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ANNUAL REPORT 2010‹NDEKS B‹LG‹SAYAR S‹STEMLER‹ MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
contentsMessage from the Chairman ……………………………………….........................................................................
Agenda of General Assembly Meeting …………………………….............................................………….....…..
1. Company ………………………………………………………………………........................................................
1.1 Summary Info ...........................................................................................................................................
1.2 Capital and Shareholding Structure ...........................................................................................................
1.3 Board of Directors, Auditing Board and Auditing Committee .....................................................................
1.4 Management Organisation ........................................................................................................................
1.5 Management Team ...................................................................................................................................
1.6 Historical Background ...............................................................................................................................
2. Sector of Operation ………………………………………..………………….……………………………………...
2.1 Turkish IT Sector ......................................................................................................................................
2.2 Sub-segments of the IT Sector .................................................................................................................
2.3 Growth of the IT Sector ............................................................................................................................
3. Subsidiaries ……………………………………………………………………………………………………………
3.1 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. .......................................................................................................................
3.5 Teklos Teknoloji Lojistik A.fi. ....................................................................................................................
4. Operation ……………………………………………………………………………………………………………....
4.1 Structure of Product Supply and Distribution ............................................................................................
4.2 Logistics ...................................................................................................................................................
4.3 Invoicing and Payment Collection .............................................................................................................
4.4 Technical Service and Customer Relations ...............................................................................................
4.5 Sales and Marketing .................................................................................................................................
5. Corporate Governance Principles Compliance Report ………………………………………………………....
6. Board of Directors' Suggestions on Dividend Distribution ……………..........………………………………...
7. Auditing Board’s Report ………………..……………………………………..……………………………………..
8. Independent Auditor’s Report ………………………………………………..……………………………….........
9. Financial Statements and Notes ………………………………………………..………………………………......
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ANNUAL REPORT
Nevres Erol B‹LEC‹KChairman
Dear Shareholders;
Before our activities performed in 2010, and the relevant balance sheetand profit & loss account reflecting the results of these activities, Iwould like to talk briefly about the latest developments in the globaleconomy and Turkish economy, and the expectations of the IT sectorin 2011.
After the global crisis in 2008, the world started having slow recovery,and in 2010, the growth rate reached the growth tempo that the sectorwas having before the global crisis. Although, the growth rates ofdeveloping countries contribute lots to global economic recovery,developed countries’economies could not meet the expectationregarding economic recovery. In 2010, the world had 5 % growth withthe help of financial supports conducted commonly by EU & IMF andstimulus packages of developing countries. It is essential to say thatincreasing debt amount with precautions taken may result in problemsin EU.
Turkish Economy had quite successful year in 2010 with 8,9% growthby means of strong financial structures in public and financial institutions.We estimate 5 % - 6 % growth in 2011 as the strong economic recoveryresulted in current account deficit.
IT Sector achieved 10% growth in 2010 compared to 2009 and reached6 billion USD. Individual consumer demand, smart devices, proliferationof internet connection, common campaigns of Telecom Companies,usage of social networking websites have been main drivers in termsof e- government services sector to grow.
We consider that Increasing interest for mobile and tablet, increasingdemand of individual consumers, proliferation of internet usage withthe changes in Turkish Trade Law will contribute the sector growth by8%-9% in 2011. In 2010, our Company’s turnover reached1.228.175.766 TRL with an increase of 12.94% comparing to theprevious year. Our gross profit has been TRL 74.903.229; and its ratioto sales realized as 6.10%. Operating costs of our Company hasincreased from 2.25% to 2.34% of the sales, comparing to the previousyear. Net income after tax reached 13.171.469 TRL.
As the company, we consider investing in IT sector. In this way, weacquired 51 % of Art›m Biliflim ve Da¤›t›m A.fi. that has the contractsof multifarious producers who provides value added solutions in 2011.
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ANNUAL REPORT
In 2011, as the company management, we will continue our business understanding, which is focused on profitability, making cost-effective analyses, aiming at the realization of the sales budget figures, producing sales policies with a target of customer satisfactionusing mobile channel sales teams and prioritizing productivity.
I would like to express my gratitude to all who contributed to our success, to our business partners, suppliers, employees, and particularlyto our shareholders.
Yours Faithfully,
Erol B‹LEC‹K
Chairman
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ANNUAL REPORT
Agenda of General Assembly Meeting 2010
1. Opening and Election of the Chair of the Meeting,2. Authorisation of the Chair of Meeting for signing of the Minutes of General Assembly Meeting,3. Review of the Board of Director's Report, Auditing Board's Report and Independent Auditor's Report prepared by AGD Ba¤›ms›z
Denetim ve Dan›flmanl›k S.M.M.M. A.fi. regarding the activities and related accounts of 2010,4. Review and approval of the Balance Sheet and Profit & Loss Account of 2010,5. Acquittal of the members of the Board of Directors and Auditing Board in respect of the duties performed during the year 2010,6. Approval of the appointment of Independent Audit Company,7. Review and approval of the Board of Directors' suggestion on dividend distribution for the year 2010 and determination of the
dividend distribution date,8. Providing the shareholders with information on “Disclosure Policy” adopted by a resolution of the Company Board in accordance
with the Corporate Governance Principles,9. Determining the remunerations to be paid to the Board Members in 2011,10. Determination of the remunerations and number of the members of the Auditing Board and election thereof,11. Wishes and closure.
Date of Meeting : 06.05.2011
Time of Meeting : 10:00
Place of Meeting : Ayaza¤a Mah. Cendere Yolu No :9/1 fiiflli / Istanbul - Turkey
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ANNUAL REPORT
1. COMPANY
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
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ANNUAL REPORT
1. Company1.1 Highlights• ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., which was founded in 1989 to operate in the computer field, has
became a company distributing about 200 worldwide brands, employing 382 people and cooperating with over 7.500 businesspartners, holding the leadership position of the sector for a long time.
• In the Turkey Top 500 ICT Companies Ranking performed every year by Interpro Medya A.fi., our company ranked 7th (seventh) inthe general ranking based on turnover achieved in 2009 among the companies including telephone operators and mobile phonesellers. Our company ranked first in the hardware category with a turnover of 1.020.865 (thousand TRL) among the companiesincluding those above. On the other hand, our Company ranked 1st (first) with a sales revenue of TRL 1.087.422 (thousand TRL),like the previous years, in the category of companies selling only computers. Further, it ranked first in seven IT categories.
• ‹ndeks 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 companiesare shown in the following table:
Product Groups by Company
INDEKS• PC• Notebooks• Printers• Servers• Peripherals• Software
DATAGATE• Microprocessor• Hard Disk• Main board• Display Card• Monitor• Optical Products• Server Products• Memory Products• Notebooks• Desktops• Backup Units• Network Products• Accessories• Security Products• Network (Modem-USB- Adaptor) products• Laser Printers
NETEKS• Corporate Network Systems• Network Equipment• Structured Cabling• Private Exchange Systems• Network Security Solutions• ADSL and SME
Communication Solutions
NEOTECH• Consumer Electronics• Communication Equipment• Alternative Electronic
Products
TEKLOS• Logistics and Transportation
Major distributorships undertaken by main product groups are shown below:
PCProducts OEM Printer &
PeripheralsHouseholdElectronics
Memoryand
MediumSized
Systems
APPLEASUS
FUJITSUHP
LENOVOLGMSI
SONY VAIOTOSHIBA
ALPSINTEL
IOMEGAKINGSTON
LITE-ONNEC
PHILIPSSEAGATE
VIEWSONICWD
BELKINSAMSUNG
WDFUJITSU
APCCANONEPSON
HPIBMOKI
PANASONICXEROX
3COMALIED TLCHECKP.
CISCOHCSHP
NEWBRIDGENORTELLTREND M.PANDUITAVAYAIBM ISS
IBMLOTUS
MICROSOFTNOVELL
SYMANTECTIVOLI
AIRTIESAPPLE
HITACHILG
NOKIAPANASONIC
SONYVIEWSONIC
HPIBM
LACIESEAGATE
WD
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NetworkProducts
SoftwareProducts
ANNUAL REPORT
a) Breakdown of Sales:69% of the Company’s income is derived from the sales of PC and OEM (Original Equipment Manufacturer–computer parts). Breakdownof the Company’s sales is as follows:
Breakdown of Sales on Product Category Based
c) Changes in the Share Price throughout the Year:‹NDEKS in ISE: Having held an IPO in June 2004, our company’s shares are traded in Istanbul Stock Exchange (ISE) national marketunder the code of “INDES”. The ISE-100 index opened at 52.825 in 2010, closed at 66.004 on 31.12.2010 with the increase of 25%. The lowest level was 48.739 on 25.02.2010 and the highest level was 71.777 on 25.10.2010.
The TRL/USD exchange rate opened at 1.4810 at the beginning of the year, had some fluctuations during the year and closed theyear at 1.5376 USD valued by 3.8% within the year.
The year-end value of 1 share was TRL 2.63, whereas its value was 1,54 at the beginning of the year. According to the closing valueon the last transaction day of the year, the value of our Company is TRL 147.280.000.
b) Major Manufacturers of our Company‹ndeks Bilgisayar has a wide range of product line, which allows it to reach more number of dealers, with this advantage, to increaseits sales above the sector average. Breakdown of the major distributorships undertaken by our Company are shown below:
(*) Trademarks are listed in alphabetic order.
Computer48.95%
OEM19.72%
Communication5.35%
Printer7.59%
Software3.86%
Peripherals2.35%
HouseholdElectronics
8.46%Medium Sized
Systems2.11%
Other1.61%
3 COM
ACER
AIR TIES
AOC
APC
APPLE
ASUS
AVAYA
AVOCENT
BELKIN
CABINET
CANON
CHECKPOINT
CISCO SYSTEM
CORNING
DELL
EPSON
FUJITSU SIEMENS
GENIUS
GIGABYTE
GKB
HCS
HOMEND
HP
IBM
IMATION
IOMEGA
ISS
JUNIPER
KINGMAX
KINGSTON
LENOVO
LEXMARK
LG
LINKSYS
LITE – ON
MAXTOR
MICROSOFT
MSI
NEC
NOKIA
NORTEL NETWORKS
NOVEL
OKI
PANDUIT
PANASONIC
POWERSONIC
SAMSUNG
SAPPHIRE
SEAGATE
SERVER i SERIES
SERVER p SERIES
SIEMENS
SONY
SONY VAIO
SYMANTEC
TARGUS
TIPPING POINT
TOSHIBA
TREND MICRO
TRUST
VERITAS
VERITECH
VESTEL
WACOM
WESTERN DIGITAL
XEROX
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ANNUAL REPORT
d) Awards achieved in 2010
Company Date Description
Cisco Our subsidiary, Neteks A.fi achieved the distributor of the year award organized byCisco Systems in 2009. This award was given in revenue, business development,common channel and dealers satisfafaction categories.
Indeks achieved the most efficient business partner award which was organized byLenovo in China in 2009. This award was given in revenue, growth, number of dealersmade purchasing from the distributor, financial performance and payment performancecategories
Lenovo
IBM Indeks has been awarded the distributor of the year organized by IBM Turk Ltd inIstanbul. This award was given in revenue, growth, number of dealers made purchasingfrom the distributor, financial performance and payment performance categories
Interpromedya A.fi. ‹ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies with itssales income of TRL 1.087.422 in the turnover-based general ranking as determinedby Interpromedya A.fi. In the analysis of the general ranking results, ‹ndeks Bilgisayarranked 1st, as the previous years, among the companies dealing with computertrade only. Further, it ranked first in six different ICT categories. These are Personalcomputer, Mobile, Printing systems, data back up and storage, monitor, operatingsystems and B2B E-Trade. Further, Datagate Bilgisayar Malzemeleri Tic. A.fi., whichis a 59% subsidiary of ‹ndeks Bilgisayar, ranked first in the category of “OEM (computerparts)” incomes and Neteks ‹letiflim Da¤›t›m Ürünleri A.fi., which is a 50% subsidiaryof ‹ndeks Bilgisayar, ranked first in the category of “Data Communication Hardware”.
15.01.2010
01.02.2010
12.02.2010
29.06.2010
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ANNUAL REPORT
e) Distributorships Undertaken in 2010:
Al›nan Ödül Tarih Aç›klamaCompany Date Description
Turkish Telecom Our logistic company called Teklos A.fi. achieved the contract of TurkishTelecom for storage and distribution of the products which will be providedto the customers of Turkish Telecom.
Canon Eurasia Ltd. Our subsidiary Neotech A.fi. has started negotiations with Canon EurasiaLtd for the distribution of cameras, video camcorders products and theiraccessories in Turkey as Canon is one of the biggest producer of thesetypes of products in the world.
22.12.2010
17.03.2010
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ANNUAL REPORT
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f) Data on Financial Structure:
1.2 Capital and Shareholding StructureAs of 31.12.2010, the shareholding structure of our Company is as follows:
Shareholder's Name Country Shares % Number of Shares Amount of Shares
Nevres Erol Bilecik T.C. %38,63 21.634.440 21.634.440
Ayfle ‹nci Bilecik T.C. %2,37 1.325.558 1.325.558
Pouliadis ana Associates S.A.(*) Yunanistan %35,56 19.911.119 19.911.119
Public Offer T.C. %23,44 13.126.987 13.126.987
Other T.C. %0,00 1.896 1.896
TOTAL 56.000.000 56.000.000
(*) Voting rights of the shares of Pouliadis and Associates S.A. were given to 5 Greek banks.
LIQUIDITY RATIOS 31.12.2010 31.12.2009
Current Ratio 1,24 1.30
Liquidity Ratio 0,93 0.85
OPERATING RATIOS (*) 31.12.2010 31.12.2009
Receivables Turnover 69 61
Payables Turnover 86 74
Inventory Turnover 37 31
PROFITABILITY RATIOS 31.12.2010 31.12.2009
Gross Profit Margin 6,10 % 5.91 %
Operating Profit Margin 3,76 % 3.66 %
Net Profit Margin 1,07 % 1.47 %
Profit Before Tax Margin 1,51 % 2.06 %
FINANCIAL STRUCTURE RATIOS 31.12.2010 31.12.2009
Shareholders’ Equity / Total Liabilities & Shareholders’ Equity 22 % 26 %
Short Term Liabilities / Total Liabilities & Shareholders’ Equity 76 % 71 %
Long Term Liabilities / Total Liabilities & Shareholders’ Equity 2 % 3 %
Financial Debts / Total Liabilities 5 % 10 %
(*) The figures in quarterly financial accounts have beentaken into consideration in the calculation of the averages.
ANNUAL REPORT
Capital Increase throughout the Year:The upper limit of authorized capital of our Company was determined as TRL 75.000.000 and its share capital issued as of 31.12.2009is TRL 56.000.000. Covering the all maximum authorized capital, i.e. TRL 75.000.000, from the profit of 2006, an application is madeto Capital Markets Board (CBM) of Turkey for issuing shares with nominal value of TRL 1.000.000 for the capital increase from TRL55.000.000 to TRL 56.000.000 and the application was approved with the resolution of CBM with no. 25/699 of 28.06.2007. Thecapital increase was registered on 10.07.2007 and announced on the Turkish Trade Register Gazette with no. 6852 of 16 July 2007.Our company’s capital of TRL 56.000.000 is composed of Group A registered shares in value of TRL 318,18 and Group B bearershares TRL 55.999.681,82.
Group A shareholders are authorised to determine half plus one of the board members and to receive 5% of the remaining profit afterthe first issue reserve funds and first dividend.
1.3 Board of Directors, Auditing Board, Auditing Committee and Corporate Governance Committee
Board Members
In the General Assembly held on 25.05.2009, Members of the Board of Directors were elected for duration of three years, and theirduties and powers were determined pursuant to the Company's Articles of Association and the relevant provisions of the TurkishCommercial Code. Resolutions of the General Assembly were published in the Turkish Trade Register Gazette with no. 7336 of 19June 2009.
Name & Surname Title Term of Office
Nevres Erol Bilecik Chairman 3 years
Salih Bafl Deputy Chairman 3 years
Atilla Kayal›o¤lu Board Member 3 years
Ayfle ‹nci Bilecik Board Member 3 years
Halil Duman Board Member 3 years
Members of the Auditing Board
Name & Surname Title Term of Office
Veli Tan Kirtifl Auditor 1 year
Haluk fien Auditor 1 year
Corporate Governance Committee
Name & Surname Title Term of Office
Salih Bafl Chairmen of the Committee 3 years
Ayfle ‹nci Bilecik Committee Member 3 years
Halil Duman Committee Member 3 years
Members of the Auditing Committee
Name & Surname Title Term of Office
Salih Bafl Committee Member 3 years
Ayfle ‹nci Bilecik Committee Member 3 years
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ANNUAL REPORT
1.4 Organisation Chart:Organisation chart of the company is given below:
Product Management
Retail
Non-Retail
Software
Elektronic Sales
Medium Sized Systems
Ankara
‹zmir
Erol B‹LEC‹KChairman ofthe Board
Atilla KAYALIO⁄LUGeneral Manager
Tayfun Y‹⁄‹TTechnology
Development ManagerNaim SARAÇInternal Audit
Manager
Sales Management Halil DUMANAssistant
General Manager
Accounting
Finance
Logistics
Customer Services
Import
Human Resources
Business UnitManagement
ProductManagement
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ANNUAL REPORT
1.5. Board of DirectorsThe Board of Directors of the company consists of five members. Curriculum Vitae of the board members are given below.
Nevres Erol Bilecik, Chairman of the Board of Directors: Erol Bilecik was born in 1962 and graduated from Istanbul TechnicalUniversity, Department of Computer Engineering. Erol Bilecik, who established ‹ndeks A.fi. in 1989, acts as the chairman of the followingsubsidiaries of Index, besides our company: Despec Bilgisayar Pazarlama ve Ticaret A.fi., Datagate Bilgisayar Malzemeleri TicaretA.fi., Neteks ‹letiflim Ürünleri Da¤›t›m A.fi., Neotech Teknolojik Ürünler Da¤›t›m A.fi., Desbil Teknolojik Ürünler Ticaret Afi., HomendElektrikli Cihazlar San. Ve Ticaret Afi., ‹nfin Bilgisayar Ticaret A.fi. and Teklos Teknoloji Lojistik Hizmetleri Afi. Moreover, between theyears 2002 and 2005, he presided TUBISAD (Turkish Informatics Industry Association) established in 1974, the oldest civil societyorganisation in the ICT sector, members of which are companies realising 95% of the total transaction volume of the Turkish ICT sector.Erol Bilecik is married with two children and speaks English.
Salih Bafl, Deputy Chairman: Salih Bafl was born in 1965, and graduated from Anadolu University, Department of BusinessAdministration. He has been working for Index Group since 1990. In 2003, while he was acting as the Assistant General Manager -Finance & Accounting for ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., he was appointed as the General Managerand Vice Chairman of the Board of Directors of Datagate Bilgisayar Malzemeleri Ticaret A.fi.. He curren acts as the Deputy Chairmanfor the companies, ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Afi., Teklos Teknoloji Lojistik Hizmetleri Afi., HomendElektrikli Cihazlar San. Ve Ticaret Afi., ‹nfin Bilgisayar Ticaret A.fi. and Desbil Teknolojik Ürünler Ticaret A.fi., and as one of the membersof the Board of Directors for the companies Despec Bilgisayar Pazarlama ve Ticaret Afi., Neotech Teknolojik ÜrünlerDa¤›t›m A.fi. and Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. Salih Bafl is married with one child and speaks English.
Atilla Kayal›o¤lu, General Manager, Board Member: Atilla Kayal›o¤lu was born in 1952, and graduated from Bo¤aziçi University,Department of Mechanical Engineering in 1974; following that he received a masters degree from Syracuse University, Departmentof Industrial Engineering. He carried out several duties in IBM Turk between the years 1980-1999; and in 1999, when he was the GlobalServices Manager he left IBM Turk and joined Index. Kayal›o¤lu acts as a Board Member and General Manager of ‹ndeks BilgisayarSistemleri Mühendislik Sanayi ve Ticaret A.fi.; he also acts as a Board Member of the companies of Neteks ‹letiflim Ürünleri Da¤›t›mA.fi., Datagate Bilgisayar Malzemeleri Ticaret Afi., ‹nfin Bilgisayar Ticaret A.fi. and Teklos Teknoloji Lojistik Hizmetleri Afi.. Atilla Kayal›o¤luis married with two children and speaks English.
Ayfle ‹nci Bilecik, Board Member, Computer Engineer: Ayfle ‹nci Bilecik was born in 1964 and graduated from Istanbul TechnicalUniversity, Department of Computer Engineering. She also acts as a Board Member of Desbil Teknolojik Ürünler Ticaret A.fi., being asubsidiary of Index. Being one of the founding partners of ‹ndeks Bilgisayar founded in 1989, Ayfle ‹nci Bilecik used to work as anengineer specialized in software in the ICT sector for long years. Ayfle ‹nci Bilecik is married with two children and speaks English.
Halil Duman, Board Member: Halil Duman was born in 1965, and graduated from Marmara University, Department of BusinessAdministration. He carried out several duties in Yücelen ‹nflaat A.fi. between the years 1987 and 2000; and in 2000, when he wasthe Manager of Finance, he left Yücelen ‹nflaat and joined Index as Finance Director. Duman acts as a member of the Board of Directorsof ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi., and also acts as a Board Member of Datagate Bilgisayar MalzemeleriTicaret Afi., Neteks ‹letiflim Ürünleri Da¤›t›m Afi., Teklos Teknoloji Lojistik Hizmetleri Afi., Neotech Teknolojik Ürünler Da¤›t›m Afi.,Despec Bilgisayar Pazarlama ve Ticaret Afi., Desbil Teknolojik Ürünler Ticaret A.fi. Homend Elektrikli Cihazlar San. ve Ticaret Afi., ‹nfinBilgisayar Ticaret A.fi. ve Alk›m Bilgisayar Afi, and acts as Assistant General Manager - Finance of ‹ndeks Bilgisayar Sistemleri MühendislikSanayi ve Ticaret A.fi. Halil Duman is married with two children.
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ANNUAL REPORT
Names and titles of executives are as follows:
Board Member - General Manager
Board Member – Asst. General Manager
Internal Audit Manager
Technology Development Manager
Finance Manager
Accounting Manager
Customer Services and Logistics Dept. Manager
IT Manager
Import Manager
Administrative Affairs Manager
Ankara District Manager
‹zmir District Manager
Marketing and Communication Manager
Group Sales Manager
Retail Channel Sales Manager
Electronic Sales and Marketing Manager
IBM e server Software Manager
OEM Sales Manager
HP Business Unit Manager
Microsoft IBM and Lenovo Sales Manager
Asus, Dell, Toshiba, Canon Business Unit Manager
Atilla KAYALIO⁄LU
Halil DUMAN
Naim SARAÇ
Tayfun Y‹⁄‹T
Birgül ÖZTÜRK
Halim ÇA⁄LAYAN
Çetin EK‹NC‹
Erkan BERBER
Canan Koç RANA
Selahattin GÜL
Özcan AKDEN‹Z
Osman fiAH‹N
Özen BOZÇA⁄A BEZ‹RC‹
Mahmut ÖLÇER
Atilla ALKAfi
Korkut YILDIRIM
‹lker SALTO⁄LU
Elif fiEN
Ebru KOÇO⁄LU
Sedat AZ‹ZO⁄LU
Yeliz ÖZCAN
aalkas @index.com.tr
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ANNUAL REPORT
1.6 Historical Background
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1990
2002
1998
1996 PCDistribütör AS400
1994
1995
NIXDORF1992
2005 563 Million $ Revenue
1999 IBM POS105 Million $ Revenue
Business Partner1997 51 Million $ Revenue
1993Consumables
5 Million $Revenue
Public Offer2004 431 Million $ Revenue
2000 163 Million $ Revenue
2003
2001
2006 630 Million $ Revenue
2008
2007 787 Million $ Revenue
2009
Kingston
2010Foto & Video
ANNUAL REPORT
1991
‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi. was founded on 10.07.1989 to operate in the computer sector. TheCompany was transformed into a joint stock company in April 2000. The headquarters of the Company, in which Greece-basedPouliadis Group participated in August 2000, is in Istanbul. The Company operates in the Information Technologies (“IT”) sector anddeals with the purchase, sales, technical and software support of computers, computer supplies and data transmission equipment.
The Company made a distributorship agreement with 3M, being an American company operating in Turkey, for 3M magnetic mediumproducts in 1989. The Company increased its market share in the 3M magnetic products market from 1,2% to 55% in one year. Itachieved a turnover of 875 thousand USD with only a staff of 6 in 1989. In the next year, in 1990, it made a turnover of 1.380 thousandUSD with a staff of 19. It ranked 82nd among the Turkish IT companies in 1990.
In 1991 it made a contract with the Italian company named Olivetti to act as the “Authorised Seller” of Olivetti PC products. In thesame year, it increased the number of staff to 36 and made a turnover of 2.188 thousand USD in 1991. It ranked 45th, rising 37 stepsin the ranking of the Turkish IT companies.
The Company set up Ankara branch as its first branch in 1992 and started more permanent activities in the Central Anatolia Region.
In 1992 the number of its staff increased to 49 and its turnover to 3.7 million USD. It ranked 30th, rising 15 steps in the ranking ofthe Turkish IT companies, in 1992.
It climbed to the rank of 20th among the Turkish IT companies with its turnover of 9.2 million USD and staff of 56 in 1993.
In 1994, it has become the Turkish Distributor of HP consumables, APC Uninterrupted Power Supplies and Siemens Nixdorf PCproducts. Then, it became the 19th biggest IT company of the Turkish market. In 1994 it achieved a turnover of 11.3 million USDwith its staff of 61.
It founded its ‹zmir branch in April 1995 and signed “Business Partner” contract with IBM in May. Just in the second half of the sameyear, i.e. at the end of 1995, it was granted “IBM PC Business Partner Award” by IBM due to its achievements as a business partner.With its significant ‘channel’ activities in the same year, ‹ndeks won “The Most Active Distributor Award” of INTERPRO, which isconsidered valuable by the sector. It achieved a turnover of 15.9 million USD with its staff of 62 in 1995. Thereafter, it has becomethe 16th biggest IT Company in the sector.
In 1996, IBM changed the distribution model in PC sales organization and adopted the “distributorship” model. Thus, ‹NDEKS hasbecome the first Turkish company that made a distributorship contract with IBM. It made 4.127 units of IBM PC in 8 days in April ofthe same year, which was first in the market. By the end of year, ‹ndeks reached the turnover of 38.7 million USD with a staff of 70and ranked 9th by climbing 7 steps more in the ranking of the Turkish IT companies. It was deserved to receive the tiTRLe of “TheMost Active Computer Company” once more in 1996, just like in 1995.
In 1997, ‹ndeks has become the 8th biggest IT Company in Turkey, with a turnover of 58.6 million USD and a staff of 75.The Company made a distributorship agreement for Lotus & IBM Software products, thereby starting distribution of software in 1998.
In the same year, it made a distributorship agreement with HP A.fi. for distribution of hardware products. In the same year, it madea new agreement with IBM and became the distributor of AS/400, being one of the most important value-added products of Turkey.Towards the end of that year, ‹ndeks made a distributorship agreement with Kingston. In 1998, the Company won “The Most ActiveIT Company Award” again after 1995 and 1996 and became the only IT company that achieved to win the same award third times.In November 1998, the “Supplies Department” of ‹ndeks Bilgisayar was reorganised as an independent company and became “DESPECTürkiye” with a joint investment with Von Dorp Despec Group, which was the “Number 1” in its field in Europe. With its turnover of89.4 million USD with a staff of 131 in 1998, ‹ndeks climbed another 2 steps in the ranking of Turkish IT ranking and became the 6thBiggest Turkish IT Company.
In 1999, ‹ndeks made distributorship agreements with many significant products such as Cisco, Microsoft, Xerox, IBM Pos and Escort;and its “logistics centre” started operations in June of the same year. “‹ndeks Logistics Centre”, which is situated on an area of 2,500sqm and equipped with highly functional technology, was one of the most important investments of ‹ndeks in canal. The Companyreached the turnover of 111 million USD with a staff of 155 in 1999.
On 12 April 2000, the company transformed from a Limited Liability Company into a Joint Stock Company. In August 2000, Pouliadisand Associate Societe Anonyme Industrial and Commercial of High Technology Systems S.A. ('Pouliadis S.A.') acquired 50% of‹NDEKS Bilgisayar which thereby became a company with foreign shareholder. In the same year, ‹ndeks made an agreement fordistributorship of Epson products and added Epson products to its increasingly growing range of products. ‹ndeks Bilgisayar achieveda turnover of 163 million USD by the end of 2000.
16
ANNUAL REPORT
In 2001, the Company made a distributorship agreement with COMPAQ. With this agreement, ‹NDEKS blazed a trail being the onlydistributor dealing with IBM, HP and COMPAQ PC products. In the same year, ‹ndeks also made distributorship agreements for Novel,Sony and Microsoft OEM products. The Company continued its investments in spite of the economic crisis in 2001 and in March ofthe same year, it acquired 50.5% of Datagate Bilgisayar Malzemeleri Ticaret Afi. (DATAGATE), which is a leading company in Computerparts/OEM sector, thereby boosting the morale of the sector. In the same period, it acquired 70% of Neteks ‹letiflim Ürünleri Da¤›t›mA.fi. (NETEKS) , which is one of the highly experienced distribution companies in network, and continued its growth in spite of thecrisis. In the Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.fi. in 2001, our company ranked 1st in thecategory of “IT Hardware Incomes”, 2nd in the category of “Turkish IT Companies” and 11th in the general ranging of the ICT Sector.
In 2002, Oki printers and Toshiba notebook and server products were included in the ‹ndeks range of products. In July 2002, allcompanies of the group relocated to its current three-storey building with an indoor area of 10.000 sqm in the address of CendereYolu, No: 23 Ka¤›thane. The turnover of the Company in 2002 was 189 million USD.
Products with Fujitsu Siemens and Nec brands were added to the product portfolio of the Company in 2003. Further, the share of‹ndeks in DATAGATE, of which 50.5% shares were acquired by ‹ndeks in 2001, thereby being an affiliate of the Company, was increasedto 85%. The consolidated turnover of the Company was realized as 323 million USD as of the end of 2003.
15.34% of the ‹ndeks Bilgisayar shares was offered to public on ISE via a capital increase through rights issue after restricting theexecution of pre-emptive rights of existing shareholders, on 24.06.2004. The Company made distributorship contracts with Kingmaxand Asus for memory and barebone products, respectively, in 2004 and started to distribute such products. In the same year, ‹ndeksBilgisayar A.fi. was awarded ISO 9001:2000 certificate.
On 02.02.2005, in accordance with the resolution of the Board of Directors dated 02.02.2005, ‹ndeks acquired 80% of NeotechTeknolojik Ürünler Da¤›t›m Anonim fiirketi for wholesale trade of consumer electronics and communication products as a new field ofoperation of the Company. In March 2005, the Registered Capital System was adopted, and its maximum registered capital wasapproved as TRL 75.000.000. In May 2005, the issued capital of ‹ndeks was increased from TRL 17.600.000 to 45.000.000. InSeptember 2005, the Company made an exclusive distributorship agreement with TPV Technology Limited, which manufactures 19,5%of the monitors in the global market and has realised a turnover of 4 billion USD in 2004, for distribution of AOC branded LCD, CRTMonitor, Plasma Monitor and LCD TV products in Turkey.
According to the Top 500 Turkish ICT Companies report issued by Interpro on 27.05.2005 for 2004, our Company ranked 1st in thecategories of Notebooks, Desktop PCs, Print Systems, Servers, Data Backup and Storage Units, Office Software and OEM and 8thin the turnover-based general ranking of Turkey, in which Turk Telekom ranked 1st. With these results, ‹ndeks Bilgisayar achieved tobe the only local computer company in the Top Ten.
In February 2006, 30.30% of the shares of the second biggest company of the group and a subsidiary of ‹ndeks Bilgisayar, namelyDatagate Bilgisayar Malzemeleri Ticaret A.fi., was offered to public in February 2006. of was offered to public on ISE via a capitalincrease through rights issue after restricting the execution of pre-emptive rights of existing shareholders. Began to be traded on ISEon 10.02.2006 Thus, 2 companies of the group have been offered to public and begun to be traded on ISE.
Partnership share of ‹ndeks Bilgisayar decreased from 85% to 59.2% with the public offering of Datagate. The issued capital of ‹ndeksBilgisayar was increased from TRL 45.000.000 to TRL 55.000.000 in May 2006. TRL 8.718.703 out of the amount of increase, i.e.TRL 10.000.000, is covered from the profit of the period of 2005 and the remaining TRL 1.281.297 from extraordinary reserves. ‹ndekshas executed one of the most important and greatest investments in ICT sector by purchasing Karadeniz Orme A.S., which is foundedon a 39.761 m2 land and having 18.969 m2 indoor area, in order to be used as a logistics centre. The trade name of Karadeniz OrmeAS has been changed into Teklos Teknoloji Lojistik Hizmetler A.fi. and its field of activity has been customized to be able to work onthe logistics services. The head office of the company moved to its new location on 26.10.2006. EVOS (Effective Efficient OperationalResult-Oriented) ERP System developed by ‹ndeks A.fi. in 2006 was started to be used by ‹ndeks Group Companies on 01.01.2007.EVOS Project was developed by the Software Engineers Group of ‹ndeks A.fi. within a period of 9 months.
Our Company and its subsidiaries included in the consolidated financial statements made distributorship agreements with Canon forprinter, fax and scanner products, with Western Digital Corporation for hard disk products, with Panasonic for consumer electronics,with Viewsonic for monitor products and with Sony Vaio for notebook products. According to the 2005 Turkey Top 500 ICT Companiesreport issued Interpro in 2006, ‹ndeks Bilgisayar, with its turnover of 758.634 (thousand TRL), again ranked 1st in the category ofcompanies selling only computers, like in 2004. With this result, the Company kept its special place as the only local computercompany in the Top Ten. Moreover, it was ranked the biggest company in the category of markets with respect to the incomes fromServer, Print Systems, OEM, Operating System, Office Software and E-Trade sales.
17
ANNUAL REPORT
‹ndeks Bilgisayar and its subsidiaries made distributorship contracts with Philips for monitors and PC peripherals, Asus for notebookproducts, Apple IMC for Apple brand products, Trend Micro for software products for internet security and viruses, Nokia for E-seriesproducts, LG Electronics for notebook products in 2007. The issued capital of the Company was increased from TRL 55.000.000 toTRL 56.000.000 in July 2007. The amount of increase, i.e. TRL 1.000.000, is covered from the profit of the period of 2006.
On 24.07.2007, ‹ndeks Bilgisayar and its subsidiary Datagate Bilgisayar A.fi sold 50% of their shares in Neteks ‹letiflim Ürünleri Da¤›t›mA.fi., an affiliate of ‹ndeks Bilgisayar, to Westcon Group Eurepean Operation Limited, one of the leading global companies in its field.Of the 50% shares sold, 26% and 24% were provided by ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi and DatagateBilgisayar Malzemeleri Ticaret A.fi., respectively. Following such sale, Neteks become a JV of which shares are held by ‹ndeks BilgisayarA.fi. and Westcon Group on 50%-50% basis. It was the first time that with this agreement, Westcon Group made an investment inTurkey under a partnership; until then, it was operating only with its fully owned subsidiaries in 19 countries around the world.
According to the 2007 Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.fi., our company ranked seventh,one step higher than the previous year, in the general ranking based on turnover achieved in 2006 among the companies includingtelephone operators and mobile phone sellers. On the other hand, it ranked first with its sales income of 901.778 (thousand TRL),like the previous years, in the category of companies selling only computers. Further, it ranked first in nine ICT categories. The categoriesin which ‹ndeks Bilgisayar ranked first are the Portable computer wholesale trader and distributor, Data backup and storage hardware,Server, Print systems wholesale trader and distributor, Data communication hardware, OEM products, Operating system, Officesoftware wholesale trader and distributor and E-trade.
In 2008, ‹ndeks Bilgisayar made a distributorship agreement with LG, which is one of the most valuable brands of the world, fornotebooks, consumer products and monitors and with Asustek for Asus branded server products. In the same year, Neotech, beinga subsidiary of ‹ndeks Bilgisayar, and Datagate were appointed as the distributors of Wacom and Belkin products, respectively. OurCompany ranked sixth, one step higher than the previous year, in the general ranking based on sales made in 2007 among the first500 ICT companies including telephone operators and mobile phone sellers in Turkey. On the other hand, our Company ranked 1stwith a sales revenue of TRL 1.022.919 thousand TRL, like the previous years, in the category of companies selling only computers.Further, it ranked first in eight ICT categories.
In 2009, ‹ndeks Bilgisayar made distributorship agreements with Iomega and Dell and a supply contract with Best Buy. The contractsmade by Neotech A.fi., a subsidiary of ‹ndeks Bilgisayar, for Apple and Airties products were transferred to ‹ndeks Bilgisayar as a resultof the segment adjustments in this year. In the same period, Neteks, a 50% affiliate of ‹ndeks Bilgisayar, made distributorship agreementswith Juniper, IBM ISS and Avaya. On the other hand, Datagate A.fi. made a distributorship agreement with Fujitsu Siemens. ‹ndeksBilgisayar ranked 7th among the Turkey Top 500 ICT Companies with its sales income of 927.893 thousand TRL in the turnover-basedgeneral ranking as determined by Interpromedya A.fi. In the analysis of the general ranking results, ‹ndeks Bilgisayar ranked 1st, asthe previous years, among the companies dealing with computer trade only. Further, it ranked first in six ICT categories. Further,Datagate Bilgisayar Malzemeleri Tic. A.fi., which is a 59% subsidiary of ‹ndeks Bilgisayar, ranked first in the category of “OEM (computerparts)” incomes and Neteks ‹letiflim Da¤›t›m Ürünleri A.fi., which is a 50% subsidiary of ‹ndeks Bilgisayar, ranked first in the categoryof “Data Communication Hardware”.
In 2010, our logistic company called Teklos A.fi. achieved the contract of Turkish Telecom for storage and distribution of the productswhich will be provided to the customers of Turkish Telecom. ‹ndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companieswith its sales income of TRL 1.087.422 in the turnover-based general ranking as determined by Interpromedya A.fi. In the analysisof the general ranking results, ‹ndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer tradeonly. Further, it ranked first in six different ICT categories. These are Personal computer, Mobile, Printing systems, data back up andstorage, monitor, operating systems and B2B E-Trade. Further, Datagate Bilgisayar Malzemeleri Tic. A.fi., which is a 59% subsidiaryof ‹ndeks Bilgisayar, ranked first in the category of “OEM (computer parts)” incomes and Neteks ‹letiflim Da¤›t›m Ürünleri A.fi., whichis a 50% subsidiary of ‹ndeks Bilgisayar, ranked first in the category of “Data Communication Hardware”. Furthermore, Indeks hasstarted negotiations with Canon Eurasia Ltd for the distribution of cameras, video camcorders products and their accessories in Turkeyas Canon is one of the biggest producer of these types of products in the world. Our subsidiary, Neteks A.fi achieved the distributorof the year award organized by Cisco Systems in 2009. Indeks achieved the most efficient business partner award which was organizedby Lenovo in China in 2009. In addition, Indeks has been awarded the distributor of the year organized by IBM Turk Ltd in Istanbul.
18
ANNUAL REPORT
19
ANNUAL REPORT
2. SECTOR OFOPERATION
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
21
ANNUAL REPORT
2. Sector of Operation2.1 IT Sector
2.1.1 Turkish IT SectorThe usage of computers in Turkey started in the end of the 1980’s. Although there was a very rapid development in the sector betweenthe years of 1990 and 1995, usage of computers were limited to mostly financial sector, governmental units, big businesses anduniversities. In the second half of the 1990’s, the increase in the usage of computers made the IT sector one of the most rapidlygrowing sectors in Turkey. According to the data issued by International Data Corporation (“IDC”), the Turkish Information andCommunication Technologies (“IT”) sector achieved a compound annual growth rate (“CAGR”) of 20% between 1997 and 2000. In2000, the Turkish IT sector has reached its greatest business volume thus far with 2.3 billion USD, whereas that figure reduced to1.2 billion USD with 49% recession in 2001 because of the economical crisis that was encountered in the end of 2000 and thepostponement of the demand of IT investments by public and private sectors. The figures achieved in 2000 were again caught onlyin 2004, with a business volume of 2.4 million USD. In other words, it took 4 years to eliminate the effects of the crises. However,one should also consider that one of the causes of the shrinkage of the business volume was the continuously price reduction ofproducts, which is the structural feature of the IT Industry.
As a consequence of the realization of the postponed IT investments especially in the private sector in parallel with the improvementin the macroeconomic indicators after 2001, the IT sector continued its growth with a compound annual growth rate (“CAGR”) of27.9% between 2001 and 2007, which is higher than the growth rates in the period before the crisis. Particularly the increasing usageof internet in the recent years has made a great contribution to this development. With the contribution of the increasing interest andthe continuing investments in the market for notebooks, Turkish IT Sector reached the value of 5.2 billion USD in 2007. However, indespite of the negative pressure of the global economic shrinkage on the consumption tendency and the appreciation of USD againstTRL, contrary to the previous crisis periods, the Turkish IT Sector did not shrink, but has reached 5.3 billion USD in 2009. Thecontribution of tax stimulus packages of the government during 6 months cannot be underestimated for this growth. According toIDC’s research, IT market achieved growth from 2009 to 2010 with 10,7 %.
9.665
Turkish IT Market Business Volume (Mio $)
2010 2011F 2012F 2013F
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
IT Sector Business Volume % Growth
CAGR(09-14): %12.5
2009
0%
20%
50%
10%
30%
40%
2014F
10.000
Source: IDC 2011
8.767
7.688
6.910
5.937
5.361
60%
22
(% G
row
th)
(Mio
US
D)
ANNUAL REPORT
According to the 2011 Turkey IT Expenditures Research conducted by IDC, the Turkish IT market is expected to have a 12.5%compound annual growth rate (CAGR) in the period between 2009 and 2014, reaching 9.7 billion USD in 2014. IT investment demandsdeferred in the 2001 crisis period have been started to be realized with the appearance of the increasing stable outlook of the economyand these investment expenditures have been one of the most powerful dynamics of the market in the first 5 years following 2001.New investments that increased after merger and acquisition operations in all sectors, beginning in the finance and telecommunicationsectors and spread to other sectors from 2005 on, technology replacement investments, increased IT investment made by thegovernment as part of e-government projects, increase in the internet usage rates and finally, in the number of the users who followup the rapidly developing technology became the driving forces of the market between 2005 and 2008. Although the first quarter of2008 started very favourably, the sector started to lose its strength due to the suit brought to close AKP, a slowdown was experiencedin the third quarter when not so many negative results were observed. However, with the last quarter, the sector was affected bythe global financial crisis that started at the beginning of October, and thus, the quarter was closed with a double-digit shrinkage.2009 was experienced as a year when the wounds of the crisis were bandaged; the effects of the crisis in the first quarter diminishedwith the effect of the VAT cut applied for 6 months, including the second and third quarters, and positive growth was recorded in thefourth quarter. In 2010, IT sector achieved quite gradual growth after constitutional referendum particularly static summer season.
Turkey has been one of the major developing countries due to the improving general economic conditions, increased per capita incomeand steps taken for globalization. In addition to highly qualified and cost effective human resources, majority of the young populationis contributing to the attractiveness of our country. When the pressure of the diminished consumption tendency on the IT Market dueto the crisis in 2008-2009 decreased, it is estimated that the IT sector will grow by 16.4 comparing to the previous year and with suchgrowth, the sector will reach 6.9 billion USD by the end of 2011.
On the other hand, if the share of the end-users in the market is monitored in the period between 1995 and 2009, it would be clearlyseen that the market structure has changed considerably. Accordingly, the IT market comprised governmental and public bodies(38%), finance sector companies (30%), private sector companies (20%), individual users (7%) and SMEs (5%) in 1995. However, theshares of government and public sector companies, finance sector companies and private sector companies in the market decreasedwhile those of individual users and SMEs increased in the period between 1995 and 2009. As a result, as of 2010, the Turkish ITmarket comprises 40% individual users, 17% government and public sector companies, 16% private sector companies, 13% financesector companies and 14% SMEs.
According to the 2009 report of ITU (International Telecommunication Union) on the basis of 2007 data, the rate of PC ownershipper household is 70% in the USA, 75% in England, 79% in Germany, 40% in Greece, 53% in Italy, 21% in Brazil and 29% in Turkey.The rate of internet users is 62% in the USA, 67% in England, 71% in Germany, 25% in Greece, 43% in Italy, 15% in Brazil and 19%in Turkey.
2010
17%
13%
16%
14%
40%
2011T
18%
11%
15%
14%
42%
Changes in the Market Share of End Users
2009
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1995
2000
2005
2008
18% 14% 16% 14% 38%
20% 15% 18% 12% 35%
22% 25% 25% 10% 18%
25% 35% 23% 7% 10%
38% 30% 20% 5% 7%
Public Institutions
Finance Sector
Private Sector (Corporate)
SME
Individiual Users
1995
38%
30%
20%
5%
7%
2000
25%
35%
23%
7%
10%
2005
22%
25%
25%
10%
18%
2008
20%
15%
18%
12%
35%
2009
18%
14%
16%
14%
38%
Source: IDC 2011
2011F
2010
18% 11% 15% 14% 42%
17% 13% 16% 14% 40%
23
ANNUAL REPORT
It is estimated that the rate of the number of PC in operating status to the total population has increased from 8% to 27% in the periodbetween 1995 and end of 2010, and that the rate of the internet users to the total population has increased from 10% to 37% in thesame period. This indicates that PC ownership and internet usage rates increased over 3 times in the last 15 years. PC ownershipand internet usage rates have increased by 67% and 40%, respectively in the last 5 years. Comparing to the country data publishedby ITU above, it is clear that Turkey is far below the developed countries with respect to the PC ownership and internet users rateand that there is a long distance to be covered in this field. The PC and internet penetration in Turkey between 1995 and 2010 hasdeveloped as shown in the following graphics.
According to the results of “Households IT Usage Research” published by the Turkish Statistical Institute (TÜ‹K) in April 2010, the PCand internet usage rates of individuals are 40.1% and 38.1%, respectively. The survey indicates that computer and internet usagerates of people between 16 and 74 ages are 50.5% and 48.6% for men and 30.0% and 28.0% for women, respectively.
The age group in which the rate of computer and internet usage is highest is 16-24.These rates are higher in men than women in allage groups. By educational level, the population who use the computer and internet most are graduates of first degree and highereducation levels. 11.8% of people place order for or purchase goods or service for personal use via internet.
According to the report results, PC and internet usage rates have increased by 8% and 9%, respectively in the period between 2009and 2010. Another interesting feature of the report is that although the computer and internet usage rate of the rural population islower than the urban population, the computer and internet usage rates increased by 16% and 15%, respectively, in the rural areas.Although the increasing rate is pleasing, it is clear that the computer and internet usage rate in the urban areas is over 2 times higherthan the rural areas.
27%
15%
12%
8%
0%
10%
20%
30%
40%
2010200520001995
PC Penetration
37%
25%
15%
10%
0%
10%
20%
30%
40%
50%
60%
2010200520001995
Internet Penetration
Source: IDC 2011
30%
35%
2011 2012F
40%
50%
2011T 2012F
24
ANNUAL REPORT
Public investment in IT sector increasingly grows year by year with the contribution of the “e-Transformation Turkey Project” inaccordance with the Information Society Strategy adopted by the Prime Ministry. Accordingly, the share of IT investments out of thetotal public investments increased to 159 million USD in 2002, 389 million USD in 2005, 555 million USD in 2007, 590 million USD in2009 and 675 million USD in 2010.
Comparison of computer and internet usage on area based (rural & urban) (%) (2009-2010)
Computer usage rate
Turkey
Urban
Rural
Internet usage rate
Computer andinternet users
Over one year
Never used
2009
40,11
47,70
22,16
35,60
42,60
19,02
2,29
2,77
1,14
2,23
2,33
2,00
59,89
52,30
77,84
2010
43,18
50,61
25,60
39,08
46,28
22,04
1,94
2,12
1,50
2,17
2,21
2,06
56,82
49,39
74,40
Change
%
8%
6%
16%
10%
9%
16%
-15%
-23%
32%
-3%
-5%
3%
-5%
-6%
-4%
2009
38,14
45,52
20,68
33,97
40,87
17,64
2,43
2,78
1,59
1,75
1,87
1,46
61,86
54,48
79,32
2010
41,64
49,23
23,69
37,58
44,72
20,67
2,24
2,57
1,46
1,82
1,93
1,57
58,36
50,77
76,31
Change
%
9%
8%
15%
11%
9%
17%
-8%
-7%
-8%
4%
3%
7%
-6%
-7%
-4%
Source : TUIK 2009, 2010
Computer and Internet Usage in the Seperation of Urban and Rural
0
10
20
30
40
5043,18
50,61
25,60
41,64
49,23
23,69
Computer usage Internet usage
Turkey Urban Rural
60
Source: TUIK 2011
25
In the lastthere months
Between three monthsand one year
Turkey
Urban
Rural
Turkey
Urban
Rural
Turkey
Urban
Rural
Turkey
Urban
Rural
ANNUAL REPORT
2.1.2. IT Market Comparison in the World and TurkeyAccording to IDC’s report regarding growth rates between countries, the highest growth rate from 2009 to 2010 was seen in Ukrainewith 76% and respectively Russia with 55 %, BAE with 32 %, Romania with 28 %, Egypt with 27 %, South Africa with 26 %, Poland,Saudi Arabia and Czechoslovak with 16 %. Turkey has been the 10th in above rank with 12 % growth rate on PC quantity basedsales. Israel has been stated after Turkey with 9 % growth rate.
Year Number of Project
(000) TRLÜrünleri
(000) $ US (000) TRL (000) $ US
Amount of Total Payment(Current Prices)
Amount of Total Payment(2010 Prices)
Source: State Planning Agency 2009, Public Information & Communication Technology Investments
2002
2003
2004
2005
2006
2007
2008
2009
2010
203
204
211
200
203
237
271
244
177
286.013
369.321
451.181
626.253
791.065
816.753
814.890
847.663
1.083.743
158.808
208.656
281.285
388.494
557.716
555.463
591.529
590.418
675.524
478.029
536.205
587.673
814.734
900.868
927.964
835.966
890.046
1.083.743
297.511
318.536
376.958
533.215
685.156
629.695
589.603
619.939
675.524
World IT Market - Country Based PC Market Growth Analysis, 2009 - 2010 (Quantity)
0
2.000
4.000
6.000
8.000
10.000
12.000
Russia Turkey Poland Ukraine SaudiArabia UAE
7.122 3.210 2.854 1.351 1.997 1.762
11.070 3.607 3.304 2.379 2.319 2.318
%55 %12 %16 %76 %16 %32Growth
2010
2009
SouthAfrica
1.637
2.069
%26
Source: IDC 2011
Israel Egypt
1.121 1.011 656
1.305 1.104 836
%16 %9 %27
Romania
478
614
%28
Turkish IT Market - Dealers Market Share Analysis, 2009 - 2010 (Million $ USD)
0
200
400
600
800
1000
1400
Retail ClassicDealers
ProducerShops
ProducingShops
DirectProducer Telecom
1.339 473 179 172 163 75
1.329 633 357 220 120 76
- %0.7 %33.8 %98.8 %27.6 - %26.5 %1.3Growth
2010
2009
AuthorizedSeller
147
76
- %48.5
Source: IDC 2011
43
13
- %69.6
1200
%47 %22 %13 %8 %4 %3Market Share 2010 %3 %0
VirtualShops
26
Chech Rep.
ANNUAL REPORT
According to IDC’s report regarding Turkish IT Market, market shares of the dealers in 2010; 47 % in retails, 22 % in Regular Dealers,13 % in Producer Shops, 8 % in Corporate Dealers, 4 % in producers, 3 % Telecom, 3 % in Authorized Sellers, less than 1 % in VisualMarkets (online shops). The major growth was recorded by Producer Shops and Regular Dealers, Corporate Dealers and TelecomDealers respectively.
The growth rates are 98 %, 33,8 %, 27,6 %, 1,3 % respectively. On the other hand, Visual Shops -69,6 %, Authorized Sellers -48,5%, Producer Direct -26,5 % and Retail -0,7 % were shrank. The stakes of retail shops were too small and especially after 2007 and2008, the market share of these shops increased in considerably important amount. The main factor was that the individual userstook important stake from the market up to 40 % in 2010. It is expected to be higher in the future.
2.2 Sub-segments of the ICT SectorTurkish IT sector is essentially separated into three main groups, namely hardware, software and IT services. According to the Turkeyresults published by IDC in 2011, the business volume of the Turkish Information and Communication Technologies (IT) market reached5.3 billion USD in 2009, 5.9 billion USD in 2009. The same report shows that the share of the “Hardware”, “Software” and “IT Services”sub-segments in the total market are 75 %, 10 % and 15 %, respectively. This indicates that the Turkish IT sector has got a structurewhere “hardware” is predominant with respect to income created.
Growth on Segments
Hardware
Software
Service
IT
11,8%
9,7%
6,5%
11%
18,2%
14,8%
8,7%
16%
11,3%
13,2%
9,9%
11%
14,7%
13,6%
10,8%
14%
9,9%
11,6%
11,0%
10%
Turkish IT Sector 2009-2014 (Mio $)
2009 2010 2011 F 2012 F 2013 F 2014 FIT Sector Contents (x m $)
Hardware
Software
Service
Total IT
Growth %
3.975,0
532,6
853,6
5.361,2
4.443,1
584,2
909,4
5.936,7
10,7%
5.251,0
670,9
988,2
6.910,1
16,4%
5.842,0
759,7
1.086,2
7.687,9
11,3%
6.699,5
863,1
1.204,0
8.766,6
14,0%
7.365,6
963,3
1.336,1
9.665,0
10,2%
Distribution in Segments
Hardware
Software
Service
IT
74,8%
9,8%
15,3%
100%
76,0%
9,7%
14,3%
100%
76,0%
9,9%
14,1%
100%
76,4%
9,8%
13,7%
100%
76,2%
10,0%
13,8%
100%
74,1%
9,9%
15,9%
100%
(Telecom, Network tools are not included for the calculation)
2010 2011 F 2012 F 2013 F 2014 F
2009 2010 2011 F 2012 F 2013 F 2014 F
IT Sector Expenditures, 2009-2014 (mio US$)
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
2009 2010 2011 2012F 2013F 2014F
3.975 $ 4.443 $ 5.251 $ 5.842 $ 6.700 $ 7.366 $
533 $ 584 $ 671 $ 760 $ 863 $ 963 $
854 $ 909 $ 988 $ 1.086 $ 1.204 $ 1.336 $- Service
- Software
- Hardware
Source: IDC 2011
8.000
27
ANNUAL REPORT
According to the 2011 Turkey IT Expenditures Survey conducted by IDC, the Turkish IT market is expected to have a 12.5% compoundannual growth rate (CAGR) in the period between 2009 and 2014, reaching 9.6 billion USD in 2014. These estimates are based onthe anticipated growth rates, investments anticipated to be made by companies rapidly as they were deferred due to the crises of2001 and 2008, effects of IT expenditures incurred by the public sector for e-transformation projects on IT consumption, increaseduse of IT in education, anticipated increased rate of the use of internet and mobile technologies and replacement investments to becaused by new technologies.
2.2.1 Hardware MarketHardware market in Turkish IT sector is the sub-segment having the biggest share regarding the sales amounts of 1999 – 2009, withthe ratios changing between 57% and 74%. With tax stimulus packages of the government for only 6 months in 2009 and constitutionalreferendum at the end of third quarter were both supported the growth in the sector. The hardware sector achieved growth from 2009to 2010 as 11,8 %.
Growth Rates & Targets of Hardware Expenditures in IT Sector, 2009-2014 (Mio USD,%)
Source: IDC 2011
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
2009 2010 2011F
Hardware % Growth
3.9754.443
5.251
5.842
0%
2%
4%
6%
8%
10%
12%
(% G
row
th)
Har
dwar
e
8.000
2012F 2013F 2014F
6.700
7.366
14%
20%
18%
16%
2009 2010 2011F 2012F 2013F 2014F0.0%
15.00%
30.00%
45.00%
90.00%
75.00%
60.00%
Hardware Software Service Total IT
28
Growth Rates in Turkish IT Market Between 2009-2014 (%) on Sub-Group Based
Source: IDC 2011
ANNUAL REPORT
The developments at PC market are closely related with the ongoing projects in public and educational sectors. The stable growthin demand of the consumers is also considered as another significant factor on this issue. The growing retail chains and financialopportunities offered to the consumers by these chains have been the most important driving forces for the PC sales. Besides, noticingthe benefits of mobile computing systems by the corporate companies is seen as another important reason for the growth. At thispoint, one may clearly see from then market sales figures that the demand by the small and large enterprises seeking productivity forportable PCs as an important part of mobile data systems has increased.
IDC expects Hardware sector capacity is expected to reach 7,336 million USD in 2014.
2.2.1.1 PC Market:The hardware sub-group consisting of Desktop PCs, portable PCs (“Laptop PCs”, “Notebooks”), Servers and Peripherals is monitoredvia the sales data in PC market which represent a very significant portion of the total sales. Accordingly, total sales of the PC marketwere realized as 2.691.519 in 2008, whereas such total number (both notebook and desktop) rose to 3.210.386 units with an increaseof 19.3% in 2009. In 2010, it reached 3.607.136 with 12,4 % growth rate.
However, when the sales in the PC market are considered by quantity excluding the server market, it is noticed that portable PCshave gained majority in this market for the first time in 2009. From the year of 2004, supplying portable PCs with high performance,increased mobility possibility with their lighter structure and affordable prices to the consumers has enabled significantincreases in their sales, and finally, sales of portable PCs have surpassed those of desktop PCs in 2009.
When the market share of mobile PC was 35,7 % in 2005, it reached 63 % in 2009 and 66,1 % in 2010. In this paralel, when themarket share of desktop PC was 64,3 %, it decreased to 37 % in 2009 and 33,9 % in 2010.
29
Trends in Market Shares of Desktops & Notebooks
54% 46%
37% 63%
34% 66%
2009
0% 20% 40% 60% 80% 100%
1995
2000
2005
2008
2010
2011F 32% 68%
64% 36%
92% 8%
96% 4%
Quantity
45% 55%
32% 68%
29% 71%
2009
0% 20% 40% 60% 80% 100%
1995
2000
2005
2008
2010
2011F 28% 72%
53% 47%
84% 16%
91% 9%
Amount (USD)
Desktop Market Share Notebook Market Share Desktop Market Share Notebook Market Share
Desktop
Notebook
(%)64.3
35.7
20051.027.336
570.366
Estimation of Turkish PC Market on Type and Quantity Based, 2005-2010
2006 (%)1.331.144 63.7
757.597 36.3
2007 (%)1.415.568 54.3
1.191.332 45.7
2008 (%)1.455.049 54.1
1.236.470 45.9
CAGR(%)3.52%
33.13%
2009 (%)1.186.862 37.0
2.023.524 63.0
2010 (%)1.221.607 33.9
2.385.529 66.1Total 100,01.597.702 2.088.741 100,0 2.606.900 100,0 2.691.519 100,0 17.69%3.210.386 100,0 3.607.136 100,0
200629.57%
32.83%
20076.34%
57.25%
20082.79%
3.79%
Growth
2009-18.43%
63.65%
20102.93%
17.89%30.7% 24.8% 3.2% 19.3% 12.4%
Source: IDC 2011
Type
ANNUAL REPORT
30
Besides the producers which have international brands, a considerable part of hardware production both inside and outside the countryis performed with the main components that are obtained from the global computer parts suppliers by big and small-sized companies.Over time, these factors have transformed the hardware product market and the especially PC market into a low added value structurein which the competition is highly sensitive to the price.
According to IDC’s 2011 report, 36 % of Desktop PCs were sold by local producers, 28 % International Producers and the rest consistsof processor selling amount to local market. In this category, local producers are dominant in 2010. When look at the Notebookamounts, local producers have market share of 19 % and International producers have market share of 81 %.
Desktop PC34%
Turkish IT Market on Main Form Based 2009 – 2010
Mobile PC66%
2010
Total PC Sales Quantity: 3.607.136
Mobile PC63.0%
Desktop PC37.0%
2009
Total PC Sales Quantity: 3.210.386
InternationalProducers
28%
Local Producers36%
Suppliers Based Distribution of Turkish Desktop and Notebook Market, 2010
Desktop
Local Producers19%
InternationalProducers
81%
Source: IDC 2011
Notebook
Others36%
Source: IDC 2011
ANNUAL REPORT
31
2.2.1.1.1 Desktop PCsPC Desktop products have represented the most important product category within the sub-group of hardware in terms of the unitand sale volumes until 2009. Total sales of Desktop PCs decreased from 594 thousand in 2000 to 251 thousand in 2001 due to the2001 economic crisis. PC sales increased with the rate 41% CAGR between 2002 and 2005, well above the economical development,with the influence of the decrease in the year 2001 and reached 1 million units in 2005. Desktop PC sales rose to 1.33 million unitsand 1.4 million units with an increase of 30% and 6% in 2006 and 2007, respectively.
Such sales again increased by 10-15% in the first three quarters of 2008 and by 2,8% in the last quarter due to the global crises,and closed the year with a sales quantity of 1.45 million units, which was the highest historical level. However, as a consequence ofthe development of the mobile technology, the share of the desktop PC sales in the total PC market decreased to 37%, and the salesquantity was realized as 1,19 million units with a decrease of 18,4% in 2009.
PC Desktop market exhibits much segmented structure where the domestic producers are dominated. While international producersget a market share of 28%, the remaining part of the market is under the control of the big or small sized domestic producers. Theseare Hewlett Packard 16,3 %, Casper 13,9 %, Exper 11,3 %, Arçelik 3,5 %, Fujitsu 3 %, Lenovo 3 %, Pro2000 2,9 %, Dell 2,4 %,Crea 2,4 %, Acer Group 1,7 %, Vestel 1,6 % and Others 38 %.
Quantity Based Distribution of Desktop Sales (000), 2010
Source: IDC 2011
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0
Desktop PC 593.5 251.4 344.8 516.4 710.1 1.027.3 1.331.1 1.415.6
2000 2001 2002 2003 2004 2005 2006 2007
1.600,0
1.455.0
2008
1.186.9
2009
1.221.6
0,02010
Others38.0%
Vestel1.6%
Acer Group1.7%
Crea2.4%
Dell2.4%
Pro20002.9%
Lenovo3.0%
Fujitsu3.0%
Arçelik3.5%
Exper11.3%
Casper13.9%
Hewlett - Packard16.3%
ANNUAL REPORT
32
2.2.1.1.2 NotebooksSince 2004, a significant consumption activity has started all over the world in Portable PCs (notebook, netbook) market when theinternational big producers decreased the prices with increasing competition in this market and the developing technology. As aconsequence of affordable price policies of producers and retailers, notebook prices for end users decreased to 400 - 1000 USD onaverage in Turkey, which eventually made these products affordable for home users and increased the widespread usage of thenotebooks in the offices. Accordingly, the share of Portable PCs (except for server) in the total PC sales by quantity has increasedfrom 5% to 23.8% between 1998 and 2004 and then to 45.9% in 2008. Supplying portable PCs with high performance, increasedmobility possibility with their lighter structure and affordable prices to the consumers has enabled significant increases in their sales,and finally, sales of portable PCs have reached 63.03%, well above those of desktop PCs in 2009. In 2010, it reached 66,1 %.
Sales of Portable PCs in 2000 increased from 51 thousand units to 221 thousand units in 2004 and then rose to 1.236 thousand unitsin 2008, 2.023 thousand units in 2009 and 2.385 thousand units in 2010. According to the 2011 results of the IDC report on TurkishIT Expenditures, the Turkish mobile PC Market is estimated to reach 3 million units in 2011, and the share of the mobile PC sharesin the total PC sales shall reached 66,1 % in 2010.
It seems that international brands are more dominant in the Notebook PC market than the Desktop PC market. According to the2010 data obtained from IDC, the most important leading brands in the Portable PC market, namely Acer, Hewlett Packard, Toshiba,Casper, Lenovo and Dell, control 66.1% of the market in terms of quantity.
As a consequence of the fact that just like in the desktop products in previous periods, the structure of notebook products tends tobe standardised, it is observed that some part of the market shares of international brands are left to the domestic producers. Themarket share of the domestic producers which was 10% at the end of the year 2003 increased to 16.8% in 2008 and 19% in 2010.According to the 2010 results, the shares of Casper and Exper, which are the two big domestic market of the Turkish market, wererealized as 8,84 % and 5.77%, respectively.
Notebook Sales (000) and Supplier Based Distribution of Sales, 2010
Source: IDC 2011
250,0
500,0
750,0
1.000,0
1.250,0
1.500,0
1.750,0
Notebook PC 51,1 33,2 68,9 138,1 221,5 570,4 757,2
2000 2001 2002 2003 2004 2005 2006 2007
2.000,0
1.191,3
2008
1.236,5
2009
2.023,5
0,0
2.250,0
2010
2.385,5
2.500,0
Others8.5%
Asus7.0%
Exper5.8%
LG Electronics6.1%
Samsung6.5%
Dell8.7%
Lenovo8.8% Casper
8.8%
Toshiba10.1%
Hewlett - Packard14.5%
Acer15.1%
ANNUAL REPORT
2.2.2 Software MarketThe size of the software sub-group increased from USD 276 million in 1999 to USD 377.3 million in 2000. However, in the 2001 crisis,just like in hardware sector, software sector decreased to USD 172.3 million with shrinkage of about 54%. In 2009 it reached 533million USD. However, due to the pressure of the crises that has deepened in the last quarter of 2008 on the consumption tendencies,the sales of the Turkish Software Market decreased to 609 million USD with minor shrinkage of 1% in 2009, contrary to the dramaticshrinkage of the 2001 crisis.
As of the end of 2010, the share of the software sub-group in the entire IT market in terms of the total turnover is at very low levels incomparison with Europe and America with 9.8% share, mainly because of pirated usages. Microsoft Office, being a commonly usedprogram, is the most pirated program. The laws which were enacted by the Turkish Parliament in 1995 for purpose of ensuring theprotection of the registration rights decreased the pirated usage rate. According to the estimations of our company, while 70% of thesoftware is illegally used in Turkey, this rate is around 35% in the USA.
Because the operating system software is purchased as incorporated into the computer, its pirated usage is less than other software. The registration right laws had influence on the custom suppliers using pirated products most frequently. Most of the custom suppliersuse the licensed operating system software at present.
0
1
2
3
4
5Ages of the Biggest 20 Software Companies of Turkey
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average13 years
Source: State Planning Agency 2007, Information and Communication Technology Specialisation Commission
IT Sector Software Expenditures Growth Figures and Growth Targets, 2009-2014 (Mio USD,%)
Source: IDC 2011
0
200
400
600
800
1.000
1.200
2009 2010
Software % Growth
2011F
0%
2%
4%
6%
8%
10%
12%
(% G
row
th)
Sof
twar
e
2012F
533
14%
16%
2014F2013F
584671
760
863
963
33
ANNUAL REPORT
The average age of the top 20 software companies of Turkey is 13. While the imported products in the software sector have the mostimportant share, there is also an increase in the Turkey-based software. Because the government keeps it compulsory to use thedomestic software in some of the projects, it is expected that shares of the Turkey-origin software companies will continue to increase.A great part of the software produced in Turkey is used by the banking, accounting, human resources and textile sectors for production.
While some part of the software companies offers the ready-to-use packages, particularly the domestic companies in the sector offersoftware solutions tailored to specific requirements of their customers. Microsoft is the leader of the application software and IBM isleader of the system software. The other major companies in the software sub-group are SAP, Oracle, Havelsan, Logo Yaz›l›m, LikomYaz›l›m and Link Bilgisayar.
2.2.3 IT Services MarketContrary to the hardware and software sub-sectors, IT Services sub-sector s the constant and necessary services relating to theexisting IT investments periodically and leasing services. In the 2001 crisis, the Turkish IT Services Market decreased to 288.2 millionUSD with a decrease of 39% comparing to the previous year. The volume of the Turkish IT Services Market grew faster than the totalmarket in 2002, reaching 403.5 million USD, and the share of the IT Services in the total market increased to a record level of 28.1%in the same year. However, in spite of the pressure of the crisis that deepened in the last quarter of 2008 on the consumption tendencies,the market was realized at 854 million USD in 2009.
The share of the IT Services in the total market was 15.9% in 2009, which decreased to 15.3 in 2010. However, it is expected thatthis share will increase due to the needs that may arise during the integration of newer technology systems on the existing systemsand outsourcing of IT operations by big companies and banks in particular.
‹ndeks Bilgisayar in the ICT Sector:In Turkey, Top 500 ICT Companies Ranking performed every year by Interpro Medya A.fi., our company ranked seventh in the generalranking based on turnover achieved in 2009 among the companies including telephone operators and mobile phone sellers. On theother hand, it ranked first, like the previous years, in the category of companies selling only computers. Further, it ranked first in sevenIT categories.
IT Sector IT Services Growth Figures and Growth Targets, 2009-2014 (Mio USD,%)
Source: IDC 2011
0
200
400
600
800
2009 2010
IT Services % Growth
854
1.086872
1.204
2011F
IT S
ervi
ces
0%
2%
6%
10%
(% G
row
th)
4%
8%
12%
1.000
1.200
1.400
1.336
2012F
1.600
2014F2013F
909988
34
ANNUAL REPORT
Company
2009 Top 10 ICT Companies Revenue Range (Sales Revenue)
2009Range
1
2
3
4
5
6
7
8
9
10
Türk Telekom
Turkcell
Vodafone
Avea
KVK
Gen-pa
‹ndeks Bilgisayar
Hewlett-Packard
Teknosa
Digitürk
US $ (mio)
6,787
5,739
1,631
1,608
1,317
1,088
698
612
562
514
Important Events in the IT Sector in 2010:
Important events that occurred in the Turkish IT Sector in 2010 are listed below:
Business - Entertainment - Education world is recognised by Technology!
1- Announcement of smart devices2- Announcement of tablets3- Demand for internet connection from everywhere4- Individual Consumer is the leader of technology world5- Telecom campaings6- Prevalence of Social Networking websites in Anatolia7- Transformation of citizen << >> e-citizen8- Turkey became the 7th biggest internet market of Europe.9- Constitutional referandum at the end of third quarter, market started to have gradual growth.
2.3 Growth of the Turkish IT Sector:
Factors Inciting the Growth of the Turkish IT Sector:
• Rapidly Increasing Usage of Technology: All business and public companies recognise the value of the increasing control oversources, development of productivity, expanding the business volume and analysing the customer requirements by using thetechnological devices.
• Economic Performance: The development of the IT market was struck down by the economic crises of 2001 and 2008. Afterthe economic crisis, Turkey entered a recovery period with strict economic policies. Economic stability makes a direct positive effecton IT investments.
• Changing Economic Structure: The importance of service sector increased, with a decrease of agriculture in the economy inTurkey in the last ten years. The increasing operations in the service sector instigate the IT investments especially in retail, wholesale,logistics, financial services, professional and personal services markets.
• Developing Trade with European Union-27 and other EU countries: Turkey made 38.94% of its importation from the EuropeanUnion (EU)-27 countries in 2010, respectively. When including also the other European countries in the figures, 55% of the importationwas made from the EU countries in 2010. On the other hand, 46% of the total export is made to the European Union (EU)-27 countriesin 2010. When including also the other European countries in the figures, 56% of the exportation was made to the EU countries in2010.
Development of the trade with the European Union and Direct Foreign Investments in Turkey will increase IT investments and competitionin local industries, instigate the investments of European Union-originated companies in Turkey, which ultimately expedites the changeof quality standards in data management and analysis systems.
35
ANNUAL REPORT
Direct Foreign Investment Inflow: Direct foreign capital investments in developing countries such as Turkey, make importantcontribution to the development of the country economy. It makes direct contribution to the improvement of IT investments.
The economic reforms implemented by Turkey just after the 2001 crisis and the macroeconomic stability, together with the politicalstability, contributed to the improvement of the business and investment environment and broadened the horizon of the companiesin their investment decisions. With the economic and political stability environment, Turkey utilized foreign resources in considerableamounts. The amount of the direct foreign investment flowed into Turkey was 1.8 bn USD in 2003, 2.9 bn USD in 2004, 10 bn USDin 2005, 20.2 bn USD in 2006, 22 bn USD in 2007 and 18 bn in 2008. With the effect of the global crisis towards the end of 2008,the foreign capital investments remained limited to 18%. However, the effects of the crisis have aggravated in 2009, which ultimatelyresulted in a decrease of 58% in such investments (7.6 bn USD). In 2010, it became 7 billion USD with 8 % decrease.
Privatization: Income obtained from privatization has increased considerably in the last 5-6 years. According to the data obtainedfrom the Turkish Privatization Administration, the income obtained from privatization was 187 million USD in 2003, 1.3 billion USD in2004, 8.2 billion USD in 2005, 4.3 bn USD in 2007, 6.3 billion USD in 2008 and 2.3 billion USD in 2009. 1.225 million USD, 600 millionUSD and 440 million USD out of 2.3 bn USD obtained in 2009 was resulted from the privatization of Baflkent Elektrik, Sakarya Elektrikand Meram Elektrik, respectively. In 2010, 3,1 billion USD privatisation was made.
Investments made following the privatizations by the new owners of the privatized companies in new infrastructure and technologicaloptimization efforts supported the growth in the IT sector.
Banking Sector: The banking sector has undergone a structural change since 2001. Banks are under the pressure of the diminishingprofitability due to the changing market conditions. Bank managements are trying to increase their profitability while protecting theirmarket shares. To be marketing-oriented and address to the target customer segment more efficiently have been necessary for allbanks. Most of banks have strong growing targets in all customer segments.
IT Managements in Turkish Banks replace the existing IT infrastructure in a certain schedule, instead of replacing all of them at once,in order to use them efficiently and respond to the requirements of the competition.
Public Sector: Information Society projects conducted in accordance with the Information Society Action Plan established by thePrime Ministry are defined one of the most important projects of the general policies of the Government. As part of such efforts, e-transformation Turkey Project aims to carry out the process of transformation into an information society in a harmonious and integratedstructure under. The administration in charge of the project is the State Planning Organization attached to the Prime Ministry. TheState Planning Organisation determines its public investment program by evaluating and selecting the proposals for projects submittedby public institutions and agencies with respect to the plan targets, public investment policies, national economy, the European Unionprocess, sector-specific and intersector priorities and allocating resource to the selected projects.
It is estimated that the number and amount of the projects relating to the public information and communication technology will increasein the forthcoming period.
Telecommunication Sector: Turkey made major progress in the telecommunication sector with respect to the compliance with theEU and catching up with the global changes in the recent years. As part of the process of the accession of Turkey to the EuropeanUnion, the chapter “Information Society and Media” was opened and the negotiations have started on 19 December 2008 becauseTurkey has met the criteria for the chapter to be opened. On the other hand, the chapter “Information Society and Media” in the ThirdNational Program, which was adopted on 31 December 2008 to schedule the commitments of Turkey for harmonisation with the EUacquisition, commits to complete necessary arrangements in 2009 and 2010.This commitment aims at the liberalization of the electroniccommunication sector, creation of good working competition atmosphere, catching up with the development in information andcommunication fields and establishment of infrastructure and legal foundations for the related fields. Accordingly, it is estimated thata resource of about 8 million Euros will be needed for the institutional structuring for purpose of the harmonization with and implementationof the EU acquits.
The enforcement of the Electronic Communication Law, which had been on the agenda of the telecommunication sector for five yearsfrom 2003, on 10 November 2008 and the enforcement of the Authorisation Regulation on Electronic Communication on 28 May 2009are some of the favourable events that occurred in the recent years. In addition to the foregoing, the enforcement of the NumberPorting Regulation at the beginning of July may be considered one of the most important steps taken for introduction of the thirdgeneration electronic communication service.
Rapid progress of technological developments makes impact on every part of our lives and creates some concepts such as informationeconomy and internet economy. Extraordinary developments in the IT sector go beyond the country borders of the goods and financemarkets and take the world into an economic globalization. Besides such progress in the IT technology, telecommunication sectoralso experiences many developments. As a consequence, it is inevitable that the countries that cannot keep up with such developmentswill remain behind the technologically advanced countries.
36
ANNUAL REPORT
Logistics Sector: Intensifying competition in the logistics sector entails to follow the business process via Supply Chain Management(SCM) to control the supply of materials and distribution costs. Big producers operating in consumables and household appliancesfeel this need considerably. Supply Chain Management solutions require making additional investments in web technologies andcommunication networks, etc.
Retail Sector: Competition in the Turkish retail sector is intensifying. Investments made by international actors in the Turkish marketincreasingly continue. Media Markt, Dixons, Darty, Electro World and Best Buy have also been included in the chain stores in Turkeyin the recent years. Entrance of the international actors into the Turkish market has made a favourable effect on the growth rate ofthe sector. It is the first time Best Buy and Media Markt has met in the Turkish market in 2009.
Growing Individual Consumer Market: It is obvious that consumers use the IT more than before. Opportunity of payment by instalmentwith credit cards and growth of retail markets rapidly support the growth of the individual consumer market. PC usage of end usersand their demand for peripherals have increased from 7% to 38% of the market between 1995 and 2009. Accordingly, the structureof the market has changed, and individual consumers have represented the biggest share in the end user market since 2007.
Internet Technology and Portals: Corporate usage of internet technology is still improving. Data portals become common via internetbanking. The public sector is the main factor instigating the portal turnovers due to the e-government projects. Telecommunication,production, insurance and distribution sectors use portals for developing business with partners and suppliers, enhance communicationand cooperation with customers and develop the management of the internal business processes.
According to the Information society strategy (2006-2010) report, priority subjects considered and hindrances that should be overcomefor all actions taken towards an information society are concentrated on the following items:
• Increasing the sustainable growth and competitiveness,• Enhancing the life quality,• Prevention of numerical gap,• Enhancing the competence of human resource and employment,• Presentation of public services from multi-platforms in a citizen-oriented and efficient manner,• Generalizing the e-trade,• Ensuring standardization and security in information society applications,• Develop R-D and innovativeness in tune with the market and creating value accordingly,• Generalizing wide band communication infrastructure,• Enriching the content and information society applications,• Making use of the convergence potential of technologies,• Making use of media channels for development of information society.
Strategic Priorities of Turkey
According to the Information society strategy (2006-2010) report, the priorities of the Turkish Strategy are established on the following7 foundations:
1- Social Transformation: "Opportunity for information and communication technologies for everybody". Economic and social benefitwill be increased by efficient use of citizens in their daily and working lives.
2- Penetration of Information and Communication Technologies into Business Life: "Competition advantage of companies withinformation and communication technologies".
SMEs will be encouraged to prefer e-trade by increasing their computer ownership and internet access rates; the need for informationand communication technologies relating to the strategically important sectors and regions will be determined and to meet such need,sector-specific productivity programs will be implemented.
3- Citizen-Oriented Service Transformation: "Presentation of public service in high standards"Public services will be transferred to electronic environment starting from the frequently used and value added services via informationand communication technologies, and at the same time, the business processes will be restructured in accordance with the userrequirements, thereby making service presentation more efficient.
4- Modernization in Public Management: "Public management reform supported with IT"An e-government formation attaching priority to efficiency and citizens’ satisfaction and having organization and process structuresin tune with the country conditions will be realized by support of IT.
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5- Global Competitive Information Technologies Sector; "Internationally acting IT Sector"Actions to be taken are project-oriented services, improvement of the capabilities and international expansion in IT services and morecompetitive sector-specific solutions in software.
6- Competitive, Widespread and Cheap Communication Infrastructure and Services; "Providing access to high quality andcheap wide band to every level of the society"For ensuring the improvement and widespread usage of the communicational infrastructure and services, an efficient competitiveenvironment will be created in the field of the telecommunication infrastructure. By this way, fast, secure, continuous and qualitycommunication services will be provided, and an environment suitable for the establishment of the telecommunication infrastructuresbased on new technologies will be created.
7- Development of R-D and Innovativeness: "New product and services suitable to the demand of the global market"Priority will be attached to R-D activities in the IT sector which is a highly demanded Innovative and highly value-added sector in theglobal markets. Development of new technologies and transformation of such technologies into production will be supported. Inaddition, for development and efficiency of R-D and innovativeness activities, ITs will be used to the maximum extent.The first four of the foregoing strategic priorities are for the change in the daily life of the citizens participating in the economic andsocial transformation, public sector and business life, and the other strategic priorities are for the IT infrastructure necessary for therealization of such transformation, strengthening the sector that will provide such infrastructure and development of the new productand services that will enhance the competitiveness of our country, being suitable to the demands of the market.
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3. SUBSIDIARIES
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3. Subsidiaries
Name of Subsidiary Percentage of Share Issued Capital
Datagate Bilgisayar Malzemeleri A.fi.(*) % 59,24 10.000.000 TRL
Neteks ‹letiflim Ürünleri Da¤. A.fi.(*) % 50,00 1.100.000 TRL
Neotech Teknolojik Ürünler Da¤›t›m A.fi. % 80,00 1.000.000 TRL
‹nfin Bilgisayar Ticaret A.fi. % 99,80 50.000 TRL
Neteks D›fl Ticaret Ltd. fiti. (**) % 49,50 5.000 TRL
Teklos Teknoloji Lojistik A.fi. % 99,99 5.000.000 TRL
(*) With %7,5 registered, total %59,24(**) Neteks D›fl Ticaret Ltd. fiti is a 99% owned subsidiary of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi.
The financial statements of Datagate Bilgisayar Malzemeleri A.fi., Neotech Teknolojik Ürünler Da¤. A.fi. and Teklos Teknoloji LojistikHizmetleri A.fi. are consolidated by full consolidation method and those of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. by proportionalconsolidation method. The financial statements of ‹nfin Bilgisayar Ticaret A.fi. and Neteks D›fl Ticaret Ltd fiti are not included in theconsolidation because their low volumes of operation are not likely to be of significance for the financial statements.
3.1. Datagate Bilgisayar Malzemeleri Tic. A. fi.
Datagate is engaging in the representation, sales, distributorship, marketing, logistics andafter sales services of many IT producer supplying IT components such as microprocessors, harddiscs, memory units, optical units, motherboards, tapes, video accelerator cards, monitors, varioustypes of hardware supporting software.
The company was founded in Istanbul in 1992. Head office and logistic operations of the Company are carried out in Ayaza¤a MahallesiCendere Yolu No: 9/2 fiiflli /ISTANBUL. . Ankara and ‹zmir offices provide service for Anatolia.
The partnership started with the acquisition of 50.5% shares of Datagate Bilgisayar Malzemeleri A.fi by ‹ndeks Bilgisayar A.fi. in 2001reached 85.00% with an additional acquisition of 34.5% by the same company in November 2003. Partnership share of ‹ndeksBilgisayar decreased to 59.24% with the public offering of Datagate in February 2006.
In February 2006, the shares of Datagate Bilgisayar Malzemeleri Tic. A.fi. were offered to public successfully, restricting the preferentialrights of the existing shareholders, and begun to be traded in the New Economy Market of Istanbul Stock Exchange. Its capital, whichwas TRL 1,550,000 before public offering, has increased to TRL 6,600,000 following the public offering. With the public offering, thecapital of Datagate Bilgisayar Malzemeleri Tic. A.fi. was increased from TRL 6.600.000 to TRL 10.000.000 in 2007, covering TRL1.910.004 from the profit of the period in 2006 and TRL 1.489.996 from the Share Premiums. The maximum registered capital ofthe company is TRL 20.000.000.
Datagate was subject to an Independent Audit and it achieved sales revenue of TRL 305.497.533 in 2010 according to its audit reportwhich is prepared in accordance with International Financial Reporting Standards as required by the Capital Market Regulations. Thefinancial statements show that the company earned an operating profit of TRL 4.657.774 and net profit of TRL 1.712.982 in 2010.
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The main product groups and brands distributed by Datagate are listed below:
Product Group Brands
3.2. Neteks ‹letiflim Ürünleri Da¤›t›m A.fi.
Neteks was established to provide network and communication products to the market through itsretailers and business partners as a distributor company in 1996. Neteks has tried to providecomplete network solutions to business partners by accommodating the most experienced namesin their fields in Turkey. Besides the corporate networks systems and its components of the companies
such as Cisco, Nortel Networks, 3Com, HP, Juniper and Avocent, Neteks A.S. also distributes corporate telephone switchboardsystems of Nortel Networks and Avaya, structural cable products of HSC, Corning, Panduit and Günko, network security solutionsof Check Point, Trend Micro and IBM ISS.
The main product groups and brands distributed by Neteks are listed below:
Ürün Grubu Markalar
Kurumsal A¤ Sistemleri Cisco System, Nortel Networks
3Com, HP, Avocent
Kurumsal Santral Sistemleri Nortel Networks, Avaya
Yap›sal Kablolama Çözümleri Corning, HCS, Panduit, Günko
A¤ Güvenlik Çözümleri Check Point, Trend Micro,
IBM, ISS
Hard Disk
Microprocessor
Main board
Display Card
Monitor
Laptops
Desktops
Memory Products
Server Products
Card Readers
Network Products
Backup Units
Accessories
Security products
Network (Modem-USB-Adaptor) products
Projector
Seagate, Maxtor
Intel
Intel, MSI
MSI, Sapphire, Gigabyte
AOC, Fujitsu, Acer
Acer, Fujitsu
Fujitsu, Acer
Veritech, Samsung, Transcend
Intel, Fujitsu
Sony
Intel
Fujitsu, Seagate
Belkin, Genius
GKB, Avermedia
Belkin
Acer
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Netex was subject to an Independent Audit and it achieved sales revenue of TRL 107.884.168 in 2010 according to its audit reportwhich is prepared in accordance with International Financial Reporting Standards as required by the Capital Market Regulations. Thefinancial statements show that the company earned an operating profit of TRL 2.675.970 and net profit of TRL 1.547.920 in 2010.
70% and 24% of the share of Neteks were acquired by ‹ndeks and Datagate A.fi., respectively, in 2001. In 2007, 6% of Neteks A.fi.’sshares which are held by other shareholders were acquired by Indeks A.fi. at US$ 374.000. Our company kept 50% of shares foritself and sold 26% to Westcon Group European Operation Limited at US$ 1.820.000. According to the agreement signed betweenthe parties, 24% of the shares of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. held by Datagate Bilgisayar A.fi, as a 59,24% affiliate of ‹ndeksBilgisayar A.fi. and listed in Istanbul Stock Exchange, were sold to Westcon Group European Operation Limited at US$ 1.680.000.
Of the 50% shares sold, 26% and 24% were provided by ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.fi and DatagateBilgisayar Malzemeleri Ticaret A.fi., respectively. ‹ndeks Bilgisayar A.fi. and Westcon Group have had 50-50% of the shares of NeteksA.fi after the sale of shares.
3.3. Neotech Teknolojik Ürünler Da¤›t›m A.fi.
Neotech Teknolojik Ürünler Da¤›t›m A.S. was established with a capital of 100.000 TRL on04.02.2005. The company, being an 80% affiliate of ‹ndeks A.S., operates in wholesale marketingof consumer electronics and communication devices. The company increased its capital fromTRL 100.000 to TRL 1.000.000 in 2007.
The main product groups and brands distributed by Neotech are listed below:
The contracts made between our company and Apple and Airties, respectively, have been transferred to ‹ndeks Bilgisayar A.fi., whichis our main shareholder, within the year.
Neotech was subject to an Independent Audit and it achieved sales revenue of TRL 122.424.058 in 2010 according to its audit reportwhich is prepared in accordance with International Financial Reporting Standards as required by the Capital Market Regulations. TheCompany earned an operating profit of TRL 2.959.890 and net profit of TRL 829.965 in 2010 according to the financial statements.
3.4. ‹nfin Bilgisayar Ticaret A.fi.‹nfin Bilgisayar Ticaret Anonim fiirketi was established in 2001 to help the retailers with their sales and exportoperations within the framework of investment operations under incentive certificates.
Due to the fact that its biggest part of purchase and sales of the company was arisen out of the companiesincluded in the financial statements, and its business volume was so low that does not make any impact on the financial statements,this company is left out of the said statements
Product Group Brands
Household Electronics Product Homend
Home Electronics Product Sony, Toshiba, Viewsonic, NEC
LG, Panasonic
Projectors NEC, Canon, Viewsonic
Mobile Phones Blackberry, Samsung, iPhone
Photo & Video Canon
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3.5. Teklos Teknoloji Lojistik A. fi
This company was founded under the name of Karadeniz Örme Sanayi A.fi. to operate in textile sector on03.01.1973. In March 2006, ‹ndeks has executed an important and greatest investment in IT sector bypurchasing Karadeniz Orme A.S., which is founded on a 39,761 square meters land and having 18,969square meters indoor area, in order to be used as a logistics headquarters. The trade name of Karadeniz
Orme AS has been changed into Teklos Teknoloji Lojistik Hizmetler A.fi. and its field of activity has been changed to as logisticsservices.
Teklos Teknoloji Lojistik Hizmetler A.fi. is providing logistic services to the companies operating in the IT sector. The company distributed10.287.389 units of products and 515.427 cartons in 2009.
Teklos was subject to an Independent Audit and it achieved sales revenue of TRL 6.160.060 TRL in 2010. According to its audit reportwhich is prepared in accordance with International Financial Reporting Standards required by the Capital Market Regulations. Thestatements show that the company earned an operating profit of TRL 3.388.433 and net profit of TRL 2.742.279 in 2010.
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4. OPERATION
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4. OperationThe supply and distribution structure of Indeks Bilgisayar A.fi. is shown as follows:
1. Structure of Product Supply and Distribution:Indeks operates as a main distributor (“broadline distributor”) in IT industry. It buys IT products from suppliers at certain prices andmaturity periods and subsequently sells the products to the sales channels that will sell them to the end user. The company doesnot plan to develop a sales structure that will include direct sales to the end user in the near future.
Supplier
‹NDEKS B‹LG‹SAYAR A.fi.
SystemIntegrators
Value AddedDealers Channel
Regular Dealers Retail Channel
RetailChain
RegularShops
E-Commerce
END USER
Supplier Supplier Supplier Supplier Supplier
1.1 Suppliers:The hardware and software suppliers of the company are grouped into two categories.• Global brands that operate in Turkey: ((IBM, HP, LENOVO, INTEL, SEAGATE, CANON, OKI, SYMANTEC, MICROSOFT, APC,FUJITSU SIEMENS, EPSON, TOSHIBA, SONY, ASUS): As this is the nature of the business, these global companies prefer workingwith distributors which are less in numbers instead of handling distribution,• Global brands that do not operate in Turkey: (KINGSTON, NEC, VIEWSONIC, WESTERN DIGITAL) These companies have not setup offices in Turkey yet. However, these companies conduct their imports, sales and marketing activities through the dealership ofdistributors.
1.1.2 Distribution Channel:As a distribution company, Indeks buys the products from suppliers. Furthermore, it resells them to the sales channels which sell tothe end user. The structure of distribution channels which Indeks sells to and which sell IT products to the end user in Turkey issummarised below:
1.1.2.1 Solution Provider Dealers Channel (System Integrators)With respect to the number of people they employ, companies in this channel have at least 100 employees. They are among therelatively old companies in the industry. The end user these companies target is solely the big corporate customers. They haveexperience in the industry and have especially high service, sales and product recognition capabilities. The main target of the companiesin this channel is to adapt new technologies to corporate customers.
The numbers of these companies are not more than 100 all over Turkey at the moment.
1.1.2.2 Value Added Dealers:With respect to the number of people they employ, companies in this channel have 25-100 employees. These companies are morelimited with respect to capital but thanks to their young and dynamic structures, they are able to make quick decisions and operateon low margins by keeping costs down. Their target group is multinational companies and corporate customers with generally onelocation.
Distributors support these companies with respect to finance, logistics, and product information. These companies do not have anintensive relationship with the manufacturers. The numbers of these companies are more than 500 all over Turkey.
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1.1.2.3 Regular Dealers (Classic):These are pretty small companies with a staff of 5 to 25. They do not have their own unique solutions. Their target is SMEs and thehome market. They number at least 4.000 to 5.000 and are the biggest group in the IT industry.These companies carry out their operations fully with distributor company resources. Their sales are more directed towards OEMproducts and peripherals than branded products.
1.1.2.4 Retail ChannelIn the recent years, Retail Chains diversified and reached huge transaction volume with the reason of investments made by local chainsshops and the investment also made by international chains in this category. Furthermore, Food Chain Shops and Dowry Shopsincreased their business volume. Majority of home market needs is provided by above mentioned chain shops in Turkey. For Indeks,there are 3 types of retail groups:
• Retail Chains:The retail chains are big groups having more than one store under the same brand such as Teknosa, Bimeks, Vatan, Gold,Media Markt , Darty, Electro world, Best Buy Teknolojiks, NT, Yalç›nlar, Evkur, Metro, Migros, Real, Carrefour, Tesco/ Kipa.The main function of some groups of this category is computer, while some of them such food markets and dowry shopsare chains dealing with computer as a secondary business.
• Regular Computer Stores (Classic):These stores are small companies where the owner of the store and a few sales representatives work and they operatewith limited resources. They are totally focused on computers.
• E-Retail:This channel is based on virtual markets which open virtual stores and operate in the internet medium. Due to the widespread
usage of the internet in the recent years, the number of the companies operating in this channel is increasingly growing.The companies such as Hepsiburada, e-store are the examples of this type of channel.
2. LogisticIndeks makes sales and distribution via its 382 employees and more than 7000 dealers with companies included into consolidationin its financial statements to 81 provinces of Turkey from its logistic centres in Istanbul, Ankara and Izmir.
The branch offices in Ankara and ‹zmir established in 1992 and 1995, respectively, operate as “district offices”. Having their ownlogistic, sales, accounting, finance, current accounts and customer services departments, they are responsible for sales to the dealersand development of the sales channels in their cities. Ankara office is responsible for the district Ankara, Central Anatolia and EasternAnatolia Regions, ‹zmir Office for the District Izmir, Western Anatolia and Aegean Regions. The areas not included the foregoing shallbe under the responsibility of the headquarters in Istanbul.
Indeks has executed one of the most important and greatest investments in IT sector by purchasing Karadeniz Orme A.fi., which isfounded on a 39,761 square meters land and having 18,969 square meters closed area, in order to be used as a logistics headquarters.The trade name of Karadeniz Orme A.fi. has been changed into Teklos Tekn oloji Lojistik Hizmetler A.fi. and its field of activity hasbeen customized to be able to work on the logistics services. Teklos Teknoloji Lojistik Hizmetler A.fi. is providing logistic services tothe group companies and other companies in IT sector as well. The head office of the company moved to its new location on26.10.2006.
Indeks has also district warehouses in Ankara and Izmir.
3. Invoicing and CollectionIndeks makes sales to almost all companies dealing with computer and IT products.
This kind of dealers, which are estimated as number about 5,000 in total in Turkey, are considered Regular Dealer (Classic Dealers).
Credit Committee:Credit claims of the dealers are submitted to the Credit committee that does meetings every week on a regular basis for this purpose.These meeting are organized with headed of CFO (Assistant General Manager responsible for Financial and Operational Affairs),Assistant CFO, Finance Manager, Credit & Risk Manager and Sales Managers of related customers.
4. Technical Support and Customer ServiceThe Company does not provide after sale service. Instead, it directs its customers to the companies of each product authorised toprovide service. It is because the suppliers prefer their own solution partner to provide service to the end user.
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5. Marketing and SalesDue to the structure of the IT industry, the technologies and prices of the products that Indeks distributes are subject to frequentchanges and improvements. Therefore, an efficient and effective inventory management and rate of inventory turnover may makesignificant impact on the operational performance of companies.
Considering the dynamic structure of the industry, Indeks assigns one product manager for each group of product. The productmanagers have the mission of understanding the requirements of the sales groups with differing targets and objectives are comprehendedbetter and therefore, the Company provides better service to such groups, following up the market and technology trends, executingthe marketing activites.
Exchange of information with customers are provided via web, e-mail and fax.
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5. CORPORATE GOVERNANCEPRINCIPLES COMPLIANCE
REPORT 2010:
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5. Corporate Governance Principles ComplianceReport 2010:1. Corporate Governance Principles Compliance StatementOur Company complies with and applies the Corporate Governance Principles published by the Capital Markets Board within theoperating period between 01.01.2010 and 31.12.2010. These principles are adopted by the company management. Some of theseprinciples were adopted immediately, and works continue to fulfil the deficiencies.
SECTION I - SHAREHOLDERS
2. Shareholders Relations Department:We have established an Investor Relations Department in order to facilitate the relations with the shareholders. The Department carriesout it activities reporting to Asst. General Manager-Finance Halil Duman, and contact information of the responsible people are asfollows.
During the period, Investor Relations Department has provided information to the shareholders and intermediary institution analysts,and to this end, questions asked via telephone, fax or e-mail were answered. Questions asked by the shareholders and intermediaryinstitutions during the period were answered pursuant to CMB's "Communiqué on the Disclosure of Special Events to the Public"Series VIII, No. 39. Besides, our Company makes a press conference each year, evaluates the previous year, publishes the targetsfor the relevant year, thus informs the investors. Recently, a press conference was made on 05.04.2011 for the group companies,and information was provided on the activities.
3. Use of Shareholders' Rights to Obtain Information:Shareholders direct their requests to our Company to obtain information via telephone, fax or e-mail. A great part of the questionsasked by the investors are on the subsidiaries of the Company, contents of the concluded distributorship contracts, capital increase,and share certificate activities. No distinction is made among shareholders as regards the exercise of the right to obtain information.
Aside from the annual press conferences, disclosure of special events submitted to ISE is another method for providing generalinformation. Our special event disclosures are also published on our web-site simultaneously. In order to help shareholders to usetheir rights to obtain information in an efficient way, detailed information is given www.index.com.tr, in the investors.
Assignment of a special auditor is not arranged as an individual right in the Articles of Association. In order to ensure shareholdersto use their rights to obtain information, the principle has been adopted allowing minority shareholders to notify any subjects, theyare doubtful of and request inspection of, to the Auditing Committee, and thus, investigation of such subjects. During the period norequest was made for assignment of a special auditor.
Moreover, in order to help foreign investors to use their rights to obtain information, an English version of the investors section of ourwebsite has been prepared, and company information, financial statements and notes, operation reports, and research reports wereuploaded to this section.
4. Information on General Assembly:2009 General Assembly of our Company was held on 20.04.2010. The General Assembly resolved the followings unanimously:
- Acceptance of the accounts of the 2009 Balance Sheet and Income Statement,- Acquittal and discharge of the Board Members and Auditors with respect to the accounts in 2009, and- Hiring AGD Ba¤›ms›z Denetim ve Dan›flmanl›k SMMM A.fi. for Independent Audit Services to be provided for the 2010 financialstatements,
The Company has a net profit after tax amounting to TRL 15.934.942 given in its financial statements for the year 2009, whichwere prepared pursuant to Communiqué of the Capital Markets Board Series XI, No. 29.
Name & Surname Title E-mail address Telephone No.
Halil Duman Assistant General Manager [email protected] 0-212-312 21 09
Naim Saraç Internal Audit Manager [email protected] 0-212-331 21 15
Halim Ça¤layan Accounting Manager [email protected] 0-212-331 23 70
Emre Ba¤c› Internal Auditor [email protected] 0-212-331 21 17
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- TL 544.647,09, which composes 5% of the net profit, i.e. TL 10.892.941,74 according to the legal records will be retained asthe 1st Issue Reserve Fund,- The First Dividend will be distributed in amount of gross TL 6.156.117,97 (TL 0,109931 for 1 share with a nominal value of TL1 in the rate of 10,9931%) and net TL 5.232.700,27 (TL 0,093442 for 1 share with a nominal value of TL 1 in the rate of 9,3442%),corresponding 40% of the net distributable profit, i.e. TL 15.390.294,91 found by deducting the 1st Issue Reserve Fund in amountof TL 544.647,09 from TL 15.934.942 , which is the net profit after tax.- The Second Dividend will be distributed to the Preferred Group A Shareholders in amount of gross TL 461.708,85 (TL 1.451,09for 1 share with a nominal value of TL 1) and net TL 392.452,52 (TL 1.233,43 for 1 share with a nominal value of TL 1), corresponding5% of TL 9.234.176,94 remaining after deducting the first dividend, i.e. TL 6.156.117,97 from TL 15.390.294,91, which is the netdistributable profit of the period,- Starting for profit distribution on 04 May 2010,
- Allocation of the remaining amount as extraordinary reserve funds,
- Election of Mr. Veli Tan Kirtifl and Mr. Haluk fien as the Members of the Auditing Board for a term of office of one year, unanimously.
5. Voting Rights and Minority Rights:In general, there is no privilege concerning voting rights. However,
• Pursuant to the Article 9 “Board of Directors and its Term of Office” of the Company's Articles of Association, "Half plus one ofthe members of the Board of Directors are elected from the candidates nominated by the Group A shareholders.”• Pursuant to Article 12 "General Assembly" of the Articles of Association, the rights given to the shareholders who represent at leastone-tenth of the principal capital by the Articles 341, 348, 356, 359, 366, 367 and 377 of the Turkish Code of Commerce, shall beused by shareholders who represent at least one-twentieth of the principal capital.• There is no company, holding shares in cross-ownership. Pursuant to the above explained provision of the Articles of Association,the method of minority shares' representation in the board of directors and use of accumulated votes is not applicable.
6. Dividend Distribution Policy and Deadline for Dividend Distribution:Our Company's Dividend Distribution Policy is to distribute in cash or in bonus share, or partly in cash and partly in bonus share,provided that it is no less than the minimum amounts stipulated by the Capital Market legislation, considering long-term growth andstrategies, investments and fund requirements, profitability and the expectations of shareholders, excluding the special conditionsrequired by extraordinary conditions in the economic conditions. Profit distribution for 2010 was done on time on 04 May 2010 asstated.
7. Transfer of Shares:The Articles of Association of the Company does not contain any articles limiting the transfer of shares.
SECTION 2 - PUBLIC DISCLOSURE AND TRANSPARENCY
8. Company Information Disclosure PolicyThe company information disclosure policy was formed in accordance with Article 20 of the articles of association regulating "PublicDisclosure and Transparency".
Disclosure of information to the public is made pursuant to the relevant provisions of the capital markets legislation.An information policy for public disclosure is prepared and announced to the public. Information to be disclosed to the public aresubmitted to the use of public in a timely, accurate, complete, understandable, interpretable, accessible and equal manner.
Ethical rules of the Company shall be determined by the Board of Directors and submitted to the information of the General Assembly. Implementations of ethical rules are announced to the public. Company's principles on social responsibility are also included withinthese rules.
In use of shareholder's rights, it is complied with the relevant legislation, to which the Company is subject to, this Articles of Association,and other In-Company regulations. The Board of Directors takes the necessary measures to ensure use of shareholder's rights.For the purpose of extending the shareholders' right to get information, submission of any information which may affect the use ofrights to the shareholders in electronic media is considered with great care.
Annual operation report, financial statements and reports, dividend distribution suggestion, articles of association amendment proposals,organisation changes, and other important information regarding the activities of the Company to be kept accessible to shareholders'inspection in the head office and branches of the Company and in electronic format at the Company website considered with greatcare.
Commercial relations with the Group companies and other partners are performed within the scope of market prices.
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Name & Surname Title E-mail address Telephone No.
N.Erol Bilecik Chairman of the Board [email protected] 0-212 331 21 11
Atilla Kayal›o¤lu General Manager - ‹ndeks akayal›[email protected] 0-212 331 21 11
Salih Bafl General Manager - Datagate [email protected] 0-212 332 15 00
Erhan Do¤an General Manager - Neteks [email protected] 0-212 331 23 23
Erol Çetin General Manager - Neotech [email protected] 0-212 331 21 71
Our Company's website at www.index.com.tr is used as a communication channel pursuant to the points determined in CMB'sCorporate Governance Principles, for the use of shareholders, investors, intermediary institution analysts, and other stakeholders.
9. Disclosure of Special Events:The Company has made 23 Disclosures of Special Events in the period between 01.01.2010 – 31.12.2010, and no additional clarificationwas asked by CMB or ISE. The Company has duly fulfilled all its liabilities regarding disclosure of special events.
10. Company Website and Contents:Our Company has a website at the address of www.index.com.tr. Our website includes commercial register information, final statusof partnership and management structure, members of the Board of Directors, Auditing Board, Auditing Committee, information ongeneral assembly, Company's Articles of Association, periodical financial statements and reports, independent auditor's report, annualreports, information on public offering, and disclosure of special events made by the Company.
11. Disclosure of the Company's Ultimate Controlling Individual Shareholder/ Shareholders:Following public offering, our Company's ultimate controlling individual shareholders are given below.
Shareholder's Name Country Shares %
Nevres Erol Bilecik T.C. 41,06 %
12. Disclosure of Insiders:The list of individuals who can be classified as an insider are as follows.
Members of the Board of Directors
Nevres Erol Bilecik
Salih Bafl
Atilla Kayal›o¤lu
Ayfle ‹nci Bilecik
Halil Duman
Auditors assigned pursuant to the Turkish Code of Commerce
Veli Tan Kirtifl
Haluk fien
Due care shall be given in preparation of the periodical financial statements and statement footnotes to reflect actual financial conditionof the Company, and to ensure that Company Operation Report provides detailed information on the activities of company.
Consultancy activities and Independent Audit Companies are separated. Independent Audit Company is elected for maximum 5periods. Independence of such companies is strictly protected.
Accordingly, new distributorship agreements were disclosed to the public by the Chairman of the Board and General Managers viadisclosure of special events. Names and duties of people responsible as regards the information policy are given below.
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General Manager of the Company and other Managers
Atilla Kayal›o¤lu General Manager
Halil Duman Assistant General Manager - Finance
Naim Saraç Internal Audit Manager
Halim Ça¤layan Accounting Manager
Birgül Öztürk Finance Manager
Other Related Company Managers
Tayfun Atefl Datagate A.fi. Board Member
O¤uz Gülmen Despec A.fi. General Manager
Erhan Do¤an Neteks A.fi. General Manager
Erol Çetin Neotech A.fi. General Manager
Yi¤it Deniz Neteks A.fi. Accounting Manager
Chartered Accountant
Hakk› Dede
SECTION III – STAKEHOLDERS
13. Informing Stakeholders:Stakeholders are regularly informed by the Company concerning any issues related to themselves. E-mail and the company's websiteare essential means of information. Each year at least one meeting is held with the suppliers separately. Regional informational meetingsare made with the vendor channel throughout Turkey. Informational meetings with dinner are made for the employees and their spousesat least once each year to notify the developments related to the Company.
14. Participation of the Stakeholders in the Management:There is no special arrangement for participation of the stakeholders in the management. However, within the scope of vendor directedspecial channel programs, product supply and sales policies of suppliers are performed in conjunction.
15. Human Resources Policy:The human resources policy of our Company, which is also published on www.index.com.tr is as following:
Our personnel policy is based on the target of becoming a company admired and appreciated by all our employees.
Essential criteria composing our personnel policy are;• Ensuring that our employees do not worry about their future,• Ensuring that the employees have confidence in the managers and the company,• Measuring the performance of all employees, and managing the success criteria in line with these
measurements,• Displaying a transparent management,• Ensuring easy access to management,• Ensuring that employees have freedom and convenience of expression,• Caring about work discipline,• Ensuring that all personnel work not individually but with a team spirit,• Caring about career planning,• Organizing social activities,• Providing efficient working environment and conditions.
The satisfaction of the personnel of our Company is measured via “Personnel Satisfaction Survey” conducted each year, the areasthat need to be improved are determined and corrective steps are taken.
There is no discrimination, under no circumstances, based on ethnic origin, sex, colour, race, religion or other faiths in our Company.No complaints of discrimination have been filed to the management.
57
ANNUAL REPORT
16. Information on Relations with the Clients and Suppliers:Achieving customer satisfaction in marketing and sale of products and services is one of our important and indispensable targets.To achieve it, in-company procedures were prepared and are currently applied. Visits are made to customers and suppliers, andoccasionally customer satisfaction surveys are made to learn their expectations and find solutions. As a result of such works, it wasawarded ISO 9001:2000 in 2004.
Product Supply and Distribution Structure;The company operates as a main distributor (“broadliner distributor”) in IT industry. It buys IT products from suppliers at certain pricesand maturity periods and subsequently sells the products to the sales channels that will sell them to the end user. The company doesnot plan to develop a sales structure that will include direct sales to the end user in the near future.
Suppliers;The hardware and software suppliers of the company are grouped into two categories. 90% of the business volume of the Companyis achieved with the products of such international companies.
17. Social Responsibility:We show respect to the society, nature and environment, national values, customs and traditions; in the light of our transparencyprinciple, we provide reliable information to shareholders and stakeholders, also considering the rights and benefits of our Company,in a timely, accurate, full, understandable, analysable and easily accessible condition, on the company management, financial andlegal status; we comply with the laws of the Republic of Turkey; we act in accordance with the legislation in force in all our operationsand decisions. During the year, no lawsuits were filed against the Company for environmental issues.
SECTION IV - BOARD OF DIRECTORS
18. The Structure and Composition of the Board of Directors and Independent Members:
Board of Directors Title Executive/Non-Executive
Nevres Erol Bilecik Chairman Executive
Salih Bafl Vice Chairman Non-Executive
Atilla Kayal›o¤lu Member/General Manager Executive
Ayfle ‹nci Bilecik Member Non-Executive
Halil Duman Member Executive
There are no independent members in the Board of Directors, and election of independent members was not provided in the Articlesof Association. Each year, in the Ordinary General Assembly meetings, permission is given to the Chairman and Members of the Boardof Directors, pursuant to Articles 334 and 335 of the Turkish Code of Commerce, to perform the works, in person or on behalf of otherpeople, included in the subject of the Company, and to become partners in companies performing these types of activities, and toperform other relevant operations. Other affiliates of the Company are represented in the Board of Directors. As these companiesoperate in the IT sector but have different specialization areas, it is permitted to the Members of the Board of Directors to performtasks in other companies.
19. Qualifications of Board Members:Minimum and essential qualifications required in the Members of the Board of Directors are regulated in Article 9 "Board of Directorsand Its Term of Office" of the Company's Articles of Association. All Members of the Board of Directors meet the qualifications listedin CMB's Corporate Governance Principles, Section IV, Articles 3.1.1, 3.1.2 and 3.1.3.
20. Mission, Vision and Strategic Goals of the Company:Our Company’s mission is to “Continue its leadership by providing service as a main supply centre of IT products for all companiesin the computer channel considering their changing requirements”. This definition has been determined by the Board of Directors andannounced to the general public through the website of the Company.
Our Company’s vision is to “Be an IT Distributor capable of meeting all requirements of the computer channel from one single point.”
Managers each year prepare a business plan and submit to the Board of Directors, which upon approval becomes effective as of thefirst week of January. Strategic business plan, income and expenditure budgets, which are prepared at the beginning of December,are evaluated by the Board of Directors which convenes regularly each month.
58
ANNUAL REPORT
21. Risk Management Mechanism and Internal Control:Risk management has an important place within the constant activities of our Company. Main starting point of risk management isidentification and follow-up of all risks, which our Company has confronted with or it is probable to confront. Our managers targetto ensure that applications which improve and develop risk management are constantly implemented in the Company. Current andprobable risks of our Company are categorized as follows:
a- Payment Risk: Dealer channel, which is described as regular dealers within the distribution structure, has low capital structure.This group of dealers, which is considered to have a number of approx. 5,000, is transferred frequently, therefore, their opening andclosing ratio is rather high. The Company makes sales to almost all companies dealing with the trading of computer.
b- Constant Renewal of Product Technologies: The most important feature of the sector we operate in is that technology and pricesof the products are constantly changed and renewed. Companies who fail to adjust their inventory turnover to this change may facewith the risk of loss.
c- High Competition in the Sector and Profit Margins: Manufacturer companies in the sector have a high competition worldwide asbrands. The competition of manufacturer companies reflects to the prices in the national market. For companies which have weakfinancing and cost structure, this situation causes an important risk.
d- Exchange Rate Risk: A great part of the IT products are imported from foreign countries or purchased from domestic sources inforeign currency. When buying products the Company is often credited in foreign currency, and then payments are made in thesecurrencies. Companies, which do not formulate their sales policy based on product-in-currency, are faced with loss risk when foreignexchange rate increases.
e- No exclusivity clause in appointing of distributors by the manufacturer companies: In distributorship contracts made with manufacturercompanies there is no reciprocal exclusivity relation. Manufacturer companies, when appointing distributors, may appoint otherdistributors as well according to the conditions of the market, and distributor companies may sign distributorship contracts with othermanufacturer companies.
f- Changes made in importation regimes: Changes occasionally made by the Governments in importation regimes effect the importationpositively, but such changes may sometimes have negative effects as well.
Due to the foregoing risks and for controlling all assets and liabilities of the Company, an Internal Audit Department reporting directlyto the Chairman of the Board is established. Further, our current accounts and risk management department investigates our dealers.These inquiries are intended to reveal current account relations of the dealers with other suppliers, their relations with banks and otherfinancial institutions and whether they issue any bad cheques or not. Credit Committee: The reports on the computer companies whichcompleted their first year in the industry and those whose credit line has been extended are drawn up by the risk control analysts andpresented to the credit committee that meets in certain days each week. The credit committee determines credit lines for each companyaccording to the data from their investigation, past payment data and sales performance. The credit committee determines the workingmethod, and if required, asks dealers to submit a cheque endorsed by a third party or give a further security in mortgage form. Creditlines exceeding a certain amount are evaluated at the weekly meetings of the executive committee, and any excess of credit lines issubject to the approval of the executive committee.
22. Authority and Responsibilities of the Members of the Board of Directors and Managers:Authority and Responsibilities of the Members of the Board of Directors and Managers are defined in the Articlesof Association with reference to the relevant provisions of the Turkish Code of Commerce.
23. Principles of Activity of the Board of Directors:The Board of Directors has convened 9 times within the period between 01.01.2010 and 31.12.2010. The agenda and statementsrelating to the meeting are passed to the Members of the Board of Directors in advance. Such communication is handled by thesecretary of the Chairman of the Board.
While no resolutions are made in some of the discussed topics, the minutes of the topics which were resolved are not disclosed tothe public. On the other hand, important subjects resolved in the meeting of the Board of Directors are announced to the generalpublic through Disclosure of Special Events.
24. Prohibitions Concerning Transactions and Competition with the Company:The required permission was granted by the General Assembly to the Members of the Board of Directors to carry out transactionsand competition with the Company as specified in Articles 334 and 335 of the Turkish Commercial Code.
59
ANNUAL REPORT
25. Ethical Rules:The Board of Directors of the Company has formulated the ethical rules for the employees. These rules are included in the prospectuswhich was published during the public offering of the company, and can be found in the investors section of the company websiteat the address of www.index.com.tr.
26. Number, Structure and Independence of Committees Established by the Board of Directors:Auditing Committee of our Company is composed of Mr. Salih Bafl and Mrs. Ayfle ‹nci Bilecik. The committee met 4 times in 2010Auditing Committee audited and inspected the accounting system and financial data of the Company, controlled whether the financialstatements reflected the actual financial status, and found out compliance to generally accepted accounting principles and financiallegislation.
There are not independent members in the Board of Directors, therefore, the members of the committee are not independent, either.Executive members of the Board of Directors do not take office in any committee. At the meeting of the Board of Directors of theCompany held on 29.04.2009, it was resolved to establish a Corporate Governance Committee, and to elect Salih BAfi, who is aBoard Member, as the Chairman of the Committee, and Ayfle ‹nci Bilecik and Halil Duman, who are Board Members, as the membersof the Committee.
27. Remuneration of the Board of Directors:Members of the Board of Directors do not get any remuneration. The Chairman and Deputy Chairman of the Board of Directors andPresident of the Executive Board, also the General Manager and Deputy General Manager get monthly salaries related to their tasks.
The Company did not lend any money, extend any credit, extend a personal credit through a third party, nor provided any guaranteesto or in favour of any Member of the Board of Directors or any Manager of the Company.
60
ANNUAL REPORT
61
ANNUAL REPORT
6. BOARD OFDIRECTORS'
SUGGESTIONS ONDIVIDEND DISTRIBUTION
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
63
ANNUAL REPORT
6. Board of Directors' Suggestions on DividendDistributionThe Board of Directors has convened at the company head office, and resolved:
a) that a motion would be submit to the Ordinary General Assembly to be held on 06.05.2011 for distribution of the first dividend inamount of 30% of the net distributable profit of 2010.
b) that if adopted by the Ordinary General Assembly, the amounts of dividends to be distributed for the profit of 2010 would bedetermined as following:
- The net profit after tax of the Company is TRL 13,171,469 as given in its consolidated financial statements for the year 2010,which were prepared pursuant to Communiqué of the Capital Markets Board Series XI, No. 29.
- Set up 1st Issue Reserve Funds as TRL 413.959,12 which is 5% of net profit occurred as TRL 8.279.182,39 in accordance withTax Law.
- The First Dividend will be distributed in amount of gross TRL 3.830.021,96 (TRL 0,0683936 for 1 share with a nominal value ofTRL 1 in the rate of 6,83936%) and net TRL 3.255.518,67 (TRL 0,0581346 for 1 share with a nominal value of TRL 1 in the rateof 5,81346%), corresponding 40% of the net distributable profit which occurred after deduction of 1st Issue Reserve Funds, TRL413.959,12, from Net profit after tax TRL 13.171.469 and with adding donation TRL 9.230.
- The Second Dividend will be distributed to the Preferred Group A Shareholders in amount of gross TRL 446.835,90 (TRL 1.404,35for 1 share with a nominal value of TRL 1) and net TRL 379.810,51 (TRL 1.193,70 for 1 share with a nominal value of TRL 1),corresponding 5% of TRL 8.936.717,92 remaining after deducting the first dividend of TRL 3.830.021,96 from TRL 12.766.739,88,which is the net distributable profit of the period,
- TRL 147.685,79 will be retained as the 2nd Issue Reserve Fund,
- The distribution of dividend will be started on 17 May 2011,
c) That the remaining amount would be added to the extraordinary reserve funds.
Suggested dividend distribution table is given below.
64
ANNUAL REPORT
65
ANNUAL REPORT
66
Profit for the Period
Taxes Payable (-)
Net Profit for the Period (=)
Losses from Previous Years (-)
First Issue Legal Reserves (-)
NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=)
Charitable contributions made in the year (+)
Net distributable profit for the period including the charitable c
ontributions with which the first dividend will be calculated
First Dividend to Partners
Cash
Free of charge
Total
Dividends Distributed to Preference Share Owners
Dividends to members of the Board of Directors, personnel, etc.
Dividends Distributed to Bonus Share Owners
Second Dividend to Partners
Second Issue Legal Reserve Fund
Statutory Reserves
Special Reserves
EXTRAORDINARY RESERVES
Other Resources Considered for Distribution
- Profit from Previous Year
- Extraordinary Reserves
- Distributable pursuant to the Law and the Articles of Association
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
17,518,526.00
4,347,057.00
13,171,469.00
0.00
413,959.12
12,757,509.88
9,230.00
12,766,739.88
3,830,021.96
3,830,021.96
0.00
3,830,021.96
446,835.90
0.00
0.00
0.00
147,685.79
0.00
0.00
8,332,966.23
0.00
11,057,588.39
2,778,406.00
8,279,182.39
0.00
413,959.12
7,865,223.27
3,440,680
0
According to CMBAccording to
Legal Records
5% of the profit remaining after allocating
1st issue legal reserves and first dividend
are paid to preferred shareholders
If there is preference in divident distribution pursuant to the Article of Association, information on preference
1. Paid-up / Isuued Capital
2. Total Legal Reserve Fund (according to Legal Records)
56,000,000
4,608,765.84
Preferred (Group A)
Ordinary Shares (Group B)
446,835.90
3,830,021.96
67,025.38
574,503.29
379,810.51
3,255,518.67
SUMMARIZED DIVIDEND Total Gross Dividend Tax Deduction Total Net Dividend
Total 4,276,857.86 641,528.68 3,635,329.18
To the Holders of Preferred Shares (Group A)
To the Holders of Ordinary Shares (Group B)
TOTAL
To the Holders of Preferred Shares (Group A)
To the Holders of Ordinary Shares (Group B)
TOTAL
446,835.90
3,830,021.96
4,276,857.86
379,810.51
3,255,518.67
3,635,329.18
1,404.35
0.0683936
1,193.70
0.0581346
140,434.94%
6.83936%
119,369.70%
5.81346%
GROSS
NET
GROUP TOTAL AMOUNTOF DIVIDEND (TRL)
AMOUNT RATE%
DIVIDEND CORRESPONDING WITH 1SHARE WITH A NOMINAL VALUE OF TRL 1
RATE OF NET DISTRIBUTABLE DIVIDEND TO THE PROFIT FOR THE PERIOD INCLUDING CHARITABLE CONTRIBUTION
AMOUNT OFDIVIDENDDISTRIBUTEDTO SHAREHOLDERS (TRL)
RATE OF NET DIVIDEND DISTRIBUTED TO SHAREHOLDERS TOTHE PROFIT FOR THE PERIOD INCLUDING CHARITABLE CONTRIBUTION (%)
33,50 %4.276.857,86
INFORMATION ABOUT DIVIDEND TO BE DISTRIBUTED(1)
DETAILS OF DIVIDEND PER SHARE
ANNUAL REPORT
67
ANNUAL REPORT
7. AUDITING BOARD’SREPORT
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
69
ANNUAL REPORT
7. Auditing Board’s Report
70
Title :
Head Office :
Capital :
Fields of Activity :
The auditors' names, terms of office, whether :they are partners or personnel of the company,or not
Number of the Board of Directors meetings :attended or Auditing Board meetings held
Scope, dates and consequence of examinations :performed on the company's accounts, booksand documents
Numbers and conclusions of the counting made :in the shareholding cash office in accordancewith the sub-paragraph 3, paragraph 1, article353 of the Turkish Code of Commerce
Dates and conclusions of the examinations :performed in accordance with thesub-paragraph 4, paragraph 1, article 353 ofthe Turkish Code of Commerce
Complaints and irregularities reported and :measures taken in respect of the same
We have examined the accounts and transactions of ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim fiirketi for theaccounting period between 01.01.2010 to 31.12.2010 for compliance with the requirements of the Turkish Code of Commerce, thecompany's Articles of Association, other relevant legislation, and generally accepted accounting principles and standards.
In our opinion the enclosed balance sheet issued as of 31.12.2010, the contents of which we certify, accurately reflects the truefinancial standing of the company as of the same date; and the profit & loss statement for the period between 01.01.2010 and31.12.2010 accurately and truly reflects the results of business activities during the same period, and the suggestion of profit allocationis in compliance with the legislation in force and the articles of association of the company.
We kindly submit for your approval the balance sheet and the profit & loss statement and acquittal of the Board of Directors.
‹ndeks Bilgisayar istemleri Mühendislik Sanayi ve Ticaret A.fi.
Ayaza¤a Mah. Cendere Yolu No: 9/1 fiiflli – ISTANBUL
TRL 56.000.000
Purchase and sale of computers of any kind, providing technical and softwaresupport and their sales, purchase and sale of computer parts, accessoriesand consumables of any kind.
Veli TAN K‹RT‹fi, Haluk fiEN: Term of office is 1 year, and they are notpartners or personnel of the company.
Attended the Board of Directors Meetings for 2 times.
The legal book records and the documents concerning the semi-annual andannual balance sheets of the company have been examined. We confirmthat the mentioned book records and documents reflect the actual situation.
The company cash office was counted 3 times within the period, and as aresult of the counting, it was seen that the actual cash assets comply withthe corresponding records.
The presence of the guarantees and valuable papers listed in the company'srecords was checked, and it was seen that they comply with the correspondingrecords.
No complaints or irregularities have been reported to us.
AUDITING BOARD'S REPORT
To the General Assembly of‹ndeks Bilgisayar istemleri Mühendislik Sanayi ve Ticaret A.fi.
Auditors
ANNUAL REPORT
71
ANNUAL REPORT
8. INDEPENDENTAUDIT REPORT
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
73
ANNUAL REPORT
8. Independent Audit Report
INDEPENDENT AUDIT REPORT
To The Board of Directors of‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim fiirketi
IntroductionWe have audited the accompanying consolidated financial statements of ‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonimfiirketi, its subsidiaries (together with “Group”) which comprise the consolidated balance sheet as of December 31, 2010 and the consolidated incomestatement, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the years then ended, and asummary of significant accounting policies and other explanatory notes. (Note:2.03) Consolidated financial statements of the Group as of December31, 2009 were audited by another independent auditing company. The independent auditing company has expressed a positive opinion in the auditreport dated March 8, 2010.
Responsibility of Management in Accordance with Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with financial reporting standardspublished by Capital Market Board (CMB). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparationand fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.
Responsibility of Independent Auditing CompanyOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with InternationalStandards on Auditing published by Capital Market Board. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Our audit involves performing proceduresto obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly the consolidated financial position of ‹ndeks Bilgisayar Sistemleri MühendislikSanayi ve Ticaret Anonim fiirketi as of December 31, 2010 and of its consolidated financial performance and its consolidated cash flows for theyear then ended in accordance with financial reporting standards published by Capital Market Board (CMB).
ÇA⁄DAfi BA⁄IMSIZ DENET‹M S.M.M.M. A.fi.An Independent member of IAPA International
ÖZCAN AKSUCertified Public Accountant(Istanbul, April 4, 2011)
74
ANNUAL REPORT
75
ANNUAL REPORT
9. FINANCIALSTATEMENTS AND NOTES
ANNUAL REPORT 2010
‹NDEKS B‹LG‹SAYAR S‹STEMLER‹MÜHEND‹SL‹K SANAY‹ VE T‹CARET A.fi.
77
9. FINANCIAL STATEMENTS AND NOTES
ANNUAL REPORT
78
9. Financial Statements and NotesNotes to consolidated financial statements for the periods ended 01.01.2010 and 31.12.2010 prepared in accordance with internationalfinancial reporting standards.
INDEKS B‹LG‹SAYAR S‹S. MÜH. SAN. T‹C. Afi.BALANCE SHEET(XI-29 CONSOLIDATED )(Turkish Lira)
CURRENT ASSETS
ASSETS Notes
The accompanying policies and explanatory notes are an integral part of the financial statements.
TOTAL ASSETS
NON-CURRENT ASSETS 31.092.091
Current�31.12.2010
Cash and Cash Equivalents
Financial Investments
Trade Receivables
- Receivables from Related Parties
- Other
Other Receivables
- Receivables from Related Parties
- Other
Inventories
Other Current Assets
6
7
10
10-37
10
11
11-37
11
13
26
26.415.870
100.875
315.185.436
4.619.012
310.566.424
246.748
96.013
150.735
127.325.894
36.985.711
2.320.888
33
229.494.807
624.262
228.870.545
1.355.562
1.205.509
150.053
138.885.304
33.597.675
506.260.534 405.654.269
Other Receivables
Financial Investment
Investment Property
Tangible Fixed Assets
Intangible Fixed Assets
Goodwill
Deferred Tax Assets
11
7
17
18
19
20
35
56.440
64.894
124.871
28.430.858
59.139
2.467.577
667.458
51.844
64.894
-
28.031.126
68.865
2.467.577
407.785
31.871.237
538.131.771 436.746.360
Previous�31.12.2009
ANNUAL REPORT
79
SHORT -TERM LIABILITIES 408.392.686 313.007.623
-
LONG -TERM LIABILITIES 10.962.332
8
24
8.285.360
1.016.481
10.313.062
649.270
SHAREHOLDERS EQUITY 120.437.244 112.776.405
LIABILITIES
22.155.856
265.080.401
6.760.191
258.320.210
8.239.654
1.182.299
7.057.355
1.530.656
3.382.919
12.618.137
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 538.131.771 436.746.360
The accompanying policies and explanatory notes are an integral part of the financial statements.
INDEKS B‹LG‹SAYAR S‹S. MÜH. SAN. T‹C. Afi.BALANCE SHEET(XI-29 CONSOLIDATED )(Turkish Lira)
27
27
Financial Liabilities
Trade Payables
-Due to Related Parties
-Other
Other Financial Liabilities
- Due to Related Parties
- Other
Provision For Tax
Provision For Liabilities
Other Short-Term Liabilities
Finansal Borçlar
K›dem Tazminat› Karfl›l›¤›
Parent Company Shareholders' Equity
Paid-in Capital
Adjustments regarding Share Capital of Participations (-)
Hedging Funds
Restricted Reserves Assorted from Profit
Previous Years’ Profit / (Loss)
Net Profit / (Loss) for the Period
Minority Interests
8
10
10-37
10
11
11-37
11
35
22
26
11.424.383
365.962.360
624.144
365.338.216
13.468.858
4.834.616
8.634.242
1.098.634
5.176.795
11.261.656
9.301.841
110.656.770
56.000.000
241.113
79.284
5.109.837
36.055.067
13.171.469
9.780.474
104.023.844
56.000.000
241.113
-
4.183.406
27.664.383
15.934.942
8.752.561
NotesCurrent
�31.12.2010Previous
�31.12.2009
ANNUAL REPORT
80
The accompanying notes are integral parts of the consolidated financial statements.
INDEKS B‹LG‹SAYAR S‹S. MÜH. SAN. T‹C. Afi.INCOME STATEMENT(XI-29 CONSOLIDATED)(Turkish Lira)2.2007
CONTINUED OPERATIONS
Sales Revenue
Cost of Sales (-)
GROSS PROFIT
Marketing, Sales and Distribution Expenses(-)
General Administration Expenses (-)
Other Operating Income
Other Operating Expenses (-)
OPERATING PROFIT / (LOSS)
Financial Income
Financial Expenses (-)
CONTINUED OPERATIONS PROFIT BEFORE TAXATION
Continued Operations Tax Income / (Expense)
- Tax Expense for the Period
- Deferred Tax Income / (Expense)
PROFIT FOR THE PERIOD
Change in Hedging Fund
Other Comprehensive Income
OTHER COMPREHENSIVE INCOME (AFTER TAXES)
Total Comprehensive Income
Distribution of Profit / (Loss) For the Period
Minority Interest
Parent Company Share
Distribution of Total Comprehensive Income for the Period
Minority Interest
Parent Company Share
Earnings Per Share
28
28
29
29
31
31
32
33
35
35
27
27
27
27
36
1.228.175.766
(1.153.272.537)
74.903.229
(13.493.798)
(14.896.959)
60.687
(374.948)
46.198.211
40.029.703
(67.681.475)
18.546.439
(4.347.057)
(4.626.551)
279.494
14.199.382
79.284
79.284
14.278.666
-
14.199.382
1.027.913
13.171.469
14.278.666
1.027.913
13.250.753
0,235205
1.087.422.382
(1.023.117.198)
64.305.184
(11.173.103)
(12.767.710)
353.339
(948.369)
39.769.341
28.286.140
(45.663.848)
22.391.633
(4.747.543)
(4.681.623)
(65.920)
17.644.090
-
-
17.644.090
-
17.644.090
1.709.148
15.934.942
17.644.090
1.709.148
15.934.942
0,284553
NotesCurrent
01.01.201031.12.2010
Previous01.01.200931.12.2009
ANNUAL REPORT
81
INDEKS B‹LG‹SAYAR S‹S. MÜH. SAN. T‹C. Afi.CONSOLIDATED CASH FLOW STATEMENT(Turkish Lira)
CASH FLOW STATEMENT (TL)
The accompanying policies and explanatory notes are an integral part of the financial statements.
18-19
24
10
18-19
22
10
10
13
10
33
32
10-11
13
10-11
26
26
22
35
17
18-19
18-19
8
8
32-33
6
6
18.546.439
840.617
521.509
489.818
(16.309)
1.793.875
438.975
(242.705)
284.547
(626.494)
-
13.146.389
(8.367.322)
-
26.809.339
(85.515.205)
11.274.863
-
106.737.658
(3.388.036)
(1.356.481)
286.070
54.848.208
(154.297)
(5.058.573)
49.635.338
-
-
(125.500)
(1.265.890)
52.206
(1.339.184)
-
-
(10.731.473)
(2.027.702)
(6.617.827)
(4.903.594)
79.284
(24.201.312)
24.094.842
2.320.888
26.415.730
22.391.633
698.376
323.612
(368.166)
1.794
570.793
2.124.324
(375.794)
(223.830)
(166.845)
-
9.866.332
(5.564.708)
-
29.277.521
(46.971.198)
(58.455.063)
-
84.935.249
(3.568.637)
5.596.084
(452.307)
10.361.649
(176.683)
(3.899.370)
6.285.596
-
-
-
(898.843)
22.257
(876.586)
-
-
(7.157.785)
(1.331.514)
-
(3.726.004)
-
(12.215.303)
(6.806.293)
9.127.181
2.320.888
A) CASH FLOW PROVIDED FROM OPERATIONS
Net Profit for the Year
Adjustments :
Depreciation (+)
Change in Provision for Termination Indemnities
Rediscount on Notes Receivable (+)
Gain (-) or Loss (+) on Sale of Assets
Increase (+) / Decrease (-) in Provision for Debt
Provision for Doubtful Receivables for Current Period (+)
Provision for Nullified Doubtful Receivables (-)
Provision for Decrease in Value of Inventories (+)
Rediscount on Notes Payable (-)
Provision for Decrease in Value of Affiliates (-)
Interest Expenses (+)
Interest Income (-)
Income from Marketable Securities or Long-term Investments(-)
Operational Income Before Changes in Working Capital:
Increase/Decrease in Trade Receivables /Other Receivables (-)
Decrease in Inventories (+)
Increase in Marketable Securities with Purchase/Sale Purposes(-)
Decrease in Trade Receivables /Other Receivables (-)
Increase (-) / Decrease (+) in Other Current Assets
Increase (+) / Decrease (-) in other Liabilities
Other Cash Flows (+)/(-)
Cash Inflow Provided/(Used) From Operating Activities:
Termination Indemnities Payment (-)
Tax Payment (-)
Net Cash Inflow Provided/(Used) From Operating Activities:
B) NET CASH USED IN INVESTMENT OPERATIONS
Net Tangible Assets Purchases (-)
Investment property (-)
Tangible Assets Purchases
Cash provided from sale of Tangible and Intangible Assets
NET CASH RELATING TO INVESTMENT OPERATIONS
C) CASH FLOW RELATING TO FINANCIAL ACTIVITIES
Capital Increase
Change in Cash with Issue Premiums
Change in Short Term Financial Liabilities
Change in Long Term Financial Liabilities
Dividends Payments (-)
Net Interest Income / (Expense)
Hedging fund
NET CASH RELATING TO FINANCIAL ACTIVITIES
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
NotesCurrent
01.01.201031.12.2010
Previous01.01.200931.12.2009
ANNUAL REPORT
82
INDEKS B‹LG‹SAYAR S‹S. MÜH.SAN.T‹C.Afi.CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY(Turkish Lira)
Not
esCa
pita
lTh
e In
flatio
nAd
just
men
tsD
iffer
ence
s
CON
SOLI
DAT
ED S
TATE
MEN
TO
F CH
ANG
ES IN
SH
AREH
OLD
ERS’
EQU
ITY
(TR
L)
Not
-27
Not
-27
56.0
00.0
00
- - - - - -
56.0
00.0
00
56.0
00.0
00
- - - - - -
56.0
00.0
00
241.
133 - - - - - -
241.
113
241.
133 - - - - - -
241.
113
- - - - - - - - - - - - - - - -
3.97
2.25
5 - -
211.
151 - - -
4.18
3.40
6
4.18
3.40
6 - -
926.
431 - - -
5.10
9.83
7
27.6
64.3
83
-
15.9
34.9
42
(926
.431
)
(6.6
17.8
27) - -
36.0
55.0
67
22.8
08.7
05
-
5.06
6.82
9
(211
.151
) - - -
27.6
64.3
83
15.9
34.9
42
-
15.9
34.9
42 - - -
13.1
71.4
69
13.1
71.4
69
5.06
6.82
9 -
5.06
6.82
9 - - -
15.9
34.9
42
15.9
34.9
42
8.75
2.56
1 - - - - -
1.02
7.91
3
9.78
0.47
4
7.04
3.41
3 - - - - -
1.70
9.14
8
8.75
2.56
1
112.
776.
405 - - -
(6.6
17.8
27)
79.2
84
14.1
99.3
82
120.
437.
244
95.1
32.3
15
- - - - -
17.6
44.0
90
112.
776.
405
- - - - -
79.2
84 -
79.2
84
Not
-27
Not
-27
- - - - - - - -
The
acco
mpa
nyin
g po
licie
s an
d ex
plan
ator
y no
tes
are
an in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
01.0
1.20
10
Capi
tal
Tran
sfer
s to
Ret
aine
d Ea
rnin
gs
Tran
sfer
s to
Res
erve
s
Divi
dend
s
Othe
r Com
preh
ensi
ve In
com
e
Net P
rofit
31.1
2.20
10
01.0
1.20
09
Capi
tal
Tran
sfer
s to
Ret
aine
d Ea
rnin
gs
Tran
sfer
s to
Res
erve
s
Divi
dend
s
Othe
r Com
preh
ensi
ve In
com
e
Net P
rofit
31.1
2.20
09
CON
SOLI
DAT
ED S
TATE
MEN
TO
F CH
ANG
ES IN
SH
AREH
OLD
ERS’
EQU
ITY
(TR
L)
Prof
it of
Canc
elle
dSh
ares
Fore
ign
Curr
ency
Tran
slat
ion
Res
erve
Res
tric
ted
Res
erve
sfr
om P
rofit
Prev
ious
yea
rPr
ofit
/ (Lo
ss)
Net
Per
iod
Prof
it / (
Loss
)M
inor
ityIn
tere
stTo
tal
Equi
ty
Not
esCa
pita
lTh
e In
flatio
nAd
just
men
tsD
iffer
ence
s
Prof
it of
Canc
elle
dSh
ares
Fore
ign
Curr
ency
Tran
slat
ion
Res
erve
Res
tric
ted
Res
erve
sfr
om P
rofit
Prev
ious
yea
rPr
ofit
/ (Lo
ss)
Net
Per
iod
Prof
it / (
Loss
)M
inor
ityIn
tere
stTo
tal
Equi
ty
ANNUAL REPORT
83
Mali Tablolara Ait Dipnotlar
1. ORGANIZATION AND BUSINESS SEGMENTS‹ndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim fiirketi was established in 1989, and the activities of the Companyare comprised of trade of all kinds of “Information Technology” products for the purpose of wholesale trading. The Company isregistered to the Capital Markets Board of Turkey since June 2004 and 15,34% of the Company’s shares are traded on Istanbul StockExchange.
As of December 31, 2010 and December 31, 2009, details regarding to Company’s subsidiaries, which are subject to consolidation,are as follows:
The financial statements of Datagate Bilgisayar Malzemeleri A.fi., Neotech Teknolojik Ürünler Da¤. A.fi. and Teklos Teknoloji LojistikHizmetleri A.fi. are consolidated according to “the full consolidation method”. The financial statements of Neteks ‹letiflim Ürünleri Da¤›t›mA.fi. is consolidated according to the proportionate consolidation method”.
The main shareholders of the Company are Nevres Erol Bilecik (%38,63) and Pouliadis and Associates S.A. ( % 35,56) located inGreece. The average number of employees for the year ended December 31, 2010 is 316.(2009: 289 ) . All personnel are administrativestaff.
The Company’s official address registered in Trade Registry is Ayaza¤a District, Cendere Yolu No: 9/1 Ka¤›thane, ‹stanbul and it hasbranches in Ankara, ‹zmir, Diyarbak›r, Elaz›¤ and Atatürk Airport Free Zone.
The Group’s’ subsidiaries as of December 31, 2010 and December 31, 2009 are as follows:
(*)Neteks D›fl Ticaret Ltd.fiti is the subsidiary of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. with a rate of 99%. Hereafter, the Company and thesubsidiaries will be referred as (‘The Group’) in the consolidated financial statements and notes to the financial statements.
Company Name Field Of Operations Capital % of % ofDirect Ownership Indirect Ownership
Datagate Bilgisayar Malzemeleri A.fi. Purchasing and Selling of Computer 10.000.000 59,24 59,24
(Datagate) and Equipment
Neotech Teknolojik Ürünler Da¤. A.fi. Purchasing and Selling of Home 1.000.000 80,00 80,00
(Neotech) Electronic Products
Teklos Teknoloji Lojistik Hizmetleri A.fi. Logistics 5.000.000 99,99 99,99
(Teklos)
Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. Purchasing and Selling of 1.100.000 50,00 50,00
(Neteks) Network Products
Company Name Field Of Operations Capital % of % ofDirect Ownership Indirect Ownership
Datagate Bilgisayar Malzemeleri A.fi. Purchasing and Selling Computer 10.000.000 59,24 59,24
and equipment
Neotech Teknolojik Ürünler Da¤. A.fi. Purchasing and selling Home 1.000.000 80,00 80,00
Electronic Products
Teklos Teknoloji Lojistik Hizmetleri A.fi. Logistics 5.000.000 99,99 99,99
Neteks ‹letiflim ürünleri Da¤›t›m A.fi. Purchasing and Selling Network 1.100.000 50,00 50,00
Products
‹nfin Bilgisayar Ticaret A.fi. Purchasing and Selling Computer 50.000 99,80 99,80
and equipment (Export-Import)
Neteks D›fl Ticaret Ltd.fiti. (*) Purchasing and Selling Network 5.000 - 49,50
Products
84
2. PRINCIPLES RELATED TO THE PRESENTATION OF THE FINANCIAL STATEMENTS
2.01 Basic Principles For The PresentationThe Group maintains its books of account and prepares its statutory financial statements in accordance with the regulations of CapitalMarket Board (CMB) Law, Turkish Commercial Code, Tax Procedural Law and Uniform Chart of Accountants published by Ministryof Finance.
The accompanying consolidated financial statements of the Group were prepared in accordance with the communique Serie XI, No:29“Comminuque on Financial Reporting at Capital Markets” which was declared by the CMB dated April 9, 2008 with No:26842.
This communique has become valid for the first interim financial statements after January 01, 2008. Based on 5th clause of thiscommunique, companies applying International Accounting / Financial Reporting Standards (IAS/ IFRS) , which were accepted byEuropean Union and financial statements are disclosed in s appropriate to IAS/ IFRS.Turkish Accounting/Financial Reporting Standardswhich were published by Turkish Accounting Standards Board, are based and consistent with IAS/ IFRS. Group’s consolidatedfinancial statements were prepared in accordance with the communique Serie XI, No:29 and s to the consolidated financial statementswere presented according to the format obliged by the CMB with the declaration dated April 14, 2008. For that reason, prior periodfinancial statements reclassified accordingly.
As of April 4, 2011 the Group’s financial statements were approved and signed by its Board of Directors for the period January 1-December 31, 2010. General Assembly has a right to change financial statements.
2.02 Dealing with the Inflation Effects in Hyper-Inflationary PeriodsAccording to the decision, dated March 17, 2005 with No:11/367, made by the Capital Market Board, the inflation accounting hasbeen no longer effective as of 2005 and the accompanying consolidated financial statements has not been adjusted since January1,2005. Nonmonetary values, which are in the accompanying consolidated financial statements, exist with valued as of December31, 2004 in accordance with International Accounting Standards No. 29 “Financial Reporting on Hyper-Inflationist Economies”.
2.03 Consolidation PrinciplesSubsidiaries are the companies, whose shares are held by the Company directly or indirectly through shares of other companies. Asa result, the Group with or without over 50% of voting right, has the power and authority to direct and control the management andpolicies of the subsidiary companies whether through the ownership of voting securities, by contract or otherwise.
Balance Sheet and Income statements of the subsidiaries are consolidated according to “full consolidation method” and book valueand capital of the Group’s subsidiary are adjusted accordingly. Transactions and balances between the Company and Subsidiariesare eliminated during consolidation. Minority interests show minority shareholders’ share in the subsidiaries’ assets and result ofoperations for the related period. These details are to be expressed separately in consolidated Balance Sheet and Income Statement.If losses related to minority interest are over benefits from shares of a subsidiary and if there is no bounding liability to the minorities,in general, these losses related with the minorities result against to benefits of the minorities.
Companies under common control of the Group is described as Joint Managing Companies. The Group has significant impact onfinancial and operating policies of these companies.
The current shares in the subsidiaries as of December 31, 2010 and December 31, 2009 are as follows:
(*)Neteks D›fl Ticaret Ltd.fiti is the subsidiary of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. with a rate of 99%.
Company Name Field Of Operations Capital % of % ofDirect Ownership Indirect Ownership
Datagate Bilgisayar Malzemeleri A.fi. Purchasing and Selling Computer 10.000.000 59,24 59,24
and Equipments
Neotech Teknolojik Ürünler Da¤. A.fi. Purchasing and Selling Home 1.000.000 80 80
Electronic Products
‹nfin Bilgisayar Ticaret A.fi. Purchasing and Selling Computer 50.000 99,80 99,80
and Equipments (Export-Import)
Teklos Teknoloji Lojistik Hizmetleri A.fi. Logistics 5.000.000 99,99 99,99
Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. Purchasing and Selling Network Products 1.100.000 50,00 50,00
Neteks D›fl Ticaret Ltd.fiti. (*) Purchasing and Selling Network Products 5.000 - 49,50
ANNUAL REPORT
85
The financial statements of Datagate Bilgisayar Malzemeleri A.fi., Neotech Teknolojik Ürünler Da¤. A.fi. and Teklos Teknoloji LojistikHizmetleri A.fi. are consolidated for using direct consolidation method, the financial statements of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi.is consolidated by using partial consolidation method.
Balance Sheets and Income statements of the subsidiaries are consolidated according to “full consolidation method” and “partialconsolidation method”, and book value and capital of the Company’s subsidiaries are adjusted accordingly. Transactions and balancesbetween the Company and subsidiaries are eliminated during consolidation.
Minority interests show minority shareholders’ equity in the subsidiaries’ assets and result of operations for the related period. Thesedetails are expressed separately in consolidated balance sheet and Profit/Loss Statement. If losses related to minority interest are overbenefits from shares of a subsidiary and if there is no bounding liability to the minorities, in general, these losses related with theminorities can result against to benefits of the main shareholders.
Financial Information of Companies which are subjected to Partial Consolidation MethodNeteks ‹letiflim Ürünleri Da¤›t›m A.fi. which is joint managing of company are subjected to partial consolidation method. Financialsummary of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi stated as follows
Current Assets
Fixed assets
Total Assets
Short Term Liabilities
Long Term Liabilities
Total Equity
Total Liability
Sales
Gross Profit
Operational Profit
Net Profit
42.657.724
197.745
42.855.469
38.003.364
16.960
4.835.145
42.855.469
107.884.168
5.752.937
2.675.971
1.547.921
26.285.563
160.931
26.446.494
23.150.765
8.505
3.287.224
26.446.494
99.640.221
4.740.065
2.095.566
998.033
Financial Statement Items 31.12.2010 31.12.2009
Companies which are not subjected to ConsolidationParent and subsidiary companies which are not subjected to consolidation and the subsidiary related with management, auditing,capital are as follows:
Companies which are not subjected to consolidation
Consolidated Financial Statements
%
Financial Outcomes of 2010
7.158.065
538.131.771
1,33%
Total Asset
425.158
120.437.244
0,35%
Total Equity
28.165.752
1.228.175.766
2,29%
Net Sales
78.690
13.171.469
0,60%
Period Income
Associate % of Ownership TL Amount of Ownership
‹nfin Bilgisayar Ticaret A.fi.
Neteks D›fl Ticaret Ltd. fiti.(*)
99,80
49,50
62.419
2.475
Total Subsidiary Amount 64.894
‹nfin Bilgisayar Ticaret A.fi. and Neteks D›fl Ticaret Limited fiirketi were not consolidated to the fact that they are both insignificant anddo not have material effect on the Group’s consolidated financial statements. These subsidiaries are classified as financial assetsavailable for sale in consolidated financial statements.
Comparison between financial outcomes of companies which are not subjected to consolidation and financial outcomes of consolidatedfinancial statements on 31.12.2010 are as follows;
(*)Neteks D›fl Ticaret Ltd.fiti is the subsidiary of Neteks ‹letiflim Ürünleri Da¤›t›m A.fi. with a rate of 99%.
ANNUAL REPORT
86
Significant part of items, which are located in total asset and sales,are eleminated during the consolidation eventhough this companiesare subjected to consolidation. Considered other matters when mentioned companies are excluded from the consolidation, are asfollows;
These companies has not got significant assets and liabilities which are out of balance sheet. Moreover these companies has not gotsignificant assets such as fixed assets etc.
On the lights of above given data all these companies were not subjected to consolidation due to all quantitative and qualitativeevaluations and on the lights of above given data indicate that these companies do not effect to financial outcomes significantly.
2.04 Comparative Information and Adjustment of the Previous Consolidated Financial StatementsThe comparative financial statements have been presented to enable to perform the financial position and the performance trendanalysis. All necessary adjustments have been made in prior financial statements to present consistent and comparative financialstatements.
The new items have been added to Group's Statement of Cash Flows in the current period in order to better reporting of the cashflows of the Group. In parallel with the changes in Statement of Cash-Flows in the current period, the similar classifications are madeto prior periods in order to ensure the comparability of the financial statements. The classifications do not have any effect on the priorperiod’s profit / loss, shareholders’ equity, total assets, etc.
2.05 OffsettingThe financial assets and liabilities in the financial statements are offset and the net amount reported in the balance sheet, where thereis a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis or realize the assetand settle the liability simultaneously.
2.06 Changes in Accounting PoliciesThe changes to the current accounting policies can be performed if it is necessary or the changes will provide more appropriate andreliable presentation of the transactions and to the events related financial position, performance and the cash flow of the Group thataffect the financial statements of the Group. If the changes in accounting policies affects the prier periods, policy is applied to the prierperiod financial statements as if it is applied before.
There is no any changing in financial accounting policies made in the current period
2.07 Changes in Accounting Estimates and ErrorsAccounting estimates are made based on reliable information and using appropriate estimation methods. However, if new or additionalinformation becomes available or the circumstances, which the initial estimates based on, change, then the estimates are reviewedand revised, if necessary. If the change in the accounting estimates is only related to a sole period, then only that period’s financialstatements are adjusted. On the other hand, if the amendments are related to the current as well as the forthcoming periods, thenboth current and forthcoming periods’ financial statements are adjusted.
In instances where the accounting estimates affect both current and forthcoming periods, then description and monetary value of theestimate is disclosed in the notes to the financial statements. However; if the effect of the accounting estimate to the financial statementcannot be determined, then it is not disclosed in the notes to the financial statements.
The Group is applying the accounting estimates to determine the doubtful receivables, the value decrease in fixed assets and inventory,the useful lives of the fixed assets, contingent liabilities, actuarial assumptions for the termination indemnities, etc. There is no changein accounting estimates in the current period. Accounting estimates applied by the Group are disclosed below in the related parts ofthe footnotes. The Group benefits from past experiences for the accounting estimates.
2.08.01 IncomeThe Group recognizes income according to the accrual basis, when the Group reasonably determines the income and economicbenefit is probable. Group’s income mainly consists of sales of computer and computer equipments as PC, laptop, motherbord, harddisk, display adapter. All the sales are operated via dealers and there are not any direct sales to end customers. Net sales is calculatedby deducting sales return and sales discounts from total sales.
Revenue from the sale of goods is recognized when all the following conditions are gratified:
• The significant risks and the ownership of the goods are transferred to the buyer;• The Group refrains the managerial control over the goods and the effective control over the goods sold;• The revenue can be measured reasonably;• It is probable that the the economic benefits related to transaction will flow to the entitiy;• The costs incurred or will be incurred in conjuction with the transaction can be measured reliably.
ANNUAL REPORT
87
Interest revenue is accured on a time basis, by reference to the principal outstanding and at the effective interest rate applicaple, whichis the rate that discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carryingamount.
When there is significant amount of cost of financing included in the sales, the fair value is determined by discouting all probable futurecash flows with the yield rate, which is embedded in the cost of financing. The differences between the fair value and the nominal valueis recorded as interest income according to the accrual basis.
2.08.02 InventoriesInventories are stated either at the lower of acquisition cost or net realizable value. Group’s inventories consist of computer andcomputer equipments like PC, laptop, electrical household appliances, network products.
The inventory costing method used by the Group is “First In First Out (FIFO)”. Net realizable value is the estimated selling price in theordinary course of business less the estimated costs of completion and the estimated costs neccessary to make the sale.
2.08.03 Tangible Fixed AssetsFor Assets acquired in and after 2005, the tangible assets are reflected to the consolidated financial statements by deducting theiraccumulated depreciation from their cost. For assets that were acquired before January 01, 2005, the tangible fixed assets is presentedon the consolidated financial statements based on their cost value, which is adjusted according to the inflationary effects as of December31, 2004. Depreciation is calculated using the straight-line method based on their economic lives. The following rates, determined inaccordance with the economic lives of the fixed assets, are used in calculation of depreciation.
Lands are not subject to depreciation since they have unlimited useful lives.
Tangible fixed assets has been revised in terms of impairment each period.If the carrying value of a tangible fixed asset is more than its expected net realizable value then the carrying value is reduced to itsnet realizable value by making the necessary provision.
The profit and loss arisen from fixed asset sales are determined by comparing the net book value with the sales price and the resultis added to the operating profit or loss.
Maintenance and repair expenses are accounted as expense at their realization date. If the maintenance and repair expenses clearlyimprove the economic value or performance of the related asset then they are capitalized.
2.08.04 Intangible AssetsIntangible Assets contains acquired assets by sales such as computer software programs and computer software licences. Thereis no intangible assets created within the structure of business. Intangible assets acquired before January 1, 2005 are carried atacquisition costs adjusted for inflation; whereas those purchased in the year 2005 and purchased after 2005 are carried forward attheir acquisition cost less accumulated amortization.
Amortization is calculated using the straight-line method between 5 and 10 years period.
Intangible fixed assets are rewieved in terms of impairment for each balance sheet period. If the carrying value of a tangible fixed assetis more than its expected net realizable value, then the carrying value is reduced to its net realizable value by making the necessaryprovisions. There is no provision for decrease in value of a tangible fixed assets.
2.08.05 Impairment of AssetsAssets which has infinite life are not subjected to amortization. Impairment test is applied for these assets for each year.
ANNUAL REPORT
Land Improvements 10 10
Buildings 2 2
Machinery, Plant and Equipment 20-10 20-10
Motor Vehicles 25-10 20-10
Furniture and Fixtures 25-10 20-10
Leasehold Improvements 20-10 20-10
TYPE OF FIXED ASSET Depreciation rates as of Depreciation rates as of
December 31, 2010 (%) December 31, 2009 (%)
88
Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable.The recoverable amount is the higher of an asset’s fair value less costs to sell and value inuse. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are seperately identifiable cashflows. Apart from the goodwill, non-financial assets that suffered impairment are reviewed for possible reversal of impairment at eachreporting date.
2.08.06 Research and Development ExpensesNone.
2.08.07 Borrowings CostsThe borrowing costs are recognized as expense when they are incurred. Borrowing costs that are directly attributable to the acquisition,construction or production of a qualifying asset shall be capitalized as part of the cost of that asset. The capitalization of borrowingcosts as part of the cost of a qualifying asset shall commence, when expenditures and borrowing costs for the asset are incurred,continues until that asset becomes available for sale. Expenditures on a qualifying asset include only those expenditures that haveresulted in payments of cash, transfers of other assets or the assumption of interest-bearing liabilities. There are no capitalized borrowingcosts in current period related to qualifying assets.
2.08.08 Financial Instruments
(i) Financial AssetsInvestments are recognized and derecognized on transaction date where the purchase and sales of an investment is under a contract,terms of which require delivery of the investment within the timeframe established by the market concerned and are initially measuredat fair value, net of transaction costs except for those financial assets classified as fair value through profit or loss which are initiallymeasured at fair value.
Financial assets are classified as “financial assets, whose fair value differences are reflected to the profit or loss”, “financial assetsheld to the maturity”, “financial assets available for-sale” and “loans and receivables.”Prevailing Interest Method
Prevailing interest method is the assessment of financial asset with their amortized cost and allocation of interest income to the relevantperiod. Prevailing interest rate is a rate that discounts the estimated cash flow of the financial instruments for the expected life or whereappropriate a shorter period.
Income related to financial assets, except the “financial assets, whose fair value differences are reflected to the profit or loss”, iscalculated by using the prevailing interest rate.
a) Financial Assets Whose Fair Value Differences Are Reflected to the Profit or Loss“Financial assets whose fair value differences are reflected to the profit or loss”, are the financial assets that are held for trading purposes.If a financial asset is acquired for trading purposes, it is classified in this category. Also, derivative instruments, which are not exemptfrom financial risk, are also classified as “Financial assets whose fair value differences are reflected to the profit or loss”. These financialassets are classified as current assets.
b) Financial Assets Which Will Be Held to the MaturityDebt instruments, which the Group has the intention and capability to hold to maturity, and/or have fixed or determinable paymentarrangement are classified as “Investments Held to the Maturity”. Financial asset that will be held to the maturity, are recorded afterdeducting the impairment from the cost basis, which has been amortized with prevailing interest method. All relevant income is calculatedusing the prevailing interest method.
c) Financial Assets Available-For-SaleFinancial assets, which are “Available-for-Sale” are either financial assets, which will not be held to maturity or financial assets, whichare not held for trading purposes. Financial assets Available-for-Sale are recorded with their fair value if their fair value can be determinedreliably.
Marketable securities are shown at their cost basis unless their fair value can be reliably measured or have an active trading market.Profit or loss pertaining to the financial assets Available-for-Sale is not recorded on the income statement. The fluctuation in the fairvalue of these assets are shown in the statement of shareholders’ equity. Where the investment is disposed of or is determined to beimpaired, the cumulative gain or loss previously recognized is includeded in profit or loss for the period. Provisions recorded in theincome statement pertaining to the impairment of financial asset Available-for-Sale can not be reversed from the income statementin future periods.
Except equity instruments classified as available-for-sale, if impairment loss decreases in next period and if therein decreasing canbe related to an event occurred after the accounting of impairment loss, impairment loss accounted before, can be cancelled in incomestatement.
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d) Loans and ReceivablesTrade receivables, other receivables, and loans are initially recognized at their fair value. Subsequently, receivables and loans aremeasured at amortized cost using the effective interest method. In the case of interest on loans and receivables negligible, registeredvalue of loan and receivables is accepted as fair value.
Impairment of financial assetsFinancial assets, other than those at fair value through profit or loss, are assessed for indication of impairment at each balance sheetdate. Financial assets are impaired, where there is objective evidence that, as a result of one or more events that occurred after theinitial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assetscarried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present valueof estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced with the impairment loss directly for all financial assets with the exception oftrade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable isuncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are reversedagainst the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreasesand the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognizedimpairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairmentis reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
With respect to available-for-sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directlyin equity.
Cash and Cash Equivalents
Cash and cash equivalents are cash, demand deposit and other short-term highly liquid investments, which their maturities are threemonths or less from the date as of acquisition, that are readily convertible to a known amount of cash and are subject to an insignificantrisk of changes in value.
(ii) Financial LiabilitiesFinancial liabilities and equity instruments are classified according to the contractual agreements entered into and the definition offinancial liability and equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of theCompany after deducting all the liabilities. Accounting policies determined for the financial liabilities and the financial instruments basedon equity are explained below.
Financial liabilities are classified as either “financial liabilities whose fair value differences are reflected to the profit /loss” or other financialliabilities.
a) Financial Liabilities Whose Fair Value Differences Are Reflected to the Profit /Loss“Financial liabilities whose fair value differences are reflected to the profit /loss” are recorded with their fair value and are re-evaluatedat the end of each balance sheet date. Changes in fair values are recorded on the income statement. Net earnings and/or lossesrecorded on the income statement also include interest payments made for this financial liability.
b) Other Financial LiabilitiesNone.
(iii) Derivative Financial InstrumentsThe Group has aggrement in foreign currency futures markets. Derivative financial instruments are recognised with its market valueon the date of derivative contracts signed and re-assessed with its market value.
The difference between the fair value as of December 31, 2010 and the cost value of the forward contracts as of December 31, 2010is recognised under the shareholders’ equity within the scope of “ IAS 39 Hedge Accounting.”
The gain or loss realized from the increase or decrease in the fair value of the derivative instruments which do not meet the conditionsfor hedge accounting is recognised in profit or loss.
The fair value is determined by the appropriate one of possible valid market values, otherwise discounted cash flows and option pricingmodels. The derivatives with positive fair value is recognised as an asset and with negative fair value is recognised as a liability underthe balancesheet. (Note:7)
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2.08.09 Effects of Currency FluctuationsAll transactions, denominated in foreign currencies, are converted into TL by the exchange rate ruling at the transaction date. All foreigncurrency denominated monetary assets and liabilities stated at the balance sheet are converted into TL by the exchange rate rulingat the balance sheet date. Foreign exchange gains and/or losses as a result of the conversions are recorded in the income statement.Group uses same foreign currency in their sales and purchase transaction. Therefore Group does not contain cuurency risk.
2.08.10 Earnings per ShareEarnings per share in the income statement is calculated by dividing net income by the weighted average number of common sharesoutstanding for the period.
In Turkey, companies are allowed to increase their share capital by distributing “bonus shares” from retained earnings. These bonusshares are deemed as issued shares while calculating the net earnings per share. Accordingly, the retrospective effect for those sharedistributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation.
2.08.11 Subsequent EventsSubsequent events cover all events that occur between the balance sheet date and the publication date of the financial statements.If there is substantial evidence that the subsequent events existed or arise after the balance sheet date, these events are disclosedand explained in the notes to the financial statements.
2.08.12 Provisions, Contingent Liabilities and AssetsA provision is recognized when an entity has a present obligation (legal or constructive) as a result of a past event; it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation; and reliable estimate can be made ofthe amount of the obligation Where the effect of the time value of money is material, the amount of a provision is the present value ofthe expenditures expected to be required to settle the obligation.
The discount rate (or rates) is a pre-tax rate (or rates) that reflect(s) current market assessments of the time value of money and therisks specific to the liability. The increase in provisions arisen from time differences is recorded as interest expense in case of discounting.Future events that may affect the amount required to settle an obligation shall be reflected in the amount of a provision where thereis sufficient objective evidence that they will occur. The amount recognized as a provision is the best estimate of the considerationrequired to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding theobligation.
Contingent liabilities and assets are not reflected to consolidated financial statements but disclosed in the notes to the consolidatedfinancial statements. The entity recognizes a provision for the part of the obligation, for which an outflow of resources embodyingeconomic benefits is probable, except in the extremely rare circumstances where no reliable estimate can be made.
2.08.13 Leasing Operations
The Group as Lessee
Financial LeasesFinancial leases are descibed which the lessor retains all the risks and benefits pertaining to the goods. Financial leases are takeninto the accounts according to lower current market value or minimum lease payments.
The liability arising from a financial leasing transaction is separated into interest payable and principal debt in order to determine a fixedinterest rate on the remaining balance. The costs and expenses incurred at the initial acquisition of the fixed asset subject to financialleasing are added to the cost. The fixed assets obtained through financial leasing are subject to depreciation over their estimated usefullives.
Information of net book value of Group’s assets ,which are subject to lease, stated on Note:18. Information related with Group’sfinancial leasing debt stated on Note:8
Operating LeasesLease agreements in which the lessor retains all the risks and benefits relating to the good are described as operational leasing. Leasepayments made for an operational leasing are recorded as expense according to normal method throughout the lease term.
Group’s Lease agreements as a lessee ,are related with store and office lease in ‹stanbul, Ankara, ‹zmir, Diyarbak›r and vehicle leases.Annual lease expense is 479.728 TL (2009 : 582.934 TL) as of 2010. Lease payments have been expensed with straight line-method.
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The Group as Lessor
Operating LeasesThe Group presents assets subject to operating leases in their balance sheet according to the nature of the asset. Lease income fromoperating leases is recognized as income according to the normal method. The initial direct costs incurred during operational leasingare reflected to income statement as expense.
Group’s Lease agreements as a lessor, are related with leasing to small part of the main building where Group’s operating, to othernon-consolidated companies and to another company which is not include the Group, as aoffice and store.
2.08.14 Related Party DisclosuresThe partners’ of the Company, Company’s Board of Directors, Company’s management personnel, Company’s other directors, closefamily members in the charge of the Company, and other companies directly or indirectly controlled by the Company are consideredas related parties. The transactions with related parties are disclosed in the Note: 37.
2.08.15 Government Grants and AssistanceNone.
2.08.16 Investment PropertyNone.
2.08.17 Taxation and Deferred TaxIncome tax expense represents the sum of the tax currently payable and deferred tax.
Current taxThe tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that arenever taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantivelyenacted by the balance sheet date.
Deferred taxDeferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and thecorresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liabilitymethod. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognizedfor all deductible temporary differences to the extent that it is probable that taxable profits will be available against whichthose deductibletemporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwillor from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neitherthe taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates,and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probablethat the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differencesassociated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxableprofits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settledor the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which theGroup expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current taxliabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current taxassets and liabilities on a net basis.
Current and deferred tax for the periodCurrent and deferred tax are recognized as an expense or income to the income statement, except when they relate to items creditedor debited directly to equity, in which case the tax is also recognized directly in the equity, or where they arise from the initial accountingfor a business combination.
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In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of theacquirer’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities over cost.Taxes stated in financial statements contain changes in current and deferred taxes for the period. The Group calculates current periodtax and deferred tax over the period results.
Offsetting Tax Income and LiablitiesCorporate tax amounts are offset with prepaid corporate tax as they are related. Deferred tax assets and liabilities are also offset.
Retirement PayAccording to Turkish Labor Law, employee termination benefit is reflected in the financial statements, when the termination indemnitiesare deserved. Such payments are considered as being part of defined retirement benefit plan as per IAS No.19 “Employee Benefits”.
Termination indemnity liability is reflected to the financial statements with the amount calculated for value at balance sheet date of lumppension in the next years by discounting by adequate interest rate. Interest cost added to the lump pension expense is shown asinterest expense in the results of operations.
2.08.19 Statement of Cash FlowCash and cash equivalents are stated at their fair values in the balance sheet. The cash and cash equivalents comprises cash in hand,bank deposits and highly liquid investments. On cash flow statement, the Group classifies period’s cash flows as investment andfinancing activities.
Cash inflow provided from operating activities denotes cash inflow provided from main activities of the Group. Cash flow concernedwith investment activities shows cash used and provided from investment activities (asset investments and financial investments).Cashflow concerned with investment activities represents sources used from financial activities and pay-back of these funds.
2.08.20 Income AccrualsThe most of the products sold by the Group has foreign origin. The purchases is made from foreign companies, offices of foreigncompanies in Turkey or domestic companies in Turkey. Depending upon the realization of the targets given by the domestic or foreigncompanies; a set of payments are received or offsetting the accounts under the name of “rebate”, “risturn”, “sell out”, or “bonus”.
The mentioned amounts is recognised as credit note income accruals in the balancesheet depending upon the realization of the targetsand conditions given by the sellers. The documents prepared by sellers under the name of “rebate”, “risturn”, “sell out”, “bonus”, and“credit note” (or Invoices prepared by the Group) is collected or offsetted.
2.08.21 Provisions for WarrantyThe Group is a distributor of the information technologies in Turkey. The warranties of the products sold is provided by the companiesassigned by the producers. The products submitted to Company from dealers and these products are sent to producers or companiesassigned by the producers for repair and maintenance. After the repair and maintenance, if there is a need to change or give a newproduct to customers within the scope of the warranty, the amount of the products are invoiced to producer companies. The Companyhas no liability of provisions for warranty.
2.09 New and Revised International Financial Reporting Standards
i) Amendments and interpretations that have become effective after January 01, 2010 are as follows:• IFRS 2 (Amendment) “Share-based payment” A set of explanations related to share-based payments.• IFRS 3 (Amendment), “Business Combinations” and IAS 27 (Amendment), “Consolidated Financial Statements and Non-ConsolidatedFinancial Statements” Regulations has been made related to accounting for conditional value, cost of acquisition, goodwill and examplesrelated to exchange of shares in subsidiaries are given.• IFRS 1(Amendment), “First-time Adoption of IFRS” Some exceptions to First-time Adoption of IFRS have been made• IAS 39 (Amendment), “Financial Instruments: Recognition and Measurement” – Hedging Instruments• IFRIC 17, “Distributions of Non-cash Assets to Owners”. A set of explanations related to recognition of distribution of non-cash assetsto shareholders.
These changes do not have impact on the financial statements of the Group.
i) The following standards, amendments and interpretations not preferred an early application by the Group and will becomeeffective after December 31, 2010:• IAS 24 (Revised) “Related-Party Disclosures” (The amendment is effective for financial period beginning on and after January 01,2011.) Revision on the related party disclosures related to entities with significant state ownership.
• IFRS 9 “Financial Instruments” (The amendment is effective for financial period beginning on and after January 01, 2013.) Additionalconditions to recognition and measurement of Financial Instruments
ANNUAL REPORT
93
• IAS 32 (Amendment) “Financial Instruments’ Presentation” (The amendment is effective for financial period beginning on and afterFebruary 01, 2010.) Some explanations related to right issue offerings in return for the foreign currency amounts recognised as derivativefinancial instruments.• IAS 1 (Amendment) “Presentation of Financial Statements” (The amendment is effective for financial period beginning on and afterJanuary 1, 2011.) Some explanations have been made for presentation of the statement of shareholders’ equity per shareholders’equity items.• IFRS 1 (Amendment) (The amendment is effective for financial period beginning on and after July 01, 2010, early adoption is permitted)Limited exemptions for comparative IFRS 7 notes• IFRS 7 (Amendment) “Financial Instruments: Disclosures” (The amendment is effective for financial period beginning on and afterJanuary 1, 2011.): Some explanations have been made for the disclosures must be done according to IFRS 7.• IFRS 7 (Amendment) “Financial Instruments: Disclosures” (The amendment is effective for financial period beginning on and afterJuly 1, 2011.): Some explanations have been made for the off-balancesheet transactions to be examined more comprehensively.• IFRIC 9 “Reassesment of Embedded Derivatives” (The amendment is effective for financial period beginning on and after January01, 2013.)• IFRIC 14 (Amendment) “Prepayments of a Minimum Funding Requirement” (The amendment is effective for financial period beginningon and after January 01, 2011.) Some explanations have been made for the permit to recognise as an asset some voluntary prepaymentsfor minimum funding contributions.• IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” (The amendment is effective for financial period beginning onand after July 01, 2010.)Some explanations have been made for the recognition of the transactions such as a negotiation betweenthe company and the creditor for the conditions of the financial liabilities and such a situation that the creditor accept that the debtorcompany repay the complete or a part of the financial liability by equity instruments.
Management of the Group has the opinion that the implementations of the standards stated above does not have an important effectof the Company’s financial statements at subsequent periods.
i) Amendments and interpretations that have become effective after January 01, 2010 are as follows:
• IFRS 2 (Amendment) “Share-based payment” A set of explanations related to share-based payments.• IFRS 3 (Amendment), “Business Combinations” and IAS 27 (Amendment), “Consolidated Financial Statements and Non-ConsolidatedFinancial Statements” Regulations has been made related to accounting for conditional value, cost of acquisition, goodwill and examplesrelated to exchange of shares in subsidiaries are given.• IFRS 1(Amendment), “First-time Adoption of IFRS” Some exceptions to First-time Adoption of IFRS have been made• IAS 39 (Amendment), “Financial Instruments: Recognition and Measurement” – Hedging Instruments• IFRIC 17, “Distributions of Non-cash Assets to Owners”. A set of explanations related to recognition of distribution of non-cash assetsto shareholders.
These changes do not have impact on the financial statements of the Group.
3. BUSINESS COMBINATIONSNone.
4. BUSINESS ASSOCIATIONSNone.
5. REPORTING FINANCIAL INFORMATION BY SEGMENTS AND GEOGRAPHIC AREASThe Group operates in only one sector, which is related to products of information technologies in only one geographical location.Due to these facts it is not necessary to disclose any information related to segment reporting. The information related to the productionand sales quantities are disclosed in the relevant note.
6. CASH AND CASH EQUIVALENTSCash and Cash Equivalents for the periods December 31, 2010 and December 31, 2009 are as follows:
Account Name
Cash
Bank (Demand Deposits)
Financial Assets held until Maturuity (Reverse Repo)
Credit card slips
Total
31 December 2010
32.821
24.326.634
1.000.140
1.056.275
26.415.870
31 December 2009
35.603
1.569.999
-
715.286
2.320.888
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94
Account Name 31 December 2010 31 December 2009
Cash and Equivalents
Accrued Interest Income (-)
Total
26.415.870
(140)
26.415.730
2.320.888
-
2.320.888
Maturity of credit card slips are 1 or 2 days for the current and prior period.Maturity of Reverse Repo transactions are 1 day and interest income of TL 140 is accrued. Reverse repo transaction currency is madein TL and ‹nterest rate of reverse repo transaction is % 5,10.
There is no lien and blocked amounts on cash and cash equivalents as of December 31, 2010 (December 31, 2009 : None.)
Cash and cash equivalents has been indicated as accured interest income deducted from cash and equivalants in Group’s cashflow statements.
7. FINANCIAL ASSETS & INVESTMENTS
Short- Term Financial Assets & Investments
All short term financial investments consist of stock investments and they are classified as financial assets whose fair value differencesare reflected to profit or loss. Details are shown below;
Account Name 31 December 2010 31 December 2009
Shares
Assets arised from Derivative Instruments
Total
214
100.661
100.875
33
-
33
Groups Stock investments consists of shares which are traded in Istanbul Stock and Exchange Market (IMKB).
181 TL of valuation income which is valuated with closing price on December 31, 2010, is considered as other income.
Group has been made a forward foreign exchange purchase commitments amounted USD 21.126.341 as of December 31, 2010.The fair value of this contract is TL 3.186.663 as of December 31, 2010. TL 1.556 of revaluation surplus is considered as incomeand a mount of TL 99.105 considered as ‘’ hedging fund’’under the shareholder’s equity. Amount of 19.821 Deferred Tax Liabilitieswhich is related with revaluation surplus, has been offsetting from hedging fund.
Long –Term Financial Assets & Investments
All long term financial investments, are consist of Financial Assets Ready for Sale .
Details of Financial Assets Avaliable for Sale are as follows:
31 December 2010 31 December 2009
Shares
- Listed stocks
- Unlisted stocks
Total
64.894
-
64.894
64.894
64.894
-
64.894
64.894
Account Name
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95
Total Asset
5.488.926
1.669.139
7.158.065
‹nfin A.fi.
Neteks D›fl Tic. Ltd.fiti.
Total
5.147.499
1.585.408
6.732.907
341.427
83.731
425.158
14.786.251
13.379.501
28.165.752
48.714
29.976
78.690
TotalLiabilities Total Equity Net Sales Profit for
the period
‹nfin A.fi.
Neteks D›fl Tic. Ltd.fiti.
Total
10.272.466
2.013.512
12.285.978
9.979.753
1.959.758
11.939.511
292.713
53.754
346.467
17.821.381
12.924.449
30.745.830
47.939
63.239
111.178
Unlisted stock investments are as follows;
Share Amount Rate (%)
‹nfin A.fi.
Neteks D›fl Tic. Ltd.fiti.
Total
99,80
49,50
99,80
49,50
62.419
2.475
64.894
62.419
2.475
64.894
Summary of financial information related to unlisted stock investments ;
31 December 2010
31 December 2009
8. FINANCIAL LIABILITIESShort-Term financial liabilities for the years ended are as follows:
Bank Loans
Payables of Financial Leases
Deferred Financial Leasing Borrowing Cost (-)
Total
11.424.242
156
(15)
11.424.383
22.154.762
3.378
(2.284)
22.155.856
Annual InterestRate (%)
Short Term Loans
TL Loans(Short Term)
USD Loans (Short Term)
Total Loans
7.110.514
431.388
10.992.854
11.424.242
Faizsiz - 13
3 – 8
TypeForeign
CurrencyAmount
Amountin TL
The details of the Short Term Bank Loans are as follows:
31 December 2010 31 December 2009
31 December 2010 31 December 2009Account Name
Company Name
Company Name Share Amount Rate (%)
Total Asset TotalLiabilities Total Equity Net Sales Profit for
the periodCompany Name
31 December 2010
ANNUAL REPORT
96
Short Term Loans
TL Loans(Short Term)
USD Loans (Short Term)
Total Loans
14.547.600
250.441
21.904.321
22.154.762
Interest free -11.63
2.50-7.82
Account Name
Bank Loans
Total
31 December 2010
8.285.360
8.285.360
31 December 2009
10.313.062
10.313.062
Long Term Loans
TL Loans(Short Term)
USD Loans (Short Term)
Total Loans
5.190.241
261.247
8.024.113
8.285.360
12 / 13
8
6.704.308
218.386
10.094.676
10.313.062
Interest free -11.63
7.82
Long Term Loans
TL Loans(Short Term)
USD Loans (Short Term)
Total Loans
0-3 Months
3-12 Months
12-60 Months
60 Months and above
Total
31 December 2010
5.594.772
5.829.471
7.884.224
401.135
19.709.602
31 December 2009
17.083.167
5.071.595
7.522.904
2.790.158
32.467.824
The details of the Short Term Bank Loans are as follows:
31 December 2010
31 December 2009
The details of the Long Term Bank Loans for the years ended are as follows:
31 December 2009
Maturity Information of Bank Loans Liabilities are as follows;
Annual InterestRate (%)Type
ForeignCurrencyAmount
Amountin TL
Annual InterestRate (%)Type
ForeignCurrencyAmount
Amountin TL
Annual InterestRate (%)Type
ForeignCurrencyAmount
Amountin TL
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97
0-3 Months
3-12 Months
Total
31 December 2010
156
-
156
31 December 2009
968
2.410
3.378
Account Name 31.12.2010 31.12.2009
Trade Receivables
Due from Related Parties
Other
Receivables
Rediscount on s Receivables (-)
Doubtful Receviables
Provision for Doubtful Receviables (-)
Total
217.070.240
4.619.012
212.451.228
99.446.201
(1.331.005)
5.082.748
(5.082.748)
315.185.436
161.033.481
624.262
160.409.219
69.302.512
(841.186)
4.888.556
(4.888.556)
229.494.807
Opening Balance
Recived amount in current period (+)
Exchange Differance
Period Expenses (-)
Period-end Balance
(4.888.556)
242.705
2.078
(438.975)
(5.082.748)
(3.140.027)
375.794
-
(2.124.323)
(4.888.556)
1 January-31 December 2010
1 January-31 December 2009
Up to 3 Months
Between 3- 12 Months
Between 1-5 Years
Total
31 December 2010
744.859
75.791
-
820.650
31 December 2009
1.209.251
153.816
-
1.363.067
Maturity Information of financial lease liabilities are as follows:
9. OTHER FINANCIAL LIABILITIESNone.
10. TRADE RECEIVABLES AND PAYABLESShort-Term trade receivables for the years ended December 31, 2009 and December 31, 2008 are as follows:
The Group has no Long-Term Trade Receviables for the years ended December 31, 2010 and December 31, 2009.
A part of 21.616.698 TL of Total 315.185.436 TL trade receivables are in the scope of guarantee as of December 31, 2010. As ofDecember 31.2009, A part of 34.269.777 TL of total 229.494.807 TL trade receivables were in the scope of guarantee.
Provision for Doubtful Receivables summarize table is below:
Maturity analysis of trade receivable overdue that is not assessed for impairment is as follows:
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98
Long-term other receivables for the years ended are as follows:
Account Name 31.12.2010 31.12.2009
Suppliers
Other Suppliers
Due to Related Suppliers
Notes Payable
Rediscount on Payable
Total
339.132.873
338.508.729
624.144
28.449.708
(1.620.221)
365.962.360
212.094.553
205.334.362
6.760.191
53.979.575
(993.727)
265.080.401
Account Name 31.12.2010 31.12.2009
Other Receivables
Deposits and Guarantees Given
Due From Personnel
Non-commercial Receivables Due From Related Parties
Total
1.526
-
149.209
96.013
246.748
-
14.975
135.078
1.205.509
1.355.562
Account Name 31.12.2010 31.12.2009
Taxes, Duties Payable and Other Fiscal Liabilities 4.177.693 3.195.053
Social Security Institution Payables 311.604 250.798
Advances Received 4.012.373 3.354.910
Personnel 132.572 256.594
Non-commercial Payables Due to Releated Parties 4.834.616 1.182.299
Total 13.468.858 8.239.654
Explanations concerning the nature risk and level of risk of trade receivables are disclosed in Note:38
Details of Trade payables for the year ended are as follows:
There are not any long-term trade payables for the years ended December 31, 2010. Avarage Maturity of Trade receivables andpayables are under two months.
Compound interest rate of domestic government bonds is used as prevailing interest rate for rediscount of trade receivables andpayables in TL. Also Libor and Eurobor are used for trade receiavbles and payables in USD and EURO.
11. OTHER RECEIVABLES AND PAYABLESShort-term other receivables for the years ended are as follows;
Account Name 31.12.2010 31.12.2009
Deposits and Guarantees Given 56.440 51.844
Total 56.440 51.844
Explanations concerning the nature risk and level of risk of trade receivables are disclosed in Note:38
Short-term other payables for the years ended are as follows:
ANNUAL REPORT
99
Account Name 31.12.2010 31.12.2009
Commercial Goods 125.235.533 135.921.631
Goods in Transportation 3.695.200 4.283.966
Decrease in Value of Inventory (-) (1.604.839) (1.320.293)
Toplam 127.325.894 138.885.304
12. RECEIVABLES AND PAYABLES FROM / TO FINANCE SECTOR OPERATIONSNone.
13. INVENTORIESInventories for the periods ended are as follows:
Openning Balance (-) (1.320.293) (1.544.123)
Cancellation of Provision Due to Increase in Net Realizable Value Net(+) 118.899 337.416
Provision for the Period(-) (403.445) (113.586)
Balance at the end of year (-) (1.604.839) (1.320.293)
1 January - 31 December 2010 1 January - 31 December 2009
Products which are invoiced but not actually transfered to inventories are recognised under the “Goods in Transit”.
Provision for Impairment of Inventory:
The provision for decrease in value of stocks is calculated with increasing percentages for the goods waiting in the inventory morethan 3 months depending upon increase in the inventory turnover rate.
As of December 31, 2010, 7.537.113 TL TL of the inventories is presented with their net realizable value and the remaining balanceis presented with their cost in the the financial statements. (As of December 31, 2009, 9.277.090 TL TL of the inventories is presentedwith their net realizable value and the remaining balance is presented with their cost in the the financial statements.)
Explanation
Cost
Provision for Decrease in value of Inventories
Net Realizable Value (a)
Inventory presented with its cost value (b)
Total Inventories (a+b)
31 December 2010
7.537.113
1.604.839
5.932.274
121.393.620
127.325.894
31 December 2009
9.277.090
1.320.293
7.956.797
130.928.507
138.885.304
There is no inventory given as a guarantee for a liability.
Total Amount of Insurances on Assets are disclosed in Note:22.The information related to inventories recognised as expense in the current period is disclosed in Note:28.
14. BIOLOGICAL ASSETSNone.
15. CONSTRUCTION CONTRACTS IN PROGRESSNone.
16. INVESTMENTS EVALUATED BY EQUITY METHODNone.
ANNUAL REPORT
100
18. TANGIBLE FIXED ASSETSThe Fixed Assets details for the years ended are as follows:
31 December 2010
Cost
Account Name
Buildings
Total
1 January 2010
-
-
Aditions
125.500
125.500
Sales
-
Transfer
-
31 December 2010
125.500
125.500
Lands and parcels
Land Improvements
Buildings
Machinery, Plants&Equipments
Motor Vehicles
Furniture & Fixtures
Leasehold improvements
Other tangible fixed assets
Total
17.320.543
39.204
11.786.858
1.372.927
1.231.892
4.094.611
274.115
128.372
36.248.522
-
-
277.037
40.550
517.682
415.110
1.950
-
1.252.329
-
-
-
-
(98.946)
(12.970)
-
-
(111.916)
17.320.543
39.204
12.063.895
1.413.477
1.650.628
4.496.751
276.065
128.372
37.388.935
Account Name 01 January 2010 Additions Disposals Transfer 31 December 2010
17. INVESTMENT PROPERTIESThe investment property of the Group consists of a house placed in Çankaya, Ankara. The mentioned property is acquired from apledge for a receivable. The Group management estimates the fair value of this property as 125.000 TL. The Group management hasconsidered the fair value of the properties in the neighbourhood and acquisition of mentioned properties in their estimates.
Cost
Accumulated Depreciation
Account Name
Buildings
Total
Net Value
1 January 2010
-
-
Period Depreciation
(629)
(629)
Sales
-
-
Transfer
-
31 December 2010
(629)
(629)
124.871
31 December 2009
None
ANNUAL REPORT
101
Accumulated Depreciation
Account Name 01 January 2010 Additions Disposals Transfer 31 December 2010
Land Improvements
Buildings
Machinery, Plants&Equipments
Motor Vehicles
Furniture & Fixtures
Leasehold Improvements
Total
(39.204)
(3.305.121)
(1.307.261)
(531.971)
(2.931.370)
(102.469)
(8.217.396)
-
(238.578)
(11.267)
(237.251)
(297.308)
(32.296)
(816.700)
-
-
-
72.128
3.891
-
76.019
-
-
-
-
-
-
(39.204)
(3.543.699)
(1.318.528)
(697.094)
(3.224.787)
(134.765)
(8.958.077)
Net Value 28.031.126 28.430.858
Lands and parcels
Land Improvements
Buildings
Machinery, Plants&Equipments
Motor Vehicles
Furniture & Fixtures
Leasehold Improvements
Other tangible assets
Total
17.320.543
39.204
11.412.201
1.372.927
1.133.338
3.968.677
197.112
128.372
35.572.374
-
-
374.657
-
304.904
133.981
77.003
-
890.545
-
-
-
-
(206.350)
(8.047)
-
-
(214.397)
-
-
-
-
-
-
-
17.320.543
39.204
11.786.858
1.372.927
1.231.892
4.094.611
274.115
128.372
36.248.522
Accumulated Depreciation
Lands and parcels
Land Improvements
Buildings
Machinery, Plants&Equipments
Motor Vehicles
Furniture & Fixtures
Leasehold Improvements
Total
-
-
-
-
-
-
Net Value 27.837.991 28.031.126
-
(39.204)
(3.029.428)
(1.296.051)
(602.292)
(2.682.842)
(84.566)
(7.734.383)
-
-
(275.693)
(11.210)
(118.725)
(249.830)
(17.903)
(673.361)
-
-
-
-
189.046
1.302
-
190.348
-
(39.204)
(3.305.121)
(1.307.261)
(531.971)
(2.931.370)
(102.469)
(8.217.396)
Other tangible fixed assets consist of art objects. Due to there is no depriciation on art objects, these are not subject to depreciation.
Other InformationThe depreciation and amortization expenses are recognised under the operational expenses.The Amount of mortgage on buildings which are stated in assets is USD 6.686.756 .Total Amount of Insurances on Assets are disclosed in Note:22.
31 December 2009
Cost
Account Name 01 January 2009 Additions Disposals Transfer 31 December 2009
Account Name 01 January 2009 Additions Disposals Transfer 31 December 2009
ANNUAL REPORT
102
20. GOODWILL
Rights
Total
522.419
522.419
13.560
13.560
-
-
-
-
535.979
535.979
Rights
Total
(453.554)
(453.554)
(23.286)
(23.286)
-
-
-
-
476.840
476.840
Net Value 68.865 59.139
Opening Balance
Additions
Disposals/ Sales
Provisions for the value decrease
Closing balance
Goodwill 31.12.2010 31.12.2009
2.467.577
-
-
-
2.467.577
2.467.577
-
-
-
2.467.577
19. INTANGIBLE FIXED ASSETS
31 December 2010
Cost
Accumulated Depreciation
31 December 2009
Cost
Accumulated Depreciation
Rights
Total
(428.538)
(428.538)
(25.016)
(25.016)
-
-
-
-
(453.554)
(453.554)
Net Value 85.583 68.865
514.121
514.121
8.298
8.298
522.419
522.419
Rights
Total
-
-
-
-
There is no provisions for the value decrease in Goodwill. Group’s goodwill arised from Data Gate Bilgisayar A.fi. which is subsidiaryof Group’s and Neteks Bilgisayar A.fi. which is group’s joint managing company.
Calculated amount of goodwill is revised each balance sheet period. Mentioned companies’ cash amounts are subjected to calculatedpresent discounted value during to revising. According to evaluation made, discount rate is %12, and rate of growth is %5 which isused for determining the future cash flows to present value, as of December 2010
Account Name 01 January 2010 Additions Disposals Transfer 31 December 2010
Account Name 01 January 2010 Period Depreciation Disposals Transfer 31 December 2010
Account Name 01 January 2009 Additions Disposals Transfer 31 December 2009
Account Name 01 January 2009 Period Depreciation Disposals Transfer 31 December 2009
ANNUAL REPORT
103
21. GOVERNMENT GRANT AND ASSISTANCENone.
22. PROVISIONS, CONTINGENT LIABILITIES AND ASSETS
Account Name December 31, 2010 December 31,2009
Provisions for Price Differences 3.552.295 2.487.557
Provision for Litigations 1.624.500 895.362
Total 5.176.795 3.382.919
December 31, 2010 Provision for Litigations Provisions for Price Differences Total
As of January 1, 2010 895.362 2.487.557 3.382.919
Additions 1.222.790 3.552.295 4.775.085
Payments (493.652) - (493.652)
Cancellation of Provisions (2.487.557) (2.487.557)
As of December 2010 1.624.500 3.552.295 5.176.795
December 31, 2009 Provision for Litigations Provisions for Price Differences Total
As of January 1, 2009 18.629 2.793.497 2.812.126
Additions 902.986 2.487.557 3.390.543
Payments (26.253) - (26.253)
Cancellation of Provisions - (2.793.497) (2.793.497)
As of December 2009 895.362 2.487.557 3.382.919
Price difference invoices are taken from clients for selling products with different prices,prvisions are made.isions Additionally, due toincrease the sales , targets are given to clients. When the clients achieve the targets, turnover premiums, credit note, price differencesinvoices etc. are taken from dealers and prvisions are made.
ii) Contingent Assets and Liabilities;
31.12.2010
As of December 31, 2010, for one lawsuit initiated against Group , provision amount 1.624.500 TL is reflected to the financial statements.
31.12.2009
As of December 31, 2009, for one lawsuit initiated against Group, provision amount 895.392TL is reflected to the financial statements.
ANNUAL REPORT
104
Bailment Given
Guarantee Notes Given
Mortgage
Guarantess letters given
Total
1.462.250
1.586.506
-
3.096.000
6.144.756
3.685.500
-
6.686.756
11.515.000
21.887.256
1.000.000
-
-
7.500.000
8.500.000
31 December 2010 TRL USD EURO
Bailment Given
Mortgage
Guarantess letters given
Total
31 December 2009 TRL USD EURO
312.750
-
2.854.000
3.166.750
9.435.500
7.699.183
10.515.000
27.649.683
-
7.100.000
7.100.000
Type of Insured Assets USD EUR TL
Trade goods 104.285.000 - -
Vehicles - - 1.376.200
Plants machinery and equipment 8.818.571 57.545 -
Other 610.000 - -
Total 113.713.571 57.545 1.376.200
31.12.2010
Type of Insured Assets USD EUR TL
Trade goods 91.200.000 - -
Vehicles - - 961.839
Plants machinery and equipment 8.926.446 37.700 -
Other 805.125 - 55.000
Total 100.931.571 37.700 1.016.839
31.12.2009
iv) Total Guarantees and Mortgages on AssetsNone
v) Total Insurance Coverage on Assets:
iii) Contingent Liabilities and Commitments:
ANNUAL REPORT
105
A. T
otal
am
ount
of
M&
G G
iven
on
beha
lf of
the
Gro
up
G
uara
ntee
Let
ter
(US
D)
G
uara
ntee
Let
ter
(EU
R)
G
uara
ntee
Let
ter
(TL)
G
uara
ntee
not
es a
nd c
hequ
es(T
L)
L
ien
M
ortg
age
B. T
otal
am
ount
of
M&
G G
iven
on
beha
lf of
the
Sub
sidi
arie
s an
d A
ffilia
ted
Com
pani
es s
ubje
ct to
full
cons
olid
atio
n
Bai
lmen
t (U
SD
)
Bai
lmen
t (E
UR
O)
Bai
lmen
t (TL
)
C.
Tota
l Am
ount
of
M&
G G
iven
on
beha
lf of
the
third
per
son
liabi
lity
in o
rder
to s
usta
in u
sual
bus
ines
s ac
tiviti
es.
D. T
otal
Am
ount
of o
ther
M&
G G
iven
i
. Tot
al A
mou
nt o
f M&
G G
iven
on
beha
lf of
mai
n sh
areh
olde
r
i
i. T
otal
Am
ount
of M
&G
Giv
en o
n be
half
of o
ther
affi
liate
d co
mpa
nies
whi
ch c
an n
ot b
e cl
assi
fied
unde
r se
ctio
n B
and
C.
i
ii. T
otal
Am
ount
of M
&G
Giv
en o
n be
half
of th
e th
ird p
erso
n th
at c
anno
t be
clas
sifie
d un
der
sect
ion
C.
To
tal
-
11.5
15.0
00
7.50
0.00
0
6.68
6.75
6 -
3.68
5.50
0
1.00
0.00
0 - - - - -
31 D
ecem
ber
201
0Fo
reig
n C
urre
ncy
Am
oun
t
48.1
90.6
71
17.8
02.1
90
15.3
68.2
50
3.09
6.00
0
1.58
6.50
6
10.3
37.7
25
9.20
9.13
3
5.69
7.78
3
2.04
9.10
0
1.46
2.25
0 - - -
31 D
ecem
ber
201
0T
L A
mo
unt
-
10.5
15.0
00
7.10
0.00
0
7.69
9.18
3 -
9.43
5.50
0 - - - - -
31 D
ecem
ber
200
9Fo
reig
n C
urre
ncy
Am
oun
t
45.6
17.2
26
15.8
32.4
36
15.3
38.1
30
2.85
4.00
0
11.5
92.6
60
14.5
19.7
82
14.2
07.0
32
312.
750 - - - -
31 D
ecem
ber
200
9T
L A
mo
unt
MO
RT
GA
GE
S &
GU
AR
AN
TE
ES
GIV
EN
BY
TH
E G
RO
UP
57.3
99.8
0460
.137
.008
vi ) The ratio of Mortgages and Guarantees Given to Shareholders’ Equity is as follows;
ANNUAL REPORT
106
January 1
Service Costs
Actuarial Gains
Interest Expences
Payment (-)
Closing Balance
649.270
109.748
202.293
209.467
(154.297)
1.016.481
502.341
108.164
66.827
148.621
(176.683)
649.270
1 January 201031 December 2010
1 January 200931 December 2009
As of December 31, 2010, the ratio of Mortgages and Guarantees Given to Shareholders’ Equity is 0 %. (0 % of December 31, 2009)
23. COMMITMENTSNone.
24. EMPLOYEE TERMINATION BENEFITS
Account Name
Provision for Employment Termination Indemnity
Total
31 December 2010
1.016.481
1.016.481
31 December 2009
649.270
649.270
Under the Turkish Labor Law, the Group is required to pay employee termination benefits to each employee, who has entitiled toreceive provisions for employee termination benefits in accordance with the effective laws: No: 2422 on March 6, 1981 and No: 4447on August 25, 1999 of the Social Insurance Act No: 506 and the requirements of the amended Article 60 of the related Act. Themaximum employee termination benefit payable as of December 31, 2010 is 2.517,01 TL. (December 31, 2009: 2.365,16). Themaximum employee termination benefit payable as of January 1, 2011 is 2.623,23 TL and taken into consideration in the calculationsof the Group’s provision for termination indemnities.
Termination indemnity payable is not subject to any legal funding.Termination indemnity payable is calculated by forecasting the present value of currently working employee’s possible future liabilities.IAS 19 (“Employee Termination Benefits”) predicts to build up Group’s liabilities with using actuarial valuation techniques in contextof defined benefit plans. According to these predictions, actuarial assumptions used in calculation of total liabilities are as follows.
Base assumption is the inflation parallel increase of maximum liability of each year. Applied discount rate must represent expectedreal discount rate after the adjustment of future inflation.
As of December 31, 2010, provisions in financial statement are calculated by forecasting the present value of currently workingemployee’s possible future liabilities.Provisions as of December 31, 2010 are calculated with %4,66 reel discount rate based on theassumptions of % 5,10 inflation rate and % 10 discount rate annually. (31 December 2009: %5,92 reel discount rate).
Provision expense for termination indemnities is recognised under the operational expenses.
25. RETIREMENT BENEFIT PLANSNone.
ANNUAL REPORT
107
27. SHAREHOLDERS’ EQUITY
i) Minority Shares / Minority Shares Profit - (Loss)
Prepaid Expenses for the Following Months
Credit Note Income Accrual
Deferred VAT
VAT Return
Job Advances
Advances Given
Total
1.076.036
17.176.193
11.016.348
1.213.692
681.336
5.822.106
36.985.711
440.136
15.506.860
15.180.738
-
22.805
2.447.136
33.597.675
31 December 2010 31 December 2009Account Name
Account Name
Income Relating to Future Months
Total
31 December 2010
11.261.656
11.261.656
31 December 2009
12.618.137
12.618.137
Opening Balance
Current period accrual
Collection / Current account transfer
Balance at the end of year
15.506.860
91.020.591
(89.351.258)
17.176.193
15.855.397
81.638.173
(81.986.710)
15.506.860
26. OTHER ASSETS AND LIABILITIESOther Current Assets for the years ended, are as follows:
Short-term other liablities for the years ended, are as follows:
Income recognised from invoiced but not delivered products are recognised under the “Income Relating to Future Months“ due to thecriterias related with IAS 18 (delivery, transfer of risks, etc.) are not met.
Credit Note Income Relating to Future Months transactions as follows:
Account Name
Minority Shares
Total
31 December 2010
9.780.474
9.780.474
31 December 2009
8.752.561
8.752.561
Account Name
Minority Shares Profit - (Loss)
Total
31 December 2010
1.027.913
1.027.913
31 December 2009
1.709.148
1.709.148
ii) Capital / Share Capital / Elimination Adjustments
The share capital of the Group is TL 56.000.000 as of December 31, 2010 and the share capital consist of 56.000.000 per-shareswhich each of 1 nominal value.
The paid in capital of the Group, which is TL 56.000.000, consists of A Group shares issued to the name as paid-in capital is TL 318,B Group shares issued to the bear as paid-in capital is TL 55.999.682.
A Group of shareholders have the rights to appoint one more of the half member of the Executive Board. After the initial dividend isgiven from the distribution of profit, A group Shareholders has also the rights to get % 5 of the remaining part.
Account Name 1 January 201031 December 2010
1 January 200931 December 2009
ANNUAL REPORT
108
The Group accepts the Registered Share capital System with the March 17,2005 dated and 11/327 numbered permission of CapitalMarket Board and determined the Registered Share Capital ceiling TL 75.000.000. The decision accepted at 2004 Regular MeetingShareholders of the Group dated April 27,2005.
The Group’s registered capital is TL 75.000.000. The Group’s application to raise capital from TL 55.000.000 to TL 56.000.000 byimplementing TL 1.000.000 from share of profit of 2006 is approved by committee ruling numbered 25/699 and dated June 28, 2007.The public offering of shares to be issued with nominal value of TL 1.000.000 has been accepted in the Board’s meeting dated June28, 2007 and with the number of 25/699. As of July 10, 2007, the increase of the capital is registered and published in the OfficialGazette numbered 6852 and dated July 16, 2007.
The share capital shown in the consolidated balance sheet is the share capital of the Group. The amounts of share capital of thesubsidiaries and the subsidiary account are eliminated mutually.
ShareholderShare Percentage
%
Nevres Erol Bilecik
Pouliadis and Associates S.A.
Public Offer
Other
Total
% 38,63
% 35,56
% 23,44
% 2,37
% 100
21.634.440
19.911.119
13.126.987
1.327.454
56.000.000
% 41,06
% 35,56
% 21,01
% 2,37
% 100
22.994.220
19.911.119
11.767.207
1.327.454
56.000.000
Share Amount
The ultimate controlling party of the Group is Nevres Erol Bilecik and his family members.
iii) Capital ReservesNone.
iv) Restricted Reserves from ProfitRestricted reserves from profits consist of legal reserves.
The legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code (TCC).The TCC stipulates that the first legal reserve is appropriated out of historical statutory profits at the rate of 5% per annum, until thetotal reserve reaches 20% of the Group’s historical paid-in share capital. The second legal reserve is appropriated at the rate of 10%per annum of all cash distributions in excess of 5% of the historical paid-in share capital. Under TCC, the legal reserves are not availablefor distribution unless they exceed 50% of the historical paid-in share capital but may be used to offset losses in the event that historicalgeneral reserve is exhausted.
v) Previous Years’ Profits / (Losses)Profits of previous years consist of extraordinary reserves, miscellaneous inflation differences and profits of other previous years.
In accordance with the CMB’s decision numbered 7/242 dated on February 25, 2005; if the amount of net distributable profit basedon the CMB’s requirement on the minimum profit distribution arrangements, which is computed over the net profit determined basedon the CMB’s regulations, does not exceed the net distributable profit in the statutory accounts, the whole amount should be distributed,otherwise; all distributable amount in the statutory accounts are distributed. However, no profit distribution would be made if anyfinancial statements prepared in accordance with the CMB or any statutory accounts carrying net loss for the period.
In accordance with the CMB’s decision numbered 2/53 on January 18, 2007, Groups, which prepared their financial statements inaccordance with the CMB standards, are required to distribute at least 20% of their net profit. The distribution, with the approval anddecision via the General Assembly’s resolution, can be made either by cash, bonus issues or cash and bonus shares with a rule thatthe distributable amount will not be less than 20 % of the distributable profit.
In accordance with CMB’s decision dated January 27,2010; it is decided not to bring any obligation for any minimum profit distributionabout dividend distribution which will be made for public corporations. The Group management decided to distribute dividens accordingto the regulations specified in articles of association of the Group and dividend distiribution policies declared to public.
31 December 2010 31 December 2009
Share Percentage% Share Amount
ANNUAL REPORT
109
Account Name
Share capital
Shareholders’ Equity Inflation Adjustment Differences
Hedging Funds
Restricted Reserves From Profit
-Legal Reserves
-Profit Reserves of Sales from Affiliates
Previous Years’ Profits
Net Period Loss/ Profit
Parent Company Shareholders' Equity
Minority Interests
Total Shareholders’ Equity
56.000.000
241.113
79.284
5.109.837
3.962.787
1.147.050
36.055.067
13.171.469
110.656.770
9.780.474
120.437.244
56.000.000
241.113
-
4.183.406
3.036.356
1.147.050
27.664.383
15.934.942
104.023.844
8.752.561
112.776.405
Breakdown of Shareholders' Equity for the periods January 01 – December 31, 2010 and January 01 – December 31, 2009 are asfollows:
In the financial statements prepared according to the standards of the CMB, the Group’s current profits amounted to TL 13.171.469.The Group’s distributable profit for current period is TL 8.279.182. In the financial statements prepared according to the standardsof the CMB, the Group’s accumulated profits amounted to 49.226.536 TL. The Group’s distributable profit amount is TL 31.703.103.Group’s dividend which is related previous period profits is limited with this amount. Inflation adjustments on equity, real estates salesprofits which are held in fund for adding the share capital are not take into consideration to total distributable profit.
Result of General board , which belongs to 2009, dated on April 20, 2010 as follows;
Net income after tax is 15.934.942 TL in 2009 Consolidated Financail statements according to CMB’s bulletin of No29. Serial :XI.Realized profit is TL 10.892.941,74 according to tax legistation. It has been decided that restricting primary reserve, total amount is544.647,09 TL, which calculated according to %5 of Realized profit (TL 10.892.941,74)
- It has been decided that distrubiting the primary dividend of Gross 6.156.117,97 TL as a cash, ( distributing %10,9931 for 1 nominalvalue per share is 0,109931 TL); (Net 5.232.700,27 which is distributing %9,3442 for 1 nominal value per share is 0,093442 TL). Thegross Primary dividend is calulated %40 of 15.390.294,91 TL , as a result of deducting 544.647,09 TL, which is primary reserve,from 15.934.942 TL, which is tax after net profit.
- It has been decided that distrubiting the the Secondary dividend to A Group preferred shareholder. The distributing the secondarydividend of of Gross 461.708,85 TL as a cash, ( distributing for 1 nominal value per share is 1.451,09 TL); (Net 392.452,52 which isdistributing for 1 nominal value per share is 1.233,43 TL). The gross Secondary dividend is calulated %5 of 9.234.176,94 TL , as aresult of deducting 6.156.117,97, which is primary dividend, from 15. 390.294,91 TL, which is net period profit.
- It has been decided that amount of 381.782,68 TL made as a secondary reserve.
- Remainin distribution of profit is started on May 04, 2010
- It has been decided that the remaining amount is added to exstraordinary reserves.
31 December 2010 31 December 2009
ANNUAL REPORT
110
29. RESEARCH AND DEVELOPMENT, MARKETING, SALES & DISTRIBUTION EXPENSESOther operating expenses which belong twelve months accounting period of the Group as of December 31, 2010 and December 31,2009 are as follows:
Domestic Sales
Foreign Sales
Other Sales
Sales Returns (-)
Sales Discounts (-)
Other Discounts (-)
Net Sales
Cost of Sales (-)
Gross Profit from Business Operations
1.220.214.680
13.816.010
46.717.733
(45.676.817)
(6.117.768)
(778.072)
1.228.175.766
(1.153.272.537)
74.903.229
1.072.788.369
8.400.999
45.200.032
(34.275.959)
(4.304.865)
(386.194)
1.087.422.382
(1.023.117.198)
64.305.184
Accessories
Computer
Storage and Medium Sized Systems
Security
Communication Products
Network Products
PC Components (OEM)
Consumer electronics
Consumption
Printer and Peripherals
Software
Small house appliances
Other
183.314
512.035
299.107
4.567
24.153
1.213.149
3.024.448
167.730
-
632.341
543.642
18.677
577.010
116.752
422.887
332.272
5.093
155
957.731
3.077.113
69.147
2.719
617.179
471.978
-
757.209
57%
21%
(10%)
(10%)
15.483%
27%
(2%)
143%
(100%)
2%
15%
100%
(24%)
Difference%
Marketing and Selling Expenses (-)
General Administrative Expenses (-)
Total Operating Expenses
(13.493.798)
(14.896.959)
(28.390.757)
(11.173.103)
(12.767.710)
(23.940.813)
28. SALES AND COST OF SALESSales and cost of sales details which belong twelve months accounting period of the Group as of December 31, 2010 and December31, 2009 are as follows:
Quantity of sales related to twelve months accounting period of the Group as of December 31, 2010 and December 31, 2009 are asfollows:
Account Name
Account Name
1 January 201031 December 2010
1 January 200931 December 2009
1 January 201031 December 2010
1 January 200931 December 2009
1 January 201031 December 2010
1 January 200931 December 2009Account Name
ANNUAL REPORT
111
30. EXPENSES RELATED TO THEIR NATUREExpenses Related to Their Nature of the Group as of December 31, 2010 and December 31, 2009 are as follows:
Sales, Marketing and Distribution Expenses (-)
- Personnel Expenses
- Logistic and storage expences
- Depreciation expenses
- Rental Expense
- Communication Expense
- Travelling Expenses
- Transportation Expenses
- Consultancy and Audit Expenses
- Insurance Expenses
- Maintenance and repair expenses
- Advertisement Expense
- Taxes, Duties, Charges Expenses
- Decrease in value of stocks
- Provisions for termination indemnities expenses
- Provisions for doubtful trade receivables
- Provision for ligitation Expence
- Sales and foreign trade expenses
- Other Expenses
Total Operating Expenses
(28.390.757)
(16.270.464)
(3.327.649)
(840.615)
(479.728)
(334.662)
(359.739)
(632.137)
(462.234)
(619.926)
(96.728)
(1.024.701)
(423.101)
(284.547)
(521.508)
(196.270)
(1.222.790)
(718.041)
(575.917)
(28.390.757)
(23.940.813)
(12.954.133)
(2.501.586)
(698.377)
(582.934)
(380.905)
(252.132)
(449.898)
(402.161)
(685.662)
(67.983)
(694.444)
(156.380)
-
(323.612)
(1.748.529)
(902.986)
(661.879)
(477.212)
(23.940.813)
Depreciation and amortisation exspenses and personel expenses are recognised in operational expenses.
31. OTHER OPERATING INCOME / EXPENSEOther operating Income / Expense which belong twelve months accounting period, of the Group as of December 31, 2010 andDecember 31, 2009 are as follows:
Insurance Compensation Income
Cancellation provision for inventories
Other Income
Other Income Total
Other Expense Total (-) (*)
Other Income / Expence (Net)
25.854
-
34.833
60.687
(374.948)
(314.261)
129.508
223.831
-
353.339
(948.369)
(595.030)
(*)Other expenses consist from non-deductibel expenses such as tax, penalty,motorvehicle taxes and special communication taxes, etc.
1 January 201031 December 2010
1 January 200931 December 2009Account Name
Account Name 1 January 201031 December 2010
1 January 200931 December 2009
ANNUAL REPORT
112
32. FINANCIAL INCOMEFinancial income for the periods ended are as follows:
33. FINANCIAL EXPENSESThe financial expenses of the Group as of December 31, 2010 and December 31, 2009 are as follows:
Interet Income
Other
Foreign Exchange Gains (-)
Interest Eliminated From Sales(-)
Rediscount Income
Previous Period Rediscount Cancellation
Total Financial Income
730.520
181
29.200.793
7.636.802
1.620.220
841.187
40.029.703
869.733
-
20.518.353
4.694.975
993.725
1.209.354
28.286.140
Banking Charges and Interet Expense (-)
Foreign Exchange Loss (-)
Eleminated Interest From Purchases(-)
Rediscount Expense (-)
Cancellation of Previous Period’s Rediscount
Total Financial Expense
(7.284.186)
(52.193.769)
(5.878.789)
(1.331.006)
(993.725)
(67.681.475)
(5.754.806)
(33.795.758)
(4.111.526)
(841.187)
(1.160.571)
(45.663.848)
Period Tax Income/(Expense)
Prepaid Taxes And Funds (-)
Total Tax Payable
4.626.551
(3.527.917)
1.098.634
4.681.623
(3.150.967)
1.530.656
Period Tax Income/(Expense)
Deferred Tax Income / (Expense)
Total Tax Income / (Expense)
(4.626.551)
279.494
(4.347.057)
(4.681.623)
(65.920)
(4.747.543)
There is no capitalized financial expense of Group for current period.
34. FIXED ASSETS HELD FOR SALE PURPOSES AND DISCONTINUED OPERATIONSNone.
35. TAX ASSETS AND LIABILITIESThe Group’s tax income / (expense) is composed of current period’s corporate tax expense and deferred tax income / (expense)The tax assets and liabilities of the Group as of December 31, 2010 and December 31, 2009 are as follows:
Account Name
Account Name
1 January 201031 December 2010
1 January 200931 December 2009
1 January 201031 December 2010
1 January 200931 December 2009
Account Name 31 December 2010 31 December 2009
Account Name1 January 2010
31 December 20101 January 2009
31 December 2009
ANNUAL REPORT
113
i) Provision for Current Period Tax
Group calculate their temporary taxes on their quarterly financial profits in Turkey. Corporate income as of the temporary tax periods,temporary tax rate of 20 % over the corporate income was calculated and prepaid taxes deducted from taxation on income.
According to Turkish Corporate Tax Law, losses can be carried forward to offset the future taxable income for a maximum period of5 years. On the other hand, such losses cannot be carried back to offset prio years’ profits.
According to Corporate Tax Law’s Article: 24, the corporate tax is imposed by the taxpayer’s tax returns. There is no prosedure fora final and definitive agreement on tax assessments. Annual corporate tax returns are submitted until the 25th of April following theclosing of the accounting year. Moreover, the tax authorities have the right to examine the tax returns and the related accountingrecords within five years.
Effective Corporate Tax Rate:
According to the corporate tax law numbered 5520, which was published in the official gazette dated June 21, 2006, the effectivecorporate tax rate was set as 20%.
In Turkey, advance tax returns are files on a quarterly basis. The advance corporate income taxes have been calculated with theeffective corportate tax rate of 20%.
According to Turkish Corporate Tax Law, losses can be carried forward to offset the future taxable income for a maximum period of5 years. On the other hand, such losses cannot be carried back to offset prio years’ profits.
According to Corporate Tax Law’s Article: 24, the corporate tax is imposed by the taxpayer’s tax returns. There is no prosedure fora final and definitive agreement on tax assessments. Annual corporate tax returns are submitted until the 25th of April following theclosing of the accounting year. Moreover, the tax authorities have the right to examine the tax returns and the related accountingrecords within five years.
Income Withholding Tax:In addition to corporate tax, Group should also calculate income withholding tax on any dividends and income distributed, except forresident companies in Turkey receiving dividends from resident companies in Turkey and Turkish branches of foreign companies. Therate of withholding tax has been increased from 10% to 15% upon the Cabinet decision No: 2006/10731, which was published inOfficial Gazette on July 23, 2006.
ii) Deferred Tax
The deferred tax asset and tax liability is based on the temporary differences, which arise between the financial statements preparedaccording to CMB’s accounting standards and statutory tax financial statements. These differences usually due to the recognition ofrevenue and expenses in different reporing periods for the CMB standards and tax purposes.
Fixed Assets
Rediscount Expense
Provision for Termination Indemnities
Provision for Reduced Depreciation from Stock
Prekont Income
Other
Deferred Tax Assets / (Liabilities)
(673.700)
1.331.005
1.016.480
1.604.840
(1.620.220)
1.678.885
(134.740)
266.201
203.296
320.968
(324.044)
335.777
667.458
(722.245)
621.465
625.365
1.260.760
(961.270)
1.214.850
(144.449)
124.293
125.073
252.152
(192.254)
242.970
407.785
31.12.2010TemporaryCumulatedDifferences
31.12.2010Deffered
Tax Assets /(Liabilities)
31.12.2009TemporaryCumulatedDifferences
31.12.2009Deffered
Tax Assets /(Liabilities)
Account Name
ANNUAL REPORT
114
Deferred Tax Asset / Liability at the beginning of the period
Deferred Tax Income / (Expense)
Deferred Tax Asset / Liability at the end of the period
Deferred Tax Asset / Liability at the beginning of the period
407.785
279.494
(19.821)
667.458
473.705
(65.920)
-
407.785
31 December 2010 31 December 2009Account Name
Explanation of Unused Tax Advantages:
There is no financial loss transferred to forthcoming periods as of December 31, 2010.
Reconciliation of tax provision as of December 31, 2010 and December 31, 2009 are as follows:
Reconciliation of Tax Provision
Profits obtained from continuing operations
Income tax rate %20
Tax effect:
-Non-taxable income
-Non-deductible Expenses
Deferred Tax Income
18.546.439
(3.709.287)
(637.770)
(4.347.057)
22.391.633
(4.478.327)
(269.216)
(4.747.543)
1 January 201031 December 2010
1 January 200931 December 2009
36. NET EARNINGS PER SHAREEarnings per share in the income statement are calculated by dividing net income by the weighted average number of common sharesoutstanding for the period. Group’s earnings per share are calculated for the periods are as follows:
13.171.469
56.000.000
0,235205
2.070
0,223446
15.934.942
56.000.000
0,284553
2.504
0,270326
Period Profit/ (Loss)
Weighted Average Number of Common Shares Outstanding
Earnings / (Loss) per Share
Profit for preferred shares
Profit for ordinary shares
Account Name 1 January 201031 December 2010
1 January 200931 December 2009
37. EXPLANATIONS OF RELATED PARTIES
a) Receivables and Payables of Related Parties:
31 December 2010Commercial Non-
Commercial
Receivables Liabilities
Shareholders
Homend A.fi.
Desbil A.fi.
Neosoft A.fi.
‹nfin A.fi.
Neteks D›fl Tic.
Despec A.fi.
Total
-
1.783.661
5.957
-
2.399.123
292.827
137.444
4.619.012
-
-
96.013
-
-
-
-
96.013
-
-
-
-
624.144
-
-
624.144
3.043.727
112.119
-
-
-
-
1.678.690
4.834.616
Commercial Non-Commercial
ANNUAL REPORT
115
Sales toRelated Parties
Goods andService Sales
Common CostParticipation
Interest andForeign Exchange
Income
Total Expense /Purchases
-
6.672.779
270.992
9.683.293
3.648.161
20.275.225
10.363
295.300
226.804
617.698
3.550
1.153.715
13.357
8.466.832
715.612
10.306.061
3.651.711
23.153.573
Desbil A.fi.
Despec A.fi.
Homend A.fi.
‹nfin A.fi.
Neteks D›fl Ltd.fiti.
Total
2.994
1.498.753
217.816
5.070
-
1.724.633
1 January - 31 December 2010
Purchases FromRelated Parties
Goods andService Purchases
Common CostParticipation
Interest andForeign Exchange
Expense
Total Expense /Purchases
Desbil A.fi.
Despec A.fi.
Homend A.fi.
‹nfin A.fi.
Neteks D›fl Ltd.fiti.
Total
-
5.869.015
4.834.305
5.431.286
4.611.145
20.745.751
-
-
-
-
-
-
20.713
389.459
309.094
461.823
10.397
1.191.486
20.713
6.258.474
5.143.399
5.893.109
4.621.542
21.937.237
There is no guarantees or mortgages for the related party receivables or payables. There is no provision made for doubtful receivablesfor the related party receivables.
The related party balances generally consist from trade transactions. But in some conditions there are cash usages between the relatedparties. The balances consist from non-trade transactions are classified as non-trade receivables or payables in the financial statements.Interest is calculated for the balances and invoiced quarterly. The interest rates for USD is between % 3 and % 4,50 in 2010.
Shareholders current accounts are generally arised from divident debt, and interest is not calculated for these debt.
b) Purchases from Related Parties and Purchases from Related Parties
Shareholders
Homend A.fi.
Desbil A.fi.
Neosoft A.fi.
‹nfin A.fi.
Neteks D›fl Tic.
Despec A.fi.
Total
-
-
-
-
453.492
-
170.770
624.262
-
1.077.335
128.174
-
-
-
-
1.205.509
-
-
-
-
-
759.468
6.000.723
6.760.191
1.182.299
-
-
-
-
-
-
1.182.299
31 December 2009Commercial Non-
Commercial
Receivables Liabilities
Commercial Non-Commercial
ANNUAL REPORT
116
1 January - 31 December 2009
Desbil A.fi.
Despec A.fi.
Homend A.fi.
‹nfin A.fi.
Neteks D›fl Ltd.fiti.
Total
-
12.863.898
10.731
8.023.374
2.850.108
23.748.111
2.802
1.276.599
2.802
4.800
-
1.287.003
9.571
851.795
153.871
765.743
3.518
1.784.498
12.373
14.992.292
167.404
8.793.917
2.853.626
26.819.612
Desbil A.fi.
Despec A.fi.
Homend A.fi.
‹nfin A.fi.
Neteks D›fl Ltd.fiti.
Total
-
11.062.358
-
5.864.858
5.209.632
22.136.848
-
19.944
-
-
-
19.944
10.769
948.035
78.577
350.534
10.868
1.398.783
10.769
12.030.337
78.577
6.215.392
5.220.500
23.555.575
Short term benefits provided to employees
Employment Termination Benefits
Other long term benefits
Total
2.384.466
-
-
2.384.466
2.088.213
-
-
2.088.213
c) Benefits and wages provided to Management Staff
Benefits and wages provided to Management Staff consist of general manager wages, assistant general manager wages.
38. NATURE AND LEVEL OF RISKS ARISING OUT OF FINANCIAL INSTRUMENTS
(a) Capital risk management
The Group, while trying to maintain the continuity of its activities in capital management on one hand, aims to increase its profitabilityby using the balance between debts and resources on the other hand.
The capital structure of the Group consists of debts containing the credits explained in note 8, cash and cash equivalents explainedin note 6 and resource items containing respectively issued capital, capital reserves, profit reserves and profits of previous yearsexplained in note 27.
Risks, associated with each capital class, and the capital cost are evaluated by the senior management. It is aimed that the capitalstructure will be stabilized by means of new borrowings or repaying the existing debts as well as dividend payments and new shareissuances based on the senior management evaluations.
The Group follows the capital by using debt/total capital rate. This rate is found by dividing the net debt by total capital. The net debtis calculated by excluding the cash and cash equivalent amounts from the total debt amount (including credits, leasing and commercialdebts as indicated in the balance sheet). Total capital is calculated as resources plus net debt as indicated in the balance sheet.
General strategy of the Group based on resources is not different from the previous years.
Sales toRelated Parties
Goods andService Sales
Common CostParticipation
Interest andForeign Exchange
Income
Total Expense /Purchases
Purchases FromRelated Parties
Goods andService Purchases
Common CostParticipation
Interest andForeign Exchange
Expense
Total Expense /Purchases
Account Name 1 January 201031 December 2010
1 January 200931 December 2009
ANNUAL REPORT
117
Total Debt
Minus (-) Cash and Equivalent
Net Debt
Total Shareholder’s Equity
Total Share capital
Rate %
417.694.527
(26.415.870)
391.278.657
120.437.244
511.715.901
76,46%
323.969.955
(2.320.888)
321.649.067
112.776.405
434.425.472
74,04%
Foreign Exchange Rate Sensitivity Analysis Table
Current Period
Profit / Loss
Appreciation ofForeign Exchange
Depreciation ofForeign Exchange
Previous Period
1- US Dollar Net Property / Liability
2- The part, protected from US Dollar Risk (-)
3- US Dollar Net Effect (1+2)
(5.376.668)
(5.376.668)
5.376.668
5.376.668
5.727.877
5.727.877
(5.727.877)
(5.727.877)
4- Euro Net Property / Liability
5- The part, protected from Euro Risk (-)
6- Euro Net Effect (4+5)
(40.779)
(40.779)
(5.417.447)
40.779
40.779
5.417.447
622.808
622.808
6.350.685
(622.808)
(622.808)
(6.350.685)
In the event of 10% value change of US Dollar against TL;
In the event of 10% value change of Euro against TL;
The Group is entening into hedging contracts (including derivative financial instruments) for the purpose of diversifing currency fluctuationrisks.
(b) Important Accounting Policies
Significant accounting policies of the Group relating to the financial instruments are stated in the footnote 2.
(c) Market risk
The , due to its activities, is exposed to changes in exchange rates (see article d) and interest rates (see article e), and other risks(article g). The Group, as it holds the financial instruments, also bears the risk of other party not meeting the requirements of theagreement.
Market risks seen at the level of Group is measured according to the sensitivity analysis principle. The market risk of the Group incurredduring the current year or the method of handling the encountered risks or the method of measuring those risks are no different fromthe previous year.
(c1) Foreign exchange rate risk management
Transactions by foreign currency cause the formation of rate risks. The Group is exposed to rate risk due to the changes in exchangerates used for exchanging the assets and liabilities from foreign currency to Turkish Lira. The rate risk evolves due to the commercialtransactions to be executed in the future and the difference between actives and passives of the recorded.
The Group is exposed to rate risk depending on the course of change of rate changes because it actually evaluates its accounts asforeign exchange deposits and has payables and receivables in foreign currency.
31 December 2010 31 December 2009Account Name
Profit / Loss
Appreciation ofForeign Exchange
Depreciation ofForeign Exchange
Total
ANNUAL REPORT
118
TRL Value USD EUR GBP
Current Period
Account Name
1. Trade Receivables
2a. Monetary Financial Assets
2b. Non-Monetary Financial Assets
3. Other
4. Current Assets Total (1+2+3)
5. Trade Receivables
6a. Monetary Financial Assets
6b. Non-Monetary Financial Assets
7. Other
8. Fixed Assets Total (5+6+7)
9. Total Assets (4+8)
10. Trade Payables
11. Financial Liabilities
12a. Other Monetary Liabilities
12b. Other Non-Monetary Liabilities
13. Total Short Term Liabilities (10+11+12)
14. Trade Payables
15. Financial Liabilities
16a. Other Monetary Liabilities
16b. Other Non-Monetary Liabilities
17. Total Long Term Liabilities (14+15+16)
18. Total Liabilities (13+17)
19. Net Asset/ (Liability) Position of Derivative Instruments
off the Balance Sheet (19a-19b)
19a. Total Amount of Hedged Assets
19b. Total Amount of Hedged Liabilities
20. Net Foreign Exchange Asset / (Liability) Position (9-18+19)
21. Monetary Items Net Foreign Exchange Asset / (liability)
position (1+2a+5+6a-10-11-12a-14-15-16a)
22. Total Fair Value of Financial Instruments Used for
the Foreign Exchange Hedge
23. The Amount of Hedged part of Foreign Exchange Assets
23. The Amount of Hedged part of Foreign Exchange Liabilities
23. Export
24. Import
226.257.352
43.237.733
-
-
269.495.085
-
373
-
-
373
269.495.457
(291.405.123)
(10.992.996)
(13.247.695)
-
(315.645.814)
-
(8.024.113)
-
-
(8.024.113)
(323.669.927)
3.287.323
3.287.323
-
(50.887.147)
(54.174.470)
-
3.186.663
-
13.816.010
472.875.309
142.650.727
26.926.709
-
-
169.577.436
241
241
169.577.677
(183.490.699)
(7.110.605)
(8.564.059)
(199.165.363)
(5.190.242)
(5.190.242)
(204.355.605)
2.126.341
2.126.341
(32.651.587)
(34.777.928)
2.126.341
2.791.142
785.243
-
-
3.576.384
-
3.576.384
(3.771.657)
-
(3.738)
(3.775.395)
-
(3.775.395)
-
(199.011)
(199.011)
-
-
-
-
-
-
-
-
-
As of December 31, 2010 total amount of the commercial good inventories is 123.630.694 TL. A significant part of inventories arepurchased or imported in USD. As of December 31, 2009 total amount of the commercial good inventories is 134.601.338 TL. Asignificant part of inventories are purchased or imported in USD.
c2 ) Credit Risk and Management
Table of Foreign Exchange Position
ANNUAL REPORT
119
TRL Value USD EUR GBP
Previous Period
1. Trade Receivables
2a. Monetary Financial Assets
2b. Non-Monetary Financial Assets
3. Other
4. Current Assets Total (1+2+3)
5. Trade Receivables
6a. Monetary Financial Assets
6b. Non-Monetary Financial Assets
7. Other
8. Fixed Assets Total (5+6+7)
9. Total Assets (4+8)
10. Trade Payables
11. Financial Liabilities
12a. Other Monetary Liabilities
12b. Other Non-Monetary Liabilities
13. Total Short Term Liabilities (10+11+12)
14. Trade Payables
15. Financial Liabilities
16a. Other Monetary Liabilities
16b. Other Non-Monetary Liabilities
17. Total Long Term Liabilities (14+15+16)
18. Total Liabilities (13+17)
19. Net Asset/ (Liability) Position of Derivative Instruments
off the Balance Sheet (19a-19b)
19a. Total Amount of Hedged Assets
19b. Total Amount of Hedged Liabilities
20. Net Foreign Exchange Asset / (Liability) Position (9-18+19)
21. Monetary Items Net Foreign Exchange Asset / (liability)
position (1+2a+5+6a-10-11-12a-14-15-16a)
22. Total Fair Value of Financial Instruments Used for
the Foreign Exchange Hedge
23. The Amount of Hedged part of Foreign Exchange Assets
23. The Amount of Hedged part of Foreign Exchange Liabilities
23. Export
24. Import
180.541.616
19.306.770
-
-
199.848.386
-
672
-
-
672
199.849.058
(216.064.992)
(21.905.416)
(15.290.751)
-
(253.261.159)
-
(10.094.751)
-
-
(10.094.751)
(263.355.910)
3.850.671
3.850.671
-
(59.656.181)
(63.506.852)
-
3.850.671
-
8.400.999
444.575.290
112.923.852
12.263.280
-
-
125.187.132
446
446
125.187.578
(133.023.950)
(14.548.327)
(8.952.235)
(156.524.512)
(6.704.358)
(6.704.358)
(163.228.870)
2.557.396
2.557.396
(35.483.896)
(38.041.292)
2.557.396
4.866.071
389.737
-
-
5.255.808
-
5.255.808
(7.300.296)
-
(838.481)
(8.138.778)
-
(8.138.778)
-
(2.882.970)
(2.882.970)
-
-
-
-
-
-
-
-
-
-
Account Name
ANNUAL REPORT
120
CREDIT TYPES INCURRED IN RESPECT OFFINANCIAL INSTRUMENT TYPES
Receivables
Commercial Receivables Other ReceivablesFootNote
Depositat BanksCurrent Period
Maximum credit risk incurred as of the date of reporting (A+B+C+D+E) (1)
- The part of maximum risk secured by guarantee etc.
A. Net book value of financial assets which are undue or which did not decline
in value (2)
B. Book value of financial assets which conditions are renegotiated, and which
otherwise would be counted as overdue or declined in value (3)
C. Net book value of assets, overdue but did not decline in value. (6)
- The part secured by guarantee etc.
D. Net book values of assets declined in value (4)
- Overdue (gross book value)
- Decline in value (-)
- The part of net value secured by guarantee etc.
- Undue (gross book value)
- Decline in value (-)
- The part of net value secured by guarantee etc.
E. Elements containing credit risk off the balance sheet (5)
4.619.012
-
4.619.012
-
-
-
-
-
310.566.424
21.166.698
309.745.773
296.209
524.442
524.442
-
5.082.748
(5.082.748)
-
96.013
-
96.013
-
-
-
-
-
-
207.175
-
207.175
-
-
-
-
-
-
10-11
10-11
10-11
10-11
10-11
10-11
10-11
10-11
10-11
25.326.774
25.326.774
-
-
-
6
6
6
6
6
6
6
6
6
Previous Period
Maximum credit risk incurred as of the date of reporting (A+B+C+D+E) (1)
- The part of maximum risk secured by guarantee etc.
A. Net book value of financial assets which are undue or which did not decline
in value (2)
B. Book value of financial assets which conditions are renegotiated, and which
otherwise would be counted as overdue or declined in value (3)
C. Net book value of assets, overdue but did not decline in value. (6)
- The part secured by guarantee etc.
D. Net book values of assets declined in value (4)
- Overdue (gross book value)
- Decline in value (-)
- The part of net value secured by guarantee etc.
- Undue (gross book value)
- Decline in value (-)
- The part of net value secured by guarantee etc.
E. Elements containing credit risk off the balance sheet (5)
624.262
-
624.262
-
-
-
-
-
228.870.545
34.269.777
227.507.477
269.589
1.093.479
1.093.479
-
4.888.856
(4.888.856 )
-
1.205.509
-
1.205.509
-
-
-
-
-
-
150.053
-
150.053
-
-
-
-
-
-
10-11
10-11
10-11
10-11
10-11
10-11
10-11
10-11
10-11
1.569.999
1.569.999
-
-
-
6
6
6
6
6
6
6
6
6
FootNote
Related Other Related Other
Receivables
Commercial Receivables Other ReceivablesFootNote
Depositat Banks
FootNote
Related Other Related Other
ANNUAL REPORT
121
Current Period (31 December 2010)
1-30 Days Overdue
1-3 Months Overdue
More than 3 Months Overdue
The part of net value secured by guarantee etc.
Commercial Receivables
641.987
102.873
75.791
524.442
-
-
-
-
Previous Period (31 December 2010)
1-30 Days Overdue
1-3 Months Overdue
More than 3 Months Overdue
The part of net value secured by guarantee etc.
Commercial Receivables
-
-
-
-
1.112.764
96.487
153.816
1.093.479
The Group’s credit risk management exposed from trade receivables. Trade receivables mostly consist from receivables from dealers.The Group has set up an effective control system over its dealers and the risk is monitorized by credit risk management team andGroup Management. The Group has set limits for every dealer and these limits are revised if it is neccessary. The taking adequateguarantees from dealers is another method for the risk management. There is no significant trade receivable risk for the Group, becausethe Group has receivables from a wide range of customers instead of a small number customers and significant amounts. Tradereceivables are evaluated by taking into consideration of Group’s past experience and current economic situation and these receivablesare presented with their net values in the balancesheet after the proper provisions for doubtful receivables are made. The low profitmargin by force of the sectoral conditions make collection and credit risk management policies important and the Group managementshow sensivity in these situations. The detailed information about the collection and risk management policies are as follows;
The Group starts executive proceedings and / or litigate for the receivables overdue for a few months. The Group can configure termsfor dealers in difficult situations. The low profit margin by force of the sectoral conditions make collection of receivables important.There is a risk management team to minimize the risk of collections and the sales are realized by making credibility evaluations. Thesales to new or risky dealers are made in cash collection.
The Group is selling products to a wide range of institutions which are selling or buying computer and its equipments. The capitalstructure of the dealers classified as “classic dealers” in the distribution channel is low. It is estimated that there are about 5.000 dealersin this group in Turkey and in terms of risk management to minimize the receivable risk of Datagate by taking steps and establishingits own organisation and working system. The steps taken by the Group is as follows;
The sales to new customers which has no experience more than 1 year : The sales to new customers which has no experience morethan 1 year are made in cash collection.
The information team involved in receivable and risk management department consist of 2 staff and this team is monitoring the dealerscontinuously.
Credit Committee: The information about the customers which has experience more than 1 year in the sector and the customerswhich are demanding an increase for the credit limit are prepared by the information team and presented to credit committee everyweek. Credit committee consist of Senior Vice President of Finance, Finance Manager, Accounting Manager, information team staffand the Sale Manager of related Customer. Credit Committee establish credit limits to related customers by taking into considerationthe information gained from the information team, past payments and sale performances. The Credit Committee determine theconditions and if it is needed they demand for guarantees, mortgages, etc.
Group sales are widespread on Turkey, therefore it is reduce the concentration risk.
Trade receivables are evaluated by taking into consideration the Group policies and procedures and the trade receivables are shownwith their net value after the provisions for doubtful receivables are made in the financial statements. (Note:10)
Commercial Receivables
Commercial Receivables
ANNUAL REPORT
122
(c3) Management of interest rate risk
Group’s fixed interest financial instruments liabilies are stated in Note: 8. Group’s fixed interest assets (deposit etc.) are stated inNote: 6
Table of Interest Position
Fixed Interest Financial Instruments
Financial Assets
Financial Liabilities
Current Period
1.000.140
19.525.078
Previous Period
-
32.314.574
Floating Rate Financial Instruments
Financial Assets
Financial Liabilities
Current Period
-
-
Previous Period
-
-
(c4) Liquidity risk management
The Group tries to manage the liquidity risk by maintaining the continuation of sufficient funds and loan reserves by means of matchingthe financial instruments and terms of liabilities by following the cash flow regularly.
Liquidity Risk Tables
Prudent liquidity risk management signifies maintaining sufficient cash, the utility of fund sources by sufficient credit transactions andthe ability to close out market positions.
Risk of existing or future possible debt requirements being fundable is managed by maintaining the continuation of availability ofsufficient numbers and high quality credit providers.
The table below indicates the term divisions of derivative and non-derivative financial liabilities of the Group in TL currency.
Cash outflows TotalAs Per the Agreement
Shorter than3 Months
Between3-12 months
Between1-5 years
Non-Derivative FinancialLiabilities
Book ValueExpected Terms
9.970.175
Longerthan 5 year
603.291
Bank Credits
Leasing Liabilities
Commercial Debts
Other Debts
Issuances of DebtInstrument
31.12.2010
399.140.961
19.709.602
141
365.962.360
13.468.858
403.267.462
22.215.866
-
156
367.582.581
13.468.858
386.681.131
5.629.535
-
156
367.582.581
13.468.858
6.012.865
6.012.865 9.970.175 603.291
Derivative FinancialLiabilities
Derivative Cash Inflow(*)
Derivative Cash Outflow
-
-
3.287.323
100.660
(3.186.663)
89.471
3.287.323
(3.197.852)
-
-
-
-
-
-
-89.471
3.287.323
(3.197.852)
(*)The amount of forward transactions consist of USD 2.125.341. In liability calculation, derivative cash outflow is calculated using exchange ratesvalid at the end of term. Derivative cash inflow is calculated using the exchange rate valid on December 31, 2010. Actual profit or loss will ariseat the end of term.
Cash outflows TotalAs Per the Agreement
Shorter than3 Months
Between3-12 months
Between1-5 years
Book ValueExpected TermsLonger
than 5 year
ANNUAL REPORT
123
31.12.2009
305.788.973
32.467.824
-
1.094
265.080.401
8.239.654
309.943.977
35.626.817
-
3.378
266.074.128
8.239.654
291.014.033
16.699.283
-
968
266.074.128
8.239.654
6.345.517
6.343.107
-
2.410
11.996.821
11.996.821
-
587.606
587.606
-
(*) The amount of forward transactions consist of USD 2.557.396 In liability calculation, deriative cash outflow is calculated using exchange ratesvalid at the end of term. Derivative cash inflow is calculated using the exchange rate valid on December 31, 2009. Actual profit or loss will ariseat the end of term.
(c5) Analyses of other Risks
Risks Related to Financial Instruments, Stocks Etc.
Group has no stocks or similar marketable securities evaluated by fair value in the current period.
39. FINANCIAL INSTRUMENTSThe Group considers that the recorded values of financial instruments reflect the fair values.
Aims at financial risk management
The finance department of the Group is responsible for maintaining the access to financial markets regularly and observing andmanaging the financial risks incurred in relation with the activities of the Group.The said risks include market risk (including foreignexchange risk, fair interest rate risk and price risk), credit risk, liquidity risk and cash receiving risk.
Fair Value of Financial Instruments
Fair value is the amount for which an financial instrument could be exchanged except compulsory sale or liqudation process betweenwilling parties and it is determined with its market value if there is a quoted price.
The Group has determined the estimated values of financial instruments by taking into consideration the present market informationand proper valuation methods. But determination of market information and estimation of fair value require interpretation and discernment.Consequently the estimations presented are not always the indicators of the values could be realized from a current market transaction.
The methods and assumptions used for the determination of the fair value of the financial instruments are as follows;
Monetary Assets
Balances denominated in foreign currencies are converted into Turkish Lira by the exchange rate rulling at the balancesheet date. Itis predicted that these balances are considered to approximate to their net book value.
Financial instruments in which cash and cash equivalents are included are carried by their cost value and it is predicted that theirnet book value are considered to approximate to their fair values due to their short-term maturity.
Cash outflows TotalAs Per the Agreement
Shorter than3 Months
Between3-12 months
Between1-5 years
Book ValueExpected TermsLonger
than 5 year
Non-Derivative FinancialLiabilities
Bank Credits
Leasing Liabilities
Commercial Debts
Other Debts
Issuances of DebtInstrument
-
-
3.850.671
(20.673)
(3.871.344)
(20.673)
3.850.671
(3.871.344)
(20.673)
3.850.671
(3.871.344)
-
-
-
-
-
-
-
Cash outflows TotalAs Per the Agreement
Shorter than3 Months
Between3-12 months
Between1-5 years
Book ValueExpected TermsLonger
than 5 year
Derivative FinancialLiabilities
Derivative Cash Inflow(*)
Derivative Cash Outflow
ANNUAL REPORT
124
It is predicted that the net book value of trade receivables with provisions made for doubtful receivables present their fair values.
Monetary Liabilities
Balances denominated in foreign currencies are converted into Turkish Lira by the exchange rate rulling at the balancesheet date. Itis predicted that these balances are considered to approximate to their net book value.
It is predicted that net book value of bank loans and other monetary liabilities are considered to approximate their fair values due totheir short-term maturity.
It is predicted that the net book value of trade payables present their fair values due to their short-term maturity.
Fair Value Assessment :
The Group has applied the amendments in IFRS 7 related with the financial instruments evaluated by fair value in the balancesheeteffective from the date of January 1, 2009.
The amendment in fair value calculations is disclosed in accordance with the steps of hierarchy for fair value mentioned below;
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)or indirectly (i.e. derived from prices).
Level 3 : Inputs for the asset or liability that are not based on observable market data
It is predicted that net book value of balances are considered to approximate to their fair values.
The Group present its financial investments with their fair values in the financial statements as of December 31, 2010. (Level 2) (Note:7)
It is accepted that the discounted net book value of financial assets such as cash and cash equivalents present thier fair values dueto their short-term maturity.
Trade receivables and payables are measured at their discounted cost using the effective interest method and it is accepted that thenet book value of these balances are considered to approximate their fair values.
40. SUBSEQUENT EVENTSNone.
41. OTHER ISSUESNone.
ANNUAL REPORT
ANNUAL REPORT
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