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Currency Risk As of the date of this Offering Circular the Estonian Kroon is fixed to the German Mark at the rate of DEM 1 = EEK 8.00 with allowed fluctuation band of ±3% under the currency board regime. Although the Bank of Estonia has declared its firm intention to keep the exchange rate stable for at least the next seven years and currently there is no significant pressure on the exchange rate, there can be no assurance that there will be no devaluation of the Estonian Kroon in the coming years. Should such devaluation occur, it may have a serious material adverse effect on the financial condition and the results of operations of the Bank. As regards the Bank's customers, an exposure to the devaluation of the Kroon could hamper their ability to repay loans granted by the Bank (a significant portion of which are denominated in foreign currency) and therefore increase the likelihood of future loan losses for the Bank. In addition, fluctuations in the exchange rate between the Kroon and the German Mark will also affect the US dollar or other currency equivalent of the Kroon price of the Shares of the Bank. Such fluctuations would affect the US dollar or other currency amounts received by holders of the Shares of any cash dividends paid in Kroons on the Shares. |