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Vestel Elektronik (VESD)

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Friday 04 May, 2007

Vestel Elektronik

Final Results

Vestel Elektronik Sanayi Ve Ticaret
04 May 2007



                          VESTEL ELEKTRONIK SANAYI VE
                            TICARET ANONIM SIRKETI
                                   CONSOLIDATED
                             FINANCIAL STATEMENTS AT
                                    31.12.2006
                          TOGETHER WITH AUDITORS' REPORT



                           INDEPENDENT AUDITOR'S REPORT

To The Shareholders and Board of Directors of
Vestel Elektronik Sanayi ve Ticaret A.S.

We have audited the accompanying consolidated financial statements of Vestel
Elektronik Sanayi ve Ticaret A.S. and its subsidiaries listed under note 1 (the
'Group'), which comprise the consolidated balance sheet as at 31 December 2006,
and the consolidated statements of income, changes in equity and cash flow for
the year then ended and a summary of significant accounting policies and other
explanatory notes.

Management's responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these
financial statements in accordance with International Financial Reporting
Standards. This responsibility includes: designing, implementing and maintaining
internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit in accordance with International Standards
on Auditing. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.

The property, plant and equipment for TV production, a part of stocks of
finished goods, components and raw materials of Vestel CIS Ltd. (Russia), a 100%
subsidiary, were destroyed as a result of fire on 14 November 2005. The
administrative building was also destroyed together with all accounting records
and documents relating to the period from 01 January through 14 November 2005.
Therefore it was not possible to perform a full scope of the procedures to
report on the financials statements of Vestel CIS Ltd. for the year ended 31
December 2005. Vestel CIS Ltd. recorded insurance claims of USD 37.347 thousand
(YTL 52.495 thousand) with respect to assets affected by the said fire and the
resulting business interruption (note 8). In addition Vestel CIS Ltd is
negotiating with relevant tax authorities a VAT reclaim on the destroyed
properties in the amount of USD 4.894 thousand (YTL 6.879 thousand). Pending the
outcome of negotiations (and possible litigation) between Vestel CIS Ltd and the
insurance company, as well as negotiations with tax authorities, it is not
possible to determine the amount that will be recovered under these claims. 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.

The total assets of Vestel CIS Ltd. are YTL 249.992 thousand which amounts to
5,2% of the consolidated total assets of the Group. The net loss of Vestel CIS
Ltd. for year ending 31 December 2006 is YTL 10.314 thousand. The management of
the Group is of the opinion that the total fire damage of YTL 52.495 thousand
does not have a material effect on the operations of the Group.

Opinion

In our opinion, except for the effects on the corresponding figures of the
adjustments, if any, which might have been considered necessary if it were
possible to perform full scope of procedures on the financial statements of
Vestel CIS Ltd. as of 31 December 2005 the consolidated financial statements
present fairly in all material respects, the consolidated financial position of
the Group as of 31 December 2006, and of its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards.

ARKAN & ERGIN Uluslararasi Denetim ve Yeminli Mali MuSavirlik A.S.
Member Firm of GRANT THORNTON International

Aykut Halit
Partner

Istanbul, 12 April 2007


                                                                             1

                    VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
                          CONSOLIDATED BALANCE SHEETS
                             AT 31.12.2006 AND 2005

     (All amounts in thousands of New Turkish Lira ('YTL') unless indicated
                                  otherwise.)

Assets                                  Note       31.12.2006       31.12.2005
------------------------------         ------        ----------       ----------

Current assets
Cash and cash equivalents                  5          584.684          581.086
Trade receivables                          6        1.349.794        1.367.848
Inventories                                7        1.241.766        1.030.006
Other assets                               8          233.667          196.391
------------------------------         ------        ----------       ----------
Total current assets                                3.409.911        3.175.331

Non-current assets
Trade receivables                                      14.803           13.077
Investments                                9            1.496            3.069
Property, plant and equipment, net        10        1.021.601          974.033
Intangible assets, net                    11          267.513          138.476
Other assets                               8           26.909           31.728
Deferred tax asset                        15           36.113           55.031
------------------------------         ------        ----------       ----------
Total non-current assets                            1.368.435        1.215.414
------------------------------         ------        ----------       ----------
Total assets                                        4.778.346        4.390.745
------------------------------          ------       ----------       ----------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.




                                                                            2

                   VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
                          CONSOLIDATED BALANCE SHEETS
                            AT 31.12.2006 AND 2005

    (All amounts in thousands of New Turkish Lira ('YTL') unless indicated
                                  otherwise.)

Liabilities and equity                 Note       31.12.2006       31.12.2005
--------------------------------       -----         ---------        ---------

Current liabilities
Borrowings                               12          523.650          171.934
Trade payables                           13        2.306.328        2.064.592
Taxation on income                       15            7.317           12.030
Provision for expenses                 14.1           46.286          105.674
Other liabilities                      14.2           89.728           70.382
--------------------------------       -----         ---------        ---------
Total current liabilities                          2.973.309        2.424.612

Non-current liabilities
Borrowings                               12          394.659          525.597
Provision for retirement pay             16           21.447           18.456
Provision for expenses                 14.1            8.871            7.850
Other liabilities                                        265               --
Deferred tax liability                   15           57.613          115.753
--------------------------------       -----         ---------        ---------
Total non-current liabilities                        482.855          667.656

Equity
Share capital                            17          576.862          576.862
Minority interest                                    130.253          160.432
General reserves                         18          615.068          561.183
--------------------------------       -----         ---------        ---------
Total equity                                       1.322.183        1.298.477

Commitments and contingencies            19
--------------------------------       -----         ---------        ---------
Total liabilities and equity                       4.778.346        4.390.745
--------------------------------        -----        ---------        ---------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.








                                                                            3

                   VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
                        CONSOLIDATED INCOME STATEMENTS
                    FOR THE YEARS ENDED 31.12.2006 AND 2005

    (All amounts in thousands of New Turkish Lira ('YTL') unless indicated
                                  otherwise.)

----------------------------                -----    -----------   -----------
                                             Note         01.01.-       01.01.-
                                                     31.12.2006    31.12.2005
----------------------------                -----    -----------   -----------
Net sales                                    25.1     5.231.125     4.456.229
Cost of sales                                        (4.367.941)   (3.798.115)
----------------------------                -----    -----------   -----------
Gross profit                                 25.3       863.184       658.114

Warranty expenses                                       (36.971)      (30.972)
Selling expenses                                       (444.726)     (337.763)
General and administrative expenses                    (172.168)     (141.642)
Other income, net                              20        28.016        22.265
----------------------------                -----    -----------   -----------
Operating profit                                        237.335       170.002

Financing income                               21       336.990       286.386
Financing expense                              21      (581.303)     (322.471)
----------------------------                -----    -----------   -----------
Profit / (loss) before taxation                          (6.978)      133.917

Taxation charge
Current                                                 (17.272)      (54.699)
Deferred                                                 38.677        43.592

Taxation on income                             15        21.405       (11.107)
----------------------------                -----    -----------   -----------
Profit after taxation                                    14.427       122.810

Monetary loss                                                --        (9.296)
----------------------------                -----    -----------   -----------
Net profit for the year                                  14.427       113.514
----------------------------                -----    -----------   -----------
Attributable to:
Equity holders of the Company                             2.021        83.346
Minority interest                                        12.406        30.168
----------------------------                -----    -----------   -----------
                                                         14.427       113.514
----------------------------                -----    -----------   -----------
Basic and fully diluted earnings per share      4          0,00          0,05
----------------------------                -----    -----------   -----------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.




                                                                             4

                    VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                    FOR THE YEARS ENDED 31.12.2006 AND 2005

     (All amounts in thousands of New Turkish Lira ('YTL') unless indicated
                                  otherwise.)

     -------------------   --------     ---------     ---------        ---------
                              Share       General      Minority          Total
                                         reserves      interest
                            capital                                       equity
     -------------------   --------     ---------     ---------        ---------
Balance at 31.12.2004     576.862       493.873       110.722        1.181.457

Translation differences        --          (433)           --             (433)
Acquisition of
subsidiary                     --       (15.603)       19.542            3.939
Net profit for the year        --        83.346        30.168          113.514
     -------------------   --------     ---------     ---------        ---------
Balance at 31.12.2005     576.862       561.183       160.432        1.298.477

Translation differences        --         5.205           575            5.780
Public offering of
Vestel White                   --        47.202       (45.123)           2.079
Change in minority
interest                       --          (543)          543               --
Acquisition of
subsidiary                     --            --         1.420            1.420
Net profit for the year        --         2.021        12.406           14.427
     -------------------   --------     ---------     ---------        ---------
Balance at 31.12.2006     576.862       615.068       130.253        1.322.183
-------------------        --------     ---------     ---------        ---------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.




                                                                             5

                    VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
                       CONSOLIDATED CASH FLOW STATEMENTS
                    FOR THE YEARS ENDED 31.12.2006 AND 2005

     (All amounts in thousands of New Turkish Lira ('YTL') unless indicated
                                  otherwise.)
           --------------------------------  ------   ---------        ---------
                                                        01.01.-  01.01.-31.12.20
                                                     31.12.2006               05
                                             Note
           -------------------------------- ------    ---------        ---------

Profit (loss) before income tax                        (6.978)         133.917
Adjustment to reconcile net income to net
cash provided from operating activities:
Depreciation and amortisation
expense                                        22     139.470          119.222
(Profit) loss on sale of fixed
assets                                                 (2.348)           6.082
(Profit) loss on sale of
investments                                            (3.189)              --
Provision for retirement pay                            5.387           (4.237)
Provision for doubtful receivables                      6.302            1.278
Warranty provision                                      5.104            2.757
Provision for expense accruals                         10.801           11.746
           --------------------------------  ------   ---------        ---------
Operating profit before changes in
working capital                                       154.549          270.765

Changes in operating assets and
liabilities                                    22     (43.409)         (56.766)
Taxes paid                                            (21.985)         (57.135)
           --------------------------------  ------   ---------        ---------
Net cash provided by operating
activities                                             89.156          156.864

Cash flows from financing activities
Changes in current borrowings                         351.245           15.142
Changes in non-current borrowings                    (130.938)          16.562
Changes in minority interest                            2.653            3.939
           --------------------------------  ------   ---------        ---------
Net cash provided by financing
activities                                            222.960           35.643

Cash flows from investing activities
Acquisition of subsidiary, net of
cash acquired                                  22      (1.619)           1.521
Purchases of investments                                  (71)           1.797
Purchases of property, plant and
equipment                                            (215.781)        (267.780)
Purchases of intangible assets                       (150.302)         (13.621)
Proceeds from sale of investments                       4.833               --
Proceeds from sale of property,
plant and equipment                                    54.422           43.585
           --------------------------------  ------   ---------        ---------
Net cash used in investing
activities                                           (308.518)        (234.498)

Net increase (decrease) in cash
and cash equivalents                                    3.598          (41.991)
Cash and cash equivalents at
beginning of year                                     581.086          623.077
           --------------------------------  ------   ---------        ---------
Cash and cash equivalents at end
of year                                               584.684          581.086
--------------------------------             ------   ---------        ---------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

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
Istanbul, Turkey. The name was changed to Star Elektronik Sanayi ve Ticaret A.S.
during the same year. In April 1984 Polly Peck Group acquired the Company and
changed its name to Vestel Elektronik Sanayi ve Ticaret Anonim Sirketi which has
been its current name. In 1990 18% of the Company's shares were issued to the
public at the Istanbul Stock Exchange. The Company has been operating the
Foreign Capital regulations in Turkey 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 Ambarli, Petrol Ofisi
Dolum Tesisleri Yolu, Zorlu Plaza, Avcilar / 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.

The Company is mainly engaged in the production of colour televisions. The
Company's production facilities are located in Manisa industrial site (Aegean
Region, Turkey). As of the balance sheet date, production capacity for colour
televisions was 14.300.000 (2005: 14.000.000) 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 colour televisions and commenced
production in the second half of 2003.

B. Refrigerator, air conditioning units, washing machines and cookers

Vestel Beyaz ESya 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, washing machines and cooker unit
was 2.500.000, 700.000, 2.000.000 and 1.000.000 (2005: 2.800.000, 700.000 and
2.000.000) units per year respectively.

Vestel CIS

During 2005, Vestel CIS commenced construction of white goods production
facilities and started production by 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 Izmir Aegean free zone industrial site. As of the balance
sheet date, production capacity for digital devices was 8.600.000 (2005:
8.600.000) units per year.

Vestel 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 3.700.000 (2005: 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          Shareholding (%)
Consolidated Company         Location    activity      31.12.2006   31.12.2005
------------------------     --------    ----------        --------      -------
                                            ----------

Vestel Beyaz ESya Sanayi ve
Ticaret                      Turkey      Manufacturing       72,6         35,0
A.S.
Vestel Komunikasyon Sanayi
ve                           Turkey      Manufacturing       99,3         99,3
Ticareti A.S.
Vestel CIS Limited           Russia      Manufacturing      100,0        100,0
Vestel Dijital Uretim        Turkey      Manufacturing       99,3         98,0
Sananayi A.S.
Deksar Multimedya ve
Telekomunikasyon             Turkey      Information         99,9         99,9
A.S.
Vestel Savunma Sanayi A.S.   Turkey      Software            10,0         29,9
Cabot Communications Limited England     Software            90,9         90,9
Cabot Izmir Donanim Sanayi
ve Ticaret                   Turkey      Software            52,7         90,5
A.S.
Veseg Video                  Germany     Marketing           50,8         50,8
Handelsgesellschaft GmbH
Vestel France SA             France      Marketing           99,5         99,5
Vestel Iberia SL             Spain       Marketing           99,7         99,7
Vestel DiS 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 Dayanikli Tuketim
Mallari                      Turkey      Marketing           99,8         99,8
Pazarlama A.S.
Vestel Italy SRL             Italy       Marketing           50,8         50,8
Vestel Holland BV            Netherlands Marketing           99,7         99,7
Aydin Yazilim Elektronik
Sanayi ve                    Turkey      Software             6,0         18,0
Ticaret A.S.
Electronics Outlet SRL       Italy       Marketing           50,8         50,8
Vestek Elektronik AraStirma
GeliStirme                   Turkey      Marketing           94,0         93,8
A.S.
Vestel Trade Limited         Russia      Marketing          100,0           --
Birim Bilgi Teknolojileri    Turkey      Software            55,0           --
Ticaret A.S.

Vestel Savunma Sanayi A.S. and Aydin Yazilim Elektronik Sanayi ve Ticaret A.S.
with group shares of respectively 10% and 6% are consolidated because they are
under the effective control and management of the Group.

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 Istanbul Stock Exchange, maintains its books
of account and prepares its statutory financial statements in accordance with
the Turkish Commercial Code, accounting policies prescribed by the Turkish
Capital Markets Board and tax legislation and since 1994 has adopted the Uniform
Chart of Accounts issued by the Ministry of Finance (collectively 'Turkish
Practices'). 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 and reporting currency

The restatement for the changes in the general purchasing power of YTL as of 31
December 2005 is based on IAS 29 ('Financial Reporting in Hyperinflationary
Economies'). IAS 29 requires that financial statements prepared in the currency
of a hyperinflationary economy be stated in terms of the measuring unit current
at the balance sheet date and the corresponding figures for previous periods be
restated in the same terms. One characteristic (but not limited to) that
necessitates the application of IAS 29 is a cumulative three year inflation rate
approaching or exceeding 100%. As of 31 December 2005, the three year cumulative
rate has been 36% (31 December 2004: 70% - 31 December 2003: 181%) based on the
Turkish countrywide wholesale price index published by the State Institute of
Statistics.

As of 1 January 2006, it has been decided to discontinue the adjustment of
financial statements for inflation after taking into account that hyperinflation
period has come to an end as indicated by existing objective criteria and, that
other signs indicating the continuance of hyperinflation have largely
disappeared the financial statement as of 31 December 2006 have therefore, not
been subjected to any adjustment for inflation.

The effects of ending the adjustments for inflation on financial statements are
summarized as follows:

The financial statements as of 31 December 2006 have not been subjected to any
inflation adjustment whereas the financial statements for previous periods have
been adjusted for inflation on basis of the measuring unit current at the last
preceding balance sheet date namely 31 December 2005.

Together with the ending of the hyperinflationary period the balances adjusted
for inflation as of the last preceding balance sheet date form the opening
balances of the assets, liabilities and equity accounts as of 1 January 2006.

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, 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

Foreign currency transactions and translation - Transactions in foreign
currencies during the period 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.

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

                                                  31.12.2006       31.12.2005
          -----------------------------------        ---------        ---------

US Dollar                                             1,4056           1,3418
EURO                                                  1,8515           1,5875

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.

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 improvements                                                       10 to 20
Buildings                                                               25 to 50
Machinery, equipment and moulds                                         10 to 15
Furniture and fixtures                                                 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 as operating
leases. Lease payments on operating lease are recognized as an expense on a
straight-line basis over the lease term.

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 Dayanikli Tuketim Mallari ve Pazarlama A.S.,
Vestel DiS Ticaret A.S., Vestel Komunikasyon Sanayi ve Ticaret A.S., Vestel
Beyaz ESya Sanayi ve Ticaret A.S., Aydin Yazilim Elektronik Sanayi ve Ticaret
A.S. and Birim Bilgi Teknolojileri 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.

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.

Other intangible assets - These are amortized using the straight line basis over
their useful lives which vary between 5 to 10 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 average of the
closing bid prices at the balance sheet date.

Inventories

Inventories are stated at the lower of cost and net realizable value. Costs
comprise direct materials and, where applicable, direct labour costs and those
overheads 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 measured at initial recognition at fair value and are
subsequently measured at amortized cost using the effective interest rate method
to set an allowance for unearned interest. Appropriate allowances for estimated
irrecoverable amounts are recognized in profit or loss when there is objective
evidence that the asset is impaired. The allowance recognized is measured as the
difference between the asset's carrying amount and the present value of
estimated future cash flows discounted at the effective interest rate computed
at initial recognition.

Trade payables

Trade payables are initially measured at fair value and are subsequently
measured at amortized cost using the effective interest rate method to set an
allowance for unearned interest.

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).

Bank borrowings

Interest-bearing bank loans and overdrafts are recognized at fair value at
initial recognition which equate to 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 instruments

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 or when financial
asset or a portion of financial asset expires. 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 virtually certain
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.

Other revenues earned by the Company are 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 labour law, the Company and its Turkish
subsidiaries are required to pay termination benefits to each employee who has
completed one year of service and whose employment is terminated without due
cause, or who retires in accordance with social insurance regulations or is
called up for military service or dies. The reserve for retirement pay is made
for the maximum amount payable to employees, based on their accumulated period
of service at the balance sheet date.

Warranty - The Company 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

                                                     31.12.2006    31.12.2005
               ------------------------------------     ---------     ---------

Net profit for the year                                  14.427       113.514
Weighted average number of ordinary shares in issue
('000.000)                                              159.100       159.100
               ------------------------------------     ---------     ---------
Basic and diluted earnings per share                       0,00          0,07
------------------------------------                    ---------     ---------

5.             CASH AND CASH EQUIVALENTS

Cash at bank and in hand                               574.492         570.557
Other                                                   10.192          10.529
            ------------------------------------       ---------       ---------
                                                       584.684         581.086
            ------------------------------------       ---------       ---------

The maturity of time deposits was January 2007 and the interest rate was between
2,7% and 5,9 % per year for foreign currency and between 15,6% and 19,8% for New
Turkish Lira per year (2005: the interest rate was 2% for foreign currency and
14% for New Turkish Lira per year).

6.             TRADE RECEIVABLES

Current
Current accounts
                               - Third parties      1.012.263        1.090.297
                    - Related parties, note 23          1.154              647
Notes receivable
                               - Third parties        368.669          300.336
Others                                                  1.758              253
          ------------------------------------        ---------        ---------
                                                    1.383.844        1.391.533
Unearned interest on receivables (-)                  (20.311)         (14.703)
Allowance for doubtful receivables (-)                (13.739)          (8.982)
          ------------------------------------        ---------        ---------
                                                    1.349.794        1.367.848
          ------------------------------------        ---------        ---------


The movement of doubtful receivables is given below:

Beginning balance                                        8.982           8.938
Additions                                                6.302           1.278
Proceeds from doubtful receivables                      (1.545)           (833)
Monetary gain                                               --            (401)
            ------------------------------------       ---------       ---------
Ending balance                                          13.739           8.982
------------------------------------                   ---------       ---------


7.             INVENTORIES

                                                  31.12.2006       31.12.2005
         ------------------------------------        ---------         --------

Raw materials                                        487.144          327.016
Work in process                                       42.241           42.589
Finished goods and merchandise                       514.430          413.853
Spares and supplies                                    8.604            4.175
Goods in transit                                     197.901          248.404
Provision for diminution in value                     (8.554)          (6.031)
         ------------------------------------        ---------         --------
                                                   1.241.766        1.030.006
         ------------------------------------        ---------         --------


The cost of inventories recognized as expense and included in cost of sales
during the year amounted to YTL 3.625.053 (2005: YTL 3.174.986).



8.             OTHER ASSETS

Current
Prepaid expenses                                         25.019         25.123
Income accruals                                           6.445         43.655
VAT receivable                                          107.361         59.758
Work advances                                             1.549          4.222
Due from personnel                                          461            753
Due from related parties, note 23                           911            225
Project expenses                                         23.618         17.273
Receivables from insurance company (*)                   52.495         41.341
Prepaid taxes                                            12.960          1.910
Other                                                     2.848          2.131
              ------------------------------------      ---------      ---------
                                                        233.667        196.391
              ------------------------------------      ---------      ---------

Non-current
Prepaid expenses                                        26.899          31.583
Other                                                       10             145
            ------------------------------------       ---------       ---------
                                                        26.909          31.728
            ------------------------------------       ---------       ---------


(*)The property, plant and equipment for TV production, a part of stocks of
finished goods, components and raw materials of Vestel CIS Ltd. (Russia), the
100% subsidiary of the Company were destroyed as a result of fire on 14 November
2005. The administrative building was also destroyed together with all
accounting records and documents relating to the period from 01 January through
14 November 2005. Vestel CIS Ltd recorded insurance claims of USD 37.347
thousand (YTL 52.495 thousand) with respect to assets affected by the said fire
and the resulting business interruption (note 8). In addition Vestel CIS Ltd is
negotiating with relevant tax authorities a VAT reclaim on the destroyed
properties in the amount of USD 4.894 thousand (YTL 6.879 thousand). Pending the
outcome of negotiations (and possible litigation) between Vestel CIS Ltd and the
insurance company, as well as negotiations with tax authorities, it is not
possible to determine the amount that will be recovered under these claims. 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.

9.             INVESTMENTS

                                                   31.12.2006       31.12.2005
         -------------------------------------          -------          -------

Unconsolidated investments                                 52               28
Other investments                                       1.444            3.041
         -------------------------------------         --------         --------
                                                        1.496            3.069
         -------------------------------------         --------         --------



                                                    Share percentage               Amount
Unconsolidated
investments                            Country  31.12.2006   31.12.2005   31.12.2006   31.12.2005
-------------------                    -------      --------     --------      -------      -------

Vestpro
Electronics SA                         Romania          52           52          301          301
Vestel USA Inc.                        USA             100          100          233          233
Vestel
Electronica SA                         Romania         100          100           19           18
Vestel India                           India           100          100           10           10
OY Vestel
Scandinavia AB                         Finland         100           --           17           --
Uts-United
Technical
Services, S.R.O                        Romania          60           --            6           --
                   -------------------  -------     --------     --------      -------      -------
                                                                                 586          562
Allowance for diminution in value (-)
Vestpro
Electronics SA                                                                  (301)        (301)
Vestel USA Inc.                                                                 (233)        (233)
                   -------------------  -------     --------     --------      -------      -------
                                                                                  52           28
                   -------------------  -------     --------     --------      -------      -------



The above companies in which the Company has a controlling interest or
significant influence are not consolidated because:


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


- Vestel Electronica SA, Vestel India, OY Vestel Scandinavia AB and Uts-United
Technical Services, S.R.O are newly established inactive companies.



Other investments                 Share percentage               Amount
                     Country  31.12.2006   31.12.2005   31.12.2006   31.12.2005
 ------------------- -------      --------     --------      -------      -------

Zorlu Enerji
Elektrik Uretim
A.S                  Turkey    Less than 1  Less than 1      1.369        3.013
Tursoft A.S.         Turkey            7            7           13           13
Zorlu
Endustriyel
Enerji A.S.          Turkey            1            1           50            3
Izmir Teknoloji
GeliStirme A.S.      Turkey            5            5           12           12
 -------------------  -------     --------     --------      -------      -------
                                                             1.444        3.041
 -------------------  -------     --------     --------      -------      -------





10.          PROPERTY, PLANT AND EQUIPMENT, net

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

Cost
Balance at
01.01.2005                 169.373     1.074.281          2.832        72.583          72.174    1.391.243
Additions                   14.010        86.492          1.328         8.960         160.532      271.322
Disposals                  (11.997)      (46.746)          (109)       (2.825)         (4.376)     (66.053)
Acquisition of
subsidiary                      --         6.254            354         3.299              --        9.907
Translation
differences                 (1.998)         (935)          (133)         (264)           (686)      (4.016)
Transfers                   44.245       105.227            161         1.313        (150.946)          --
         ----------------    -------       -------        -------       -------        --------      -------
Balance at
31.12.2005                 213.633     1.224.573          4.433        83.066          76.698    1.602.403
Additions                   40.164        79.795          1.681        25.838          58.486      205.964
Disposals                     (144)       (3.897)          (627)         (238)        (43.248)     (48.154)
Acquisition of
subsidiary                      --            --            235         4.558              --        4.793
Translation
differences                    976           934             --           300           8.153       10.363
Transfers                    1.761        42.608             --         1.379         (45.748)          --
         ----------------    -------       -------        -------       -------        --------      -------
Balance at
31.12.2006                 256.390     1.344.013          5.722       114.903          54.341    1.775.369

Accumulated depreciation
                                 ---           ---
Balance at
01.01.2005                  18.251       463.733          1.029        48.174              --      531.187
Additions                    4.948        93.473            696         6.300              --      105.417
Disposals                     (402)      (15.163)           (77)       (1.107)             --      (16.749)
Acquisition of
subsidiary                      --         6.201            174         2.614              --        8.989
Translation
differences                   (147)         (136)           (28)         (163)             --         (474)
         ----------------    -------       -------        -------       -------        --------      -------
Balance at
31.12.2005                  22.650       548.108          1.794        55.818              --      628.370
Additions                   10.212       104.229            916         9.505              --      124.862
Disposals                      (29)       (2.040)          (490)         (217)             --       (2.776)
Acquisition of
subsidiary                      --            --             89         2.677              --        2.766
Translation
differences                    132           179             --           235              --          546
         ----------------    -------       -------        -------       -------        --------      -------
Balance at
31.12.2006                  32.965       650.476          2.309        68.018              --      753.768

Net book value
as of
31.12.2005                 190.983       676.465          2.639        27.248          76.698      974.033
----------------             -------       -------        -------       -------        --------      -------
Net book value
as of
31.12.2006                 223.425       693.537          3.413        46.885          54.341    1.021.601
----------------             -------       -------        -------       -------        --------      -------


As of 31.12.2006 and 2005, property, plant and equipment have been mortgaged to
the extent of YTL 45.000 as collateral against bank loans.


Leased assets included in the table above comprise plant and machinery amounting
to YTL 28.785 (2005: YTL 34.231) 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 White to
increase its refrigerator and washing machine production capacity and new
investment made in cooker and dishwasher segment during 2005 and 2006 and new
investment related to fire damaged Vestel CIS plant (Russia) used for television
production which was affected by fire on 14 November 2005.






11.          INTANGIBLE ASSETS, net

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

Cost
Balance at
01.01.2005                  72.637          38.546       140.355       251.538
Additions                    2.672              --        12.069        14.741
Disposals                       --              --          (395)         (395)
Acquisition of
subsidiary                      --              --         2.273         2.273
Translation
differences                 (1.184)             --          (271)       (1.455)
   ----------------------  ---------       ---------     ---------     ---------
Balance at
31.12.2005                  74.125          38.546       154.031       266.702
Additions                  128.387              12        21.531       149.930
Disposals                       --          (6.557)       (1.376)       (7.933)
Acquisition of
subsidiary                      --              --            47            47
Translation
differences                    384              --           305           689
   ----------------------  ---------       ---------     ---------     ---------
Balance at
31.12.2006                 202.896          32.001       174.538       409.435

Accumulated amortisation
Balance at
01.01.2005                  14.212           5.544        93.425       113.181
Additions                       --           2.330        11.475        13.805
Disposals                       --              --           (32)          (32)
Acquisition of
subsidiary                      --              --         1.607         1.607
Translation
differences                   (168)             --          (167)         (335)
   ----------------------  ---------       ---------     ---------     ---------
Balance at
31.12.2005                  14.044           7.874       106.308       128.226
Additions                       --           5.481         9.127        14.608
Disposals                       --              --        (1.237)       (1.237)
Acquisition of
subsidiary                      --              --             8             8
Translation
differences                     51              --           266           317
   ----------------------  ---------       ---------     ---------     ---------
Balance at
31.12.2006                  14.095          13.355       114.472       141.922

Net book value
as of
31.12.2005                  60.081          30.672        47.723       138.476
----------------------     ---------       ---------     ---------     ---------
Net book value
as of
31.12.2006                 188.801          18.646        60.066       267.513
----------------------     ---------       ---------     ---------     ---------





The share values of Vestel White was established on basis of prices received
from invitations for submission of price quotations between 11-12 April 2006 and
the value thus ascertained was YTL 3.20 (full) per share. The Company purchased
89.699.993 shares (65% of capital) of Vestel White which were held by Zorlu
Holding A.S. and Zorlu Family at YTL 3.20 (full) each on 13 April 2006 and
consequently became 100% owner of the shares Vestel White. At the same time the
share capital of Vestel White was increased by YTL 52.000 (52.000.000 shares) to
YTL 190.000 and 59.800.000 shares were sold through public offering on 21 April
2006 at the price of YTL 3.20 (full) per share. Subsequently 7.800.000 shares
were reacquired at the Istanbul Stock Exchange and therefore the interest of
minorities in Vestel White was reduced to 27.4%.


On 3 May 2006, Company acquired 2.750.000 shares (55% of capital) of Birim Bilgi
ISlem for YTL 1.990


Goodwill arising in 2006 on acquisitions and the net assets acquired of the
companies mentioned above is given below:

        -----------------------------   ---------      ---------      ---------
                                           Vestel    Birim Bilgi        Total
                                                           ISlem
                                            White
        -----------------------------   ---------      ---------      ---------

Purchase consideration                  287.040          1.990        289.030
Group share of net assets acquired     (158.958)        (1.685)      (160.643)
        -----------------------------   ---------      ---------      ---------
Positive goodwill                       128.082            305        128.387
-----------------------------           ---------      ---------      ---------


In mid 2001, the Company established the Digital Research and Development
Department within Aegean Free Zone - Izmir 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 comprise internally generated expenditure on
development costs on the above projects where it is reasonably anticipated that
costs will be recovered through future commercial activity.






12.          BORROWINGS

                                         Current                 Non-current
                                   Foreign YTL equivalent    Foreign YTL equivalent
         ----------------------   currency      ---------   currency      ---------
                                  --------                  --------

                   31.12.2006
New Turkish
Lira bank
loans                                 --          1.649         --             --
Foreign currency bank loans
                   -USD ('000)   183.712        258.226    235.280        330.710
                   -EUR ('000)   141.236        261.498     33.976         62.907
Finance lease liabilities, net
                   -USD ('000)     1.373          1.930        610            857
                   -EUR ('000)       187            347        100            185
         ----------------------   --------      ---------   --------      ---------
                                                523.650                   394.659
         ----------------------   --------      ---------   --------      ---------

                   31.12.2005
New Turkish
Lira bank
loans                                 --          1.049         --             --
Foreign currency bank loans
                   -USD ('000)    27.184         36.476    249.141        334.297
                   -EUR ('000)    82.215        130.516    118.644        188.347
Finance lease liabilities, net
                   -USD ('000)     1.273          1.708      1.774          2.380
                   -EUR ('000)     1.376          2.185        362            573
         ----------------------   --------      ---------   --------      ---------
                                                171.934                   525.597
         ----------------------   --------      ---------   --------      ---------


The effective interest rates of foreign currency loans and New Turkish Lira
loans vary between 3% and 12,9% (2005: 2,7% and 11,4% and), respectively.


Summary maturity schedule of bank borrowings was as follows:

                                                  31.12.2006       31.12.2005
         ------------------------------------        ---------        ---------

Due in one year                                      523.650          171.934
One to five years                                     76.043          215.748
Over five years                                      318.616          309.849
         ------------------------------------        ---------        ---------
                                                     918.309          697.531
         ------------------------------------        ---------        ---------


Letters of guarantee and notes amounting to YTL 35.113 (EUR 18.965.000) have
been given as collateral for Turkish Eximbank and other credits (2005: YTL
67.740 (USD 15.000.242 and EURO 29.992.000)).


As of 31.12.2006 and 2005, property, plant and equipment have been mortgaged to
the extent of YTL 45.000 as collateral against bank loans.


The payment schedules of finance lease liabilities are given below:

                                                               31.12.2006   31.12.2005
                          ------------------------------------    ---------     --------

Finance lease liabilities - minimum lease payments:
Payable with in one year                                            2.438        4.279
Payable later then one year and not later than four
years                                                               1.069        3.125
                          ------------------------------------    ---------     --------
                                                                    3.507        7.404
Future finance charges on finance leases                             (188)        (558)
                          ------------------------------------    ---------     --------
Present value of finance lease liabilities                          3.319        6.847

The present value of finance lease liabilities is as follows:

Payable with in one year                                            2.277        3.893
Payable later then one year and not later than four
years                                                               1.042        2.953
                          ------------------------------------    ---------     --------
                                                                    3.319        6.846
                          ------------------------------------    ---------     --------





13.          TRADE PAYABLES

Current accounts
                              - Third parties      1.844.403        1.516.343
                   - Related parties, note 23          3.964            1.272
                          - Letters of credit        219.417          243.850
               - Letters of credit discounted        197.639          248.925
Notes payable
                              - Third parties         45.535           56.872
Other                                                    118              615
         ------------------------------------        ---------        ---------
                                                   2.311.076        2.067.877
Unearned interest on payables (-)                     (4.748)          (3.285)
         ------------------------------------        ---------        ---------
                                                   2.306.328        2.064.592
         ------------------------------------        ---------        ---------







14.          PROVISION FOR EXPENSES AND OTHER LIABILITIES


14.1 PROVISION FOR EXPENSES

                                                  31.12.2006       31.12.2005
         ------------------------------------       ----------         --------

Current
Warranty provision                                    35.485           31.402
Expense accruals                                      10.801           74.272
         ------------------------------------       ----------         --------
                                                      46.286          105.674
         ------------------------------------       ----------         --------

Non-current
Warranty provision                                     8.871            7.850
------------------------------------                ----------         --------


The movement of provisions is as follows:

                                                        Warranty         Expense
            ------------------------------------         expense        accruals
                                                       ---------       ---------

Opening balance                                         39.252          74.272
Additions                                               36.971          10.801
Disposals                                              (31.867)        (74.272)
            ------------------------------------       ---------       ---------
Closing balance                                         44.356          10.801
------------------------------------                   ---------       ---------





14.2  OTHER LIABILITIES

                                                     31.12.2006     31.12.2005
              ------------------------------------      ---------      ---------

Income tax and social security premiums payable          32.809         20.038
Advances received                                        17.489         18.373
Deferred project income                                  31.007         20.263
Due to personnel                                          3.665          6.663
Other                                                     4.758          5.045
              ------------------------------------      ---------      ---------
                                                         89.728         70.382
              ------------------------------------      ---------      ---------







15.          TAXATION ON INCOME


In Turkey, the corporation tax rate on the profits for the calendar year 2006 is
20% (2005: 30%). Taxable profits are calculated by modifying accounting income
for certain exclusions and allowances for tax purposes from the profit disclosed
in the statutory income. No other taxes are paid unless profits are distributed.


In Turkey no taxes are withheld from undistributed profits, profits added to
share capital (bonus shares) and dividends paid to other resident companies.
Other than those, profits distributed in dividend to individuals and
non-resident companies are subject to withholding at the rate of 15%.


In Turkey, the tax legislation does not permit a parent company and its
affiliates to file a consolidated tax return. Therefore, provision for taxation
charge, as reflected in the accompanying consolidated financial information, has
been calculated on a separate-entity basis.


The exemption period granted on profits from the sale of investment shares and
immovable property by Corporation Tax Law transitory articles No. 28 and 29
expired on 31 December 2004. However this exemption was re-enacted by Law No.
5281 on permanent basis in effect from 1 January 2005. Accordingly, 75% of
profits from the sale of investments and immovables held for a minimum of two
years will be tax exempt provided the sale proceeds are collected within two
years and 75% of the profit is added to share capital or is kept in a special
reserve account for minimum five years.


Companies were allowed to deduct 40% of the value of fixed assets (exceeding YTL
6.000) purchased after 24 April 2003 (investment allowances) from their taxable
profits as investment incentive. Such investment deduction is also not subject
to income tax withholding. The investment deductions not used in any year
because of insufficient profits may be carried to future periods. Investment
allowances related to fixed assets purchased or to be purchased under Investment
Incentive Certificates granted or applied for before 24 April 2003, may be based
on up to 100% of the investment value in fixed assets, but these are subject to
tax at 19.8%. Investment allowances have been cancelled as from 1 January 2006
but investment allowances earned prior to this date may be used up to 31
December 2008; any balance unused after this date may not be carried forward; if
this option is exercised the balance of taxable profit after deduction of
investment allowances is to be taxed at 30%.


Tax losses that are reported in the Corporation Tax in Turkey return may 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 taxation liabilities of foreign subsidiaries are calculated in accordance
with the regulations of the respective country where the subsidiary is situated,
as follows:

Country                                                             % of taxable
-----------------------------------------                                 profit
                                                                      ----------

Germany                                                                  39,62
France                                                                   33,33
The Netherlands                                                          25,50
UK                                                                       30,00
Spain                                                                    35,00
Italy                                                                    37,45
Russia                                                                   20,00



As of 31.12.2006 and 2005, taxation on income for the year is reconciled to the
profit per income statements as follows:

            ------------------------------------       ---------        --------
                                                         01.01.-         01.01.-
                                                    31.12.2006      31.12.2005
            ------------------------------------       ---------        --------

Profit (loss) before tax                                (6.978)        133.917

Corporation tax using applicable tax rates              17.272          54.699
Disallowable expenses                                   41.446          48.863
Income not subject to tax                              (70.674)        (76.553)
Investment allowances                                   (8.253)        (14.768)
Research and development allowances                     (1.196)         (1.134)
            ------------------------------------       ---------        --------
Taxation on income                                     (21.405)         11.107
------------------------------------                   ---------        --------



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

                                                   31.12.2006       31.12.2005
          ------------------------------------        ---------        ---------

Corporation and income taxes                           17.272           54.699
Prepaid taxes (-)                                      (9.955)         (42.669)
          ------------------------------------        ---------        ---------
Provision for taxation at the year end                  7.317           12.030
------------------------------------                  ---------        ---------


Deferred taxation

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 the balance sheet dates using the expected future tax rates were as follows:

                                 Cumulative temporary          Deferred tax
                                      difference
                               31.12.2006   31.12.2005   31.12.2006   31.12.2005
       -----------------------    ---------    ---------    ---------    ---------

Deferred tax asset
Warranty expense provision         38.039       32.879        8.192        9.864
Retirement pay provision           19.588       16.173        4.192        4.852
Unearned interest on
receivables                        21.034       14.246        4.296        4.274
Capitalized financing
expenses written off               20.057       12.728        5.921        3.818
on inventory and fixed assets
Finance lease liabilities               4        2.056            1          617
Provision for doubtful
receivables                        12.750        6.536        2.550        1.961
Accrued expenses                   17.846       67.273        3.569       20.182
Investment incentive
allowances                             --       21.500           --        2.193
Taxable loss carried
forward                            10.205        4.788        2.041        1.436
Other                              25.208       19.450        5.351        5.834
       -----------------------    ---------    ---------    ---------    ---------
                                                             36.113       55.031
Deferred tax liability
Temporary differences arising
from restating
non-monetary assets               245.578      189.073       53.875       56.749
Income accruals                        --      182.590           --       54.777
Unearned interest on
payables                           15.891        9.800        3.309        2.940
Other                               1.798        4.302          429        1.287
       -----------------------    ---------    ---------    ---------    ---------
                                                             57.613      115.753
       -----------------------    ---------    ---------    ---------    ---------
Deferred tax liability,
net                                                         (21.500)     (60.722)
-----------------------           ---------    ---------    ---------    ---------


The movement of deferred tax liability is given below:

                                                    01.01.-      01.01.-31.12.20
        ------------------------------------     31.12.2006                   05
                                                  ---------            ---------

Opening balance                                   (60.722)            (106.574)
Acquisition of subsidiary                             610                2.155
Deferred tax income                                38.677               43.592
Translation difference                                (65)                 105
        ------------------------------------      ---------            ---------
Closing balance                                   (21.500)             (60.722)
------------------------------------              ---------            ---------


16.          PROVISION FOR RETIREMENT PAY

In accordance with existing social legislation in Turkey, the Company is
required to make lump-sum termination indemnities to each eligible 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.


The amount of indemnity is the equivalent of one month's salary for each year of
service subject to a ceiling which is YTL 1.857,4 as of 31 December 2006 (2005:
YTL 1.727,2) on historical cost basis).



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


In the accompanying consolidated financial statements, the Company 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.


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

         ------------------------------------        ---------        ---------
                                                       01.01.-          01.01.-
                                                  31.12.2006       31.12.2005
         ------------------------------------        ---------        ---------

Opening balance                                       18.456           17.262
Additions                                              5.387            5.639
Acquisition of subsidiary                                788              593
Disposals                                             (3.184)          (3.908)
Monetary gain                                             --           (1.130)
         ------------------------------------        ---------        ---------
Closing balance                                       21.447           18.456
------------------------------------                 ---------        ---------




Number of personnel employed at year end:                11.686         11.845
------------------------------------                    ---------      ---------



Personnel cost:

Gross salaries, wages, and employer's share of social
insurance                                                 240.296      200.181
------------------------------------                      ---------    ---------

Key personnel salaries and other short term benefits        8.881        6.801
------------------------------------                      ---------    ---------





17.          SHARE CAPITAL


The authorized share capital of the Company comprised 22.000.000.000 shares of
par value YKr  1 each at 31.12.2006 and the issued and paid up share capital of
the Company comprised 15.909.988.696 shares of par value YKr 1 each at
31.12.2006 and 2005.


As of 31.12.2006 and 2005 the shareholders of the Company and their percentage
shareholdings were as follows:

                                                          Shareholding
                                                      Percentage         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
              -----------------------------------      ---------      ---------
                                                                      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 31.12.2006 the Group had contingent liabilities of YTL 169.868 (2005: YTL
164.165) 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 Group
has committed to realize exports amounting to USD 333.344.860 as of the balance
sheet date.


c) Property, plant and equipment have been mortgaged to the extent of YTL 45.000
as collateral against bank loans.


d) 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 Group continues until such clearance
however no liability has arisen in the past and no liability is reasonably
expected for the future. The amount of postponed VAT at 31.12.2006 was YTL
185.176 (2005: YTL 183.417).


e) The Group signed a loan agreement with Vakiflar Bankasi for USD 125 million
which has not yet been utilised. Group companies and the majority shareholder of
the Group were guarantors to the agreement. This mortgage on fixed assets was
released during March 2007.


f) Claims from court cases started by the group and pending as of 31.12.2006
amounted to YTL 14.477. Claims from court cases started and pending against the
group as of the same date was YTL 927.


Included among the court cases started by the group are receivables totalling
YTL 13.379 and tax claim of YTL 1.287 which have been provided for in full. In
addition a provision of YTL 860 has been set aside in respect of court cases
opened against the group.


h) A lawsuit has been initiated against the Group by a company engaged in the
production of household appliances in respect of a patent certificate for a
minor component used in refrigerators. The Group has initiated a counter lawsuit
with a claim to cancel the patent certificate from the related registry and
invalidity of the same. The lawsuits are still pending and at the stage of
expert evaluation.


i) Vestel CIS Limited's property, plant and equipment used for television
production, part of finished goods, components and raw materials were destroyed
by a fire on 14 November 2005. The situation related to the fire at Vestel CIS
Ltd. (Russia) has been explained under note (8) above.


k) Total obligation of the Group related to operational lease agreements is
amounted to YTL 2.514 (2005: YTL 2.559) per year.


20.          OTHER INCOME, net

                                                    01.01.-      01.01.-31.12.20
        ------------------------------------     31.12.2006                   05
                                                  ---------            ---------

Scrap sales                                         9.333               14.434
Export commission and freight related
income                                             14.509                7.428
Profit on sale of fixed assets                      2.896                  635
Profit on sale of investments                       3.189                   --
Provisions                                          2.109               11.652
Other                                              10.970                5.026
        ------------------------------------      ---------            ---------
Other income                                       43.006               39.175

Idle capacity expenses                             (2.692)              (7.170)
Loss on sale of fixed assets                         (548)              (6.717)
Other                                             (11.750)              (3.023)
        ------------------------------------      ---------            ---------
Other expense                                     (14.990)             (16.910)
        ------------------------------------      ---------            ---------
                                                   28.016               22.265
        ------------------------------------      ---------            ---------





21.          FINANCING EXPENSE, net

Foreign exchange gain                                 276.280         183.835
Interest income from bank deposits                     39.608          75.445
Profit on forward contracts                                25           8.044
Unearned interest on payables                          21.077          19.062
           ------------------------------------       ---------       ---------
Financing income                                      336.990         286.386

Foreign exchange loss                                (370.161)       (145.160)
Bank loans interest expense                           (95.841)        (55.970)
Letters of credit expenses                            (34.541)        (32.075)
Finance lease interest expense                           (443)           (768)
Factoring expenses                                     (6.353)         (3.411)
Loss on forward contracts                              (2.298)        (44.353)
Bank commission expenses                              (17.683)        (14.427)
Unearned interest on receivables                      (28.207)        (18.376)
Other financial expenses                              (25.776)         (7.931)
           ------------------------------------       ---------       ---------
Financing expense                                    (581.303)       (322.471)
           ------------------------------------       ---------       ---------
                                                     (244.313)        (36.085)
           ------------------------------------       ---------       ---------



22.          SUPPLEMENTARY CASH FLOW INFORMATION

                                                      01.01.-    01.01.-31.12.20
           ------------------------------------    31.12.2006                 05
                                                    ---------          ---------

Depreciation and amortisation:
Cost of sales                                       114.858             97.868
Selling expenses and general and
administrative expenses                              24.612             21.354
           ------------------------------------     ---------          ---------
                                                    139.470            119.222
           ------------------------------------     ---------          ---------

Changes in operating assets and liabilities:
Trade receivables                                    20.120           (321.616)
Inventories                                        (211.691)          (116.199)
Other assets                                        (31.299)            11.572
Trade payables                                      236.096            429.106
Other liabilities                                   (56.635)           (59.629)
           ------------------------------------     ---------          ---------
                                                    (43.409)           (56.766)
           ------------------------------------     ---------          ---------

Acquisition of subsidiary:

During 2006 and 2005 the Group acquired Birim Bilgi ISlem and Aydin Yazilim. The
fair value of assets acquired and liabilities were as follows:
               ------------------------------------      ---------     ---------
                                                             Birim         Aydin
                                                       Bilgi ISlem       Yazilim
               ------------------------------------      ---------     ---------

Current assets                                            11.692        20.409
Non-current assets                                         3.062         6.235
Total liabilities                                        (11.386)      (26.365)
               ------------------------------------      ---------     ---------
Total net assets acquired                                  3.368           279

Minority share (-)                                        (1.378)         (235)
               ------------------------------------      ---------     ---------
Total purchase price                                       1.990            44

Less: Cash and cash equivalents                             (371)       (1.565)
               ------------------------------------      ---------     ---------
Cash flow on acquisition net of cash acquired              1.619        (1.521)
------------------------------------                     ---------     ---------


Birim Bilgi ISlem is a Turkish company engaged in software preparation in
hospitals and undertaking to operate computer information system in hospitals.


Aydin Yazilim is a Turkish company engaged in software work for military
applications.


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.


a) The significant balances with related parties at year end are shown below:

----------------------------                 ---------    ---------    ---------
Related party                                    Trade        Other        Trade
                                           receivables       assets     payables
              ----------------------------   ---------    ---------    ---------

                              31.12.2006
Zorpet Petrogaz, Petrol, Gaz ve Petrokimya
A.S.                                              58           --          330
Promer Bilgisayar Limited Sirketi                 --           --        1.170
Vestel USA Inc.                                  535          240           --
Teds International                                --          552           --
L-3 Communications Investments                    --           --        1.553
Other related parties                            561          119          911
              ----------------------------   ---------    ---------    ---------
                                               1.154          911        3.964
              ----------------------------   ---------    ---------    ---------



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






b) Significant income and expense from related parties are summarised below:

                                                    01.01.-      01.01.-31.12.20
        ------------------------------------     31.12.2006                   05
                                                  ---------            ---------

Sales
Zorpet Petrogaz, Petrol, Gaz ve
Petrokimya A.S.                                     1.883                   --
Other                                                 933                   --
        ------------------------------------      ---------            ---------
                                                    2.816                   --
        ------------------------------------      ---------            ---------

Operating expense
Deniz Destek Oto Alim Satim Kiralama
Temizlik Hizmetleri ve InSaat A.S.                  1.864                1.665
Other                                                  --                  851
        ------------------------------------      ---------            ---------
                                                    1.864                2.516
        ------------------------------------      ---------            ---------

Other income
Vestelnet Elektronik IletiSim ve
Bilgilendirme A.S.                                     --                2.373
Other income                                           --                1.566
        ------------------------------------      ---------            ---------
                                                       --                3.939
        ------------------------------------      ---------            ---------

Other expense
Vestelnet Elektronik IletiSim ve
Bilgilendirme A.S.                                     --                1.540
Other expense                                          --                2.474
        ------------------------------------      ---------            ---------
                                                       --                4.014
        ------------------------------------      ---------            ---------


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.


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 at fixed and
variable 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, e.g. by collecting receivables and disposing of marketable
securities. The Group's proceeds from these instruments generally approximate
their fair values.


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 31.12.2006 and 2005 is
shown below:

        -----------------------    ---------  ---------  ---------     --------
                                         USD       EURO        GBP          YTL
                                                                     equivalent
        -----------------------    ---------  ---------  ---------     --------

                   31.12.2006
Cash and cash equivalents          112.975    110.133     12.114      396.106
Trade receivables                   71.104    323.937     30.070      782.613
Inventories                         94.599     96.887      9.640      338.931
Other receivables                   89.328      8.479        202      141.815
        -----------------------    ---------  ---------  ---------     --------
Total foreign currency assets      368.006    539.436     52.026    1.659.465

Current borrowings                 183.712    141.236         --      519.724
Non-current borrowings             235.280     33.976         --      393.617
Current lease payables               1.373        187         --        2.277
Non-current lease payables             610        100         --        1.042
Trade payables                     905.641    499.294        813    2.199.653
Advance received                     5.902      3.294         --       14.395
Other liabilities                   22.060         --         --       31.007
        -----------------------    ---------  ---------  ---------     --------
Total foreign currency
liabilities                      1.354.578    678.087        813    3.161.715
        -----------------------    ---------  ---------  ---------     --------
Net foreign currency position     (986.572)  (138.651)    51.213   (1.502.250)
-----------------------            ---------  ---------  ---------     --------


        -----------------------    ---------  ---------  ---------     --------
                   31.12.2005            USD       EURO        GBP          YTL
                                                                     equivalent
        -----------------------    ---------  ---------  ---------     --------

Cash and cash equivalents           48.832    103.508        179      230.256
Trade receivables                  249.875    378.138      1.120      938.166
Inventories                        174.305    123.640        217      430.663
Other receivables                   45.766      8.038        629       75.623
        -----------------------    ---------  ---------  ---------     --------
Total foreign currency assets      518.778    613.324      2.145    1.674.708

Current borrowings                  27.184     82.215         --      166.992
Non-current borrowings             249.141    118.644         --      522.644
Current lease payables               1.273      1.376         --        3.893
Non-current lease payables           1.774        362         --        2.953
Trade payables                     916.939    450.592        979    1.947.927
Advance received                     8.439      3.272         47       16.626
Other liabilities                   15.101         --         --       20.263
        -----------------------    ---------  ---------  ---------     --------
Total foreign currency
liabilities                      1.219.851    656.461      1.026    2.681.298
        -----------------------    ---------  ---------  ---------     --------
Net foreign currency position     (701.073)   (43.137)     1.119   (1.006.590)
-----------------------            ---------  ---------  ---------     --------


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 organized 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 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 CIS (Vladimir Region/Russia)


Segment information about these businesses is presented below:


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

                                   01.01- 31.12.2006          01.01- 31.12.2005
                                     Amount      Quantity       Amount      Quantity
        ----------------------    ---------     ---------    ---------     ---------

Television                      3.271.073    10.978.636    2.797.912    10.868.211
                    - Domestic    366.950     1.044.342      499.189     1.338.265
                 - Export         499.817     1.666.790      443.839     1.779.806
 - Foreign marketing companies  2.404.306     8.267.504    1.854.884     7.750.140
Monitor                                --            --       24.125       267.749
                    - Domestic         --            --       12.737        96.986
                 - Export              --            --           14            26
 - Foreign marketing companies         --            --       11.374       170.737
Electronic Devices                582.375     5.999.434      545.342     7.314.755
                    - Domestic    240.335       970.389      148.371     1.028.466
                 - Export         124.564       549.749       54.848       995.718
 - Foreign marketing companies    217.476     4.479.296      342.123     5.290.571
White goods                     1.216.844     4.150.159      902.191     3.203.442
                    - Domestic    452.194       864.728      398.113       832.743
                 - Export         297.867     1.428.259      182.787       938.669
 - Foreign marketing companies    466.783     1.857.172      321.291     1.432.030
Other                             160.833            --      186.659            --
                    - Domestic    160.833            --      186.659            --
        ----------------------    ---------     ---------    ---------     ---------
                                5.231.125                  4.456.229
        ----------------------    ---------     ---------    ---------     ---------





25.2 The breakdown of television export sales by country is as follows:

                               01.01- 31.12.2006           01.01- 31.12.2005
                                 Amount        Quantity      Amount     Quantity
  ----------------------      ---------       ---------   ---------    ---------

Germany                       639.525       2.151.110     548.197    2.164.831
United Kingdom                666.439       2.094.247     464.591    1.823.995
France                        325.763       1.153.621     262.351    1.052.771
Denmark                        35.409         115.813      37.404      162.918
Portugal                       49.187         187.055      34.607      149.830
Netherlands                    79.064         225.439      79.322      322.832
Spain                         263.809         942.889     217.339      874.363
Italy                         269.328         978.108     216.894      883.110
Russia                        218.548         786.015     140.491      564.926
Others                        357.051       1.299.997     297.527    1.530.370
  ----------------------      ---------       ---------   ---------    ---------
                            2.904.123       9.934.294   2.298.723    9.529.946
  ----------------------      ---------       ---------   ---------    ---------


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

                                 01.01- 31.12.2006          01.01- 31.12.2005
    ----------------------       ----------------           ----------------
                                                             ---------  --------
                               Gross profit         % of  Gross profit      % of
                                     amount                     amount
                                                   sales                   sales
    ----------------------        ---------     --------     ---------  --------

Domestic
Televisions                        75.115           20       106.594        21
Monitors                               --           --         1.437        11
Electronic devices                 40.008           17        24.392        16
White goods                        91.182           20        74.162        19
Others                             17.008           11        28.955        14
    ----------------------        ---------     --------     ---------  --------
Domestic total                    223.313           18       235.540        19

Export
Televisions                       422.779           15       287.480        13
Monitors                               --           --         1.157        10
Electronic devices                 48.904           14        41.656        10
White goods                       168.188           22        92.281        18
    ----------------------        ---------     --------     ---------  --------
Export total                      639.871           16       422.574        13
    ----------------------        ---------     --------     ---------  --------
                                  863.184           17       658.114        15
    ----------------------        ---------     --------     ---------  --------


25.4 The segment assets and liabilities at 31.12.2006 and 2005 and capital
expenditure for the year then ended are as follows:


 --------------------       --------   --------    -------   -------      -------
                      Television and Electronic      White     Other      Total
                             monitor    devices
                                                     goods
 --------------------       --------   --------    -------   -------      -------

         31.12.2006
Trade
receivables                951.727     97.076    279.692    21.299    1.349.794
Inventories                759.968    220.018    220.174    41.606    1.241.766
Property,
plant and
equipment, net             505.121     59.801    451.844     4.835    1.021.601
Intangible
assets, net                 74.678     33.174    155.104     4.557      267.513
Unallocated
assets                                                                  897.672
 --------------------       --------   --------    -------   -------      -------
Total assets                                                          4.778.346
--------------------        --------   --------    -------   -------      -------

Trade payables           1.693.199    258.825    323.939    30.365    2.306.328
Unallocated
liabilities                                                           1.149.835
 --------------------       --------   --------    -------   -------      -------
Total
liabilities                                                           3.456.163
--------------------        --------   --------    -------   -------      -------

Capital
expenditure                 66.829     19.151    116.898     3.086      205.964
--------------------        --------   --------    -------   -------      -------

         31.12.2005
Trade
receivables              1.121.299     70.435    156.899    19.215    1.367.848
Inventories                709.301    176.028    122.127    22.550    1.030.006
Property,
plant and
equipment, net             564.546     80.965    325.392     3.130      974.033
Intangible
assets, net                 89.352     39.714      2.837     6.573      138.476
Unallocated
assets                                                                  880.382
 --------------------       --------   --------    -------   -------      -------
Total assets                                                          4.390.745
--------------------        --------   --------    -------   -------      -------

Trade payables           1.599.660    239.482    196.564    28.886    2.064.592
Unallocated
liabilities                                                           1.027.676
 --------------------       --------   --------    -------   -------      -------
Total
liabilities                                                           3.092.268
--------------------        --------   --------    -------   -------      -------

Capital
expenditure                 74.881     26.270    163.864     6.307      271.322
--------------------        --------   --------    -------   -------      -------










25.5 Geographical segments:

Segment sales                                        01.01.-     01.01.-31.12.20
------------------------------------              31.12.2006                  05
                                                   ---------           ---------

Turkey                                           1.220.312           1.245.069
Europe                                           3.717.611           2.924.010
Rest of the world                                  293.202             287.150
       ------------------------------------        ---------           ---------
                                                 5.231.125           4.456.229
       ------------------------------------        ---------           ---------

Segment assets                                  31.12.2006          31.12.2005
------------------------------------               ---------           ---------

Turkey                                           3.418.942           3.387.930
Europe                                           1.069.341             836.247
Asia                                               290.063             166.568
       ------------------------------------        ---------           ---------
                                                 4.778.346            4.390. 745
       ------------------------------------        ---------           ---------

Capital expenditure                                  01.01.-     01.01.-31.12.20
------------------------------------              31.12.2006                  05
                                                   ---------           ---------

Turkey                                             137.129             213.997
Europe                                               1.520                 910
Asia                                                67.315              56.415
       ------------------------------------        ---------           ---------
                                                   205.964             271.322
       ------------------------------------        ---------           ---------









                      This information is provided by RNS
            The company news service from the London Stock Exchange