Estonia. Attention: Please note important background and customer information at the end of this report

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1 Equity Weekly Equity Research - Monday, December 27, 2010 Baltic Indices Sep 28-Oct 27-Nov 27-Dec Baltic Benchmark OMX Tallinn* OMX Riga* OMX Vilnius* * Relative to Baltic Benchmark Source: Reuters, Swedbank Index value Weekly Change,% Weekly Turnover % 2.6m The Christmas week passed with positive sentiment and the Baltic markets ended mostly in positive territory. In general, markets were quiet because retail investors were in the Christmas mood. Some larger trades were made between the institutional clients. Since the beginning of December we have seen lot of insider selling in the Tallinn Stock Exchange. Insiders have sold stocks in Baltika (-0.5%), Nordecon (-0.9%) and Ekspress Grupp (-2.7%). Nordecon won a railway construction contract worth 4.3 million and the shares ended the week 0.7% higher. The best performers were Tallink (+3.5%) with a turnover of 0.9m and Harju Elekter (+3.5%) with a turnover of 0.7m. The OMXT ended the week 2.74% higher with a total turnover of 2.6m. Latvia % 0.2m (in ) Arco Vara % 69, Baltika % 89,366 neg. neg Ekspress Grupp % 329,786 neg Harju Elekter % 656, Merko Ehitus % 98, Nordecon International % 145,247 neg. neg Olympic Entertainment Grou % 615,905 neg Premia Foods % 52, Silvano Fashion Group % 243, Tallink % 905, Tallinna Kaubamaja % 189,482 neg Tallinna Vesi % 465, Viisnurk % 18, Latvia (in LVL) Grindeks % 44, Latvian Gas % 12, Latvian Shipping Company % 64,182 neg. 0.1 Latvijas Balzams % 2, Liepajas Metalurgs % 361 neg. 0.2 Olainfarm % 22, SAF Tehnika % 21, Valmiera Fibre Glass % 6, Ventspils Nafta % 329 neg. 0.4 (in ) Apranga % 230,335 neg. neg City Service % 68, Grigiskes % 74, Invalda % 139,471 neg. 0.8 Klaipedos Nafta % 11, Lietuvos Dujos % 16, Lietuvos Energija % 7, Lietuvos Juru Laivininkyste % 16,314 neg. 0.1 Lifosa % 1, Linas Agro Group % 123, Panevezio Statybos Trestas % 181,223 neg. 0.3 Pieno Zvaigzdes % 25, Rokishkio Suris % 1,287, RST % 34,214 neg. 0.1 Sanitas % 64, Siauliu Bankas % 69,161 neg. 0.2 Snaige % 32,142 neg. 0.3 Snoras % 423,363 neg. 0.4 TEO LT % 461, Ukio Bankas % 1,136,659 neg. 0.2 Source: Bloomberg, Swedbank The Latvian government passed the 2011 budget with 5.7% of GDP deficit target, nevertheless Riga Stock Exchange ended the week higher and closed at with weekly turnover of 0.2m. The largest turnover at 0.1m was Latvian Shipping Company, which declining 0.6%. Quite actively traded shares were SAF Tehnika with turnover 31k. Olainfarm (+2%) with turnover 31k and Grindeks +1.4% % 3.6m In, the index ended the week 0.16% higher with a total turnover of 3.6m. The most actively traded share was Rokiskio, increasing 0.8%, where investors changed over 1.25m shares. There was a lot of buying activity seen in Ukio Banka and the stock increased 6.3% over the week. Grigiskes shares increased by +8.2% with a turnover of 74k after the company Board approved an ambitious budget for the year Actively traded shares were Snoras (-4.2%), TEO LT (unch.), Apranga (-0.1%) and Panavezio (-0.3%). Nordecon International Group s wholly owned subsidiary Nordecon Infra AS (leading partner) with partners Nordecon International AS and Ramboll Eesti AS signed a construction contract with Road Centre for the Southern Region of (a regional office of the Road Administration). The contract is for the rebuilding of railway crossings on road nr 39. A substantial part of the works is the design and building of the Kaarepere viaduct. In total the works cover road networks covering approximately 5.2 kilometres. The project is co-financed by European Union structural funds. The value of the contract with the client's reserve is approximately 4.3m, excluding VAT. Works begin in January 2011 and last for 12 months. Another construction contract was signed with Riigi Kinnisvara AS (the operator of state's real estate property) to continue works on Koidula border station premises. The contract with the previous contractor was terminated by Riigi Kinnisvara AS prior to the completion of works. Nordecon signed a contract based on the newly issued public tender. Works include completing the border station building, customs' warehouse and maintenance center. Included is also finishing of connecting roads between buildings, pavement Equity Research Large Corporations & Institutions Page 1 of 5

2 of sites and telecommunications. The value of the contract is approximately 4.7m (excl. VAT). Works will begin in January 2011 and will be finished during summer of Merko Ehitus added a new member to the management board - Viktor Mõisja. Mr. Mõisja previously worked as the Head of the Concreting Department in Merko. On 20th December the Supervisory Board of Premia Foods AS adopted a resolution on the issue of options to the members of management bodies and key employees of Premia Foods and its subsidiaries. The Supervisory Board of Premia Foods granted the Management Board of Premia Foods the right to execute option agreements on the terms and conditions approved by the Supervisory Board. The option agreements will be executed during January 2011 at the latest. A-Selver AS, a subsidiary of Tallinna Kaubamaja AS, decided on December 15, 2010, to increase the share capital of SIA Selver Latvia, i.e. its subsidiary in Latvia. By capitalising the borrowing of the parent company, the share capital of SIA Selver Latvia will be increased as a non-monetary contribution equivalent to 220,558.0 thousand n kroons (EEK) ( 14,096.2 th, LVL 10,000.0 th) whereby the share capital will increase by one share, i.e. EEK 2,206 ( 141, LVL 100) and share premium by EEK 220,555.8 th ( 14,096.1 th, LVL 9,999.9 th). Share capital increase is necessary to ensure the sustainability of activities of the company. The decision to increase the share capital will enter into force upon entering the information into the Commercial Register. Latvia No Corporate News. Grigiskes has announced its budget for The group expects LTL 300m (EUR 86.9m) in revenues which is LTL 70m (EUR 20.3m) or 30% more than in It is expected that profit before taxes will reach LTL 12m (EUR 3.5m) which is LTL 4.4m (EUR 1.3m) or 58% more than in During the next year Grigiskes will focus on hygiene paper products, fluting and packaging made of corrugated board sales in export markets. Poland is indicated as a very important market in On December 22 LITGRID Turtas AB (ticker symbol: LGD1L) started trading on the Secondary List of NASDAQ OMX Vilnius. LITGRID Turtas AB was established on November 16, 2010 as a result of a spin-off from n electricity generation company Lietuvos Energija AB. Electricity transmission system operator activity was separated from Lietuvos Energija AB and attributed to LITGRID Turtas. Lietuvos Energija AB will continue its operations and its shares will continue to be listed on the Secondary List of NASDAQ OMX Vilnius. On the 23rd of December ОАО «Сити Сервис», part of City Service group in Russia, sold ООО «Жилкомсервис г. Ломоносов», a company operating in Lomonosov town of Leningrad district to a local enterprise. The company was sold for RUB 3m and it should result in the accounting profit of RUB 35m. According to the company, ООО «Жилкомсервис г. Ломоносов» was the only loss making company within City Service group in Russia. ООО «Жилкомсервис г. Ломоносов» manages sq. meters of facilities in Lomonosov town. Equity Research Large Corporations & Institutions Page 2 of 5

3 Investor Calendar: Date Description NasdaqOMX Tallinn is closed Latvia LKB1R, LKB2R - Extraordinary General Shareholders' Meeting PXS - Investors' meeting NasdaqOMX Riga is closed NasdaqOMX Vilnius is closed Source: NASDAQ OMX Equity Research Large Corporations & Institutions Page 3 of 5

4 Large Corporates & Institutions Baltic Equity research & Institutional sales: Energy, Materials & Utilities Industrials Equity Sales Andres Suimets andres.suimets@swedbank.ee Head of Sales () Svetlana Skutelska Svetlana.skutelska@swedbank.lv Head of Sales (Latvia) Telecom Services Financials Simona Silevičiūtė simona.sileviciute@swedbank.lt Head of Sales () Equity Trading Consumers & Retail Healthcare Simmo Sommer simmo.sommer@swedbank.ee Head of Baltic Equity Trading Equity Capital Markets Allan Marnot allan.marnot@swedbank.ee Baltic Equity Capital Markets Swedbank Group Homepage: For Research products on Bloomberg please type: HBME <GO>. Background Information: Recommendation structure Large Corporates & Institutions recommendation structure consists of six recommendations: Buy, Accumulate, Hold, Reduce, Sell and Avoid. The recommendations are based on an absolute return for the security 12 months forward. The absolute return includes share price appreciation and dividend yield combined. The recommendations for the securities mentioned in this report are based on risk and return considerations. The higher the risk category of the investment, the higher the required return. For equity investments, returns are defined as capital appreciation and dividends received over the investment horizon of 12 months forward. The expected capital appreciation is the ratio of a stock s target price over the current price. A company risk rating depends on its stock price volatility, liquidity and business outlook. The target price depends on a company s fundamentals as well as the market valuation of peer stocks, and can be changed at any time if the relevant changes occur within a company/market perception of the peer group. Buy, accumulate, hold, reduce, sell and avoid recommendations may be used in this report. The table below presents the relationship between recommendations and target prices compared to risk level of the stock. These are indicative ranges and actual recommendations may deviate from the indications if other relevant issues are considered. For more detailed information about the recommendation system please visit Recommendation structure Buy > +20% to target price Accumulate +10% < target price < +20% Hold 0% < target price < +10% Reduce -10% < target price < 0% Sell < -10% to target price Avoid used when security does not match the standards presented in SWB s investment guidelines The recommendation by Large Corporates & Institutions Equity Research department is based on a variety of standard valuation models. However, the base for the calculation of the target price is our DCF model (DCF = discounted cash flow) with the exception of financial and investment companies. The DCF model discounts future cash flow at present value. In preparation of this report different valuation methods have been used, including, but not limited to, discounted free cash-flow and comparative analysis. The selection of methods depends on the industry, the company, the nature of the stock and other circumstances. The target price (previous fair value) takes into account the DCF value, the relative valuation of the share versus others peers (national or international) and news that can have a positive or negative effect on the share price. Relative and absolute multiples that we consider are: EV/EBITDA, EV/EBIT, PE, PEG and Net Asset models for companies with liquid markets for their assets and other industry specific ratios when available. Break-up valuation models are also sometimes considered. Recommendations by the 27 Dec 2010 No of shares Part of total Buy 7 37% Accumulate 4 21% Hold 1 5% Reduce 2 11% Sell 2 11% Under Review 3 16% Equity Research Large Corporations & Institutions Page 4 of 5

5 Information to the customer: General Equity weekly is a compilation of news, corporate events, companies results and other similar information published in stock exchange notifications last week, an overview of Baltic stock exchanges of the same period and a weekly timeline of upcoming corporate events of listed companies. No research is made here, any resemblances to research are purely coincidental and should be considered unintentional. Weekly may contain references to effective price targets and investment recommendations of companies mentioned in previously published research reports and may update such price targets and recommendations on the basis of important new information. 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