Market announcement

Title

Announcement of shareholders' general meeting

Message

The board of AS Merko Ehitus (registry code 10068022, address Järvevana rd 9G,  
Tallinn, 11314) hereby convenes an extraordinary shareholders' general meeting  
on Tuesday, February 19th 2008 at 2PM in hotel Nordic Hotel Forum conference    
hall “Arcturus” (Viru Väljak 3, Tallinn).                                       

§ 226 and 287 of the Commercial code stipulate the shareholders' right to       
information. The importance of notifying shareholders is also held in high      
esteem in the Corporate Governance Code. According to the § 32 of the General   
Principles of the Civil Code Act shareholders and members of governing bodies of
corporate entities are required to follow principles of good faith and consider 
the justified interests of each other.                                          

Taking into account the hereby set forth requirements of informing shareholders 
and a proposal by the supervisory board of AS Merko Ehitus, the board convenes  
the extraordinary shareholders' general meeting to inform the shareholders about
the suspicions regarding the company's activities expressed on October 15th 2007
and the effects of the criminal proceedings on the company.                     

The shareholders entitled to participate in the general meeting will be         
pronounced on February 9th 2008 at 11:59PM. Registering for the meeting         
commences at 1:30PM on February 19th 2008.                                      

The agenda:                                                                     

1. Preliminary, unaudited financial results of year 2007; 

2. Prospects of the construction sector in Estonia and the Baltic states in the 
following years and AS Merko Ehitus's position; 

3. A legal analysis of criminal proceedings launched against AS Merko Ehitus; 
Regarding criminal matter number 05913000055, in which Merko Ehituse AS         
(hereinafter Merko) is involved as a suspect                                    
3.1. Introductory description.
3.1.1. Merko is suspected in a criminal offense qualified under § 298
subsection 4 of the Penal Code (hereinafter KarS) - giving or promising a
bribe, committed at least twice, which, if committed by a juristic person, is
punishable by a pecuniary punishment of 50 000 - 250 000 000 kroons (KarS § 44
subsection 8) and liquidation as a discretionary supplementary punishment. 
3.1.2. It would be an option to deposit the fine. The assets of Merko exceed
the maximum punishment by magnitude. In case of compulsory dissolution the
shareholders would receive the distribution ratio (Commercial Code - ÄS § 226). 
3.1.3. The act of suspicion is indistinct and incomprehensible and impairs
performance of right of defence. In contradiction with principles of rule of
law, the transcript of the suspicion constantly refers to anonymous physical
and juristic persons. From the plot of the suspicion it remains in basic part
incoherent, who, via whom and what offered as a bribe. The act of suspicion is
full of logical mistakes and also controversies. The suspicion demonstrates
selective prosecution and is visibly artificial. Accepting of such a suspicion
opens a door to declare anyone to be under suspicion simply for the reason that
he or she or it made transactions with the state or - on the ground which is
not under control of anybody - merely on a ground that in a course of ordinary
civil turnover, in tiny Estonia, in different periods of time some transactions
were made with the same property by acquaintances of officials or these persons
have merely expressed their interest in the property. The groundless suspicion
has caused damages. 
3.1.4. This is just an act of suspicion. It is not certain whether an official
accusation will follow. Merko Ehituse AS defends itself actively against the
suspicion which is visibly lacking legal merits and has engaged law firm Teder,
Glikman & Partnerid to provide qualified legal assistance for that purpose. 

3.2. Merko is suspected in three episodes of promising or giving a bribe to
persons related to Minister of Environment Villu Reiljan. 
3.2.1. The bribe given to L. Kiivit, “a person related to Reiljan”, is
supposedly the apartment which L. Kiivit acquired from Mr. Astover, who
previously acquired it from Mr. Karjatse, the latter had acquired the apartment
from Merko in 2006. Merko is also suspected in offering Kiivit to use the
apartment acquired by her free of charge. 
3.2.2. A bribe promised to Reiljan is said to be a promise given in 2006 to
acquire within an unspecified time period directly or via a person not
mentioned in the suspicion an equity holding of an anonymous legal entity.
There is no suspicion about actual transfer of the holding. 
3.2.3.	A bribe promised to Reiljan is also said to be granting a possibility to
a person, not specified in the suspicion, who is in good relations with
Reiljan, to acquire a state owned immovable without an auction. The act of
suspicion acknowledges that the anonymous person determined by Reiljan refused
to acquire the immovable. 

3.3. Merko is suspected in two episodes of promising or bestowing a bribe to
Kalev Kangur. 
3.3.1. A bribe is allegedly an apartment which Merko sold in 2003 to leasing
company AS Hansa Liising. The lessee of the latter was OÜ Sootel. In 2005
Kangur concluded a lease agreement with Hansa Liising. 
3.3.2. Merko is said to have permitted Kangur to participate in management of
OÜ KV Tarantel via A. Sööt, promising future profit from assets of OÜ KV
Tarantel, also promising an equity ownership of the said legal entity to an
anonymous person named by Kangur. The act of suspicion does not allege actual
transfer of the share. 

3.4. Merko Ehituse AS confirms to the shareholders, that it has not given any
bribes and that there is no elements of a criminal offence whatsoever. 
3.4.1. No bribe has been promised or given and the alleged behaviour described
in the act of Suspicion does not correspond to the imperative legal
prerequisites of bribe. 
3.4.2. According to an erroneous concept of the suspicion, the bribes were
linked with land swap transactions with the state. All land exchange
transactions were legal and met utterly the requirements provided in § 19 of
Nature Conservation Act. All the administrative acts and transactions
concerning swap of lands are valid even today. 
3.4.3. Exchange took place on the basis of value, which was approved and
confirmed by officially certified and officially recognized immovable property
valuation experts, from whom the valuations were ordered by the state. 
3.4.4. Merko is suspected selectively and discriminatorily. Without
participation of Merko, 184 identical transactions have been made under the
same valid law and procedure, which are considered to be legal and made without
any bribes. Consequently Merko had as well no reason for offering bribe. 
                   
4. About the effects of the criminal proceedings on AS Merko Ehitus; 
The unjustified unveiling of data about several procedural steps at the criminal
proceeding to the public has had an enormously negative impact on the company.  
Revealing of sensitive data in a stage of procedure when it is unclear whether  
the official accusation will follow is unprecedented. The board of AS Merko     
Ehitus has repeatedly found itself in the position where responsibilities taken 
on by listing on the Tallinn Stock Exchange regarding the divulgement of        
information and the public interest are at odds with the unwillingness of the   
law enforcement agencies to share information. At the same time, whether through
unprofessional handling of information or by ill will, information has reached  
the press which casts a shadow on AS Merko Ehitus but to which it is impossible 
to react due to lack of information. Incidents have occurred where potential    
clients have withdrawn from signing construction agreements with AS Merko Ehitus
due to pressure applied by third persons through the media. There are marked and
unsubstantiated stalls in providing the company with legal clearances and       
accords necessary for construction activities, due to the officials charged with
handling these documents being wary of potential accusations in the media.      

5. The appraisal of damages that have been, and are continuing to be caused to  
shareholders by the launch of the criminal proceedings and the extent of the    
possible demand for compensation;                                               
AS Merko Ehitus has analyzed the fall in share price, its possible causes and   
compared the drop in share price to the dynamics of other comparable companies' 
share price performance. Additionally we have analyzed the implications of      
specific information leaks on the price movements. We have consulted with       
specialists in the field and received a third-party estimate and an analysis,   
which will be introduced to shareholders.                                       

It is the proposal by the supervisory board to acknowledge the information in   
the agenda points 1-5 and not to pass resolutions regarding these agenda points.

Upon registration the legitimate representatives of the corporate shareholders  
are asked to submit the documents, which would confirm their right to           
representation. For the board members of a corporate body it is a copy of the   
registration card of the company, for the authorized representatives it is the  
authorization from the board or its substitute and a copy of the registration   
card of the company. The document for personal identification will be required. 
The individual shareholders will be asked to submit the document for personal   
identification, a representative will be asked to submit also the authorization.
A passport or other identity document containing the photograph, name, and      
personal identification code of the person and the name of the state agency     
having issued the document is acceptable as an identity document.               

For any further questions concerning the general meeting, please contact us by  
telephone +372 6 805 105 or by e-mail merko@merko.ee.                           

Alar Lagus                                                                      
Member of the board                                                             
6 805 109                                                                       
alar.lagus@merko.ee