Annual 2005

01 Milestones

02 Financial Ratios

03 Breakdown of Sales Revenue

03 Production and Distribution

04 Five-Year Consolidated Financial Review

05 Shareholders and Dividends Paid

06 Report of the Board of Directors and

Message from the Chairman

10 2005 Review of Activities and Message

from the General Manager

CONTENTS28 Brands

30 Awards in 2005

31 Production Facilities

35 Corporate Social Responsibility Report

56 Board of Directors 2005

58 Management 2005

60 Agenda

61 Proposal for Profit Distribution

61 Amendments to the Articles of Association

62 Consolidated Financial Statements and Independent Auditor’s Report

100 Compliance with International Systems and Product Standards

1955... 1975... 1991... 1998...

Restructuring1998:

The three-year warranty program

was introduced.

Decision to implement the Six

Sigma methodology was taken.

1999:

Ardem Piflirici ve Is›t›c› Cihazlar

Sanayi A.fi. merged into Arçelik A.fi.

Arçelik A.fi., Türk Elektrik Endüstrisi

A.fi., At›l›m A.fi., and Geliflim A.fi. were

united to become a single legal entity.

Quality - Technology1991:

R&D Center was established.

Consumer Information Service was

launched.

1993:

Ankara Dishwasher Plant

commenced production.

1996:

Çay›rova Air-Conditioner Plant was

inaugurated.

1997:

Arçelik A.fi. received the National

Quality Award.

Single Product -Single Plant1975:

Eskiflehir Refrigerator Plant started

production.

1977:

Ardem Piflirici ve Is›t›c› Cihazlar

Sanayi A.fi. was founded in partnership

with Türk Demir Döküm Fabrikalar› A.fi.

1979:

‹zmir Vacuum Cleaner Plant started

production.

Foundation1955:

Arçelik A.fi. started its operations

in Sütlüce.

1959:

First ever washing machine

produced in Turkey.

1960:

First ever refrigerator produced in

Turkey.

1968:

Production plant moved to

Çay›rova.

MILESTONES

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2000... 2002... 2004... 2005...

Today2005:

Arçelik A.fi. celebrated its 50th

anniversary.

Foundation of the Russian plant

was laid.

First production line for the Arctic

chest freezer launched at the Gaesti plant.

Arçelik A.fi. continued to expand

its product range through investments in

technology and R&D and broke new ground

producing the first tumble dryer of Turkey.

Blomberg product range completed,

blending advanced technology with German

design; the product line received several

awards in the environment, design,

efficiency and technology categories.

In furniture sector, Arstil reached

80 stores nationwide and the first

distributors’ meeting was held.

Ankara Dishwasher Plant and

Çerkezköy Electric Motors Plant received

the “TPM Excellence Award” of Japanese

state organization JIPM.

InternationalAchievements2004:

The decision was taken to begin

investments in Russia.

At the outset of the TPM (Total

Productive Maintenance) Awards bestowed

by the Japanese state organization JIPM,

the Eskiflehir Refrigerator Plant received the

“Excellence Award” and the Çay›rova Plant

received the “Continuous Excellence Award”.

The Beko dishwasher was

recommended by the British state

organization Energy Saving Trust for

exhibiting superior performance in efficient

energy consumption.

Blomberg’s CT1300A refrigerator

named “The Most Energy-Efficient

Refrigerator” within the European Energy

Commission’s Energy+ contest.

Beko dishwashers were included

among the best buys in the German market

by Stiftung Warentest, the most prestigious

consumer magazine of Germany.

Blomberg washing machine received

the “Design Award in Plus X”, the most

important technology contest in Germany.

Globalization2002:

Beko became the leader of the

British refrigerator market.

Digital Life Project was introduced

for the very first time during the Berlin

Hometech Fair.

Arçelik A.fi. purchased German

household appliances company Blomberg,

and Austrian household appliances

company Elektra Bregenz, as well as their

brand names Elektra Bregenz and Tirolia.

Arçelik A.fi. also acquired British household

appliances brands Leisure and Flavel, and

Romanian household appliances company

Arctic.

The new logo reflecting innovation

and dynamism was introduced.

2003:

Sale of smart products started.

Arçelik A.fi. was mentioned in the

training manual of Six Sigma trainers.

Arçelik A.fi. was chosen “The Best

Turkish Company in 2003” by The Banker,

a publication of the Financial Times.

Productivity2000:

Arçelik A.fi. received the European

Quality Prize (EFQM).

Arçelik - LG Klima Sanayi ve Ticaret

A.fi. started production.

2001:

The domestic marketing and sale

of products bearing the Beko brand was

taken over by Arçelik A.fi. from Beko Ticaret

A.fi.

In order to increase productivity,

the ‹zmir Vacuum Cleaner Plant, and the

Topkap› Motor and Pump Plant were united

and relocated to their new site in Çerkezköy.

Financial Ratios

Rapid and profitable growth,strong financial results

NET SALES - WORLDWIDE(EUR million)

NET SALES - DOMESTIC(EUR million)

2,500

2,000

1,500

1,000

500

0

2005

2004

2003

2002

2001

NET SALES - INTERNATIONAL(EUR million)

1,250

1,000

750

500

250

0

2005

2004

2003

2002

2001

OPERATING MARGIN(%)

EBITDA(EUR million)

375

300

225

150

75

0

2005

2004

2003

2002

2001

1,85

8

1,51

6

1,08

2

944

823

1,19

9

1,17

0

1,00

0

472

334

294

245

231

96

956

3,750

3,000

2,250

1,500

750

0

2005

2004

2003

2002

2001

3,05

6

2,68

6

2,08

2

1,90

0

1,29

5

10

8

6

4

2

0

2005

2004

2003

2002

2001

8.0

8.0

7.7

7.6

1.1

INVENTORY TURNOVER RATE

7.50

6.00

4.50

3.00

1.50

0.00

2005

2004

TOTAL LIABILITIES /SHAREHOLDERS’ EQUITY

1.25

1.00

0.75

0.50

0.25

0.00

2005

2004

CURRENT RATIO

2.00

1.60

1.20

0.80

0.40

0.00

2005

2004

1.841.73

5.676.12 1.061.06

NET MARGIN(%)

15

10

5

0

2005

2004

2003

2002

6.1

5.9

4.5

2.3

-5

-10

-15

(14.

9)20

01

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Production and Distribution

Head Office

Turkey / ‹stanbul Headquarters

Sales and Marketing

Germany Beko Deutschland GmbH

Austria Elektra Bregenz AG

Czech Republic Beko S.A. Czech Republic

China (Hong Kong) Archin Limited

France Beko France S.A.

United Kingdom Beko Plc.

Spain Beko Electronics Espana S.L.

Italy Arcelitalia S.r.l.

Hungary Beko S.A. Hungary

Poland Beko Polska S.A.

TOTAL CONSOLIDATED NET SALES OF WHITE GOODS BY PRODUCT

Dishwashers 9%

Washing Machines 30%

Refrigerators 46%

Ovens 15%

TOTAL CONSOLIDATED NET SALES BY REGIONOther 5%

Europe 34%

Turkey 61%

Production and Marketing

Romania SC Arctic S.A.

Russia Beko Llc.

ProductionLocal Plants

Eskiflehir Refrigerator Plant

‹stanbul, Tuzla Washing Machine Plant

Bolu Cooking Appliances Plant

Ankara Dishwasher Plant

Tekirda¤, Çerkezköy Electric Motors Plant

Eskiflehir Compressor Plant

‹stanbul, Tafldelen Multi-purpose Motor Plant

Five-Year Consolidated Financial Review(EUR million)

2005 2004 2003 2002 2001

1. Net Sales - Worldwide 3,056 2,686 2,082 1,900 1,295

2. Net Sales - International 1,199 1,170 1,000 956 472

3. Gross Profit 772 672 542 505 334

4. Income from Operations 244 214 161 145 14

5. Income before Provision for Taxes and Minority Interest 248 228 134 100 (160)

6. Net Income 187 159 95 44 (193)

7. EBIT 244 214 161 145 14

8. EBITDA 334 294 245 231 96

9. Total Current Assets 1,676 1,372 1,110 1,001 687

10. Total Current Liabilities 913 791 605 532 260

11. Working Capital 763 581 505 469 427

12. Property, Plant and Equipment - Net 434 352 342 354 325

13. Total Assets 2,597 1,908 1,606 1,518 1,181

14. Total Liabilities 1,331 976 830 785 502

15. Minority Interest 14 12 11 13 3

16. Shareholders’ Equity 1,252 919 764 721 676

17. Net Cash Provided by Operating Activities 164 108 202 15 158

18. Net Cash Used in Investment Activities (231) (120) (64) (69) 0

19. Pre-financing Cash Flow (66) (12) 138 (54) 158

20. Dividends Paid 146 1 47 0 45

21. Cash and Cash Equivalents at the End of the Year 168 155 189 140 170

22. Capital Expenditures 150 105 78 43 38

23. Depreciation and Amortization 90 80 84 86 82

24. Year-end Number of Employees 11,079 10,841 9,725 9,349 5,717

Hourly 8,866 8,437 7,185 6,476 3,892

Salaried 2,213 2,404 2,540 2,873 1,825

25. Year-end Market Capitalization (ISE) 2,364 1,803 1,788 1,110 1,093

* Excluding 2005, the above figures have been restated in terms of the purchasing power of the Turkish Lira at 31 December 2004, and converted to Euro at 2004 year-end exchange rate. In 2005, incomestatement items were converted to Euro at the average Euro rate, whereas balance sheet items were converted to Euro at year-end exchange rate (this procedure does not apply to Item 25).

Shareholders andDividends Paid

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ShareholdersPaid-in Capital (TRY thousand) Share (%)

KOÇ HOLD‹NG A.fi. 156,546 39.1

KOÇ GROUP OTHER 68,911 17.2

TOTAL KOÇ GROUP 225,457 56.3

TEKNOSAN A.fi. 58,709 14.7

BURLA T‹CARET VE YATIRIM A.fi. 30,649 7.7

OTHER SHAREHOLDERS 85,145 21.3

TOTAL 399,960 100.0

Dividends PaidDividends distributed from the 2000, 2001, 2002, 2003 and 2004 profits and their share in paid-in capital:

Dividends Distributed Paid-in Capital Dividend Ratio

Year (TRY thousand) (TRY thousand) (%)

2000 36,360 60,600 60.0

2001 20,000 90,900 22.0

2002 145,440 145,440 100.0

2003 0 399,960 0

2004 229,177 399,960 57.3

Distinguished Members of Arçelik A.fi. Family,

Dear Shareholders,

We have witnessed major national and global developments this past year. The

year 2005 had a special meaning for Arçelik A.fi. as well. We celebrated our

50th anniversary and we all shared the well-deserved enthusiasm and pride of

half a century full of achievements.

Before evaluating the year 2005, I would like to take a brief look at major

developments that marked last year.

Although global economic performance was not significantly better than 2004,

it was generally in line with expectations. For 2005, it was predicted that

economic growth and the expansion in trade volumes would slow down, inflation

rates would rise slightly, and interest rates would increase significantly compared

to previous years.

The global economy, which grew 5.1% in 2004, was estimated to have grown

4.3% in 2005. However, this involved major intercontinental and international

differences as in previous years. Growth was once again led by emerging

markets, mainly China and India. Growth rates in the US and China, which have

become the engines of the global economy, were 3.5% and 9%, respectively,

while the rate of growth remained at 2% in Japan and a mere 1.3% in the Euro

zone, thus further increasing imbalances in global growth dynamics. The positive

effect of the abolishment of the textile quota accelerated capital inflow to

developing Asian countries such as China and India, thanks to the increase in

foreign direct investments and exports.

Report of the Board of Directors and Message from the Chairman

The well-deserved prideof half a century

Despite these positive developments, the poor performance of the Euro zone,

economic and political problems, ever-increasing budget deficits and rising

unemployment levels hindered the expected recovery in 2005. The rejection of

the EU Constitution by founding members France and the Netherlands deepened

concerns about the future of the European Union and led to a serious confidence

crisis. The negative outcomes of the referendums caused the Euro to decline.

High oil prices, which have a considerable influence on the global economy,

have been a major factor behind increased inflationary pressures worldwide.

Crude oil prices climbed to a record 40% in 2005 and continued to adversely

affect raw material, other material and energy prices.

Meanwhile, exchange rate fluctuations in world markets became even more

unpredictable. The US current account deficit and its influence on the dollar

started to threaten the global economy. The primary interest rate, repeatedly

increased by the Federal Reserve, finally reached 4.25% by the end of 2005,

while the European Central Bank closed the year with 2.25%. The US deficit,

substantial differences between the growth rates of world economies, and the

potential inflationary pressure exerted by the rise in crude oil prices resulted

in mounting concerns for the future.

Unfortunately, we will remember 2005 not only for its political, economic and

social events, but also for its wars and natural disasters. While the world was

trying to heal the wounds of the tsunami disaster, which ruined great swathes

of Asia, the US was greatly shaken by hurricane Katrina and numerous other

powerful hurricanes, which left hundreds of thousands of people homeless. In

October, the earthquake in Pakistan cost many lives and caused huge damage.

In the face of this catastrophe, the Koç Group started a campaign to help

Pakistanis in pain. We offered our wholehearted support to the victims of the

earthquake in Pakistan and sent the donations of our employees, of Koçbank

and of the Vehbi Koç Foundation.

In 2005, the world also faced the risk of a disastrous pandemic of avian influenza.

This disease, which has long been terrorizing Asia, spread to Turkey and Europe

in the last months of 2005 and caused quarantines and the mass destruction

of tens of thousands of birds.

While the world was witnessing these developments, 2005 has been a very

bright and promising year for Turkey. Growing for the last four years since the

economic crisis of 2001, Turkey became the 19th largest economy of the world.

Thanks to the consistent economic program of the government, growth rate

reached 5-6% in 2005.

In January, the New Turkish Lira (TRY) was introduced by removing six zeroes

from the Turkish Lira. Inflation, which fell to single-digit levels after so many

years, remained even below the 8% target by the end of 2005. Tight fiscal and

monetary policies proved to be effective anti-inflationary measures and resulted

in stable growth supported by increases in productivity. The positive effects of

these policies were immediately felt in portfolio investments and foreign capital

inflows, and lucrative outcomes were obtained in privatization projects. Total

privatization revenue reached USD 26.7 billion with such giant privatization

projects as Turkish Telecom, Tüprafl and Erdemir.

Turkey’s foreign trade volume grew 16% over 2004, and by the end of the year,

the highest export figures in Turkish history were reached. Today, Turkey is the

22nd largest exporter worldwide with an export volume of over USD 73 billion,

and the 14th largest importer worldwide with an import volume of USD 116

billion.

All national economic indicators are positive, except for the current account

deficit and the high unemployment rate, which have been subject to heated

debates recently. The risk imposed by the current account deficit may be avoided

by Turkey becoming more competitive in international markets and by increasing

foreign direct investment in the country. Improvement of the investment and

employment environment and facilitation of foreign capital inflow will offer a

permanent solution for unemployment. The Koç Group and Arçelik A.fi. are

committed to fulfill their responsibilities and create new jobs.

The year 2005 has been a turning point in Turkish foreign policy as well. There

is no doubt that the most important and positive event was the start of full

membership negotiations with the European Union after the long, hectic hours

we spent on 3rd October. The start of negotiations has also been the starting

point of a long and arduous journey into the future of our nation. Both parties

have certain responsibilities in this journey. What is expected of us is to create

and maintain a stable political atmosphere and a strong economy, to perform

the necessary structural reforms and move forward with determination. In our

EU membership venture, which started 43 years ago, Europe is aware what

benefits Turkey’s membership will offer and it must keep its promise and support

this process which is crucial for Europe’s future and global peace.

The Turkish economy has already gained significant momentum with the start

of EU accession talks. Foreign direct investment soared as a result of the boost

in confidence and optimistic expectations. In the next couple of years, Turkey

is expected to attract almost USD 4-5 billion in foreign investment annually.

The economic support of two major anchors, the EU and the IMF, the

implementation of political, legal and economic reforms, and continuing fiscal

discipline are very important for the maintenance of sustainable growth in Turkey.

In parallel with the positive economic developments in Turkey, 2005 has also

been a dynamic and successful year for Arçelik A.fi. The success and strength

We continue to grow,relying on our confidencein the future of our country

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of Arçelik A.fi., which has aimed to make life easier and more fulfilling for

consumers since its inception, were also translated into financial results. By

the end of 2005, which was very successful in terms of growth, profitability and

plant efficiency, profits reached a new record high: EUR 187 million. In 2005,

the Company’s consolidated sales revenue increased 14% over 2004, from EUR

2.7 billion to EUR 3.1 billion. Its net international sales were EUR 1.2 billion.

Almost 20% of the total consolidated revenue of the Koç Group in 2005 came

from Arçelik A.fi. alone.

Arçelik A.fi. strengthened its leadership in the domestic market with a market

share over 50%, and also invested abroad, in accordance with its strategy to

expand in foreign markets. In June, construction of a washing machine and

refrigerator plant started in Russia. When the plant in Russia starts production

in the second half of 2006, the Company will have a very strong presence in

the Russian market, which will be much bigger than the Romanian market where

we already have a presence. This will bring Arçelik A.fi. closer to its target of

making half of its sales in foreign markets. In November, Arçelik A.fi. started

a new chest freezer production line at its production facility Arctic in Romania.

Attributing great importance to technology and R&D, Arçelik A.fi. produced the

first tumble dryer of Turkey. The Company has a 50-year history full of

achievements, and will continue to grow in the coming years through new

investments.

In the last 50 years, Arçelik A.fi. carried Turkish people from hand dishwashing

to dishwashers, from wood stoves to electric ovens, from screened kitchen

cupboards to refrigerators, from cloth sticks to washing machines. Today, with

the comfort and convenience Arçelik A.fi. offers Turkish people in their homes,

there is no household, which does not have at least one Arçelik A.fi. product.

Today, Arçelik A.fi. is a global company, exporting its products to 106 countries

with its 9 brands, 12 foreign operations and a total of 11,000 employees. It is

one of the five largest household appliances producers in Europe. We are all

proud of the success of Arçelik A.fi.

Arçelik A.fi. has become an important player in the global arena by increasing

its profitability, while growing rapidly. Arçelik A.fi. set off on this journey in

reliance of its founder Vehbi Koç’s motto, “I shall exist as long as my state and

country exist.” Having full confidence in the future of the Company, we will be

committed to our mission in the future, as we always have been in the past.

I would like to express my gratitude to all members of our Group for their

contribution to our Company, to our business partners, authorized dealers,

authorized services and suppliers, with whom we share our success, and to our

valuable shareholders and distinguished employees for their unfailing support.

I hope that 2006 will be a healthy, joyful, peaceful, and successful year for all

of you.

Sincerely yours,

Rahmi M. Koç

Chairman

Arçelik A.fi.

Our Esteemed Shareholders and Business Partners,

In 2005, we realized significant accomplishments as a result of self-sacrificing

efforts. We continued to grow rapidly and strengthened our position with

successful operations in both domestic and foreign markets. We are proud of

carrying to world markets the synergy created by Koç Holding, a private company

pioneering industrial development in Turkey.

“Plus 50 Years”

Founded by Vehbi Koç in 1955, Arçelik A.fi. celebrated its 50th anniversary last

year. Today, everything we do, is a product of our knowledge, skill and courage

of a 50-year-experience and “Plus 50 Years”. Why “Plus 50 Years”? Because

we are eager to add new “plusses”, and we want our successful history to reflect

our confidence in the future.

2005 Review of Activities and Message from the General Manager

Knowledge, skill, courage,“plus 50 years”

Arçelik A.fi. has always pioneered its industry with determination, discipline,

accurate strategies and a consistent vision. The Company’s reliance in its skilled

people and its customer-focused services and solutions empower it to achieve

its targets.

It is our greatest ambition and dedication to carry our Founder’s valuable flag

further, and to achieve even more in many 50 years to come. While carrying

this flag our Founder has handed over to us, we will always remember his

legacy: “The customer is our boss.” We will always apply the formula he taught

us: “High-quality products, a strong sales organization and effective after-sales

services”.

Arçelik A.fi. has always pioneered its industry withdetermination, discipline, accurate strategiesand a consistent vision.

2005 has been a difficult year for the global economy due to record-high oil

prices, which reached USD 70 per barrel. The household appliances sector has

always been vulnerable against the cost of inputs such as metals, oil-based

plastics, fuel and transportation, which have all rocketed last year. Despite these

developments, we achieved profitability and increased our net income by 18%.

We are continuing to grow rapidly and profitably.

Despite the depreciation of the dollar, the global inflationary pressure of

skyrocketing oil prices resulting from strong increases in demand and concerns

over supply, Turkey managed to keep inflation even below its target of 8%,

which was only 7.7% at the end of the year. In 2005, the budget deficit to GNP

ratio was for the first time lower than the 3% limit specified in the EU’s Maastricht

criteria, and fell to 2%. The opening of accession talks with the EU on 3rd

October, the implementation of political and economic stability programs, the

appreciation of the national currency with the transition to the New Turkish Lira,

and an economy growing at the rate of 5-6% were only a few of the positive

developments which filled the nation as a whole with optimism. Turkey will

move forward if it can benefit from this period of opportunities properly. Increased

competition will attract new investments, which in turn will be translated into

employment and efficiency.

Arçelik A.fi. has been remarkably successful in achieving sustainable growth.

Despite all the difficulties we had to endure, the Company neither delayed its

investments, nor revised its targets. In 2005, consolidated sales revenue

increased 14% over the previous year, reaching EUR 3.1 billion, well above the

target. With a market share over 50%, Arçelik A.fi. strengthened its position in

the domestic market despite intense competition, and became one of the five

largest household appliances producers of Europe.

The volume of the global household appliances market is estimated to be EUR

100 billion. About 60% of this market belongs to developed countries in Western

Europe, North America and Japan. Turkey’s share in the global market is around

2%. In recent years, increased economic stability and prosperity had positive

effects on the domestic household appliances industry. In 2004, the record

growth of 66% in the domestic market fueled by postponed demand was followed

by 3% growth in domestic household appliances in 2005. In the domestic

household appliances market, Arçelik A.fi. grew 11.8% over 2004.

In 2006, we expect the domestic market to grow by 5% and export markets by

more than 15%. Positive steps towards macroeconomic stability will also be

reflected positively on sales volumes.

The Company’s household appliances sales volume increased 9%, and its total

international sales revenue reached EUR 1.2 billion. Total household appliances

production grew 6% over 2004, reaching 7.9 million units.

Human resources are among Arçelik A.fi.’s most vital assets. In 2005, the

number of its employees exceeded 11,000. Of these, 9,203 employees work

locally and 1,876 work in our subsidiaries abroad.

Arçelik A.fi. continues stressing the domestic marketplace while becoming an

important global player. It has almost 4,600 Arçelik and Beko dealers and 920

after-sales services (household appliances and electronics) in Turkey.

Sustainable growth

Leader in Turkey with amarket share over 50%


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CONSOLIDATED SALES REVENUE(EUR million)

3,750

3,000

2,250

1,500

750

0

2005

2004

2003

2002

In 2005, the Company’sconsolidated sales revenueincreased 14% over theprevious year and reachedEUR 3.1 billion, well overthe target.

Annual householdappliances productionreached 7.9 million unitsin four main productgroups. Productionvolume increased 6%compared to 2004.

International householdappliances sales volumeincreased 9%, whileinternational sales revenuereached EUR 1.2 billion.

Arçelik A.fi.’s target is toincrease the share of itsinternational sales in totalsales from 40% to 50%.

Arçelik A.fi.’s investmentsfor capacity increase andnew product developmentreached EUR 150 millionin 2005.

CONSOLIDATED SALESREVENUE DISTRIBUTION(EUR million)

CAPITAL EXPENDITURES(EUR million)

200

160

120

80

40

0

2005

2004

2003

2002

PRODUCTION(Thousand units)

10,000

8,000

6,000

4,000

2,000

0

2005

2004

2003

2002

International

Domestic

International

Domestic

CONSOLIDATED SALESREVENUE DISTRIBUTION(%)

100

80

60

40

20

0

2005

2004

2003

2002

2,000

1,600

1,200

800

400

0

2005

2004

2003

2002


Arçelik’s wide washing machine range, offering capacities between 3.5 kg to 10 kg, meets the needs of any customer.

Competencies and competitive advantages

High product standards,customer-focused services

Arçelik A.fi. is one of the five largest household appliances producers in Europe.

The Company has become a global player carefully followed and monitored by

the international business community, along with its other major rivals. Arçelik

A.fi.’s strengths, which carried it to its current position in the domestic market

and abroad, include the following:

Total commitment to product quality

Investments not only aimed at superior productsand services but also at superior technology

An appropriate product range and aconsistent brand strategy

Flexible management in accordance withthe dynamics of the relevant market

A strong distribution network

An effective and extensive service network

Continuous monitoring of changingcustomer expectations

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In 2005, our gross margin was 25.3%. Our operating profit increased 14%

compared to 2004 and reached EUR 244 million. EBITDA reached EUR 334

million, increasing 14%, and the margin was 11%. The net profit increased by

18% and reached EUR 187 million. In the last two years, the net profit increased

two times more than sales revenue.

The profitable growth of Arçelik A.fi. delivers considerable value to shareholders,

business partners and employees.

The Company’s ever-rising market capitalization, which has consistently increased

in recent years, is an indication of the confidence of domestic and foreign

investors in Arçelik A.fi. By the end of 2005, Arçelik A.fi.’s market capitalization

reached USD 2.8 billion, increasing 14% over 2004. Analysts recommend

investors to buy Arçelik A.fi. shares, since the Company is capable of responding

to growing domestic demand, maintaining a stable increase in its sales to

foreign markets, investing in the Russian market and implementing a competitive

pricing policy against products of Far Eastern origin.

In 2005, an important development took place, which confirmed the confidence

of global markets in the Company. Arçelik A.fi. obtained a high-denominated,

long-term syndicated loan from international finance organizations led by IFC

(International Finance Corporation). The Company used this loan facility to

finance the construction of its production plant in Russia, to realize capacity

increases, acquire new technology and develop new products.

Almost half of the Company’s balance sheet, which reached EUR 2.6 billion, is

composed of shareholders’ equity worth EUR 1.3 billion, which is the total

amount of the capital provided by shareholders and the funds generated by

operations. This shows the strength of the Company and the support of its

shareholders.

Robust cash flow and risk management guarantee current ratio and liquidity

ratio to be better than industry averages. Strong subsidiary and fixed assets

portfolio also strengthen the Company’s balance sheet.

Financial results

A company that delivers“value” to shareholders

In 2005, our gross margin was 25.3%. Our operatingprofit increased 14% compared to 2004 and reachedEUR 244 million.

New targets,new products

2005 Review of Activities andMessage from the General Manager

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Arçelik A.fi. is committed to developing and offering products and services,

which enrich quality of life at homes.

Thus, in addition to its core business of household appliances, the Company

is expanding its activities to embrace new business areas.

Arçelik A.fi. offers a very wide product range to consumers, from furniture

to computers, home textiles to small household appliances. All products in

line with Arçelik A.fi.’s mission will be included in its product range.

Arçelik A.fi. is also focused on the fitted-kitchen and built-in product segments,

which are growing fast in Europe. The Company’s product range, which

included 100 models in 2005, will be increased to 110 models soon.

Arçelik A.fi. made an aggressive entry to the furniture industry in 2004 with

the Arstil brand and the number of stores reached the target of 80. In 2005,

the Company held its first Arstil Dealers’ meeting.

Through cooperation with Sony in the domestic market, Arçelik and Beko

dealers started to offer Sony products that complement Arçelik A.fi.’s product

range.

Product portfolio and new businesses

A risingstar in theglobal arena


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International competition

Arçelik A.fi.’s aim is to replicate its domestic success in foreign markets. In

the period 2000 - 2005, the Company’s annual international household

appliances sales increased 34% per annum on average, and a 19% increase

is targeted for 2006.

Arçelik A.fi. offers products and services to more than 100 countries worldwide.

It carries out sales and marketing activities in several foreign countries

through 12 subsidiaries. In 2005, the Company established sales companies

in the Czech Republic, Hungary and Italy. Arçelik A.fi. continues to invest in

global markets, capitalizing on the synergies generated by being a member

of the Koç Group, Turkey’s largest group of companies with a vision to become

a global player that grows steadily and profitably.

Our New Target Markets: China and the US

Chinese and Far Eastern influences on our industry are clearly visible.

Worldwide, many producers are concerned that Far Eastern countries will

offer more competitive prices by obtaining cost advantages through high

production volumes. Arçelik A.fi. management is closely monitoring China,

one of the fastest growing markets of the world. In terms of our strategic

plan, China is an attractive country with a rapidly growing market, a logistic

advantage that allows Arçelik A.fi. to reach remote areas and inexpensive

production opportunities. As a first step, Arçelik A.fi. established a sales and

marketing company in Shanghai. Against the tide of ever-increasing imports

from China, Arçelik A.fi. will for the first time be exporting dishwashers and

washing machines from Turkey to China.

With the start of European Union accession talks on 3rd October 2005, Turkey

reached the pre-accession stage to full EU membership. Turkey has actually

been integrated into Europe since it became a member of the Customs Union

in 1995. Similarly, Arçelik A.fi. had become a major player in European

markets years ago. While investing in brands and technology to keep up with

the competition in these markets, the Company also consolidated its position

by adopting effective sales and marketing policies and will continue to do

so in the future to further capitalize on growing closeness with the EU.

Brands

Strong globalbrands


To be successful in international markets a company has to cultivate its own

brands. In the long term, OEM-based growth is a price-oriented strategy and

does not result in profitability and sustainability.

In addition to Arçelik, the leading brand in the domestic market, and Beko,

the second largest brand, the Company also offers economical products to

consumers under the Altus brand in Turkey.

In parallel with its strategy to expand in international markets, Arçelik A.fi.

acquired several companies. Following the acquisition of the Blomberg

Company and brand in Germany, Arçelik A.fi. acquired Leisure and Flavel

in the UK, and the Elektra Bregenz Company and brand in Austria. Arçelik

A.fi. also acquired the renowned Romanian refrigerator brand Arctic and

became the largest refrigerator producer of the Middle East and Eastern

Europe. By positioning its brands in accordance with the unique local

conditions of each country, the Company aims to reach all consumer segments.

The Beko brand transformed Arçelik A.fi. into a major player in international

markets. Statistics show that 250 million people worldwide prefer the Beko

technology today.

The ratio of Arçelik A.fi.’s own branded sales to its net international sales

revenue is 80%.

According to a survey conducted by independent research company GFK in

27 countries including 13 Western European countries, 12 Eastern European

countries, Russia and Turkey, Arçelik A.fi. brands have a cumulative market

share of 9%.

Arçelik A.fi. made several additions to its brands, in parallel with its

globalization strategy. The “Diffusion” series of the Beko brand has been

simultaneously offered for sale in both domestic and international markets,

from Madrid to Mardin. The Company completely renewed the product range

of its Blomberg brand and launched it in European markets.

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The economic crisis Turkey experienced in 2001 illustrated to Arçelik A.fi. that

strategies focused solely on the domestic market were insufficient. The Company

thus adopted an expansion strategy focused on maintaining a balance between

the domestic market and export markets.

By exporting a substantial portion of its output, Arçelik A.fi. aims to expand its

sales volume and become a stronger player internationally. The share of the

Company’s international sales in total sales is around 40%. The target is to

increase this share to over 50%.

Targets and strategies

2006 sales revenue target isEUR 3.5 billion


Beko’s Diffusion line creates a new concept in household appliances.

In 2006, Arçelik A.fi. plans for EUR 3.5 billion in sales revenues, a 14% increase

in total sales volume (6% domestic and 19% international), and a capital

investment of EUR 125 million. In parallel with its growth policy, the Company

will continue to acquire brands and companies appropriate for its strategies

and targets.

Our vision

To possess one of the ten mostpreferred global brands in oursector by the year 2010 AR

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Arçelik A.fi.’s new vision is to possess one of the ten most preferred global brands in itssector by the year 2010.

A consistent vision and well-defined strategies have both ensured 50 years ofaccomplishments and at the same time constituted the basis for continued success inthe future.

Arçelik A.fi.’s corporate culture and values, which it has embraced for 50 years, are thestrongest pillars on which the future of the Company is going to rise. The principles,to which the Company owes its success in the past, have always guided it inbecoming a global company.

In this context, I would like to underline Arçelik A.fi.’s most important assets:

These are;

A highly competent workforce,

Services and solutions that meet consumer expectations, and

The Company’s determination to produce its own technology.

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Arçelik A.fi. is a leading generator of technology and patents in Turkey. In

the last three years, 13% of the patents issued in Turkey and 45% of the

international patent applications filed with the World Intellectual Property

Organization by Turkish organizations belonged to Arçelik A.fi.

Producing its own technology without using any license and protecting its

products under more than 300 patents have become part and parcel of Arçelik

A.fi.’s corporate culture.

Technology

Arçelik meansinnovation


To meet domestic and foreign demand for no-frost refrigerators, Arçelik A.fi.

designed at its Eskiflehir Refrigerator Plant the Super No-Frost refrigerator,

which is the highest-volume refrigerator produced in Turkey in its category. The

refrigerator is unrivaled in Turkey with the many accessories it offers, “Double

Power” cooling system and “Full Protection Triangle” hygiene application.

Thanks to its superior features, it achieved a remarkable market position.

Arçelik A.fi. has always made efforts to expand its product range by investing

in technology and R&D. The Company once again broke new ground in 2005

and offered its consumers a washing machine with a capacity of 10 kilograms.

The new 10 kg washing machine complemented the washing machine range of

Arçelik A.fi., which already includes patented 3.5 - 7 kg washing machines

launched in 2004. Thus, the washing machine range of Arçelik A.fi. is ready to

meet all possible needs of consumers. The 10 kg washing machine is one of

the highest capacity washing machines in the market and saves energy and time

by washing more clothes.

With its “Direct Drive” technology, Arçelik A.fi. produced Turkey’s first washing

machine to win a technology award. The new technology, which attracted attention

worldwide, provides for a uniquely silent and steady operation and superior

performance. In 2005, the Company continued to offer consumers new award-

winning technologies. Arçelik A.fi. has always been a pioneer and innovator in

its industry; it has developed Turkey’s first “water jet” technology for washing

machines, which improves washing performance by wetting the laundry quickly

through additional water inflow and spraying detergent water on the laundry.

Arçelik A.fi. developed the world’s first dishwasher, which is driven by a brushless

DC motor and has the lowest water consumption level. The “Ecologist” dishwasher,

produced entirely by Turkish engineers, proved its success by qualifying for

the finals of the 6th Technology Awards. The “Ecologist” set the new world

standard for dishwashers with its low water and energy consumption, high

washing performance and silent operation.

In 2005, Arçelik A.fi. broke new ground when it produced the first domestically-

produced tumble dryer. The dryer, which is the most efficient one in Europe

and, which offers Class A energy performance was launched in November and

won the “Innovation Award” in Plus X Awards 2005.

At the beginning of 2005, Arçelik A.fi. launched the household appliances and

consumer electronics rental service, a unique service offered to Turkish

consumers. With this service, which is quite popular in developed countries,

the Company offers consumers the possibility to rent products ranging from

plasma TV sets to mobile phones, laptops and refrigerators for short or long

terms.

Breaking new ground

Pioneering and innovativeat global standards


In 2005, Arçelik A.fi. broke new ground whenit produced the first tumble dryer in Turkey.

Investments continuing

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In 2005, Arçelik A.fi. invested a total of EUR 150 million in capital expenditures,

to increase its production capacity and develop new products.

In June 2005, Arçelik A.fi. started the construction of a new production facility

in Russia. With its market size, growth potential, geographical proximity, low

white goods penetration rates and purchasing power, entering the Russian

market supports the Company’s strategy to expand in international markets. The

plant, which will cost EUR 58 million, will start production in the second half

of 2006. The planned annual production capacity is 900,000 units.

In November, Arçelik A.fi. started producing chest freezers in its Arctic plant in

Romania. The Company invested EUR 5 million in the production line, which

is planned to produce 400,000 units annually. The total production capacity of

the plant has thus been increased to 1.5 million units.

Arçelik A.fi. produced the first tumble dryer in its Çay›rova plant, with an

investment worth EUR 6.6 million. The dryer production capacity will be 200,000

in the first year, and 170,000 units will be exported.

Arçelik A.fi. will continue to seize investment opportunities and maintain its

sustainable growth.

Arçelik A.fi. was built with the faith, vision and targets of a few men in 1955.

Today, it is a powerful, 50-year-old company, which is committed to its founder’s

principle of “giving back what you have taken from the society,” not only from

a business perspective but also in terms of corporate social responsibilities.

One of the most important principles, which brought us to this day is “promising

what we can do and doing what we have promised.” I am confident that, with

the knowledge, experience, team spirit and result-oriented mindset of our

employees, we will make our vision come true by 2010. The values of the Koç

Group, which have been acquired over the years, our corporate reputation,

robust financial structure and international business skills will guide us to

achieve our vision.

The important thing is not to grow and win only but to develop strategies, which

will result in sustainable competitiveness through sustainable development and

to secure our future. This philosophy underlies Arçelik A.fi.’s success, and will

continue to do so in the next 50 years.

I would like to express my gratitude to the entire Arçelik A.fi. family for their

contribution to the success of our Company.

Sincerely yours,

A. Gündüz Özdemir

General Manager

Arçelik

Leading brand of the Turkish household appliances industry

Innovativeness and technological superiority

Wide product range including household appliances, small household

appliances, consumer electronics products, air conditioners, built-in products,

fitted-kitchen sets

The strongest sales and service network in Turkey

Beko

Wide product range in international markets, including free-standing

and built-in household appliances and consumer electronics products

High-performance electronic washing machines, dryers and dishwashers

Turkey’s second largest brand in household appliances and electronic

goods

“World Brand” motto that associates Beko with the Turkish people in the

domestic market

Altus

For consumers seeking economical durable goods

Product range including refrigerators, washing machines, dishwashers,

ovens, vacuum cleaners, TV sets and small household appliances

Ability to reach consumers through stores and wholesalers selling various

brands, in addition to supermarkets and hypermarkets

Blomberg

Free-standing and built-in household appliances combining hi-tech with

German design

Product range launched in 2004 and designed by Frog Design, a famous

design office

Offered to consumers in Western and Eastern Europe in 2005, especially

in Germany, Denmark, Belgium, the Netherlands, France, Greece, Switzerland,

Portugal, Russia, Estonia and Lithuania

Arctic

Romania’s largest and oldest local brand and market leader

Romania’s strongest local brand in the sector with a 96% brand recognition

rate in 2005

Romania’s largest cooling equipment producer with a wide product range

expanded with washing machines, ovens, dishwashers, combination boilers,

vacuum cleaners and TV sets

Recently in 2005, start of chest freezer production for Beko users in

Europe and rest of the world

Brands

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Elektra Bregenz

Austria’s strong and reputable brand in cooking appliances and built-

in products

Product range consisting of free-standing products, built-in household

appliances and water heaters

Leisure

Leading brand in free-standing cooking appliances segment in the UK

market

Wide product range including gas cookers, electric cookers, 100 cm

wide cookers, built-in cookers and dishwashers

Flavel

One of the leading household appliances brands in the UK and Ireland

Free-standing household appliances range meeting the needs of

consumers in the most economical way

Arstil

Furniture, kitchen and household accessories brand launched in 2005

in the domestic market

More than 1,000 models of furniture and home textile products, produced

at world standards

High-quality, elegant, modern and affordable products

Keeps its brand promise of setting “New Standards at Your Home,” by

offering new service, design, health and security standards in accordance with

Arçelik values

Awards in 2005

Awards that confirm Arçelik A.fi.’ssuperiority in technologyand design

Leaving behind world-famous brands, Arçelik’s Telve Turkish-coffeemachine won the “Design Award” in the IF Design competition, one of the mostprestigious design awards.

Beko refrigerator, washing machine and dishwasher have been chosenthe best products by consumers in the “Trophee de la Maison 2005” organizationheld in France.

Dutch consumer magazine Consumentengids has chosen Beko deepfreezer among the best three products.

Blomberg dishwasher won the “Red Dot Design Award”.

Beko built-in dishwasher was chosen “Best Buy” by the Belgian ConsumerAssociation.

Blomberg heat-pump dryer won the “Eco Top Ten” Energy Award.

The design methodology for the most energy efficient refrigerator of itsclass study won the “Award of Excellence” at the “International ApplianceTechnical Conference (IATC)”.

Blomberg and Elektra Bregenz dishwashers and dryers won a total of sixawards in two categories at the Plus X competition in 2005. Blomberg andElektra Bregenz heat-pump dryers won the “Innovation” Award, and dishwasherswith AC motors won both the “Innovation” and the “Design” Awards.

Beko D 8879 FD dishwasher was the most recommended product in theApril issue of the Test-Achats/Test Aankoop Magazine published by the BelgianConsumer Association.

It was the first time for a Turkish company to run in the Brand of the Yearcompetition held in Belarus, and Beko washing machines won first prize in therelevant product group.

Awards won by the Company’s production process in 2005

The Ankara Dishwasher Plant won the “TPM Excellence Award” of Japanesestate organization JIPM.

The Çerkezköy Electric Motors Plant won the “TPM Excellence Award”of Japanese state organization JIPM.

Washing Machine PlantRefrigerator and Compressor Plants

Refrigerator Plant - Eskiflehir

In 2005, the plant attained 92% capacity utilization and thanks to its high output,

it continued to rank first among other plants producing from a single campus in

Europe.

The plant supports its hi-tech equipment and well-established production processes

through effective use of advanced techniques such as Six Sigma. In 2004, the plant

designed and produced the most energy-efficient refrigerator in Europe. In 2005,

by making 28 additional patent applications, it increased the number of its cooling

patents to 136. Capitalizing on its unique know-how, it designed the Super

No-Frost refrigerator, which is the highest-volume refrigerator produced in

Turkey, and has a “Double Power” cooling system and a “Full Protection Triangle”

hygiene application. The new refrigerator has an unrivaled position in the market.

Washing Machine Plant - Tuzla, ‹stanbul

The plant added significant value to its brands in domestic and foreign markets

and strengthened its market position with its new product range which features

advanced control systems. In the last three years, the plant’s exports increased

significantly, and with its high production capacity exceeding 3 million units, it

is the largest front-loading automatic washing machine producer in Europe operating

under a single roof.

The plant started dryer production in the second half of 2004 and won the “Eco

Top Ten Energy” and “Plus X Innovation” Awards in 2005.

It is the only plant to win TPM’s Continuous Excellence Award.

Cooking Appliances Plant - Bolu

The Cooking Appliances Plant has the highest production volume among other

plants in Europe operating from a single campus. It increased its production

capacity by 25% through investments in 2005, and reached an annual production

capacity of 2 million units. The plant which contributed substantially to customer

satisfaction by investing in the rapidly growing built-in oven and stove markets,

started the production of electronic and self-cleaning ovens. In 2005, it exported

70% of its production.

Dishwasher Plant - Ankara

In 2005, the plant produced the “Class-A Ecologist” dishwasher, which offers the

lowest water consumption in the world. The plant complemented its product range

composed of 60 cm standard, free-standing and built-in products, with 45 cm

standard free-standing and built-in products. In 2005, the plant confirmed its

competitiveness by winning the “TPM Excellence Award” of JIPM. The plant owes

its competitiveness to its flexible production structure. In 2005, it attained 84%

capacity utilization and further increased its capacity. In 2005, the plant also won

the “Red Dot Design Award” and the “Plus X Innovation and Design” Awards. Every

year, new and easy-to-use features are added to the products, which are being

continuously improved aesthetically and technologically.

Production facilities

Pioneering production plantsin Europe with their advancedtechnology, internationalmanagement standards and capacity AR

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Production facilities

Vacuum Cleaner and Motor Plant* - Çerkezköy, Tekirda¤

The Çerkezköy Vacuum Cleaner and Motor Plant, which added a Turkish-

coffee machine to its product line, produced more than 7.1 million motors

and 460,000 vacuum cleaners. Its motor production increased 5% over 2004.

In 2005, the plant won the “TPM Excellence Award” of JIPM. The Turkish-

coffee machine won the “IF Design Award”, the most prestigious design award

in the world.

Compressor Plant - Eskiflehir

The plant produces compressors for Arçelik A.fi.’s Eskiflehir and Arctic

(Romania) Refrigerator Plants. Its total output exceeded 31 million units in

2005. The plant, which produces high-quality products at international

standards, has a significant competitive edge. Cost reduction, quality and

process improvement projects are carried out using the Total Production

Maintenance and Six Sigma methodologies. In 2005, development efforts

continued to produce new models, which will improve competitiveness of the

plant.

Multi-purpose Motor Plant - Tafldelen, ‹stanbul

The plant produced 560,000 motors of various sizes in 2005. About 59% of its

production is exported to 17 countries including Germany, France, United

Kingdom, Spain, Taiwan and China.

Cooling Appliances Plant / Arctic - Gaesti, Romania

With investment projects undertaken following its acquisition by Arçelik A.fi.,

Arctic became a market leader with a 30% market share. It exports 65% of its

production to European countries. Today, Arctic is the largest household

appliances producer in Romania, and also the strongest local brand with a

recognition rate of 96%.

Arctic celebrated its 35th anniversary and sold its 12,000,000th refrigerator in

2005. While it strengthened its leadership in the refrigerator segment with a

50% market share, it also started chest freezer production at the Gaesti plant

with an investment of EUR 5 million. Arctic is a giant household appliances

producer with a wide product range, strong technology transfer, new investments,

and an annual production capacity of over 1.5 million units.

*The plant was renamed Electric Motors Plant in January 2006.

Dishwasher PlantCooking Appliances Plant

Blomberg’s product range has received several awards in environment, design, technology and efficiency categories.

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2002

2003

2004

2005

REFRIGERATORS (Thousand Units)

5,000

4,000

3,000

2,000

1,000

0

Production Capacities

2002

2003

2004

2005

WASHING MACHINES (Thousand Units)

5,000

4,000

3,000

2,000

1,000

0

2002

2003

2004

2005

DISHWASHERS (Thousand Units)

1,000

800

600

400

200

0

2002

2003

2004

2005

OVENS (Thousand Units)

2,500

2,000

1,500

1,000

500

0

Arçelik A.fi. believesthat Corporate SocialResponsibility is anintegral part of itscore business, and iscommitted to itsprinciples and values.

CorporateSocialResponsibilityReportAR

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Global resources are limited and we are aware that not only individuals, governments and non-governmental organizations, but also companies must assume importantresponsibilities in using and developing such resources carefully, while improving and sustaining living standards.

Within the framework of its corporate social responsibility policy, Arçelik A.fi. is committed to sustainable development. The Company is aware of and sensitive toenvironmental and social issues and fully complies with applicable laws, ethical codes, its corporate governance principles and human rights in all its operations.

“Our Most Valuable Asset is Our People”. This is one of the main principles set by the Company’s founder Vehbi Koç, and based on this principle, Arçelik A.fi.employees and business partners do their best to fulfill their responsibilities. Guided by these corporate values, we believe it is our duty to meet the needs of thesociety in line with our mission.

Corporate Social Responsibility Approach

Arçelik A.fi.’s corporate values and culture, ethical values, good governancepolicies and code of professional conduct guide the Company in fulfilling itsresponsibilities.

In line with international business standards, the Company has adopted fourprinciples of corporate governance, which builds confidence between thestakeholders and organizations: accountability, responsibility, openness andtransparency, and fair treatment. These principles are indispensable for theproductivity and success of the Company in the long run.

Arçelik A.fi. is aware that keeping its promises, gaining the confidence of itsstakeholders and investors and maintaining its stability depend on propercorporate governance. The benefits of implementing good corporate governanceprinciples are clearly visible in the Company’s meetings with institutionalinvestors.

With a view to attaining its profit targets, Arçelik A.fi. not only capitalizes on itsbusiness results and strong financial structure, but also manages its longstandingcorporate reputation as a core value.

Corporate Governance

Responsible management,sustainable development

Corporate Governance Compliance Report

Monitoring all amendments to the Capital Market Law and applicable legislationand reporting them to the Company’s relevant departments,

Representing the Company vis-à-vis the Capital Markets Board, the ‹stanbulStock Exchange and the Central Registry Agency.

Staff members in charge of investor relations:

Fatih Kemal Ebiçlio¤lu Assistant General Manager, Finance and Accounting +90 212 314 34 01 [email protected]

Türkay Tatar Finance Director+90 212 314 31 84 [email protected]

Çi¤dem Ergüven Investor Relations and Subsidiaries Manager+90 212 314 31 13 [email protected]

Turhan Sar› Investor Relations Specialist+90 212 314 31 15 [email protected]

Baran Bülbül Investor Relations Specialist+90 212 314 31 17 [email protected]

Fax: +90 212 314 34 90

In 2005, with a view to providing existing and potential investors with detailed

information on the Company:

Seven investor meetings were held abroad,

Interviews were conducted with more than 300 investors, both in Turkey andabroad and their questions about the Company were answered,

Three press conferences were held in Turkey to inform the public and investors.

2. Shareholders’ Exercise of Their Rights to Obtain Information

Arçelik A.fi. treats its shareholders equally in terms of their rights to obtain andanalyze information.

In addition to the above-mentioned 300 interviews in 2005, the Company makesavailable on its website (www.arcelikas.com.tr) its financial statements, as well asupdated information that could affect shareholders’ exercise of their rights with a viewto further improving their right to obtain information.

Information requests from shareholders were handled either verbally or in writingthroughout 2005, without making any discrimination between shareholders. Duringthe year, 80 shareholders who failed to collect their dividends and participate in thecapital increase last year were provided with necessary assistance and their dividendswere paid.

Arçelik A.fi. has completed its efforts to send the necessary electronic data to theCMB and the ISE with electronic signatures, within the framework of the PublicAnnouncement Project carried out by Tübitak-Bilten under the supervision and controlof the Capital Markets Board. When it is completed, the Public Announcement Projectwill allow the Company to inform shareholders quickly and reliably.

Arçelik A.fi. became a member of the Turkish Central Registry Agency establishedfor the dematerialization of capital market instruments. In 2005, the Company’s stockstraded on the ISE were dematerialized. Thus, no physical share certificates will be

The proper implementation of the “Corporate Governance Principles” that wereadopted by the Capital Markets Board (CMB) under Resolution No. 35/835 of 4 July2003 and announced in July 2003 is essential for the reliability and creditworthinessof companies, particularly those that are publicly traded. Arçelik A.fi. has adoptedand fully implements these Corporate Governance Principles, which demonstratesthe quality of the Company’s corporate governance system.

Pursuant to Resolution No. 48/1588 of the CMB adopted on 10 December 2004, allcompanies listed on the ‹stanbul Stock Exchange (ISE) are encouraged to disclosetheir compliance with the CMB’s Corporate Governance Principles in their annualreports and on their websites beginning with their 2004 annual reports. Accordingly,Arçelik A.fi. has set up a committee to study what it could do to ensure compliancewith these principles and, as a result of these studies, has disclosed additionalinformation in its 2005 Annual Report and on its website, for the purpose of ensuringcompliance with the principles mentioned below. The “OECD Corporate GovernancePrinciples” published in 1999 were revised in 2004, and upon this revision, the CMBrevised its “Corporate Governance Principles” for harmonization with the “OECD’s2004 Corporate Governance Principles”. Arçelik A.fi. prepared its 2005 CorporateGovernance Compliance Report in accordance with the revised Corporate GovernancePrinciples.

CHAPTER I - SHAREHOLDERS

1. Investor Relations Department

Relations with shareholders at Arçelik A.fi. are handled by a department reportingto the Assistant General Manager in charge of Financial and Fiscal Affairs. Thisdepartment is mainly responsible for:

Maintaining and updating shareholders data in a safe and reliable manner,

Responding to written inquiries of shareholders, excluding confidential andsecret information of the Company, which are not disclosed to the public,

Ensuring that the general meeting of the Company is conducted in conformitywith applicable legislation, the Company’s Articles of Association, and other internalregulations,

Preparing documents for shareholders attending the general meeting,

Registering voting results and sending reports to requesting shareholders,

Monitoring any issue related to public announcements within the context ofapplicable legislation and the Company’s disclosure policy,

Promoting the Company to individual and institutional investors both inTurkey and abroad,

Providing information to analysts evaluating the Company,

Attending conferences held abroad by various organizations for informinginvestors,

Attending road shows held by investment companies in various countries forinforming investors,

Providing corporate information to undergraduates, graduates and academicsstudying the Company and the industry,

Sending all required Material Disclosures to the ISE and the CMB in accordancewith Communiqué Serial No. VIII, No. 39,

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issued and costs will be reduced. Also, an agreement has been made with Koç Yat›r›mMenkul De¤erler A.fi. for the performance of shareholder transactions with the CentralRegistry Agency. With this agreement, shareholders will be able to collect theirdividends, participate in capital increases and open accounts at Koçbank branches.

Arçelik A.fi.’s operations and accounts are periodically audited by independent auditorPricewaterhouseCoopers, and by in-house auditors, both elected by the GeneralMeeting. The Articles of Association do not contain any provision requiring theappointment of special auditors. During the reporting period, no request has beenmade to the Company for the appointment of a special auditor.

3. General Meeting

Ordinary General Meeting was held in 2005 and majority of the shareholders attendedthe meeting. The Company’s shareholders (by proxy), stakeholders and the mediawere present at this meeting. The audience included media representatives, variousbrokerage houses’ and banks’ representatives.

The General Meeting is announced at least three months in advance, asrequired by applicable legislation. The announcement is also published on theCompany’s website to maximize shareholders participation.

All announcements comply with the Corporate Governance Principles.

The financial statements and reports, including the Annual Report, the proposalfor the distribution of profit, an informative document on the agenda of the GeneralMeeting, other supplementary documents, the latest version of the Articles ofAssociation, and the text and justification of any amendment to be made to the Articlesof Association are made available to shareholders at the Company’s headquarters,branches and on the website, after the invitation for the General Meeting is announced.

Agenda of the General Meeting is determined clearly, avoiding anymisunderstanding.

Proxy statement forms to be used by shareholders who will be representedat the General Meeting by proxy are made available in the invitation, and are alsoposted on the Company’s website.

The voting procedure is announced to shareholders electronically before theGeneral Meeting.

In 2005, the Company received no request from shareholders for the additionof an item to the agenda.

No significant changes in the management and operational organization of theCompany took place in the previous financial period, and to our knowledge, no suchchange is planned for future periods. In the event any such change occurs, publicannouncements will be made in accordance with applicable legislation.

When holding General Meetings, the aim is to avoid any inequality among shareholdersand to ensure that the simplest procedures possible are implemented at minimum

cost to shareholders. In order to make it easier for shareholders living in Turkey andabroad to attend the General Meeting, the one-week period specified in the invitationcan be shortened. Also, all required documents are translated into English with aview to informing foreign shareholders of the General Meeting and of agenda items,and these translations are sent via banks performing the custody and settlementtransactions of such shareholders.

General Meetings are held at a central location in the city to ensure better and easierparticipation by shareholders. The number of participants is monitored annually andthe location of the meeting is determined according to the number of attendingshareholders. The venue of the meeting can accommodate all shareholders. Noticesinviting shareholders to attend a general meeting are made by the Board of Directorsin accordance with the Turkish Commercial Code (TCC), the Capital Market Law andthe Company’s Articles of Association. The Board of Directors’ decision to convenea General Meeting is notified immediately to the ISE and the CMB, and thereby tothe public.

Pursuant to the regulations of the CMB and the ISE, financial statements must bedisclosed to the public within 14 weeks of the end of the financial reporting period.However, the Company discloses its financial statements before this deadline. Financialstatements as of 2005 year end were disclosed at the end of the ninth week. Followingdisclosure of the results, preparations are made for the General Meeting, and uponcompletion of relevant legal formalities, the General Meeting convenes. However,due to the time required for completion of this process, the General Meeting cannotconvene within three months following the end of the financial reporting period. TheGeneral Meeting for the 2004 operations of the Company took place on 12 April2005, and the General Meeting for 2005 operations is planned to be held on 5 April2006.

At any General Meeting, agenda items are explained in detail to shareholders, in anobjective and comprehensible manner, and the items are discussed by givingshareholders equal opportunity to voice their opinion and ask questions. Shareholdersare also given the opportunity to make comments and recommendations on theremuneration to be paid to the directors and officers of the Company.

Any shareholder who has an access card to the General Meeting is authorized tovoice his/her opinion on the operations of the Company, ask questions to Companymanagement and get answers to his/her questions. The minutes of the GeneralMeeting include voting results. Each agenda item is voted individually. GeneralMeetings are held under the supervision of a representative of the Ministry of Industryand Trade.

The Board of Directors has been authorized by the General Meeting to purchase, selland lease material assets, and to make donations and give grants. The Articles ofAssociation of the Company allow such authorization.

Minutes of the General Meeting are made available to shareholders on the Company’swebsite and at the Company’s headquarters. They are also provided upon request.

Any development, which may influence the capital market instruments of the Companyare disclosed to the public without delay, as required in applicable legislation. Thepublic is kept up to date about any consequent changes and developments regardingsuch disclosures.

In public disclosures, in addition to those required by applicable legislation, datadistribution companies, media and the Company’s website are used effectively.

Board members and managers of the Company, managers of subsidiaries abroad andappointments and resignations disclosed under Material Disclosures in 2005 wereas follows:

Board of Directors 2005*

Rahmi M. Koç Chairman

Dr. Bülent Bulgurlu** Vice Chairman

Robert Sonman Member

Mustafa V. Koç Member

Cengiz Solako¤lu Member

F. Bülend Özayd›nl› Member

Temel K. Atay** Member

M. Ömer Koç Member

A. Gündüz Özdemir Member

Board of Auditors

Serkan Özyurt

Mert fi. Bayram***

* In accordance with the Company’s Articles of Association, Board members arere-elected every year during the Ordinary General Meeting. Accordingly, all members’terms started on 12 April 2005.

** Dr. Bülent Bulgurlu and Temel K. Atay are also members of the Audit Committee.

*** Since Fatih Kemal Ebiçlio¤lu, who was appointed auditor at the Ordinary GeneralMeeting of 12 April 2005, was assigned to the vacant position of Assistant GeneralManager in charge of Finance and Accounting, Mert fi. Bayram was appointed auditorby the other auditor Serkan Özyurt on 18 April 2005, to serve until the next GeneralMeeting in accordance with the Turkish Commercial Code.

4. Voting Rights and Minority Rights

Shareholders attending a General Meeting are informed of the voting procedure atthe beginning of the meeting. The Company refrains from any practice, which wouldmake it difficult to exercise voting rights, and ensures that each shareholder is ableto exercise his/her voting rights in the most convenient manner.

The Company’s Articles of Association do not grant any privilege regarding votingrights. Each share is entitled to one vote. Among the shareholders of the Company,there is no corporate body, which is one of Arçelik’s subsidiaries. The Company’sArticles of Association do not contain any provision preventing a non-shareholderfrom voting by proxy.

With their attendance at the General Meeting, holders of minority shares constitutethe Company’s management together with the holders of majority shares. The Articlesof Association do not provide for a cumulative voting procedure.

5. Dividend Distribution Policy and Time

The dividend policy of the Company maintains a balance between the interests of theshareholders and the interests of the Company in accordance with corporate governanceprinciples.

Under the conditions of no legal arrangement changes or no major exceptionalinvestments take place other than the regular capital expenditures; the long-termaverage of the dividend distributed will not be less than 50% of the yearly distributableincome.

Profit distribution takes place in accordance with the Turkish Commercial Code andthe Capital Market Law, and within statutory time limits. At the General Meeting dated12 April 2005, it was decided to distribute gross 57.3% (net 54.76%) dividend basedon 2004 operating results and distribution started on 16 May 2005. The Articles ofAssociation do not contain any privilege regarding participation in Company profit.

The Articles of Association allow for the distribution of advance dividends, and theauthorization of shareholders is sought for such a distribution, provided that suchdividends are limited to the relevant year.

6. Transfer of Shares

The Articles of Association do not contain any procedure or provision, which impedesor restricts the free transfer of shares by shareholders.

CHAPTER II - DISCLOSURES AND TRANSPARENCY

7. Public Announcement Policy

All material events are disclosed to the public pursuant to Communiqué Serial No.VIII, No. 39 issued by the CMB. Information desired or required to be disclosed isdisclosed by the office of the Assistant General Manager in charge of Financial andFiscal Affairs at required intervals. Individuals who are responsible for disclosingsuch information are indicated in the Annual Report.

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Management 2005 (31 December 2005)

Aka Gündüz Özdemir General Manager

Atilla ‹lbafl* Assistant General Manager -Production and Technology

Fatih Kemal Ebiçlio¤lu* Assistant General Manager - Finance and Accounting

Mustafa Nadir Yalç›nalp* Assistant General Manager -International Marketing and Sales

fiirzat Subafl› Assistant General Manager -Turkey Marketing and Sales

Ahmet ‹hsan Ceylan Information Technologies Director

Ahmet Sak›zl› Product Planning and Coordination Director

Ali Tayyar Accounting Director - Headquarters / Plants

Cemal Can Dinçer* International Sales Director - Non-European Markets

Cemal fieref O¤uzhan Öztürk* Product Director - Washing Machine

Dilek Temel Corporate Relations Coordinator

Ferhat Erçetin* Purchasing Director

Hilmi Cem Akant* International Sales Director -Europe and Business Development

‹hsan Somay Accounting Director - Sales and Marketing

‹smail Hakk› Sa¤›r Product Director - Refrigerator

Koral Boro Beko Sales Director

Mehmet Savafl* Product Director - Cooking Appliances

Melis Mutufl fiahinler* Corporate Communications Coordinator

Murad fiahin* Marketing Director

Mustafa Türkay Tatar* Finance Director

Oktay Sokullu Arçelik Sales Director

Salih Arslantafl Product Director - Dishwasher

Serdar Sözeri Consumer Services and Logistics Director

Sibel Kesler* Budget, Reporting and Analysis Director

fiemsettin Eksert Research and Development Director

fierife Füsun Ömür* Human Resources and Strategic Planning Director

Management, Subsidiaries (31 December 2005)

Brigitte Petit Country Manager - France / Beko France General Manager

Clayton Witter Country Manager - United Kingdom / Beko PLC

General Manager

‹smail Kürflat Coflkun* Country Manager - Italy / Arcelitalia SRL General Manager

Kamil U¤ur Kayal›* Country Manager - Romania / Arctic S.A. General Manager

Nam›k Koçer Country Manager - Spain / Beko Espana General Manager

Orhan Sayman Country Manager - Poland / Hungary, Czech Republic, Slovakia / Beko Polska General Manager

Osman Diyarbekirli* Country Manager - Germany, Austria / Elektra Bregenz AGGeneral Manager, Blomberg GmbH General Manager,Beko Deutschland General Manager

Tevfik Adnan Tüfekçi* Country Manager - Russia / Beko LLC General Manager

*Appointments in 2005

Purchasing Director - Ferhat Erçetin (as of 28 February 2005)

Product Director - Washing Machine - C. fi. O¤uzhan Öztürk (as of 28 February 2005)

Assistant General Manager - Production and Technology - Atilla ‹lbafl (as of 4 March2005)

Marketing Director - Murad fiahin (as of 4 March 2005)

Human Resources and Strategic Planning Director - fierife Füsun Ömür (as of 4March 2005)

Assistant General Manager - Finance and Accounting - Fatih K. Ebiçlio¤lu (as of 18April 2005)

Assistant General Manager - International Marketing and Sales - M. Nadir Yalç›nalp(as of 18 May 2005)

International Sales Director - Non - European Markets - C. Can Dinçer (as of 1 June2005)

International Sales Director - Europe and Business Development - H. Cem Akant (asof 1 June 2005)

Product Director - Cooking Appliances - Mehmet Savafl (as of 1 June 2005)

Country Manager - Germany, Austria / Elektra Bregenz AG General Manager, BlombergGmbH General Manager, Beko Deutschland General Manager - Osman Diyarbekirli(as of 1 June 2005)

Country Manager - Russia / Beko LLC General Manager - T. Adnan Tüfekçi (as of 1June 2005)

Country Manager - Romania / Arctic S.A. General Manager - K. U¤ur Kayal› (as of1 June 2005)

Finance Director - M. Türkay Tatar (as of 15 August 2005)

Breakdown of shares purchased and acquired, during the previous year andthrough capital market instruments issued by the Company, by board members,executives and shareholders directly or indirectly holding more than 5% of the capitalstock of the Company.

10. Ultimate Controlling Shareholder(s) who are Natural Persons

There is no material circumstance with regard to individual controlling shareholders,which might influence investors’ decisions if disclosed to the public. Since the publicknows that members of the Koç Family are the ultimate controlling shareholders ofthe Company, it was considered unnecessary to perform and disclose a separatecalculation in this regard.

11. Individuals Who Have Access to Insider Information

In order to maintain a balance between transparency and the protection of theCompany’s interests, the Company requires its personnel to strictly observe the rulesregarding the use of any insider information.

Any information which directors and other staff members have access to while workingfor the Company, which the Company does not prefer to be known by anyone otherthan certain individuals inside the Company, and which can be classified as tradesecrets, constitutes “proprietary information” and must be kept confidential. Allemployees are required to keep confidential such proprietary information during andafter their employment, and are not allowed to use such information directly orindirectly to their benefit. No Arçelik A.fi. employee is allowed to engage in anyactivity intended to obtain a gain by using such proprietary information for tradingthe shares of Arçelik A.fi. or any Koç Group company.

If any manager of the Company who has access to information that could affect theprices of the Company’s capital market instruments purchases and/or sells suchinstruments issued by the Company, he/she is required to disclose such transactionsimmediately.

The Company’s Annual Report contains a list of the individuals who constitute itssenior management and may have access to insider information.

CHAPTER III - STAKEHOLDERS

12. Announcements to Stakeholders

The stakeholders of the Company are third parties, which have a direct relation withthe Company. Stakeholders are informed of the relevant issues through meetingswhen necessary, or through other communication means. Considering that cooperationbetween the Company and stakeholders is in the interest of the Company in the longrun, Arçelik A.fi. respects and protects the rights of its stakeholders through mutualunderstanding and agreement, as defined in applicable legislation. The corporategovernance structure of the Company allows all stakeholders, including employeesand representatives, to report to the management their concerns about any illegal orunethical transaction.

13. Stakeholder Participation in Management

The mechanisms and models, which support the participation of stakeholders, andespecially employees, in management are developed in a manner that would nothinder the Company’s operations.

Arçelik A.fi. supports the participation of its stakeholders in its management by usingvarious means such as “proposals” or “questionnaires”, provided that the Company’soperations are not hindered.

Country Manager - Italy / Arcelitalia SRL General Manager - ‹. Kürflat Coflkun

(as of 1 September 2005)

Budget, Reporting and Analysis Director - Sibel Kesler (as of 15 October 2005)

Corporate Communications Coordinator - Melis Mutufl fiahinler (as of 1 November2005)

Resignations in 2005

Assistant General Manager - Finance and Accounting - Ya¤›z Eyübo¤lu (appointedGeneral Manager of Beko Elektronik A.fi. on 18 April 2005)

Finance Director - Tamer Soyupak (appointed Assistant General Manager - Financeand Accounting, Beko Elektronik A.fi. on 10 June 2005)

Financial Analysis, Budget and Planning Director - Mehmet Yaz›r (retired on 28February 2005)

Purchasing Director - Zülfikar Bekar (retired on 28 February 2005)

Production and Technology Group Director - Turgut Soysal (retired on 4 March 2005)

International Marketing and Sales Group Director - ‹brahim Yaz›c› (retired on 6January 2005)

8. Material Disclosures

Arçelik A.fi. made 29 material disclosures in 2005. The CMB and the ISE did notrequest any additional explanations. Since the Company is not listed on any stockexchange abroad, it is not required to disclose material events to any party other thanthe CMB or the ISE. Arçelik A.fi. made all material disclosures within the statutorytime limits and therefore no sanctions were imposed by the CMB.

9. The Company's Website and its Contents

In order to ensure efficient and rapid interaction with investors and have continuouscommunication with shareholders, the financial statements of the Company whichare filed with the CMB are also made available in Turkish and English on the Company’sofficial website at www.arcelikas.com.tr. The website contains the following:

Trade registry information

Shareholders structure

Board members

Latest version of the Articles of Association

Annual reports of the last four years

Material Disclosures


List of shareholders attending the General Meeting and minutes of thesemeetings

Proxy Statement Form

Periodical financial statements and independent auditors’ reports

Agenda of the General Meeting

Frequently asked questions

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Arçelik A.fi. cooperates with and obtains the consent of the labor union with regardto changes in working conditions, the working environment and employee rights.

Additionally, by organizing annual Dealer Meetings, the Company ensures that itsauthorized dealers participate in management.

14. Human Resources Policy

The principle “Our Most Valuable Asset is Our Human Resources” is the core valueof the Company’s human resources policy. Within the framework of its HR policy,Arçelik A.fi. employs a set of written criteria regarding recruitment and promotion.

When developing its recruitment policies and undertaking career planning activities,the Company ensures that equal opportunity is given to individuals with equalqualifications.

The goal of the Company’s human resources policy is to continuously improve thecompetencies of its people and maintain its permanent superiority in the globalcompetitive environment by adhering to the following principles:

The right individual for the right job

Equal pay for equal work

Performance-based merit

Equal opportunity for every employee.

The human resources procedures of the Company are prepared accordingly, andannounced to employees. In order to create a participative management environment,informational meetings are held for employees concerning the financial capabilitiesof the Company, remuneration, career, education and healthcare, and other informationis exchanged at such meetings. The Company does not discriminate against anyindividual based on religion, language, race or sex, treats its employees equallyregarding training and promotion, makes training plans and develops training policiesto improve the knowledge, skills and attitude of its employees.

The Company offers excellent working conditions in terms of safety and efficiency.

Roles and responsibilities of employees, as well as performance and award criteriaare determined and announced by management.

Employee relations at Arçelik A.fi. are conducted by the Company’s Human ResourcesDepartment on the basis of programs entitled “Proposals”, “Rewards” and “SatisfactionSurveys”. Relations with employees covered by a collective agreement are conductedthrough labor union representatives, in addition to the programs mentioned above.Representatives of labor unions have the right to represent their member employeesunder the Trade Union Act and are entitled and obliged to:

Ensure constant cooperation, harmony and peace between the employer andthe employees at the workplace;

Assist settlement of any labor dispute in accordance with the relevantprocedures, applicable legislation and collective labor agreement;

Ensure the proper implementation of the collective agreement;

Prevent illegal acts and possible disputes.

15. Relations with Customers and Suppliers

The satisfaction of customers and suppliers is a major Company objective. Customersatisfaction is regularly reported and monitored. The Company is committed tomaintaining the confidentiality of the trade secrets of its customers and suppliers.

16. Social Responsibility

The Company is aware of its social responsibilities and complies with regulationson the environment, consumers, public health, as well as ethical rules, and announcesits relevant policies to the public. The Company also monitors its corporate socialresponsibility efforts. This issue has been explained in detail in the Annual Report.

CHAPTER IV – BOARD OF DIRECTORS

17. Structure and Election of the Board of Directors

The Board of Directors of the Company is comprised of nine members and, pursuantto its Articles of Association, the General Manager may also be elected to the Board.Currently, Mr. A. Gündüz Özdemir acts as an Executive Member. Following eachGeneral Meeting where board members are elected, the Board of Directors elects aChairman and a Vice-Chairman from among its members. In case of any vacancyduring the term of the board, the relevant provisions of Article 315 of the TurkishCommercial Code apply.

Articles 334 and 335 of the Turkish Commercial Code require the Chairman and theMembers of the Board of Directors to seek the approval of the General Meeting todirectly or indirectly engage or hold an interest in any business, which is identicalor similar to the business of the Company.

The Board of Directors does not have any independent member, since such a needhas not arisen.

18. Qualifications of Board Members

Board members possess the qualifications contemplated in Paragraphs 3.1.1, 3.1.2and 3.1.3 of Part 4 of the Corporate Governance Principles issued by the CapitalMarkets Board. However, the Company’s Articles of Association do not contain theseprinciples separately.

19. Mission, Vision and Strategic Goals

Arçelik A.fi.’s vision is “to possess one of the ten most preferred global brands inits sector by the year 2010”.

The vision, mission, values and strategies of the Company are shared with the publicthrough annual reports, the Company’s website (www.arcelikas.com), informationalmeetings and various other statements made by appropriate communication means.

The strategies and goals defined in line with the Company’s vision and mission areperiodically assessed by the Board of Directors.

The Board of Directors meets to compare the Company’s objectives and actualoperations, taking into account the performance of previous years. Such meetingsare held as frequently as specified in the Articles of Association.

Company, was formed in accordance with the common values adopted by both theKoç Group and Arçelik A.fi. The goal here is to define and communicate Arçelik A.fi.’scommon values, and thus achieve uniformity of conduct within the Company.

Arçelik A.fi. is at one with its employees, shareholders, dealers and other partnersand is fully aware of its responsibilities towards the society and the environment, aswell as towards its customers and shareholders. These responsibilities form the basisof business life at Arçelik A.fi.

Integrity and good conduct are among the basic principles that guide all Arçelik A.fi.employees. When doing their jobs, employees ask themselves the following questionsand, if the answer is “No”, they refrain from that act:

Am I acting in compliance with Arçelik A.fi.’s Code of Ethics?

Does my behavior promote Arçelik A.fi.’s reputation?

Is my behavior acceptable to the public?

In decision-making and implementation, it is essential to act in accordance withapplicable laws, the Code of Ethics and common values. “Arçelik A.fi.’s CommonValues and Code of Business Ethics” issued in 2003 is an essential guide regardingall corporate processes and activities.

Arçelik A.fi. adopts an open, transparent, accountable and ethical management styleand its common values include reliability, integrity, self-confidence, customer-focus,team spirit, solidarity, continuous improvement, quality-focus and social awareness.Arçelik A.fi.’s code of professional ethics contains a set of principles providingguidance to Arçelik A.fi. employees in their business lives. Among these principlesare the protection of corporate data that are considered trade secrets, the creation ofa work environment based on respect, discipline and trust, the existence of equalrights to employees regardless of their race, language, religion or sex, and ensuringthat all employees show respect for intellectual property rights.

25. Number, Structure and Independence of the Committees Set Up by the Board

To ensure that the Board of Directors performs its duties and responsibilities properly,an “Audit Committee” has been set up. The “Audit Committee” has two members.In 2005, the Board of Directors elected Dr. Bülent Bulgurlu and Temel Kamil Atay asmembers of the Audit Committee. The Audit Committee operates regularly in accordancewith the Capital Market Law and the CMB’s Corporate Governance Principles. Memberson committees are not independent members. Arçelik A.fi. is also planning to set upa “Corporate Governance Committee” in accordance with the applicable legislationand CMB’s regulations.

26. Remuneration of Board Members

Financial benefits to be offered to Board members are determined by the GeneralMeeting. The General Meeting of 12 April 2005 agreed to pay a monthly fee tomembers of the Board of Directors. Members acting as executive officers are paidfees on a performance basis. Except for any advance payment made in accordancewith the relevant procedures of the Company, the Company does not extend anypersonal loans to directors and officers or grant any security in favor of them, suchas sureties.

20. Risk Management and Internal Control Mechanism

The Board of Directors has established Risk Management and Internal Audit Departmentsto minimize the risks, which may affect stakeholders. These departments, reportingto the Assistant General Manager in Charge of Financial and Fiscal Affairs, areresponsible for determining and reporting financial and operational risks andestablishing an implementation and control mechanism.

21. Powers and Duties of Directors and Officers

The powers and duties of directors are clearly described in the Articles of Association.Signatory powers are specified in detail in the list of authorized signatures of theCompany. These documents are available on the website and are also filed withcompetent authorities as required by applicable laws.

22. Principles Regarding Board Meetings

The agenda of each board meeting is based on the issues, which are reported by therelevant departments to the Company’s Senior Management and Board and whichrequire the Board’s decision according to the Articles of Association. Any Boardmember may, by reporting to the Company’s Senior Management, call for a Boardmeeting to discuss and decide a specific issue. Issues that are required to be discussedby the Board are collected and compiled at the office of the Assistant General Managerin charge of Financial and Fiscal Affairs with a view to developing the agenda of thenext meeting.

Arçelik A.fi. has authorized its Assistant General Manager in charge of Financial andFiscal Affairs to set the agenda of Board meetings, file Board decisions adopted inaccordance with Article 330/II of the TCC, provide information to Board membersand ensure communication among them.

The Board of Directors adopts decisions as the Company’s business requires. Theminimum number of members required to be present for a decision to be deemedvalid is specified in the Articles of Association. In exceptional cases, the Board mayadopt a decision unanimously by agreeing to a proposal made by a Board member.

The reasons of all dissenting opinions expressed and votes cast at Board meetingsare written in the minutes of the meeting. However, since no dissenting opinion hasbeen expressed in recent Board meetings, no disclosure has been made in this regard.

23. Transactions with the Company; Non-competition

Although the Company does not restrict any Board member to compete with or dobusiness with the Company, no Board member currently competes or does businesswith the Company.

24. Code of Ethics

To attain its profit targets, Arçelik A.fi., does not merely rely on its business resultsand strong financial structure, but also manages its corporate reputation as a corevalue, which it has earned over so many years. Operations are carried out within theframework of the Code of Professional Conduct, which was developed by the Boardof Directors, submitted to the General Meeting and disclosed to the public. The Codeof Professional Conduct is one the essential components of Arçelik A.fi.’s corporateculture. This Code, which should be followed when performing any task within the

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Environment-friendly technology,environment-friendly products

Environmental protection is an integral part of Arçelik A.fi.’s corporate culture.

Arçelik A.fi. believes that the environment is entrusted to us by future generationsand protection of the environment and natural resources is a vital part of theCompany’s management philosophy, which rests on the total quality principle.In this respect, on all Arçelik A.fi. campuses, we:

Use energy and natural resources efficiently,

Design systems that prevent pollution at the source,

Comply with domestic and international environmental laws andregulations,

Train all employees and subcontractors to raise environmental awareness,

Starting at the design stage, prefer materials and technologies, whichminimize environmental impact during production and use,

Perform environmental impact analyses for new investments.

Arçelik A.fi.’s environmental management system is based on continuousdevelopment. This system allows the Company to produce environmentallyfriendly products.

Arçelik A.fi. strives to minimize environmental impact by reducing the amountof natural resources consumed during the production and use of its products,increasing the recycling rate of materials, building cogeneration plants andliquid waste treatment facilities in line with its sustainable development conceptand within the framework of its environmental management system.

Arçelik A.fi. both reaches its own environmental targets and also conveys itssuccessful sustainability approach to its stakeholders.

For the environment…

For Sustainable Development…Low energy consumption

Arçelik A.fi. controls the environmental impact of its products throughout theirlifecycle, starting in the design stage. With this aim, the Research and DevelopmentCenter, responsible for product technology, works together with the ProductDevelopment Unit, responsible for product development and improvement, andthe Industrial Design Unit, responsible for product design. The successfulresults of these efforts can be seen in the A+ series, which reflects anenvironmentally-sensitive product identity.

According to EU standards, Arçelik A.fi. products provide 20% energy savingsin Class A products compared to Class B products.

Had all the country’s durable consumer goods been produced in accordancewith Class A standards, Turkey would have obtained a 3% energy savings. Thistranslates into 5.2 billion kWh permanent and sustainable savings annually.

Technology with less resources

The relevant EC directive requires an 80% recovery rate for large electric andelectronic household appliances. Thanks to improvements in raw materials andsupplies, the recovery rate of all Arçelik A.fi. products is over 90% as of 2005.

There are ongoing efforts to improve the recovery rate of products. To this end,non-recyclable thermoset waste, which is produced during rubber production,is being incorporated into the products in certain proportions. Using productionwaste in washing machine bellows is an innovation in the household appliancesindustry. This improvement reduced the quantity of waste disposed into theenvironment and reduced the environmental impact of rubber waste disposal.

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Production in Compliance withInternational Standards and DirectivesArçelik A.fi. considers international standards an integral part of its operations.The Company’s environment-friendly production plants operate at world standardsand comply with all international product and management standards, especiallyISO 9001:2000 and ISO 14001:2004.

To protect the steadily worsening ecological balance of the world, Arçelik A.fi.complies with all regulations throughout the lifecycle of its products, fromdesign to disposal. In addition to legal regulations, it also complies withEuropean Community directives aimed at harmonizing the national systems ofEU members.

Arçelik A.fi. is making efforts to achieve harmonization with the followingdirectives:

WEEE - Waste of Electrical and Electronic Equipment

RoHS - Restriction of the Use of Certain Hazardous Substances

EuP - Eco Design Requirements for Energy Using Products

Arçelik A.fi. closely monitors regulations and developments related to its industryand is a member of the European Committee of Domestic EquipmentManufacturers (CECED). In line with the EC directives for electrical and electronichousehold appliances, Arçelik A.fi. started to use energy labels to indicate thelow energy consumption of its products, long before the use of such labelsbecame mandatory in Turkey. Arçelik A.fi. also was the first household appliancesproducer to produce refrigerators without ozone-depleting CFC gases, longbefore 2006 which was the deadline set for Turkey in the Montreal Protocol.

19951995 1997 2005

Use of

CFC12discontinued.

R134a and

R600aare still beingused.

Use of

R134astarted.

Use of

R600astarted.

‹stanbul Chamber ofIndustry, GrandEnvironment Award -Compressor Plant

‹stanbul Chamber ofIndustry, NationwideEnvironment Award -Refrigerator Plant

Electrical ResearchAdministration (EIEI)Energy Saving ProjectAward - RefrigeratorPlant

Bolu Chamber ofIndustry and Commerce,Environment Award -Cooking Appliances Plant

‹stanbul Chamber ofIndustry, EnvironmentSuccess Award - CookingAppliances Plant

American Societyfor Quality (ASQ),Environment-FriendlyIndustry Award -Compressor Plant

Environmental Developmentand Awards

Environmental TrainingEvery year, regular training is provided to raise environmental awareness. Totaltime of environmental training increased from 3,083 hours in 2004 to 6,096hours in 2005.

Occupational health and safety training increased from 8,407 hours in 2004 to22,896 hours in 2005.

OCCUPATIONAL HEALTH AND SAFETY TRAINING HOURS

25,000

20,000

15,000

10,000

5,000

02003 2004 2005

2003 2004 2005

ENVIRONMENTAL TRAINING HOURS

7,500

6,000

4,500

3,000

1,500

0

1995 1996 1997 1998 1999 2000 Non-CFC

Refrigerator Production

Ankara Chamber ofIndustry, EnvironmentBadge and Plaque

Establishment ofÇay›rova and EskiflehirCogeneration Plants

‹stanbul Chamber ofIndustry, EnvironmentalIncentive Award -Washing Machine Plant

‹stanbul Chamber ofIndustry, GrandEnvironment Award -Washing Machine Plant

Golden PackageAward - DishwasherPlant

Energy Saving inIndustry Award of theMinistry of Energy -Refrigerator Plant

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Refrigerators Dishwashers Washing Machines

RECOVERY RATE (%)

125

100

75

50

25

0

20042005

20022003

Environmental ImpactProduction


ENERGY CONSUMPTION TREND (kWh/24h)

2.5

2

1.5

1

0.5

0

20032004

20012002

2005


WATER CONSUMPTION (m3/unit)

0.75

0.60

0.45

0.30

0.15

0

20032004

20012002

2005


ENERGY CONSUMPTION (kWh/product)

50

40

30

20

10

0

20032004

20012002

2005

Product

2001 2002 2003 2004 2005 Production of

refrigerators withVCC compressorsand A+ energy labelsstarts

Orbital Products

TurkishCogenerationAssociation, BestCogeneration PlantAward - WashingMachine Plant

Turkish CogenerationAssociation, BestCogeneration PlantAward - RefrigeratorPlant

Direct DriveTechnology

Total ProductiveMaintenance, TPMExcellence Award -Washing MachinePlant

Products bearingenergy labelscompatible with ECnorms

European EnergyCommission, Energy+Award - The MostEnergy-EfficientRefrigerator

First and only Turkishcompany to be invited tothe 10th Global ClimateChange Conference ofthe United Nations

Total ProductiveMaintenance, TPMExcellence Award -Refrigerator Plant

Total ProductiveMaintenance, TPMContinuous ExcellenceAward - WashingMachine Plant

Total ProductiveMaintenance, TPMExcellence Award -Dishwasher Plant

Total ProductiveMaintenance, TPMExcellence Award -Electric Motors Plant

Products

REFRIGERATOR

The Super No-Frost refrigerator was designed at the Eskiflehir Refrigerator Plant in order to meet theconsiderable demand for no-frost refrigerators in domestic and foreign markets. The Super No-Frostrefrigerator with Class A energy performance is the highest-volume refrigerator produced in Turkeyin its category. The refrigerator is unrivaled in Turkey with its accessories as well. These include the“Double Power” cooling system and the “Full Protection Triangle” hygiene application. This producthas been quite successful in the market with its superior features.

The product is equipped with patented accessories providing ease of use. While a single evaporatoris used for cooling in no-frost refrigerators, Super No-Frost refrigerators use a Double Power technologywhere cooling is quicker, more effective and efficient thanks to the double evaporators and doublefans.

The full protection triangle keeps food fresh for a long time.

The Protection Triangle: The Protection Triangle is composed of the Silver Ion, Photocatalyst OdorFilter and Ionizer components used in the body and vegetable compartments. This patented applicationvery effectively eliminates odor inside the refrigerator and completely prevents odor transition betweenthe freezer and cooler sections.

The Double Evaporator System: The system, developed in Turkey, provides three times fasterand more uniform cooling.

Additional features include:

A quick icemaker for the first time in Turkey

Double freezer capacity (10 kg / 24 hours)

Class A energy performance, low energy consumption, economical no-frost

LCD electronic display

Quick-Freeze, Quick-Fridge, Quick-Ice, Eco-Fuzzy, Vacation modes adjustable on an electronicdisplay on the door

Easy-to-pull sliding shelves, storage containers under the shelves, wire drawer in the freezersection, easy-to-fill cartridge icemaker

DISHWASHER

The “Ecologist™” dishwasher offers Class A washing performance, and with water consumption at9.6 liters, it is the most efficient dishwasher in the world.

During washing, various pressures are applied depending on the characteristics of the dishes. Thedishwasher applies 60% higher spraying pressure when cleaning very dirty pots and pans. It helpsthe protection of natural resources by saving energy, water and detergents.

Technological advances have resulted in new programs and functions such as Mixed Dishes, Extra-Quick and Extra-Silent. With the Mixed Dishes program, it is possible to apply lower spraying pressurefor glassware on the top shelf, and higher spraying pressure for the greasy pots and pans on thebottom shelf. The Extra-Quick option reduces washing time and water consumption, while the Extra-Silent option ensures more delicate and silent, but still effective, dishwashing.

The dishwasher’s brushless DC motor is not influenced by fluctuations in the mains voltage and avoidsany performance loss. Thus, any potential consumer problems due to low voltage are prevented.

Lower Energy Consumption: With an energy consumption level of 1.10 kWh, this dishwasherbelongs to Class A according to EU energy label specifications. According to the Household AppliancesIndustrialists Society, there are almost 4 million dishwashers in Turkey. This means that, had alldishwashers in Turkey been replaced with Ecologist™, 330 GWh of energy would have been saved.This corresponds to 80% of the annual power generation of the Ankara Sar›yer Dam according to StateWater Works (DS‹) data, and provides for TRY 53 million in savings.

Low Water Consumption: The dishwasher’s water consumption is 9.6 liters, which is the lowestfigure in the world among Class A dishwashers. Had every dishwasher in Turkey been an Ecologist™,Turkey’s national water consumption would have been reduced by 5.9 million m3. According to DS‹data, this equals 10% of the Kurtbo¤az› Dam or 80% of the Bay›nd›r Dam.

Advanced Sensor Technology: Water intake is controlled by sensors, which sense the quantityof the dishes inside the machine. Thus, unnecessary water consumption is avoided. Any conditionwhich may affect cleaning performance or create safety problems such as filter build-ups, drainagepump and circulation pump blockages, too much dirt and too much foam, are sensed and correctivealgorithms are activated.

New Washing Programs and Functions:Extra Hygiene: This is a hygiene program of the Ecologist™ Dishwasher specially developed forpatients and babies. Design data for the Extra Hygiene program was gathered in a study carried outwith TÜB‹TAK-MAM called Hygienic Cleaning in Dishwashers, and hygiene labels were obtained fromLGA (Landesgewerbeanstalt Bayern - Germany) laboratories.

Extra Quick: This function, designed for users with a limited time, shortens the time and boosts theenergy and sound of the selected program.

Extra Silent: An extra sensitive and extra silent program for washing dishes at night in areas wherepower prices are lower at night time.

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OVEN

The Bolu Cooking Appliances Plant designed a hi-tech electronicoven to meet demand in the rapidly growing Turkish and Europeanbuilt-in markets.

This is the only oven in the world, which, with its “Staged Cooking"feature, allows adjusting the temperature and time of two differentcooking programs at once.

The multifunctional product offers several advanced features suchas electronic control, Class A energy performance, single-buttoncontrol, wide functions display, and directions for the positioningof trays. Thus, everything is cooked optimally, at the most appropriatetemperature and in the most appropriate position.

Wide Display: Displays the functions to guide the user.

Staged Cooking Feature: Allows adjusting the temperature andtime of two different cooking programs at the same time.

3D Cooking Feature: Allows cooking three meals simultaneously.

Other features include:

Class A energy savings

12 functions

Rapid heating

Telescopic shelf (single)

36 ready-meal menus plus two supplementary programs

Easy-to-clean

DRYER

In 2005, Arçelik launched the first and only Class A dryer of Turkey.With Class A energy performance, the product is among the fewof its kind in the world and offers up to 45% energy savingcompared to conventional dryers.

The dryer uses a heat-pump technology developed with the supportof TÜB‹TAK’s Technology Monitoring and Evaluation Agency.

Other features include:

Class A Energy Saving: Class-A products are energy-efficient. The heat pump allows drying without a heater and ensuresClass A energy performance.

Intelligent Humidity Sensor: The sensor accuratelycalculates and automatically adjusts drying time according to thetype of the laundry and the desired dryness level.

Remaining Time Display: The length of the programand the remaining drying time are indicated on the display.

Time Programming: The machine can be programmedto start within 19 hours, in 30-minute intervals.

Ventilation Program: This program eliminates badodors such as cigarette smoke from woolen, silk, cotton andsynthetic cloth.

WASHING MACHINE

Washing machine, which allows easy adjustment through interactiveLCD displays, washes laundry at Performance Level A even at40°C with the ACTIVE 40 program. This machine washes laundryperfectly, while saving energy thanks to its A+ energy label.

The soaking feature allows better cleaning and the SENSORINSEfeature performs automatic measurements to start additional rinsingonly when this is necessary. Thus, the machine rinses effectivelyand does not waste a single drop of water. It saves both time andenergy.

Class A+: Although Class A products are energy-efficient,Class A+ products save a further 10% energy compared to ClassA products.

HYGIENE Plus Program: Ensures very hygienic cleaningfor those who suffer from allergies and infants by washing thelaundry at high temperatures and rinsing it four times.

Water Jet: The water jet system of the machine ensuresquick wetting of the laundry and improves washing performanceby spraying detergent water on the laundry.

Unbalanced Load Control System: The machineworks silently and without any vibration thanks to this system.

Electronic Water Intake System: This systemautomatically calculates and adjusts water intake according to thetype and quantity of the laundry. It does not waste a single dropof water and saves both time and energy. This feature allowseconomical washing of smaller quantities, without waiting for themachine to be fully loaded.

Electronic Tracking Display: The display allows theuser to track progress while the machine is working.

For the community...

Arçelik A.fi. believes that developing and implementing projects to improve socialstandards and find solutions to social problems in order to achieve sustainabledevelopment is an integral part of its core responsibilities. Arçelik A.fi. perceivescorporate social responsibility as assuming responsibilities and makingcommitments in light of its corporate values and culture.

To promote social development, the Company has assumed a leading role byimplementing projects with clearly measurable outcomes.

Arçelik A.fi. believes that raising society’s awareness of the importance of educationis crucial for reaching the desired development level in Turkey.

Education is the key to many social problems and also makes an importantcontribution to the nation’s economy in terms of resource utilization. In the future,a key factor that will determine the roles of states in the international arena will

be their knowledge base. Therefore, any investment we make in educating youngpeople and any step we take towards becoming an information society wouldcontribute to the future of our country.

Being aware that any contribution to self-development must be made at earlyages, Arçelik A.fi. started a corporate social responsibility program called“Standing United for Education with Arçelik A.fi.” for primary schoolstudents.

To find permanent and effective solutions to social problems, Arçelik A.fi. adopteda model based on volunteerism and collaboration between NGOs and public andprivate entities.

In this context, involving community issues Arçelik A.fi. aims to raise publicawareness and sensitivity with regard to Regional Primary Boarding Schools.

300 schools, 200,000 students,6,000 teachers in eight years

STANDING

UNITED FOR

EDUCATION

The Standing United for Education Program with Arçelik A.fi.

With its Standing United for Education program, Arçelik A.fi., acting in cooperationwith the Ministry of National Education, aims to improve the education anddevelopment standards of children of disadvantaged families studying in RegionalPrimary Boarding Schools and ensure that these children become valuablemembers of the society. Regional Primary Boarding Schools offer children equalopportunity in education and are regarded as one of the most critical tools forsocial change.

Focusing on self-development of the students, the program is composed of fivemajor sub-projects: Our Rooms, They Were Children Too, Support andEducation to Teachers, Education Scholarship and Voluntary FamilyAssociation. At the end of the program what is now the eight year, the target

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is to improve the qualifications of 6,000 teachers working in almost 300 RegionalPrimary Boarding Schools and help the education of 200,000 students as themodern and self-confident new generation of Turkey.

NGOs contributing to the program and their specializations include:

Vehbi Koç Foundation (VKV) - Education ScholarshipTurkish Mothers Association (TAD) - Voluntary Family Association and

Voluntary WorksTurkish Educational Volunteers Foundation (TEGV) - Teachers Training

for the Use of Our RoomsMother-Child and Educational Foundation (AÇEV) - Teacher Support and

Personal Development SeminarPrivate Sector Volunteers Society (ÖSGD) - Volunteer Authorized Dealers

and Employees.

Collaboration Model of the Standing United for Education Program

STANDING UNITED FOREDUCATION WITH

ARÇEL‹K A.fi.

Ministry ofNational

EducationNon-

GovernmentalOrganizations

Public andPrivateSectors

UniversitiesInternationalOrganizations

LocalAdministrations

Volunteers

ArçelikFamily

Projects carried out with greatenthusiasm and a strong senseof responsibility while touchingall segments of the society


Sub-projects of the Standing United for Education Program withArçelik A.fi.

Our Rooms

Our Rooms designed for the Regional Primary Boarding Schools students arehome like environments that are equipped with interactive educational andrecreational tools and materials, where the students can spend their free timecreatively, participate in culture and arts activities, relax and have fun whilelearning all the while feeling very much at home.

The main objective of the program is to create a better environment for childrenwho study away from their parents and to support their education by providingthe necessary educational materials. Various social skills are also developed inthese facilities where children interact with each other under supervision.

Our Rooms is implemented under the supervision of guiding teachers, who followactivity programs aiming to support the personal and social development ofstudents.

Guiding teachers are given special training for activities to be carried out as partof the Our Rooms project. These training sessions help teachers to plan theactivities to be performed in the rooms and their timing.

Our Rooms are being built in all Regional Primary Boarding Schools participatingin the program. Our Rooms are not merely physical spaces; they are a positivecontribution to teachers’ and students’ vision of the future.

Education Scholarship

It is well known that most graduates of Regional Primary Boarding Schools cannotcontinue their studies in high schools due to a lack of financial resources. TheEducation Scholarship project provides financial support to graduates of RegionalPrimary Boarding Schools who finish their schools with the highest scores anddo not have the financial means to attend a high school. With the scholarshipprogram, these students are offered equal opportunity to become modern individualswith an analytical mind, open for universal values and keen on research.

The scholarship encourages students to continue their education depends thecontinuation of the academic success of the student. The project covers all schoolsand eligible graduates of 300 Regional Primary Boarding Schools are givenscholarships.

before after

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Support and Education to Teachers

The responsibilities of teachers working at Regional Primary Boarding Schoolsare not identical to those of teachers working at other primary schools. Inaccordance with the concept of social learning, learning by imitation and observationare common teaching methods. The teachers set models for the children withtheir behavior and the communication methods they use. Improvement of theschool as a whole also requires school managers to become an active part of thiseducation process.

In an era where lifelong learning has become indispensable, it is necessary tocontinuously update the knowledge and skills of teachers and managers andprovide them professional support. Under the Support and Education to Teachersproject, a series of seminars and workshops are held to support the personal andprofessional development of teachers and managers of Regional Primary BoardingSchools. The content of these seminars are developed with the Ministry of NationalEducation considering the needs of the teachers and managers of these schools.

They Were Children Too

As part of their natural development process, children follow the example of theindividuals around them. These role models have significant influences on thepersonality and future goals of adolescents especially. Therefore, teachers arevery important role models for boarding school students during their developmentand education. It is crucial for boarding school students, whose role models arelimited in number, to meet and talk with different role models with whom they canassociate themselves.

This project gives students the opportunity to meet renowned members of variousprofessions: artists, athletes, public leaders, prominent individuals living nearby,and successful graduates of their schools.

Children are given the message that each one of them is a precious individualand can be successful if they pursue their dreams and life goals. This helps thembelieve in themselves and become self-confident individuals.

Voluntary Family Association

Voluntary Family Association is a group of volunteers coming from every segmentof society, including representatives of local administrations, the private sector,military officers, academics and prominent members of the community. Thesepeople work together with NGOs to act as observation and assistant units forRegional Primary Boarding Schools.

One of the principal values of the Standing United for Education Program withArçelik A.fi. is the “volunteerism”, which has rapidly gained popularity both inTurkey and in the world recently. The contribution and commitment of volunteersis vital for the sustainability of the project. Regional Primary Boarding Schoolsare different from regular primary schools in several aspects. Most studentsstudying at Regional Primary Boarding Schools come from low-income familiesliving in rural areas and these schools are responsible for their care. However,since these children have several problems because of being separated from theirfamilies at a very young age, they face difficulties in having a high-quality educationthat offers equal opportunity.

It is crucial for our children to be in a safe and peaceful education environment,where they do not acutely feel the absence of their families and where they aretaken care of and feel happy. Set up in areas where Regional Primary BoardingSchools are operating, Voluntary Family Associations help supporting the children,motivating them, giving them the affection they need and offering them a warmfamily atmosphere. Arçelik A.fi. is a big, extended family with its employees,extensive authorized dealer and technical service network and suppliers and everymember of this family is a potential volunteer of this program.


A project aimed at promotingself-development of the students

Efforts and Accomplishments in the 2004 - 2005 Academic Year

Following the pilot project that started in March 2004 in Van, Hakkari and I¤d›r,the program was expanded in the 2004-2005 academic year, to cover 55 schoolsin 10 provinces including Erzurum, Ordu, Bal›kesir, Çank›r›, Gaziantep, Rize andKars. A detailed time line and list of accomplishments the program achievedfollows.

6 January 2005: Arçelik A.fi. General Manager A. Gündüz Özdemir gavebrief information summation about the program to representatives of the Ministryof National Education and NGOs at a meeting in Ankara. The Minister of NationalEducation was also present at the meeting.

26 January - 2 February 2005: Construction of Our Room completed inOrdu Gülyal› Turnasuyu Regional Primary Boarding School.

February 2005: Van Voluntary Family Association developed solutions forthe health problems of students who need help.

7 February 2005: Construction of Our Room completed in Erzurum Il›caYavuz Selim Regional Primary Boarding School. Representatives of localadministrations and authorities were present at the opening ceremony.

7 February - 12 February 2005: Stage I training of the “Support andEducation to Teachers” project repeated in Erzurum, for teachers of the RegionalPrimary Boarding Schools in Erzurum and Ordu.

17 - 24 March 2005: Students of Vehbi Koç Foundation’s Koç PrimarySchool performed a play at the Van Gürp›nar Regional Primary Boarding School.The Ordu Voluntary Family Association in cooperation with authorized dealersand technical services visited the schools and offered information on variousprofessions.

19 - 29 March 2005: The project was announced at Arçelik A.fi.’s 50thYear Authorized Dealers and Technical Services Meeting.

13 - 16 April 2005: Erzurum Voluntary Family Association members offeredinformation on various professions.

21 - 25 April 2005: Ordu Voluntary Family Association joined the 23rdApril celebrations and visited schools. Van Voluntary Family Association membersjoin the 23rd April celebrations. I¤d›r Voluntary Family Association visited schools.Prof. Füsun Akkök gave a seminar to parents.

22 - 30 April 2005: Hakkari Regional Primary Boarding School visitedtogether with the Voluntary Family Association.

23 April 2005: TÜB‹TAK books were donated to Regional Primary BoardingSchools in Van, Hakkari, I¤d›r, Erzurum and Ordu.

May 2005: Our Rooms completed in Ordu.

9 - 13 May 2005: Project measurement and evaluation work completedin pilot provinces.

12 - 15 May 2005: Education Equipment and Technologies Fair in ‹stanbulattended.

May 2005: Arçelik Education Scholarship Application Forms sent to 300Regional Primary Boarding Schools.

24 - 28 May 2005: Erzurum Horasan, Tekman, Karayaz› and ‹spir RegionalPrimary Boarding Schools visited by the Voluntary Family Association. TheVoluntary Family Association held a drawing contest at these schools.

2 - 4 June 2005: The project was introduced at Antalya Rotary meeting.

2 - 7 June 2005: Private Sector Volunteers Society and Ordu VoluntaryFamily Association opened Our Rooms at the Ünye, Akkufl, Mesudiye, GölköyRegional Primary Boarding Schools.

June 2005: Standing United for Education Program’s annual report prepared.

26 - 29 June 2005: Under the Support and Education to Teachers project,Stage II on-the-job-training given to the teachers of Van, I¤d›r, Hakkari, Erzurumand Ordu Regional Primary Boarding Schools; a training seminar was held forthe headmasters of Rize, Çank›r›, Kars, Bal›kesir, Gaziantep Regional PrimaryBoarding Schools.

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July 2005: Our Rooms completed in Erzurum.

August 2005: Preliminary work for Our Rooms finished in Çank›r›, Bal›kesirand Rize.

September 2005: Our Rooms completed in Kars and Rize.

26 September - 2 October 2005: Under the Support and Education toTeachers project, Stage I on-the-job-training given to teachers of Rize, Çank›r›,Kars, Bal›kesir and Gaziantep Regional Primary Boarding Schools.

27 September 2005: Our Rooms completed in Çayeli, Rize.

October 2005: Scholarships became effective.

10 November 2005: Our Rooms completed in Bal›kesir.

18 November 2005: Prizes given to winners of the drawing and essaycontests held by the Bal›kesir Voluntary Family Association at the Bal›kesir BigadiçRegional Primary Boarding School; Our Room opened.

23 November 2005: Prizes given to winners of the drawing and essaycontest held by the I¤d›r Voluntary Family Association at the Il›ca and KarakoyunluRegional Primary Boarding Schools.

November 2005: Our Rooms completed in Çank›r›.

24 November 2005: Our Rooms completed at the Erzurum Çat RegionalPrimary Boarding School. Erzurum Voluntary Family Association members joinedTeachers’ Day events together with members of the sales organization andauthorized dealers.

December 2005: Our Rooms completed in Gaziantep.

December 2005: Pictures of students who had won prizes in the drawingcontest held by the Erzurum and Ordu Voluntary Family Associations on 23 Aprilused on New Year’s postcards and calendars for 2006.

Provinces Covered by the Program

Pilot Provinces in 2004 - 2005 Academic Year: Van, Hakkari, I¤d›r

Provinces Added Subsequently: Erzurum, Ordu

2004 - 2005 Academic Year: Gaziantep, Kars, Rize, Çank›r›, Bal›kesir

2005 - 2006 Academic Year: Çanakkale, Kocaeli, Bolu, Konya, Aksaray,Kahramanmarafl, Kayseri, Adana, Trabzon, fianl›urfa, Hatay, Giresun, Kilis

2004 - 2005 Academic Year

Total number of schools included in the program: 55 schools in 10provinces

Total number of students included in the program: 40,000

Total number of teachers included in the program:Number of directly trained teachers: 165Number of teachers included in the program through the multipliereffect: 1,200

Targets for 2005-2006 Academic Year

The Standing United for Education Program with Arçelik A.fi. targets to reach80,000 students at 100 schools in 23 provinces, and 45 Regional Primary BoardingSchools in 13 provinces including Çanakkale, Kocaeli, Bolu, Konya, Aksaray,Kahramanmarafl, Kayseri, Adana, Trabzon, fianl›urfa, Hatay, Giresun and Kilis.

G. ANTEP

K‹L‹S

HATAY

ADANA

KAYSER‹

KONYA

ÇANAKKALE

KOCAEL‹

BOLU ÇANKIRIORDU

G‹RESUN

TRABZONR‹ZE

ERZURUM

VAN

HAKKAR‹

I⁄DIR

AKSARAY

K. MARAfi

fi.URFA

BALIKES‹R

KARS

Rahmi M. Koç Chairman

Dr. Bülent Bulgurlu** Vice Chairman

Robert Sonman Member

Mustafa V. Koç Member

Cengiz Solako¤lu Member

F. Bülend Özayd›nl› Member

Temel K. Atay** Member

M. Ömer Koç Member

A. Gündüz Özdemir Member

Serkan Özyurt

Mert fi. Bayram***

* In accordance with the Company’s Articles of Association, Board membersare re-elected every year during the Ordinary General Meeting. Accordingly,all members’ terms started on 12 April 2005.

** Dr. Bülent Bulgurlu and Temel K. Atay are also members of the Audit Committee.

*** Since Fatih Kemal Ebiçlio¤lu, who was appointed auditor at the OrdinaryGeneral Meeting of 12 April 2005, was assigned to the vacant position ofAssistant General Manager in charge of Finance and Accounting, Mert fi.Bayram was appointed auditor by the other auditor Serkan Özyurt on 18 April2005, to serve until the next General Meeting in accordance with the TurkishCommercial Code.

Board of Directors 2005 * Board of Auditors

Atilla ‹lbaflAssistant General Manager,Production and Technology

Fatih Kemal Ebiçlio¤luAssistant General Manager,Finance and Accounting

Management 2005

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Aka Gündüz ÖzdemirGeneral Manager Mustafa Nadir Yalç›nalp

Assistant General Manager,International Marketing and Sales

fiirzat Subafl›Assistant General Manager,Turkey Marketing and Sales

Aka Gündüz Özdemir General Manager

Atilla ‹lbafl Assistant General Manager-Production and Technology

Fatih Kemal Ebiçlio¤lu Assistant General Manager-Finance and Accounting

Mustafa Nadir Yalç›nalp Assistant General Manager-International Marketing and Sales

fiirzat Subafl› Assistant General Manager-Turkey Marketing and Sales

Ahmet ‹hsan Ceylan Information Technologies Director

Ahmet Sak›zl› Product Planning and Coordination Director

Ali Tayyar Accounting Director-Headquarters / Plants

Cemal Can Dinçer International Sales Director-Non-European Markets

Cemal fieref O¤uzhan Öztürk Product Director-Washing Machine

Ferhat Erçetin Purchasing Director

Hilmi Cem Akant International Sales Director-Europe and Business Development

‹hsan Somay Accounting Director-Sales and Marketing

‹smail Hakk› Sa¤›r Product Director-Refrigerator

Koral Boro Beko Sales Director

Mehmet Savafl Product Director-Cooking Appliances

Murad fiahin Marketing Director

Mustafa Türkay Tatar Finance Director

Oktay Sokullu Arçelik Sales Director

Salih Arslantafl Product Director-Dishwasher

Serdar Sözeri Consumer Services and Logistics Director

Sibel Kesler Budget, Reporting and Analysis Director

fiemsettin Eksert Research and Development Director

fierife Füsun Ömür Human Resources and Strategic Planning Director

Management 2005 (31 December 2005)

Koral BoroMr. Boro started his career in 1983 as Sales Representative at Beko TicaretA.fi. He has been working as Beko Sales Director at Arçelik A.fi. since 2003.

Mehmet SavaflMr. Savafl started his career in 1987 as Product Engineer at Arçelik A.fi. Hehas been working as Product Director, Cooking Appliances at Arçelik A.fi.since 2005.

Murad fiahinMr. fiahin started his career in 1993 as Market Research Officer at ArçelikA.fi. He has been working as Marketing Director at Arçelik A.fi. since 2005.

Mustafa Türkay TatarMr. Tatar started his career in 1991 as Treasury Specialist at Eximbank’sTreasury. He has been working as Finance Director at Arçelik A.fi. since 2005.

Oktay SokulluMr. Sokullu started his career in 1974 as a Sales Representative at BekoTicaret A.fi. He has been working as Arçelik Sales Director since 2000.

Salih ArslantaflMr. Arslantafl started his career in 1987 as Project Engineer and SheetProduction Chief at Arçelik A.fi. He has been working as Product Director,Dishwasher at Arçelik A.fi. since 2003.

Serdar SözeriMr. Sözeri started his career in 1984 as Product Planning Engineer at ArçelikA.fi. He has been working as Consumer Services and Logistics Director atArçelik A.fi. since 2005.

Sibel KeslerMs. Kesler started her career in 1989 as Project Officer at Tüyap A.fi. Shehas been working as Budget, Reporting and Analysis Director at Arçelik A.fi.since 2005.

fiemsettin EksertMr. Eksert started his career in 1988 as Project Engineer at Arçelik A.fi.He has been working as Resarch and Development Director at Arçelik A.fi.since 2003.

fierife Füsun ÖmürMs. Ömür started her career in 1987 as Project Engineer at the R & DDepartment of Koç Holding. She has been working as Human Resourcesand Strategic Planning Director at Arçelik A.fi. since 2005.

Aka Gündüz ÖzdemirMr. Özdemir started his professional career in 1972 as a Sales Representativeat Beko Ticaret A.fi. He has been the General Manager of Arçelik A.fi. since2003.

Atilla ‹lbaflMr. ‹lbafl started his career in 1979 as a Project Engineer at Arçelik A.fi.Headquarters. He has been Arçelik A.fi. Assistant General Manager forProduction and Technology since 2005.

Fatih Kemal Ebiçlio¤luMr. Ebiçlio¤lu started his career in 1989 as an Assistant Account Specialistat the Ministry of Finance. He has been Arçelik A.fi. Assistant General Managerfor Finance and Accounting since 2005.

Mustafa Nadir Yalç›nalpMr. Yalç›nalp started his career in 1977 as a Finance Officer at DemirdökümA.fi. He has been Arçelik A.fi. Assistant General Manager for InternationalMarketing and Sales since 2005.

fiirzat Subafl›Mr. Subafl› started his career in 1986 as a Sales Representative at BekoTicaret A.fi. He has been Arçelik A.fi. Assistant General Manager for TurkeyMarketing and Sales since 2003.

Ahmet ‹hsan CeylanMr. Ceylan started his career in 1989 as a Programmer at Döktafl A.fi. Hehas been working as Information Technologies Director at Arçelik A.fi. since1999.

Ahmet Sak›zl›Mr. Sak›zl› started his career in 1980 as Chief of Maintenance and Productionat Hisar Çelik Döküm A.fi. He has been working as Product Planning andCoordination Director at Arçelik A.fi. since 2003.

Ali TayyarMr. Tayyar started his career in 1981 as Assessment Officer at Arçelik A.fi.He has been working as Accounting Director, Headquarters / Plants at ArçelikA.fi. since 2000.

Cemal Can DinçerMr. Dinçer started his career as a Trainee at Arçelik A.fi. Finance Department.He has been working as International Sales Director, Non-European Marketsat Arçelik A.fi. since 2005.

Cemal fieref O¤uzhan ÖztürkMr. Öztürk started his career in 1987 as Quality Control Engineer at ArçelikA.fi. He has been working as Product Director, Washing Machine at ArçelikA.fi. since 2005.

Ferhat ErçetinMr. Erçetin started his career in 1976 as Energy and Maintenance Managerat Elka Elyafl› Plaka T.A.fi. He has been working as Purchasing Director atArçelik A.fi. since 2005.

Hilmi Cem AkantMr. Akant started his career in 1987 as Project Manager at Tioxide, France.He has been working as International Sales Director, Europe and BusinessDevelopment at Arçelik A.fi. since 2005.

‹hsan SomayMr. Somay started his career in 1979 as Accounting Officer at At›l›m A.fi. Hehas been working as Accounting Director, Sales and Marketing at ArçelikA.fi. since 2000.

‹smail Hakk› Sa¤›rMr. Sa¤›r started his career in 1980 as Project Engineer at Arçelik A.fi.He has been working as Product Director, Refrigerator at Arçelik A.fi.since 2002.

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1. Opening and election of the Presidential Board.

2. Reading and discussing the Board of Directors’ Report, the Board of Auditors’ Report and the Independent Auditors’ Report on 2005 operations and accounts,

discussing the balance sheet and income statement and submitting the same to the approval of the General Meeting.

3. Releasing the members of the Board of Directors and the Board of Auditors from liability regarding the 2005 accounts and operations of the Company.

4. Approving, amending and voting the proposal of the Board of Directors for profit distribution.

5. Determining the number of Board Members who shall continue to serve on the Board until the next Ordinary General Meeting to be held to review 2006 operations

and accounts, and electing new members.

6. Electing the auditors who shall continue to serve until the next Ordinary General Meeting to be held to review 2006 operations and accounts.

7. Determining monthly remuneration to be paid to the Chairman and Members of the Board of Directors and the Members of the Board of Auditors.

8. Informing the General Meeting of donations and contributions made by the Company to foundations and societies in 2005 under social responsibility projects.

9. Deciding on the amendment of Article 5 (Head Office and Branches) of the Articles of Association.

10. Authorizing the Independent Auditors selected by the Board of Directors to audit 2006 and 2007 operations and accounts pursuant to the Regulations on

Independent External Auditing in Capital Markets issued by the Capital Markets Board.

11. Within the context of Article 15 of the Capital Markets Law and the provisions of Communiqué Series IV, No. 27 of the Capital Markets Board, authorizing

the Board of Directors with regard to distribution of a dividend to shareholders out of the interim profit, provided that such distribution remains limited to 2006,

and deciding that the advance dividend to be distributed in 2006 shall be offset against extraordinary reserves of the previous balance sheet in the event of a loss

or insufficient profit at the end of the relevant financial period.

12. Pursuant to Articles 334 and 335 of the Turkish Commercial Code, authorizing the members of the Board of Directors to directly or indirectly engage or hold

an interest in any business, which is identical or similar to the business of the Company, and to perform certain other procedures.

13. Signing the minutes of the General Meeting by the Presidential Board and authorizing the Presidential Board in this regard.

14. Bestowing salutary wishes.

Arçelik A.fi.Ordinary General Meeting

5 April 2006

Agenda

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The Board of Directors decided to amend “Article 5 (Head Office and Branches)” of the Articles of Association of the Company as follows. The necessary permissionshave been obtained from the Capital Markets Board and the Ministry of Industry and Trade.

AMENDED TEXT

HEAD OFFICE AND BRANCHES

ARTICLE 5: The head office of the Company is located in Beyo¤lu, ‹stanbul. Itsregistered address is Karaa¤aç Caddesi, No. 2-6, 34445 Sütlüce, Beyo¤lu,‹stanbul.

In case of any change in address, the new address shall be registered with theTrade Registry and announced in the Turkish Commercial Registration Gazette,and notification made to the Ministry of Industry and Trade and Capital MarketsBoard. Any notice served to the registered and announced address shall bebinding on the Company. In the event the Company evacuates its registeredand announced address and fails to register its new address within the statutorytime limit, this shall constitute a reason for termination.

Based on the decision of its Board of Directors, the Company may open branchesin Turkey and abroad, provided that the Ministry of Industry and Trade and theCapital Markets Board are notified.

FORMER TEXT

HEAD OFFICE AND BRANCHES

ARTICLE 5: The head office of the Company is located in Tuzla, ‹stanbul. Itsregistered address is Ankara Asfalt›, 81719, Tuzla - ‹stanbul.

In case of any change in address, the new address shall be registered with theTrade Registry and announced in the Turkish Commercial Registration Gazette,and also notified to the Ministry of Industry and Trade. Any notice served to theregistered and announced address shall be binding on the Company. In theevent the Company evacuates its registered and announced address and failsto register its new address within the statutory time limits, this shall constitutea reason for termination.

Based on the decision of its Board of Directors, the Company may open branchesin Turkey and abroad, provided that the Ministry of Industry and Trade is notified.

Amendments to the Articles of Association

Proposal for Profit Distribution

Esteemed Shareholders,

The financial statements of our Company are prepared in accordance with the IFRS pursuant to Communiqué Series XI, No. 25 of the Capital MarketsBoard.

The balance sheet and income statement containing the results of 2005 operations, which have been made available for your examination for thelast fifteen days demonstrate that;

by the end of 2005, our Company realized a consolidated net profit of TRY (New Turkish Lira) 312,153,251.53.

Upon keeping a 5% legal reserve worth TRY 12,402,071.29 according to Article 466 of the Turkish Commercial Code, the distributable profit ofour Company is calculated to be TRY 282,126,729.37 in line with the Capital Market Law and the regulations of the CMB, and TRY 509,483,937.01in the statutory records.

We hereby propose the allocation of the following sums from the IFRS profit for the reporting period;

TRY 12,402,071.29 as 5% Primary legal reserve,

TRY 199,980,000.00 as Dividend to shareholders,

TRY 17,998,200.00 as 10% Secondary legal reserve, and

the balance as to be added to extraordinary reserves.

Based on our statutory records, we ask for the approval of the General Assembly for:

• Funding the TRY 199,980,000.00 cash dividend as follows:

TRY 197,873,109.57 from extraordinary reserves kept between 1999 and 2003

TRY 2,106,890.43 from current period’s exceptional earnings.

• Paying a cash dividend at the rate of 50%, which corresponds to TRY 0.50 gross and net cash dividend for one share certificate with a nominalvalue of TRY 1.00, to institutional shareholders who are full taxpayers or limited taxpayers and obtain dividends through a business or a permanentrepresentative in Turkey.

• Paying a cash dividend at the rate of 50%, which corresponds to TRY 0.50 gross and TRY 0.45053 net cash dividend for one share certificatewith a nominal value of TRY 1.00 to other shareholders,

• Starting dividend payments on 15 May 2006.

We wish that 2006 will be a prosperous year for Turkey and our Company,

Sincerely yours,

Rahmi M. KoçChairman

Arçelik Anonim fiirketi

Convenience Translationinto English of ConsolidatedFinancial Statementsat 31 December 2005Together with Auditor’s Report

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CONVENIENCE TRANSLATION INTO ENGLISH OF AUDITOR’S REPORT ORIGINALLY ISSUED IN TURKISH

ARÇEL‹K A.fi.

AUDITOR’S REPORTFOR THE PERIOD 1 JANUARY - 31 DECEMBER 2005

1. We have audited the accompanying consolidated balance sheet of Arçelik A.fi. ("the Company") at 31 December 2005 and the related consolidated statement of incomefor the year then ended. Our examination was made in accordance with the auditing principles issued by the Capital Market Board ("CMB") and accordingly includedsuch tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

2. In our opinion, the consolidated financial statements, present fairly, in all material respects, the consolidated financial position of Arçelik A.fi. at 31 December 2005 andthe results of its operations for the year then ended in accordance with the accounting principles issued by the CMB (Note 2).

Additional paragraph for convenience translation into English:

3. As of 31 December 2005, the accounting principles described in Note 2 (defined as ‘CMB Accounting Standards’) to the accompanying consolidated financialstatements differ from International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board with respect to the application ofinflation accounting and presentation of the basic financial statements and the notes to them. Accordingly, the accompanying consolidated financial statements are notintended to present the financial position and results of operations in accordance with IFRS.

Baflaran Nas Serbest MuhasebeciMali Müflavirlik Anonim fiirketia member ofPricewaterhouseCoopers

Haluk Yalç›n, SMMMPartner

Istanbul, 3 March 2006

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

ARÇEL‹K ANON‹M fi‹RKET‹CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER (Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)

RestatedNotes 2005 2004

ASSETS

Current assetsCash and cash equivalents 4 267,191 258,953Marketable securities (net) 5 - 38,305Trade receivables (net) 7 1,600,089 1,310,900Lease receivables (net) 8 - 83Due from related parties (net) 9 121,268 102,238Other receivables (net) 10 - -Biological assets (net) 11 - -Inventories (net) 12 619,274 727,195Construction contract receivables (net) 13 - -Deferred tax assets 14 - -Other current assets 15 53,031 68,859

Total current assets 2,660,853 2,506,533

Non-current assetsTrade receivables (net) 7 18,777 2,127Lease receivables (net) 8 - -Due from related parties (net) 9 - -Other receivables (net) 10 - -Financial assets (net) 16 658,613 276,062Goodwill/negative goodwill (net) 17 39,268 43,312Investment properties (net) 18 - -Property, plant and equipment (net) 19 688,292 642,298Intangible assets (net) 20 56,573 13,645Deferred tax assets 14 210 780Other non-current assets 15 - -

Total non-current assets 1,461,733 978,224

Total assets 4,122,586 3,484,757

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


ARÇEL‹K ANON‹M fi‹RKET‹CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER (Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)


LIABILITIES

Current liabilities Short-term bank borrowings 6 35,861 16,158Current maturities of long-term bank borrowings 6 87,086 96,221Lease payables (net) 8 208 2,128Other financial liabilities (net) 10 55,694 51,374Trade payables (net) 7 352,432 407,319Due to related parties (net) 9 554,456 517,946Advances received 21 195,429 192,634Construction contracts progress billings (net) 13 - -Provisions 23 3,809 -Deferred tax liabilities 14 - -Other current liabilities (net) 15 164,730 162,103

Total current liabilities 1,449,705 1,445,883

Non-current liabilitiesLong-term bank borrowings (net) 6 543,647 209,820Lease payables (net) 8 140 6,217Other financial liabilities (net) 10 10,676 12,196Trade payables (net) 7 - -Due to related parties (net) 9 - -Advances received 21 - -Provisions 23 43,849 39,502Deferred tax liabilities 14 12,033 33,622Other non-current liabilities (net) 15 53,643 36,333

Total non-current liabilities 663,988 337,690

Total liabilities 2,113,693 1,783,573

MINORITY INTEREST 24 21,837 22,019

SHAREHOLDERS’ EQUITY

Share capital 25 399,960 399,960Treasury shares 25 - -Capital reserves 26 1,251,364 1,018,241

Share premium 256,707 256,707Share cancellation gains - -Revaluation fund - -Financial assets fair value reserve 245,673 12,550Inflation adjustment to shareholders’ equity 748,984 748,984

Profit reserves 27 4,478 (14,198)Legal reserves 31,359 -Statutory reserves - -Extraordinary reserves - -Special reserves - -Investment and property sales income to be added to the capital - -Translation reserve (26,881) (14,198)

Current year profit 312,153 290,207Retained earnings/(Accumulated deficits) 28 19,101 (15,045)

Total shareholders’ equity 1,987,056 1,679,165

Total shareholders’ equity and liabilities 4,122,586 3,484,757Commitments and contingent liabilities 31


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ARÇEL‹K ANON‹M fi‹RKET‹CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)


Operating revenue

Net sales 36 5,102,907 4,906,835Cost of sales (-) (3,814,291) (3,679,973)

Gross operating profit 1,288,616 1,226,862

Operating expenses (-) 37 (880,483) (836,647)

Net operating profit 408,133 390,215

Other income and profit 38 27,232 65,349Other expenses and losses 38 (17,389) (45,664)Financial income/(expenses), net 39 8,733 68,122(Loss)/income from associates, net 9 (13,066) 5,922

Income before monetary loss, taxes and minority interests 413,643 483,944

Monetary loss 40 - (68,223)

Income before tax and minority interest 413,643 415,721

Minority interest 24 (6,541) (5,601)

Income before tax 407,102 410,120

Taxes on income 41 (94,949) (119,913)

Net income 312,153 290,207

Earnings per share (TRY) 42 0,780 0,726



ARÇEL‹K ANON‹M fi‹RKET‹CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)


Operating activities:

Net income 312,153 290,207

Adjustments for:

Increases and decreases in accruals and provisions 43 (33,948) 33,426Depreciation and amortisation 19,20 149,809 143,557Amortisation of goodwill, net 38 - 2,839Interest income 39 (23,195) (53,419)Interest expense 39 44,697 21,985(Loss)/income from investment in associated companies, net 13,066 (5,922)Excess of negative goodwill in the fair value of identifiable non-monetary assets acquired 38 - (36,305)Impairment losses of fixed assets - 13,392Net loss from sales of property, plant and equipment, and intangible assets 38 892 5,156Minority interest 24 6,541 5,601Taxation expenses 41 94,949 119,913

Net cash provided by operating activities before changes in operating assets and liabilities 564,964 540,430

Changes in operating assets and liabilities, net 43 (220,503) (189,520)Income and corporate taxes paid 41 (83,408) (153,333)

Net cash provided by operating activities 261,053 197,577

Investing activities:Cash provided from sale of tangible and intangible assets 8,559 9,673Acquisition of tangible and intangible assets 19,20 (261,858) (197,039)Capital increases of associates (113,290) (31,893)

Net cash used in investing activities (366,589) (219,259)

Financing activities:Interest received 28,092 48,720Interest paid (41,992) (22,796)Dividends paid (231,389) (2,454)Increase/(decrease) in bank borrowings, net 342,039 (63,365)

Net cash used in financing activities 96,750 (39,895)Effect of exchange rate changes (7,983) 208

Net (decrease)/increase in cash and cash equivalents (16,769) (61,369)Cash and cash equivalents at the beginning of the period 283,960 345,329

Cash and cash equivalents at the end of the period 267,191 283,960


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ARÇEL‹K ANON‹M fi‹RKET‹CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED 31 DECEMBER(Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)

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ARÇEL‹K ANON‹M fi‹RKET‹NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2005(Amounts expressed in thousands of New Turkish lira [TRY] unless otherwise indicated)

NOTE 1 - ORGANISATION AND PRINCIPAL ACTIVITIES

Arçelik Anonim fiirketi (a Turkish corporation - "Arçelik" or "the Company") and its subsidiaries and associates (collectively, "the Group") undertake all commercial andindustrial activities in respect of the production, sales and marketing including e-commerce, leasing, exportation and importation of electrical and non-electrical householdappliances, their main and supplementary materials, mobile phones, electronic appliances and their spare parts. The Group operates eight manufacturing plants in Turkeyand Romania. The Company is a member of the Koç Group of companies, which holds a majority stake in the Company. The Company’s head office is located at Tuzla,34950 Istanbul, Turkey.

The Company is registered with the Capital Markets Board ("CMB") and its shares have been quoted on the Istanbul Stock Exchange since 1986. At 31 December 2005 theshares quoted on the Istanbul Stock Exchange are approximately 21.29% of the total shares. At 31 December 2005, the principal shareholders and their respectiveshareholdings in the Company are as follows (Note 25):

%Koç Holding A.fi. 39.14Teknosan A.fi. 14.68Koç Family 9.81Burla Ticaret ve Yat›r›m A.fi. 7.66Koç Holding Emekli ve Yard›m Sand›¤› Vakf› 4.50Other 24.21

100.00

The Company’s subsidiaries ("Subsidiaries") and investments in associated undertakings ("Associates") are explained in Note 2.

Starting from January 2001, the Company obtained the right to use the Beko brand from Beko Ticaret A.fi. and to undertake the marketing, sales and distribution activities ofBeko branded products for twenty years. The rights to use the Beko brand will be transferred to the Company at the termination of the contract.

The Company performs export sales either directly or through Ram D›fl Ticaret A.fi.

The number of employees of the Group is 10,827 (31 December 2004: 10,283).

NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

2.1 Accounting policies

The consolidated financial statements of Arçelik have been prepared in accordance with the accounting and reporting principles published by the Capital Market Board("CMB"), namely "CMB Accounting Standards". The CMB published a comprehensive set of accounting principles in Communiqué No: XI-25 "The Accounting Standards inthe Capital Markets". In the aforementioned communiqué, it has been stated that applying the International Financial Reporting Standards ("IFRS") issued by theInternational Accounting Standards Board ("IASB") is accepted as an alternative to conform with the CMB Accounting Standards.

With the decision taken on 17 March 2005, the CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer required forcompanies operating in Turkey and preparing their financial statements in accordance with CMB Accounting Standards. Accordingly, International Accounting Standard("IAS") 29 ("Financial Reporting in Hyperinflationary Economies") issued by IASB, has not been applied in consolidated financial statements for the accounting periodscommencing from 1 January 2005. The consolidated financial statements presented for comparison purposes are expressed in the purchasing power of TRY at 31 December2004. These consolidated financial statements and the related notes have been prepared under the alternative application defined by the CMB as explained above andpresented in accordance with the formats required by the CMB with the announcement dated 20 December 2004.

The Company and its Turkish Associates maintain their books of account and prepare their statutory financial statements in New Turkish lira ("TRY") in accordance with theTurkish Commercial Code and Tax Procedure Law. The consolidated financial statements, which are in accordance with CMB Accounting Standards, are prepared in NewTurkish lira ("TRY") based on the historical cost conversion except for the financial assets and liabilities which are expressed with their fair values.

2.2 Financial reporting in hyperinflationary periods

The consolidated financial statements at 31 December 2004 are expressed in terms of the purchasing power of TRY at 31 December 2004. As disclosed in the "accountingpolicies" note, the CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkeyand preparing their financial statements in accordance with CMB Accounting Standards. Therefore, inflation accounting was not applied commencing from 1 January 2005.

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 that corresponding figures for previous periods be restated in the same terms. The restatement of the comparative amounts was calculated by means of conversionfactors derived from the Turkish nationwide wholesale price index ("WPI") published by the State Institute of Statistics ("SIS"). Indices and conversion factors used to restatethe comparative amounts in the consolidated financial statements until 31 December 2004 are given below:

Cumulativethree-year

Dates Index Conversion factors inflation rates (%)31 December 2004 8,403.8 1,000 69.731 December 2003 7,382.1 1,138 181.1

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2.3 New Turkish lira

Through the enactment of the Law numbered 5083 concerning the "Currency of the Republic of Turkey" in the Official Gazette dated 30 January 2004, the New Turkish lira("TRY") and the New Kurufl ("YKr") have been introduced as the new currency of the Republic of Turkey, effective from 1 January 2005. The hundredth part of the TRY is theYKr (1 TRY=100YKr). When the prior currency, Turkish lira ("TL"), values are converted into the TRY, one million TL is equivalent to one TRY (1 TRY). Accordingly, thecurrency of the Republic of Turkey is simplified by removing 6 zeroes from the TL.

All references made to Turkish lira or lira in laws, other legislation, administrative transactions, court decisions, legal transactions, negotiable instruments and otherdocuments that produce legal effects as well as payment and exchange instruments shall be considered to have been made to TRY at the conversion rate indicated as above.Consequently, effective from 1 January 2005, the TRY replaces the TL as a unit of account in keeping and presenting of the books, accounts and financial statements.

2.4 Translation of foreign subsidiary financial statements

The assets and liabilities of the Group’s foreign undertakings are translated into New Turkish lira at the closing rate and the income and expenses are translated into NewTurkish lira at the average rate for the period. Exchange differences arising on retranslation of the opening net assets of foreign undertakings and differences between theaverage and period-end rates are included in the translation reserve under shareholders’ equity.

2.5 Group accounting

(a) The consolidated financial statements include the accounts of the parent company, Arçelik, and its Subsidiaries and Associates on the basis set out in sections (b), (c)and (d) below. The financial statements of the companies included in the consolidation have been prepared as of the date of the consolidated financial statements and arebased on the statutory records, which are maintained under the historical cost convention, with adjustments and reclassifications for the purpose of presentation inconformity with IFRS and applying uniform accounting policies and presentations.

(b) Subsidiaries are companies over which Arçelik has the power to control the financial and operating policies for the benefit of Arçelik, either (a) through the power toexercise more than 50% of the voting rights relating to shares in the companies owned directly and indirectly by itself; or (b) although not having the power to exercisemore than 50% of the voting rights, otherwise has the power to exercise control over the financial and operating policies.

The balance sheets and statements of income of the Subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by Arçelik and itsSubsidiaries is eliminated against the related shareholders' equity. Intercompany transactions and balances between Arçelik and its Subsidiaries are eliminated onconsolidation. The cost of, and the dividends arising from, shares held by Arçelik in its Subsidiaries are eliminated from shareholders' equity and income for the period,respectively.

The table below sets out all Subsidiaries included in the scope of consolidation and shows their shareholding structure at 31 December:

Direct and indirect Direct and indirectcontrol by Arçelik control by Arçelik

and its Subsidiaries (%) and its Subsidiaries (%)2005 2004

Ardutch B.V. ("Ardutch") 100.00 100.00Artesis Teknoloji Sistemleri A.fi. ("Artesis") (*) - 65.00Beko Deutschland GmbH ("Beko Deutschland") 100.00 100.00Beko Electronics Espana S.L ("Beko Espana") 99.97 99.97Beko France S.A. ("Beko France") 99.94 99.94Beko Llc. 100.00 100.00Beko Plc. 50.00 50.00Beko Polska S.A. ("Beko Polska") 100.00 100.00Blomberg Vertriebsgesellschaft GmbH ("Blomberg Vertrieb") 100.00 100.00Blomberg Werke GmbH ("Blomberg Werke") 100.00 100.00Elektra Bregenz ("Elektra Bregenz") 100.00 100.00Raupach Wollert GmbH ("Raupach") 100.00 100.00SC Arctic SA ("Arctic") (**) 96.69 94.85Sherbrook International Limited ("Sherbrook") 55.00 55.00

(*) Artesis, a Subsidiary of the Group, has been sold at 16 June 2005 and is excluded from the scope of consolidation at the date that the Group’s control ceased.Following the sales transaction, the Group has recognised the subsidiary sales loss in the consolidated income statements for the year ended 31 December 2005.

(**) On 1 November 2005, Ardutch, a Subsidiary of the Group, has acquired 1.83% of the shares of Arctic. Excess of the interest in the net fair value of identifiable netassets acquired over the cost of the acquisition is recognised in the consolidated income statement.



Ardutch, incorporated in the Netherlands, acts as a holding and finance company.

Beko Deutschland, incorporated in Germany, is engaged in import, export and marketing of durable consumer goods, electromotors and raw materials/investment goods.

Beko Espana, incorporated in Spain, primarily engages in the sales of electrical appliances purchased from the Group.

Beko France, incorporated in France, deals with the import, distribution and marketing of durable consumer goods.

Beko Llc. (previously known as Arus), incorporated in Russia, deals with the production of durable consumer goods and import, export, sales and marketing of white goods.

Beko Plc., incorporated in the United Kingdom, deals with the import, distribution and marketing of durable consumer goods.

Beko Polska, incorporated in Poland, is engaged in sales and marketing of durable consumer goods.

Blomberg Vertrieb, is engaged in the trading and marketing of washing machines, tumble driers and other kitchen equipment for fitted kitchens, heat pumps and storageheaters in Germany.

Blomberg Werke, incorporated in Germany, is in the liquidation process. The production lines of washing machines, tumble driers, heat pumps, wall-mounted and floor-standing storage heaters of Blomberg Werke have been moved to Turkey.

Elektra Bregenz, incorporated in Austria in 1992, is engaged in trading white goods and household products such as cookers, hobs, hoods, ovens, refrigerators and otherhousehold products.

Raupach is a holding company dealing with the purchase of holdings of other companies.

Arctic, incorporated in Romania, is engaged in the production of refrigerator and import, export, sales and marketing of white goods.

Sherbrook, incorporated in United Kingdom, deals with export, import and logistic warehousing of original accessories and spare parts related with the automotive industry.

(c) Associates are companies in which the Company and its Subsidiaries have an attributable interest of 20% or more of the ordinary share capital held for the long-termand over which a significant influence is exercised. Associates are accounted for using the equity method. The Group’s share of the Associates’ profits or losses for theperiod is recognised in the income statement and its share of Associates’ movements in shareholders’ equity such as changes in financial assets fair value reserve andcumulative translation difference are recognised in the statement of shareholders’ equity. The Group’s interest in the Associates is carried in the consolidated balance sheet atan amount that reflects its share in the net assets of the Associates. Provisions is provided in the case of long-term impairment in value identified (Note 16).

The table below sets out the Associates and shows their shareholding ratio at 31 December:

Direct and indirect Direct and indirectcontrol by Arçelik control by Arçelik

and its Subsidiaries (%) and its Subsidiaries (%)2005 2004

Arçelik-LG Klima Sanayi ve Ticaret A.fi. ("Arçelik - LG") 45.00 45.00Beko Elektronik A.fi. ("Beko Elektronik") 22.36 22.36Koç Tüketici Finansman› ve Kart Hizmetleri A.fi. ("Koç Tüketici Finans") 41.18 41.18Ram D›fl Ticaret A.fi. ("Ram D›fl Ticaret") 28.26 28.26Ram Pacific Ltd. ("Ram Pacific") 25.00 25.00Tan› Pazarlama ve ‹letiflim Hizmetleri A.fi. ("Tan› Pazarlama") 32.00 32.00

Beko Elektronik, incorporated in Turkey, was founded in 1966 for the manufacture and sale of colour televisions, household electronic appliances and electronic cashregisters and the provision of related services. Its shares have been quoted on the Istanbul Stock Exchange since 1992.

Ram D›fl Ticaret was founded as an export trading company of the Koç Group and became an international trading company in 1984. It exports merchandise and theproducts of affiliated companies and renders intermediary export and import services.

Koç Tüketici Finans, incorporated in Turkey, was established in 1995 to finance the purchase of goods and services by customers and to provide consumer credit.

Arçelik-LG, incorporated in Turkey in 1999, was established to engage in the production, sale and export of air conditioning units.

Tan› Pazarlama, incorporated in Turkey in 2002, was established to serve consultancy services related with marketing and communication.

Ram Pacific, incorporated in China in 1995, is a foreign trading company.

(d) Available-for-sale investments, in which the Group have controlling interests equal to 20% or, which are either immaterial or where a significant influence is notexercised by the Group, that do not have quoted market prices in active markets and whose fair values cannot be reliably measured are carried at cost less any provision forimpairment.

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Available-for-sale investments in which the Group have attributable interests of more than 50%, which are immaterial for the Group’s consolidated financial position,operation results and net assets, are not included in the scope of consolidation.

(e) The results of operations of Subsidiaries and Associates are either included or excluded from their effective dates of acquisition or disposal, respectively.

(f) The minority shareholders’ share in the net assets and results for the year of Subsidiaries are separately classified as minority interest in the consolidated balance sheetsand statements of income.

2.6 Comparatives

Where necessary, comparative figures are reclassified to conform to changes in presentation of the current period consolidated financial statements.

2.7 Changes in accounting policies and restatement of prior periods’ financial statements

IAS 39 ("Financial Instruments: Recognition and Measurement") has been revised effective from the annual period beginning on or after 1 January 2005. In accordance withthe revised standard, gains and losses on available-for-sale financial assets shall be directly recognised in equity until the financial assets are derecognised.

The Group recognised such gains and losses on available-for-sale financial assets in the consolidated statements of income until 31 December 2004. As a result of therevision in IAS 39, the Group applied the accounting policy change retrospectively, and accordingly, adjusted comparative financial information.

Furthermore; according to IFRS 3 ("Business Combinations"), the carrying value of previously recognised negative goodwill is derecognised at the beginning of the period,with a corresponding adjustment to the opening balance of retained earnings (Note 3 - Goodwill and amortisation of goodwill).

The Group’s share of the corrections as a result of accounting policy changes in the financial statements of Koç Tüketici Finans, an Associate of the Group, is recognised inthe consolidated financial statements.

2.8 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 recognised amounts andthere is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.9 Convenience translation into English of consolidated financial statements originally issued in Turkish

As of 31 December 2005, the accounting principles described in Note 2.1 (defined as CMB Accounting Standards) differ from IFRS issued by the International AccountingStandards Board with respect to the application of inflation accounting, presentation of the basic financial statements and the notes to them. Accordingly, these financialstatements are not intended to present the financial position and results of operations in accordance with IFRS.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these consolidated financial statements are summarised below:

3.1 Related parties

For the purpose of these consolidated financial statements, shareholders, key management personnel and Board members, in each case together with their families andcompanies controlled by/or affiliated with them, associated companies and other companies within the Koç Holding group are considered and referred to as related parties.Transactions with related parties are priced predominantly at market rates (Note 9).

3.2 Trade receivables

Trade receivables that are created by the Group by way of providing goods or services directly to a debtor are carried at amortised cost. Short-term receivables with no statedinterest rate are measured at the original invoice amount unless the effect of imputing interest is significant.

A credit risk provision for trade receivables is provided if there is objective evidence that the Group will not be able to collect all amounts due. The amount of provision isthe difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees andcollateral, discounted based on the original effective interest rate of the originated receivables at inception.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income (Note 7).

3.3 Credit finance income/charges

Credit finance income/charges represent imputed finance income/charges on credit sales and purchases. Such income/charges calculated by using the effective interestmethod are recognised as financial income or expenses over the period of credit sale and purchases, and included under financial income and expenses (Note 39).



3.4 Loans and provisions for loan impairment

When the loan is originated by the Group by providing money directly to a bank, the loan is secured with marketable securities, Turkish government bonds and treasurybills, acquired under reverse repurchase agreements with banks with a predetermined sale price at fixed future dates and is stated at amortised cost. The accrued interestrepresents the apportionment to the current period of the difference between future sale prices and the amount provided by the Group. Such originated loans where originalmaturity at the time the money is directly transferred to the bank is less than three months, are considered and classified as cash equivalents for the purposes of statement ofcash flows (Note 5).

A credit risk provision for loan impairment is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provisionis the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees andcollateral, discounted based on the original effective interest rate of the originated loan at inception.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to current period’s incomestatement.

3.5 Financial assets

Investment securities with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity. Investment securities intendedto be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale. These areincluded in non-current assets unless management has the intention of holding the investment securities for less than 12 months from the balance sheet date, or unless theywill need to be sold to raise working capital, in which case they are included in current assets. Management determines the appropriate classification of its investmentsecurities at the time of the purchase and re-evaluates such designations on a regular basis. The unrealised gains and losses arising from changes in the fair value ofavailable-for-sale securities are directly recognised in the equity without being related to net results of the period (Note 16).

All financial assets are initially recognised at the cost of the purchase including the transaction costs. Investments, in which the Group has ownership interest under 20%,do not have a quoted market prices in active markets, and whose fair values cannot be reliably measured, are carried at cost, less any provision for impairment.

3.6 Inventories

Inventories are valued at the lower of cost or net realisable value. Cost elements included in inventories are materials, labour and an appropriate amount for factoryoverheads. The cost of inventories is determined on the moving average basis for each purchase. Net realisable value is the estimated selling price in the ordinary course ofbusiness, less the costs of completion and selling expenses (Note 12).

3.7 Property, plant, equipment and depreciation

Property, plant and equipment are carried at cost less accumulated depreciation (Note 19). Depreciation is provided on restated amounts of property, plant and equipmentusing the straight-line method based on the estimated useful lives of the assets, except for land. The depreciation periods for property and equipment, which approximatethe economic useful lives of assets concerned, are as follows:

Land -Land improvement 25 yearsBuildings 25-50 yearsMachinery and equipment 10 yearsVehicles and other 4-6 yearsMoulds 4-10 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Gains or losses on disposals of property, plant and equipment are included in the related income or expense accounts, as appropriate.

3.8 Intangible assets

Intangible assets comprise acquired information systems, trademarks, software, licenses and other identified rights. They are recorded at acquisition cost and amortised on astraight-line basis over their estimated useful lives for a period not exceeding 10 years from the date of acquisition. Amortisation is not provided for trademarks and serviceorganisation since they have an indefinite life. Where an indication of impairment exists, the carrying amount of any intangible assets is assessed and written downimmediately to its recoverable amount (Note 20).

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3.9 Goodwill and amortisation of goodwill

Effective from 1 January 2005, in accordance with IFRS 3 - "Business Combinations", goodwill is accounted for the excess of the cost of business combination over theGroup’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities. Goodwill recognised in a business combination is tested for impairmentannually (as of 31 December) or more frequently if events or changes in circumstances indicates an impairment, instead of amortisation.

The excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities acquired over the cost of business combination isaccounted for as income in the related period.

Previously recognised goodwill and negative goodwill, had been amortised over their estimated useful lives using the straight-line method in consolidated financialstatements until 31 December 2004. The carrying value of negative goodwill from the acquisitions is derecognised in the financial statements in accordance with IFRS 3 witha corresponding adjustment to the opening balance of retained earnings (Note 17).

3.10 Finance leases

(1) The Group as the lessee

Finance leases

Assets acquired under finance lease agreements are capitalised at the inception of the lease lower of the fair value of the leased asset, net of grants and tax creditsreceivable, or the present value of the lease payment. Lease payments are treated as comprising capital and interest elements, the capital element is treated as reducing thecapitalised obligation under the lease and the interest element is charged to the statement of income. Depreciation on the relevant asset is also charged to the statement ofincome over its useful life.

Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leasesare charged to the income statement on a straight-line basis over the period of the lease.

(2) The Group as the lessor

Finance leases

When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and thepresent value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method, whichreflects a constant periodic rate of return.

Operating leases

Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basisconsistent with similar owned property, plant and equipment. Rental income is recognised on a straight-line basis over the lease term.

3.11 Borrowing cost

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. They are stated at amortised cost using the effective yield method; anydifference between proceeds and the redemption value is recognised in the income statement over the period of borrowings (Note 6).

3.12 Deferred income taxes

Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carryingvalues in the consolidated financial statements. Currently enacted tax rates at the balance sheet date are used to determine deferred income tax.

The principal temporary differences arise from the restatement of property, plant and equipment and over their historical cost, unused tax credits, the portion of allowance forunearned credit finance income and expense, warranty provision, provision for employment termination benefits.

Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognised to theextent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised.

Deferred tax assets and deferred tax liabilities related to income taxes levied by the same taxation authority are offset accordingly.



3.13 Employment termination benefits

Employment termination benefits represent the present value of the estimated total reserve of the future probable obligation of the Company arising from the retirement of theemployees calculated in accordance with the Turkish Labour Law (Note 23).

3.14 Foreign currency transactions

Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilitiesdenominated in foreign currencies have been translated into New Turkish lira at the exchange rates prevailing at the balance sheet dates. Exchange gains or losses arisingfrom the settlement and translation of foreign currency items have been included in the consolidated statements of income.

3.15 Revenue recognition

Revenues are recognised on an accrual basis at the time deliveries or acceptances are made, at the invoiced values. Net sales represent the invoiced value of goods shippedless sales returns and commission. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting allfuture receipts using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognised as interest income in theperiod on an accrual basis as financial income.

3.16 Interest income

Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset.

3.17 Repair and maintenance expenditure, research and development costs and borrowing costs

Repair and maintenance expenditure, research and development costs and borrowing costs are charged to the statement of income as they are incurred.

3.18 Dividends

Dividends receivable are recognised as income in the period when they are declared and dividends payables are recognised as an appropriation of profit in the period inwhich they are declared (Note 9).

3.19 Warranties

Warranty expenses are recorded as a result of repair and maintenance expenses for products produced and sold, authorised services’ labour and material costs for productsunder the scope of the warranty terms without any charge to the customers, initial maintenance costs and estimated costs based on statistical information for possible futurewarranty services and returns of products with respect to the products sold during the period (Note 15).

3.20 Investment, research and development incentives

Grants arising from investment, research and development are recognised when the Company's incentive claims are approved by the related incentive authorities.

3.21 Share premium

Share premium represents (a) differences resulted from the sale of the Company’s Subsidiaries and Associates’ shares at a price exceeding the face value of those shares (b)differences between the face value and the fair value of shares issued for acquired companies.

3.22 Financial instruments and financial risk management

The Group’s activities expose to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interestrates. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financialperformance of the Group.

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. These exposures are managed by using naturalhedges that arise from offsetting interest rate sensitive assets and liabilities.

Funding risk

The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of adequate committed funding lines from high quality lenders.

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Credit risk

Ownership of financial assets involves the risk that counter parties may be unable to meet the terms of their agreements. Majority of the receivables are from authoriseddealers and related parties. The Group has in place effective credit evaluation, disbursement and monitoring procedures and those control procedures are supported bysenior management. The credit risk is generally highly diversified due to the large number of entities comprising the customer bases. Another method in managing creditrisk is the collaterals adequately received from authorised dealers.

Foreign currency risk

The Group is exposed to foreign currency risk through the impact of rate changes on the translation of TRY pertaining to foreign currency denominated assets and liabilities.These risks are monitored and limited by the analysis of the foreign currency position.

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 isbest 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 and appropriate valuation methodologies to theextent that relevant and reliable information is available from the financial markets. However, judgement is necessarily required to interpret market data to estimate the fairvalue. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange.

The following methods and assumptions are used in the estimation of the fair value of the financial instruments for which it is practicable to estimate fair value:

Monetary assets

The fair values of balances denominated in foreign currencies, which are translated at period-end exchange rates, are considered to approximate carrying values.

The fair values of certain financial assets carried at cost, including cash and cash equivalents and held to maturity investments plus the respective accrued interest areconsidered to approximate their respective carrying values due to their short-term nature and negligible credit losses.

The carrying values of trade receivables along with the related allowances for uncollectibility are estimated to be their fair values.

The fair values of investment securities, which have been determined by reference to market values, approximate their carrying values.

Monetary liabilities

The fair values of bank borrowings and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature.

Trading liabilities, derivatives and foreign exchange instruments have been estimated at their fair values.

Borrowings that are denominated in foreign currencies are translated at period-end exchange rates and accordingly their fair values approximate their carrying values. Thecarrying values of borrowings along with the related accrued interest are estimated to be their fair values.

3.23 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation at the balance sheet date as a result of past events, it is probable that an outflow ofresources will be required to settle the obligation, and a reliable estimate of the amount can be made.

3.24 Contingent assets and liabilities

Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain futureevents not wholly within the control of the Group are not included in consolidated balance sheets and disclosed as contingent assets or liabilities (Note 31).

3.25 Earnings per share

Earnings per share disclosed in the consolidated statement of income are determined by dividing net income attributable to that class of shares by the weighted averagenumber of such shares outstanding during the period concerned.

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares ("bonus shares") to existing shareholders from retained earnings andinflation adjustment to shareholders’ equity. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the period hasbeen adjusted in respect of bonus shares issued without a corresponding change in resources by giving them retroactive effect for the period in which they were issued andeach earlier period.

There are no bonus shares issued during the period.



3.26 Reporting of cash flows

For the purposes of the statement of cash flows, cash and cash equivalents include cash and amounts due from banks and marketable securities with maturity periods ofless than three months.

The analysis of cash and cash equivalents included in the consolidated statements of cash flows for the year ended 31 December is as follows:

2005 2004Cash, cheques on hand, bank deposits and other liquid assets (Note 4) 267,191 258,953Government bonds, where remaining original maturities are less than three months (Note 5) - 25,007

267,191 283,960

NOTE 4 - CASH AND CASH EQUIVALENTS

2005 2004Cash in hand 72 122Cash at banks

- demand deposits 54,459 70,194- time deposits 160,097 161,124

Cheques and notes 52,086 26,526Other 477 987

267,191 258,953

As of 31 December, maturities of cash and cash equivalents are as follows:

2005 2004Up to 30 days 246,719 192,70930 - 90 days 20,472 66,244

267,191 258,953

As of 31 December, interest rates of time deposits are as follows:2005 2004

% %TRY time deposits 12.75-15.00 21.60-25.00Foreign currency time deposits 1.00-4.75 1.00-6.00

NOTE 5 - MARKETABLE SECURITIES

There are no short term marketable securities at 31 December 2005. As of 31 December 2004 all short-term marketable securities are held-to-maturity and the breakdown ofsuch investments is as follows:

2005 2004Government bonds - 38,305

- 38,305

As of 31 December 2004 maturities of short-term marketable securities are as follows:

2005 2004Up to 90 days - 25,00790-180 days - 10,000Accrued interest income - 3,298

- 38,305

All marketable securities held at 31 December 2004 are in TRY and interest rates range from 23.00% to 23.90%.

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NOTE 6 - BORROWINGS

(a) Short-term bank borrowings

2005 2004Eximbank loans 32,682 9,161Foreign currency loans 3,179 6,997

35,861 16,158

Interest rates for short-term TRY loans for the year ended 31 December 2005 range from 12.00% to 13.00% (31 December 2004: 17.00%). Interest rates for short-termforeign currency loans for the year ended 31 December 2005 range from 3.89% to 6,00% (31 December 2004: 3.25-7.00%).

(b) Long-term bank borrowings

As of 31 December 2005, long-term bank borrowings are as follows:

BalanceInterest rate Original foreign outstanding

Currency per annum (%) currency TRYUSD Libor+0.95-3.25 and 8% 64,834,551 86,995GBP Libor+1.38-3.75 34,279,659 79,258EUR Euro Libor+1.85-3.25 212,643,780 337,573TRY 14.85 126,906,641 126,907

630,733

Less: Current maturities (87,086)

543,647

As of 31 December 2004, long-term bank borrowings are as follows:

BalanceInterest rate Original foreign outstanding

Currency per annum (%) currency TRYUSD Libor+0-3.25 55,461,043 74,434GBP Libor+2.75-3.75 28,486,862 73,396EUR Euro Libor+2.60-3.25 86,605,320 158,211

306,041

Less: Current maturities (96,221)

209,820

The Company has syndication loans from the International Finance Corporation ("IFC") in the amount of USD 9,857,143, EUR 172,702,134, GBP17,769,231 and from theNetherlands Development Finance Company ("FMO") in the amount of EUR 20,000,000 as at 31 December 2005. Loans obtained for general usage purposes consist of thepurchase of equipment and other fixed assets for production and modernisation purposes, research and development and new product development, as well as acquisitionsand increased working capital requirements.

The redemption schedules of the long-term bank borrowings are as follows:

2005 20042006 - 93,6732007 243,200 51,3612008 104,142 38,3132009 85,238 13,9872010 65,009 8,3242011 and over 46,058 4,162

543,647 209,820



NOTE 7 - TRADE RECEIVABLES AND PAYABLES

Short-term trade receivables: 2005 2004Trade receivables 439,722 451,511Notes receivables 1,070,872 781,984Cheques receivables 174,462 146,364Doubtful receivables 16,437 26,061

1,701,493 1,405,920

Less: Provision for doubtful receivables (9,598) (25,390)Less: Unearned credit income (91,806) (69,630)

1,600,089 1,310,900

Long-term trade receivables:

Trade receivables 17,973 1,141Deposits and guarantees given 804 986

18,777 2,127

Short-term trade payables:

Trade payables 356,005 410,917Deposits and guarantees received 1,687 1,929Unearned credit finance charges (5,260) (5,527)

352,432 407,319

NOTE 8 - LEASE RECEIVABLES AND PAYABLES

(a) Finance lease receivables 2005 2004

Short-term finance lease receivables - 83

(b) Finance lease payables 2005 2004

Short-term finance lease payables 208 2,128Long-term finance lease payables 140 6,217

348 8,345

The redemption schedules of long-term finance lease payables are as follows:

2005 20042007 118 2,2502008 22 2,2212009 - 1,746

140 6,217

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NOTE 9 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

Amounts due from and due to related parties at year-ends and a summary of major transactions with related parties during the year are as follows:

(i) Balances with related parties

(a) Due from related parties

2005 2004Ram D›fl Ticaret A.fi. 65,933 53,578Akpa Dayan›kl› Tüketim (*) 19,014 7,744Türk Demir Döküm Fabrikalar› A.fi. 16,829 26,007Other 19,136 14,403

120,912 101,732

Due from personnel 356 506121,268 102,238

(*) Bursa Gaz ve Tic. A.fi. continues its operations in the name of Akpa Dayan›kl› Tüketim LPG ve Akaryak›t Ürünleri Pazarlama A.fi. ("Akpa Dayan›kl› Tüketim").

(b) Due to related parties

2005 2004Beko Elektronik A.fi. 308,629 232,602Arçelik LG Klima Sanayi ve Ticaret A.fi. 82,558 36,968Ram D›fl Ticaret A.fi. 79,653 151,368Koç Faktoring Hizmetleri A.fi. 23,536 20,769Beko Ticaret A.fi. 14,607 10,838Döktafl A.fi. 10,877 6,718Kofisa S.A. 9,180 29,719Ram Pasific Ltd. 8,936 694Türk Demir Döküm Fabrikalar› A.fi. 6,269 1,183Other 20,250 17,340

564,495 508,199

Due to personnel 14,060 16,124Less: Unearned credit finance charged to related parties (24,099) (6,377)

554,456 517,946

(c) Deposits

2005 2004Koçbank A.fi.

- time deposits 54,736 75,927- demand deposits 666 4,959

Yap› ve Kredi Bankas› A.fi.- demand deposits 124 -

55,526 80,886

(ii) Transactions with related parties

(a) Sales

2005 2004Ram D›fl Ticaret A.fi. 156,719 167,564Akpa Dayan›kl› Tüketim 68,558 43,616Kofisa S.A. 27,631 6,298Other 25,864 17,458

278,772 234,936



(b) Purchases

2005 2004Beko Elektronik A.fi. 717,014 681,009Ram D›fl Ticaret A.fi. 380,413 571,318Arçelik LG Klima Sanayi ve Ticaret A.fi. 194,255 142,367Kofisa S.A. 86,579 116,955Beko Ticaret A.fi. 65,721 55,512Türk Demir Döküm Fabrikalar› A.fi. 54,090 51,410Döktafl A.fi. 53,373 48,984Ram Pacific Ltd. 20,169 -Ram Sigorta Arac›l›k Hizmetleri A.fi. 13,930 15,122‹zocam Ticaret ve Sanayi A.fi. 12,391 13,257Palmira Turizm Ticaret A.fi. 10,022 -Other 52,153 54,467

1,660,110 1,750,401

Less: Credit finance charges to related parties (Note 39) (26,647) (31,091)

1,633,463 1,719,310

(c) Income/(loss) from investments in associated companies, net

2005 2004Beko Elektronik A.fi. (30,681) 2,308Arçelik LG Klima Sanayi ve Ticaret A.fi. 7,165 3,738Koç Tüketici Finansman› ve Kart Hizmetleri A.fi. 9,457 3,442Ram D›fl Ticaret A.fi. 391 (2,232)Tan› Pazarlama ve ‹letiflim Hizmetleri A.fi. (42) (1,334)Ram Pacific Ltd 644 -

(13,066) 5,922

(d) Other transactions with related parties

2005 2004Dividends paid 231,389 2,454Interest income 13,873 20,226Technical service assistance income 2,726 1,669Dividends income 411 1,033Rent income 158 115Other income 2,421 4,699

NOTE 10 - OTHER RECEIVABLES AND PAYABLES

Other short-term financial liabilities

2005 2004Taxes and duties payable 43,397 40,281Rescheduled taxes payable 12,297 11,093

55,694 51,374

Other long-term financial liabilities

2005 2004Rescheduled taxes payable 10,676 12,196

10,676 12,196

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NOTE 11 - BIOLOGICAL ASSETS

There is no biological asset in the operations of the Group.

NOTE 12 - INVENTORIES

2005 2004Raw materials and supplies 202,433 186,445Semi-finished goods 20,728 24,420Finished goods 127,703 165,300Merchandises 146,998 161,877Goods-in-transit 127,064 194,628

624,926 732,670

Less: Provision for slow-moving and obsolete inventories (5,652) (5,475)

619,274 727,195

NOTE 13 - CONSTRUCTION CONTRACT RECEIVABLES AND PROGRESS BILLINGS

The Group has no construction contract receivables or progress billings.

NOTE 14 - DEFERRED TAX ASSETS AND LIABILITIES

Deferred taxes

2005 2004Deferred tax assets 210 780Deferred tax liabilities (12,033) (33,622)Deferred tax liabilities - net (11,823) (32,842)

The Company recognises deferred tax assets and liabilities based upon temporary differences arising between their financial statements prepared in accordance with CMBAccounting Standards and their statutory financial statements.

Tax rates used for calculation of deferred tax assets and liabilities based on temporary differences expected to be realised or settled based on the taxable income in comingyears under the liability method are 30%, 16%, 30% and 19% for Turkey, Romania, the United Kingdom and Poland, respectively.

The breakdowns of cumulative temporary differences and the resulting deferred tax assets/(liabilities) provided at 31 December using the enacted tax rates are as follows:

Cumulative temporary Deferred taxdifferences assets/(liabilities)

2005 2004 2005 2004Net difference between the tax base and carrying amount of property

plant and equipment and intangible assets 274,933 302,379 (79,313) (86,736)Provision for warranties and assembly (119,394) (79,185) 34,956 23,608Portion of allowance for unearned credit finance income and

expense that is currently non-tax deductible/taxable (60,955) (57,338) 18,287 17,201Provision for employment termination benefits (42,966) (38,439) 12,889 11,532Unused tax credits (4,053) (7,125) 649 1,261Other provisions (5,279) (910) 709 292

Deferred tax liabilities - net (11,823) (32,842)



NOTE 15 - OTHER CURRENT/NON CURRENT ASSETS AND LIABILITIES

Other current assets

2005 2004Value Added Tax (VAT) receivable 22,739 24,323Taxes and funds deductible 20,288 28,439Prepaid expenses 5,481 6,191Assets held for sale 3,175 8,354Other 1,348 1,552

53,031 68,859

Other current liabilities

2005 2004Warranty provision 81,130 81,348Assembly provision 22,782 14,661Deferred income 14,220 14,841Accrual for marketing and sales expenses 12,995 18,021Transportation expenses provision 8,319 10,029Accrual for bonuses and premiums 3,112 6,503Other 22,172 16,700

164,730 162,103

Other non- current liabilities

2005 2004Warranty provision 50,962 32,009Deferred income 1,889 1,908Other 792 2,416

53,643 36,333

NOTE 16 - FINANCIAL ASSETS

2005 2004Available-for-sale investments 464,853 123,586Held-to-maturity investments 55,802 17,524Investments in associated companies 137,958 134,952

658,613 276,062

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i. Available-for-sale investments:

2005 2004% TRY % TRY

Koç Finansal Hizmetler A.fi. 6.96 448,270 6.96 102,752Entek Elektrik A.fi. 6.86 15,782 6.86 20,040Beko S.A. Hungarian (*) 100.00 410 - -Arcelitalia (*) 100.00 191 100.00 191Beko S.A. Czech Republic (*) 100.00 95 - -Tat Konserve Sanayii A.fi. 0.34 71 0.34 192Eco Systems 2.00 32 - -ArticPro SRL 0.99 1 0.99 1Çerkezköy Enerji A.fi. 0.00 1 0.04 1Arctic Service (*) 100.00 - 100.00 -Archin Limited (*) 99.99 - 99.99 23Basic International Investment Ltd. (**) 20.00 - 20.00 -Srccb SA 8.30 - 8.30 -Idea A.fi. 2.67 - 2.67 386Banca Internationala a Religiflor 0.80 - 0.80 -Ubicom Inc. 0.02 - 0.02 -

464,853 123,586

(*) Available-for-sale investments, in which Arçelik and its Subsidiaries have ownership interests over 20% and which are immaterial, are carried at cost, less anyprovision for impairment.

(**) Available-for-sale investments, in which Arçelik and its Subsidiaries have ownership interest of 20% and which the Group does not exercise a significant influence over,are carried at cost, less any provision for impairment.

Impairment loss provision for available-for-sale investments amount to TRY 70,942 (31 December 2004: TRY 70,923 ) at 31 December 2005.

The unrealised gains (net) arising from changes in the fair value of investments in Koç Finansal Hizmetler A.fi., Entek Elektrik A.fi. and Tat Konserve Sanayi A.fi. amountingto TRY 227,849 are recognised in equity under "financial assets fair value reserve".

ii. Held-to-maturity investments:

2005 2004Time deposits 39,025 -Eurobonds 16,777 16,780Government bonds - 744

55,802 17,524

Interest rate for time deposits held at 31 December 2005 is 8.00%. Interest rate for Eurobonds held at 31 December 2005 is 9.88% (31 December 2004: 9.88%). Interestrate for government bonds held at 31 December 2004 is 21.20%- 24.25%.

iii. Investments in associated companies

The respective shares of the Company and its Subsidiaries in investments in associated companies at 31 December are as follows:

2005 2004% TRY % TRY

Beko Elektronik A.fi. 22.36 60,857 22.36 75,265Arçelik LG Klima Sanayi ve Ticaret A.fi. 45.00 38,964 45.00 31,799Koç Tüketici Finansman› ve Kart Hizmetleri A.fi. 39.50 31,892 39.50 22,435Tan› Pazarlama ve ‹letiflim Hizmetleri A.fi. 32.00 3,011 32.00 3,053Ram D›fl Ticaret A.fi. 26.75 1,862 26.75 1,471Ram Pacific Ltd. 25.00 1,372 25.00 929

137,958 134,952

Portion of current year change in associates amounting to TRY 5,274 is accounted in financial assets fair value reserve in consolidated statement of shareholders’ equity.



NOTE 17 - GOODWILL/NEGATIVE GOODWILL

Currency 1 January translation 31 December

2005 Additions Disposals Transfers difference 2005Goodwill 90,790 - - (11,530) (250) 79,010Accumulated amortisation (43,003) - - 3,180 81 (39,742)

Net book value 47,787 - - (8,350) (169) 39,268

Negative goodwill (7,783) - 7,783 - - -Accumulated amortisation 3,308 - (3,308) - - -

Net book value (4,475) - 4,475 - - -

Total net book value 43,312 - 39,268

Previously recognised negative goodwill with carrying value of TRY 4,475 as of 1 January 2005 resulting from acquisition of Blomberg Vertrieb has been derecognised fromfinancial statements at the beginning of the period in accordance with IFRS 3 with a corresponding adjustment to the opening balance of retained earnings (Note 3).

Assets with a carrying value of TRY 8,350 were transferred from "Goodwill/Negative Goodwill" to "Intangible Assets" (Note 20).

NOTE 18 - INVESTMENT PROPERTY

The Group has no investment property.

NOTE 19 - PROPERTY, PLANT AND EQUIPMENT

Currency Disposal from1 January translation scope of 31 December

2005 Additions Disposals Transfers difference consolidation 2005CostLand 16,817 292 (213) (2,826) (257) - 13,813Land improvement 16,479 752 (19) 17 (24) - 17,205Buildings 253,522 3,517 (1,445) (15,216) (4,933) - 235,445Machinery and equipment 1,614,812 115,193 (39,852) (16,663) (5,314) (188) 1,667,988Motor vehicles, furniture and fixtures 127,360 8,962 (10,525) 31,921 (3,348) (66) 154,304Leasehold improvements 17,233 14,616 - 20 (71) - 31,798

2,046,223 143,332 (52,054) (2,747) (13,947) (254) 2,120,553

Accumulated DepreciationLand improvement (6,925) (639) 11 200 44 - (7,309)Buildings (109,919) (9,335) 916 15,357 3,143 - (99,838)Machinery and equipment (1,193,272) (121,759) 37,857 28,224 3,141 77 (1,245,732)Motor vehicles, furniture and fixtures (96,850) (11,462) 10,164 (23,990) 2,545 41 (119,552)Leasehold improvements (6,950) (2,686) - (20) 13 - (9,643)

(1,413,916) (145,881) 48,948 19,771 8,886 118 (1,482,074)

Construction in progress 9,609 59,376 (2,966) (20,199) (146) (166) 45,508Advances given 382 7,853 (3,930) - - - 4,305

Net book value 642,298 64,680 (10,002) (3,175) (5,207) (302) 688,292

Mortgages on property, plant and equipment amount to TRY 15,874 at 31 December 2005 (31 December 2004: TRY 18,317).

A building with the cost of TRY 18,731 and accumulated depreciation of TRY 15,556 was transferred to "Other Current Assets" from buildings under the property, plant,equipment with a net value of TRY 3,175.

Disposal from scope of consolidation is due to the sale of Artesis.

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NOTE 20 - INTANGIBLE ASSETS

Currency Disposal from1 January translation scope of 31 December

2005 Additions Disposals Transfers difference consolidation 2005CostRights 44,813 40,316 (2,740) 11,873 (2,621) (3,168) 88,473Other intangible assets 1,679 - (125) (343) (175) - 1,036

46,492 40,316 (2,865) 11,530 (2,796) (3,168) 89,509

Accumulated amortisationRights (31,333) (3,793) 2,749 (3,307) 1,088 2,894 (31,702)Other intangible assets (1,514) (135) 106 127 182 - (1,234)

(32,847) (3,928) 2,855 (3,180) 1,270 2,894 (32,936)

Net book value 13,645 36,388 (10) 8,350 (1,526) (274) 56,573

TRY 38,210 of additions results from the acquisition of Beko After Sales Service Organisation.

Transfers to rights at a cost of TRY 11,530 and accumulated amortisation of TRY 3,180 are from "Goodwill" (Note 17).

Disposal from scope of consolidation is due to the sale of Artesis.

NOTE 21 - ADVANCES RECEIVED

2005 2004Order advances received 195,148 192,402Other advances received 281 232

195,429 192,634

NOTE 22 - RETIREMENT PLANS

There is no liability for retirement plans in the consolidated balance sheet.

NOTE 23 - PROVISIONS

a) Short-term provisions2005 2004

Tax provision (Note 41) 3,809 -

b) Long-term provisions2005 2004

Provision for employment termination benefits 43,849 39,502

There are no agreements for pension commitments other than the legal requirement as explained below.

Under the Turkish Labour Law, the Company and its Turkish Subsidiaries and Associates are required to pay termination benefits to each employee who has completed oneyear of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service and reachesthe retirement age (58 for women and 60 for men). Since the legislation was changed on 8 September 1999, there are certain transitional provisions relating to length ofservice prior to retirement.

The amount payable consists of one month’s salary limited to a maximum of TRY 1,72715 (31 December 2004: TRY 1,57474) for each period of service at 31 December2005.

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

The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees.



IAS 19 ("Employee Benefits") requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly thefollowing actuarial assumptions were used in the calculation of the total liability:

2005 2004Discount rate (%) 5.49 5.45Turnover rate to estimate the probability of retirement (%) 99 99

The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected realrate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum amount of TRY 1,77062 (1 January 2005:TRY 1,64890) which is effective from 1 January 2006 has been taken into consideration in calculating the reserve for employment termination benefit of the Company and itsTurkish Subsidiaries and Associates.

Movements in the provision for employment termination benefits are as follows:

2005 2004Balance at the beginning of the year 39,502 39,179Increase in the year 11,771 10,370Payments during the year (7,357) (5,287)Disposal from scope of consolidation (Artesis) (67) -Monetary gain - (4,760)

Balance at the end of the year 43,849 39,502

NOTE 24 - MINORITY INTEREST

Changes in minority interest during the year are as follows:

2005 2004Balance at the beginning of the year 22,019 20,367

Dividend payments (2,213) (2,454)Decrease in minority interest due to sale of Subsidiary (Artesis) (547) -Decrease in minority interest due to acquisition of Subsidiary (Arctic) (1,579) -Currency translation differences (2,384) (1,495)Net income attributable to minority interest 6,541 5,601

Balance at the end of the year 21,837 22,019

NOTE 25 - SHARE CAPITAL/ADJUSTMENT TO SHARE CAPITAL

The Company adopted the registered share capital system available to companies registered with the CMB.

The Company’s historical registered and authorised and paid-in share capital at 31 December are as follows:

2005 2004Limit on registered share capital 500,000 500,000Authorised and paid-in share capital 399,960 399,960

At 31 December the shareholding structure can be summarised as follows:

2005 2004Shareholders % Share Amount % Share AmountKoç Holding 39.14 156,546 39.14 156,546Teknosan A.fi. 14.68 58,709 14.68 58,709Koç Family 9.81 39,252 10.25 41,001Burla Ticaret ve Yat›r›m A.fi. 7.66 30,649 7.66 30,649Koç Holding Emekli ve Yard›m Sand›¤› Vakf› 4.50 17,982 4.50 17,982Other 24.21 96,822 23.77 95,073

Total 100.00 399,960 100.00 399,960

Adjustment to share capital 468,811 468,811

Total paid-in share capital 868,771 868,771

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NOTE 26 - 27 - 28 CAPITAL RESERVES, PROFIT RESERVES, RETAINED EARNINGS

Retained earnings as per the statutory financial statements, other than legal reserve requirements, are available for distribution subject to the legal reserve requirementreferred to below.

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code ("TCC"). The TCC stipulates that the first legal reserveis appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the Group’s paid-in share capital. The second legal reserve isappropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can only be used to offsetlosses and are not available for any other usage unless they exceed 50% of paid-in share capital.

Quoted companies are subject to dividend requirements regulated by the CMB as follows:

In accordance with the Communiqué No: XI-25 Section 15 paragraph 399, the accumulated deficit amounts arising from the first application of inflation adjustment, in linewith CMB’s profit distribution regulations, are considered to be deductive when computing the distributable profit. The amounts presented as accumulated deficit shall benetted-off first from net income and retained earnings, if possible and then the remaining amount of deficit shall be netted-off from extraordinary reserves, legal reserves andinflation adjustment to shareholders’ equity.

Effective from 1 January 2004, the IFRS net income computed in accordance with Communiqué No: XI-25 must be distributed in the ratio of a minimum of 30% of totaldistributable profit. This distribution may be made either as cash, as pro-rata shares or as a combination of both, in accordance with the decisions taken in generalassemblies.

The Company distributed dividends of TRY 229,177 from prior periods income and extraordinary reserves during the year 2005.

For the purposes of profit distribution in accordance with related CMB regulations, items of statutory shareholders’ equity such as share capital, share premium, legalreserves, other reserves, special reserves and extraordinary reserves, are presented at their historical amounts. The difference between the inflated and historical amounts ofthese items is presented as inflation adjustment to shareholders’ equity.

Inflation adjustment to shareholders’ equity shall only be netted-off against prior years’ losses and used as an internal source in capital increase where extraordinaryreserves can be netted-off against prior years’ losses or used in distribution of bonus shares and distributions of dividends to shareholders. In accordance with theCommuniqué No: XI-25, at 31 December the shareholders’ equity schedule, is as follows:

2005 2004Paid-up capital 399,960 399,960Legal reserves 31,359 -Extraordinary reserves - -Share premium - -Inflation adjustment to shareholders’ equity 748,984 748,984Financial assets fair value reserve 245,673 12,550Net income 312,153 290,207Prior years’ income/(losses) 19,101 (15,045)Share premium arising from the fair value of the acquired assets and liabilities 256,707 256,707Translation reserve (26,881) (14,198)

Total shareholders’ equity 1,987,056 1,679,165

Details of the inflation adjustment to shareholders’ equity as of 31 December are as follows:

Inflation AdjustmentRestated to Shareholders’

Nominal value amounts EquityShare capital 399,960 868,771 468,811Offsetting difference (*) - 280,173 280,173

399,960 1,148,944 748,984

(*) Inflation adjustment to shareholders’ equity amounting to TRY 280,173 which is the remaining balance of equity accounts have been zeroed by offsetting as shown inthe inflation adjustment to shareholders’ equity account.



NOTE 29 - FOREIGN CURRENCY POSITION

Assets and liabilities denominated in foreign currency at 31 December are as follows:

2005 2004Assets 873,507 813,610Liabilities (900,551) (779,100)Off-balance sheet liabilities - (38,096)

Net foreign currency position (27,044) (3,586)

TRY equivalents of assets and liabilities denominated in foreign currency at 31 December 2005 are as follows:

31 December 2005 EUR USD GBP Other TotalCurrent assets:Cash and cash equivalents 118,871 15,645 39,816 10,978 185,310Trade receivables (net) 206,588 26,198 67,247 57,611 357,644Due from related parties (net) 78,710 1,716 16,106 418 96,950Other receivables (net) - - - - -Inventories (net) 53,399 - 67,233 36,862 157,494Other current assets 12,807 24 27 6,460 19,318

Non-current assets:Trade receivables (net) 779 - - - 779Financial assets (net) - 55,802 - - 55,802Deferred tax assets - - - 210 210Other non-current assets - - - - -

Total assets 471,154 99,385 190,429 112,539 873,507

Current liabilities:Short-term bank borrowings 3,175 - 4 - 3,179Current maturities of long-term bank borrowings 37,483 34,422 13,274 - 85,179Lease payables (net) - - 138 70 208Other financial liabilities (net) 2,205 - 6,244 811 9,260Trade payables (net) 78,486 13,445 3,601 7,520 103,052Due to related parties (net) 126,564 8 39,470 5,858 171,900Advances received - - 9 1 10Provisions 623 - 503 158 1,284Other current liabilities (net) 36,923 2,206 42,815 10,973 92,917

Non-current liabilities: Long-term bank borrowings (net) 300,090 52,573 65,984 - 418,647Lease payables (net) - - 126 14 140Other financial liabilities (net) - - - 4,546 4,546Provisions 884 - - 8 892Deferred tax liabilities - - 256 1,123 1,379Other non-current liabilities (net) 792 - - 7,166 7,958

Total liabilities 587,225 102,654 172,424 38,248 900,551

Off-balance sheet liabilities - - - - -

Net position (116,071) (3,269) 18,005 74,291 (27,044)

The net foreign currency position of the Group as of 31 December 2005 is negative TRY 27,044 equivalent to EUR 17,035,591.

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TRY equivalents of assets and liabilities denominated in foreign currency at 31 December 2004 are as follows:

31 December 2004 EUR USD GBP Other TotalCurrent assets:Cash and cash equivalents 82,743 9,099 25,859 9,326 127,027Trade receivables (net) 313,865 20,724 85,509 58,424 478,522Due from related parties (net) 901 2,709 29,492 5 33,107Other receivables (net) 126 - 76 168 370Inventories (net) 58,186 - 57,326 30,537 146,049Other current assets 7,905 8 696 992 9,601

Non-current assets:Trade receivables (net) 1,646 - - - 1,646Financial assets (net) - 16,508 - - 16,508Deferred tax assets - - 323 457 780Other non-current assets - - - - -

Total assets 465,372 49,048 199,281 99,909 813,610

Current liabilities:Short-term bank borrowings 3,657 - 3,343 - 7,000Current maturities of long-term bank borrowings 43,414 41,073 11,734 - 96,221Lease payables (net) 1,867 - 146 115 2,128Other financial liabilities (net) 2,010 - 11,281 1,018 14,309Trade payables (net) 114,147 17,219 4,944 6,476 142,786Due to related parties (net) 154,462 2 22,061 336 176,861Advances received 87 - - 4 91Provisions 2,054 - 2,260 1,914 6,228Other current liabilities (net) 37,459 941 50,702 9,414 98,516

Non-current liabilities:Long-term bank borrowings (net) 114,797 33,361 61,662 - 209,820Lease payables (net) 5,923 - 294 - 6,217Other financial liabilities (net) - - - 6,050 6,050Provisions 995 - - - 995Deferred tax liabilities - - - 3,518 3,518Other non-current liabilities (net) 1,758 - 1 6,601 8,360

Total liabilities 482,630 92,596 168,428 35,446 779,100

Off-balance sheet liabilities (37,750) - - (346) (38,096)

Net position (55,008) (43,548) 30,853 64,117 (3,586)

The net foreign currency position of the Company as of 31 December 2004 is negative TRY 3,586 equivalent to EUR 1,962,390.



NOTE 30 - GOVERNMENT GRANTS

The Company has obtained investment incentive certificates from the Turkish government authorities in connection with certain major capital expenditures, which entitle theCompany, among other things to:

a) 100% exemption from customs duty on machinery and equipment to be imported; b) Value Added Tax exemption with respect to purchases of investment goods both from domestic and export markets;c) Exemption of tax and funds (for the incentives 67302, 67303, 72396);d) A 100% investment allowance for purchases of assets and construction costs for investments; 67302 and 67303; 40% investment allowance for investments; 72396,

74349, 74387, 74408, 74840, 75810, 75864, 76568;e) Investment incentive amounting to 40% of the investment expenditures related to tangible and intangible assets for the year 2005 exceeding TRY 10 made after 24 April

2003 (Note 41),f) 40% of the research and development expenditures (Note 41).

The 100% investment allowance indicated in (d) above is deductible from current or future taxable profits for the purposes of corporation tax. However, such investmentallowances are subject to withholding tax. For 40% investment allowances there is no such withholding taxation.

Total investments subject to investment allowances amount to TRY 107,114 in 2005. Total research and development expenditures subject to allowances amount to TRY32,764 in 2005.

NOTE 31 - PROVISIONS, COMMITMENTS AND CONTINGENT LIABILITIES

Provisions

Provisions in consolidated financial statements are disclosed in Notes 15 and 23.

Commitments and contingent liabilities

a) Guarantees and commitments given are as follows at 31 December

2005 2004Collateral obtained 1,074,657 846,275Guarantee notes given 41,657 16,935Pledges given 13,137 17,962Forward commitments 4,280 4,436Other guarantees 185 1,000Capital commitments - 17

b) In connection with the Inward Processing Permission Certificates, the Company committed to realise export sales amounting to USD 1,414,925,057 (31 December 2004:USD 718,147,580) at 31 December 2005.

c) The export commitments in scope of the Investment Incentive Certificates at 31 December 2005 amount to USD 21,000 (31 December 2004: USD 21,000).

d) In connection with the Investment Incentives Certificates, the Company committed to realise a capital increase amounting to TRY 102,103 at 31 December 2005 (31 December 2004: TRY 113,006) at 31 December 2005.

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NOTE 32 - BUSINESS COMBINATIONS

There are no business combinations in 2005 and 2004.

NOTE 33- SEGMENT REPORTING

Primary reporting format - Business segment

The Group is engaged in the production and sale of electrical and manual household appliances. Since the products that the Group produces are not subject to differentrisks and returns, no distinguishable business segment is identified.

Secondary reporting format - Geographical segment

The Group’s geographical segments are organised as Turkey and Europe. Turkey, where the domestic activities are performed, is the home country of the parent company,Arçelik, which is also the main operating company.

Segment sales 2005 2004Turkey 3,101,751 2,770,173Europe 1,744,266 1,876,314Other 256,890 260,348

5,102,907 4,906,835

Segment assets 2005 2004Turkey 3,565,009 2,901,706Europe 511,323 583,051Other 46,254 -

4,122,586 3,484,757

Segment capital expenditures 2005 2004Turkey 188,536 169,290Europe 23,646 22,815Other 38,695 -

250,877 192,105

Segment revenue from external customers by geographical area is reported based on the geographical location of its customers. The total carrying amount of segment assetsis reported based on the location of assets.



NOTE 34 - SUBSEQUENT EVENTS

In the Board of Directors meeting held dated 21 January 2006, it has been resolved to register the share pledges in favour of J.P. Morgan Europe Limited on shares withnominal value TRY 156,546 by shareholder, Koç Holding A.fi., within the framework of the Secured Term Facility Agreement dated 21 January 2006 executed between KoçHolding A.fi. as borrower and J.P. Morgan Europe Limited as Agent, Security Trustee and Calculation Agent and J.P. Morgan Chase Bank N.A. as Original Bank and as perthe share pledge agreement dated 21 January 2006 entered into between shareholder Koç Holding A.fi. as pledgor and J.P. Morgan Europe Limited as pledgee, with theshareholders’ ledger of the Company.

NOTE 35 - DISCONTINUED OPERATIONS

The Group has no discontinuing operations as of 31 December 2005.

NOTE 36 - OPERATING INCOME

2005 2004Domestic sales 3,243,902 2,893,382Foreign sales 2,188,853 2,314,409

Gross sales 5,432,755 5,207,791

Less: Discounts (329,848) (300,956)

Net sales 5,102,907 4,906,835

NOTE 37 - OPERATING EXPENSES

2005 2004Research and development expenses (48,039) (46,336)Selling and marketing expenses (607,541) (549,236)General administrative expenses (224,903) (241,075)

Operating expenses (880,483) (836,647)

NOTE 38 - OTHER INCOME/EXPENSES AND PROFIT / LOSSES

The other income and expenses for the periods ended 31 December are as follows:

2005 2004Other incomeReversal of provisions 10,255 6,980Indemnities and incentives 6,324 1,779Service income 2,810 1,517Rent income 982 1,201Dividend income 411 1,033Income from fixed asset sales 334 915Excess of negative goodwill in the fair value of identified non-monetary assets acquired - 36,305Amortisation of negative goodwill - 5,834Other 6,116 9,785

Other income and profit 27,232 65,349

Other expensesProvision expenses (10,603) (18,972)Restructuring expenses (2,301) (3,299)Loss from fixed asset sales (1,226) (6,071)Amortisation of goodwill - (8,673)Other (3,259) (8,649)

Other expenses and losses (17,389) (45,664)

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NOTE 39 - FINANCIAL INCOME/EXPENSES

The financial income and expenses for the periods ended 31 December are as follows:

2005 2004Credit finance income 110,747 104,362Foreign exchange gains 83,065 51,923Interest income from bank deposits and loan to banks secured

with government bonds and treasury bills 23,195 53,419Other 2,427 5,139

Financial income 219,434 214,843

Foreign exchange losses (79,252) (47,770)Credit finance charges (67,036) (53,316)Interest on borrowings (44,697) (21,985)Cash discounts expenses (18,448) (18,599)Other (1,268) (5,051)

Financial expenses (210,701) (146,721)

Financial income/(expenses), net 8,733 68,122

NOTE 40 - NET MONETARY POSITION GAIN/LOSSES

On 17 March 2005, the CMB has announced that the application of inflation accounting is no longer required for the companies operating in Turkey effective from 1 January2005 (Note 2).

Consequently, inflation accounting was not applied for the period beginning on or after 1 January 2005, therefore there is no gain/loss on net monetary position for the yearended 2005.

NOTE 41 - TAXES ON INCOME

2005 2004Corporation and income taxes 108,229 107,902Less: prepaid tax (104,420) (128,914)

Taxes payable/(receivable), net 3,809 (21,012)

Deferred tax liabilities, net 11,823 32,842

15,632 11,830

Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the consolidatedfinancial statements, have been calculated on a separate-entity basis.

Corporation tax rate of the fiscal year 2005 is 30%. Corporation tax is payable at a rate of 30% on the total income of the Company after adjusting for certain disallowableexpenses, exempt income (like participation exemption) and allowances (like investment allowance, research and development expenditures deduction). No further tax ispayable unless the profit is distributed.



In accordance with Tax Law No.5024 "Law Related to Changes in Tax Procedure Law, Income Tax Law and Corporate Tax Law" published in the Official Gazette on 30December 2003 to amend the tax base for non-monetary assets and liabilities, effective from 1 January 2004, income and corporate taxpayers will prepare the statutoryfinancial statements by adjusting the non-monetary assets and liabilities for the changes in the general purchasing power of the Turkish lira. Corporate taxpayers are obligedto prepare the opening balance sheets restated for inflation at 31 December 2003. Corporate taxpayers, who are required to follow the inflation accounting principles inaccordance with the aforementioned Communiqué, are obliged only to restate their balance sheets for the periods ended after 1 January 2004. The Company has not appliedrestatement for inflation in its statutory financial statements as of 31 December 2005 in accordance with Tax Procedure Law since the due requirements of restatement forinflation have not been materialised.

Dividends paid to non-resident corporations, which have a place of business in Turkey, or resident corporations are not subject to withholding tax. Otherwise, dividends paidare subject to withholding tax at the rate of 10%. An increase in capital via issuing bonus shares is not considered as a profit distribution and thus does not incurwithholding tax.

Corporations are required to pay advance corporation tax quarterly at the rate of 30% on their corporate income. Advance tax is declared by 10th and payable by the 17th ofthe second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporation tax liability. The balance of the advancetax paid may be refunded or offset against other liabilities to the government.

The exception for participation share and property sales profit which took part in Corporation Tax Law temporary articles 28 and 29 has been ended as of 31 December2004. However, this arrangement has been added to Corporation Tax Law article 8 as permanent exception with Law No. 5281 dating from 1 January 2005. Calculatedinvestment allowance deduction right is transferred to the future periods in case that corporate income is not sufficient to use this right in the current period.

According to this, profit of corporations’ participation shares and property sales which have taken part in assets at least for two years -dependent on corporation capitaladdition commitment in definite conditions- will be exempted from corporation tax. The two year commitment will not be required when debtors of the banks and theirguarantors transfer their property and participation shares as a compensation for debt.

On the other hand, in parallel with the change in Corporation Tax Law, Value Added Tax exception previously regulated in Value Added Tax Law temporary article 10 andapplied in parallel with the exemption in Corporation Tax Law has been amended and the property sale and Value Added Tax exemption application has become permanent.

Furthermore, title deed and cadastral fees exception was applied in transactions that are subject to property sales profit exception in Corporation Tax Law temporary article28 and 29/6 but ended in 31 December 2004. However since there is no regulation on this subject, property sales will be subject to a title deed fee in general.

Capital expenditures, with some exceptions, over TRY 10 are eligible for investment incentive allowance of 40%, which is deductible from taxable income prior tocalculation of the corporate income tax, without the requirement of an investment incentive certificate, and the amount of allowance is not subject to withholding tax.Investment allowances utilised within the scope of investment incentive certificates granted prior to 24 April 2003 are subject to withholding tax at the rate of 19.8%,irrespective of profit distribution.

In accordance with the Tax Law 5228 item 28.9 dated 16 July 2004, 40% of the research and development expenditures on technology and knowledge research made by theCompany itself with effect from 31 July 2004 are exempted from corporate tax. Such exemptions are not subject to withholding taxes.

For the properties that are depreciated more than normal because of forcedly usage, "Extraordinary Economical and Technical Depreciation Ratios" are used. For theproperties that are demanded for extraordinary depreciation, which are used for between 3001 hours and 4800 hours in a year, addition to the ratio of declining balancesmethod is the 25% of the normal depreciation. For the assets used for more than 4800 hours, the addition to the ratio of declining balances method is 30% of the normaldepreciation.

Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable income for up to 5 years. Tax losses cannot be carried back to offsetprofits from previous periods.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within the 15th of the fourth month following theclose of the financial year to which they relate. Tax returns are open for 5 years from the beginning of the year that follows the date of filing, during which time the taxauthorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.

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The taxes on income for the periods ended 31 December, are summarised as follows:

2005 2004Taxes on income

- Current (115,945) (114,446)- Deferred 20,996 (5,467)

Taxes on income (94,949) (119,913)

NOTE 42 - EARNINGS PER SHARE

The earnings per share for each year are as follows:

2005 2004Net profit for the year 312,153 290,207Weighted average number of ordinary

shares with nominal value of TRY 1 each 399,960,000 399,960,000

Earnings per share (TRY) 0.780 0.726

NOT 43 - SUPPLEMENTARY OF CASH FLOW INFORMATION

"Changes in reserves and provisions" and "changes in operating assets and liabilities" shown in consolidated statements of cash flows for the year ended 31 December aredetailed as follows:

2005 2004Changes in reserves and provisionsDeferred taxation (21,019) 5,467Warranty provision (18,735) 28,555Assembly provision and transportation expenses provision (6,411) 14,002Provision for employment termination benefit 4,347 323Provision for redundancy (547) (14,595)Accrual for bonuses and premiums 3,391 (1,851)Accrual for marketing and sales expenses 5,026 1,525

(33,948) 33,426

Changes in operating assets and liabilitiesMarketable securities 7,643 (8,599)Trade receivables and due from related parties (325,072) (235,448)Inventories 107,570 (252,746)Financial assets (38,406) 4,480Other current assets and liabilities 36,275 75,466Other non-current assets and liabilities 9,786 835Trade payables and due to related parties (18,299) 226,492

(220,503) (189,520)



NOTE 44 - DISCLOSURE OF OTHER MATTERS

None.

NOTE 45 - DATE OF AUTHORISATION FOR ISSUE

The consolidated financial statements as at and for the year ended 31 December 2005 have been approved for issue by the Board of Directors on 3 March 2006 and signedby Fatih Kemal Ebiçlio¤lu, Finance and Accounting Assistant General Manager and by Ali Tayyar, Accounting Director.

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INTERNATIONAL SYSTEM STANDARDS

COMPLIANCE CERTIFICATES

ISO 9001:2000 TSE

ISO 14001:2004 SGS

ISO 17025:2000 TÜV-Mikes

PRODUCT STANDARD

COMPLIANCE CERTIFICATES

TSE - Turkey

CE - European Union

TÜV, VDE - Germany

BEAB - United Kingdom

ROSTEST - Russia

UL - USA

SEMKO - Sweden

IRAM - Argentina

KSS - Kuwait

SASO - Saudi Arabia

ISCIR, ICPE - Romania

CCIB - China

KETI - South Korea

PKN, PREDOM - Poland

AFNOR - France

AGA, AS - Australia

ÖVGW - Austria

CSA - Canada

UkrSEPRO - Ukraine

ARÇEL‹K A.fi.

Karaa¤aç Caddesi, No. 2-6, Sütlüce, Beyo¤lu, 34445 ‹stanbul, Turkey

Phone: +90 212 314 34 34 Fax: +90 212 314 34 63

www.arcelikas.com

Annual 2005

Documents

Transcript of Annual 2005