Baltika                          NEWS RELEASE                         01.11.2004



New Baltika subsidiary company take over Production Division



As and from November 1st, 2004, Baltika Tailor OÜ, a subsidiary company

established by Baltika AS, will undertake the Production Division of Baltika AS,

which specialises in the production of men's suits, blazers, and trousers; and

women's jackets. The venture capital of Baltika Tailor OÜ is 40 000 EEK, and the

operation, comprising 578 employees, will be located at 24 Veerenni St., Tallinn.



Baltika Tailor OÜ is being founded with the purpose of achieving higher

productivity through better cost management. Improved efficiency is expected by

focusing production into a single independent legal entity.



Baltika Tailor OÜ is the biggest production enterprise belonging to the Baltika

Group. A total annual turnover of 70 million EEK is planned for the operation.



At its inception, the company will not hold assets and will rent its production

equipment from its parent company, Baltika AS. Baltika Tailor OÜ will be

responsible for the manufacture of Monton, CHR/Evermen, and Baltman brand

products and, in addition, will contract works to subcontractors from Finland,

Sweden, and England.



Ms. Anneli Mühle, the long-term Production Manager of Baltika AS, will assume the

position of Manager of Baltika Tailor OÜ. Ms. Mühle holds 3 000 Baltika AS shares

together with 6 500 B and C series Baltika convertible bonds.



The establishment of Baltika Tailor OÜ is part of the restructuring of the

Baltika Group, whereby companies are being organised according to their main

areas of activity. In addition to Baltika Tailor OÜ, there are other production

companies in the Baltika Group, including Virulane AS, in Rakvere, and Elina STC

AS, in Tallinn.



Following the foundation of Baltika Tailor OÜ, Baltika AS's primary focus will be

on performing retail and wholesale activities, product development, stock and

logistic activities, and on the general management of the group. As of November

1st, there will be 174 people working in the parent company.





Ülle Järv

Financial Director

AS Baltika

+372 6302 731