AS MERKO EHITUS                     ANNOUNCEMENT                     05.12.2005  



Acquisition of shares



On December 1 2005, SIA MERKS, subsidiary of AS Merko Ehitus, acquired 50

per cent share in SIA Zakusala Estates. Transaction’s value is 9.391 million

euro of which 8.450 million euro is cleared with a loan previously granted to

shareholders of SIA Zakusala Estates, and with a further monetary payment of

0.940 million euro. This share purchase is a prospective and long-term invest-

ment which does not affect financial performance of Merko Ehitus Group in the

following years. This share purchase does not qualify as transaction with

related parties and members of Group’s management board and board of directors

do not hold any kind of personal interests in this transaction.



SIA Zakusala Estates was established in 1992 and company’s main branch of

business is real estate development. The company does not conduct significant

business activities at the moment, and the current amount of its liabilities

and tangible assets is insignificant. SIA Zakusala Estates has concluded

a fixed-term tenancy contract with the city of Riga, which is valid until

July 2nd 2051 and provides SIA Zakusala Estates land use rights to 126 000 m²

of property on Zakusala island in central Riga. The above-mentioned land use

right is not portrayed in company's balance sheet. 



SIA Zakusala Estates is not involved in pending judicial procedures or arbitral

tribunal procedures and no significant changes have taken place in company’s

business operations during current financial year.



The most significant shareholders of SIA Zakusala Estates are SIA Merks with

a 50% share, AS Urban Development Group (Norway)  with a share of 16.67% and

Viesturs Koziols with a share of 33.33%. Company is managed by a management

board, whose members are Mr Ivars Geidans ja Mr Viesturs Koziols. SIA Zakusala

Estates does not have a board of directors.



Annual reports are presented as unaudited as auditing of SIA Zakusala Estates

annual reports is not obligatory according to Latvia’s Commercial Code.



                                                                 LVL



ASSETS                      30.06.2005     31.12.2004     31.12.2003

			

Fixed assets                    71 055             67            182

Trade receivables                  303            303              -

Other debtors                   70 492         28 767         23 759

Deferred expenses                1 441              6          3 666

Cash and bank                   22 610          5 622         25 292

Total assets                   165 901         34 765         52 899



EQUITY AND LIABILITIES

			

Share capital                2 025 000      1 848 965      1 848 965

Accumulated deficit         (1 854 642)    (1 800 820)    (1 215 682)

Loss for the period            (51 440)       (53 822)      (585 138)

Total equity                   118 918         (5 677)        48 145



Provisions                         400            400            400



Borrowings from bank               127              -              -

Other borrowings                40 000         40 000              -

Trade payables                     263             42          4 326

Tax liabilities                  2 653              -              -

Other creditors                  3 540              -             28

Total liabilities               46 583         40 042          4 354



Total equity and liabilities   165 901         34 765         52 899





Income statement               6M 2005           2004           2003



Net sales                            -            212              -

Cost of sales                  (29 438)       (30 977)       (19 967)

Gross profit                   (29 438)       (30 765)       (19 967)

Selling expenses                     -              -           (125)

Administrative expenses        (16 417)       (11 139)      (561 643)

Other operating income               -            501              -

Other operating expenses             -           (103)          (381)

Interest and similar income        665             31         16 633

Interest expense

and similar charges               (202)          (197)        (7 558)

Profit before taxation         (45 392)       (41 672)      (573 041)

Corporate income tax                 -              -              -

Property tax                    (6 048)       (12 150)       (12 097)

Loss for the period            (51 440)       (53 822)      (585 138)



1 EUR = 15,647 EEK

1 EEK = 22,472 LV



Alar Lagus

Member of the Board

+372 6 805 109