ELKO Group Convention Riga, September 2004. Agenda Regional Economic Overview CEE and EU effect Russian Market Elko Group Update Future developments.

ELKO Group ConventionELKO Group Convention

RigaRiga,, September September 20042004

Agenda

Regional Economic OverviewCEE and EU effectRussian Market

Elko Group Update

Future developments

Regional Economic Overview

European Developing Market Overview

Three groups of countries– New EU Entrants:

Baltics, Poland, Czech, Slovakia, Slovenia, and Hungary

– Prospective EU Entrants: Romania, Bulgaria, and Former Yugoslavia

– EU Neighbours: Russia, Ukraine, and Turkey

The Convergence Play– Political and Economic convergence to EU norms

driven by economic power of one market and political pressure

Convergence – Implications

Faster economic growth than US or Western Europe for 20 years plus– Implies faster market growth for all manufactured goods– Increasing share of European Market

Harmonisation– Common EU law – Similar business rules and partnership

Extending to neighboring countries

– Standardized rules on VAT and Duty– Common Currency and Accounting Principles– Unfortunately, significant cultural and other differences will

remain

CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth GapCEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap

CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap

0

5,000

10,000

15,000

20,000

25,000

EU

ES

P

GR

EU

8

BU

CR

O CZ

HU

Es

ton

ia

LT

V

LT

H

PO

RO

RU

SK

SL

O

UK

R

TK

Productivity gap = lower IT spendProductivity gap = lower IT spend

GDP Per Capita at Nominal Rates — 2002GDP Per Capita at Nominal Rates — 2002

Various Estimates — 50 to 80 Years — Based on 3% to 4% Annual GDP Growth

Source: EIU, Eurostat

U.S. $

EU Accession: Understanding the Impact

0

5,000

10,000

15,000

20,000

25,000

30,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Services

Software

Hardware

US$M

CAGR 10.7%

Pre-AccessionIndirect

1998–2000

CAGR 9.9%

Pre-AccessionLow Impact2001–2006

CAGR 9.9–11.4%

Post-AccessionHigh Impact2007–2013

Three Phased Market DevelopmentThree Phased Market DevelopmentIT Spending for the EU 12 Accession StatesIT Spending for the EU 12 Accession States

Source: IDC

CEE vs. EU: GDP Per Capita, 2002The Enduring Wealth Gap

IT Spending Ratios in CEE, 2002

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0 50 100 150 200 250 300 350 400 450 500 550 600 650

Czech Rep.

Slovenia

Greece

Hungary

Romania

EU 15 = 2.8%

Bulgaria

EU Accession 12

CEE is still playing catch-upEU 15 average: $635 per capita/ca. 2.8% of GDP (2002)

Poland Spain

Ukraine

EU 15

Russia

Estonia

Latvia

Lithuania

Turkey

CroatiaSlovakia

Cyprus

Source: IDC

IT/Capita US$

IT$/GDP

EU 12 — IT Market Development

CAGR 2002–2007

IT Consulting

0%

10%

20%

30%

40%

50%

60%

70%

PCs

ServicesOperations

Datacoms

ImplementationVolume

Servers

Software

App. Tools. App. Solutions.

Storage

Overall Regional Market Growth of 10–11% Annually

CAGR 02/07CAGR 02/074.5%4.5%CAGR 02/07CAGR 02/07

6.9%6.9%

CAGR 02/07CAGR 02/0711.8%11.8%

CAGR 02/07CAGR 02/0712.2%12.2%

CAGR 02/07CAGR 02/079.8%9.8%

CAGR 02/07CAGR 02/0711.6%11.6%

$16 Billion Market by 2007

Source: IDC Worldwide Black Book, December 2003

Conclusion

Low IT spending ratios plus high growth = huge potentialLocal expertise will be needed to design and implement a regional strategy.Majority of countries will grow quickly for at least 10 to 15 years in order to reach parity with Western Europe. EU accession will make more funding options available and drive additional investment in IT (direct and indirect impact)

Russian Market: Stabilizing

Political system moving toward democracy

Growth of middle class supporting political and economic reforms

Russian business is increasingly linked to the EU

Russian Market: High Economic Growth

Oil Boom fueling all sectorsEconomic growth spreading throughout country Dormant manufacturing capacity being utilized More predictable regulatory, tax and legal environment More focus on quality and value

High usage of technology to meet international competition

Russian Growth and the PC MarketRussian Growth and the PC Market

6%

30%

64%

Int. Vendors

Large Russianvendors

Others

Total Desktop PCs shipped in 2003: 3.6 Million

Source: IDC

Proximity resellers

Supplier is local

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003

State / Corp.

S. bus.

Home

Russian PC Market by End User, 2003Russian PC Market by End User, 2003

Source: IDC

Russian PC Market: Unsaturated

0

2

4

6

8

10

12

14

1999 2000 2001 2002 2003

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

IB (Millions)

PC Pentration

Source: IDC

Russian IT Market Growth by Product key issue in 2003 has been availability more than marketing investment

PC

Printer

PDP

Server

Total IT

0% 20% 40% 60% 80% 100% 120%

YoY Growth

Source: IDC

0

2

4

6

8

10

12

2003 2007

PC

Total IT

Long term growth for Russian IT market

$bn>70% increase

Source: IDC

ELKO Group Update

Vilnius, LT

Emerald lakes, SL

president Vaira-Vīķe Freiberga, LV

Tatry, SK

Drakula’s castle, RO

Crimea, UA

Andrus Veerpalu, EE Olympics champion

St.Petersburg, RU

Kolsjun island , CR

RIGA, the Headquarters of ELKO Group

ELKO Group countries, overview

countryPopul., mil.

Area sq km Language (Grow to succeed.)

Croatia 4,4 56 542 Da bi uspijeli trebamo neprestano rasti.Estonia 1,4 45 226 Edukalt kasvanud.Latvia 2,4 64 589 Augt, gūstot panākumus.Lithuania 3,6 65 200 Augti, kad pasiektum tikslą.Russia 144,5 17 075 200 Расти преуспевая.Romania 22,3 237 500 Creste spre succes.Slovakia 5,4 48 845 Rast k uspechu.Slovenia 1,9 20 273 Z rastjo do uspeha.Ukraine 48,1 603 700 Зростати у процвітанні.

countries are different:

• size

• language

• culture

• political situation

• mentality

ELKO Group offices have in common:

• ambition to grow and succeed

• be a member of the ELKO Group

Mission Statement

Be the Number One IT supplier in Europe’s Emerging Markets

Through excellent execution and professional services, offer customers and vendors the opportunity to participate in the rapid growth in CIS, Eastern European and the Baltic countries.

Deliver value to customers through excellent service, value to shareholders through superior returns, and value to employees through a stimulating and challenging work environment.

Key Figures ‘00-’04 / SALES REVENUE ($M)

180217

260

360

187

233

0

50

100

150

200

250

300

350

400

450

'00 '01 '02 '03 '04

Sales Revenue ($M) FC ($M)

+20%

+20%

+38%

+18%

Revenue HY 1’03 & HY 1’04

Q1 2003 Q1 2004

Sales $78 million $92 million

+ 18 %

Q2 2003 Q2 2004

Sales $74 million $94,4 million

+ 28 %

Sales Growth by Office HY1’03-HY2’04

21% 15% 12%3%

47% 46%34%

104%

34%21%

0%

20%

40%

60%

80%

100%

120%

Latv

ia

Estonia

Lithu

ania

StPet

ersb

Mos

cow

Ukrain

e

Sloven

ia

Slovak

ia

Roman

ia

Croat

ia

Operational & Strategic Overview

ELKO Group Territory Development

ELKO Group Corporate Strategy

Centralise Strategic management

Integration into local markets

Maintain extensive components based product portfolio

Leverage technology

Recent Developments

Slovakia: – Acquired new company– Upgraded warehouse and office space

Russia:– New logistic centre in Moscow and 11 other regional centers– Increasing sales team by 15 people– Implementing JD Edwards

Ukraine– Opened 5 offices and regional warehouses

Romania– New warehouse and office

Successes of the ELKO TEAM

Some numbers

CPU: 1 Mio.HDD’s: 1,4 Mio.Mainboards: 400kMedia: 20,X Mio.VGA cards:220kStorage devices: 850kDisplays: 220kFloppy Disks: 740kKeyboards: 300kMice: 620k

And much more…

Revenue Development 2003 – 2007 ($M)

233

504

605

726

360

187

0

100

200

300

400

500

600

700

800

2003 2004 2005 2006 2007

FC ( $M ) Sales Rev

The ELKO Team

Powerful selling machine in the NEW middle of EuropeHard working dedicated distribution teamAccess to fast growing marketsOne central contact and control point opens business to 9 countries, 26 offices, 28 warehouses, 120 sales people and 5000 customersStrong financial performance audited by PriceWaterhouseCoopers gives stability and security

thank you!

for more information about ELKO Group please visit our website:

http://www.elkogroup.com/for further questions please contact ELKO Group

marketing department [email protected]