2011 12 months and IV quarter unaudited interim report

Tallinn, Estonia, 2012-02-29 15:30 CET (GLOBE NEWSWIRE) --

MANAGEMENT REPORT

General information

The company was formed after the demerger from AS Järvevana (former AS Merko Ehitus), as a result of which the complete set of assets related to the business activities of the construction company was separated and transferred to the new AS Merko Ehitus, including all concluded construction contracts, subcontracts and supply contracts, machinery, equipment and employees, all professional know-how and cash flows from uninterrupted, continuous economic activities, except for liabilities arising from the criminal case no. 05913000055, including compensations for damage, penalties and other payables, legal expenses and liquid assets to cover potential liabilities arising from the criminal proceedings in the amount of EUR 16.0 million. The company does not have ordinary economic activities and the only objective of its activities is to protect the interests of the company and shareholders in the long-lasting criminal proceedings related to the land swap.

Operating activities

The company does not have active business operations and its only income is finance income earned on the investment of the company’s liquid funds. Between 01.01.2011 and 31.12.2011, AS Järvevana earned finance income in the amount of EUR 212.9 thousand. The most significant cost article is the legal costs related to the criminal proceedings of the land swap, which totalled 36% of the administrative expenses in 2011. A claim against AS Merko Ehitus arising from a collaboration agreement totalled EUR 13.4 million of the company’s assets (http://www.merko.ee/upload/File/Restruktureerimise%20dokumendid/Koost%F6%F6leping%20ENG.pdf). As of 31 December 2011, one person was employed by AS Järvevana, its Management Board member Toomas Annus. The company’s activities do not have seasonal or cyclical nature.

At 3 April 2009, the Public Prosecutor’s Office submitted a statement of charges (dated 31.03.2009) against AS Järvevana and Toomas Annus in criminal case no. 05913000055 concerning the land swap (http://www.nasdaqomxbaltic.com/market/?pg=news&news_id=232810).

At 12 November 2009, the judicial proceedings concerning the land swap case commenced at Harju County Court. An overview of the proceedings is available at: http://www.nasdaqomxbaltic.com/market/?pg=details&instrument=
EE3100003559&list=3&tab=news&news_id=238437. In the statement of charges, AS Järvevana has been incriminated with five episodes of giving a bribe and the matter has been referred for judicial proceedings to Harju County Court. The subject of proof concerning bribery charges has three elements, the absence of even one of which precludes the necessary elements of criminal offence: (i) promising or giving of a material reward to an official; (ii) illegal act by an official in favour of a person giving a bribe; (iii) equivalence relation between the first and second elements, i.e. giving of a reward to an official for a favourable act. Evidence also needs to be produced against AS Järvevana in the matter that (i) the act was committed by a senior executive of a legal person, and (ii) the act was committed in the interests of the legal person. AS Järvevana has not concluded any land swap transactions described in the statement of charges. These transactions were concluded and hypothetical benefits could have been reaped by independent subsidiaries as legal persons who have not been charged. Even according to the statement of charges, AS Järvevana has never swapped land. It is also evident that the acts could not have been illegal because they had been permitted under § 19 of the Nature Conservation Act which rules out the qualification of bribery. It has been proved that, on the same basis and by the same methods, more than 180 legal transactions were made by different people.

The court has completed the judicial investigation of the so-called “land swap case”. More than a hundred witnesses have been heard at the judicial investigation none of whom mentioned the approval or giving a bribe as the subject of proof. All documentary evidence have been published which, according to the assessment of the company, lacks any information referring to a bribe.

The prosecutor asked to impose Järvevana AS a pecuniary punishment of EUR 1,598 million. Such a huge pecuniary punishment is not conventional in court practice. In case of judgement of acquittal, there would not be such a financial obligation; on the contrary, the state would have to compensate all reasonable costs for legal assistance.

The trial lawyer of Järvevana AS has submitted the court a defence on 350 pages and asked to acquit the accused, as no crime has been committed. 

On 27 February 2012, the court action continued with the rebuttal of trial lawyers and the final rebuttal of the accused. The proceedings schedule has been established until 6 March 2012 after which the court would render its judgement. As it is an extremely voluminous case with numerous accused parties, episodes and the volume of which by now is more than 200 editions, it is impossible to estimate when the court would render its judgement.

The company considers the charges brought against it to be groundless. The Supervisory Board and Management Board of AS Järvevana are convinced that the activities of the company and its governing bodies have been conducted properly and in conformity with the laws of the Republic of Estonia, and that relevant proof can be supplied in the court.

Share and shareholders

The largest shareholders of AS Järvevana as of 31.12.2011

From 15.09.2009, the shares of AS Järvevana are included in the secondary list of NASDAQ OMX Tallinn Stock Exchange. During the demerger of AS Merko Ehitus, the company’s business name was changed to AS Järvevana and from August 4^th 2008, the shares of AS Järvevana are traded under the symbol of JRV1T. In 2011, 342 transactions were performed with the shares of AS Järvevana in the course of which 504 016 shares were traded and the total monetary value of transactions was EUR 159 781. The lowest transaction price was EUR 0.24 and the highest transaction price was EUR 0.50 per share. The closing price of the shares as of 31.12.2011 was EUR 0.36.

STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

STATEMENT OF FINANCIAL POSITION
unaudited, in thousand euros

Toomas Annus
Member of Management Board
+372 6 805 400
toomas.annus@merko.ee