EESTI ÜHISPANK

REPORT



PUBLIC 1999 YEAR 12 MONTH INTERIM REPORT (IV)



2.8.Changes in Shareholders' Equity, Bank

                                                       Share

                                       Year   Profit/  issue

                                      begin-  loss of   for    Final

                                       ning   annual    FMO   balance

                                       1998   year   20.05.99   1999



Paid up capital                         661.5             4.1    665.6

Subscribed capital, unpaid                 .0                       .0

Share premium                         1,340.6             6.0  1,346.6

Own shares                                 .0                       .0

General Banking reserve                 298.5                    298.5

Revaluation reserve                        .0                       .0

Other reserves                             .0                       .0

Translation differsnces                    .0                       .0

Retained earnings and

   profit/loss of annual year          -412.4   129.2           -283.2

Potential income tax                       .0                       .0

Total shareholders' equity            1,888.2   129.2    10.1  2,027.6











2.9.Accounting principles



General principles



The    financial   statements   of   Eesti   Ühispank   conform   with

International Accounting Standards  and generally accepted  accounting

principles.   Compared   to    the    previous    year,   presentation

principles  of   long-term  investments    in subsidiaries' shares  in

the financial statements separate from   the parent company have  been

changed: in 1998   they were  re-valued   at  an   equity method,   in

1999   at   an acquisition  cost; the  results of  the previous   year

have been adjusted respectively.



Scope of the consolidated financial statements



The   financial  statements  of  Eesti  Ühispank  group  include   the

audited  financial  statements  of  the  subsidiaries   as  of      31

December  1999.  Only  the   statements  of   the subsidiaries   where

Eesti Ühispank exercises  significant control have been  consolidated.

The control is treated as significant when the bank owns at least  50%

of the voting right   in   the company or in some other way  exercises

a significant  power.   The   statements   of   Eesti  Ühispank  Group

include     the   financial     statements   of   Ühisliisingu      AS

(participation  100%);   Russkii  Obedinennoi  Liising  (participation

75%), Ühispanga    Varahalduse   AS    (participation    100%),     AS

Ühisinvesteeringud   (participation    100%),   AO    Baltic    Invest

(participation        100%),       PT       Investeeringute         AS

(participation 100%), AS  Bangalo (participation  100%), OÜ PV Navarra

(participation 100%), AS TPF Orior (participation 100%),  AS  PF  Koda

(participation  100%),  AS   LF   Finants  (participation  100%),   OÜ

Efficio   (participation   100%)   and   AS   Ühispanga  Elukindlustus

(participation 100%).  The  subsidiaries of AS Ühisliising,  Ühispanga

Varahalduse AS and AS PF Koda have been prior consolidated  into   the

financial statements of the parent company.



Consolidation



In   significant  aspects  the   statements  have  been  compiled   in

conformity   with    the  accounting   principles    of   the   parent

company.   In   consolidation,   internationally accepted   accounting

principles  have  been   applied,   which   require   a   line-by-line

combination of a  parent company's and   subsidiaries' balance  sheets

and income  statements, while  intra-group  balances and  transactions

have  been eliminated.   Minority  interests   in  the   subsidiaries'

equity    are presented      separately    from    the     liabilities

and shareholders' equity of the group.



Income  and  expenditures  of the  subsidiaries  acquired during   the

accounting year  have been  consolidated   into the   parent company's

statement over the  period from   the moment   of  acquisition   until

the  termination  of   the accounting year. The subsidiaries  disposed

of  within   the  accounting  year  have  been  consolidated  into the

statement up to the moment of disposal.



The   income   statements of  subsidiaries   incorporated   in foreign

countries have been re-valued  in   the  Estonian kroons  at the  1999

average exchange rate of the Bank   of Estonia and the balance  sheets

have been consolidated  at the  Bank of Estonia's exchange rate of  31

December 1999.



In   the   parent  company's  separate  statements  investments   into

subsidiaries have  been  presented    at,  either  at acquisition,  or

realisation cost.



Long-term investments  into associates  (participation 20%-  50%)  are

presented  at  equity  method  where   the   initial  investment    is

increased by the group's  share of  profits  and  reduced   by  losses

of  or  distribution    of   profits  received   from  the   associate

attributable to the group.  The   results  of the associates  disposed

of    during   the accounting  year are  recognised in  the  statement

until the moment of disposal.



Securities



All  securities possessed by the bank are  recognised  as  securities.

Investments  into  securities are   classified  either  as short,   or

long-term  financial  investments  depending   on  the aim of holding.

Long-term  investments  include   shares  acquired  for   a strategic,

long-term holding.  In the  group's   statements long-term investments

are carried at a lower,  either at a realisation or  acquisition cost,

their disposal is  based on FIFO-formula.



Short-term    investments   include   shares   acquired    for trading

purposes. Such shares are recognised  at  market values, based on  the

stock exchange latest  BID-price on a  respective  day.   The   shares

not  quoted  on  the  stock exchange  are  recognised at cost. In  the

bank's   balance  sheet   those  investments  will  be  re-valued upon

decrease of   the  company's   bookkeeping value (according   to   the

financial information of the company).



Bonds include fixed  interest bonds and  other securities.   Long-term

bonds are recognised  in the balance  sheet at   a lower,   either  at

acquisition or realisation  cost.   For valuation,  interest   arising

as the   difference   between acquisition  cost and  nominal value  is

allocated over   the period   up  to   maturity  of   the  bond.   The

result  is presented in the  income statement as interest income.   In

case  the bonds are disposed, FIFO-formula is applied  to specify  the

yield.   Short-term bonds  are recognised  in the  balance   sheet  at

market values i.e.  the latest stock  exchange BID-price on  a balance

sheet  date  is  applied.  The  result  is  recognised  in  the income

statement as a financial income.



Loans



Loans  to  customers are presented  in the  balance  sheet until  they

are written off despite that part of them  may be carried under  costs

as bad  and doubtful  debts. Bad  and doubtful   debts   are presented

under  the  same   name  in assets side  with the minus.  Loans   have

been recognised in  the balance sheet  at their actual    amount   due

from  customers,  without    accrued interests and penalties. In  case

of overdraft, the actual utilisation   of  the overdraft limit by  the

borrower   is stated.   Credit   limits not  used are   presented   as

off-  balance  sheet  liabilities.   In   valuation  of loans, various

risks have  been prudently  considered.   Probability   of  collection

of   loans    and interest   payments   over the  coming   periods  is

valued.  Within   the  extent   of  presumed   loan  losses,   a  loan

provision  has  been  set up, where  doubtful  debts  are  recognised,

irrevocable loans are carried under costs and presented on the  income

statement line "loan provisions".



Valuation  of  collection  of  loans   is  based  on   the  borrower's

financial  position,  value  of  loan  security  and  its  realisation

options, on  due meeting  the   obligations under   the loan contract,

trustworthiness  of  the  borrower  and  on  other  factors.  If  loan

interests  have  not  been  received  for  two  months,  accruing   of

interests  will   be  terminated    and   interest   income  will   be

respectively adjusted.



Presentation of balances in foreign currencies



In  the balance sheet, assets and liabilities denominated in   foreign

currencies are recognised  in   the  Estonian kroons according to  the

rate  of  the  Bank  of  Estonia  as  of  31   December  1999. Foreign

currency, which is not  quoted by the Bank of Estonia is presented  at

an accounting rate under the  balance sheet date DEM quotation  of the

central bank   of  a   respective  country.   Profit  received    from

foreign  currency  purchases  and  sales  are  presented in the income

statement as net income.



Goodwill



Goodwill represents the difference between the cost of an  acquisition

and  the  fair  value  of  net   assets   on purchasing of a  business

entity.  Goodwill    is   amortised    on    a    straight-line-basis,

considering  its expected payback period, but  no  longer than  within

10 years.



Tangible fixed assets



Land,  buildings  and other  assets of long-term  use   are recognised

in   the  balance  sheet  as   fixed  assets.   Fixed  assets      are

presented  at  net  book    value   whereas accumulated   depreciation

has  been   deducted  from   the acquisition   cost. Depreciation  and

write-down  of   fixed assets   is presented on  the income  statement

line"   Value adjustments  of   tangible and  intangible fixed  assets

and depreciation".   Depreciation   calculation is  based   on  useful

lives  of fixed   assets,  which  serves  as the  basis   for  forming

depreciation  rates.   Buildings   are   depreciated  over  20   -  50

years,   other  assets  over  2,5  -  10  years (exceptionally over 20

years).  Land    is   not   depreciated.  Renovation   expenses    are

capitalised  and  carried  at  costs  proportionally  over five  years

or according to the terms rental  contract.  Assets  with  a  purchase

price less than EEK 7,000 are expensed  upon their purchase.



Technical allocations of life insurance



Life insurance allocation  comprises of discounted  current value   of

disbursements to be made to the  insured in  the future.   Allocations

of non-met claims  includes losses, which   are valued   and   handled

but not yet disbursed,  and  losses, which are registered but not  yet

handled.  Amounts  allocated to the  insured or the  beneficiary under

the  contract  in the accounting  year in  addition  to   a guaranteed

profit  share and on account  of  which  life insurance    allocations

will  be  increased   or    bonus disbursements  will  be  made,   are

presented  as  bonus allocations.



Reserves and general banking reserve



According  to   the  income tax  law  in   force  up   to  31 December

1999  credit institutions, to   cover  potential losses, could form  a

tax-exempt reserve up to  5%  of   the loan    portfolio.  Allocations

to this reserve  could   be deducted  from   the  taxable income.   In

case   the   loan portfolio  decreased, excess  portion of the reserve

had to be transferred to the bank's taxable income.  Eesti  Ühispank's

profit of the year 1994, 1995, 1996  and 1997  has  been allocated  to

the  general  banking   reserve  (except   EEK   6.5  million from the

1995-year  profit)   and  makes    up  EEK  298.5  million.  In   1999

allocations  to  the reserve were not made.



Taxes



In the Republic of Estonia under the law in force in 1999 the   income

tax  rate  was  26%. A profit/loss  tax   rate includes  real   taxes.

Real taxes  are calculated   on   the basis   of   direct income   tax

liability  using  the  adjusted  pre-tax   profit/loss for non-taxable

income/expenditures.   In   1999, Eesti  Ühispank was  not subject  to

income  tax  as  the   accumulated  losses  of  the  previous  periods

exceeded the taxable income of the accounting period.



According to the income tax law  in force in Estonia since 1   January

2000, legal entities registered in Estonia  are subject   to    income

tax   in   case   of   direct    profit distribution  in the  form  of

dividends and  indirect profit  distribution    in    the    form   of

allowances,     gifts,  allocations   and  costs  that  not related to

business.   The  tax  rate  is  26/74  on  all  dividends  and  profit

allocations made   to  individuals,  NGOs  and  foundations  and    on

allowances   made   to   employees.   Dividends   paid   to   business

associations-residents  are  not  taxed.   In  case dividends are paid

from retained earnings of 1994- 1999,  income tax paid earlier on  the

paid-out  dividends could be deducted from non-payable income tax.





Deferred income tax liability



Under  the law in force until the year 2000, the deferred income   tax

liability could have  realised on the  decrease of the  loan portfolio

or on reducing a  tax-exempt rate in connection   with  a  non-taxable

general  banking   reserve credit institutions  were allowed to  form,

as well   as   on the   cumulative   difference between   depreciation

charges  for  accounting  and  tax  purposes.   Proceeding  from   the

amendment of  the Estonian  income   tax law   in   2000 and  from the

liability  concept  provided   in  the  accounting  law,  the deferred

income tax liability  is not entered in the 1999 annual report.



Derivatives



Forward,  swap, and option transactions are presented  as  off-balance

assets and  liabilities. Forward,   swap,   and option    transactions

are  re-valued   according  to    the effective  rate of the  Bank  of

Estonia.  Equity   options  are   re-adjusted   at    market    price.

Interests   on     forward-  transactions   and   premiums  on  option

transactions   are  presented   over  to  the  period  of transaction.

Unrealised profit  from the  revaluation of off-balance sheet   assets

and  liabilities  are recognised in the income  statement under   "net

dealing profits" Interest income from  swap- transactions  is   stated

in the income  statement  under  "interest   income"   and   "interest

expenses".    Option premiums   and  unrealised  profit on revaluation

of  off-  balance  sheet   assets and liabilities  are recognised   in

the income statement under "dealing profits".



Changes in the accounting statements



Liquid   bonds'   portfolio   of   EEK   224  million  presented under

bonds'  investments  portfolio  in   1998   is   placed   under liquid

assets together with the trading portfolio.    The  aim is to   better

present  a  liquidity  level   of   the  assets stated in  the balance

sheet.



In     1999,   the   process   of   merging   of  Eesti   Ühispank and

Tallinna Pank groups was finalised.   Compared to the bank's and   the

group's 1998-reports, goodwill has   been  increased  by   EEK    47.4

million,   resulting   from   the  adjustment   of   net   assets   of

Tallinna  Pank  Liising.   Retroactively,    from   the  moment     of

the     merger,  depreciation    cost  has  been  deducted  from  this

amount,  which  is  presented   also  in  the 1999 income  statements.

Compared   to the   1998-report, goodwill  is re-classified  according

to the data of AS Bangalo   by EEK 0.8 million, which    was presented

under other assets in the previous year's group report.



In    1998,     investments   into   subsidiaries    and    associates

in  the statements separate from    a  parent company were   presented

at equity method,  in 1999, at    a comparable   period,    statements

are   re-calculated   and presented    at   a   lower, either  at   an

acquisition   or  realisation  cost.   As  a  result  of this  change,

investments into subsidiaries and  associates have been decreased   in

the statements separate from a  parent company, and income   statement

lines    "Income/expenses     from       equity participation"     and

"Re-valuation  of  investments"   have   been  adjusted.   The   group

statements have remained unchanged.



Deferred  income   tax  liability   presented  in   the  1998  balance

sheet is presented  in the  1999  adjusted original balance   sheet as

an  adjustment  to  the   equity  capital  on the  balance  sheet line

"Retained earnings of  previous periods".



The  1998 income statement presented  in the 1999 annual report    has

been re-valued. Adjustment to the    deferred income  tax    liability

provided for in  the 1998    annual report   has been eliminated   and

presented  in   the   1999   adjusted   balance  sheet  on  the   line

"Retained   earnings of    previous periods".  Profit adjustments   of

the  1998 adjusted   accounting year  is presented  on  the    balance

sheet  line  "Profit (-loss) of the accounting  period".





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