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Vestel Elektronik (VESD)

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Friday 31 March, 2006

Vestel Elektronik

Final Results

Vestel Elektronik Sanayi Ve Ticaret
31 March 2006





                                             VESTEL ELEKTRONYK SANAYY VE
                                              TYCARET ANONYM SP YRKETY
                                              GROUP OF COMPANIES
                                              INFLATION ADJUSTED
                                             FINANCIAL STATEMENTS AT
                                                31 DECEMBER 2005
                                          TOGETHER WITH AUDITORS' REPORT



                   INDEPENDENT PUBLIC ACCOUNTANTS' REPORT OF
                   VESTEL ELEKTRONYK SANAYY VE TYCARET A.S.
                      FOR THE YEAR ENDED 31 DECEMBER 2005


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

1.       We have audited the accompanying consolidated balance sheet of Vestel
Elektronik Sanayi ve Ticaret Anonim Sirketi (the 'Company') and its
subsidiaries together with the Company (the 'Group') at 31 December 2005 and the
related consolidated statement of income, movement in shareholders' equity and
cash flows 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.

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

3.       The property, plant and equipment for TV production, a part of stocks
of finished goods, components and raw materials of Vestel CIS Ltd., the 100%
subsidiary of the Company in Russia were destroyed as a result of fire on 14
November 2005. The administrative building was also destroyed together with all
accounting records and documents.

The assessment of the damage resulting from the fire has been started and
according to the external auditor's report of Vestel CIS Ltd. the net book value
of fixed assets and stocks damaged or destroyed amounted respectively to YTL
17.899.433 of and YTL 19.830.433 together with claim for loss of profit the
total damage comes to YTL 41.341.006 (note 8) which has been accounted for under
'other current assets'. As of the report date negotiations between the insurance
company and Vestel CIS Ltd. have not yet been concluded. The management of
Vestel CIS Ltd. believes that there will be no difference between their claim
and the compensation to be received from the insurance company and therefore no
provision has been set aside in this respect.

Furthermore the local tax authority in Russia has asked for a reimbursement of
YTL 6.007.239 representing the Value Added Tax ('VAT') deducted in the past with
respect to fixed assets which have been destroyed by the fire. Negotiations with
the tax office have been in progress. No provision has been set aside in respect
of the VAT reimbursement in question.





The external auditor of Vestel CIS Ltd. has not been able to carry out its audit
as of 31 December 2005 in accordance with International Standards on Auditing
and has therefore not been able to express an opinion on the accounts as of 31
December 2005.

The total assets of Vestel CIS Ltd. are YTL 166.567.964 which amounts to 3,8% of
the consolidated total assets of the Group. The net loss of Vestel CIS Ltd. for
year ending 31 December 2005 is YTL 1.184.871 which amounts to 1,4% of the
consolidated net profit of the Group for same year. The management of the Group
is of the opinion that the total fire damage of YTL 41.341.006 does not have a
material effect on the operations of the Group.

4.       In our opinion, except for the effects, if any, of the matters
mentioned in paragraph three above the financial statements referred to above
present fairly, in all material respects the financial position of Vestel
Elektronik Sanayi ve Ticaret Anonim Sirketi and its subsidiaries at 31
December 2005 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

Istanbul
24 March 2006



                                    1

                    VESTEL ELEKTRONYK GROUP OF COMPANIES
                         CONSOLIDATED BALANCE SHEETS
                        AT 31 DECEMBER 2005 AND 2004

    (Currency shown in thousands of New Turkish Lira ('YTL') in equivalent
         purchasing power at 31.12.2005 unless otherwise indicated.)

ASSETS                                 Note       31.12.2005       31.12.2004
---------------------------------      -----         ---------        ---------

Current Assets
Cash and cash equivalents                 5          581.086          623.077
Trade receivables                         6        1.367.848        1.049.733
Due from group companies                 23              225           40.281
Inventories                               7        1.030.006          913.629
Other assets                              8          196.166          181.168
---------------------------------      -----        ---------        ---------
Total Current Assets                               3.175.331        2.807.888

Non-current Assets
Trade and other receivables                           13.077           10.425
Investments                               9            3.069            4.866
Property, plant and equipment, net       10          974.033          860.056
Intangible assets, net                   11          138.476          138.357
Other assets                              8           31.728               --
Deferred tax asset                       15           55.031           34.913
---------------------------------       -----        ---------        ---------
Total Non-current Assets                           1.215.414        1.048.617
---------------------------------       -----        ---------        ---------
Total Assets                                       4.390.745        3.856.505
---------------------------------       -----        ---------        ---------

      The accompanying notes are an integral part of these statements.


                                      2
    
                     VESTEL ELEKTRONYK GROUP OF COMPANIES
                         CONSOLIDATED BALANCE SHEETS
                         AT 31 DECEMBER 2005 AND 2004

     (Currency shown in thousands of New Turkish Lira ('YTL') in equivalent
         purchasing power at 31.12.2005 unless otherwise indicated.)

LIABILITIES AND EQUITY                Note        31.12.2005        31.12.2004
---------------------------------     -----          ---------         ---------

Current Liabilities
Borrowings                              12           171.934           156.792
Trade payables                          13         2.064.592         1.633.908
Taxation on income                      15            12.030            14.466
Other liabilites                        14           183.906           159.840
---------------------------------      -----         ---------         ---------
Total Current Liabilities                          2.432.462         1.965.006

Non-current Liabilities
Borrowings                              12           525.597           509.035
Reserve for retirement pay              16            18.456            26.003
Deferred tax liability                  15           115.753           175.004
---------------------------------      -----         ---------         ---------
Total Non-current Liabilities                        659.806           710.042

Equity and Reserves
Share capital                           17           576.862           576.862
Minority interest                                    160.432           110.722
General reserve                         18           477.837           406.935
Net income for the year                               83.346            86.938

Total Equity And Reserves                          1.298.477         1.181.457
---------------------------------      -----         ---------         ---------

Commitments And Contingencies           19
---------------------------------      -----         ---------         ---------
Total Liabilities And Equity                       4.390.745         3.856.505
---------------------------------      -----         ---------         ---------

       The accompanying notes are an integral part of these statements.


                                         3

                        VESTEL ELEKTRONYK GROUP OF COMPANIES
                           CONSOLIDATED INCOME STATEMENTS
                    FOR THE YEAR ENDED 31 DECEMBER 2005 AND 2004

(Currency shown in thousands of New Turkish Lira ('YTL') in equivalent purchasing power
                     at 31.12.2005 unless otherwise indicated.)

                                                    Note         01.01- 01.01-31.12.2004
                                                              31.12.2005               
--------------------------                           -----       --------        --------

Net sales                                                   4.456.229       4.604.903

Cost of Sales                                              (3.798.115)     (3.854.366)
---------------------------------                    -----     --------        --------
Gross Profit                                                  658.114         750.537

Selling expenses                                             (337.763)       (318.197)
General and administrative
expenses                                                     (141.642)       (138.089)
Warranty expenses                                             (30.972)        (30.327)
Other income / (expense), net                         20       22.265           5.224
---------------------------------                    -----     --------        --------
Income From Operations                                        170.002         269.148

Financing income / (expense),
net                                                   21      (36.085)        (74.057)
---------------------------------                    -----     --------        --------
Income Before Taxation                                        133.917         195.091

Taxation charge
Current                                                       (54.699)        (41.036)
Deferred                                                       43.592          (2.428)

Taxation on income                                    15      (11.107)        (43.464)
---------------------------------                    -----     --------        --------
Income Before Minority
Interest                                                      122.810         151.627

Minority interest                                             (30.168)        (45.979)

Monetary loss                                         27       (9.296)        (18.710)
---------------------------------                    -----     --------        --------
Net Income For The Year                                        83.346          86.938
---------------------------------                    -----     --------        --------
                                                                             

Basic and fully diluted
earnings per share (in full
TL)                                                    4          524             546
---------------------------------                    -----     --------        --------

          The accompanying notes are an integral part of these statements.



                                        4

                     VESTEL ELEKTRONYK GROUP OF COMPANIES
          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004

     (Currency shown in thousands of New Turkish Lira ('YTL') in equivalent
         purchasing power at 31.12.2005 unless otherwise indicated.)

                              Share   General  Minority   Net income       Total
                            capital  reserve   interest   for the year    equity
                            
                         ----------   ---------  -------  ---------  ----------

Balance at 1
January 2004              576.862   367.509     65.114     82.158    1.091.643

Distribution of income
- Transfer to
reserves                       --    82.158         --    (82.158)          --
Exchange
differences                    --    (1.552)      (427)        --       (1.979)
Transfer from
minority                       --       121       (121)        --           --
Consolidated
subsidiaries                   --        (9)       177         --          168
Deferred tax
liabilities                    --   (41.292)        --         --      (41.292)
Net income for
the year                       --        --     45.979     86.938      132.917
  ------------   --------   ------- ---------    -------  ---------   ----------
Balance at 1
January 2005              576.862   406.935    110.722     86.938    1.181.457

Distribution of income
- Transfer to
reserves                       --    86.938         --    (86.938)          --
Exchange
differences                    --      (433)       (92)        --         (525)
Transfer to
minority                       --        --     30.260         --       30.260
Consolidated
subsidiaries                   --   (15.603)    19.542         --        3.939
Net income for
the year                       --        --         --     83.346       83.346
------------------          ------- ---------    -------  ---------   ----------
Balance at 31
December 2005             576.862   477.837    160.432     83.346    1.298.477
------------------          ------- ---------    -------  ---------   ----------

        The accompanying notes are an integral part of these statements.




                                        5

                     VESTEL ELEKTRONYK GROUP OF COMPANIES
                      CONSOLIDATED CASH FLOW STATEMENTS
                 FOR THE YEAR ENDED 31 DECEMBER 2005 AND 2004

     (Currency shown in thousands of New Turkish Lira ('YTL') in equivalent
         purchasing power at 31.12.2005 unless otherwise indicated.)

                                                         01.01- 01.01-31.12.2004
                                             Note    31.12.2005               
                                            ----------  ----------     ---------

Cash flow provided by operating activities
Net income for the year                                 83.346          86.938
Adjustment to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization                  22      119.222         109.332
Provision for retirement pay                            (3.639)          5.523
Provision for tax                                       11.107          43.464
Provision for doubtful
receivables                                              1.273           4.045
Provision for expense
accurals                                                11.746          18.730
Warranty provision                                       2.757          (3.853)
Other                                                       --              (9)
-----------------------------                ------   ----------       ---------
Operating profit before
changes in working capital                             225.812         264.170

Changes in operating assets
and liabilities                                22      (10.578)         (4.808)
Taxes paid                                             (57.135)        (36.766)
-----------------------------                ------   ----------       ---------
Net cash provided by
operating activities                                   158.099         222.596

Cash flow from financing activities
Changes in current
borrowings, net                                         15.142          46.893
Changes in non-current
borrowings, net                                         16.562         (57.622)
Changes in minority interest                            34.107          45.608
-----------------------------                ------   ----------       ---------
Net cash provided by
financing activities                                    65.811          34.879

Cash flow from investing activities
Changes in investments                                   1.797              91
Changes in tangible and
intangible assets                                     (285.167)       (265.415)
Changes in other investing
activities                                     22      (34.380)         14.884
Net book value of fixed
assets disposed                                         51.849          24.927
-----------------------------                ------   ----------       ---------
Net cash used in investing
activities                                            (265.901)       (225.513)

Net increase (decrease) in
cash and cash equivalents                              (41.991)         31.962

Cash and cash eqivalents at
begining of year                                       623.077         591.115
-------------------------------              ------   ----------       ---------
Cash and cash equivalents at
end of year                                            581.086         623.077
-----------------------------                ------   ----------       ---------
                                                                      
                                      6

       The accompanying notes are an integral part of these statements.

             VESTEL ELEKTRONIK SANAYI VE TICARET A.S. GROUP OF COMPANIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEAR ENDED 31 DECEMBER 2005 AND 2004
   
(Currency shown in thousands of New Turkish Lira ('YTL')in equivalent purchasing 
                  power at 31.12.2005 unless otherwise indicated.)

1.            ORGANISATION AND NATURE OF ACTIVITIES
Vestel Elektronik Sanayi ve Ticaret Anonim  Sirketi (the 'Company' or 'Vestel
Elektronik') 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  P irketi
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

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

Nature of Activities of the Group

The Group is organized 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 color televisions. The
Company's production facilities are located in Manisa industrial site (Aegean
Region, Turkey). As of the balance sheet date, production capacity for color
televisions was 14.000.000 (2004: 12.500.000) units per year respectively .

Vestel-CIS Limited (Vestel CIS)

Vestel CIS was registered on 15 November 2002 (in Vladimir Region, Russia). The
Company is mainly engaged in the production of color 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 cookers.
Vestel White's production facilities are located in Manisa Organized industrial
site (Aegean Region, Turkey). As of the balance sheet date, production capacity
for refrigerators, room air conditioning units and washing machines was
2.800.000, 700.000 and 2.000.000 (2004: 2.000.000, 350.000 and 1.150.000) units
per year.

Vestel-CIS Limited (Vestel CIS)

During 2005, Vestel CIS commenced construction of white goods production
facilities and started its production by the end of 2005.

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 and internet access devices. Vestel Kom's production facilities are
primarily located in Yzmir Aegean free zone industrial site. As of the balance
sheet date, production capacity for digital devices was 8.600.000 (2004:
7.000.000) units per year.

Vetsel Dijital Uretim Sanayi A.S. (Vestel Dijital)

Vestel Dijital is engaged in the production of, analogue and digital receivers,
personal computers (PC) and internet access devices. Vestel Dijital's production
facilities are located in Manisa industrial site. As of the balance sheet date,
production capacity for digital devices was 2.800.000 units per year.

The Company has always exercised effective control over the management of each
of the companies included in the group consolidation. The direct and indirect
shareholding of Vestel Elektronik in their capital, are:

                                       Field of activity      Shareholding (%)
Consolidated Company     Location                            31.12.2005   31.12.2004
------------------------ --------     ---------- ----------  -------      -------
                                                

Vestel Beyaz Epya Sanayi
ve                         Turkey        Manufacturing             35,0%        35,0%
Ticaret A.S.

Vestel Komunikasyon
Sanayi                     Turkey        Manufacturing             99,2%        99,2%
ve Ticareti A.S.

Vestel CIS Ltd.            Russia        Manufacturing            100,0%       100,0%

Vestel Dijital Uretim
Sananayi A.S.              Turkey        Manufacturing             98,0%          --

Deksar Multimedya ve
Telekomunikasyon A.S.      Turkey        Information               99,9%        99,9%

Vestel Savunma Sanayi A.S. Turkey        Software                  29,9%        29,9%


Cabot Communications       England       Software                  90,9%        82,5%
Ltd.

Cabot Izmir Donanym
Sanayi ve                  Turkey        Software                  90,5%        85,6%
Ticaret A.S.

Veseg Video
Handelsgesellschaft GmbH   Germany       Marketing                 50,8%        50,8%

Vestel France SA           France        Marketing                 99,5%        99,5%

Vestel Iberia SL           Spain         Marketing                 99,7%        99,7%

Vestel Dyp Ticaret A.S.    Turkey        Marketing                 99,7%        99,7%


Vestel Benelux BV          Netherlands   Marketing                 50,8%        50,8%
Vestel UK                  England       Marketing                 99,7%        99,7%
Vestel Dayanykly Tuketim

Mallary Pazarlama A.S.     Turkey        Marketing                  99,8%        99,8%

Vestel Italy SRL           Italy         Marketing                  50,8%        50,8%

Vestel Holland BV          Netherlands   Marketing                  99,7%        99,7%

Aydyn Yazylym Elektronik
Sanayi ve Ticaret A.S.     Turkey        Software                   18,0%          --

Electronics Outlet SRL     Italy         Marketing                  50,8%          --

Vestek Elektronik
Araptyrma                 Turkey        Research and                93,8%          --
Geliptirme A.S.                         development


2.            BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as developed and published
by the International Accounting Standards Board ('IASB').
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.

Measurement Currency, Reporting Currency

In accordance with Law No. 5083 in respect of 'the Currency of the Turkish
Republic' published in the Legal Gazette dated January 31, 2004, numbered 25363,
which came into force from January 1, 2005, a new local measurement and
reporting currency unit has been introduced. Turkish Lira (TL) currency units
formerly used have been converted to New Turkish Lira (YTL) at the rate of
1,000,000 TL= 1 YTL. Both notes and coins of the former (TL) as well as the new
currency units (YTL) were in circulation during 2005.

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 most recent
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%. The restatement of previous periods in the
accompanying financial statements has been based on the conversion factors
obtained from the Wholesale Price Indices ('WPI') published by the State
Institute of Statistics of Turkey. As of 31 December 2005, the three year
cumulative rate has been 36% (31 December 2004: 70%) based on the Turkish
countrywide wholesale price index published by the State Institute of
Statistics. These indices and the conversion factors are shown below:

Year                                        2005           2004           2003
------------------------------            --------       --------       --------

Index                                    8,785.7        8,403.8        7,382.1
Conversion factor                          1.000          1.045          1.190



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 for the year ended December 31, 2005.


   • Monetary assets and liabilities reported in the balance sheet as of
    December 31, 2005 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 is derived by indexing cash
    contributions, dividends reinvested, transfers from statutory retained
    earnings and income from sale of investments and property, transferred to
    share capital from the date they were contributed and registered so.


   • The financial statements of the prior periods are restated with current
    purchasing power of money at the most recent balance sheet date.


   • All items in the income statement are restated by applying the monthly
    conversion factors except for depreciation, amortization, gain or loss on
    disposal of non-monetary assets which are calculated based on the restated
    gross book values and accumulated depreciation or amortization of the
    related values.


   • The effect of general inflation on the net monetary position is included
    in the income statement as monetary gain (loss).

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 summarized 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 recognized.

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 2005 have been
translated from New Turkish Lira to EURO 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 organizationally
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:

                                                 31.12.2005         31.12.2004
--------------------------------                -----------         ----------
US Dollar                                            1,3418             1,3421
EURO                                                 1,5875             1,8268

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment 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 2005 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 capitalized 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 recognized in income.

LEASES

Finance Lease - Assets held under finance leases are recognized 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 Lease - 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 recognized as an expense on a
straight-line basis over the lease term.

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

INTANGIBLE ASSETS

Goodwill - Goodwill arising on consolidation 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., Vestel
Beyaz Epya Sanayi ve Ticaret A.S. and Aydyn Yazylym Elektronik Sanayi ve
Ticaret A.S. at the date of acquisition. Goodwill is initially recognized as
an asset at cost and is subsequently measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill is allocated
to each of the Group's cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently when there is
an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit.

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

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

Research and development costs - Research expenditure is recognized as an
expense as incurred. Costs incurred on development projects (relating to the
design and testing of new or improved products) are recognized as intangible
assets to the extent that the expenditure is expected to generate future
economic benefits. Development costs that have been capitalized are amortized on
straight line basis over 5 years. The carrying values of capitalized 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 programs are recognized 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 recognized 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
programs beyond their original specifications is recognized as a capital
improvement and added to the original cost of the software. Computer software
development costs are recognized as assets and amortized 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 licenses and amortized using the straight line basis over their useful
lives, varies between 5 to10 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 recognized at cost, restated at the equivalent
purchasing power of Turkish lira at 31 December 2005, being the fair value of
the consideration given and including acquisition charges associated with the
investment.

For investments that are actively traded in organized 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 2005, 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 23).
ALLOWANCE FOR UNEARNED INTEREST

Unearned interest is calculated at the rate of 13,8% (31 December 2004: 21%) per
year for New Turkish Lira and 3,5 % (31 December 2004: 2,6%) per year for
foreign currency on receivables and payables at the balance sheet date.

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.

REVENUE RECOGNITION

Revenue is recognized 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 2005.

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

Rental income - on an accrual basis.
Interest income - on an effective yield basis.


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.
Deferred income tax liabilities are recognized for all taxable temporary
differences.

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 utilized.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the period when the asset is realized 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 recognized in net profit or loss in the period in which they are
incurred.

PROVISIONS

Employee benefits - Under Turkish labor 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 recognizes 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 recognized 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 recognized as a separate asset
but only when the reimbursement is virtually certain.

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.

CASH AND CASH EQUIVALENTS

For the purpose of cash flow statement, cash and cash equivalents comprise cash
in 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.

4.            EARNINGS PER SHARE

                                                    31.12.2005      31.12.2004
---------------------------------                   ----------      ------------

Net profit attributable to shareholders (YTL
Thousand)                                               83.346          86.938
Weighted average number of ordinary shares in
issue ('000)                                       159.100.000     159.100.000
---------------------------------                     ----------      ----------
Basic and diluted earnings per share (in full TL
per share)                                                 524             546
---------------------------------                     ----------      ----------

5.            CASH AND CASH EQUIVALENTS

Cash at bank and in hand                              570.557          623.077
Other                                                  10.529               --
---------------------------------                    ----------       ----------
                                                      581.086          623.077
---------------------------------                    ----------       ----------

The maturity of time deposits was between January 2006 and January 2007 and the
interest rate was 2% per year for foreign currency and 14% for New Turkish Lira
per year (31 December 2004: the interest rate was 1,85% for foreign currency and
36,7% for New Turkish Lira per year).

6.            TRADE RECEIVABLES

Trade recivables
- Third parties                                      1.090.297         741.748
- Related parties (note 23)                                647           1.682
Notes recievable
- Third parties                                        300.336         323.726
Less: unearned interest on receivables                 (14.703)         (9.771)
Less: allowance for doubtful receivables                (8.982)         (8.938)
Other                                                      253           1.286
---------------------------------                      ----------     ----------
                                                     1.367.848       1.049.733
---------------------------------                     ----------      ----------

The movement of doubtful receivables is given below:

Beginning balance                                       8.938           4.893
Charge for the period, net                              1.278           5.464
Proceeds from doubtful receivables                       (833)           (846)
Monetary gain                                            (401)           (573)
---------------------------------                    ----------      ----------
Ending balance                                          8.982           8.938
---------------------------------                    ----------      ----------
7.            INVENTORIES

                                                  31.12.2005        31.12.2004
----------------------------------                 ----------          ---------

Raw materials                                        320.985           309.391
Work in process                                       42.589            39.693
Finished goods and merchandises                      413.853           276.902
Spares and supplies                                    4.175             4.029
Goods in transit                                     248.404           283.614
----------------------------------                 ----------         ---------
                                                   1.030.006           913.629
----------------------------------                 ----------         ---------

8.            OTHER ASSETS

Current
Prepaid expenses                                         25.123         31.743
Income accruals                                          43.655        100.915
Receivable from insurance company (*)                    41.341             --
VAT receivable                                           59.758         38.203
Work advances                                             4.222          6.091
Due from personnel                                          753            859
Project expenses                                         17.273          1.614
Other                                                     4.041          1.743
----------------------------------                    ----------      ---------
                                                        196.166        181.168
----------------------------------                    ----------      ---------

Non-current
Prepaid expenses                                         31.583             --
Other                                                       145             --
----------------------------------                    ----------      ---------
                                                         31.728             --
----------------------------------                     ----------      ---------

(*) Vestel CIS Limited' s property, plant and equipment used for television
production, part of finished goods, components and raw materials were fully
destroyed by fire on 14 November 2005. Vestel CIS Limited is negotiating
insurance claims in the amount of YTL 41.341 (USD 30.810 thousand) with respect
to a fire that destroyed certain Company properties, and the resulting business
interruption the outcome of which is not known as of the date of these financial
statements.


9.  INVESTMENTS

                              Country          Share percentage             Restated Amount
Entity                                         31.12.2005     31.12.2004   31.12.2005   31.12.2004
--------------------                            --------       --------     --------     --------
                                  
Unconsolidated Entity
Vestpro Electronics SA       Romania                52%            52%         301          301
Vestel USA Inc.              USA                   100%           100%         233          233
Vestel Elektronika SA        Romania               100%            --           18           18
Vestel India                 India                 100%            --           10           --

Less: Allowance for diminution in value
Vestpro Electronics SA       Romania                                          (301)        (301)
Vestel USA Inc.              USA                                              (233)        (233)
--------------------       -------              --------       --------     --------     --------
                                                                                28           18

Other investments
Zorlu Enerji Elektrik
Uretimi A.S.               Turkey       Less than 1%   Less than 1%        3.013        2.960
Vestelnet Elektronik
Yletipim A.S.              Turkey                 --              2%          --        1.860
Tursoft A.S.               Turkey                  7%             7%          13           13
Zorlu Endustriyel
Enerji A.S.                Turkey                  1%             1%           3            3
Yzmir Teknoloji
Geliptirme A.S.            Turkey                  5%             5%          12           12
--------------------         -------              --------       --------     --------     --------
                                                                             3.069        4.866
--------------------         -------              --------       --------     --------     --------

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

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

- Zorlu Enerji Elektrik Uretimi Otoproduktor Grubu A.S. shares are quoted at
the Istanbul Stock Exchange and are shown at market value by reference to the
average of the closing bid prices of the last five days preceding 31 December
2005 as required by IAS 39.

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 recognized market.

10.        PROPERTY, PLANT AND EQUIPMENT, net

                        Land Machinery and     Motor Furniture and  Construction     Total
                         and   equipment    vehicles     fixtures                   
                   buildings                                         in progress
                     -------   -------      -------       -------      ---------     -------

Restated cost
Balance at 31
December 2004      169.373     1.074.281     2.832        72.583        72.174   1.391.243
Additions           14.437        90.695     1.489         9.240       157.849     273.710
Disposals          (11.997)      (46.746)     (109)       (2.825)       (6.558)    (68.235)
Consolidated
companies               --         6.254       354         3.299            --       9.907
Translation
differences         (1.998)         (935)     (133)         (264)         (687)     (4.017)
Transfers           43.818       101.024        --         1.033      (146.080)       (205)
----------------     -------       -------   -------       -------      --------     -------
Balance at 31
December 2005      213.633     1.224.573     4.433        83.066        76.698   1.602.403

Restated accumulated
depreciation
Balance at 31
December 2004       18.251       463.733     1.029        48.174            --     531.187
Additions            4.948        93.431       696         6.342            --     105.417
Disposals             (402)      (15.163)      (77)       (1.107)           --     (16.749)
Consolidated
companies               --         6.201       174         2.614            --       8.989
Translation
differences           (147)         (136)      (28)         (163)           --        (474)
Transfers               --            42        --           (42)           --          --
----------------     -------       -------   -------       -------      --------     -------
Balance at 31
December 2005       22.650       548.108     1.794        55.818            --     628.370

Net book value
as of

31 December
2004               151.122       610.548     1.803        24.409        72.174     860.056
----------------     -------       -------   -------       -------      --------     -------

31 December
2005               190.983       676.465     2.639        27.248        76.698     974.033
----------------     -------       -------   -------       -------      --------     -------

Property, plant and equipment have been mortgaged to the extent of YTL 45.000 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 34.231 (2004: YTL 41.394) 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. Significant portion of the
construction-in-progress balance represented investment made in Vestel Beyaz
Epya to increase its refrigerator and washing machine production capacity and
new investment made in cooker and dishwasher segment during 2004 and 2005.

As of 31 December 2005, disposals from property, plant and equipment includes
restated cost and accumulated depreciation amounting to YTL 20.403 and YTL 2.503
related to fully destroyed Vestel CIS plant (Russia) used for television
production on 14 November 2005.
11.        INTANGIBLE ASSETS, net

                                     Goodwill      Research      Other   Total
                                                       and   intangible  
                                                development   assets
                                                     cost      
                                     ---------    ---------  --------- ---------

Restated cost
Balance at 31
December 2004                          72.637      38.545    140.356   251.538
Additions                               2.672          --     11.864    14.536
Disposals                                  --          --       (395)     (395)
Consolidated
companies                                  --          --      2.273     2.273
Translation
differences                            (1.184)         --       (271)   (1.455)
Transfers                                  --          --        205       205
------------------------              --------   ---------    -------   -------
Balance at 31
December 2005                          74.125      38.545    154.032   266.702

Restated accumulated amortization
                                            
Balance at 31
December 2004                          14.212       5.544     93.425   113.181
Additions                                  --       2.330     11.475    13.805
Disposals                                  --          --        (32)      (32)
Consolidated
companies                                  --          --      1.607     1.607
Translation
differences                              (168)         --       (167)     (335)
------------------------               --------   ---------    -------   -------
Balance at 31
December 2005                          14.044       7.874    106.308   128.226

Net book value as of

Balance at 31
December 2004                          58.425      33.001     46.931   138.357
------------------------               --------   ---------    -------   -------

Balance at 31
December 2005                          60.081      30.671     47.724   138.476
------------------------               --------   ---------    -------   -------

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.

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


12.     BORROWINGS

                                          Current            Non - Current
                                       Foreign        YTL    Foreign        YTL
                                               Equivalent Currency   Equivalent
                                    Currency                
                                      --------   --------   --------    --------
31.12.2005
New Turkish
lira
borrowings                                --      1.049         --         --
Foreign currency bank borrowings
-USD ('000)                           27.184     36.476    249.141    334.297
-EURO ('000)                          82.215    130.516    118.644    188.347
Finance lease liabilities, net
-USD ('000)                            1.273      1.708      1.774      2.380
-EURO ('000)                           1.376      2.185        362        573
------------------------             --------   --------   --------   --------
                                                171.934               525.597
------------------------             --------   --------   --------   --------

31.12.2004
New Turkish
lira
borrowings

and accured
interest on
bank
borrowings                                --      1.771         --         --
Foreign currency bank borrowings
-USD ('000)                           13.204     18.526    216.351    303.562
-EURO ('000)                          68.835    131.464    103.722    198.092
Finance lease liabilities, net
-USD ('000)                            1.440      2.021      3.064      4.300
-EURO ('000)                           1.576      3.010      1.614      3.081
------------------------             --------   --------   --------   --------
                                                156.792               509.035
------------------------             --------   --------   --------   --------

The effective interest rates of foreign currency loans and New Turkish Lira
loans vary between 2,7 % and 11,4% (2004: - 2,8% and 12% and) and 0% (2004- 0%
and 15%) respectively.

Summary maturity schedule of bank borrowings were as follows:

                                                  31.12.2005       31.12.2004
------------------------------------                 --------         --------

Due in one year                                      171.934          156.792
Due between one to five years                        215.747          504.626
Over five years                                      309.850            4.409
------------------------------------                --------         --------
                                                     697.531          665.827
------------------------------------                --------         --------

Letters of guarantee and notes amounting to YTL 67.740 (USD 15.000.242 and EURO
29.992.000) have been given as collateral for Turkish Eximbank and other credits
(2004: YTL 34.104 (EURO 18.411.066)).

Property, plant and equipment have been mortgaged to the extent of YTL 45.000 as
collateral against bank loans and bank guarantees on letters of credit.

13.        TRADE PAYABLES

                                                  31.12.2005        31.12.2004
---------------------------------                 ----------        ----------

Trade payables
- Third parties                                    1.516.343         1.175.968
- Related parties (note 23)                            1.272             2.838
Letters of credit                                    243.850           159.400
Letters of credit discounted                         248.925           209.211
Notes payable                                         56.872            88.660
Less: unearned interest on payables                   (3.285)           (3.387)
Other                                                    615             1.218
---------------------------------                  ----------        ----------
                                                   2.064.592         1.633.908
---------------------------------                  ----------        ----------

14.        OTHER LIABILITIES

Income tax and social security payables                  20.038         14.775
Advances received                                        18.373         20.837
Warranty expense provision                               39.252         36.495
Accrued expenses                                         11.746         18.730
Forward expense accurals                                 62.526         66.603
Deferred project income                                  20.263             --
Due to personel                                           6.663            454
Other                                                     5.045          1.946
---------------------------------                    ----------     ----------
                                                        183.906        159.840
---------------------------------                    ----------     ----------


15.        TAXATION ON INCOME

The Corporation Tax rate on the profits for the calendar year 2004 was 30%.
However according to Law 5035 published on 2 January 2004 the Corporation Tax
rate for the taxable profits of 2004 only has been determined as 33%. Taxable
profits are calculated by addition of tax disallowed expenses to and deduction
of tax exempt income from the profit disclosed in the statutory income.

The tax legislation provides for a provisional tax of 30% (25% before April 24,
2003) to be calculated and paid based on earnings generated for each quarter.
The amounts thus calculated and paid are offset against the final tax liability
for the year. However, in accordance with Law No. 5035, provisional taxes for
the year 2004 was calculated and paid at the rate of 33%.

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

   • Up to 24 April 2003, the rate was 5,5% and 16,5% respectively for public
    and non public companies.
   • 24 April 2003 -31 December 2003 the rate was 11%.
   • After 1 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 bare 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.

In addition, the Turkish government offers investment incentives to companies
that make certain qualifying capital investments in Turkey. Prior to 24 April
2003 the total amount of qualifying capital investments was deducted from
taxable income and the remainder of taxable income, if any, was taxed at the
corporate rate. A withholding tax 19,8% was applied to the total amount of
qualifying capital investments. With effect from 24 April 2003, the investment
scheme was amended such that companies are no longer subject to a withholding
tax, but rather directly deduct 40% of qualifying capital investments from their
annual taxable income. In addition, corporations that had unused qualifying
capital investment amounts from periods prior to 24 April 2003 were entitled to
carry forward these and apply the 19,8% withholding tax to these amounts in the
manner described above.

Tax losses that are reported in 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 December 2003 has introduced changes and
additions to the taxation of companies with effect from 1 January 2004, as
follows:

   • Taxable profits as from 1 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 exceeds 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 limits 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 1 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.

Law Nr: 5024 related to inflation accounting for tax purposes calls for a
cumulative inflation rate of over 100% for previous 36 months and over 10% for
previous twelve months. As the 36 months inflation rate has fallen under 100%
and 12 months inflation to 10%, No application for inflation accounting up to
the reporting date.

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

                                                 31.12.2005        31.12.2004
---------------------------------                 ----------        ----------

Corporation and income taxes                         54.699            41.036
Less : Prepaid taxes                                (42.669)          (26.570)
---------------------------------                 ----------        ----------
Taxes payable                                        12.030            14.466
---------------------------------                 ----------        ----------

The Group recognizes 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 2005 and 2004 using the expected future tax rates were as
follows:

                                                         31.12.2005                                  31.12.2004
-------------------------    ---------------   ---------    --------                       -----------   ----------
                                                 Cumulative   Deferred                     Cumulative     Deferred
                                                 temporary      Tax                         temporary        Tax
                                                 difference                                 difference                  
                                         
-------------------------   ----------------   ----------    --------                        ---------   ----------

Deferred Tax Asset
Warranty
expense
provision
                                                   32.879     9.864                            29.161     8.748
Retirement pay
provision                                          16.173     4.852                            18.760     5.628
Unearned
interest on
receivables                                        14.246     4.274                             9.771     2.931

Capitalised finace
charges written off on
inventory and
fixed assets                                       12.728     3.818                            15.571     4.679

Finance lease
liabilities                                         2.056       617                             5.990     1.797

Provision for
doubtful
receivables                                         6.536     1.961                             7.186     2.156

Interest income on                                     --        --                                --        --
marketable securities

Expense
accruals                                           67.273    20.182                             8.599     2.580

Investment
incentive
allowances                                         21.500     2.193                            53.469     5.454

Taxable loss                                        4.788     1.436                                --        --

Other                                              19.450     5.834                             3.129       940
-------------------------                          --------   -------                          --------  --------
                                                             55.031                                      34.913
-------------------------                          --------   -------                          --------  --------

Deferred Tax Liability
Temporary differences
arising from restating:

-Inventories,
prepaied
expenses and
fixed assets                                      189.073    56.749                           267.617    80.295

Income
accruals                                          182.590    54.777                           301.053    92.723
Unearned
interest on
payables                                            9.800     2.940                             3.387     1.016

Other                                               4.302     1.287                             3.234       970
-------------------------                          --------   -------                          --------  --------
                                                            115.753                                     175.004
-------------------------                          --------   -------                          --------  --------



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 1,727 (2004: YTL 1,5477 (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.
As of 31 December 2005, in the accompanying financial statements in accordance
with revised IAS 19 (Employee Benefits) the Group reflected a liability for
termination benefits based upon factors derived using their experience of
personnel terminating their services and being eligible to receive retirement
pay and discounted to present value at the balance sheet date by using average
market yield, expected inflation rates and an appropriate discount rate. Revised
IAS 19 has been applied for the first time in the financial statements for the
period ended 31 December 2005. The effect of the change in this accounting
policy has been accounted for prospectively in the current year income statement
as the effect on opening retained earnings was not deemed to be material.

The Group has no other obligation for employee termination other than the
retirement pay above.

                                                  31.12.2005        31.12.2004
----------------------------------                 ----------         ---------

Opening Balance                                       26.003            20.480

Charge for the period                                  5.639             9.881
Change in accounting estimate                         (8.741)               --
Consolidated entity                                      593                --
Disposals                                             (3.908)           (1.867)
Monetary gain                                         (1.130)           (2.491)
----------------------------------                  ----------         ---------
Closing balance                                       18.456            26.003
----------------------------------                  ----------         ---------

----------------------------------                  ----------         ---------
Number of personnel employed as of year end:               11.845       11.286
----------------------------------                  ----------         ---------

Personnel cost:
                                                        01.01-           01.01-
----------------------------------     31.12.2005       31.12.2004
                                                    ----------        ---------

Gross salaries, wages and employer's
share of social insurance                            200.181          142.911
----------------------------------                  ----------        ---------



17.        SHARE CAPITAL

The authorized share capital of the Company comprised 220.000.000.000 shares of
par value YTL 0,001 each at 31 December 2005. The issued and paid up share
capital of the Company comprised 159.099.866.960 shares of par value YTL 0,001
each at 31 December 2005 and 2004.

As of 31 December 2005 and 2004 the shareholders of the Company and their
percentage shareholdings were as follows:
                                                          Shareholding
                                                              %      Amount
-----------------------------------                     ---------      ---------

Collar Holding BV                                         51,59%        82.082
Other shareholders                                        48,41%        77.018
-----------------------------------                     ---------      ---------

Share capital (Nominal)                                  100,00%       159.100

Inflation adjustment of share capital                                  417.762
-----------------------------------                     ---------      ---------
Restated share capital equivalent
to purchasing power of
New Turkish Lira                                                       576.862
-----------------------------------                     ---------      ---------

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.        COMMITMENTS AND CONTINGENCIES

a) At 31 December 2005 the Company had contingent liabilities of YTL 164.165
(2004: YTL 94.971) 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 realize exports amounting to USD 540.423.000 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
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.

f) The Group signed a loan agreement with Vakyflar Bankasy for USD 114,4
million. Group companies and the majority shareholder of the Company were
guarantors to the agreement. Additionally, a Group company has signed a loan
agreement with the same financial institution for YTL 20 million and the Company
and Group companies were guarantors to this credit facility.

g) Claims from court cases started by the group and pending as of 31 December
2005 amounted to YTL 5.723, USD 45.000 and EURO 285.000. Claims from court cases
started and pending against the group as of the same date was YTL 135.

Included among the court cases started by the group are receivables totalling
YTL 4.626 and tax claim of YTL 944 which have been provided for in full. In
addition a provision of YTL 110 has been set aside in respect of court cases
opened against the group.

h) A law suit has been initiated against the Company by two companies which
engaged in the production of household appliances for the invalidity of the
patent certificate. The Company has initiated a counter law suit with a claim to
cancel the patent certificate from the related registry and invalidity of the
same. The law-suits are still pending and at the stage of expert evaluation. The
Company does not believe that this litigation will have a material adverse
effect on the results of operation or financial condition of the Company.

i) Vestel CIS Limited's property, plant and equipment used for television
production, part of finished goods, components and raw materials were fully
destroyed by fire on 14 November 2005. In addition, construction in progress
also suffered fire damage.Vestel CIS Limited is negotiating insurance claims in
the amount of YTL 41.341 (USD 30.810 thousand) with respect to a fire that
destroyed certain Company properties, and the resulting business interruption
the outcome of which is not known as of the date of these financial statements.

j) Company is negotiating with relevant tax authorities a VAT reclaim on the
destroyed properties in the amount of YTL 5.967 (USD 4 477 thousand), the
outcome of which is uncertain due to relevant Russian tax legislation. No
provision for any loss relating to this insurance claim and VAT reclaim has been
made in the financial statements.
k) Total obligation of the Company related to operational lease aggreements is
amounted to YTL 2.559 (31.12.2004: 5.624 YTL).

20.        OTHER INCOME / (EXPENSE), net

                                                      01.01-     01.01-31.12.200
              31.12.2005                   4
----------------------------------                 ----------           ---------

Scrap and other sales                               14.434              12.043
Export commission and freight related
income                                               7.428               6.528
Insurance claims refund                                776                 687
Profit on sale of fixed assets                         635               1.608
Idle capacity expenses                              (7.170)                 --
Reversal of unnecessary provision                   11.652                  --
Miscellaneous income                                 4.250               4.629
Loss on sale of fixed assets                        (6.717)            (18.447)
Miscellaneous expense                               (3.023)             (1.824)
----------------------------------               ----------           ---------
                                                    22.265               5.224
----------------------------------               ----------           ---------

21.        FINANCIAL INCOME / (EXPENSE), net

Foreign exchange gain / (loss)
on imports, borrowings exports and other receivables        39.360     (33.181)
Interest expense                                           (55.970)    (62.317)
Letters of credit expenses                                 (32.075)    (16.860)
Finance lease interest expenses                               (768)     (1.160)
Factoring expenses                                          (3.411)     (2.529)
Interest income from demand deposits                        75.445     119.387
Fair value gain / (loss) on forward contracts              (36.308)    (62.731)
Bank commissions and other financial expenses              (22.358)    (14.666)
----------------------------------                        ----------   ---------
                                                           (36.085)    (74.057)
----------------------------------                        ----------   ---------





22.        SUPPLEMENTARY CASH FLOW INFORMATION

                                                     01.01-     01.01-31.12.2004
----------------------------------               31.12.2005                    
                                                 ----------           ----------

Depreciation and Amortization:
Cost of sales                                      97.868               86.395
Selling expenses and
general and administrative expenses                21.354               22.937
----------------------------------              ----------           ----------
                                                  119.222              109.332
----------------------------------              ----------           ----------

Changes in operating assets and liabilities:
Trade receivables                                       (319.388)     (108.817)
Inventories                                             (116.377)     (269.794)
Due from related parties                                  40.056        12.787
Prepayments and other current assets                     (14.998)       47.270
Trade payables                                           430.684       290.168
Other payables and current liabilities                   (30.555)       23.578
----------------------------------                     ----------    ----------
                                                         (10.578)       (4.808)
----------------------------------                     ----------    ----------


Changes in other non-current assets and liabilities:
Trade receivables                                          (2.652)     14.957
Other assets                                              (31.728)        (73)
----------------------------------                      ----------  ----------
                                                          (34.380)     14.884
----------------------------------                      ----------  ----------




23.        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:

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

            31.12.2005
Vestel
Elektronika SA                         --         117         --            --
Zorpet
Petrogaz,
Petrol, Gaz ve
Petrokimya
A.S.                                159          --         69            --
Vestel USA
Inc.                                  469          --         --            --
L-3
Communications
Investments                            --          --      1.013            --
Other related
parties                                19         108        190            --
------------------------          ---------     -------   --------      --------
                                      647         225      1.272            --
------------------------          ---------     -------   --------      --------

                        31.12.2004
Vestelnet Elektronik Yletipim A.S.      --     40.162          6         --
Zorlu Holding A.S.                      --         --      2.705         --
Korteks Mensucat Sanayi A.S.            78         --        120         --
Vestel USA Inc.                          400         15         --         --
Zorlu Linen Dokuma A.S.                946         --         --         --
Other related parties                    258        104          7         --
------------------------              ---------    -------   --------   --------
                                       1.682     40.281      2.838         --
------------------------              ---------    -------   --------   --------

24.        FINANCIAL INSTRUMENTS

Financial Risk Management Objectives and Polices
The Group'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 Group's operations. The Group has various other
financial instruments such as trade debtors and trade creditors, which arise
directly from its operations.

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

Foreign exchange risk - The Group operates internationally and matches its
foreign currency commitments primarily from its foreign currency trade
receivables. Foreign currency position of the Group as of 31 December 2005 is
shown below:

                                    USD        EURO        GBP        YTL
                                 ('000)      ('000)     ('000)    Equivalent
-------------------------       ---------    --------     ------    --------

Cash and cash equivalents        48.832     103.508        179         230.238
Trade receivables               249.875     378.138      1.120         938.058
Inventories                     174.305     123.640        217         430.642
Other receivables                45.766       8.038        629          75.564
-------------------------      ---------    --------     ------        --------
Assets                          518.778     613.324      2.145       1.674.502

Borrowings                      279.372     202.597         --         696.483
Trade payables                  916.939     450.592        979       1.947.833
Advance received                  8.439       3.272         47          16.622
Other liabilities                15.101          --         --          20.263
-------------------------      ---------    --------     ------        --------
Liabilities                   1.219.851     656.461      1.026       2.681.201
-------------------------      ---------    --------     ------        --------
Net foreign currency position  (701.073)    (43.137)     1.119      (1.006.699)
-------------------------      ---------    --------     ------        --------

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

Credit risk - The Group'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 Group's management based on prior experience and
the current economic environment.
Liquidity risk - The Group raises funds by liquidating its short term financial
instruments, eg by collecting receivables and disposing of marketable
securities. The Group's proceeds from these instruments generally approximate
their fair values.

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
Group 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 Group is based on
such market data. The fair values of the remaining financial instruments of the
Group can only be estimated. The estimates presented herein are not necessarily
indicative of the amounts the Group could realize in a current market exchange.

The following methods and assumptions were used to estimate the fair value of
the Group'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.        SEGMENT INFORMATION

The Group is currently organised into three major production divisions. The
basis on which the Group 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/Turkey).
Produced by Vestel Dijital Uretim Sanayi A.S. (Manisa/Turkey).

White Goods :Produced by Vestel Beyaz Esya Sanayi ve Ticaret A.S.(Manisa/
Turkey).
Produced by Vestel Trade-CIS (Vladimir Region/Russia)

Segment information about these businesses is presented below:

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

                                 01.01- 31.12.2005        01.01- 31.12.2004
                                 Sales       Sales        Sales       Sales
                                Amount       volume      amount       volume
--------------------------      -------     --------     -------     --------

Television                     2.797.912   10.868.211   3.018.137   10.144.162
- Domestic                       499.189    1.338.265     333.521      879.050
- Export                         443.839    1.779.806     631.733    1.905.020
- Foreign marketing companies  1.854.884    7.750.140   2.052.883    7.360.092
Monitor                           24.125      267.749      11.713       74.829
- Domestic                        12.737       96.986      11.686       74.779
- Export                              14           26          27           50
- Foreign marketing companies     11.374      170.737          --           --
Electronic Devices               545.342    7.314.755     677.700    8.131.372
- Domestic                       148.371    1.028.466     107.778      687.778
- Export                          54.848      995.718     114.929    1.182.406
- Foreign marketing companies    342.123    5.290.571     454.993    6.261.188
White goods (2004: White goods
and other)                       902.191    3.203.442     897.353           --
- Domestic                       398.113      832.743     510.395           --
- Export                         182.787      938.669     192.025           --
- Foreign marketing companies    321.291    1.432.030     194.933           --
Other                            186.659           --          --           --
- Domestic                       186.659           --          --           --
--------------------------      --------     --------    --------     --------
                               4.456.229                4.604.903
--------------------------      --------     --------    --------     --------

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

                                01.01- 31.12.2005         01.01-31.12.2004
                               Sales         Sales        Sales       Sales
                              Amount        volume       amount      volume
--------------------------     --------       -------     --------     -------

Germany                         548.197     2.164.831     646.259   2.101.778
United Kingdom                  464.591     1.823.995     362.787   1.172.586
France                          262.351     1.052.771     260.304     857.220
Denmark                          37.404       162.918      31.466     105.614
Portugal                         34.607       149.830      45.811     151.815
Netherlands                      79.322       322.832      96.103     314.500
Spain                           217.339       874.363     315.345   1.051.701
Italy                           216.894       883.110     261.726     878.473
Russia                          140.491       564.926     189.768     628.886
Others                          297.527     1.530.370     475.047   2.002.539
--------------------------      --------      --------    --------    --------
                              2.298.723     9.529.946   2.684.616   9.265.112
--------------------------      --------      --------    --------    --------

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

                                  01.01- 31.12.2005         01.01-31.12.2004
-------------------------           --------------           --------------
                                      Gross profit          Gross profit
                                        Amount        %        Amount       %
-------------------------              ---------    -----   ---------    ------

Domestic
Televisions                             106.594       21         80.976     24
Monitors                                  1.437       11          1.311     11
Electronic Devices                       24.392       16         21.687     20
White goods                              74.162       19         91.263     18
Others                                   28.955       14             --    --
-------------------------             ---------   ------      --------- ------
Domestic total                          235.540       19        195.237     20

Export
Televisions                             287.480       13        386.301     14
Monitors                                  1.157       10             --    --
Electronic Devices                       41.656       10         85.936     15
White goods                              92.281       18         83.063     21
-------------------------             ---------   ------      --------- ------
Export total                            422.574       13        555.300     15
-------------------------             ---------   ------      --------- ------
Total                                   658.114       15        750.537     16
-------------------------             ---------   ------      --------- ------

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

Television and Monitor                            31.12.2005        31.12.2004
---------------------------------                   ----------        ----------

Trade receivables                                  1.121.299           805.113
Inventories                                          709.301           630.807
Property, plant and equipment, net                   564.546           536.281
Intangible assets, net                                89.352            85.574
Trade payables                                     1.599.660         1.190.382

Electronic Devices
---------------------------------                   ----------        ----------

Trade receivables                                     70.435            62.230
Inventories                                          176.028           164.684
Property, plant and equipment, net                    80.965            77.787
Intangible assets, net                                39.714            39.938
Trade payables                                       239.482           216.057
---------------------------------                   ----------        ----------

White goods
---------------------------------                   ----------        ----------

Trade receivables                                    156.899           157.032
Inventories                                          122.127            89.229
Property, plant and equipment, net                   325.392           243.322
Intangible assets, net                                 2.837             3.161
Trade payables                                       196.564           189.976
---------------------------------                   ----------        ----------

Other goods and services
---------------------------------                   ----------        ----------

Trade receivables                                     19.215            25.358
Inventories                                           22.550            28.909
Property, plant and equipment, net                     3.130             2.666
Intangible assets, net                                 6.573             9.684
Trade payables                                        28.886            37.493

At 31 December 2005, 92 % (2004: 92%) of property, plant and equipment and 84 %
(2004: 78%) of inventories are located in Turkey. The rest balances are located
at overseas subsidiaries in Europe of which less than 3% (2004: less than 4%)
are located in Russia.

At 31 December 2005, 66% of trade receivables were from European countries
(2004: 67%), 31% from Turkish domestic market (2004: 30%) and the remaining 3%
from the rest of the world (2003: 5% and 2002: 4%).

At 31 December 2005, 53% of trade payables were to European countries (2004:
51%) and 22% to Turkish suppliers (2004: 26%) and the remaining 25% to the rest
of the world (2004: 23%).
26.        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.

                                                  31.12.2005        31.12.2004
----------------------------------                  ---------         ---------

Opening Working Capital (Working 1)                  (70.747)          233.793

Cash movements during the year
Fixed assets expenditure                            (233.751)         (239.491)
Non-current assets and liabilities                   (17.691)            2.952

Sales                                              4.456.229         4.604.903
Purchases (Working 3)                             (3.816.624)       (4.037.765)
Operating expenses                                  (496.570)         (458.153)
Financing expenses                                   (36.085)          (74.057)
Other income                                          22.265             5.224
Taxation charge                                      (54.699)          (43.464)
Minority Interest                                    (30.168)          (45.979)
----------------------------------                  ---------         ---------
Net Cash Inflow                                     (207.094)         (285.830)

Closing Working Capital per above                   (277.841)          (52.037)

Closing Working Capital (working 2)                 (287.137)          (70.747)
----------------------------------                  ---------         ---------
Monetary Loss                                         (9.296)          (18.710)
----------------------------------                   ---------         ---------






Working 1: Opening Working Capital                31.12.2005       31.12.2004
----------------------------------                  ---------        ---------

Cash and cash equivalents                            623.077          541.491
Marketable securities                                     --           49.624
Trade receivables                                  1.049.733          944.209
Other current assets                                 221.449          281.508
----------------------------------                  ---------        ---------
                                                   1.894.259        1.816.832

Current borrowings                                  (156.792)        (109.899)
Trade payables                                    (1.633.908)      (1.343.095)
Other current liabilities                           (159.840)        (119.849)
Taxation on income                                   (14.466)         (10.196)
----------------------------------                  ---------        ---------
                                                  (1.965.006)      (1.583.039)
----------------------------------                  ---------        ---------
Working capital surplus / (deficit)                  (70.747)         233.793
----------------------------------                   ---------        ---------

Working 2: Closing Working Capital

Cash and cash equivalents                            581.086          623.077
Marketable securities                                     --               --
Trade receivables                                  1.367.848        1.049.733
Other current assets                                 196.391          221.449
                                                                           --
----------------------------------                 ---------        ---------
                                                   2.145.325        1.894.259

Current borrowings                                  (171.934)        (156.792)
Trade payables                                    (2.064.592)      (1.633.908)
Other liabilities                                   (183.906)        (159.840)
Taxation on income                                   (12.030)         (14.466)
----------------------------------                 ---------        ---------
                                                  (2.432.462)      (1.965.006)
----------------------------------                 ---------        ---------
Working capital surplus                             (287.137)         (70.747)
----------------------------------                 ---------        ---------

Working 3: Purchases

Closing inventories                                1.030.006          913.629
Cost of sales                                      3.700.247        3.767.971
Opening inventories                                 (913.629)        (643.835)
----------------------------------                  ---------        ---------
                                                   3.816.624        4.037.765
----------------------------------                  ---------        ---------

27.        POST BALANCE SHEET EVENTS

a) On 3 January 2006, the Group obtained various loans from Denizbank A.S.
amounting to USD 11.550.000. Interest rate is 4, 25% and the loan matures in
stages between November 2006 and March 2007.

b) On 10 February 2006, Vestel Group obtained a syndicated letter of credit
facility from a foreign financial institution amounted to USD 120.000.000. The
maturity of this facility is one year. The aggreement is signed by Vestel
Elektronik Sanayi ve Ticaret A.S., Vestel Beyaz Epya Sanayi ve Ticaret A.S.,
Vestel Dijital Uretim Sanayi A.S., Vestel Komunikasyon Sanayi ve Ticaret A.
S. and Vestel Holland B.V.. These companies were borrowers and guarantors to
this facility.

c) An application has been submitted to the Capital Market Board for a public
offering of shares of Vestel Beyaz Epya Sanayi ve Ticaret A.S. According to
the explanation given by the Company's management, the Company intends to buy
the shares of other shareholders' (Zorlu Holding and Zorlu Family) of Vestel
Beyaz Epya Sanayi ve Ticaret A.S at the price that will be formed after the
public offering; work on this respect has been in progress.

29. TRANSLATED FINANCIAL STATEMENTS

For the convenience of the reader, the financial statements have been translated
from New Turkish Lira to EURO with the Central Bank buying exchange rate at
period-end (Note 3).


                                        39

                     VESTEL ELEKTRONYK GROUP OF COMPANIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 BALANCE SHEETS AT 31 DECEMBER 2005 AND 2004
                       (Currency : Thousands of EUROs)

                                                 31.12.2005         31.12.2004
---------------------------------- ---            ---------          ---------

Current Assets
Cash and cash equivalents                           366.038            392.489
Trade receivables, net                              861.637            661.249
Due from group companies                                142             25.374
Inventories                                         648.823            575.514
Other assets                                        123.569            114.122
---------------------------------- ---          ---------          ---------
Total Current Assets                              2.000.209          1.768.748

Non-current Assets
Trade receivables                                     8.237              6.567
Investments                                           1.933              3.065
Property, plant and equipment, net                  613.564            541.768
Intangible assets, net                               87.229             87.154
Other assets                                         19.986                 --
Deferred tax asset                                   34.665             21.992
----------------------------------                ---------          ---------
Total Non-current Assets                            765.614            660.546
----------------------------------                ---------          ---------
Total Assets                                      2.765.823          2.429.294
----------------------------------                ---------          ---------

Current Liabilities
Borrowings                                          108.305             98.767
Trade payables                                    1.300.530          1.029.233
Taxation on income                                    7.578              9.112
Other liabilites                                    115.846            100.687  
----------------------------------                ---------          ---------
Total Current Liabilities                         1.532.259          1.237.799

Non-current Liabilites
Borrowings                                          331.085            320.652
Reserve for retirement pay                           11.626             16.379
Deferred tax liability                               72.915            110.239
----------------------------------                 ---------          ---------
Total Non-current Liabilites                       415.626            447.270

Equity and Reserves
Ordinary shares                                     363.378            363.378
Minority interest                                   101.059             69.746
General reserve                                     301.000            256.337
Net income for the year                              52.501             54.764
----------------------------------                 ---------          ---------
Total Equity and Reserves                           817.938            744.225
----------------------------------                 ---------          ---------
Total Liabilities and Equity                      2.765.823          2.429.294
----------------------------------                 ---------          ---------



                                     40

                     VESTEL ELEKTRONYK GROUP OF COMPANIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                              INCOME STATEMENTS
                 FOR THE YEAR ENDED 31 DECEMBER 2005 AND 2004
                       (Currency : Thousands of EUROs)

                                                     01.01-      01.01-31.12.200
-----------------------------------              31.12.2005                    4
                                                  ---------            ---------

Net sales                                       2.807.073            2.900.726

Cost of Sales                                  (2.392.513)          (2.427.947)
---------------------------------                ---------            ---------
Gross Profit                                      414.560              472.779

Selling expenses                                 (212.764)            (200.439)
General and administrative
expenses                                          (89.223)             (86.985)
Warranty expenses                                 (19.510)             (19.104)
Other income / (expense), net                      14.025                3.291
---------------------------------                ---------            ---------
Income From Operations                            107.088              169.542

Financing income / (expense), net                 (22.731)             (46.650)
---------------------------------                ---------            ---------
Income Before Taxation                             84.357              122.892

Taxation charge
Current                                           (34.456)             (25.849)
Deferred                                           27.460               (1.529)

Taxation on income                                 (6.996)             (27.378)
---------------------------------                ---------            ---------
Income Before Minority Interest                    77.361               95.514

Minority interest                                 (19.003)             (28.963)

Monetary loss                                      (5.857)             (11.787)
-----------------------------------              ---------            ---------
Net Income For The Year                            52.501               54.764
-----------------------------------              ---------            ---------




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