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 30.06.2010,
AS Järvevana earned finance income in the amount of EEK 1.7 million. The
most significant cost item was the legal expenses related to the “land swap”
criminal case; these expenses constitute 46% of the general administrative
costs in 2010 6 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 at 30 June 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.
Last land swap spring session proceeding at the Harju County Court took
place at 2 June 2010. Next session is planned at 28 September present year.
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).
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. The presentation of
documentary evidence has now started at the request of the prosecutor's
office. The procedure schedule of the litigation has been fixed until
28 April 2011 and 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 6M 2010
unaudited, in thousand EEK and EUR
EEK EUR
6M 2010 6M 2009 6M 2010 6M 2009
Administrative and general expenses (2 077) (1 017) (133) (65)
Other operating expenses (3) - (0) -
Operating profit (2 080) (1 017) (133) (65)
Financial income and expenses 1 671 4 625 107 296
incl. other financial income 1 673 4 626 107 296
other financial expenses (2) (1) (0) (0)
Net profit for current period (409) 3 608 (26) 231
incl. equity holders of the parent (409) 3 608 (26) 231
Comprehensive income (409) 3 608 (26) 231
incl. equity holders of the parent (409) 3 608 (26) 231
Earnings per share for profit attributable
to the equity holders of the parent
(basic and diluted, in EEK and EUR) (0,02) 0,20 (0,00) 0,01
STATEMENT OF COMPREHENSIVE INCOME Q2 2010
consolidated, unaudited, in thousand EEK and EUR
EEK EUR
Q2 2010 Q2 2009 Q2 2010 Q2 2009
Administrative and general expenses (1 001) (574) (64) (37)
Other operating expenses (3) - (0) -
Operating profit (1 004) (574) (64) (37)
Financial income and expenses 662 2 580 42 165
incl. other financial income 663 2 580 42 165
other financial expenses (1) - (0) -
Net profit for current period (342) 2 006 (22) 128
incl. equity holders of the parent (342) 2 006 (22) 128
Comprehensive income (342) 2 006 (22) 128
incl. equity holders of the parent (342) 2 006 (22) 128
Earnings per share for profit attributable
to the equity holders of the parent
(basic and diluted, in EEK and EUR) (0,02) 0,11 (0,00) 0,01
STATEMENT OF FINANCIAL POSITION AS AT 30.06.2010
unaudited, in thousand EEK and EUR
EEK EUR
30.06.2010 31.12.2009 30.06.2010 31.03.2009
ASSETS
Current assets
Cash and cash equivalents 19 957 30 425 1 275 1 944
Short-term deposits 20 000 10 000 1 278 639
Trade and other receivables 209 733 209 890 13 405 13 415
Total current assets 249 690 250 315 15 958 15 998
Non-current assets
Property, plant and equipment 32 40 2 2
Total non-current assets 32 40 2 2
TOTAL ASSETS 249 722 250 355 15 960 16 000
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Trade and other payables 306 530 20 34
Short-term provisions 17 500 17 500 1 118 1 118
Total current liabilities 17 806 18 030 1 138 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 37 216 37 625 2 379 2 405
Total equity 231 916 232 325 14 822 14 848
TOTAL LIABILITIES AND EQUITY 249 722 250 355 15 960 16 000
Toomas Annus
Member of Management Board
+372 6 805 400
toomas.annus@merko.ee
