HÜVITUSFOND

ANNOUNCEMENT

10.11.98

 

COMMENTARY TO THE CONTRACTS WITH EESTI ÜHISPANK

 

The present statement is an answer to Eesti Ühispank's statement about the derivatives

between Eesti Ühispank and Hüvitusfond. The statement of Eesti Ühispank includes several

allegations which Hüvitusfond finds important to specify.

 

In the afternoon of 09.11.1998, the management board of Hüvitusfond was notified about

the possibility of the existence of an additional derivative between Hüvitusfond and 

Eesti Ühispank in the worth of 181 million EEK. The manamgement board of Hüvitusfond 

has no documental information about the abovementioned deal to this day. The transaction 

is also not reflected in the Hüvitusfond's 1997. annual report. Therefore, Hüvitusfond 

thinks that it is possible that the abovementioned transaction was abrogated the same 

day that it was concluded. 

 

On 03.11.1997, another derivative was concluded between Hüvitusfond's representative 

Andres Männart and Eesti Ühispank's representative Margus Kangro in the worth of 

143.7 million EEK, which proceeded from the frame agreement concluded on 20.08.1997 

between Arle Mölder and Ain Hanschmidt. According to the previous manager of 

Hüvitusfond Andres Männart, the purpose of the derivative was to hedge the risks of 

holding the stock positions, not to earn additional profits, as Eesti Ühispank claims 

erroneously. The derivative in the worth of 143.7 million EEK is reflected in the

Hüvitusfond's 1997. unaudited annual report.

 

In the beginning of 1998, Hüvitusfond sent to Eesti Ühispank two confirmations 

on holdings, the first one to confirm the balance sheet liabilities and the 

second one to confirm the off-balance sheet liabilities. The last one included also 

a derivative in the worth of 143.7 million EEK and regular foreign currency forwards.

According to Hüvitusfond's knowledge, Eesti Ühispank today questions the authentity 

of the confirmation on holdings sent to them.

 

Ühispank's statement that the parties have acted according to the nullity of the contracts 

during the time period the contract was concluded and after the alleged abrogation

of the contract, is in Hüvitusfond's opinion erroneous. The derivative was not realized 

on May 5, 1998, and according to the previous member of Hüvitusfond's management board

Andres Männart, they contacted several times with the representative of Eesti Ühispank 

Margus Kangro in order to find a solution to this situation.

 

Eesti Ühispank's statement that the derivative was not reflected on the Hüvitusfond's 

balance sheet is also erroneous. On the Hüvitusfond's 1977. audited balance sheet, the 

shares which were the objects of the derivative, were reflected. The abovementioned shares 

were not devalued since the derivative with Eesti Ühispank was considered to 

be valid.

 

Until the end of the expertise conducted by the Hüvitusfond's auditors and lawyers, 

Hüvitusfond cannot give a concrete opinion about the derivative of 143.7 million EEK.

 

Hüvitusfond still assures its bondholders that regardless of the derivatives which have 

caused uncertainty, the bonds are continuously guaranteed by more than twice.

At the same time, Hüvitusfond hopes that the solution to these current problems will 

be fair and speedy. 

 

 

 

 

Aare Tammemäe

Hüvitusfond

Chairman of the Management Board

372 6651 800