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Last Trade - 05/05/21

Sector
Financials
Size
Micro Cap
Market Cap £16.3m
Enterprise Value £17.9m
Revenue £18.2m
Position in Universe 452nd / 795

Opinion of the supervisory board of Arco Vara AS regarding the mandatory takeover bid

Mon 15th March, 2021 12:38pm
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This opinion of the supervisory board of Arco Vara AS (“Arco Vara”) has
been formulated on 15 March 2021 conforming to clause 171 of the Securities
Market Act and clause 21 of the Minister of Finance’s 28.05.2002 regulation
no. 71 “Rules of a takeover bid” regarding the mandatory takeover bid
publicised on 2 March 2021 for acquiring the shares of Arco Vara (“Bid”)
by OÜ ALARMO KAPITAL (“Offeror”).

Members of Arco Vara supervisory board are Tarmo Sild (chairman of the
supervisory board), Allar Niinepuu, Hillar-Peeter Luitsalu, Kert Keskpaik and
Steven Yaroslav Gorelik.

The supervisory board, having examined the prospectus and notice of the Bid,
is of the following opinion:
1. Agreements and other connections between the Offeror and the supervisory
board and management board members
From members of the supervisory board, Tarmo Sild and Allar Niinepuu are
connected to the Offeror. Tarmo Sild and Allar Niinepuu are management board
members of the Offeror. Tarmo Sild is a management board member, shareholder
and actual beneficiary of Aia Tänav OÜ, 50% shareholder of the Offeror.
Allar Niinepuu is a management board member, shareholder and actual
beneficiary of Kavass OÜ, 50% shareholder of the Offeror.

Arco Vara management board member (Miko-Ove Niinemäe) and rest of the members
of the supervisory board (Hillar-Peeter Luitsalu, Kert Keskpaik and Steven
Yaroslav Gorelik) have no agreement or other connections with the Offeror.
1. Election or appointment of supervisory board and management board members
No supervisory board or management board member of Arco Vara has been elected
or appointed on a proposal of or by the Offeror.

Members of the supervisory board Tarmo Sild, Allar Niinepuu, Hillar-Peeter
Luitsalu, Kert Keskpaik and Steven Yaroslav Gorelik were elected to the
supervisory board by the general meeting held on 30 April 2020 on the proposal
of Arco Vara shareholders.

Member of the management board Miko-Ove Niinemäe was elected to the
management board by the supervisory board on the 30 April 2020 supervisory
board meeting.
1. Conflicts of interests and risk-management measures
No Arco Vara supervisory board member or management board member has the right
to any reimbursements that would depend on the Bid or its results and that
would bring about conflict of interest for the supervisory board or management
board members regarding the Bid.

Due to the connections specified in clause 1 between the Offeror and Arco Vara
supervisory board members Tarmo Sild and Allar Niinepuu, despite lack of
reimbursements, it is possible for conflict of interests for Tarmo Sild and
Allar Niinepuu to arise in the case the supervisory board should adopt
resolutions regarding the Bid. However, expect for submitting this opinion of
the supervisory board (which Arco Vara supervisory board has submitted
unanimously), Arco Vara supervisory board has not adopted any resolutions
regarding the Bid and, going forward, does not see the need to adopt
resolutions regarding the Bid. If it should become apparent, that Arco Vara
supervisory board should adopt resolutions regarding the Bid, Arco Vara
supervisory board would analyse the potential risk of conflict of interests of
Tarmo Sild and Allar Niinepuu. If there was to be a risk of conflict of
interests, Tarmo Sild and Allar Niinepuu would not vote on adopting the
corresponding resolutions.

Pursuant to the above-mentioned and as is known to the supervisory board
members, other supervisory board or management board members do not have a
conflict of interests regarding the Bid and Arco Vara has not had the need to
implement measures for risk-management of the risks possibly arising from a
conflict of interests.
1. Impact of the Bid to interests and employment relationships of Arco Vara
All supervisory board members, including all independent supervisory board
members within the meaning of § 21 (2)(4) of the Rules of a takeover bid
Hillar-Peeter Luitsalu, Kert Keskpaik and Steven Yaroslav Gorelik, are of the
opinion that the Bid is beneficial for Arco Vara and Arco Vara’s business
opportunities. Experienced managers and strong capitalization of the Offeror
create favourable conditions for development of Arco Vara and Arco Vara group
companies.

Supervisory board members, including all independent supervisory board members
within the meaning of § 21 (2)(4) of the Rules of a takeover bid
Hillar-Peeter Luitsalu, Kert Keskpaik and Steven Yaroslav Gorelik, are of the
opinion that it is not foreseeable that the Bid would affect employment
relationships of Arco Vara. Pursuant to the Bid documents, the Offeror plans
to continue with the usual commercial activities and structure of Arco Vara
and does not plan to make changes in the business model, employment
relationships or structure of Arco Vara. It is also referred in the prospectus
of the Bid, that the Offeror does not plan to change the registered address of
Arco Vara or change the location of the main office from Tallinn to elsewhere.
1. Supervisory and management board member’s plan to accept the Bid
  * Tarmo Sild (chairman of the supervisory board), as of submitting the
opinion, holds 19 880 Arco Vara shares through Aia Tänav OÜ, which total
approximately 0,2209% of all Arco Vara shares. Tarmo Sild holds 4 664 242
Arco Vara shares through the Offeror, which total approximately 51,8343% of
all Arco Vara shares. Additionally, the Offeror has subscribed for, but not
been issued, 390 000 Arco Vara shares. Tarmo Sild (indirectly, through Aia
Tänav OÜ) does not plan to accept the Bid;
* Allar Niinepuu, as of submitting the opinion, holds 4 664 242 Arco Vara
shares through the Offeror, which total approximately 51,8343% of all Arco
Vara shares. Additionally, the Offeror has subscribed for, but not been
issued, 390 000 Arco Vara shares;
* Hillar-Peeter Luitsalu, as of submitting the opinion, holds 330 505 Arco
Vara shares through OÜ HM Investeeringud, which total approximately 3,673% of
all Arco Vara shares. Hillar-Peeter Luitsalu (indirectly, through OÜ HM
Investeeringud) does not plan to accept the Bid;
* Kert Keskpaik, as of submitting the opinion, holds 59 100 Arco Vara shares
as a natural person, which total approximately 0,6568% of all Arco Vara
shares. He holds 147 271 Arco Vara shares through K Vara OÜ, which total
approximately 1,6366% of all Arco Vara shares. Kert Keskpalu holds a share in
One Eleven OÜ, who holds 4 385 Arco Vara shares which total approximately
0,0487% of all Arco Vara shares. Kert Keskpaik (directly and indirectly,
through K Vara OÜ or One Eleven OÜ) does not plan to accept the Bid.
* Steven Yaroslav Gorelik as a fund manager is connected with three investment
funds with holding in Arco Vara (Firebird Republics Fund Ltd holds 356 428
shares, which total approximately 3,961% of the share capital, Firebird Avrora
Fund Ltd holds 185 800 shares, which total approximately 2,0648% of the share
capital and Firebird Fund L.P holds 150 522 shares, which total approximately
1,6728% of the share capital), in total holding 692 750 Arco Vara shares (in
total 7,698% shareholding). According to Steven Yaroslav Gorelik, the
previously mentioned investment funds do not plan to accept the Bid.
Management board member Miko-Ove Niinemäe holds 722 Arco Vara shares, which
total approximately 0,008% of all Arco Vara shares. Miko-Ove Niinemäe has
informed the supervisory board, that he does not plan to accept the Bid.
1. Supervisory board and management board member agreements
There are no agreements between Arco Vara and a supervisory board or
management board member, that would set out termination of the agreement or
payment of a reimbursement to supervisory board or management board members by
Arco Vara or a third person in relation to the Bid or its results.

This opinion of the supervisory board is made freely available in written form
in the office of Arco Vara on business days from 9:00 to 17:00, at the address
Maakri str. 19/1 Tallinn 10145, Republic of Estonia, and also published on the
web page of Nasdaq Tallinn stock exchange market www.nasdaqbaltic.com and the
web page of Arco Vara www.arcovara.com.





Tiina Malm
 CFO
 Arco Vara AS
 Tel: +372 614 4630
tiina.malm@arcovara.com
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