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Vestel Elektronik (VESD)

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Friday 30 April, 2004

Vestel Elektronik

Final Results

Vestel Elektronik Sanayi Ve Ticaret
30 April 2004


           VESTEL ELEKTRONYK SANAYY VE  TYCARET ANONYM PYRKETY AND
                                ITS SUBSIDIARIES
                               INFLATION ADJUSTED
                                  CONSOLIDATED
                            FINANCIAL STATEMENTS AT
                           31 DECEMBER 2003 AND 2002
                         TOGETHER WITH AUDITORS REPORT


To the Shareholders and Board of Directors of

Vestel Elektronik Sanayi ve Ticaret Anonim Pirketi


We have audited the accompanying consolidated balance sheets of Vestel
Elektronik Sanayi ve Ticaret Anonim Pirketi (a Turkish corporation) and its
subsidiaries at 31 December 2003 and 2002 and the related consolidated
statements of income, changes in equity 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.

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.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Vestel
Elektronik Sanayi ve Ticaret Anonim Pirketi and its subsidiaries at 31
December 2003 and 2002 and the consolidated results of their operations and cash
flows for the years then ended, in accordance with International Financial
Reporting Standards.


      ARKAN & ERGYN Uluslararasy Denetim ve Yeminli Mali Mupavirlik A.P.
                  Member Firm of Grant Thornton International


                                  Nazym Hikmet
                                    Partner


Ystanbul
4 April 2004

                              VESTEL ELEKTRONYK SANAYY VE TYCARET A.P.
                                     CONSOLIDATED BALANCE SHEETS
                                    AT 31  DECEMBER 2003 AND 2002
       (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2003)

                                                              Note             31.12.2003   31.12.2002
CURRENT ASSETS
Cash and cash equivalents                                       4                 496,677      462,262
Trade receivables                                               5                 793,359      764,910
Due from group companies                                        6                  44,590      172,066
Inventories                                                     7                 540,974      481,612
Other current assets                                            8                 191,942      138,938

Total current assets                                                            2,067,542    2,019,788

NON CURRENT ASSETS
Trade receivables and deposits                                                     21,327        8,515
Investments, net                                                9                   4,165       35,093
Property, plant and equipment, net                             10                 601,006      338,652
Intangible assets, net                                         11                 127,694       87,402
Deferred tax asset                                             15                  43,266       22,264

Total non current assets                                                          797,458      491,926

TOTAL ASSETS                                                                    2,865,000    2,511,714

CURRENT LIABILITIES
Bank Borrowings                                                12                  88,972       98,627
Trade payables                                                 13               1,131,886      818,357
Other payables and accrued expenses                            14                 100,702       72,699
Taxation on income                                             15                   8,567       29,156

Total current liabilities                                                       1,330,127    1,018,839

NON CURRENT LIABILITIES
Bank Borrowings                                                12                 470,734      536,944
Trade payables                                                 13                   5,453            -
Reserve for retirement pay                                     16                  17,208       14,977
Deferred tax liability                                         15                 124,239       41,480

Total non current liabilities                                                     617,634      593,401


COMMITMENTS AND CONTINGENCIES                                  23

CAPITAL AND RESERVES
Share capital                                                  17                 484,700      484,700
Minority Interest                                                                  54,712          832
General reserve                                                18                 308,795      367,394
Net income for the year                                                            69,032       46,548

Total equity                                                                      917,239      899,474

TOTAL  EQUITY AND LIABILITIES                                                   2,865,000    2,511,714


                   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 2003 AND 2002
        (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2003)

                                                 Note               01.01.-31.12.2003 01.01.-31.12.2002

Net Sales                                        20.1                       3,130,162         2,645,593

Cost of Sales                                                             (2,565,492)       (1,996,976)

GROSS PROFIT                                     20.3                         564,670           648,617

Selling Expenses                                                            (241,535)         (170,637)
General and Administrative Expenses                                          (93,245)          (94,639)
Warranty Expenses                                                            (22,455)          (23,309)
Other Income / (Expense), net                     21                           17,850            16,157
Loss on disposal of discontinued operations       19                               --          (26,557)

INCOME FROM OPERATIONS                                                        225,285           349,632

Financial Expenses, net                           22                         (94,825)         (201,131)

INCOME BEFORE TAXATION                                                        130,460           148,501

TAXATION CHARGE
Current                                                                      (39,989)          (36,994)
Deferred                                                                       11,766           (1,160)

Taxation on income                                15                         (28,223)          (38,154)

INCOME BEFORE MINORITY INTEREST                                               102,237           110,347

Minority Interest                                                               (769)              (14)

INCOME BEFORE MONETARY LOSS                                                   101,468           110,333

Monetary Loss                                     24                         (34,066)          (63,785)
Translation gain                                                                1,630                --

NET INCOME FOR THE YEAR                                                        69,032            46,548

Weighted average number  ('000s) of shares                                159,100,000       159,100,000
  with face value of TL 1,000 each
Basic and fully diluted earnings per share (in                                    434               293
full TL)
Dividends per share (in full TL)                                                   --                --
Earnings before interest, tax, depreciation
 and amortisation (EBITDA) (in billions of                                     299,305           414,213
Turkish Lira)

                   The accompanying notes are an integral part of these statements.


                        VESTEL ELEKTRONYK SANAYY VE TYCARET A.P. GROUP OF COMPANIES
                                      CONSOLIDATED CASH FLOW STATEMENTS
                                FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
           (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2003)

                                                                         01.01.-31.12.2003  01.01.-31.12.2002

CASH FLOWS FROM OPERATING  ACTIVITIES

Net income                                                                          69,032             46,548
Adjustment to reconcile net income to net
 cash provided from operating activities:

   Depreciation and amortisation                                                    74,020             64,581
   Provision for retirement pay                                                      2,231                962
   Deferred taxation, net                                                         (11,766)              1,160
   Discounting of notes receivable and payable, net                                 12,251              1,817
   Previous years losses of subsidiaries included in consolidation                (24,431)                  -
         first time as of 01.01.2003
   Merger of related parties under Vestel Komunikasyon A.P.                      (7,193)                  -
   Transfer of minority interest                                                         -              2,019
   Disposal of retained earnings on sale of subsidiary                                   -              8,882
   Loss on sale of investment                                                            -             26,557
   Others                                                                                -              1,608

Changes in operating assets and liabilities
   Trade receivables                                                              (44,088)          (176,910)
   Due from related parties                                                        127,476          (112,237)
   Inventories                                                                    (59,362)             11,351
   Prepayments and other current assets                                           (53,004)             51,908
   Other non-current assets                                                       (12,812)             33,338
   Trade payables                                                                  316,917            203,344
   Due to related parties                                                                -                (6)
   Other payables and accrued liabilities                                           28,003             15,986
   Other non-current liabilities                                                     5,453            (3,793)
   Taxation on income                                                             (20,589)            (2,524)

Net cash provided by (used in) operating activities                                402,138            174,591

CASH FLOWS FROM FINANCING ACTIVITIES
Current bank borrowings                                                            (9,655)          (305,983)
Non-current bank borrowings                                                       (66,210)            422,188
Proceeds from sale of subsidiary                                                         -           (50,270)
Minority interest                                                                   53,880            (2,007)

Net cash (used for) provided from  financing activities                           (21,985)             63,928

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment and intangible assets                 (376,666)           (61,416)
Consideration received on disposal of subsidiary                                         -             27,785
Decrease/(Increase) in investments                                                  30,928            (3,176)
Proceeds from sale of subsidiary                                                         -            (4,071)
Disposal of marketable securities                                                   41,696             78,847

Net cash (used for)/ provided investing activities                               (304,042)             37,969

NET INCREASE IN CASH AND CASH EQUIVALENTS                                           76,111            276,488
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                     420,566            144,078

CASH AND CASH EQUIVALENTS AT END OF YEAR                                           496,677            420,566

                      The accompanying notes are an integral part of these statements.

                                 VESTEL ELEKTRONYK SANAYY VE TYCARET A.P. GROUP OF COMPANIES
                                   CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                          FOR THE YEARS ENDED 31 DECEMBER 2003 AND 2002
                    (Currency: billions of Turkish Lira in equivalent purchasing power at 31 December 2003)

                                                    Share       General    Minority    Net income    Total Shareholders'
                                                  Capital       Reserve    Interest  for the year                 Equity

Balance at 1 January 2002                         484,700       302,737      2,840         53,756                844,033

Distribution of income
   - Transfer to reserves                                        53,756                  (53,756)                     --
Movement during the year due to change in number
  of subsidiaries consolidated                                              (2,008)                              (2,008)
Transfer of minority                                              2,019                                            2,019
Transfer of net gain/(loss) on discontinued                       8,882                   (1,716)                  7,166
operations
Net income for the year                                                                    48,264                 48,264
   on continuing operations

Balance at 1 January 2003                         484,700       367,394        832         46,548                899,474

Distribution of income
   - Transfer to reserves                                        46,548                  (46,548)                     --
Movement during the year due to change in number
  of subsidiaries consolidated                                              53,880                               53,880
Merger of related parties under Vestel Komunikasyon             (7,193)                                          (7,193)
A.P.
Net transfer of loss on consolidated subsidiaries as           (24,431)                                         (24,431)
of 1.1.2003
Deferred tax liability (note 2)                                (73,523)                                         (73,523)
Net income for the year                                                                    69,032                 69,032

Balance at 31 December 2003                       484,700       308,795     54,712         69,032                917,239

                                The accompanying notes are an integral part of these statements.


1    Organisation and nature of activities

Vestel Elektronik Sanayi ve Ticaret Anonim Pirketi (the Company) was founded
in March 1983 under the name of Ferguson Elektronik Sanayi ve Ticaret
A.P.under the Turkish Commercial Code and was 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 Pirketi which has been 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 31
December 2003 the Company's production capacity for colour televisions and
monitors was 8,300,000 (2002 - 7,000,000) and nil  (2002 - 1,000,000) units per
year respectively .

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


Consolidated Company                               Location        Field of             Shareholding ( % )
                                                                   activity         31.12.2003     31.12.2002

Vestel Dayanykly Tuketim Mallary Pazarlama A.P.    Turkey          Marketing             99.9%          99.9%
Vestel Bilipim Teknolojileri Ticareti A.P.         Turkey          Information               -          99.7%
Vestel Komunikasyon Sanayi  ve Ticareti A.P.       Turkey          Manufacturing         99,2%          98.7%
Vestel Dyp Ticaret A.P.                            Turkey          Marketing             99.7%          99.7%
Vestel Beyaz Epya Sanayi ve Ticaret A.P. *         Turkey          Manufacturing         35.0%              -
Deksar Multimedya *                                Ystanbul        Information           99.9%              -
Vestel Holland BV *                                Netherlands     Marketing             99.7%              -
Veseg Video Handelsgesellschaft GmbH *             Germany         Marketing             50.8%              -
Vestel Italy SRL *                                 Italy           Marketing             50.8%              -
Cabot Communications Ltd. *                        England         Software              82.5%              -
Vestel France SA *                                 France          Marketing             99.5%              -
Vestel Iberia SL *                                 Spain           Marketing             99.7%              -
Vestel Trade CIS *                                 Russia          Manufacturing        100.0%              -
Vestel Benelux BV *                                Netherlands     Marketing             50.8%              -
Vestel UK *                                        England         Marketing             99.7%              -



The Company has always exercised effective control over the management
of each of these companies. However the companies which are nominated by * have
been consolidated first time in 2003.

* The companies included in the consolidation for the first time in 2003 have
been consolidated as from 01 January 2003 except Vestel Beyaz Epya Sanayi ve
Ticaret A.P. which has been consolidated as of 31 December 2003. The net
effect of these consolidations TL 24,431 billion has been deducted from the
general reserves.

As of  7 March 2003, the management of the Group merged Vestel Bilisim
Teknolojileri Ticareti 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
Mupteri Yletipim ve Bilgi Merkezi Paz. A.P. under Vestel Komunikasyon Sanayi
ve Ticaret A.P. (consolidated subsidiary).

As a result of a fire that took place at Vestel Elektronik Sanayi A.P. factory
on 13 June 2003; the monitor production lines and  related equipment were
damaged. The management of the Company did not replace monitor production lines
and related equipment because of their decision to discontinue the production of
monitors (see note 21).

2 Basis of presentation of the financial statements

The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS), which comprise standards and
interpretations approved by the International Accounting Standards Board and
International Accounting Standards and Standing Interpretations Committee
interpretations approved by the IASC that remain in effect.  The financial
statements have been prepared on an historical cost convention except for the
measurement at fair value of investment property.

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 financial statements have been prepared from statutory
financial statements of the Company presented in Turkish Lira (TL) with
adjustments and reclassifications for the purpose of fair presentation in
accordance with IFRS. Such adjustments mainly comprise effects of restatement
for the changes in the general purchasing power of local currency, deferred
taxation, employee termination benefits, fixed assets and borrowing costs,
investment property, receivables, interest expense accruals on bank loans.

As from 2003 the Company started to calculate deferred tax on unearned interest
income which has affected the total balance of deferred tax liability. The
charge of TL 73,523 billion to the general reserve account represented the
portion of this deferred tax charge relating to prior years.

Measurement Currency, Reporting Currency

Measurement currency of the Company is TL. The restatement for the changes in
the general purchasing power of TL as of 31 December 2003 is based on IAS 29 ('
Financial Reporting in Hyperinflationary Economies'). IAS 29 requires that
financial statements prepared in the currency of a hyperinflationary economy be
stated in terms of the measuring unit current at the balance sheet date and the
corresponding figures for previous periods be restated in the same terms.  One
characteristic that necessitates the application of IAS 29 is a cumulative three
year inflation rate approaching or exceeding 100%.

 As of 31 December 2003, the three year cumulative rate has been 181% (2002:
227%) based on the Turkish countrywide wholesale price index published by the
State Institute of Statistics.  Such index and conversion factors are given
below:


Year                                          31.12.2003      31.12.2002          31.12.2001       31.12.2000
Index                                            7,382.1         6,478.8             4,951.7          2,626.0
Conversion factor                                  1.000           1.139               1.491            2.811


The main guidelines for the above mentioned restatement are as follows:

-  the financial statements of the prior year, including monetary assets and
liabilities reported therein, which were previously reported in terms of the
measuring unit current at the end of that year are restated in their entirety to
the measuring unit current at 31 December 2003.

-  monetary assets and liabilities reported in the balance sheet at 31 December
2003 are not restated because they are already expressed in terms of the
monetary unit current at that balance sheet date.

-  the inflation adjusted share capital was derived by indexing cash
contributions, dividends reinvested and cash income from sale of investments and
property, transferred to share capital from the date they were contributed.

-  non-monetary assets and liabilities which are not carried at amounts current
at the balance sheet date and other components of equity (except for the
statutory revaluation adjustment which is eliminated) are restated by applying
the relevant conversion factors.

-  the gain or loss on the net monetary position as the result of the effect of
the general inflation is the difference resulting from the restatement of
non-monetary assets, shareholders' equity and income statement items. The gain
or loss on the net monetary position is included in net income.  The gain and
loss on the net monetary position has been derived as the difference resulting
from the restatement of non-monetary assets, owners' equity and income statement
items.

-  all items in the income statement are restated by applying appropriate
average conversion factors with the exception of depreciation, amortization,
gain or loss on disposal of non-monetary assets (which have been calculated
based on the restated gross book values and accumulated depreciation/
amortization).

Restatement of balance sheet and income statement items through the use of a
general price index and relevant conversion factors does not necessarily mean
that the Company could realize or settle the same values of assets and
liabilities as indicated in the balance sheets. Similarly, it does not
necessarily mean that the Company could return or settle the same values of
equity to its shareholders.

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, notes payable and
post dated cheques at the balance sheet date, at the rate of  48% (2002- 64%)
per annum, which is the statutory rate determined by the Central Bank of Turkey,
to set an allowance for unearned interest  on notes and post dated cheques.

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 2003, 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 2003, unless the market value is known, in
which case they are restated at market value. Certain subsidiaries which have
been consolidated first time in 2003 were recorded at restated cost at 31
December 2002 (see notes 1 and 9).

      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 is carried at cost, restated in equivalent
purchasing power at 31 December 2003.  Depreciation and amortisation is
calculated on a straight-line basis over the estimated useful life of the asset
as follows :

                                                                                                    Years

Buildings                                                                                           25 to 50
Machinery, equipment, installations and moulds                                                      10 to 15
Furniture, fixtures and office equipment                                                            5 to 12.5
Motor vehicles                                                                                      5 to 12.5

Deferred income taxes - The charge for current tax is based on the results for
the year/the period as adjusted for items which are non-assessable or
disallowed. It is calculated using tax rates that have been enacted or
subsequently enacted by the balance sheet date.

Deferred tax is accounted for using the liability method in respect of temporary
differences arising from differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax basis used in
the computation of taxable (statutory) profit. Deferred tax liabilities are
generally recognized for all taxable temporary differences and deferred tax
assets are recognized to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be
utilized. Such assets and liabilities are not recognized if the temporary
difference arises from goodwill or from the initial recognition of other assets
and liabilities in a transaction which affects neither the tax profit nor the
accounting profit.

      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.

      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.

Income and expenses - Revenues are recognized on the accrual basis at the time
of deliveries or acceptances are made, at the invoices values. Expenses are
recognized as incurred. Net sales reflect gross sales, less sales discounts and
returns, all restated in equivalent purchasing power at 31 December 2003.

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 period-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 and Cash Equivalents - Cash and cash equivalents include all short-term,
highly liquid investments that are readily convertible to known amounts of cash
and near to maturity that they present an insignificant risk of changes in value
because of changes in interest rates.

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    CASH AND CASH EQUIVALENTS

                                                                                   31.12.2003      31.12.2002

Cash at bank and in hand                                                              495,927         420,566
Reverse repurchase agreements                                                             750               -
Marketable securities                                                                       -          41,696

                                                                                      496,677         462,262

Less: Marketable  securities with maturity over three months                                -        (41,696)

 Cash and cash equivalents at cash flow statement                                     496,677         420,566

      The cost of marketable securities together with accrued interest were
equal to their market value.  Marketable securities were held on a short term
basis.

      As of 31 December 2002 Turkish Lira marketable securities bear annual
interest of 40% and 70% for TL denominated securities and 12.4% for foreign
currency denominated securities.

5    TRADE RECEIVABLES

                                                                                   31.12.2003      31.12.2002

Trade receivables                                                                     645,983         678,549
Notes receivable                                                                      165,839          93,662
Less: unearned interest on notes receivable                                          (15,639)         (4,016)
Less: allowance for doubtful receivables                                              (4,111)         (3,962)
Others                                                                                  1,287             677

                                                                                      793,359         764,910


The movement in the allowance for doubtful receivables were as follows:
                                                                                   31.12.2003      31.12.2002

Begining balance                                                                        3,962           2,355
Charge for the period                                                                   2,077           3,153
Proceeds from doubtful receivables                                                    (1,443)         (1,278)
Monetary gain                                                                           (485)           (268)

Ending balance                                                                          4,111           3,962


      Trade receivables include the following balances from related parties:


                                                                                   31.12.2003      31.12.2002

Trade receivables
Vestel Beyaz Epya San. Ve Tic. A.P.                                                         -              67
Deksar Multimedya ve Telekom. A.P.                                                          -          26,397
Zorlu Linen Dok ve Emp Konf A.P.                                                            -              28
Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A:P.                                      13              11
Zorlu Petrogas Petrol, Gaz A.P.                                                            30               -
Vestel Savunma Sanayi A.P.                                                                 48               -
Denizbank A.P.                                                                             18               -
Vestel Elektrikli Gerecler A.P.                                                            69               -
Korteks Mensucat San. Ve Tic. A.P.                                                          -             172
Vestel France S.A.                                                                          -          21,560
Vestel Holland B.V.                                                                         -          84,631
Vestel USA Inc.                                                                             2          13,297
Veseg  GmbH                                                                                 -          37,153
Vestel Italy SRL                                                                            -          11,701
Deniz Finansal Kiralama                                                                     -             281
Vestel Iberia S.L.                                                                          -          20,825
Zorlu Holding A.P.                                                                          -             970
Vinpa Pazarlama Ticaret A.P.                                                                -              40
Bel Air Industries S.A. / France                                                            -              18
Other group companies                                                                      23              14

                                                                                          203         217,165
6    DUE FROM GROUP COMPANIES


      Balances with subsidiaries and affiliated companies were:


                                                                                   31.12.2003      31.12.2002

Vestelnet Elektronik Yletipim ve Bil. A.P.                                             44,559          94,817
Vestel USA Inc.                                                                            21              13
Deksar Multimedya ve Telekom. A.P.                                                          -          21,609
Vestel Holland B.V.                                                                         -           3,586
Veseg GmbH                                                                                  -             608
Cabot Communications Ltd.                                                                   -           2,078
Vestel Iberia SL                                                                            -              19
Vestel Beyaz Epya A.P.                                                                      -          49,336
Vestel Savunma Sanayi A.P.                                                                 10               -

                                                                                       44,590         172,066

7    INVENTORIES

                                                                                   31.12.2003      31.12.2002

Raw materials                                                                         205,340         160,161
Work in process                                                                        31,212          23,618
Finished goods                                                                         48,838         120,891
Merchandise                                                                           135,601          30,858
Spares and supplies                                                                     3,009           6,148
Goods in transit                                                                      116,974         139,936

                                                                                      540,974         481,612


8    OTHER CURRENT ASSETS

                                                                                   31.12.2003      31.12.2002

Prepaid expenses                                                                       20,834          18,007
Income accruals                                                                       132,380         110,021
VAT receivable                                                                         30,791           2,533
Work advances                                                                           7,085           8,037
Due from personnel                                                                        837             280
Personnel advances                                                                         15              60

                                                                                      191,942         138,938


9    INVESTMENTS, net


Entity                                               Share percentage           Participation Amount
                                                   31.12.2003     31.12.2002  31.12.2003      31.12.2002

Vestpro Electronics SA                                  52.0%          52.0%         252             252
Zorlu Enerji Elektrik Uretimi A.P.               Less than 1%   Less than 1%       2,581           2,444
Vestelnet Elektronik Yletipim  A.P.                      2.2%          2.20%       1,554           1,554
Teralogic Inc USA                                        1.5%           1.5%       1,160           1,160
Tursoft A.P.                                             7.1%           7.1%          25              25
Vestel USA Inc.                                        100.0%        100.00%         196             196
Zorlu Endustriyel Enerji A.P.                            1.0%           1.0%           2               2
Yzmir Teknoloji Geliptirme A.P.                          5.0%              -           3               -

Less: Porvision for impairment in value
Vestpro Electronics SA                                                             (252)               -
Teralogic Inc USA                                                                (1,160)               -
Vestel USA Inc.                                                                    (196)               -

                                                                                   4,165           5,633
Consolidated subsidiaries ( 01.01.-
31.12.2003)
Deksar Multimedya Telekom A.P.                              -          99.9%           -          14,448
Vestel France SA                                            -          99.9%           -             175
Vestel Holland BV                                           -         100.0%           -             155
Vestel CIS                                                  -          74.0%           -             870
Cabot Communications Ltd                                    -          82.5%           -             562
Veseg Video Handelsgesellschaft GmbH                        -          51.0%           -             143
Vestel Iberia SL                                            -          91.1%           -             184
Vestel Italy SRL                                            -          51.0%           -              58

                                                                                       -          16,595
Companies merged under Vestel Komunikasyon A.P. as of  07.03.2003
Vescolor Tup ve Komponent Sanayi A.P.                       -         100.0%           -           4,823
Vinpa Pazarlama Ticaret A.P.                                -           5.0%           -               2
Sanalnet Ynternet Pazarlama ve Ticaret A.P.                 -          80.0%           -              10
Vestel Mupteri Yletipim A.P.                                -          99.9%           -           2,812

                                                                                       -           7,647
Vestel Beyaz Epya Sanayi A.P.                               -          10.0%           -           5,218

      (consolidated as of 31.12.2003)

                                                                                   4,165          35,093

      The following companies have been consolidated in the accompanying
financial statements as of and for the year ended 31 December 2003;

Deksar Multimedya Telekom A.P. (incorporated in Turkey) was established in
December 1998 as an Internet service provider via satellite.

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

Vestel CIS (Formerly named as Vestelecord Ltd.) is a television production
factory built in Russia. It has started its production activity in 2003.

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

Veseg Video Handelsgesellschaft GmbH was established in 1995 for the purpose of
repair, import, distribute and market electrical household appliances in
Germany.

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

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.

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.

      The following company has been consolidated in the accompanying financial
statements as of 31 December 2003;

Vestel Beyaz Epya Sanayi ve Ticaret A.P. (incorporated in Turkey), was
established in November 1997 for  the purpose of manufacturing refrigerators and
air conditioning units. As of 31 December 2002 the Company's investment in
Vestel Beyaz Epya Sanayi ve Ticaret A.P. stood at 10% shareholding and it was
recorded at restated cost. On 31 December 2003 the Company increased its
shareholding in Vestel Beyaz Epya Sanayi ve Ticaret A.P. to 35% and it has
been consolidated in the accompanying financial statements.

      Teralogic Inc USA was established in May 1996 for the purpose of providing
components for digital televisions. This company has been inactive in 2003.

      Vestpro Electronics SA has been inactive in 2003 and 2002.

      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
2003, in line with changes required by IAS 39.

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


10  PROPERTY, PLANT AND EQUIPMENT, net

                                   Land and      Machinery         Motor     Furniture   Construction     Total
                                  Buildings            and      vehicles  and Fixtures    in progress
                                                 equipment                               and advances
                                                                                                given

Restated Cost

Balance at 31 December 2001            63,345      498,391        1,403       47,016          6,700     616,855

Additions                                 840       48,404            -        1,432          4,498      55,174
Disposal of subsidiary                             (9,491)                   (3,041)                   (12,532)
Transfers                                 126        2,259                                  (2,385)           -
Disposals                                          (6,286)        (282)        (924)                    (7,492)

Balance at 31 December 2002            64,311      533,277        1,121       44,483          8,813     652,005

Additions                               8,170       41,630          985        5,370          9,594      65,749
Merger of related parties under             -          802           81        2,786              -       3,669
Vestel Komunikasyon A.P.
Consolidated overseas and              49,532      249,179          555        6,516         10,751     316,533
domestic
 subsidiaries as from
01.01.2003 and
 Vestel Beyaz Epya A.P. as of
31.12.2003
Foreign exchange differences            (241)      (1,787)         (19)         (18)           (18)     (2,083)
Transfers                                 615       14,507                                 (15,122)           -
Disposals                             (3,252)     (29,846)        (174)      (4,217)                   (37,489)

Balance at 31 December 2003           119,135      807,762        2,549       54,920         14,018     998,384
                                                                                                              -
Restated Accumulated
Depreciation

Balance at 31 December 2001             6,361      256,760          553       21,577                    285,251

Depreciation charge                       585       30,041           98        5,348                     36,072
Disposal of subsidiary                      -      (3,009)            -      (1,106)                    (4,115)
Disposals                                 (9)      (3,388)         (34)        (424)                    (3,855)

Balance at 31 December 2002             6,937      280,404          617       25,395              -     313,353

Depreciation charge                       890       35,719          300        6,027                     42,936
Merger of related parties under             -          189           62        2,110                      2,361
Vestel Komunikasyon A.P.
Consolidated overseas and               5,421       48,459          272        2,188                     56,340
domestic
 subsidiaries as from
01.01.2003 and
 Vestel Beyaz Epya A.P. as of
31.12.2003
Foreign exchange differences             (52)        (296)            6         (29)                      (371)
Disposals                             (1,322)     (15,122)        (128)        (669)                   (17,241)

Balance at 31 December 2003            11,874      349,353        1,129       35,022              -     397,378

Net Book Value as of

31 December 2002                       57,374      252,873          504       19,088          8,813     338,652

31 December 2003                      107,261      458,409        1,420       19,898         14,018     601,006


The Company's policy is to trace all material and significant fixed asset
additions under construction in progress and transfer to the related fixed asset
accounts when the construction process is completed. Construction-in-progress
balance represented investment made in Vestel Beyaz Epya Sanayi ve Ticaret
A.P. to increase its refrigerator and room air conditioning units production
capacity, new investment in washing machine segment and in Vestel Elektronik
Sanayi ve Ticaret A.P. new investment in high end television units during
2003.

      The net book value of fixed assets held under finance leases (which mainly
comprise machinery and equipment) amounted to TL 31,818 billion at 31 December
2003 (2002 -  TL 1,570 billion).

      Property, plant and equipment have been mortgaged to the extent of TL
45,000 billion (2002: TL 51,255 billion) as collateral against bank loans and
bank guarantees on letters of credit.


11  INTANGIBLE ASSETS, net


                                                       Goodwill    Research and         Other          Total
                                                                    Development    Intangible
                                                                           cost        assets

Restated Cost

Balance at 31 December 2001                              29,260          59,439        72,192         160,891

Additions                                                     -          11,440        10,923          22,363
Disposal of subsidiary                                        -               -       (1,087)         (1,087)
Disposals                                                     -               -       (4,256)         (4,256)

Balance at 31 December 2002                              29,260          70,879        77,772         177,911

Additions                                                31,771          10,335         5,166          47,272
Consolidated overseas and domestic                            -               -        38,380          38,380
 subsidiaries as from  01.01.2003 and
 Vestel Beyaz Epya A.P. as of 31.12.2003
Exchange differences                                          -               -           (6)             (6)
Disposals                                                     -        (55,442)       (4,629)        (60,071)

Balance at 31 December 2003                              61,031          25,772       116,683         203,486

Restated Accumulated amortisation

Balance at 31 December 2001                               4,374          20,883        38,019          63,276

Amortisation charge                                       1,464          14,177        12,868          28,509
Disposal of subsidiary                                        -               -         (485)           (485)
Disposals                                                     -               -         (791)           (791)

Balance at 31 December 2002                               5,838          35,060        49,611          90,509

Amortisation charge                                       3,052          14,176        13,856          31,084
Consolidated overseas and domestic                                            -         6,759           6,759
 subsidiaries as from  01.01.2003 and
Vestel Beyaz Epya A.P. as of 31.12.2003
Exchange differences                                          -               -           (3)             (3)
Disposals                                                     -        (49,236)       (3,321)        (52,557)

Balance at 31 December 2003                               8,890               -        66,902          75,792

Net Book Value as of

31 December 2002                                         23,422          35,819        28,161          87,402

31 December 2003                                         52,141          25,772        49,781         127,694

      Disposals in research and development cost account represented elimination
of development costs which were fully amortised.

      Goodwill brought forward from 31 December 2001 arose on the acquisition of
Vestel Dayanykly Tuketim Mallary Pazarlama (Marketing), Vestel Bilipim
(Information), Vestel Komunikasyon (Vestelkom) and Vestel Dyp Ticaret (Vestel
Foreign Trade Company) in 1999.  The Company paid TL 28,852 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.

      As of 31 December 2003, the Company acquired additional 25% of the voting
shares of Vestel Beyaz Epya A.P. (see notes 1 and 9). The Company paid TL
52,384.2 billion in cash for the fair value of the identifiable net assets and
as a result a goodwill amount of TL 31,771 billion arose from this acquisition.

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

      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.


12  BANK BORROWINGS

                                                      Foreign currency balance          TL equivalent
                                                        31.12.2003     31.12.2002   31.12.2003   31.12.2002

Current
Foreign currency bank borrowings
   -USD ('000)                                              5,952          8,047        8,308       14,986
   -EURO ('000)                                             40,573         37,726       70,787       73,225
Turkish lira borrowings                                                                  9,877       10,416

     and accured interest on bank borrowings

                                                                                        88,972       98,627

Non-current
Foreign currency bank borrowings
   -USD ('000)                                             210,549        210,144      293,892      391,370
   -EURO ('000)                                            101,337         75,000      176,842      145,574

                                                                                       470,734      536,944

      The effective interest rates of foreign currency loans and Turkish Lira
loans vary between 2% and 7.5% (2002 - 4.5% and 11.5%) and between  25% and 40%
(2002- 48% and 65%) respectively.

      Summary maturity schedule of  bank borrowings were as follows:


                                                                                   31.12.2003      31.12.2002

Due in one year                                                                        88,972          98,627
Due between two to five years                                                         444,080         536,944
Over five years                                                                        26,654               -

                                                                                      559,706         635,571

Letters of guarantee and notes amounting to TL 28,614 (EURO 14,623,549 and USD
2,217,012) have been given as collateral for Turkish Eximbank and other credits
(2002-  EURO 20,414,000).

Property, plant and equipment have been mortgaged to the extent of TL 45,000
billion (2002: TL 51,255 billion) as collateral against bank loans and bank
guarantees on letters of credit.


13  TRADE PAYABLES


                                                                                     31.12.2003      31.12.2002

Current
Trade payables                                                                          810,605         325,541
Finance lease liabilities                                                                 4,473             134
Less : Future finance charges on finance leases                                         (1,104)             (9)
Letters of credit                                                                       101,509         319,007
Letters of credit discounted                                                            158,382         153,106
Bills of exchange drawn or accepted                                                           -               -
Notes payable                                                                            60,744          20,912
Less: allowance for unearned interest income                                            (3,388)           (334)
Other                                                                                       665               -

                                                                                      1,131,886         818,357

Non-Current
Finance lease liabilities (between two to five years)                                     5,863               -
Less : Future finance charges on finance leases                                           (471)               -
Other payables                                                                               61               -

                                                                                          5,453               -

      Trade payables include the following balances owing to related parties;


                                                                                     31.12.2003      31.12.2002

Trade payabales
Zorlu Holding A.P.                                                                        1,344           1,600
Vestelnet Elektronik Yletipim A.P.                                                          128               -
Other related parties                                                                        44               -

                                                                                          1,516           1,600
      Notes payable represent promissory notes which are payable within 1 year,
are unsecured and bear no interest.


14  OTHER PAYABLES AND ACCRUED EXPENSES

                                                                                   31.12.2003      31.12.2002

Income tax and  social security premiums payable                                        7,934           6,197
Advances received                                                                      28,567           8,648
Warranty expense provision                                                             33,902          31,208
Accrued expenses                                                                       26,941          23,360
Other                                                                                   3,358           3,286

                                                                                      100,702          72,699

15  TAXATION ON INCOME

The Corporation Tax rate on the profits for the calendar year 2003 is % 30
(2002: 33%). However according to Law 5035 published on 02 January 2004 the
Corporation Tax rate for the taxable profits of  2004 only has been determined
as 33%. Taxable profits are calculated by addition of tax disallowed expenses to
and deduction of tax exempt income from the profit disclosed in the statutory
income.

The rate of advance (prepaid) Corporation Tax payable on quarterly profits has
been increased from 25% to 30% as from 30 June 2003. As from 01 January 2004 the
balance of the corporation tax after deduction of the taxes prepaid quarterly
will be declared by 15 April and paid in one installment by 30 April. This
regulation will be applicable to the Corporation Tax declaration to be given for
calendar year 2003. Previously the balance of Corporation Tax was paid in three
installments (30 April, 31 July and 30 October).

The part of profits distributed in dividend to individuals and non-resident
companies are subject to withholding tax as follows:

-    Up to 24 April 2003, the rate was 5.5% and 16.5% respectively for public
and non public companies.

-    24 April 2003 - 31 December 2003, the rate was 11%.

-    After 01 January 2004 (applicable to profits of year 2003 distributed in
year 2004) the rate has become 10%.

However the following are exempt from withholding tax:

-    Dividends out of profits obtained up to 31 December 1998.

-    Dividends out of profits exempted from Corporation Tax obtained up to 31
December 2002.

-    Investment allowances relating to fixed assets purchased before 24 April
2003 which allowances bore tax at 19.8%.

-    No withholding tax has been payable on undistributed profits, profits added
to share capital (bonus shares) and dividends paid to other resident companies.

The requirement to obtain an Investment Incentive Certificate in order to deduct
certain allowances (named investment allowances) from taxable profits has been
abolished; the date of this change in the regulations is 24 April 2003;
companies are allowed to deduct 40% of the value of fixed assets purchased after
24 April 2003 (investment allowances) from their taxable profits. Investment
allowances related to fixed assets purchased or to be purchased under Investment
Incentive Certificates granted or applied for before 24 April 2003, may be based
on up to 100% of the investment value in fixed assets, but these are subject to
tax at 19.8%. For expenditure on fixed assets incurred after 24 April 2003 in
respect of the Investment Incentive Certificates obtained before 24 April 2003 a
company may opt for investment allowance of 40% (instead of up to 100%) thus
avoiding the tax of 19.8% provided an application to this effect is submitted to
the Tax Office by 15 May 2003. The date of this option has subsequently been
extended to 10 April 2004 the latest date on which Corporation Tax Declaration
for the first quarter of year 2004 is to be made.

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

The Turkish Tax Procedural Law does not include a procedure for formally
agreeing tax assessments. Tax returns must be filed within three and half 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.

The Law nr. 5024 published on 30.12.2003 has introduced changes and additions to
the taxation of companies with effect from 01 January 2004, as follows:

-    Taxable profits as from 01 January 2004 will be based on financial
statements adjusted for the effects of inflation; such adjustments for inflation
will be made in respect of each quarterly tax period during the year.

-    The adjustments for inflation will be based on the increase in Wholesale
Price Indices published by the Turkish Institute of Statistics.



-    The adjustment for inflation has to be made if cumulative inflation rate
for previous 36 months exceeds 100% and the inflation rate for previous 12
months exceed 10%. If the 100% and the 10% condition do not apply simultaneously
there will be no requirement to adjust for inflation. The Council of Ministers
may reduce the ceiling from 100% to 35% or increase the 12 monthly limit from
10% to 25%.

-  The financial statements at 31 December 2003 must be adjusted for inflation
through the following formula:

Total of adjusted assets

Less:- total of adjusted liabilities (-)

      - adjusted share capital (-)

      - adjusted share premium account


'Difference'

-    The 'difference' will be termed 'accumulated profit/loss' and will form
part of shareholders' equity.

-    The accumulated profit ascertained as above will not be subject to any tax.
If the difference results in an accumulated loss, this loss will not be
deductible from future profits. The losses deductible from profits of 2004 and
future years will only be the losses for 2003 and previous years as disclosed in
the Corporation tax declarations for 2003 and previous years on historical
basis.

-    The adjustments to share capital and to other accounts forming part of
shareholders' equity may be added to share capital by way of bonus shares. Issue
of such bonus shares will not considered as distribution of profit.

-    Corporation Tax calculation for year 2003 will be based on the regulations
valid up to 31 December 2003.

-    The following will be discontinued as from 01 January 2004.

•   fiscally allowed revaluation of fixed assets

•   valuation of stocks on a LIFO basis

•   cost increase reserve for fixed assets

•   the part of financing costs disallowed for tax purposes

•   depreciation of up to 20% which as left to the option of the taxpayer.
Instead depreciation rates will be ascertained by the tax administration on
basis of economic life time.

Taxes on income attributable to income from continuing operations differed from
the amounts computed by applying the aggregate income tax rate of 30% (2002:
33%) to pre-tax income from continuing operations as a result of the following:


                                                                                     31.12.2003      31.12.2002

Computed tax expense at statutory rate                                                   39,138          49,005

Increase / (Decrease) in income taxes resulting from:
Effect of permanent differences arising from:
Investment incentives                                                                   (1,925)         (3,576)
Effect of restatement per IAS 29                                                          (861)         (5,981)
Other                                                                                     3,637         (2,455)

                                                                                         39,989          36,993

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:


                                                                                     31.12.2003      31.12.2002

Corporation and income taxes                                                             39,989          36,994
Prepaid  taxes                                                                         (10,890)         (7,838)
Deferred tax liability (non current)                                                   (20,532)               -
Taxes payable (current)                                                                   8,567          29,156



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):


                                                                                31.12.2003      31.12.2002

Deferred tax Liability, net                                                     (60,440)        (19,217)
Deferred tax charge                                                             11,766          (1,160)


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 2003 and 2002 using the expected future tax rates were as
follows:


                                                                31.12.2003                  31.12.2002
                                                          Cumulative  Deferred Tax   Cumulative    Deferred
                                                           temporary                  temporary         Tax
                                                          difference                 difference

Deferred Tax Asset
Warranty expense provision                                    25,867        8,536        11,373       3,753
Retirement pay provision                                      13,894        4,585         5,101       1,683
Unearned interest on notes receivable                          7,990        2,637         2,833         934
Capitalised finace charges on                                  8,812        2,908        10,610       3,501
   inventory written off
Capitalised finance charges                                    6,532        2,156         8,924       2,945

   On intangible assets written off
Adjustment related to leased assets                            8,520        2,812           150          50
Provision for doubtful receivables                             1,170          386         2,924         965
Interest income on marketable securities                          41           14         1,291         426
Expense accruals                                               9,807        3,236        11,773       3,881
Investment incentive allowances                               91,714       12,106             -           -
Other                                                         11,788        3,890        12,499       4,126

                                                                           43,266                    22,264

Deferred Tax Liability
Temporary differences arising from restating:
    -Inventories                                               8,053        2,657        34,423      11,359
    -Prepaid expenses                                          7,618        2,514         3,912       1,291
    -Investments                                              22,483        2,473        20,079       2,209
    -Fixed Assets (Including leased fixed assets)            205,151       22,567       126,457      13,910
Income accruals                                              282,094       93,091        37,843      12,488
Unearned interest on notes payable                             2,767          913           502         166
Other                                                             74           24           173          57

                                                                          124,239                    41,480


For the years ended 31 December 2003 and 2002 taxes on income comprised:

                                                                                      31.12.2003    31.12.2002

Corporation and income taxes - current                                                  (19,457)      (36,994)
Deferred tax charge - non current                                                       (20,532)             -
Net deferred tax asset / (liability)                                                    (80,973)      (19,216)
Deferred tax charge on income accruals relating to prior years (note 2)                   73,523             -
Cancellation of prior year deferred tax                                                   19,216        18,056

Income tax charge                                                                       (28,223)      (38,154)


16  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 1,389.9 million (2002: TL 1,260.1 million 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 2004 the ceiling for retirement pay has been
increased to TL 1,485 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:


                                                                                   31.12.2003      31.12.2002


Opening Balance                                                                        14,977          14,015

Charge for the period                                                                   5,490           4,446
Disposals                                                                             (1,426)         (1,874)
Monetary gain                                                                         (1,833)         (1,610)

Closing balance                                                                        17,208          14,977


The number of personnel at 31 December 2003 was 7,552 including 1,942 Vestel
Beyaz Epya employees.
Wages and salaries paid for the year ended 31 December 2003 amounted to TL
82,120 billion (2002-TL 75,538 billion).


17  SHARE CAPITAL

      The authorised share capital of the Company comprised 220,000,0000 shares
of par value TL 1,000 each at 31 December 2003.  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 2003 and 2002.

      The shareholders of the Company and their percentage shareholdings were as
follows:

                                                           Shareholding  %           Shareholding amount
                                                        31.12.2003   31.12.2002     31.12.2003  31.12.2002

Collar Holding BV                                            51.6%          51.6%       82,082       82,082
Other shareholders                                           48.4%          48.4%       65,833       65,833


                                                            100.0%         100.0%      147,915      147,915
Inflation adjustment of share capital                                                  336,785      336,785

Restated share capital equivalent                                                      484,700      484,700
 to purchasing power of Turkish Lira


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

18  GENERAL RESERVE

      General reserves comprise legal reserves and retained earnings.

      At 31 December 2003 the legal reserves amounted to TL 12,541 (2002: TL
6,764 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.

19  DISCONTINUED OPERATION

      On 31 December 2002 the Company disposed 96.6% of its share holding of
98.8% in Vestelnet Elektronik Yletipim ve Bilgilendirme A.P.; 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 Yletipim ve Bilgilendirme A.P. for the period until the date of
disposal (31 December 2002) have been included in the consolidated income
statement.

20.1  NET SALES

      The composition of sales volume and amount by principal product groups can
be summarised as follows:


                                       2003                                        2002
                             Sales               Sales                  Sales                Sales
                            Amount              volume                 amount                volume
Television                    2,211,829           7,669,291               1,856,467             6,355,798
    - Domestic                  194,142             525,315                 122,611               269,019
    - Export                    405,343           1,709,177               1,733,856             6,086,779
     - Foreign                1,612,344           5,434,799
marketing    companies
Monitor                          13,088              80,805                  39,300               156,779
    - Domestic                   13,088              80,805                  36,145               144,191
    - Export                          -                   -                   3,155                12,588
     - Foreign                        -                   -                       -                     -
marketing    companies
DVD / DVB                       564,521           4,728,605                 373,513             2,424,861
    - Domestic                   65,186             381,198                  22,798                57,166
    - Export                    108,783             974,894                 350,715             2,367,695
     - Foreign                  390,552           3,372,513
marketing    companies
Other                           340,724                                     376,313
    - Domestic                  208,103                                     213,233
    - Export                     86,005                                     163,080
    - Foreign marketing          46,616
        companies
                             3,130,162                                    2,645,593


20.2  The breakdown of television exports by country is as follows:


                                          2003                                            2002
                                  Sales             Sales                       Sales                Sales
                                 Amount            volume                      Amount               volume

Germany                         437,691         1,458,232                     390,547            1,371,031
United Kingdom                  298,674           989,324                     276,937              972,201
France                          225,302           755,017                     232,543              816,352
Denmark                          15,346            52,345                      21,855               76,725
Portugal                         12,221            41,439                      17,736               62,264
Netherlands                      66,076           221,429                      25,607               89,895
Spain                           279,211           946,744                     178,214              625,627
Italy                           213,287           727,518                     114,349              401,426
Russia                           99,837           336,535                           -                    -
Others                          370,042         1,615,393                     476,068            1,671,258
                              2,017,687         7,143,976                   1,733,856            6,086,779

20.3  The summary of contribution to gross profit and gross margin is as
follows:


                                                 2003                                        2002
                                                              %                                         %
Domestic
     Televisions                          66,008                 34                       52,722           43
     Monitors                              1,963                 15                        6,145           17
     DVD / DVB                            18,904                 29                        6,862           30
     Others                               37,458                 18                      102,352           48

Domestic total                           124,333                 26                      168,081           38

Export
     Televisions                         339,225                 17                      345,519           20
     Monitors                                  -                                             316           10
     DVD / DVB                            79,893                 16                       94,693           27
     Others                               21,219                 16                       40,008           27

Export total                             440,337                 17                      480,536           22

Total                                    564,670                18                       648,617           25


20.4  The summary of segment assets and liabilities are summarised as follows:


                       Television and            DVD and DVB          Refrigerator and          Others
                          Monitor                                         Room air
                                                                      conditioning units

                       2003       2002         2003      2002          2003       2002       2003      2002

Trade receivables   555,299    616,108      127,731    56,624        93,575                16,754    92,178

Inventories         364,179    386,007       96,666    56,781        61,589                18,540    38,824

Property, plant     368,874    306,012       57,878    28,013       167,870                 6,384     4,626

And equipment,
net

Intangible           82,528     59,147       32,920    21,505         6,621                 5,625     6,750
assets, net

Trade payables      796,687    671,714      166,899    60,168       134,349                33,951    86,475


92 % of property, plant and equipment and 80 % of inventories are located in
Turkey. The remaining balances are located at overseas subsidiaries in Europe
and less than 4% are located in Russia.

At 31 December 2003 72% of trade receivables were from European countries
(2002-66%), 23% from Turkish domestic market (2002- 30%) and the remaining 5%
from the rest of the world (2002-4%).

At 31 December 2003 50% of trade payables were to European countries (2002-52%)
and 25% to Turkish suppliers (2002- 23%) and the remaining 25% to the rest of
the world (2002- 25%).


21      OTHER INCOME / (EXPENSE), net


                                                                                  01.01-           01.01-
                                                                              31.12.2003       31.12.2002

Scrap and other sales                                                             10,382            7,477
Export commission and freight related income                                       7,414            5,811
Insurance claims refund                                                            3,273                -
Miscellaneous income                                                               4,078            1,570
Profit on sale of fixed assets                                                     1,908            1,299
Loss on sale of fixed assets                                                     (1,547)                -
Loss as a result of a fire that took place at television factory                 (7,159)                -
Miscellaneous expense                                                              (499)                -

                                                                                  17,850           16,157

At 13 June 2003 a fire took place at the television and monitor plant. Net loss
calculated per IAS 29 (inflation adjusted) on damages in inventories, property
and monitor production lines and related equipment after the compensation
received  from insurance companies amounted to TL 7,159 billion.

22      FINANCIAL EXPENSE, net

                                                                                 01.01-           01.01-
                                                                             31.12.2003       31.12.2002


Net foreign exchange gains / (losses) on imports, exports
    foreign currency borrowings and other receivables                           (97,039)        (212,195)
Interest expense
  -Bank loans                                                                   (65,398)         (72,404)
  -Letters of credit                                                             (9,145)         (17,023)
  -Finance leases                                                                  (333)          (1,417)
  -Factoring                                                                    (27,524)         (22,769)
Interest income
   -Demand deposits                                                              161,244          126,665
Fair value gains / (losses)
  -Listed investments in stock exchange                                              710              224
  -Investment property                                                             1,998                -
  -Forward contracts: fair value hedges                                         (49,761)                -
Bank commissions and other financing expenses                                    (9,577)          (2,212)

                                                                                (94,825)        (201,131)


23      COMMITMENTS AND CONTINGENCIES

(a)     At 31 December 2003 the Company had contingent liabilities of TL 46,897
billion (2002- TL 102,194 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$ 248,840,375  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 (2002: TL 51,255 billion) as collateral against bank loans and
bank guarantees on letters of credit.

24      Monetary loss of Vestel Elektronik for the years ending 31 December 2003
and 2002

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.


                                                                                31.12.2003    31.12.2002

Opening Working Capital (Working 1)                                                519,337       (1,302)

Cash movements during the year
Fixed assets expenditure                                                         (376,666)      (61,416)
Investments                                                                         30,928       (3,176)
Long-term receivables and deposits                                                (12,812)        33,338
Deferred tax asset, net                                                           (11,766)         1,160
Increase in long term debt                                                        (60,757)       418,395
Loss on sale of investment                                                              --        26,557
Transfer to / from minority interest                                                53,111         2,019
Net assets disposed on sale of subsidiary                                               --      (54,341)
Addititon of general reserves                                                     (31,624)            --
Disposal of retained earnings on sale of subsidiary                                     --         8,883

Sales                                                                            3,130,162     2,645,593
Purchases (Working 3)                                                          (2,579,811)   (1,943,546)
General administration (net off depreciation and reserve
for employee termination benefits)                                                (87,478)      (87,613)
Selling expenses (net off depreciation)                                          (216,094)     (154,978)
Warranty expenses                                                                 (22,455)      (23,309)
Financing expenses                                                                (93,195)     (201,131)
Other income                                                                        17,850        16,157
Taxation charge                                                                   (28,223)      (38,154)
Minority Interest                                                                                   (14)

Net Cash Inflow                                                                  (288,830)       584,424

Closing Working Capital per above                                                  230,507       583,122

Closing Working Capital (working 2)                                                196,441       519,337

Monetary Loss                                                                     (34,066)      (63,785)




Working 1: Opening Working Capital                                              31.12.2002    31.12.2001

Cash and deposits with banks                                                       383,415       144,078
Marketable securities                                                               78,847       120,543
Trade receivables                                                                  764,910       589,817
Other current assets                                                               311,004       252,281

                                                                                 1,538,176     1,106,719

Short-term bank borrowings                                                        (98,627)     (404,611)
Trade payables                                                                   (818,357)     (615,013)
Other payables and accrued liabilities                                            (72,699)      (56,718)
Taxation on income                                                                (29,156)      (31,679)

                                                                               (1,018,839)   (1,108,021)

Working capital surplus / (deficit)                                                519,337       (1,302)

Working 2:  Closing Working Capital

Cash and deposits with banks                                                       454,981       383,415
Marketable securities                                                               41,696        78,847
Trade receivables                                                                  793,359       764,910
Other current assets                                                               236,532       311,004

                                                                                 1,526,568     1,538,176

Short-term bank borrowings                                                        (88,972)      (98,627)
Trade payables                                                                 (1,131,886)     (818,357)
Other payables and accrued liabilities                                           (100,702)      (72,699)
Taxation on income                                                                 (8,567)      (29,156)

                                                                               (1,330,127)   (1,018,839)

Working capital surplus                                                            196,441       519,337

Working 3: Purchases

Closing inventories                                                                540,974       481,612
Cost of sales (net off depreciation)                                             2,520,449     1,954,897
Opening inventories                                                              (481,612)     (492,963)

                                                                                 2,579,811     1,943,546                
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