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Vestel Elektronik (VESD)

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Wednesday 04 May, 2005

Vestel Elektronik

Final Results

Vestel Elektronik Sanayi Ve Ticaret
04 May 2005


                          VESTEL ELEKTRONYK SANAYY VE
                             TYCARET ANONYM SYRKETY
                               GROUP OF COMPANIES
                               INFLATION ADJUSTED
                            FINANCIAL STATEMENTS AT
                                31 DECEMBER 2004
                         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 sheet of Vestel Elektronik
Sanayi ve Ticaret Anonim Sirketi (a Turkish corporation) and its subsidiaries
at 31 December 2004 and the related consolidated statement of income, movement
in shareholders' equity and cash flow for the year 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Vestel Elektronik
Sanayi ve Ticaret Anonim Sirketi and its subsidiaries at 31 December 2004 and
the consolidated results of their operations and cash flows for the year then
ended in accordance with International Financial Reporting Standards.


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


                                  Aykut Halit
                                    Partner


Ystanbul
21 March 2005


                             VESTEL ELEKTRONYK GROUP OF COMPANIES
                                  CONSOLIDATED BALANCE SHEETS
                              AT 31 DECEMBER 2004,  2003 AND 2002

 (Currency: Thousands of New Turkish Lira in equivalent purchasing power at 31.12.2004 unless
                                     otherwise indicated )
                                                                                   US $ ('000)
                                            Note  31.12.2004 31.12.2003 31.12.2002   31.12.2004

CURRENT ASSETS
Cash and cash equivalents                     5      595.990    565.418    526.240      444.072
Trade receivables                             6    1.004.098    903.162    870.775      748.154
Due from group companies                     22       38.530     50.761    195.880       28.709
Inventories                                   7      873.911    615.846    548.268      651.152
Other assets                                  8      173.294    218.509    158.167      129.122

Total current assets                               2.685.823  2.353.696  2.299.330    2.001.209

NON CURRENT ASSETS
Trade and other receivables                            9.972     24.279      9.693        7.429
Investments                                   9        4.654      4.741     39.950        3.468
Property, plant and equipment, net           10      822.667    684.187    385.522      612.970
Intangible assets, net                       11      132.342    145.367     99.499       98.608
Deferred tax asset                           15       33.395     49.254     25.345       24.884

Total non-current assets                           1.003.030    907.828    560.009      747.359

TOTAL ASSETS                                       3.688.853  3.261.524  2.859.339    2.748.568

CURRENT LIABILITIES
Borrowings                                   12      149.976    105.121    112.420      111.747
Trade payables                               13    1.562.878  1.284.707    931.477    1.164.502
Taxation on income                           15       13.837      9.753     33.191       10.310
Other liabilities                            14      152.891    114.639     82.759      113.918

Total current liabilities                          1.879.582  1.514.220  1.159.847    1.400.477

NON CURRENT LIABILITIES
Borrowings                                   12      486.906    542.023    611.258      362.794
Trade payables                                             -         70          -            -
Reserve for retirement pay                   16       24.873     19.590     17.050       18.533
Deferred tax liability                       15      167.396    141.434     47.221      124.727

Total non-current liabilities                        679.175    703.117    675.529      506.054

EQUITY AND RESERVES
Ordinary shares                              17      551.784    551.784    551.784      411.135
Minority interest                                    105.909     62.284        947       78.913
General reserve                              18      389.244    351.533    418.242      290.027
Net income for the period                             83.159     78.586     52.990       61.962

Total equity and reserves                          1.130.096  1.044.187  1.023.963      842.037

COMMITMENTS AND CONTINGENCIES                19

TOTAL LIABILITIES AND EQUITY                       3.688.853  3.261.524  2.859.339    2.748.568

                         The accompanying notes are an integral part of these statements.




                                    VESTEL ELEKTRONYK GROUP OF COMPANIES
                                  CONSOLIDATED INCOME STATEMENTS OF INCOME
                             FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002

   (Currency: Thousands of New Turkish Lira in equivalent purchasing power at 31.12.2004 unless otherwise
                                                indicated )

                                                                                                 US $ ('000)
                                               Note           2004          2003          2002          2004

Net sales                                       27       4.404.715     3.563.384     3.011.750     3.281.957

Cost of Sales                                          (3.686.806)   (2.920.562)   (2.273.362)   (2.747.043)

GROSS PROFIT                                               717.909       642.822       738.388       534.914


Selling expenses                                         (304.364)     (274.964)     (194.254)     (226.782)
General and administrative expenses                      (132.086)     (106.150)     (107.737)      (98.417)
Warranty expenses                                         (29.009)      (25.563)      (26.535)      (21.615)
Other income / (expense), net                   25           4.997        20.320        18.393         3.723
Loss on disposal of discontinued operations                     --            --      (30.233)            --

INCOME FROM OPERATIONS                                     257.447       256.465       398.022       191.823

Financing income / (expense), net               26        (70.838)     (107.949)     (228.968)      (52.781)

INCOME BEFORE TAXATION                                     186.609       148.516       169.054       139.042

TAXATION CHARGE
Current                                                   (39.252)      (45.524)      (42.114)      (29.247)
Deferred                                                   (2.322)        13.394       (1.321)       (1.730)

Taxation on income                              15        (41.574)      (32.130)      (43.435)      (30.977)

INCOME BEFORE MONETARY LOSS                                145.035       116.386       125.619       108.065

Minority interest                                         (43.980)         (875)          (16)      (32.770)

Monetary loss                                   28        (18.791)      (38.781)      (72.613)      (14.001)
Translation gain                                               895         1.856            --           667

NET INCOME FOR THE YEAR                                     83.159        78.586        52.990        61.961

Earnings before interest, tax, depreciation
and
 amortisation (EBITDA)                                     362.026       340.730       471.540       269.745

 (in thousands  of New Turkish Lira)

Basic and fully diluted earnings per share     4               523           494           333           389
(in full TL)

                      The accompanying notes are an integral part of these statements.



                                    VESTEL ELEKTRONYK GROUP OF COMPANIES
                         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
   (Currency: Thousands of New Turkish Lira in equivalent purchasing power at 31.12.2004 unless otherwise
                                                indicated )

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

Balance at 1 January 2002                  551.784       344.637        3.233        61.196          960.850

Distribution of income
   - Transfer to reserves                       --        61.196           --      (61.196)               --
Movement during the year due to                 --            --      (2.286)            --          (2.286)
change in number of
subsidiaries consolidated
Transfer from minority                          --         2.298           --            --            2.298
Transfer of net gain/(loss) on                  --        10.111           --       (1.953)            8.158
discontinued operations
Net income for the period                       --            --           --        54.943           54.943

Balance at 1 January 2003                  551.784       418.242          947        52.990        1.023.963

Distribution of income
   - Transfer to reserves                       --        52.990           --      (52.990)               --
Movement during the year due to                 --            --       61.337            --           61.337
change in number of
subsidiaries consolidated
Merger of related parties under                 --       (8.189)           --            --          (8.189)
Vestel Kominikasyon A.S.
Net transfer of loss on consolidated            --      (27.811)           --            --         (27.811)
subsidiaries as of  01.01.2003
Deferred tax liabilities (Note 2)               --      (83.699)           --            --         (83.699)
Consolidated subsidiary as of                   --            --           --            --               --
1.1.2004
Net income for the period                       --            --           --        78.586           78.586

Balance at 1 January 2004                  551.784       351.533       62.284        78.586        1.044.187
Distribution of income
   - Transfer to reserves                       --        78.586           --      (78.586)               --
Exchange differences                            --       (1.485)        (408)            --          (1.893)
Transfer from minority                          --           116        (116)            --               --
Consolidated subsidiaries in 2004               --           (9)          169            --              160
Deferred tax liabilities (Note 2)               --      (39.497)           --            --         (39.497)
Net income for the period                       --            --       43.980        83.159          127.139

Balance at 31 December 2004                551.784       389.244      105.909        83.159        1.130.096

 US $ ('000)                               411.135       290.026       78.913        61.962          842.037

Balance at 31 December 2004

                      The accompanying notes are an integral part of these statements.





                                      VESTEL ELEKTRONYK GROUP OF COMPANIES
                                        CONSOLIDATED CASH FLOW STATEMENTS
                               FOR THE  YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
(Currency: Thousands of New Turkish Lira in equivalent purchasing power at 31.12.2004 unless otherwise indicated)
                                                        
                                                                                                      US $ ('000)
                                              Note         01.01-  01.01-31.12.2003  01.01-31.12.2002      01.01-
                                                       31.12.2004                                      31.12.2004

CASH FLOWS FROM OPERATING  ACTIVITIES

Net income  for the period                                 83.159            78.586            52.989      61.961
Adjustment to reconcile net income to net
cash provided from operating activities:

   Depreciation and Amortisation                21        104.579            84.265            73.519      77.922
   Provision for retirement pay                             5.283             2.540             1.095       3.936
   Deferred taxation                                        2.322          (36.768)             1.321       1.730
   Unearned interest on notes receivable and payable,     (7.840)            13.947             2.068     (5.842)
   net
   Disposal and consolidation effect of subsidiaries          (9)          (36.001)            10.111         (7)
   Loss on sale of investment                                  --                --            30.233          --
   Transfer of minority interest                               --                --             2.298          --
   Translation differences                                (1.485)                --                --     (1.106)
   Corporation and income tax                              39.252            45.524            42.114      29.247
   Others                                                   3.987                --             1.834       2.971


Operating profit before changes in working capital        229.248           152.093           217.582     170.812

Changes in net working capital                  21         18.839           355.973           (7.474)      14.037


Cash generated from operations                            248.087           508.066           210.108     184.849

Taxes paid                                               (35.168)          (45.588)          (44.987)    (26.204)

Net cash provided by / (used in) operating activities     212.919           462.478           165.121     158.645

CASH FLOWS FROM FINANCING ACTIVITIES
Changes in current borrowings, net                         44.855           (7.299)         (348.332)      33.422
Changes in  non-current borrowings, net                  (55.117)          (69.235)           480.620    (41.068)
Proceeds from sale of subsidiary                               --                --          (57.227)          --
Changes in minority interest                               43.625            61.337           (2.285)      32.505

Net cash (used for) provided from  financing               33.363          (15.197)            72.776      24.859
activities

CASH FLOWS FROM INVESTING ACTIVITIES
Changes in investments                                         87            35.209           (3.616)          65
Changes in tangible and intangible assets       21      (230.034)         (428.798)          (42.919)   (171.399)
Disposal of marketable securities                              --            47.467            89.760          --
Changes in other investing activities           21         14.237          (14.516)            33.634      10.609

Net cash provided by / (used in) investing activities   (215.710)         (360.638)            76.859   (160.725)

NET INCREASE IN CASH AND CASH EQUIVALENTS                  30.572            86.643           314.756      22.779

CASH AND CASH EQUIVALENTS                                 565.418           478.775           164.019     421.293
AT BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR                  595.990           565.418           478.775     444.072

                        The accompanying notes are an integral part of these statements.


1.           ORGANISATION AND NATURE OF ACTIVITIES



Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi (the Company) was founded
in March 1983 under the name of Ferguson Elektronik Sanayi ve Ticaret A.S.
under the Turkish Commercial Code and was registered in Ystanbul, Turkey.  The
name was changed to Star Elektronik Sanayi ve Ticaret A.S.during the same
year. In April 1984 Polly Peck Group acquired the Company and changed its name
to Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi which 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 registered office address of the Company is  located at Ambarly, Petrol
Ofisi Dolum Tesisleri Yolu, Zorlu Plaza, Avcylar / Istanbul- Turkey


Nature of Activities of the Company

The Group is organised into three production divisions given below;


A.  Television production:

Vestel Elektronik Sanayi ve Ticaret A.S. (Vestel Elektronik)

The Company is mainly engaged in the production of colour televisions.  The
Company's production facilities are located in Manisa Organised industrial site
(Aegean Region, Turkey). As of the balance sheet date, production capacity for
colour televisions  was 12.500.000 (2003:  8.300.000 and 2002: 7.000.000) units
per year respectively .

Vestel-CIS Limited (Vestel Trade)

Vestel Trade was originally named as Vestel-Record Limited and was registered on
15 November 2002 (in Vladimir Region, Russia). The Company is mainly engaged in
the production of colour televisions and commenced its production in the second
half of 2003.


B.  Refrigerator and air conditioning units and washing machines

Vestel Beyaz Epya Sanayi ve Ticaret A.S. (Vestel White)

Vestel White started working actively in 1999 and is engaged in the production
of refrigerators,  room air conditioning units, washing machines and the trade
of brown and white durable consumer goods. Vestel White's production facilities
are located in Manisa Organised industrial site (Aegean Region, Turkey) . As of
the balance sheet date, production capacity for refrigerators, room air
conditioning units and washing machines was 2.000.000,  350.000 and 1.150.000
(2003: 1.200.000, 350.000 and 700.000) (2002: 700.000,  150.000 and 58.000)
units per year.


C. Digital Devices

Vestel Komunikasyon Sanayi ve Ticaret A.S. (Vestel Kom)

Vestel Kom is engaged in the production of DVD players, analogue and digital
receivers, personal computers (PC) and internet access devices. Vestel Kom's
production facilities are primarily located in Yzmir Aegean free zone industrial
site and in Manisa Organised Industrial Site. As of the balance sheet date,
production capacity for digital devices was 7.000.000 (2003: 6.000.000 and 2002:
2.600.000) units per year.

For the purpose of the consolidated financial statements, the Company and its
consolidated subsidiaries are referred to as ' the Group'.

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

                                                 Field of activity             Shareholding (%)
Consolidated Company                Location                          31.12.2004   31.12.2003   31.12.2002

Vestel Dayanykly Tuketim            Turkey       Marketing                 99,9%        99,9%        99,9%
   Mallary Pazarlama A.S.
Vestel Bilipim Teknolojileri        Turkey       Information                  --           --        99,7%
   Sanayi Ticareti A.S.
Vestel Komunikasyon                 Turkey       Manufacturing            99,20%       99,20%       99,20%
   Sanayi  ve Ticareti A.S.
Vestel Dyp Ticaret A.S.             Turkey       Marketing                 99,7%        99,7%        99,7%
Vestel Beyaz Epya                   Turkey       Manufacturing             35,0%        35,0%           --
    Sanayi ve Ticaret A.S.
Vestel Savunma Sanayi A.S.          Turkey       Software                  29,9%           --           --
Deksar Multimedya *                 Turkey       Information               99,9%        99,9%           --
Vestel Holland BV *                 Holland      Marketing                 99,7%        99,7%           --
Veseg Video                         Germany      Marketing                 50,8%        50,8%           --
 Handelsgesellschaft GmbH *
Vestel Italy SRL *                  Italy        Marketing                 50,8%        50,8%           --
Cabot Communications Ltd.*          England      Software                  82,5%        82,5%           --
Vestel France SA *                  France       Marketing                 99,5%        99,5%           --
Vestel Iberia SL *                  Spain        Marketing                 99,7%        99,7%           --
Vestel Trade CIS *                  Russia       Manufacturing            100,0%       100,0%           --
Vestel Benelux BV                   Holland      Marketing                 50,8%        50,8%           --
Vestel UK                           England      Marketing                 99,7%        99,7%           --
Cabot Izmir Donanym                 Turkey       Software                  85,6%           --           --
   Sanayi ve.Ticaret A.S.

     
     The Company has always exercised effective control over the management of 
     each of these companies. However the companies which are nominated by 
     asterix (*) above have been consolidated first time as of 31 December 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.S. which has been consolidated as of 31 December 2003. 
     The net effect of these consolidations YTL 27.811 has been deducted from 
     the general reserves.

     As of  7 March 2003, Vestel Bilisim Teknolojileri Ticareti A.S.
     (consolidated subsidiary) and other Vestel related parties namely Vescolor 
     Tup ve Komponent Sanayi ve Ticaret A.S., Vinpa Pazarlama Ticaret A.S., 
     Sanalnet Internet Pazarlama ve Ticaret A.S., Vestel Mupteri Yletipim ve 
     Bilgi Merkezi Paz. A.S. were merged under Vestel Komunikasyon Sanayi ve 
     Ticaret A.S. (consolidated subsidiary).

As a result of a fire that took place at Vestel Elektronik Sanayi A.S. 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 26).


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 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'). Its subsidiaries which are incorporated in Turkey, maintain their
books of account and prepare their statutory financial statements in accordance
with the Turkish Commercial Code and Tax Legislation and the Uniform Chart of
Accounts issued by the Ministry of Finance. The foreign subsidiaries maintain
their books of account and prepare their statutory financial statements in their
local currencies and in accordance with the regulations of the countries in
which they operate. The financial statements of overseas subsidiaries are
converted into New Turkish Lira (YTL) by closing rate method. The consolidated
financial statements have been prepared from statutory financial statements of
the Company and its subsidiaries and presented in New Turkish Lira (YTL) with
adjustments and reclassifications for the purpose of fair presentation in
accordance with IFRS. Such adjustments mainly comprise 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 YTL 83.699 to the general reserve account represented the portion of
this deferred tax charge relating to prior years.


Reclassifications

The Company has made reclassifications in the balance sheets as of 31 December
2004 to be consistent with the current period presentation.

a) Current finance lease liabilities, in current trade payables  amounting to
YTL 3.835 (2002 : YTL 143) was reclassified to current  borrowings (note 12 and
13 ).

b) Non-Current finance lease liabilities in non-current  trade payables
amounting to YTL 6.138 was reclassified to non-current borrowings (note 12 and
13 ).


Measurement Currency, Reporting Currency

Measurement currency of the Company is YTL. The restatement for the changes in
the general purchasing power of  YTL as of 31 December 2004 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 (but not limited to)  that necessitates the application of IAS 29
is a cumulative three year inflation rate approaching or exceeding 100%. As of
31 December 2004 , the three year cumulative rate has been 70% (2003: 181% and
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                              31.12.2004      31.12.2003      31.12.2002      31.12.2001      31.12.2000

Index                                8.403,8         7.382,1         6.478,8         4.951,7         2.626,0
Conversion factor                          1           1,138           1,297           1,697           3,200

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 2004.

- monetary assets and liabilities reported in the balance sheet at 31 December
2004 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.

- 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/amortisation).


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.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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


GROUP ACCOUNTING

Subsidiary undertakings - The consolidated financial statements incorporate the
financial statements of the Company and enterprises controlled by the Company.
Control is achieved where the company has the power to govern the financial and
operating policies of an investee enterprise so as to obtain benefits from its
activities.

On acquisition, the assets and liabilities of a subsidiary are measured at their
fair values at the date of acquisition. The interest of minority shareholders is
stated at the minority's proportion of their fair values of the assets and
liabilities recognised.

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 related equity and reserves accounts.

All significant inter-company transactions and balances between group
enterprises are eliminated on consolidation.

The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
other members of the Group.


FOREIGN CURRENCY TRANSLATIONS

Convenience translation of financial statements - For the convenience of the
reader, the accompanying financial statements 31 December 2004 have been
translated from Turkish Lira to US $ with the Central Bank buying exchange rate
at period-ends. Such convenience translations are not intended to comply with
the provisions of IAS 21 'The Effects of Changes in Foreign Exchange Rates' or
Financial Accounting Standards Board No 52 'Foreign Currency Translations' for
the translation of financial statements in a highly inflationary economy.  Prior
to the translation, the Turkish Lira amounts have been re-measured in compliance
with International Financial Reporting Standard 29, 'Financial Reporting in
Hyperinflationary Economies' as explained above.

Foreign currency transactions and translation - Transactions in foreign
currencies during the periods have been translated into YTL at the exchange
rates prevailing at 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.

Foreign entities - Foreign consolidated subsidiaries are regarded as foreign
entities since they are financially, economically and organisationally
autonomous. Their reporting currencies are the respective local currencies.
Financial statements of foreign consolidated subsidiaries are translated at
year-end exchange rates with respect to the balance sheet, and at exchange rates
at the dates of the transactions with respect to the income statement. All
resulting translation differences between the closing balances and opening
balances due to the difference in inflation and devaluation are included in
currency translation adjustment in equity.

The foreign exchange rates used by the Company are as follows:

                                                                  31.12.2004      31.12.2003      31.12.2002
USD                                                                1.342.100       1.395.835       1.634.501
EURO                                                               1.826.800       1.745.072       1.703.477



PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (except investment property) held for use in the
production or supply of goods or services, or for administrative purposes, are
stated in the balance sheet at cost, restated in equivalent purchasing power at
31 December 2004 less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.

The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate the carrying value may not be
recoverable. If any such indication exists and where the carrying values exceed
the estimated recoverable amount, the assets or cash-generating units are
written down to their recoverable amount. The recoverable amount of property,
plant and equipment is the greater of net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For
an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset
belongs.

Property, plant and equipment in the course of construction for production,
rental or administrative purposes, or for purposes not yet determined, are
carried at cost, less any identified impairment loss. Cost includes professional
fees and, for qualifying assets, borrowing costs capitalised in accordance with
the Company's accounting policy. Depreciation of these assets, on the same basis
as other property assets, commences when the assets are ready for their intended
use.

Depreciation is charged so as to write off the cost or valuation of assets,
other than land and properties under construction, over their estimated useful
lives, using the straight line basis over the following years stated below:

                                                                                                  Years

Land                                                                                              Nil
Land Improvements                                                                                 10 to 20
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

Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, the term of the
relevant lease. The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income.


LEASES

Finance Leases - Assets held under finance leases are recognised as assets of
the Company at their fair value at the date of acquisition. The corresponding
liability to the Company is included in the balance sheet as a finance lease
obligation. Finance costs, which represent the difference between the total
leasing commitments and the fair value of the assets acquired, are charged to
the income statement over the term of the relevant lease so as to produce a
constant periodic rate of interest on the remaining balance of the liability for
each accounting period.

Operating Leases - Leases of assets under which all the risks and rewards of
ownership are effectively retained by the lessor are classified operating
leases.  Lease payments on operating lease are recognised as an expense on a
straight-line basis over the lease term.

Capitalised leased assets are depreciated in accordance with the depreciation
policy noted above.


INTANGIBLE ASSETS

Goodwill - Goodwill arising on consoldation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of  Vestel Dayanykly Tuketim Mallary ve Pazarlama A.S.,
Vestel Dyp Ticaret A.S., Vestel Komunikasyon Sanayi ve Ticaret A.S. and
Vestel Beyaz Epya Sanayi ve Ticaret A.S. at the date of acquisition. Goodwill
is stated at cost, restated in equivalent purchasing power at 31 December 2004
less any subsequent accumulated depreciation and subsequent accumulated
impairment in value.

Goodwill arising on the acquisition of subsidiaries is presented separately in
the balance sheet.

On disposal of a subsidiary the attributable amount of unamortised goodwill is
included in the determination of the profit or loss on disposal.

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
on  straight line basis  over  5  years.

The carrying values of capitalised research and development expenditure are
reviewed for impairment when events or changes in circumstances indicate that
the carrying value may not be recoverable.

Computer software development cost - Generally, costs associated with developing
or maintaining computes software programmes are recognised as an expense as
incurred. However, costs that are directly associated with identifiable and
unique software products controlled by the Company and have probable economic
benefit exceeding the cost beyond one year, are recognised as intangible assets.
Direct costs include staff costs of the software development team and an
appropriate portion of relevant overheads.

Expenditure which enhances or extends the performance of computer software
programmes beyond their original specifications is recognised as a capital
improvement and added to the original cost of the software. Computer software
development costs are recognised as assets and amortised using the straight line
basis over their useful lives, not exceeding a period of 5 years.

Patent and trademarks - Patents and trademarks are measured at purchase cost and
amortised using the  straight line basis over their useful lives, not exceeding
a period of 5 years.

Other intangible assets - Expenditure on leasehold improvements and computer
software licences and amortised using the  straight line basis over their useful
lives, not exceeding a period of 5 years.

Impairment of intangible assets - Where an indication of impairment exists, the
carrying amount of any intangible asset including goodwill is assessed and
written down immediately to its recoverable amount.


INVESTMENTS

      All investments are initially recognised at cost, restated at the
equivalent purchasing power of Turkish lira at 31 December 2004, being the fair
value of the consideration given and including acquisition charges associated
with the investment. Certain subsidiaries which have been consolidated first
time in 2003 were recorded at restated cost at 31 December 2002 (see notes 1 and
9).

For investments that are actively traded in organised financial markets, fair
value is determined by reference to Stock Exchange quoted market to the average
of the closing bid prices of the last five days preceding on the balance sheet
date.


INVENTORIES

Inventories are stated at the lower of cost, restated at the equivalent
purchasing power at 31 December 2004, and net realizable value. Costs comprise
direct materials and, where applicable, direct labor costs and those overheads
(based on normal operating capacity) that have been incurred in bringing the
inventories to their present location and condition but excludes borrowing cost.
Cost is calculated by using the weighted average method. Net realizable value
represents the estimated selling price less all estimated costs to completion
and costs to be incurred in marketing, selling and distribution.


TRADE RECEIVABLES

Trade receivables are carried at original amount less an estimate made for
doubtful receivables.  The management believes that the estimated amount will be
adequate to absorb possible future losses on existing receivables that may
become uncollectible due to current economic conditions and inherent risks in
the receivables. Bad debts are written off when identified.


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 22).


ALLOWANCE FOR UNEARNED INTEREST ON NOTES

Unearned interest is calculated on all the notes receivable, notes payable and
post dated cheques at the balance sheet date, at the rate of  21%  (2003: 25%
and 2002: 64%) to set an allowance for unearned interest  on post dated notes.


BANK BORROWINGS

Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption, are accounted for on an accrual basis and are added
to the carrying amount of the instrument to the extent that they are not settled
in the period in which they arise.


RECOGNITION AND DERECOGNITION OF FINANCIAL STATEMENTS

The Company recognizes a financial asset or financial liability in its balance
sheet when and only when it becomes a party to the contractual provisions of the
instrument. The Company  derecognizes a financial asset or a portion of
financial asset when and only when it loses control of the contractual rights
that comprise the financial asset or a portion financial asset. The Company
derecognizes a financial liability when and only when a liability is
extinguished that is when the obligation specified in the contract is
discharged, cancelled and expires.


OFFSETTING

Financial assets and liabilities are offset and the net amount reported in the
balance sheet when there is a legally enforceable right to set off the
recognized amounts and there is an intention to settle on a net basis or realize
the asset and settle the liability simultaneously.


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 not very likely. Accordingly, contingent losses are recognized 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 realized.


USE OF ESTIMATES

The preparation of financial statements in conformity with IFRS 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.


INCOME TAXES

Tax expense / (income) is the aggregate amount included in the determination of
net profit or loss for the period in respect of current and deferred
tax.Deferred income tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.Deferred income tax assets and liabilities are
measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the balance sheet date.


BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on
the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the cost of those assets. All other borrowing
costs are recognised in net profit or loss in the period in which they are
incurred .


PROVISIONS

Employee benefits - Under Turkish labour law, the Company and its Turkish
subsidiaries are 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 in accordance with social insurance regulations 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.

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.

Other provisions - Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of the
obligation.  Where the Company expects a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain.


REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Company and the revenue can be reliably measured.
Revenue is shown net of value added and sales taxes, discounts and returns, all
restated in equivalent purchasing power at 31 December 2004.

Other revenues earned by the Company is recognised on the following bases:

Royalty and rental income - on an accrual basis.
Interest income - on an effective yield basis.
Dividend income - When the Company's right to receive payment is established.


CASH AND CASH EQUIVALENTS

For the purpose of cash flow statement, cash and cash equivalents comprise cash
on hand, deposits with banks and other financial institutions, other money
market placements and funds lent under securities resale agreements with the
original maturity of three months or less.

For the purposes of the cash flow statement, cash and cash equivalents comprise
cash at bank and in hand and short-term deposits with an original maturity of
three months or less. The amounts paid under the reverse purchase agreements are
included in the cash and cash equivalents.


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.           EARNINGS PER SHARE
                                                                                                   US $ ('000)
                                                    31.12.2004      31.12.2003      31.12.2002      31.12.2004

Net profit attributable to shareholders                 83.159          78.586          52.989          61.962
 (YTL thousand)
Weighted average number of ordinary                159.100.000     159.100.000     159.100.000     159.100.000
 shares in issue('000)
Basic and diluted earnings per share                       523             494             333             389
 (TL per share)
Dividend per share                                           -               -               -               -


5.           CASH  AND CASH EQUIVALENTS

                                                    31.12.2004        31.12.2003    31.12.2002    31.12.2004

Cash at bank and in hand                               595.990           565.418       526.240       444.072

Less: Marketable securities with maturity over               -                 -      (47.465)             -
three months

Cash and cash equivalents                              595.990           565.418       478.775       444.072

   at cash flow statement



At 31 December 2002, the cost of marketable securities together with accrued
interest were equal to their market value. Marketable securities bear annual
interest at the rates of 40% and 70% for YTL denominated securities and 12.4%
for foreign currency denominated securities. These securities were held on a
short term basis.



6.           TRADE RECEIVABLES
                                                                                                  US $ ('000)
                                                   31.12.2004        31.12.2003    31.12.2002      31.12.2004

Trade receivables
  -Third parties                                      709.502           735.156       525.243         528.651
  -Group companies                                      1.609               232       247.219           1.198
Notes receivable                                      309.653           188.792       106.625         230.723
Less: unearned interest on notes receivable           (9.346)          (17.803)       (4.572)         (6.964)
Less: allowance for doubtful receivables              (8.549)           (4.680)       (4.510)         (6.370)
Others                                                  1.229             1.465           770             916

                                                    1.004.098           903.162       870.775         748.154

The movement of doubtful receivables were as follows:

                                                                                                 US $ ('000)
                                                   31.12.2004       31.12.2003    31.12.2002      31.12.2004

Beginning balance                                       4.680            4.510         2.681           3.487
Charge for the period, net                              5.226            2.364         3.589           3.894
Proceeds from doubtful receivables                      (809)          (1.643)       (1.455)           (603)
Monetary gain                                           (548)            (551)         (305)           (408)

Ending balance                                          8.549            4.680         4.510           6.370



7.           INVENTORIES

Raw materials                                          295.941           233.760       182.328       220.506
Work in process                                         37.967            35.532        26.887        28.289
Finished goods and merchandises                        264.864           209.966       172.751       197.350
Spares and supplies                                      3.854             3.425         6.999         2.872
Goods in transit                                       271.285           133.163       159.303       202.135

                                                       873.911           615.846       548.268       651.152



8.           OTHER ASSETS

Prepaid expenses                                        30.363            23.717        20.499        22.624
Income accruals                                         96.528           150.702       125.248        71.923
VAT receivable                                          36.542            35.053         2.884        27.227
Work advances                                            5.826             8.066         9.149         4.341
Due from personnel                                         822               953           319           612
Project expenses                                         1.544                 -             -         1.150
Other                                                    1.669                18            68         1.245

                                                       173.294           218.509       158.167       129.122


9.           INVESTMENTS

a) Unconsolidated subsidiaries                             19                -        34.048              14
b) Other investments                                    4.635            4.741         5.902           3.454

                                                        4.654            4.741        39.950           3.468

9. a)  Unconsolidated subsidiaries
                                                Share percentage                     Restated Amount          US $ 
('000)
Entity                   Country of  31.12.2004   31.12.2003  31.12.2002   31.12.2004  31.12.2003 31.12.2002  31.12.2004
                          Business                                                                                

Vestpro Electronics SA    Romania            52%          52%         52%          287         287        287        214
Vestel USA Inc.           USA               100%         100%        100%          223         223        223        166
Vestel Elektronika SA     Romania           100%            -           -           19          --         --         14

Less: Allowance for diminution in  value
Vestpro Electronics SA    Romania              -            -           -        (287)       (287)         --      (214)
Vestel USA Inc.           USA                  -            -           -        (223)       (223)         --      (166)

Consolidated subsidiary as of 31.12.2003
Vestel Beyaz Epya Sanayi  Turkey               -            -      10,00%            -           -      5.940         --
A.S.

Consolidated subsidiaries from 01.01.2003
Deksar Multimedya Telekom Turkey               -            -        100%           --          --     16.448         --
A.S.
Vestel France SA          France               -            -        100%           --          --        199         --
Vestel Holland BV         Holland              -            -        100%           --          --        176         --
Vestel CIS                Russia               -            -         74%           --          --        990         --
Cabot Communications Ltd  England              -            -         83%           --          --        640         --
Veseg GmbH                Germany              -            -         51%           --          --        163         --
Vestel Iberia SL          Spain                -            -         91%           --          --        209         --
Vestel Italy SRL          Italy                -            -         51%           --          --         66         --

Companies merged under Vestel Komunikasyon A.S. as of
07.03.2003
Vescolor Tup ve Komponent Turkey               -            -        100%           --          --      5.491         --
A.S.
Vinpa Pazarlama Ticaret   Turkey               -            -          5%           --          --          2         --
A.S.
Sanalnet Ynternet         Turkey               -            -         80%           --          --         11         --
Pazarlama A.S.
Vestel Mupteri Yletipim   Turkey               -            -        100%           --          --      3.203         --
A.S.

                                                                                    19          --     34.048         14


The following Companies in which the Company has a controlling interest or
significant influence are not consolidated.

-Vestpro Electronics SA and Vestel USA have been inactive since 2002.

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.S. was established in 1998 for the purpose of
providing internet service via satellite.

-  Vestel Holland B.V. was established in 1995  for the purpose of wholesale
trade in consumer electronics and has acted as a trade agent on behalf of Vestel
Elektronik. Vestel Holland has  8.9% of Vestel Ibera S.L. shares.

-  Vestel Trade CIS Limited (Formerly named as Vestel Record Ltd) commenced
production in the second half of 2003 which comprised production and
distribution of electronic products (mainly TV-sets) in Russia.

-  Vestel France S.A. was established in 1996 to import, distribute, sell and
repair electrical household appliances in France.

-  Veseg Video Handelsgesellschaft GmbH was established in 1995 to import,
distribute and market and repair electrical household appliances in Germany.

-  Cabot Communications Limited was established in 1999 for the purpose of
digital television software development and sales in the UK.

-  Vestel Iberia, S.L. was established in 1998 to import, distribute, sell and
repair to electrical household appliances in Spain and Portugal.

-  Vestel Italy S.R.L. (Formerly named as Vesdit) was established in 2001 to
import, distribute and market and repair electrical household appliances in
Italy.

-  Vestel Benelux B.V.(The Company) was established in 2003 to  distribute, sell
and repair products in the Benelux (Belgium, The Netherlands and Luxemburg).

-  Vestel UK Ltd. was incorporated in 2003 and commenced operations in April
2004 to market and promote Vestel Group's products in the United Kingdom.

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

As of 7 March 2003, Vestel Bilisim Teknolojileri Ticareti A.S. (consolidated
subsidiary) and other Vestel related parties namely Vescolor Tup ve Komponent
Sanayi ve Ticaret A.S., Vinpa Pazarlama Ticaret A.S., Sanalnet Internet
Pazarlama ve Ticaret A.S., Vestel Mupteri Yletipim ve Bilgi Merkezi Paz.
A.S. were merged under Vestel Komunikasyon Sanayi ve Ticaret A.S.
(consolidated subsidiary).


9. b)     Other investments

                                              Share percentage                      Restated Amount         US $ ('000)
Entity                  Country    31.12.2004    31.12.2003    31.12.2002 31.12.2004 31.12.2003 31.12.2002  31.12.2004
                           of                                                                                
                        Business

Zorlu Enerji Elektrik   Turkey  Less than 1%  Less than 1%  Less than 1%      2.830      2.945      2.788      2.109
Uretimi A.S.
Vestelnet Elektronik    Turkey            2%            2%            2%      1.766      1.766      1.766      1.316
Yletipim A.S.
Teralogic Inc           USA               --            2%            2%         --      1.321      1.321         --
Tursoft A.S.            Turkey            7%            7%            7%         25         25         25         19
Zorlu Endustriyel       Turkey            1%            1%            1%          3          2          2          2
Enerji A.S.
Yzmir Teknoloji         Turkey            5%            5%            0%         11          3         --          8
Geliptirme A.S.

Less: Allowance for diminution in  value
Teralogic Inc USA                                                                --    (1.321)         --         --

                                                                              4.635      4.741      5.902      3.454


-Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A.S. 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  2004 as required by IAS 39.

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

Except for Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A.S., 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 and    Motor      Furniture    Construction     Total
                                 Buildings     equipment     vehicles   and Fixtures   in progress
                                                                                      and advances
                                                                                         given

Restated Cost

Balance at 31 December 2001           72.112       567.369        1.597       53.523          7.627     702.228

Additions                                956        55.103            -        1.630          5.121      62.810
Merger of related parties                  -             -            -            -              -           -
under Vestel Komunikasyon
A.S.
Disposal of subsidiary                     -      (10.805)            -      (3.462)              -    (14.267)
Transfers                                143         2.572            -            -        (2.715)           -
Disposals                                  -       (7.156)        (321)      (1.052)              -     (8.529)

Balance at 31 December 2002           73.211       607.083        1.276       50.639         10.033     742.242

Additions                              9.301        47.392        1.121        6.113         10.922      74.849
Merger of related parties                  -           913           92        3.172              -       4.177
under Vestel Komunikasyon
A.S.
Consolidated overseas and
domestic subsidiaries as from
01.01.2003 and
 Vestel Beyaz Epya A.S. as            56.387       283.666          632        7.418         12.239     360.342
of 31.12.2003
Translation differences                (274)       (2.034)         (22)         (20)           (20)     (2.370)
Transfers                                700        16.515            -            -       (17.215)           -
Disposals                            (3.702)      (33.977)        (198)      (4.801)              -    (42.678)

Balance at 31 December 2003          135.623       919.558        2.901       62.521         15.959   1.136.562

Additions                             13.170       129.600          665        6.809         96.801     247.045
Translation differences                (368)       (1.890)         (46)        (246)            (8)     (2.558)
Consolidation of                           -             -            -          427              -         427

Cabot Yzmir Yazylym A.S.
Consolidation of                           -           161            -            -              2         163

Vestel Savunma A.S.
Transfers                             14.489        28.714            -          515       (43.718)           -
Disposals                              (905)      (48.564)        (811)        (598)              -    (50.878)

                                     162.009     1.027.579        2.709       69.428         69.036   1.330.761

Balance at 31 December 2004

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

Balance at 31 December 2001           7.241      292.296          630       24.561              -      324.728

Depreciation charge                     666       34.199          112        6.088              -       41.065
Disposal of subsidiary                    -      (3.425)            -      (1.259)              -      (4.684)
Disposals                              (10)      (3.857)         (39)        (483)              -      (4.389)

Balance at 31 December 2002           7.897      319.213          703       28.907              -      356.720

Depreciation charge                   1.013       40.663          342        6.861              -       48.879
Merger of related parties under           -          215           71        2.402              -        2.688
Vestel Komunikasyon A.S.
Consolidated overseas and
domestic subsidiaries as from
01.01.2003 and
 Vestel Beyaz Epya A.S. as of         6.171       55.166          310        2.491              -       64.138
31.12.2003
Translation differences                (59)        (337)          (7)         (33)              -        (436)
Disposals                           (1.505)     (17.215)        (132)        (762)              -     (19.614)

Balance at 31 December 2003          13.517      397.705        1.287       39.866              -      452.375

Depreciation charge                   4.061       71.448          299        6.474              -       82.282
Translation differences                (53)        (324)          (8)         (72)              -        (457)
Consolidation of                          -            -            -           97              -           97
Cabot Yzmir Yazylym A.S.
Consolidation of                          -           15            -            -              -           15
Vestel Savunma A.S.
Transfers                               (3)            5            -          (2)              -            -
Disposals                              (65)     (25.276)        (594)        (283)              -     (26.218)

Balance at 31 December 2004          17.457      443.573          984       46.080              -      508.094

Net Book Value as of

31 December 2002                     65.314      287.870          573       21.732         10.033      385.522

31 December 2003                    122.106      521.853        1.614       22.655         15.959      684.187

31 December 2004                    144.552      584.006        1.725       23.348         69.036      822.667

US $ ('000)                         107.706      435.143        1.285       17.397         51.439      612.970
31 December 2004

Property, plant and equipment have been mortgaged to the extent of YTL 45.000
(2003:YTL 51.228 and 2002: 58.349 ) as collateral against bank loans and bank
guarantees on letters of credit.

Leased assets included in the table above comprise plant and machinery amounting
to YTL 39.594 (2003:YTL 36.269 ) net of accumulated depreciation. Leased assets
are pledged as security for the related finance lease obligations.

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.S. to increase its refrigerator production capacity
and new investment in washing machine segment. Increase in machinery and
equipment has taken place mainly in Vestel Elektronik Sanayi ve Ticaret A.S.
(Turkey) and Vestel Trade CIS (Russia) which are related to production of high
end television units during 2003.


11.       INTANGIBLE ASSETS, net

                                                  Goodwill      Research and        Other           Total
                                                              Development cost   Intangible
                                                                                   assets

Restated Cost

Balance at 31 December 2001                            33.310           67.665          82.184         183.159

Additions                                                   -           13.023          12.435          25.458
Disposal of subsidiary                                      -                -         (1.237)         (1.237)
Disposals                                                   -                -         (4.845)         (4.845)

Balance at 31 December 2002                            33.310           80.688          88.537         202.535

Additions                                              36.168           11.765           5.881          53.814
Consolidated overseas and domestic
 subsidiaries as from  01.01.2003 and
 Vestel Beyaz Epya A.S. as of 31.12.2003                    -                -          43.692          43.692
Translation differences                                     -                -             (7)             (7)
Disposals                                                   -         (63.115)         (5.270)        (68.385)

Balance at 31 December 2003                            69.478           29.338         132.833         231.649

Additions                                                   -            8.248           2.111          10.359
Translation differences                                     -                            (795)           (795)
Consolidation of                                            -                -              55              55

Cabot Yzmir Yazylym A.S.
Consolidation of                                            -                -              69              69

Vestel Savunma Sanayi A.S.
Disposals                                                   -            (716)            (19)           (735)

Balance at 31 December 2004                            69.478           36.870         134.254         240.602



                                                  Goodwill      Research and        Other           Total
                                                              Development cost   Intangible
                                                                                   assets

Restated Accumulated amortisation                                            -

Balance at 31 December 2001                             4.979           23.773          43.281          72.033

Additions                                               1.667           16.139          14.649          32.455
Disposal of subsidiary                                      -                -           (552)           (552)
Disposals                                                   -                -           (900)           (900)

Balance at 31 December 2002                             6.646           39.912          56.478         103.036

Amortisation charge                                     3.474           16.138          15.774          35.386
Consolidated overseas and domestic
 subsidiaries as from  01.01.2003 and
Vestel Beyaz Epya A.S. as of 31.12.2003                     -                -           7.694           7.694
Exchange differences                                        -                -             (3)             (3)
Disposals                                                   -         (56.050)         (3.781)        (59.831)

Balance at 31 December 2003                            10.120                -          76.162          86.282

Amortisation charge                                     3.474            5.564          13.259          22.297
Exchange differences                                        -                -            (41)            (41)
Consolidation of                                                                            11              11
Vestel Savunma Sanayi A.S.
Consolidation of                                                                             5               5
Cabot Yzmir Yazylym A.S.
Disposals                                                   -            (261)            (33)           (294)

Balance at 31 December 2004                            13.594            5.303          89.363         108.260

Net Book Value as of

31 December 2002                                       26.664           40.776          32.059          99.499

31 December 2003                                       59.358           29.338          56.671         145.367

31 December 2004                                       55.884           31.567          44.891         132.342

31 December 2004 US $ ('000)                           41.639           23.521          33.448          98.608



In mid 2001, the Company established the Digital Research and Development
Department within Aegean Free Zone - Yzmir to contribute to the expansion of the
product range in line with technological developments, the Department continues
development of digital satellite receivers with common Interface and Personal
Video Recording (PVR) capabilities, digital terrestrial receivers, DVD A/V
receivers and recordable DVD players in Vestel Komunikasyon A.S. and Vestel
Elektronik A.S.  Research and Development Department in Manisa continues
development of Integrated Digital TV(DTV), Hybrid TV, Digital TV, TV-DVD, Large
Digital TV and Large Flat Screen TV.

 Development costs principally comprises internally generated expenditure on R&D
development costs on the above projects where it is reasonably anticipated that
costs will be recovered through future commercial activity.

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 YTL 28,852 (historic cost) 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.S. (see notes 1 and 9). The Company paid YTL 52,384.2
(historic cost) in cash for the fair value of the identifiable net assets and as
a result a goodwill amount of YTL 34.356 arose from this acquisition.

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

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


12.       BORROWINGS
                                                             Current                 Non - Current
                                                         Foreign           YTL      Foreign           YTL
                                                        Currency    Equivalent     Currency    Equivalent

31.12.2004

Turkish lira borrowings                                                  1.694
Foreign currency borrowings and accrued interest
 -USD ('000)                                              13.204        17.721      216.351       290.365
 -EURO ('000)                                             68.835       125.749      103.722       189.480
Finance lease liabilities, net
-USD ('000)                                                1.440         1.933        3.064         4.113
-EURO ('000)                                               1.576         2.879        1.614         2.948

                                                                       149.976                    486.906

31.12.2003

Turkish lira bank borrowings                                            11.244
 and accured interest on bank borrowings
Foreign currency bank borrowings
 -USD ('000)                                               5.952         9.458      210.549       334.567
 -EURO ('000)                                             40.573        80.584      101.337       201.318
Finance lease liabilities, net
-USD ('000)                                                  161           256            -             -
-EURO ('000)                                               1.801         3.579        3.088         6.138

                                                                       105.121                    542.023

31.12.2002

Turkish lira borrowings                                                 11.858
 and accured interest on bank borrowings
Foreign currency bank borrowings
 -USD ('000)                                               8.047        17.060      210.144       445.537
 -EURO ('000)                                             37.726        83.359       75.000       165.721
Finance lease liabilities, net
-USD ('000)                                                   67           143            -             -
-EURO ('000)                                                   -                          -             -

                                                                       112.420                    611.258


31.12.2004                                                                          US $ ('000)   US $ ('000)
                                                                                        Current  Non- current
Turkish lira borrowings                                                                   1.262
Foreign currency bank borrowings
 -USD ('000)                                                                             13.204       216.351
 -EURO ('000)                                                                            93.696       141.182
Finance lease liabilities, net
-USD ('000)                                                                               1.440         3.064
-EURO ('000)                                                                              2.145         2.197

                                                                                        111.747       362.796



The effective interest rates of foreign currency loans and Turkish Lira loans
vary between 2.8% and 12% (2003:  - 2% and 7,5% and 2002: 4,5%and 11,5%) and 0%
and 15% (2003- 25% and 40% and 2002- 48% and 65%) respectively.


Summary maturity schedule of  bank borrowings were as follows:

                                                                                                 US $ ('000)
                                                      31.12.2004      31.12.2003    31.12.2002    31.12.2002

Due in one year                                          149.976         105.121       112.420       111.747
Due between two to five years                            482.689         511.680       611.258       359.655
Over five years                                            4.217          30.343             -         3.141

                                                         636.882         647.144       723.678       474.543


Letters of guarantee and notes amounting to YTL 33.633 EUR0 18.411.066 have been
given as collateral for Turkish Eximbank and other credits (2003: YTL 32.574
(EURO 14.623.549 and USD 2.217.012)and (2002: YTL 45.107 (EURO 20.414.000)).

Property, plant and equipment have been mortgaged to the extent of  YTL 45.000
(2003: YTL 51.228  and 2002: YTL 58.349) as collateral against bank loans and
bank guarantees on letters of credit.



13.       TRADE PAYABLES

                                                                                                 US $ ('000)
                                                    31.12.2004    31.12.2003      31.12.2002      31.12.2004

Trade payables
 - Third parties                                     1.124.845       921.069         368.775         838.123
 - Group companies (note 21)                             2.715         1.726           1.821           2.023
Letters of credit                                      152.470       115.558         363.158         113.606
Letters of credit discounted                           200.116       180.302         174.296         149.107
Notes payable                                           84.806        69.151          23.806          63.189
Less:  Allowance for unearned                          (3.240)       (3.857)           (379)         (2.414)
 interest income
Other                                                    1.166           758               -             868

                                                     1.562.878     1.284.707         931.477       1.164.502


14.       OTHER LIABILITIES

Income tax and  social security payables                14.133         9.032           7.055          10.531
Advances received                                       19.931        32.521           9.845          14.851
Warranty expense provision                              34.908        38.594          35.527          26.010
Accrued expenses                                        17.916        30.670          26.593          13.349
Forward expense accurals                                63.708             -               -          47.469
Other                                                    2.295         3.822           3.739           1.710

                                                       152.891       114.639          82.759         113.920


15.       TAXATION ON INCOME

The Corporation Tax rate on the profits for the calendar year 2003 was 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%. The rate for 2005 will be 30% 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 instalment by 30 April. This
regulation is applicable to the Corporation Tax declaration to be given for
calendar year 2003 and subsequent years. Previously the balance of Corporation
Tax was paid in three instalments (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, at 5.5% and 16.5% respectively for public and non public
companies.

-  24 April 2003 - 31 December 2003 at 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.

The Company's prepaid income and Corporation taxes are netted off against the
current income tax provision on the balance sheet as stated below:

                                                                                                  US $ ('000)
                                                  31.12.2004       31.12.2003      31.12.2002      31.12.2004

Corporation and income taxes                          39.252           45.524          42.114          29.247
Less : Prepaid  taxes                               (25.415)         (12.397)         (8.923)        (18.937)
Deferred tax liability (non current)                      --         (23.374)              --               -

Taxes payable                                         13.837            9.753          33.191          10.310


Provision for taxes per income statement is given below:
                                                                                                      US $ ('000)
                                                   01.01-   01.01-31.12.2003   01.01-31.12.2002          01.01-
                                               31.12.2004                                            31.12.2004

Corporation tax and income tax charge on         (39.252)           (22.150)           (42.114)        (29.247)
current period income
Deferred tax (income) / charge                         --           (23.374)                 --              --
Net deferred tax assets/(liability)             (134.001)           (92.180)           (21.875)        (99.844)
Deferred tax charge on income accruals             39.499             83.699                 --          29.431
 relating to prior years (note 2)
Cancellation of prior year deferred tax            92.180             21.875             20.554          68.683

Income tax charge                                (41.574)           (32.130)           (43.435)        (30.977)


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 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 2004 and 31 December 2003 using the expected future tax rates
were as follows:

                                                                                                        US $ ('000)
                                      31.12.2004            31.12.2003            31.12.2002             31.12.2004
                                Cumulative   Deferred  Cumulative   Deferred Cumulative   Deferred Cumulative   Deferred
                                 temporary      Tax     temporary     Tax     temporary     Tax     temporary      Tax
                                 difference             difference            difference            difference
Deferred Tax Asset
Warranty expense provision           27.893     8.368       29.447    9.717       12.947    4.272       20.783     6.235
Retirement pay provision             17.944     5.383       15.817    5.220        5.807    1.916       13.370     4.011
Unearned interest on notes            9.346     2.804        9.096    3.002        3.225    1.063        6.964     2.089
receivable      
Capitalised finace charges           14.894     4.476       17.468    5.765       22.238    7.338       11.098     3.335
written off on inventory and 
fixed assets                 
Finance lease liabilities             5.730     1.719        9.699    3.201          171       57        4.269     1.281
Provision for doubtful receivables    6.874     2.062        1.332      439        3.329    1.099        5.122     1.536
Interest income on marketable            --        --           47       16        1.470      485           --        --
securities           
Expense accruals                      8.225     2.468       11.164    3.684       13.402    4.418        6.128     1.839
Investment incentive allowances      51.145     5.217      104.407   13.781           --       --       38.108     3.889
Other                                 2.992       898       13.419    4.429       14.229    4.697        2.229       669

                                     33.395                49.254                25.345                 24.884
Deferred Tax Liability
Temporary differences arising from 
restating:
-Inventories                            298        89        9.168    3.025       39.187   12.931          222        66
-Prepaid expenses                     2.130       639        8.672    2.862        4.453    1.470        1.587       476
-Investments                             --        --       25.595    2.815       22.858    2.515           --        --
-Fixed Assets(Including leased      253.585    76.076      233.544   25.690      143.959   15.835      188.946    56.684
fixed assets)
Income accruals                     287.965    88.692      321.136  105.975       43.081   14.216      214.563    66.086
Unearned interest on notes payable    3.240       972        3.150    1.039          571      189        2.414       724
Other                                 3.093       928           84       28          197       65        2.305       691

                                    167.396               141.434                47.221                124.727


16.       EMPLOYEE TERMINATION BENEFITS

In accordance with existing social legislation in Turkey, the Company is
required to make lump-sum termination indemnities to each employee who has
completed one year of service with the Company, and whose employment is
terminated due to retirement or for reasons other than resignation or
misconduct.

Such payments are calculated on the basis of 30 days' pay limited to a maximum
of  YTL  1,5477  (2003: YTL 1,3899 - (historic) 2002: YTL 1,2601 - (historic))
per year of employment at the rate of pay applicable at the date of retirement.

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

With effect from 1 January 2005 the ceiling for retirement pay has been
increased to YTL 1,6489.

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:
                                    
                                                                                                    US $ ('000)
                                                   31.12.2004        31.12.2003      31.12.2002      31.12.2004

Opening Balance                                        19.590            17.050          15.955          14.597
Charge for the period                                   9.451             6.250           5.061           7.042
Disposals                                             (1.786)           (1.623)         (2.133)         (1.331)
Monetary effect                                       (2.382)           (2.087)         (1.833)         (1.775)

Closing balance                                        24.873            19.590          17.050          18.533


         The number of personnel at year end were as follows:

Workers                                                  9.617         6.385             3095
Employees                                                1.643         1.144              674
Directors                                                   26            23               11

                                                        11.286         7.552            3.780


        Wages and salaries paid were as follows:

                                                                                                   US $ ('000)
Personnel cost                                         01.01-           01.01-          01.01-          01.01-
                                                   31.12.2004       31.12.2003      31.12.2002      31.12.2004

                                                      142.911           93.486          85.993         106.483

17.       SHARE CAPITAL

The authorised share capital of the Company comprised 220.000.0000 shares of par
value YTL 0,001 each at 31 December 2004.  The issued and paid up share capital
of the Company comprised 159.100.000,000 shares of par value YTL 0,001 each at
31 December 2004 and 31 December 2003.

As of 31 December 2004, 2003 and 2002, the shareholders of the Company and their
percentage shareholdings were as follows:

                                                                                        US $ ('000)
                                                         Shareholding                  Shareholding
                                                      %            Amount           %           Amount

Collar Holding BV                                    52%                82.082     52%                61.159
Other shareholders                                   48%                77.018     48%                57.386

Share capital (Nominal)                              100%              159.100    100%               118.545

Inflation adjustment of share capital                                  392.684                       292.590

Restated share capital equivalent                                      551.784                       411.135
 to purchasing power of New 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 RESERVES

General reserves comprise legal reserves and retained earnings.

Under the Turkish Commercial Code, the Company is required to create the
following legal reserves from appropriations of earnings, which are available
for distribution only in the event of liquidation or losses:

First legal reserve, appropriated at the rate of 5%, until the total reserve is
equal to 20% of issued and fully paid up share capital.

Second legal reserve, apportioned at the rate of at least 10% of distributions
in excess of 5% of issued share capital, without limit. It may be used to absorb
losses.


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.S.; 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.S. for the period until the date of disposal (31 December
2002) have been included in the consolidated income statement.


20.       COMMITMENTS AND CONTINGENCIES

(a)  At 31 December 2004 the Company had contingent liabilities of YTL 88.875
(2003: YTL 13.561) 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$ 636.787.315  as of the
balance sheet date.

(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 YTL
45.000 (2003: YTL 51.228 and 2002: YTL 58.349) as collateral against bank loans
and bank guarantees on letters of credit.

(e) The payment of VAT on certain export sales may be postponed and later
cancelled by the tax office subject to clearance of certain routine formalities
in due course. Responsibility of the Company continues until such clearance
however no liability has arisen in the past and no liability is reasonably
expected for the future.


21.       SUPPLEMENTARY CASH FLOW INFORMATION

Depreciation and Amortisation:

            These are included in the following captions;
                                                                                                        US $ ('000)
                                                      01.01-   01.01-31.12.2003   01.01-31.12.2002          01.01-
                                                  31.12.2004                                            31.12.2004

Cost of Sales                                         82.639             61.396             46.583          61.574
Selling expenses and
General and administrative expenses                   21.940             22.869             26.936          16.348

                                                     104.579             84.265             73.519          77.922


         Changes in net working capital:

Changes in operating assets and liabilities:
Trade receivables                                    (96.348)      (50.190)         (201.395)       (71.789)
Inventories                                         (258.065)      (67.578)            12.922      (192.284)
Due from related parties                               12.231       145.119         (127.771)          9.113
Prepayments and other current assets                   45.215      (60.342)            59.092         33.690
Trade payables                                        277.554       357.085           231.487        206.806
Due to related parties                                     --            --               (7)             --
Other payables and current liabilities                 38.252        31.879            18.198         28.502

                                                       18.839       355.973           (7.474)         14.038

Changes in investing activities:
                                                                                                     US $ ('000)
                                                       01.01-   01.01-31.12.2003   01.01-31.12.2002       01.01-
                                                   31.12.2004                                         31.12.2004
Changes in tangible and intangible assets:

Purchases of property, plant and equipment          (244.944)           (72.915)           (62.810)    (182.508)
Purchases of intangible fixed assets                  (9.605)           (53.810)           (25.458)      (7.157)
Consideration received on disposal of subsidiary           --                 --             31.631           --
Proceeds from sale of subsidiary                           --                 --            (4.634)           --
Merger of companies under Vestel                           --            (1.489)                 --           --
Acquisition of subsidiaries                             (586)          (332.202)                 --        (437)
Disposal of fixed assets on discontinued                   --                 --             10.267           --
operation
Disposal of property, plant and equipment              24.660             23.064              4.140       18.374
Disposal of intangible fixed assets                       441              8.554              3.945          329

                                                    (230.034)          (428.798)           (42.919)    (171.399)



Changes in other investing activities:

Changes in other non-current assets and liabilities:

Trade receivables                                             14.307     (14.586)       37.952          10.660
Trade payables                                                  (70)           70      (4.318)            (52)

                                                              14.237     (14.516)       33.634          10.608


22.       RELATED PARTY DISCLOSURE

Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making the
financial and operating decisions. For the purpose of these financial statements
shareholders are referred to as related parties. Related parties also include
individuals that are principle owners, management and members of the Company's
Board of Directors and their families. In the course of conducting its business,
the Company conducted various business transactions with related parties on
commercial terms.

The most significant of these transactions carried out with related parties:

2004                                                     Due from releted parties       Due to related
                                                                                            parties
Related party                                               Trade        Other        Trade         Other
                                                         receivables    assets      payables     liabilities

Vestelnet Elektronik Yletipim A.S.                                -      38.416             6             -
Zorlu Holding A.S.                                                -           -         2.587             -
Korteks Mensucat Sanayi A.S.                                     75           -           115             -
Vestel USA Inc.                                                 383          14             -             -
Zorlu Linen Dokuma A.S.                                         905           -             -             -
Other related parties                                           246         100             7             -

                                                              1.609      38.530         2.715

2003

Vestel USA                                                        2          24             -             -
Vestelnet Elektronik Yletipim ve Bil. A.S.                        -      50.726           146             -
Vestel Savunma Sanayi A.S.                                       55          11             -             -
Vestel Elektrikli Gerecler A.S.                                  79           -             -             -
Zorlu Petrogas Petrol, Gaz A.S.                                  34           -             -             -
Zorlu Enerji Elektrik                                            15           -             -             -

Uretimi Otoproduktor Grubu A:S.
Zorlu Holding A.S.                                                -           -         1.530             -
Other related parties                                            47           -            50             -

                                                                232      50.761         1.726

2002

Vestelnet Elektronik Yletipim ve Bil. A.S.                        -     107.940             -             -
Zorlu Holding A.S.                                            1.104           -         1.821             -
Vestel Beyaz Epya A.S.                                           76      56.164             -             -
Deksar Multimedya A.S.                                       30.050      24.600             -             -
Vestel France  SA                                            24.544           -             -             -
Vestel Holland BV                                            96.344       4.082             -             -
Vestel USA Inc.                                              15.137          15             -             -
Veseg GmbH                                                   42.295         692             -             -
Vestel Italy                                                 13.320           -             -             -
Vestel Iberia SL                                             23.707          22             -             -
Cabot Communications Ltd.                                         -       2.365             -             -
Other related parties                                           642           -             -             -

                                                            247.219     195.880         1.821             -

Company name                                             Due from releted parties       Due to related
                                                                                            parties
US $ ('000)                                                 Trade        Other        Trade         Other
                                                         receivables    assets     receivables     assets
2004

Vestelnet Elektronik Yletipim A.S.                                -      28.624             4             -
Zorlu Holding A.S.                                                -           -         1.928             -
Korteks Mensucat Sanayi A.S.                                     56           -            86             -
Vestel USA Inc.                                                 285          10             -             -
Zorlu Linen Dokuma A.S.                                         674           -             -             -
Other related parties                                           183          75             5             -

                                                              1.198      28.709         2.023


23.       FINANCIAL INSTRUMENTS

Financial Risk Management Objectives and Polices

The Company's principal financial instruments comprise bank loans, overdrafts,
cash and short-term deposits. The main purpose of these financial instruments is
to raise finance for the Company's operations. The Company has various other
financial instruments such as trade debtors and trade creditors, which arise
directly from its operations.

The main risks arising from the Company's financial instruments are liquidity
risk, foreign currency risk and credit risk. The board/management reviews and
agrees policies for managing each of these risks and they are summarized below.

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.


24.       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 judgment 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 realize in a
current market exchange.

The following methods and assumptions were used to estimate the fair value of
the Company's financial instruments:

Financial Assets

Monetary assets for which fair value approximates carrying value:

-Balances denominated in foreign currencies are translated at year-end exchange
rates. The fair value of certain financial assets carried at cost, including
cash and due from banks, marketable securities plus the respective accrued
interest are considered to approximate their respective carrying values.

-The carrying value of the trade receivables net of provisions for uncollectible
are considered to approximate their fair values.


Financial Liabilities

Monetary liabilities for which fair value approximates carrying value:

-The fair values 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.


25.       OTHER INCOME / (EXPENSE),  net

                                                                                               US $ ('000)
                                                      01.01- 01.01- 31.12.2003          01.01-        01.01-
                                                  31.12.2004                        31.12.2002    31.12.2004

Scrap and other sales                                 11.519            11.819           8.512         8.583
Export commission                                      6.244             8.440           6.615         4.652

 and freight related income
Insurance claims refund                                  657             3.726              --           490
Profit on sale of fixed assets                         1.538             2.172           1.479         1.146
Miscellaneous income                                   4.428             4.642           1.787         3.299
Loss on sale of fixed assets                        (17.645)           (1.761)              --      (13.147)
Loss as a result of the fire at the                       --           (8.150)              --            --
television factory
Miscellaneous expense                                (1.744)             (568)              --       (1.300)

                                                       4.997            20.320          18.393         3.723


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 YTL 8.150.



26.       FINANCIAL INCOME / (EXPENSE),  net


                                                                                                  US $ ('000)
                                                      01.01-           01.01-          01.01-          01.01-
                                                  31.12.2004       31.12.2003      31.12.2002      31.12.2004

Foreign exchange gains / (losses)
 -On  imports, borrowings
    exports and other receivables                   (31.739)        (110.469)       (241.563)        (23.649)
Interest expense
  -Bank loans                                       (59.608)         (74.449)        (82.425)        (44.414)
  -Letters of credit                                (16.127)         (10.411)        (19.379)        (12.016)
  -Finance leases                                    (1.110)            (379)         (1.613)           (827)
  -Factoring                                         (2.419)         (31.333)        (25.920)         (1.802)
Interest income from demand deposits                 114.197          183.561         144.196          85.088
Fair value gains / (losses)
  -Listed investments in stock exchange                                   808             255              --
  -Investment property                                     -            2.275               -              --
  -Forward contracts: fair value hedges             (60.004)         (56.648)               -        (44.709)
Bank commissions and                                (14.028)         (10.904)         (2.519)        (10.452)
   other financial expenses
                                                    (70.838)        (107.949)       (228.968)        (52.781)



27.       SEGMENT INFORMATION

The Group is currently organised into three major production divisions. The
basis on  which the Company reports its primary segment information is as
follows:

Television            :Produced by Vestel Elektronik Sanayi ve Ticaret A.S.
                       (Manisa/Turkey).
and monitor           :Produced by Vestel Trade-CIS (Vladimir Region/Russia)

Electronic devices    :Produced by Vestel Komunikasyon Sanayi ve Ticaret A.S.
                       (Izmir & Manisa/Turkey).

White Goods           :Produced by Vestel Beyaz Esya Sanayi ve Ticaret A.S.
                       (Manisa/Turkey).

Segment information about these businesses is presented below:


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


                                                                                                             US $ ('000)
                            01.01- 31.12.2004       01.01- 31.12.2003        01.01- 31.12.2002         01.01- 31.12.2004
                            Sales       Sales       Sales       Sales       Sales        Sales        Sales        Sales
                           Amount      volume       amount      volume     amount       volume       Amount       volume

Television              2.886.931  10.144.162    2.517.951  7.669.291   2.113.407     6.355.798   2.151.055   10.144.162
 - Domestic               319.022     879.050      221.012    525.315     139.581       269.019     237.704      879.050
 - Export                 604.270   1.905.020      461.443  1.709.177   1.973.826     6.086.779     450.242    1.905.020
 - Foreign marketing    1.963.639   7.360.092    1.835.496  5.434.799          --            --   1.463.109    7.360.092
companies
Monitor                    11.204      74.829       14.899     80.805      44.740       156.779       8.348       74.829
 - Domestic                11.178      74.779       14.899     80.805      41.148       144.191       8.329       74.779
 - Export                      26          50           --         --       3.592        12.588          19           50
 - Foreign marketing           --          --           --         --          --            --          --           --
companies
Electronic devices        648.239   8.131.372      642.652  4.728.605     425.208     2.424.861     483.004    8.131.372
 - Domestic               103.093     687.778       74.208    381.198      25.953        57.166      76.815      687.778
 - Export                 109.933   1.182.406      123.839    974.894     399.255     2.367.695      81.911    1.182.406
 - Foreign marketing      435.213   6.261.188      444.605  3.372.513          --            --     324.278    6.261.188
companies
White goods and others    858.341                  387.882                428.394                   639.551
 - Domestic               488.207          --      236.905         --     242.745            --     363.764           --
 - Export                 183.676          --       97.908         --     185.650            --     136.857           --
 - Foreign marketing      186.458          --       53.069         --          --            --     138.929           --
companies
                        4.404.715                3.563.384              3.011.750                 3.281.957


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

                                                                                                           US $ ('000)
                        01.01- 31.12.2004        01.01-31.12.2003          01.01- 31.12.2002         01.01- 31.12.2004
                         Sales      Sales       Sales        Sales        Sales        Sales         Sales        Sales
                        Amount      volume      amount       volume       amount       volume       amount        Volume

Germany                618.164  2.101.778      498.268    1.458.232      444.600    1.371.031       460.595    2.101.778
United Kingdom         347.017  1.172.586      340.011      989.324      315.266      972.201       258.563    1.172.586
France                 248.989    857.220      256.484      755.017      264.727      816.353       185.522      857.220
Denmark                 30.098    105.614       17.470       52.345       24.880       76.725        22.426      105.614
Portugal                43.819    151.815       13.912       41.439       20.191       62.264        32.650      151.815
Netherlands             91.925    314.500       75.221      221.429       29.151       89.895        68.493      314.500
Spain                  301.636  1.051.701      317.854      946.744      202.879      625.627       224.749    1.051.701
Italy                  250.348    878.473      242.806      727.518      130.175      401.426       186.535      878.473
Russia                 181.518    628.886      113.655      336.535           --           --       135.249      628.886
Others                 454.395  2.002.539      421.257    1.615.393      541.957    1.671.258       338.570    2.002.539

                     2.567.909  9.265.112    2.296.938    7.143.976    1.973.826    6.086.780     1.913.352    9.265.112


27.3     The summary of contribution to gross profit and gross margin is as
follows:           
                                                                                                             US $ ('000)
                       01.01- 31.12.2004        01.01-31.12.2003           01.01-31.12.2002           01.01- 31.12.2004
                          Gross profit            Gross profit               Gross profit               Gross profit
                       Amount        %         Amount         %           Amount          %          Amount          %

Domestic
Televisions            77.563         24       75.144           34         60.019           43        57.792          24
Monitors                1.256         11        2.235           15          6.995           17           936          11
Electronic devices     20.773         20       21.520           29          7.812           30        15.478          20
White goods and others 86.421         18       42.642           18        116.518           48        64.392          18

Domestic total        186.013         20      141.541           26        191.344           38       138.598          20

Export
Televisions           370.020         14      386.175           17        393.340           20       275.702          14
Monitors                   --         --           --           --            360           10            --          --
Electronic devices     82.314         15       90.950           16        107.799           27        61.332          15
White goods and others 79.562         21       24.156           16         45.544           27        59.282          21

Export total          531.896         15      501.281           17        547.043           22       396.316          15

Total                 717.909         16      642.822           18        738.387           25       534.914          16


27.4.  The summary of segment assets and liabilities are summarised as follows:
                       
                                                                                                 US $ ('000)
Television and Monitor                                 2004             2003            2002            2004

Trade receivables                                   770.112          632.154         701.379         573.811
Inventories                                         603.384          414.582         439.431         449.582
Property, plant And equipment, net                  512.968          419.927         348.365         382.213
Intangible assets, net                               81.853           93.950          67.333          60.988
Trade payables                                    1.138.633          906.950         764.539         848.396


Electronic devices

Trade receivables                                    59.525          145.409          64.460          44.352
Inventories                                         157.525          110.045          64.640         117.372
Property, plant And equipment, net                   74.405           65.888          31.891          55.439
Intangible assets, net                               38.202           37.476          24.482          28.464
Trade payables                                      206.664          189.998          68.495         153.985


White goods

Trade receivables                                   150.205          106.526              --         111.918
Inventories                                          85.350           70.113              --          63.595
Property, plant And equipment, net                  232.744          191.104              --         173.418
Intangible assets, net                                3.024            7.537              --           2.253
Trade payables                                      181.717          149.109              --         135.398

Other goods and services                               2004             2003            2002            2004

Trade receivables                                    24.256           19.073         104.936          18.073
Inventories                                          27.652           21.106          44.197          20.603
Property, plant And equipment, net                    2.550            7.268           5.266           1.900
Intangible assets, net                                9.263            6.404           7.684           6.902
Trade payables                                       35.864           38.650          98.443          26.722


At 31 December 2004, 92 % (2003: 92%) of property, plant and equipment and 78 %
(2003: 80%) of inventories are located in Turkey. The rest balances are located
at overseas subsidiaries in Europe of which less than 4% (2003: less than 4%)
are located in Russia.

At 31 December 2004, 67% of trade receivables were from European countries
(2003: 72% and 2002: 66%), 30% from Turkish domestic market (2003: 23% and 2002:
30%) and the remaining 3% from the rest of the world (2003: 5% and 2002: 4%).

At 31 December 2004, 51% of trade payables were to European countries ((2003:
50% and 2002: 52%) and 26% to Turkish suppliers (2003: 25% and 2002: 23%) and
the remaining 23% to the rest of the world (2003: 25% and 2002:  25%).


28.       MONETARY  LOSS

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.

                                                                                                 US $ ('000)
                                                        31.12.2004    31.12.2003    31.12.2002    31.12.2004

Opening Working Capital (Working 1)                        223.630       591.215       (1.482)       166.627

Cash movements during the year
Fixed assets expenditure                                 (228.184)     (428.798)      (69.916)     (170.020)
Investments                                                     87        35.209       (3.616)            65
Long-term receivables and deposits                          14.307      (14.586)        37.952        10.660
Increase in long term debt                                (55.117)      (69.235)       476.302      (41.068)
Loss on sale of investment                                      --            --        30.233            --
non- cur rec                                                  (70)            70            --          (52)
Transfer to / from minority interest                        43.625        61.337         2.298        32.505
Net assets disposed on sale of subsidiary                       --            --      (61.862)            --
Addititon of general reserves                                  (9)      (36.001)            --           (7)
Disposal of retained earnings on sale of subsidiary             --            --        10.112            --

Sales                                                    4.404.715     3.563.384     3.011.749     3.281.957
Purchases (Working 3)                                  (3.862.232)   (2.938.282)   (2.213.857)   (2.877.752)
Operating expenses                                       (438.236)     (381.268)     (300.059)     (326.530)
Financing expenses                                        (70.838)     (107.949)     (228.968)      (52.781)
Other income                                                 4.997        20.320        18.393         3.723
Taxation charge                                           (41.574)      (32.130)      (43.435)      (30.977)
Minority Interest                                         (43.980)         (875)          (16)      (32.770)

Net Cash Inflow                                          (272.509)     (328.804)       665.310     (203.047)

Closing Working Capital per above                         (48.879)       262.411       663.828      (36.420)

Closing Working Capital (working 2)                       (67.670)       223.630       591.215      (50.421)

Monetary Loss                                             (18.791)      (38.781)      (72.613)      (14.001)


                                                                                                 US $ ('000)
Working 1: Opening Working Capital                    31.12.2004    31.12.2004    31.12.2001      31.12.2004

Cash and deposits with banks                             517.951       436.480       164.019         385.926
Marketable securities                                     47.467        89.760       137.226          35.368
Trade receivables                                        903.162       870.775       671.449         672.947
Other current assets                                     269.270       354.047       287.197         200.633

                                                       1.737.850     1.751.062     1.259.891       1.294.874

Short-term bank borrowings                             (105.121)     (112.420)     (460.610)        (78.326)
Trade payables                                       (1.284.707)     (931.477)     (700.132)       (957.236)
Other current liabilities                              (114.639)      (82.759)      (64.568)        (85.418)
Taxation on income                                       (9.753)      (33.191)      (36.063)         (7.267)
                                                     (1.514.220)   (1.159.847)   (1.261.373)     (1.128.247)

Working capital surplus / (deficit)                      223.630       591.215       (1.482)         166.627

Working 2:  Closing Working Capital

Cash and deposits with banks                             595.990       517.951       436.480         444.073
Marketable securities                                         --        47.467        89.760              --
Trade receivables                                      1.004.098       903.162       870.775         748.154
Other current assets                                     211.824       269.270       354.047         157.830

                                                       1.811.912     1.737.850     1.751.062       1.350.057

Short-term bank borrowings                             (149.976)     (105.121)     (112.420)       (111.747)
Trade payables                                       (1.562.878)   (1.284.707)     (931.477)     (1.164.502)
Other payables and accrued liabilities                 (152.891)     (114.639)      (82.759)       (113.919)
Taxation on income                                      (13.837)       (9.753)      (33.191)        (10.310)

                                                     (1.879.582)   (1.514.220)   (1.159.847)     (1.400.478)

Working capital surplus                                 (67.670)       223.630       591.215        (50.421)

Working 3: Purchases

Closing inventories                                      873.911       615.846       548.268         651.152
Cost of sales                                          3.604.167     2.870.704     2.226.779       2.685.467
Opening inventories                                    (615.846)     (548.268)     (561.190)       (458.867)

                                                       3.862.232     2.938.282     2.213.857       2.877.752



29.       POST BALANCE SHEET EVENTS

a) On the basis of its board decision dated 22 November 2004 the Group company
Vestel Savunma Sanayi A.S. has acquired 60% interest in Aydyn Yazylym ve
Elektronik Sanayi A.S. a Turkish company engaged in computer software
development with emphasis on military projects. The acquisition took place on 16
March 2005 against consideration of US $ 2.350.000 paid in cash or the same
date.

b) On 04 January 2005 the Manisa Branch of Vestel Komunikasyon Sanayi A.S.
engaged in production of digital devices was separated and was transferred in
its entirety to a newly formed group company named Vestel Digital Uretim A.S.
which was formed on the same date with share capital YTL 5.000.000. The
shareholders of Vestel Digital Uretim A.S. consisted of Vestel Dayanykly
Tuketim Mallary A.S. (96%) and two other group companies (1% each) and other
individual shareholders (2%).



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