2013 3 months unaudited interim report

Tallinn, Estonia, 2013-05-30 15:00 CEST (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. As at 31 March 2013, one person was employed by AS Järvevana, its Director Toomas Annus. The company’s activities do not have a seasonal or cyclical nature.

Operating activities

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 statement of charges no. 1-09-4486 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 in accordance with § 298 of the Penal Code and the proceedings were conducted at the court of first instance of 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 element, 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 a bribery. It has been proven (and established by the judgement of the court of first instance) that more than 180 legal transactions have been performed on the same bases and by the same procedure by different persons. With the statement of charges and judgment, an absence of damage and civil action was established.

At 19 June 2012, the final hearing of the land swap criminal case was held at Harju County Court, where the court fully acquitted AS Järvevana and Toomas Annus in the criminal case no. 1-09-4486 and ruled that the state would have to pay EUR 611,810 to cover the legal aid expenses of AS Järvevana.

The court categorically established that AS Järvevana and Toomas Annus have not committed any offences; all relevant land swap transactions were legitimate, that the Estonian Internal Security Service and the Public Prosecutor’s Office have committed a significant breach of the law, the Constitution and the European Convention for the Protection of Human Rights and Fundamental Freedoms. This carefully deliberated judgement was reached as a result of three years of comprehensive and direct proceedings, which, inter alia, included the hearing of approximately 120 witnesses. The judgment of acquittal was unanimous and it was also supported by lay judges.

The Public Prosecutor’s Office has filed an appeal against the judgment of acquittal in the land swap case by the court of the first instance, therefore the judgment of the court of first instance has not yet taken effect. AS Järvevana and Toomas Annus presented comprehensive arguments against the appeal on 374 pages. The petition by AS Järvevana and Toomas Annus to examine the surveillance file and to ensure the right of defense which, inter alia, is based on the judicial decision of European Court of Human Rights in the case of Leas v. Estonia, is still unresolved. The defence counsel of AS Järvevana and Toomas Annus, sworn advocate Leon Glikman, cited that releasing the materials forming the basis for surveillance would correspond to principles emphasized repeatedly by European Court of Human Rights and would facilitate exercising the right of defense. The court of first instance has established extensive procedural violations in conducting of surveillance. In addition to aforementioned, Harju County Court established that the respective petition of defence counsel Leon Glikman was lawful and justified but the court repealed its lawful affirmative injunction because the judge was threatened with criminal prosecution: ”After publicizing named injunction in court information system, a phone call was placed to the court chairman from the Public Prosecutor’s Office, asking to ascertain whether the judge has released the documents named in the injunction to the defence counsel and the accused. As the judge had not yet released the documents, criminal prosecution of the judge for breach of duty to maintain state secrets was not initiated.”; ”Based on this information from the Public Prosecutor’s Office, the court partially repealed the previously formalised injunction with an injunction dated 16.04.2010”. The court of first instance established by the same judgment that against the conscience of the court and as a result of pressure outside the legislative proceeding, AS Järvevana and Toomas Annus were not provided fair and equal judicial proceedings for which they had the right based on law, the Constitution and the European Convention for the Protection of Human Rights and Fundamental Freedoms. Despite the fact that the court established that equal judicial proceedings and right of defence were not ensured for AS Järvevana, the court was still convinced based on the analysis of the body of evidence, that the accused Toomas Annus and AS Järvevana are not guilty in any of the episodes of the charges.

Hearings in Tallinn Circuit Court took place in January and February 2013. Public prosecutors applied for annulment of the judgment of acquittal of Harju County Court and either for obtaining a new judgment of conviction, or as an alternative, re-opening the case in the court of first instance. The defence counsel of AS Järvevana submitted a comprehensive argument to the court, asking not to annul the judgment of acquittal and pointed to the passing of reasonable time-limits of proceedings together with alternative petition, based on economics of proceedings, for the termination of the proceedings that would have consequences equivalent to acquittal. Tallinn Circuit Court partially released materials forming the basis for surveillance to the defence counsel, which according to the judgment of the court of first instance was considered necessary but which the County Court did not release as a consequence of threatening of the judge established in the judgment. The defence counsel examined the surveillance material and presented voluminous positions with arguments supporting the judgment, why surveillance had been conducted unlawfully. It is significant, that according to the judgment of the court of first instance, the Public Prosecutor’s Office threatened the judge in connection with his intention to release materials forming the basis for surveillance to the defence counsel, with the justification that these contained state secret. However, the injunctions released by the court of appeal did not contain state secret.

Tallinn Circuit Court will rule on the case at 19 June 2013.

Considering the extraordinary volume and complexity of the case as well as the three-tier court system, it is not certain that final judgment will be achieved during 2013.

In case of the judgment of conviction, its entry into force and judicial record, the legal risks consist of pecuniary punishment, which according to the Income Tax Act is also subject to taxation with income tax. The entry into force of the judgment of conviction would also concur with impediments for AS Järvevana in participation in public procurements.

AS Järvevana cites that the principle of the direct court hearing is applicable in full only in the court of first instance. As a result of lengthy, comprehensive and direct proceedings, the court of first instance was convinced that AS Järvevana and Toomas Annus were not guilty, thereby casting doubt upon the entire statement of charges. We consider significant, that the court gave a judgment of acquittal regardless of pressure outside the judicial proceeding that disregarded the independence of court and was established in the judgment, and in a situation where the court could not ensure equal procedural rights deemed appropriate to the accused due to threats. 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 this has been successfully substantiated to the court of appeal.

Share and shareholders

The main shareholders of AS Järvevana as at 31.03.2013

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 04.08.2008, the shares of AS Järvevana are traded under the symbol of JRV1T. In 2013 3 months, 82 transactions were performed with the shares of AS Järvevana in the course of which 211,986 shares were traded and the total monetary value of transactions was EUR 119,860. The lowest transaction price was EUR 0.54 and the highest transaction price was EUR 0.67 per share. The closing price of the shares as at 31.03.2013 was EUR 0.60.

Structure of shareholders as at 31.03.2013

STATEMENT OF COMPREHENSIVE INCOME
in thousand euros, unaudited

STATEMENT OF FINANCIAL POSITION
in thousand euros, unaudited

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