                          Working 3: Purchases                                                
                          Closing inventories                       422,680       432,642     
                          Cost of sales (net off depreciation)      1,716,707     1,418,213   
                          Opening inventories                       (432,642)     (384,402)   
                                                                    1,706,745     1,466,453   
 





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