contents Message from the CEO 1 General Assembly Meeting Agenda 3 1. The Company Financial Highlights 1.2 Shareholder and Capital Structure 1.3

Transcription

1

2 contents Message from the CEO 1 General Assembly Meeting Agenda 3 1. The Company Financial Highlights 1.2 Shareholder and Capital Structure 1.3 Board of Directors and Supervisory Commitee 1.4 Organization Chart 1.5 About Board Members 1.6 History 2. Overwiev of IT Sector IT Sector 2.2 Sub Segments of IT Sector 2.3 Growth of the IT Sector 3. Subbsidiaries Datagate Bilgisayar Malzemeleri Tic. A.fi 3.2 Neteks letiflim Ürünleri Da t m A.fi. 3.3 Neotech Teknolojik Ürünler Da t m A.fi. 3.4 nfin Bilgisayar Ticaret A.fi. 4. Operation Structure of Product Supply and Distribution 4.2 Logistics 4.3 Invoicing and Payment Collection 4.4 Technical Services and Customer Relations 4.5 Sales and Marketing 5. Corpotate Governance Principles Compliance Report Board of Directors Suggessions on Dividend Distribution Auditor s Opinion Independent Auditor s Report Consolidated Financial Statements and Notes 78

3 Dear Shareholders, In our Ordinary General Assembly Meeting, before analyzing our company s activities and the financial statements reflecting these activities regarding the year 2007, I would like to touch on briefly the latest developments in the global economy and Turkish economy as well and the expectations of the information technology sector for the year In 2007, in our country it has been widely dealt with and focused on some political and security subjects due to the general elections, presidential elections, constitutional amendments, and terror problems. Fiscal discipline has been applied effectively and despite the fact that mortgage crisis which effects mainly USA and the whole world as well, Turkish economy maintained its stability and continued its progress. Although the inflation figures were slightly above the expectations in 2007, and realized as 8.4%, it is expected that they will fall again in 2008; employment and unemployment continued to be priority problems, and in 2007 the unemployment rate realized as 9.9%, growth rate 4.5%, foreign trade deficit US$ 62.8 bn, and current account deficit as US$ 38 bn. It is a positive development that a major part of the current account deficit is covered with direct investment inflow. It is estimated that foreign capital inflow amounting approximately to US$ 20 bn was made to our country in Nevres Erol B LEC K Chairman It is seen that the effects of the USA-originated mortgage crisis will continue in 2008, as well. As a natural consequence of globalization, Turkish economy will be affected from the fluctuations in the international markets. Undoubtedly, due to the facts that the financial structure of banking sector strengthened following the 2001 economic crisis, and that the credit portfolios of our banks do not include considerable amounts, we believe that our country will be able to cope with these crises smoothly. In the case that fiscal discipline is applied effectively in 2008 as well, we estimate the growth rate as 4.5%, CPI as 9 to 9.5%, and the end-of-the-year interest rate of the Central Bank as approximately 14.5%. As of 2007, our country s population is 70.5 million, of which 20 million are students, and 50% is younger than the age of 28. Young population is one of the most important dynamics that ensure the continuation of the interest in the IT. The IT market has grown 16% and reached 4.8 billion US$ in According to the 2007 report of IDC, it is estimated that the IT sector will grow 16.5% in the next 3 years, reaching above 7.5 billion US$ in We can categorise the Information Technology sector in three groups, namely hardware, software and service. The group of hardware products, which compose 75% of the sector, is the dominant group in the IT sector. In particular, due to the increasing interest in the mobile products in the recent years, totally 2.6 million computers including notebooks were sold. The rate of computer ownership in Turkey is approximately 15%, whereas the same rate is approx. 25% in the developing countries. In order to reach the level of developing countries in the rate of computer ownership, it is required to perform sales of at least 7,000,000 additional computers. Considering these figures, we anticipate that no change will occur in the rate of hardware products in the IT sector in the coming years. 1

4 In 2007, software and service grew 11% and 12%, accounting for 10% and 15% of the market, respectively. In 2007, our company increased its turnover by 24,73%, reaching a sales revenue of 786 million. Considering the fact that the IT sector has grown 16% in 2007, our company has grown 8.73% more than the sector. In 2006, our operating expenses were 19.4 million US$, and the ratio of such amount to the sales was 3.08%. In 2007, our operating expenses were 21.5 million US$, whereas the same ratio decreased to 2.73%. Our net profit after tax increased by 23.19% comparing to the last year and realized as 10.9 million US$. Our active size increased 38.84% comparing to 2006, reaching 300 million US$. Our company has ranked first with 626 million US$ among the companies selling only computers in the 2006 Top 500 IT Companies Ranking performed by Interpro, which is the only company ranking IT companies in Turkey. Further, our company ranked seven, one step higher than 2006, in the Top 500 Information Technology and Communication companies including GSM operators and GSM equipment distributors. In the latter ranking, Türk Telekom ranked first, and the next 5 companies were GSM operators and GSM equipment distributors. In addition, our company ranked first as the biggest company of Turkey in the market categories with the incomes from the sales of Portable Computer, Data Back-up and Storage, Server, Printing Systems, Data Communication Equipment, OEM, Operating System, Office Software and e-trade. We have been awarded 8 prizes from the suppliers and producers for which our company acts as a distributor. Philips, Asus, Apple, Trend Mirco, Nokia and LG products have been included in our product range in Like the previous years, in 2008 we are aiming at realizing our sales income above the growth of sector and at doing our business with more profit and less cost. We will show a better performance in 2008 to be a global company in our region in light of our past experience and accumulated knowledge. I would like to extend my thanks to our business partners, suppliers, employees and your side, dear shareholders, who all endeavoured a lot in the success of Respectfully Yours, Erol B LEC K Chairman 2

5 2007 General Assembly Meeting Agenda 1. Opening and Election of General Administration Board, 2. Authorizing General Administration Board for signing General Assembly Meeting Minutes, 3. Review of Board of Director s Report, Supervisory Committee s Report and Independent Auditor s Report prepared by Güreli Yeminli Mali Müflavirlik A.fi regarding the activities and related accounts as of 2007, 4. Review and approval of Balance Sheet and Income Statement as of 2007, 5. Discharge from the liabily of the Board of Directors and Supervisory Committee in respect of the duties performed during the year 2007, 6. Approval of the appointment of Independent Audit Company, 7. Review and approval of Board of Directors suggessions on dividend distribution for the year 2007 and determination of the dividend distribution date, 8. Determination of the compensation of the Board of Directors for the year 2008, 9. Determination of the compensation and the number of auditors and appointment of Supervisory Committee, 10. Requests and closing. Date of Meeting : Hour : 10:00 Place : Ayaza a Mah. Cendere Yolu No :9/1 fiiflli / STANBUL 3

6

7 5 ANNUAL REPORT 2007

8 1. Company 1.1 Highlights ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., which was founded in 1989 to operate in the IT sector, achieved a consolidated sales figure of over 1 billion YTL in 2007 and became a group of companies distributing about 200 worldwide brands, employing 323 people and cooperating with over 7000 business partners, holding the leadership position of the Turkish IT sector for a long time. In the Turkey Top 500 IT Companies Ranking performed every year by Interpro Medya A.fi., our company ranked seven, one step higher than the previous year, in the general ranking based on turnover achieved in 2006 among the companies including telephone operators and mobile phone sellers. On the other hand, it ranked first, like the previous years, in the category of companies selling only computers. Further, it ranked first in nine IT categories. Indeks acting as a holding company has 6 affiliates and subsidiaries, each of which operates in different fields of technology products. The following companies are included in the consolidated financial statements of ndeks. The product groups of such companies are shown in the following table: Product Groups by Company INDEKS PC Notebook Printer Server Peripherals Software DATAGATE CPU Hard disk Mother board VGA Card Monitors Optical Products Server Products Memory Products Notebook Laser Printers Backup Hardware Security Products NETEKS Corporate Network Systems Network Components Structural Cable Products Corporate Telephone Systems Network Security Solutions ADSL Communication Solutiions NEOTECH Consumer Electronics Communication Devices Alternative Electronics Products TEKLOS Logistics and Transportation Distributorships by main product groups are as follows: PC OEM (Computer Parts) Printers & Peripherals Network Products Software Products Home Electronics Storage & Middle-Size Systems Apple Alps APC 3Com IBM Airties HP Asus Intel Canon Alied Tl Lotus Apple IBM FSC Kingston Epson Checkp. Microsoft Hitachi Lacie HP Lite-on HP Cisco Novell LG Seagate Lenovo NEC IBM HCS Symantec Nokia WD LG Philips OKI HP Tivoli Panasonic MSI Seagate Panasonic Newbrid Samsung Sony Vaio Viewsonic Xerox Northell Sony Toshiba WD Trend M. Viewsonic 6

9 a) Distribution of Sales: Approximately 69% of sales income are provided from PC and OEM sales. Sales distribution of the company is shown below: Distribution of Sales Consumer Electronics 6% Software Products 5% Storage & Middle-Size Systems 3% PC Products 42% Network Components 8% Peripherals 9% OEM Computer Parts 27% b) Regional Distribution of Sales: Just like the previous years most of the sales revenues of the company are acquired by Marmara Region. The ratio of Central Anatolia Region has increased to 18% where it was 13% in the last year. Together with e-goverment Project, Goverment purchases contain the majority of sales of Central Anatolia Region. Regional Distribution of Sales Mediterannean Region 4% Aegean Region 9% Blacksea Region 3% Eastern Anatolia Region 2% South - Eastern Anatolia Region 2% Central Anatolia Region 18% Marmara Region 62% 7

10 c) Major Vendors: Since Indeks is able to reach large number of customers as having a wide product range, the icrease of its sales has been realized over the market average. HP IBM Cisco Systems Intel Toshiba Microsoft Asus Acer Apple Fujitsu - Siemens LG Sony Vaio Lenovo Philips MSI Kingston APC Canon Epson Nokia Sony OKI Kingmax 3 Com HCS Hes Cabling System Nortel Networks Symantec Tipping Point Airties Wireless Networks Western Digital NEC Server iseries Server pseries Seagate Checkpoint Siemens Imation Trend Micro Liteon Novell Targus Veritech Veritas Linksys Corning Wacom D-Link Viewsonic Lexmark Panasonic Tellabs AOC d) Changes in the Share Price throughout the Year: INDEKS in ISE(Istanbul Stock Exchange Market): Having held an IPO in May 2004, our company s shares are traded in the Istanbul Stock Exchange (ISE) national market under the code INDES. The ISE -100 index opened at 39,117 in 2007, climbed up to in October. The lowest level of the year was in January The same index closed the year at The ISE-100 index gained 42% during the year. The YTL/US$ exchange rate opened at 1.41 at the beginning of the year, and with a regular downward trend during the year, declined to 1.25 in July, which was the month of parliamentary elections. With the presidential election in August, the YTL/US$ exchange rate climbed to 1.39 and returned to the declining trend and closed the year at US$ depreciated by 21% within the year. The year-end value of 1 share was YTL 1.89, whereas its value was 1.98 at the beginning of the year (value after division). Throughout the year, the value of 1 share climbed up to YTL The value of each share is 2.02 as of 11 April 2008 when the report is written. Our company s value is YTL with a share value of 1.89, which is the closing value on the last trading day of the year. 120,00 110,00 100, ,00 80,00 2, ,93 1,85 1,77 1,69 1,61 1,53 1,46 1, , ,00 1/1000 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 8

11 e) Awards of the Year 2007: Al nan Ödül Tarih Aç klama IBM Turkey At the Solution Partners 2006 meeting organised by IBM-Turkey, our company was recognised as the best performing distributor. Our company won this award among three distributors, being the only award in the distributorship category. This award was given to our company due to its success in terms of increase in sales in Hewlett Packart Turkey Hewlett Packard Turkey distributed awards in many categories at the business partners conference held at Istanbul Swiss Hotel on 2 February Our company won the LSP (Best Logistics Services Providing Distributor), being the most important award given in the distributors category. This award, given only to our company among 3 distributors appointed by HP as LSPs, is based on the criteria of our turnover figures in HP products, number of dealers we supply HP products, superior logistics services we provide for HP products and our success in sales of HP branded products throughout Turkey in Nortel Networks At the Business Partners 2006 Conference organised by Nortel-Networks, our subsidiary Neteks letiflim Ürünleri Da t m A.fi. is awarded the Distributor of the Year Award. This award, which is the only one in the distributors category, is granted to our subsidiary, among two distributors, due to its success in turnover figures, in Hewlett Packart At the 2006 HP Procurve Networking Business Partners Conference organised by HP Turkey, our subsidiary Neteks letiflim Ürünleri Da t m A.fi. is awarded "2006 Most Successful CDP Award in the distributorship category due to the success of our subsidiary in the fast and efficient development of the business partners channel in Lenovo Turkey At the 2006 Business Partners Conference organised by LENOVO Turkey, our company is awarded The Best Performing Distributor Award, among three distributors, in the distributors category due to the success of our company in its 2006 turnover figures. Interpro Medya A.fi In the Turkey Top 500 IT Companies Ranking performed every year by Interpro Medya A.fi., our company ranked seven, one step higher than the previous year, in the general category based on turnover achieved in 2006 among the companies including telephone operators and mobile phone sellers. On the other hand, it ranked first, just like the previous years, in the category of the companies selling only computers, with a sales revenue of (Thousand YTL). Further, it ranked first in nine IT categories. The categories in which our company ranked first are listed below: -Notebook- wholesaler, distributor, data back-up and storing hardware, Server, -Printing systems wholesaler, distributor, -Data communication hardware, -OEM products, - Operating System, -Office software, wholesaler, distributor, -E- Commece. 9

12 Prize Date Description Microsoft Turkey Microsoft Turkey granted awards at its Business Partners Conference held on 14 August Our company is awarded the distributor of the year award in the categories of COEM Licence and Finish Goods licence for the period between July 2006 and June 2007, which was the last fiscal year of Microsoft. Microsoft - EOC Our company is given the Excellence in Operations Award at the business partners conference organised by the EOC (European Operations Center) on 4-6 September 2007 on the basis of the criteria of the accurate disclosure in weekly reports given to the EOC for Microsoft products, punctual delivery of reports and timely payments. This is the first time that a Turkish distributor was given this award in all European and Middle East region f) Distributorships Undertaken in 2007: Firma Tarih Aç klama Philips Our company concluded a contract with Türk Philips Ticaret A.fi., a subsidiary of Royal Phillips Electronic, for the distribution of Philipps brand monitors and PC peripherals (optic storage, external hard disk, speakers, web cam) in Turkey. AsusTek Our company made a contract with AsusTek Computer Inc, Taiwan, one of the biggest notebook producers, for the distribution of Asus brand notebooks in Turkey. Apple IMC Our subsidiary Neotech Teknolojik Ürünler Da t m A.fi. made a cooperation agreement with Bilkom Biliflim Hizmetleri A.fi. (Apple IMC Turkey), an agent of Koç Bilgi Group since 2000, for the logistic distribution of Apple brand products in Turkey. Trend Micro Neteks letiflim Da t m Ürünleri A.fi., a 70% subsidiary of our company operating in network, communication, telecommunication and security solutions, made a contract for exclusive distributorship in Turkey with Trend Micro producing software against computer viruses and for internet content security. Nokia Our company made a distributorship contract for Turkey with Nokia Komünikasyon A.fi. ("Nokia A.fi."), the authorised Turkish importer of Nokia Corporation, one of the biggest mobile phone producers of the world for E-series devices and their software products. LG Electronics Our Company started on the negotiations with LG Electronics Inc ("LG Electronics"), one of the biggest producers of IT electronics in the world, for the distributorship of laptops in Turkey, and made the contract on

13 g) Data Regarding Financial Structure : LIQUITY RATIOS Current Ratio 1,30 1,35 Liquidty Ratio 0,88 0,92 OPERATING RATIOS (*) Receivables Turnover Payables Turnover Inventory Turover (*)The figuress in quarterly financial accounts have been taken into account in the calculation of the averages PROFITABILITY RATIOS Gross Profit Margin % 5,19 % 6,05 Operating Profit Margin % 2,46 % 2,97 Net Profit Margin % 1,24 % 1,37 Profit Before Tax Margin % 1,40 % 1,60 Return on Equity % 14,67 % 16,77 FINANCIAL RATIOS Shareholders Equity / Total Shareholders Equity and Liabilities % 25 % 24 Short Term Liabilities / Total Shareholders Equity and Liabilities % 70 % 68 Long Term Liabilities / Total Shareholders Equity and Liabilities % 3 % 6 Minority Shareholders Equity / Total Shareholders Equity and Liabilities % 2 % 2 Bank Loans / Total Liabilities % 15 % 22 Interest Coverage Ratio % 210 % Shareholder and Capital Sturucture The shareholder structure of the company as of is as follows: Shareholder Name Country Share Stake Number of Shares Share Amounts Nevres Erol Bilecik Turkey %39, Ayfle nci Bilecik Turkey % 02, Pouliadis ana Associates S.A.(*) Greece %35, Public Offering Turkey %19, Other Turkey - Greece % 02, TOTAL (*) Suffrage of the shares of Pouliadis and Associates S.A. belongs to 5 Greek Banks. 11

14 Capital Increase Throughout the Year: The maximum registered capital of our company is YTL 75,000,000 while the issued capital was YTL 55,000,000 as of Covering the all maximum registered capital, i.e. YTL , from the profit of 2006, an application is made to Capital Markets Board (CBM) of Turkey for issuing shares with nominal value of YTL for the capital increase YTL to YTL and the application was approved with the resolution of CBM with no. 25/699 of The capital increase was registered on and announced on the Turkish Registry Gazette with no of 16 July Our company s capital of YTL is composed of Group A registered shares in value of YTL 318,18 and Group B bearer shares YTL ,82. Group A shareholders are authorised to determine half plus one of the board members and to receive 5% of the remaining profit after the first issue reserve funds and first dividend. 1.3 Board of Directors and Supervisory Committee Board of Directors Board of Directors have been appointed for three years in the General Assembly Meeting dated and their functions and duties have been determined in accordance with the provisions of the Company s Articles of Association and Turkish Commercial Code. Aforesaid General Assembly Meeting Minutes has been published in Turkish Registry Gazette No. 6571, dated 6 June Name Role Term of Office Nevres Erol Bilecik Chairman 3 years Salih Bafl Vice Chairman 3 years Atilla Kayal o lu Board Member 3 years Ayfle nci Bilecik Board Member 3 years Halil Duman Board Member 3 years Supervisory Committee Name Role Term of Office Veli Tan Kirtifl Supervisor 1 year Haluk fien Supervisor 1 year 12

15 1.4 Organization Chart Erol B LEC K Chairman Tayfun Y T Technology Development Manager Naim SARAÇ Internal Audit Manager Atilla KAYALIO LU General Manager Harun TAfiBAfi Asistant General Manager (Marketing) Erol ÇET N Asistant General Manager (Marketing) Halil DUMAN Asistant General Manager (CFO) Product Management Product Management Halim ÇA LAYAN Accounting Manager Birgül ÖZTÜRK Finance Manager Erkan BERBER IT Manager Korkut YILDIRIM e-sales & Marketing Manager Makbule YURDAER Business Productivity & Quality Control Manager Cenk KANTAR IBM eserver & Software Manager Mahmut ÖLÇER Corporate Sales Manager Çetin EK NC Customer Services& Logistics Manager Özcan AKDEN Z Ankara Regional Manager Mensure TOK Retail Sales Manager Arlet LAÇ NO LU Import&Export Manager Osman fiah N zmir Regional Manager Selahattin GÜL Administrative Manager Cihangir AKSAKAL Accounts Receivables Manager Nurcan KARADEN Z Human Resources Specialist 13

16 1.5 Board of Directors There are five members of the Board and their backgrounds are mentioned below: Nevres Erol Bilecik, Chairman - CEO: Erol Bilecik was born in 1962 and graduated from Istanbul Technical University, Department of Computer Engineering. He has established ndeks A.fi. in Besides ndeks A.fi. he is also the Chairman of the companies Despec Bilgisayar Pazarlama ve Ticaret A.fi., Datagate Bilgisayar Ticaret A.fi., Neteks letiflim ürünleri A.fi., Neotech Teknolojik Ürünler Da t m A.fi., Desbil Teknolojik Ürünler Ticaret Anonim fiirketi, nbil Teknolojik Ürünler Ticaret A.fi., nko letiflim ve Dijital Hizmetler A.fi. However, between the years 2002 and 2005,he has presided TUBISAD (Türkiye IT Industrialists and Businessmen Society) which was established in 1974 and one of the oldest civilian community societies in ITsector. He is married and has two children and he knows English. Salih Bafl, Vice Chairman: Salih Bafl was born in 1965 and graduated from Anadolu University, Department of Business Administration. He has been working for ndeks Group since 1990 and in 2003 he was appointed as the General Manager and Vice Chairman of Datagate Bilgisayar Malzemeleri Ticaret A.fi. However he is also the Vice Chairman of the companies ndeks Bilgisayar Sistemleri Mühendislik San. A.fi., Despec Bilgisayar Pazarlama ve Ticaret A.fi., Desbil Teknolojik Ürünler Ticaret Anonim fiirketi, nbil Teknolojik Ürünler Ticaret A.fi., nfin Bilgisayar Ticaret A.fi and Teklos Teknoloji Lojistik Sis.A.fi.; and he is the Board Member of the companies nko letiflim ve Dijital Hizmetler A.fi., Neteks letiflim ürünleri A.fi., and Neotech Teknolojik Ürünler Da t m A.fi. He is married and has one child and knows English. Atilla Kayal o lu, Member, General Manager: Atilla Kayal o lu was born in 1952 and graduated from Bo aziçi University, Department of Mechanical Engineering. He received a masters degree from Syracuse University, Industrial Engineering Department. He carried out several duties in IBM between the years In 1999 when he was the Global Services Manager he left IBM and joined Indeks. Besides he is the Member of the Board and General Manager of ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., he is also the Vice Chairman of Neteks letiflim Ürünleri Da t m A.fi. and the Board Members of Datagate Bilgisayar Malzemeleri Ticaret Afi., nko letiflim ve Dijital Hiz. San. Tic. Afi., and nfin Bilgisayar Ticaret A.fi He is married and has two children and knows English. Ayfle nci Bilecik, Member, Computer Engineer: Ayfle nci Bilecik was born in 1964 and graduated from Istanbul Technical University Computer Engineering Division. She established Indeks A.S. in She worked about software engineering long time in IT sector. She s married and has two children and knows English. Halil Duman, Member - CFO: Halil Duman, was born in 1965 and graduated from Mamara University, Department of Business Administration. He carried out several duties in Yucelen Insaat A.S between 1987 and He joined Indeks in 2000 and he is the Member of Board of ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi, Datagate Bilgisayar Malzemeleri Ticaret Afi.,Neteks letiflim Ürünleri Da t m Afi., Teklos Teknoloji Lojistik Hizmetleri Afi., Neotech Teknolojik Ürünler Da t m Afi., nko letiflim ve Dijital Hiz. San. Tic. Afi., Desbil Teknolojik Ürünler Ticaret A.fi. and Alk m Bilgisayar Afi. 14

17 The names and titles of other executives are as follows: Board Member - General Manager Atilla KAYALIO LU akayalioglu@index.com.tr Board Member - Asistant General Manager Halil DUMAN hduman@index.com.tr Asistant General Manager (Sales Marketing) Harun TAfiBAfi htasbas@index.com.tr Asistant General Manager (Sales Marketing) Erol ÇET N ecetin@index.com.tr Internal Audit Manager Naim SARAÇ nsarac@index.com.tr Technology Development Manager Tayfun Y T tyigit@index.com.tr Finance Manager Birgül ÖZTÜRK bozturk@index.com.tr Accounting Manager Halim ÇA LAYAN hcaglayan@index.com.tr Import Manager Arlet LAÇ NO LU alacinoglu@index.com.tr Costumers Services and Logistics Manager Çetin EK NC cekinci@index.com.tr IT Manager Erkan BERBER eberber@index.com.tr Administrative Manager Selahattin GÜL sgul@index.com.tr Ankara Region Manager Özcan AKDEN Z oakdeniz@index.com.tr zmir Region Manager Osman fiah N osahin@index.com.tr Business Productivy and Quality Control Manager Makbule YURDAER myurdaer@index.com.tr Marketing and Communications Manager Özen BOZÇA A BEZ RC obezirci@index.com.tr Corporate Channel Sales Manager Mahmut ÖLÇER molcer@index.com.tr Reait Channel Sales Manager Mensure TOK mtok@index.com.tr e-sales and Marketing Manager Korkut YILDIRIM kyildirim@index.com.tr IBM e-server Software Manager Cenk KANTAR ckantar@index.com.tr Microsoft Sales Manager Sedat AZ ZO LU sazizoglu@index.com.tr 15

18 1.6 Historical Background 2007 US $ 788 Million Turnover 2006 US $ 630 Million Turnover 2005 US $ 563 Million Turnover 2004 US $ 431 Million Turnover Public Offering US $ 163 Million Turnover 1999 US $ 105 Million Turnover IBM POS US $ 51 Million Turnover Business Partner 1996 PC Distributor AS Solution Partner US $ 5 Million Turnover Consumables 1992 NIXDORF

19 Indeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi. was established to operate in the computer industry in The company has been turned into a joint stock company in April The company made a partnership with a Greece based company, namely Pouliadis Group in August The company is headquartered in Istanbul and deals with IT business, has operations in buying and selling computers and computer hardwares, data transfer equipments, as well as providing technical and software support to the customers. In 1989, the company made an agreement with 3M, for the distribution of 3M magnetic medium products. The company increased its market share in 3M magnetic products from 1.2% to 55% within a year. In the same year, a turnover of USD 2.5 million was achieved. In 1992, Indeks established Indeks Ankara Branch which provided the company having a branch experience and the company started the activities in Ic Anadolu region permanently. That year the turnover reached USD 4.3 million. In 1993, the company became the 20th biggest company in Turkish IT sector by having a turnover of USD 5,000,000. In 1994, the company has acquired the Turkey distributorship of APC for UPS products. It became the 19th biggest IT Company and realised a turnover of USD 9.1 million. In April 1995, It has established the Izmir Branch and in May it signed a Solution Partnership agreement with IBM. Although the company has been the distributor of IBM for five months, it was rewarded with IBM PC Solution Partner Achievement Award. The company also carried off The Most Active Distributor Company award, one of the most important awards given by Interpro, for the successful channel activities of the company. The turnover was realized as USD 15.9 million. In 1996, IBM changed its selling model to the distributor model for PC sales organization. Thus, Indeks became the first company in Turkey to conclude a distributorship agreement with IBM. At the end of that year the company achieved to be the 9th biggest IT company in Turkey with a turnover of USD. In 1997, the Company became the 8th biggest IT company. It started to act in distribution of software products business by concluding distributorship agreements for the Lotus&IBM Software Products. Later on, the agreement for the distribution of HP PC and peripherals was concluded with HP A.fi. The Company made a new agreement with IBM within the same year for the distribution of AS/400 product line,one of the highest value added products in Turkish IT market. In 1998, Indeks received the The Most Active Distributor Company award for the third time as the first IT company in Turkey that achieved it. Through the joint investment made by Indeks and the company Van Dorp Despec Group, which is the number one in consumables business in Europe, consumable products department of Indeks A.S. is turned to a company named DESPEC Turkey. Indeks achieved to be the 8th biggest computer company in the same year. The turnover realised as 75 million USD. In 1999, Indeks A.S. made distributorship agreements for the major products of Xerox, Microsoft, IBM POS, Escort, Cisco and started to operate its own Logistics Centre in June of the same year. It was one of the most important investments made for the IT channel by Indeks with a closed area of 2500m2, equipped with a highly functional technology. Indeks, achieving a turnover amount of US$ was among the 6 biggest IT companies in Turkey and the biggest distributor company of Turkish IT industry regarding the qualified product range. In April 12, 2000, the company changed its type from Limited into a Joint Stock Company. In August of the same year, the company Pouliadis and Associate Societe Anonyme Industrial and Commercial of High technology Systems S.A. ( Pouliadis ) purchased 50% of shares of Indeks Bilgisayar. In 2000, The Company widened its product range in peripherals by acquiring the distributorship of the Epson products and in the same year, in November the company signed an agreement with Compaq. Through the Compaq agreement, the company achieved to be the first company who distributes IBM, HP and Compaq PC products at the same time. A turnover of USD 163 million was realised at the end of In 2001, the exclusive distributorship agreement with Novel was made. After that, the distributorship of the Sony and Microsoft OEM products were also concluded. Despite the economic crisis in 2001 the company purchased the 50.5% of DATAGATE, who is one of the leading companies in the computer parts/oem business, and thus made a crucial and valuable investment. The company continued to its investments and acquired 70% of NETEKS, an experienced distributor company on network products, and despite the economic crisis, the company sustained its growth. In 2002, OKI printers and Toshiba notebook and server products joined the Indeks product line. All of the group companies moved into new headquarters of Indeks with a closed area of m2 at Cendere Yolu No:23 Ka thane. The turnover for 2002 was realised as USD 188 million. 17

20 In 2003, the product range portfolio was extended with FUJITSU SIEMENS, NEC, and BENQ brands. The shares in DATAGATE were raised to 85%. The consolidated sales figures as of 2003 increased by 17% comparing to 2002 and realized as USD 277 million. The name of nes A.fi, one of the Indeks Group companies, was changed as nko A.fi. and the company s articles of association were amended to allow it to operate in the Telephone Operator field. Company were offered to public in the ratio of 15.34%, in by restricting the preferential rights. The distributorship agreements were made with KINGMAX for the memory products and with ASUS for the bare bone products. In the same year, Indeks Bilgisayar A.fi. achieved to get the ISO 9001:2000 certificate. In addition to these improvements, nko letiflim A.fi., which is a 70% affiliate of Indeks, has acquired a B type Telecom Operator Licence for 15 years at In 2005, according to the decision of Board of Directors dated , Indeks A.S. established A.S. which will operate in consumer electronics market. Indeks owns 80% of Neotech A.S. In March 2005, company accepts registered capital system and its registered capital ceiling is determined as YTL 75,000,000. In May 2005, Company increased its capital from YTL 17,600,000 to YTL 45,000,000. In September 2005 a distributorship agreement was signed with TPV Technology Limited which has a %19,5 market share in worldwide monitor production market with annual sales amount of USD 4 billion in 2004 for the distribution of AOC branded LCD&CRT Monitors, Plasma Monitors and LCD TV products. In May 2006, our company s capital has been increased from YTL 45,000,000 to YTL 55,000,000. YTL 8,718,703 part of YTL 10,000,000 capital increase has been compensated by the year end profit while the rest amount, YTL 1,281,297, was supplied by the reserve funds. Indeks has purchased Karadeniz Orme AS to be used as logistics headquarters, which is founded on 39,761 square meters of land and having 18,969 square meters as indoor area, and consequently it had executed one of the most important and great investments of its industry. The trade name of Karadeniz Orme AS has been changed as Teklos Teknoloji Lojistik Hizmetler AS and the company s field of activity has been amended to be convenient for providing logistics services. The company headquarters moved to its new location on Also, in February 2006, the second biggest company of the group, Datagate Bilgisayar Malzemeleri Ticaret AS has been opened to public. 30,30% of the company has been offered to public and the company s shares has been started to the transactions for trading on IMKB from Thus, two companies of the group have been opened to public and have been started for trading on IMKB. The affiliation ratio of 85% before public offer has been reduced down to 59,2% afterwards. The EVOS (Effective Efficient Operational Result-Oriented) ERP system developed by the company has been used by the Indeks Group companies effective from EVOS project was created within a period of 9 months by Indeks A.S. Software Engineers Group. At the system having 250 users, all procedures of group companies including storage automations are kept by 389 forms and codes of 120,000 lines. Within the year 2006, our company has concluded distributorship agreements with Canon (for printers, fax machines and scanners), Western Digital (for hard disk drives), Panasonic (for consumer electronics products), View Sonic (for monitors) and Sony Vaio (for notebooks). In July 2007, capital of the company has been increased to YTL 56,000,000 from YTL covered by the 2006 profit figures. Comparing with the last year s results, Indeks became the 7th by moving one step up in the top 500 companies ranking in terms of the sales figures among the Turkish ICT companies organized by Interpro Medya A.fi. every year, traditionally. Just like the previous yeras Indeks was the leader company in the ranking results as far as the IT companies concerned. Besides the company got the first prize in 9 different IT categories. The company concluded contracts with Philips for the monitors; Asus for PC peripherals; Apple IMC for Apple products; Trend Micro for antivirus and internet security software products; Nokia for E-line products and LG Electronics for the notebook products within the year In , our company and our subsdiary Datagate Bilgisayar A.fi, sold 50% shares of their affiliate Neteks letiflim Ürünleri Da t m A.fi to Westcon Group Eurepean Operation Limited, 26% of the 50% shares sold by ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi, and 24% of it sold by Datagate Bilgisayar Malzemeleri Ticaret A.fi. as well. The final shareholder sturucture realized as 50% ndeks Bilgisayar A.fi. and 50% Westcon Group. 18

21 19 ANNUAL REPORT 2007

22

23 21 ANNUAL REPORT 2007

24 2. IT Sector 2.1 IT Sector Turkish IT Sector The usage of computers in Turkey started in the end of the 1980 s. Although there was a very rapid development in the sector between the years , usage of computers were mostly limited to governmental units, big offices and universities. In the second half of the 1990 s, the increase in the usage of computers made the IT sector one of the most rapidly growing sectors in Turkey. According to the data of International Data Corporation ( IDC ), the Turkey Information Technologies ( IT ) sector exhibited a 20% yearly average growth ( CAGD ) between the years 1997 and Turkey IT sector has reached its greatest business volume thus far with 2.3 billion US$ in the year 2000, whereas that figure reduced to 1.2 billion US$ with 49% recession in 2001 because of the economical crisis that was encountered in the end of 2000 and the postponement of the demand of IT investments by public and private sectors. The figures achieved in 2000 were again caught only in 2004, with a business volume of 2.4 million US$. In other words, it took 4 years to eliminate the effects of the crises. However, it should also be considered that one of the causes of the shrinkage of the business volume was the continuously price reduction of products, which is the general structure of the IT Industry. As a consequence of the realization of the postponed IT investments especially in the private sector in parallel with the improvement in the macroeconomic indicators after 2001, the IT sector continued its growth with a compound annual growth rate ( CAGR ) of 30% between 2001 and 2005, which is higher than the growth rates in the period before the crisis. Particularly the increasing usage of internet in the recent years has made a great contribution to this development. Turkish IT Sector has grown 42% with the contribution of the increasing interest and the continuing investments in the market for notebooks in 2005, and the market has reached the value of 3,41 billion US$. Despite the pressure on the IT consumption caused by the rapid devaluation of YTL in May and June of 2006 and the ongoing volatility for the rest of the year, the sector has increased by 21% to 4.1 billion US$. The Turkish IT sector is estimated to have grown about 16% and reached 4.8 billion US$ in Turkish IT Sector Business Volume (Million US$) (mn USD) CAGR(05-10T): %17 CAGR(01-05): %31 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Growth 0-60% T 2008T 2009T 2010T 2011T IT Sector Business Volume % Growth 22

25 According to the 2007 Turkey IT Expenditures Survey conducted by IDC, the Turkish IT market is expected to have a 15% compound annual growth (CAGR) in the 5-year period between 2006 and 2011, reaching 8.4 billion US$ in IT investment demands deferred in the crisis period have been started to be realized from 2004 due to the increasing stable outlook of the economy. These investment expenditures have been one of the most powerful dynamics of the market in the last 3 years. Besides such ongoing investments, it is expected that rapid growth trend in the sector will continue in future years through the driving forces of the new investments that increased after merger and acquisition operations in all sectors, beginning in the finance and telecommunication sectors and spread to other sectors from 2005 on, the replacement investments, the expectation of IT investments to be made by the government as part of the e-government model and finally, the users who follow up the rapidly developing technology. Turkey takes the first place among developing countries by showing significant progress both in economical conditions and on the way of globalization. In addition to highly qualified and cost effective human resources, majority of the young population is contributing to the attractiveness of our country. It is estimated that, with the influence of all the foregoing factors, IT sector will reach a market volume of US$ 5.8 billion by growing around 21% by the end of According to the Gartner Dataquest s 2005 survey on PC density at country- and regional levels, Turkey is far below the average of the world. The rate of PC ownership is 4.1% in Turkey, 78.5% in the USA, 40.1% in the Western Europe, 10.4% in Eastern Europe, 2.2% in the Middle East and Africa and 3.8 in Asia and Pacific countries. As it is seen, although the rate of PC ownership in Turkey is better than the Middle East, Africa, Asia and Pacific countries, it is far below the average of Europe and the world. Total Office Home No. of PCs (M) Population (M) PC per Persons No. Of Employees (M) No. of PCs (M) PC per Employees PC No. of PCs (M) No. Of People (M) PC per Persons World in General U.S.A , , , Brazil Mexico France Germany taly Portugal Spain UK Western Europe Czech Republic Hungary Poland Russia Eastern Europe Israel South Africa Turkey Middle East and Africa , Asia / Pacific , , Source : Gartner Dataquest, March 2005, SPO 9. Development Plan IT Subcommittee Report

26 Top 10 countries having the highest and the lowest PC penetration are as follows; No. Total No. Of PCs per Persons Total No. Of PCs per Employees Total No. Of PCs per Home Users Countries/Markets Having The Highest Penetration Yüksek - Penetrasyona Sahip Ülkeler/Pazarlar 1 U.S.A 785 U.S.A. 901 U.S.A Switzerland 719 Switzerland 860 Singapore Norway 680 Israel 852 South Korea Canada 655 Canada 764 Switzerland Denmark 645 Sweden 763 Taiwan Sweden 606 Norway 744 Norway Holland 574 Denmark 730 Canada Australia 568 Singapore 715 Australia Singapore 535 Holland 685 UK UK 535 Australia 660 Hong Kong 629 Countries Having The Lowest Penetration 42 China 44 Thailand 68 China Colombia 43 Colombia 63 Other Eastern Europe Turkey 41 Peru 61 Russia Peru 37 China 42 Turkey Philippines 23 Philippines 42 Vietnam 31 Source : Gartner Dataquest, March 2005, SPO 9. Development Plan IT Subcommittee Report 2007 In both of the tables, it is seen that PC penetration ratio is significantly below the average of delveloped countries and the average of the world. The statistics regarding the Turkish IT penetration ratios between the years is as follows: 80,0 IT Penetration ( ) 70,0 60,0 50,0 40,0 30,0 20,0 10,0 0,0 Home&Office Telephones Subscriber Density (%) Mobile Telephones Subscriber Density (%) Broadband Subscriber Density (%) Internet User Density (%) ,0 26,9 26,7 26,3 25,8 33,3 39,7 48,8 60,5 72,2 0,05 0,08 0,64 2,13 3,86 5,7 8,5 13,3 13,9 18 Source: SPO 2007 e TransformationTurkey Project 24

27 As of 2006, home&office phone subscribers density is 25.8%, cellular phone subscribers density 72.2%, wideband subscribers density 3.86% and internet users density 18%. The rate of Internet users increased by 216% between 2002 and In the same period, the home&office phone subscribers density decreased by 14% and cellular phone ownership increased by We estimate that the rate of computer ownership is 14-15% in The 2007 Households ICT Usage Survey conducted by the Turkish Statistical Institute (TÜ K) gives the rates of computer and internet usage by gender according to rural vs. urban access as follows: PC and Internet Usage Ratios (%) by Gender In Terms of Urban-Rural Areas PC Usage Ratio Internet Usage Ratio Total Female Male Total Female Male Turkey In Last Three Months (April - June 2007) Urban Rural Turkey Between Three Months One Year Urban Rural Turkey Urban More Than One Year Rural Turkey Urban Ever Used Rural Source: TÜ K 2007 According to the results of the 2007 Households ICT Usage Survey conducted by the Turkish Statistical Institute (TÜ K), 18.94% of households have access to the internet % out of the households having access to internet own PCs that can connect to the internet at home. The most common type of the internet connection in the houses having access to the internet is wideband (ADSL, etc.) (78.03%). In the period from April to June 2007, the computer and internet usage rate of the households in the age group of was 29.46% and the internet usage rate of the same population was 26.67%. In the same period, 61.11% of the households used the internet almost every day, and 25.50% used it at least once a week. The age group in which the rate of computer and internet usage is highest is 16-24, which is followed by the age group of By education level, the population who use the computer and internet most are graduates of first degree and higher education levels, with the rates of 84.86% and 82.89%, respectively % of students use computer and 81.89% internet. Computer usage rate of the salaried or paid employees are 54.82% and internet usage rates of the salaried or paid employees are 54.82% and 51.38%, respectively. The same rate is 44.06% and 41.15%, respectively % of the households using internet in the period between April and June 2007 used the internet for the search of information and on-line services, for communication, 52.27% for education and 26.18% for interaction with public authorities. According to these results, percent, i.e. one-third of the Turkish population have never used PC, where percent of the Turkish population have never used internet. In rural areas, the population who has never used computer and internet is 80.48% and 83.14%, respectively. Computer and internet usage rates in the period between 2004 and 2006 are given below with comparison. As shown in the table, the computer and internet usage rates increased by 67% and 91% in three years. Another interesting feature of the table is that although the computer and internet usage rate of the rural population is lower than the urban population, the computer and internet usage rates increased by 98% and 135% in the rural areas. Although the increasing rate is pleasing, the computer and internet usage rate in the urban areas is over 2 times higher than the rural areas. 25

28 Comparision of PC and Internet Usage Ratios (%) by Gender In Terms of Urban-Rural Areas PC Usage Ratio Increase nternet Usage Ratio Increase % % Turkey In Last Three Months (April June 2007) Urban Rural Turkey Between Three Months One Year Urban Rural Turkey Urban More Than One Year Rural Turkey Urban Ever Used Rural Source: TÜ K 2005, 2007 The table showing PC and Internet usage ratios in terms of urban-rural areas are as follows: PC and Internet usage by urban-rural areas PC Usage Rate Internet Usage Rate Turkey Urban Rural Source: TÜ K