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2007

Explorer Property Fund – Baltic States acquires two properties in Estonia


Explorer Property Fund – Baltic States’ portfolio now totals fourteen properties after the acquisitions of City Hotel Portus, a hotel centrally located in Tallinn, and Favor Production Facility, an industrial property just outside Tallinn.

Favor Production Facility is an industrial property with a production area of more than 21,500m2, situated in an industrial area 15 kilometres outside Tallinn. The property has two buildings with a total area of 9,700 m2, built in 2004 and 2007. The single tenant, Favor AS, was established in 1990 and is the largest company in the region specialised in thin sheet metalworking.

City Hotel Portus is an economy class hotel perfectly situated in the ferry port area of Tallinn, which serves 2.5 million passengers annually,” explained Kristjan Kivipalu, CEO of AVEC Asset Management. The 5,500m2 building comprises 107 rooms and several conference rooms. The hotel, which was fully renovated in 2004 is managed by Aldera Hotell, a company with a good track record of operating hotel businesses.

Explorer Property Fund – Baltic States
Explorer Property Fund – Baltic States is one of the most active investors on the Baltic property market, after the fund closed in the summer of 2005 with EUR 55.1m in available capital. The portfolio of the fund as of today comprises fourteen objects in total, ten in Estonia, two in Latvia and two in Lithuania. The fund is managed by AVEC Asset Management, a management company based in Tallinn with regional offices in Riga and Vilnius. AVEC Asset Management is jointly owned by Arco Vara and East Capital.

About Arco Vara
Arco Vara was established in 1992 in Estonia and is today the leading real estate development group in the Baltic States. Arco Vara is active in brokering, development and investments and construction. The company is present in 25 cities across Estonia, Latvia, Lithuania, Ukraine, Bulgaria and Romania. Arco Vara and its joint ventures employed 546 people at the end of I Q 2007. Consolidated audited turnover of the Arco Vara group in 2006 rose to EUR 30.9m, with the net profit at EUR 13.9m. Arco Vara AS is listed on the Tallinn Stock Exchange.

About East Capital
East Capital is a leading, independent asset manager specialising in Eastern European financial markets. The company, which is headquartered in Stockholm, with offices in Paris, Hong Kong, Tallinn, Moscow and Oslo, actively manages over EUR 4.2bn, basing its investment strategy on thorough knowledge of the markets, fundamental analysis and frequent company visits by fund managers and analysts.

Further information can be obtained from:
AVEC Asset Management
Kristjan Kivipalu
Phone: +372 6144 658
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Change in the accounting of majority shareholders


1 466 667 shares of AS Arco Vara, that belong to OÜ HM Investeeringud and
2 933 333 shares of Arco vara AS that belong to OÜ Toletum account starting
from August 17th 2007 in share register on Nordea Bank Finland Plc
representative account. Neither OÜ Toletum nor OÜ HM Investeeringud have
dispossessed the shares of AS Arco Vara, the majority shareholders still
hold a 1 year's lockup period. The moving of the shares organizes the asset
base of OÜ Toletum and OÜ HM Investeeringud.


Additional information:
Kadri Mätik
+372 6144 590
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Financing agreement


SIA Bišumuisas Nami, where Arco Investeeringute AS has a 40% shareholding,
closed a financing deal in amount of mEUR 29,0 with Nordea Bank Finland Plc
Latvian branch.

14,0 million euros is disbursed immediately in order to finance the payment for
Sportings Riga SIA shareholding. The remaining mEUR 15,0 is used for financing
the construction of 1st phase of "BM-2" project. "BM-2" is a complete
residential environment development project in Riga on 111 596 m2 of land and
the company plans to construct there 1085 appartments.

SIA Bišumuisas nami is a 100% shareholder of Sportings Riga SIA. The sole asset
of Sportings Riga SIA is a land related to "BM-2" project.

Interest rate is 1m EURIBOR+1,3% with a bullet schedule up to 05.01.2010,
including prolongation option up to 05.01.2015.


Additional information:
Heigo Metsoja
Head of Investor Relations
+372 6144 654
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Arco Vara acquired its first development project in Lithuania


Arco Invest UAB, a 100% subsidiary of Arco Investeeringute AS, signed a land
acquisition deal in Vilnius, Lithuania.

Two land plots in total size of 4 000 m2 situates in the district of Santariske
and has a construction right of 6 500 m2.

„Current market situation provides to Arco Vara favorable options in the
Baltic's, that are necessary for the success of our long-term strategy“, says
the CFO, Mr. Aare Tammemäe.

In three years the company plans to construct there residential spaces.

The acquisition is funded 100% by equity. Total expected capex of the project
including the land acquisition is around 8,5 million eur.

1 EUR=15,6466 EEK

Additional information:
Heigo Metsoja
Head of Investor Relations
+372 6144 654
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http://www.arcorealestate.com/

Unaudited results for the first half of 2007


ARCO VARA AS

Unaudited operating results for the first half of 2007

Arco Vara ended the first half of 2007 with consolidated revenue and other income of 487.6 million kroons (€31.2 million), a notable 110% year-over-year increase, and a consolidated net profit of 227.1 million kroons (€14.5 million), an exceptional 5.7-fold year-over-year improvement.

Consolidated operating profit surged to 88.1 million kroons (€5.6 million), up 72% year-over-year. At 30 June, equity to assets ratio was 58% (2006: 31%). The past four quarters’ return on equity was 40.0% (2006: 21.3%) and return on invested capital 21.9% (2006: 9.8%).

The Group’s Q2 revenue and other income totalled 147.1 million kroons (€9.4 million), up 14% year-over-year, and Q2 net profit amounted to 158.1 million kroons (€10.1 million), a 12.5-fold upswing on a year ago.

Above all, the Group’s revenue growth may be attributed to successful development activities and project sales. Arco Vara sold Kerese Keskus (105.8 million kroons/ €6.8 million), the Ulmana Gatves plot (53.0 million kroons; €3.4 million) and apartments in Kolde residential project (51.0 million kroons / €3.3 million).

Consolidated net profit for the first half-year was significantly increased by financial income of 118.4 million kroons (€7.6 million) earned from the sale of the Group’s stake in Sportings Riga SIA and financial income 38 million kroons (€2.4 million) generated by the restatement of the shares in Explorer Property Fund AB to fair value. Net gains from fair value adjustments to investment property totalled 55.3 million kroons (€3.5 million), including write-downs of 17.5 million kroons (€1.1 million).

Significant milestones in the company’s development were the IPO of the company’s shares which increased the Group’s equity by 987,857 thousand kroons (€63.1 million), the purchase of the Latvian construction company Dinamo Buve SIA (to date renamed Arco Construction SIA), which completed the implementation of the Group’s full business model in Latvia, and the acquisition of two properties in Sofia where the initial cost of development projects launched amounts to €19 million (297 million kroons), commented Chairman of the Management Board of Arco Vara Viljar Arakas.

“Despite the cooling of the Baltic real estate market, we succeeded in attaining the best ever half-yearly net profit,” said Arakas.

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