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Report of the supervisory board of Tallinna Kaubamaja AS regarding the annual report of 2O1O 05.04.2011

ln 2010' the most important task for the Tallinna Kaubamaja Group was to restore profitabiliŲ. Due to the continuing decline of the retail business market, it could only be done by increasing effectiveness within the Group. The main factors in improving financial results were coordinating business processes and improving the organisation of work, optimising the use of worKorce and utilising the synergy of the Group's enterprises better,

as well as keeping operating costs under control. ln2011, the Group's goals are to forcefully develop retail business concepts and find related areas for potential expansion. ln the accounting year, Selver focused on increasing the competitiveness of its stores. Making the business

processes implemented during the previous two years more effective and optimising costs has had a positive impact on the financial results of Selver. ln 2010, the 35įh store of the Selver chain was opened in Haapsalu.

The logistics for cooled products was concentrated into one single centre įn the accounting year. Īhe aim for the year 2011 is to retain the stores' existing market share and enhance their competitive strength, which is achieved by ensuring a selection of qualiŲ goods and by offering competitive prices. The aim of the department stores' business segment in 2010 was to save on operating costs and achieve better

logistics and procurement conditions, allowing qualiŲ goods at more competitive prices to be offered to customers. ln the new financial year, the activities of Kaubamaja are oriented towards improving margin management and developing marketing campaigns. Steps are taken to introduce private labels to the market in the categories of the more important fashion goods. ln201O, the fourth store in the chain of l.L.U. cosmetic stores was opened in Tallinn in the Kristiine Centre. By the spring of 2011, a fifth store of the chain should be opened at Ülemiste Centre in Tallinn.

Īhe aim of the vehicle trade segment

in the accounting year was to increase the market share

- this was done

successfully. The triumphant launch of the new enmpact SUV Sportage helped increase the market share of KlA passenger cars. The goal in 2011 is to enhance the qualiŲ and sales of follow-up services in the vehic|e trade segment. Negotiations continue in the hopes of adding new promising vehicle brands to our sales portfolio.

ln the footwear segment, altogether 12 stores adopted the new SHU concepį, well received by customers, in 2010. The stores of the footwear chain NERO were turned from footwear stores to modern accessory boxes. Two new ABC King stores were opened at Īartu Kaubamaja and at Kristiine Centre in Īallinn. The aim in2011 is to strengthen the footwear business and achieve profitability.

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The key activities listed above have been carried out in close partnership with the supervisory board of Tallįnna Kaubamaja. Īhe members of the supervisory board have been involved in planning the activiŲ of the company,

in organising the management activiįies and in exercising supervision over the activity of the management board.

Īhe supervisory board has held 10 scheduled meetings and 1

extraordinary meeting. During the

planning process, the supervisory board has discussed and approved the budgets and investments prepared by

the management board, and defined targets and priorities for activiŲ. While exercising supervision over the activiŲ of the management board, the supervisory board has discussed the financial resu|ts of the public limited company by months and specified further activity plans at its monthly meetings.

The supervisory board of Tallįnna Kaubamaja AS is of the opinion that the management board of the Kaubamaja Group has performed the obligations assigned to įt. The supervisory board maintains that the key priorities of the management board are related to making a better use of the intemal synergy of the group, raising the effectiveness, increasing the market share and consolidating the loyal customer base. ln near future,

the supervisory board will focus on monitoring the implementation of the optimisation plans for key areas of activiŅ. The supervisory

the company approves the annual report of 2010 prepared by the management board.

Jüri Käo Chairman Tallinna

the supervisory board ia

AS


Report of the supervisory board of Tallinna Kaubamaja AS 2010