Baltika                       NEWS RELEASE                      09/26/2003



RUSSIAN RETAIL JOINT VENTURE



Baltika starts preparations to establish Russian retail joint

venture





On August  15 th 2003  Baltika signed the letter of intent to establish

Russian joint venture. The letter constitutes that preparations

will be started to establish by the beginning of 2004 a joint

venture to operate in Russian market.



The letter is bonded between Baltika and Baltika’s long term

Russian franchise partner, in established company Baltika will be

holding 50,1% stake, Russian partner 49,9%.



The contract has two phases. First phase begins with

establishment of joint venture by the beginning of 2004 and

company’s development in the region of Central Russia. The

beginning of the second phase is planned to be starting in August

2005 and embraces additionally to Central Russia the region of

Ural-Siberia.



"As the Russian market is very big and quite risky, we shall not

start operating the whole market at once, but concentrate on the

Russian fastest developing area - Central Russia," commented

Meelis Milder, CEO of the Baltika Group, the establishment of the

new joint venture. "If so far we have been operating the Russian

market for years through our franchise and wholesale partner,

which limits development and investment possibilities, then with

this joint venture we have taken the next step and we have the

possibility to develop according to our strategy to become the

leading clothing retailer in Central and Eastern Europe," added

Milder.



In the first phase of the contract will be taken over 10 shops

located in Moscow (including department store GUM), St Petersburg

and Tula, consisting of 8 Baltman and 1 Monton shop, plus 1

factory outlet. In the second phase will be added new and

existing franchise stores in Ekaterinburg, Novosibirsk, Perm,

Tumen, Tsheliabinsk and at other locations. Baltika starts its

operations in the Russian market at first with Monton and Baltman

retail concepts.



Baltika has been operating in Russian market for years. With own

stores Baltika started in 1996, when Baltman flagship store was

established at GUM department store. In the year 2000 own retail

chain was given over to long-time wholesale partner and the

operations were switched into franchise. At the moment the

franchise partner is operating a chain of more than 20 stores,

located in Moscow, St Petersburg, Ekaterinburg, Perm, Novosibirsk

etc and the estimated turnover for 2003 will be 100 mil EEK.





Meelis Milder

CEO

+372 6302 731