1. Agenda item nr 2 – Why is the dividends proposal as it is?

Before deciding on this proposal the Management Board of AS Tallinna Vesi undertook a thorough review of its cash flows for the next business plan period to ensure that the Company would be able to fully comply with all operational standards and meet its contractual requirements.

The Company engages in regular dialogue with its major shareholders. During these meetings all the majority shareholders have expressed their views on the range of dividends they feel it would be appropriate to pay to the owners of the company in 2011. The Company has taken these points of view into account.

As a result of all of the above factors the Management Board of AS Tallinna Vesi made a proposal to the Council of the company to make a dividend payment in 2011 of 16 405 105 euros. The Supervisory Council familiarised itself with the analysis made and the proposal submitted by the Management Board and voted to accept the proposal. This proposals is now included in the agenda for the Annual General Meeting of Shareholders that will take place on 24th May 2011 (agenda item nr 2).

The final decision to approve the amount of dividends to be paid in 2011 will be made by the shareholders of AS Tallinna Vesi at this meeting.

2. Agenda items nr 3 and 4 – Why is it necessary to amend the Articles of Association?

On 01.01.2011 the Republic of Estonia joined the Euro-zone, which has necessitated the conversion of currency denominations (from kroons to euros) in all documentation, including the Articles of Association of the company. The minimum and maximum capital amounts have been rounded down to millions (e.g. 12 million € in agenda item 3.1). The nominal value of a share has been rounded down to 0,60€ for an A-share and 60€ for the B-share (agenda item nr 4) due to the legal requirement of the nominal value of shares to be a multiple of ten euro cents (0,10€, 0,20€ etc.).

3. Agenda item nr 3.4

Why is it necessary to amend the notice period for extraordinary shareholder meetings? – The Commercial Code changed the notification term for stock exchange companies from 1 week to 3 weeks already in 2009. As already then the Republic of Estonia was in the process of joining the Euro-zone and a conversion exercise of the Articles of Association was expected, this amendment was postponed in order to amend the Articles of Association all at once.

4. Agenda item nr 3.5

Why is the threshold for Council approval for transactions 650 000 € and not an exact division of 10 million kroons by the euro currency exchange rate? – The exact division would result in 639 116,49€ and for practical purposes it was resolved to establish a cap for the Council approval of transactions, which would provide a rounded value that is practical to use and easy to remember.

5. Agenda item nr 3.6

Why is it necessary to specify that a wholly owned subsidiary is not an affiliate? – This is a suggestion from our auditors since Article 6.5.1.4. of the Articles of Association leaves room for interpretation, whether a wholly owned subsidiary is or is not an affiliate as per the definition contained in section 6.5. of the Articles. Any transactions with a wholly owned subsidiary shall have the same caps, necessitating the approval of the Council of the company as any other transaction undertaken by the company, hence the reference to clauses where such caps are contained.

6. Agenda item nr 4 – Why is the share capital decreased as a result of conversion to euros?

Amendment of the share capital amount is necessitated by the Republic of Estonia joining the Euro-zone from 01.01.2011 as a result of which any amount in kroons needs to be converted to euros. The nominal value of a share has been rounded down to 0,60€ for an A-share and 60€ for the B-share (agenda item nr 4) due to the legal requirement of the nominal value of shares to be a multiple of ten euro cents (0,10€, 0,20€ etc.). By choosing 0,60€ per share the share capital does reduce but this share valuation causes the least possible impact to the share capital amount. This change shall not affect the shareholding proportions of shareholders.