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2012 6 months and II quarter unaudited interim report

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Estonia, Tallinn, 2012-08-30 15:30 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 of 30 June 2012, 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 land swap case
commenced at Harju County Court. 

An overview of the proceedings:
http://www.nasdaqomxbaltic.com/market/?pg=details&instrument=EE3100003559&list=3
&tab=news&news_id=238437.
In the statement of charges AS Järvevana was charged with five counts of giving
a bribe pursuant to § 298 of the Penitentiary Code, and the proceedings in the
case were conducted by the Harju County Court, being the court of the first
instance. The subject of proof concerning a bribery charge comprises three
elements, while the absence of even one of divests the charge of the necessary
elements of a criminal offence, namely: (i) promising or giving an official a
material reward; (ii) unlawful act committed by an official for the benefit of
the person giving the bribe; (iii) equivalence relation between the first and
the second elements, i.e. a reward is offered for a beneficial act. Moreover,
with regard to AS Järvevana it is necessary to prove that (i) the act was
committed by a senior executive of a legal entity, and (ii) that the act was
committed in the interest of the legal entity. AS Järvevana has participated in
no land swap transactions described in the statement of charges. Such
transactions were concluded, and hypothetical benefits might have been received
by independent subsidiaries being legal entities, who have not been charged. AS
Järvevana, however, has never swapped any land, even in accordance with the
statement of charges. Furthermore, it is obvious, that such acts could not have
been unlawful, inasmuch as they were permissible under § 19 of the Nature
Conservation Act, which rules out the qualification of such act as a bribery.
It has been proven, and ascertained by the judgement of the court of the first
instance, that more than 180 similar legitimate transactions have been
concluded on the same grounds and applying the same procedure by a number of
various persons. The statement of charges and the judgement established the
absence of damages and the [cause for] a civil action. 

On 19 June 2012 the Harju County Court held the last hearing in the criminal
case involving the land swap deals; during this hearing the court fully
acquitted AS Järvevana and Toomas Annus in the criminal case No.1-09-4486, and
ordered the State to indemnify AS Järvevana’s legal expenses in the amount of
EUR 611 810. 

The court categorically established that AS Järvevana and Toomas Annus have not
committed the offences, all the relevant land swap transactions have been
legitimate, and also established that the Security Police Board and the Public
Prosecutor’s Office have committed a fundamental breach of the law, the
Constitution, and the European Convention for the Protection of Human Rights
and Fundamental Freedoms. This carefully deliberated judgement was a result of
three years of comprehensive and first-hand proceedings, which involved, inter
alia, questioning of about 120 persons. The judgement of acquittal was
unanimous, and it was also supported by the lay judges. 

The Public Prosecutor’s Office has filed an appeal against the judgement of
acquittal to the Tallinn Circuit court, and therefore the judgement of the
court of the first instance has not entered into effect yet. AS Järvevana and
Toomas Annus have filed a comprehensive rebuttal to the appeal on 374 pages.
The application of AS Järvevana and Toomas Annus for granting them access to
the surveillance files to review the same, and to guarantee their right of
defence, which is supported, inter alia, by the judgement rendered by the
European Court of Human Rights in the case Leas v Estonia, is still pending.
The Harju County Court established that the respective application of the
defence counsel as such is legitimate, however the court annulled its lawful
permissive ruling because the judge was threatened by criminal prosecution:
“After the court ruling in question was published in the Court’s information
system the chairperson of the Court received a telephone call from the Public
Prosecutor’s Office, and was asked to verify whether or not the judge has
already presented the documents referred to in the ruling to the accused. Since
the judge had not yet presented the documents to the accused, the criminal
prosecution against the judge concerning the breach of a confidentiality
obligation was abandoned”; “Taking into consideration the information received
from the Public Prosecutor’s Office the Court, by its ruling of 16.04.2010,
partially annulled the former court ruling.” In the same judgement the court of
the first instance established, relying on the Court’s full conviction, that by
this act AS Järvevana and Toomas Annus were not guaranteed a fair trial, which
the latter are entitled to pursuant to the law, the Constitution and the
European Convention for the Protection of Human Rights and Fundamental
Freedoms. 

The Tallinn Circuit Court set the dates for hearing the case on 14-17.01.2013,
21-23.01.2013, 04-07.02.2013. So far it is unclear whether or not additional
days are needed to hold the hearing. 

Taking into consideration the extraordinary volume and the complexity of the
matter, and the three-tier structure of the court system, one cannot be
confident that the final decision will be reached within 2013. 

In the case that the persons are found guilty, and are entered in the
punishment register, the legal risks include a pecuniary punishment, which
under the Value Added Tax Act is subject to income tax, as well as constraints
with regard to participation in public procurements. 

AS Järvevana points out that the principle of first-hand participation is fully
applicable only at courts of the first instance. As a result of long-term,
comprehensive and first-hand proceedings the court reached an unambiguous
conviction that AS Järvevana and Toomas Annus are not guilty, thereby casting
doubt to the charges as a whole. We deem important that the court rendered the
judgement of acquittal in spite of the extra-procedural pressure in disregard
for judicial independence, and in a situation where as a result of a threat the
court was unable to guarantee the accused the equal procedural rights deemed
necessary by the court. The supervisory board and the management board of AS
Järvevana are convinced that the acts of the company and its management bodies
have been appropriate and are in line with the legislation of the Republic of
Estonia, and it can be once again substantiated before the court of the second
instance. 

Share and shareholders

The main shareholders of AS Järvevana as of 30.06.2012

                                           Number of shares  % of shares
------------------------------------------                              
AS Riverito                                      12 742 686       71,99%
ING Luxembourg S.A., clients                        963 376        5,44%
Skandinaviska Enskilda Banken Ab, clients           419 957        2,37%
Tenlion OÜ                                          225 014        1,27%
Andersson Investeeringud OÜ                         221 442        1,25%

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 2012 6
months, 257 transactions were performed with the shares of AS Järvevana in the
course of which 395,477 shares were traded and the total monetary value of
transactions was EUR 169,023. The lowest transaction price was EUR 0.35 and the
highest transaction price was EUR 0.51 per share. The closing price of the
shares as of 30.06.2012 was EUR 0.46. 


STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

                                                    2012      2011
                                                6 months  6 months
                                                                  
General and administrative expenses                (114)     (126)
                                               -------------------
                                               -------------------
Operating profit (loss)                            (114)     (126)
                                                                  
Finance income and costs                             114        92
                                               -------------------
incl. interest income                                114        92
                                                                  
Net profit (loss) for the period                       -      (34)
                                               -------------------
                                                                  
Comprehensive profit (loss) for the period             -      (34)
                                               -------------------
                                                                  
Earnings per share (basic and diluted, in EUR)      0,00    (0,00)



STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

                                                      2012        2011
                                                II quarter  II quarter
                                                                      
General and administrative expenses                   (43)        (65)
                                               -----------------------
                                               -----------------------
Operating profit (loss)                               (43)        (65)
                                                                      
Finance income and costs                                57          48
                                               -----------------------
incl. interest income                                   57          48
                                                                      
Net profit (loss) for the period                        14        (17)
                                               -----------------------
                                                                      
Comprehensive profit (loss) for the period              14        (17)
                                               -----------------------
                                                                      
Earnings per share (basic and diluted, in EUR)        0,00      (0,00)


STATEMENT OF FINANCIAL POSITION
unaudited, in thousand euros

                               30.06.2012  31.12.2011
                                                     
ASSETS                                               
Current assets                                       
Cash and cash equivalents           2 527       2 531
Trade and other receivables        13 405      13 403
Total current assets               15 932      15 934
                                                     
Non-current assets                                   
Property, plant and equipment          29          35
Total non-current assets               29          35
                                                     
TOTAL ASSETS                       15 961      15 969
                              -----------------------
                              -----------------------
                                                     
LIABILITIES AND EQUITY                               
Current liabilities                                  
Trade and other payables               21          29
Short-term provisions               1 118       1 118
Total current liabilities           1 139       1 147
Total liabilities                   1 139       1 147
                                                     
Equity                                               
Share capital                      12 000      12 000
Statutory reserve capital           1 200       1 131
Retained earnings                   1 622       1 691
Total equity                       14 822      14 822
                                                     
TOTAL LIABILITIES AND EQUITY       15 961      15 969
                              -----------------------



Toomas Annus
Member of Management Board
+372 6 805 400
[email protected]