MANAGEMENT REPORT
General information
The company was formed after the demerger from AS Järvevana, as a result of
which the complete set of assets related to the business activities of the
construction company was separated and transferred to 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 EEK 250 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 public limited company does not have active business operations.
The Company's only income is generated from finance income earned on the
investment of the Company's liquid funds. Between 01.01.2010 and 30.09.2010,
AS Järvevana earned finance income in the amount of EEK 2.4 million. The
most significant cost item was the legal expenses related to the “land swap”
criminal case; these expenses constitute 39% of the general administrative
costs in 2010 9 months. EEK 209 million of the assets constitutes the claim
against AS Merko Ehitus from cooperation agreement (http://www.merko.ee/
upload/File/Restruktureerimise%20dokumendid/Koost%F6%F6leping%20ENG.pdf).
As of 30 September 2010, the sole member of AS Järvevana's Management Board
is Toomas Annus. The company's operation does not have a seasonal and cyclic
nature.
The trial over the land swap charges started on 12 November 2009, at the
Harju County Court. For an overview of the trial, please visit:
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 accused of five counts of bribery. The proceedings are conducted
at the Harju County Court. The evidence required to substantiate the charges
of bribery consists of three elements and the absence of even one element
invalidates the charges of criminal offence. The three elements to be
proved are: (i) giving, or promising to give, a tangible asset or benefit
to a public official; (ii) an illegal act by a public official for the
benefit of the bribing party; (iii) a correlation between the first and
second elements, i.e. providing a benefit to a public official for
a favourable act. In case of AS Järvevana, it also needs to be proved
that (i) the offence was committed by a senior official of the legal
entity, and that (ii) the offence was committed in the interests of the
legal entity. AS Järvevana has not conducted any of the land swap
transactions described in the statement of charges. Instead, these
transactions were made - and the hypothetical benefits were gained - by
the company's subsidiaries, who are independent legal entities and who are
not being prosecuted. It is also clearly obvious that the activities cannot
have been illegal since they are allowed under section 19 of the Nature
Conservation Act - this calls the bribery charges into question.
By 8 April 2010, the court had heard nearly 80 prosecution witnesses, and
none of the witnesses have testified about a promise to give or the giving
of a bribe, or about illegal activities. Proceedings in the criminal case
continued at the Harju County Court on 5 October 2010, after a summer
hiatus. Thirteen court dates have been scheduled for the period from October
to December, in order to examine the last prosecution witness and for the
prosecution to present documentary evidence. The 2011 schedule for the
trial has been fixed until 28 April 2011, with 14 court dates planned to
examine dozens of defence witnesses and for the defence to present a great
amount of documentary evidence. Presumably the ruling of the court of first
instance will be reached during the year 2011. The legal proceedings may
prove to be very prolonged due to the fact that the Estonian court system
consists of three instances and additionally, it is possible to go to the
European Court of Human Rights.
The company considers the brought charges 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 are also able to
supply relevant proof in the court.
STATEMENT OF COMPREHENSIVE INCOME 9M 2010
unaudited, in thousand EEK and EUR
EEK EUR
9M 2010 9M 2009 9M 2010 9M 2009
Administrative and general expenses (2 717) (7 989) (174) (510)
Other operating expenses (3) - (0) -
Operating profit (2 720) (7 989) (174) (510)
Financial income and expenses 2 389 5 934 153 379
incl. other financial income 2 391 5 936 153 379
other financial expenses (2) (2) (0) (0)
Net profit for current period (331) (2 055) (21) (131)
incl. equity holders of the parent (331) (2 055) (21) (131)
Comprehensive income (331) (2 055) (21) (131)
incl. equity holders of the parent (331) (2 055) (21) (131)
Earnings per share for profit attributable
to the equity holders of the parent
(basic and diluted, in EEK and EUR) (0,02) (0,12) (0,00) (0,01)
STATEMENT OF COMPREHENSIVE INCOME Q3 2010
consolidated, unaudited, in thousand EEK and EUR
EEK EUR
Q3 2010 Q3 2009 Q3 2010 Q3 2009
Administrative and general expenses (640) (6 973) (41) (446)
Operating profit (640) (6 973) (41) (446)
Financial income and expenses 718 1 310 46 84
incl. other financial income 718 1 310 46 84
Net profit for current period 78 (5 663) 5 (362)
incl. equity holders of the parent 78 (5 663) 5 (362)
Comprehensive income 78 (5 663) 5 (362)
incl. equity holders of the parent 78 (5 663) 5 (362)
Earnings per share for profit attributable
to the equity holders of the parent
(basic and diluted, in EEK and EUR) 0,00 (0,32) 0,00 (0,02)
STATEMENT OF FINANCIAL POSITION AS OF 30.09.2010
unaudited, in thousand EEK and EUR
EEK EUR
30.09.2010 31.12.2009 30.09.2010 31.03.2009
ASSETS
Current assets
Cash and cash equivalents 20 079 30 425 1 283 1 944
Short-term deposits 20 000 10 000 1 278 639
Trade and other receivables 209 663 209 890 13 400 13 415
Total current assets 249 742 250 315 15 961 15 998
Non-current assets
Property, plant and equipment 28 40 2 2
Total non-current assets 28 40 2 2
TOTAL ASSETS 249 770 250 355 15 963 16 000
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Trade and other payables 276 530 18 34
Short-term provisions 17 500 17 500 1 118 1 118
Total current liabilities 17 776 18 030 1 136 1 152
Equity
Share capital 177 000 177 000 11 312 11 312
Statutory reserve capital 17 700 17 700 1 131 1 131
Retained earnings 37 294 37 625 2 384 2 405
Total equity 231 994 232 325 14 827 14 848
TOTAL LIABILITIES AND EQUITY 249 770 250 355 15 963 16 000
Toomas Annus
Member of Management Board
+372 6 805 400
toomas.annus@merko.ee
