The Estonian securities market started to develop at the beginning of 1995. Since there were very few tradable stocks in public circulation the main objects for securities trade were bonds. The development accelerated in autumn 1995 when many new stocks came onto the market and trading volumes grew in proportion to trading activity. A new stage in the development of the Estonian securities market took place in June 1996 when the Tallinn Stock Exchange (TSE) started operations. This event created a good base for companies as well as for private persons for carrying out securities investments. During 1996 the Estonian securities market went up enormously. The index of ECDS, which takes into account the 19 most traded Estonian securities, rose from 139.05 at the beginning of 1996 to 527.9 at the end of 1996, or by 280 per cent. The share of the largest Estonian bank, Hansabank, which is regarded as the main indicator of the Estonian securities market, is probably the best example of price growth on the market. The share of Hansabank was worth DEM5 in January 1996 and DEM20.22 at the end of 1996. The price had increased by more than 304 per cent. However, market analysts do not expect these kinds of price rises in the future. The real investment boom on the Estonian share market is over and share prices have reached a level where trading is more stable. Despite this, share prices are expected to rise by 50 to 70 per cent during 1997.

The ECDS Index is calculated since 3 July 1995. The beginning value of index was 100.

The TSE Index is calculated since 3 June 1996. The beginning value of index was 100.

At the beginning of its development, the Estonian share market, similarly to the whole Estonian economy, was strongly affected by the banking sector, mainly by the five largest Estonian banks. Today many other economic sectors are represented on the securities market. Companies whose shares are traded on the public securities market are usually leaders of those particular industries. A great part of Estonian companies have been privatised via the Estonian Privatisation Agency which means that almost every privatised company has one main investor (more than 50 per cent of share capital) and many other investors with ownership under five per cent of share capital. This kind of privatisation system creates good assumptions for the development of a secondary securities market. Today the Estonian securities market can be described by the following factors: dematerialised securities, operating depository, well founded and trustworthy stock exchange, a sufficient number of tradable securities and quite good liquidity on the market. Also Estonia's whole economic situation is relatively stable (an expected three to five per cent real growth of GDP and 15 per cent inflation in 1997, with a stable national currency - the Estonian Kroon) which rises in line with foreign investors making investments in Estonia. As much as 40 per cent of all investments on the Estonian securities market during 1996 were made by foreigners. Several successful companies plan to quote their shares on the Tallinn Stock Exchange in 1997. In 1997 the Estonian Privatisation Agency will also sell off state ownership in various infrastructure companies which will very probably be traded on the public market after privatisation.

Tallinn Stock Exchange (TSE)

The Tallinn Stock Exchange was established on 19 April 1995, by banks, the Compensation Fund, the Ministry of Finance and Bank of Estonia. TSE started operating on 3 June 1996 and during that year the whole trading turnover was DEM286.8 million. During the first two months of 1997 the turnover was DEM821.3 million.

There are two lists - a main and an additional - and also a free market in the TSE system. All companies that are listed on main or additional list have to follow the rules of TSE. The free market is solely for improving the trading environment and companies listed on free market have no obligations to publish any information.

Securities listed on the TSE shall be traded either based on the dealer market or in the public order book. Securities are traded on the dealer market if at least two recognised dealers (market makers) have registered for that security. If there are less than two recognised dealers registered for a security, such security will be traded in the public order book.

The main list consists of six companies: five banks and one industrial enterprise (Hansabank, Estonian Forexbank, Bank of Tallinn, Estonian Savings Bank, Union Bank of Estonia and Tallinn Pharmaceutical Plant). An additional list consists of two companies, a bank and a computer company (EVEA Bank and Pennu Computer Technology Ltd) .

TSE Free Market comprises eight companies: a retail company, Tallinn Department Store Ltd., a brewery, Saku Brewery Ltd., a retail and wholesale company, Estiko Ltd., an exhibition organiser, Estonian Exhibitions Ltd., a safety belt producer, Norma Ltd., a confectionery producer, Kalev Ltd., a meat company, Rakvere Meat Factory and a construction company EMV Ltd.).

26 February 1997

Share	Number of Shares	Current Price	Capitalisation	P/E ratio
Hansabank	19,121,780	24.50 DEM	564,092,510 DEM	14.10
Forexbank	4,118,174	20.49 DEM	84,371,090 DEM	9.00
Bank of Tallinn	9,596,360	8.38 DEM	80,369,515 DEM	7.36
Estonian Savings Bank	16,423,595	14.69 DEM	241,221,552 DEM	13.78
Union Bank of Estonia	23,500,000	5.98 DEM	140,559,375 DEM	10.63
Tallinn Pharmaceutical Plant	3,770,034	14.84 DEM	55,961,442 DEM	11.63
EVEA Bank	5,500,000	2.00 DEM	11,000,000.00 DEM	6.77
Pennu Computer Technology	664,000	19.63 DEM	13,031,000 DEM	10.42
Tallinn Department Store	3,394,100	10.55 DEM	35,807,755 DEM	8.43
Saku Brewery	8,000,000	6.00 DEM	48,000,000 DEM	12.00
Estiko	856,700	6.13 DEM	11,058,075.00 DEM	10.41
Estonian Exhibitions	1,200,000	9.50 DEM	11,400,000 DEM	7.02
Norma	13,200,000	8.24 DEM	108,735,00 DEM	16.38
Kalev	250,000	156.88 DEM	39,218,750 DEM	17.43
Rakvere Meat Company	41,913,000	1.80 DEM	67,899,060 DEM	45.27
EMV	237,000	1181.25 DEM	42,956,250 DEM	15.55
Total			1,555,681,374 DEM

Since the Estonian securities market is relatively small compared with other European securities markets, and so are the Latvian and Lithuanian markets, there is a longer perspective intention to establish a unified Baltic stock exchange.

HF Development Ltd.

HF Development Ltd. was founded at the beginning of 1994. This means that the company has been dealing on the Estonian securities market from the very beginning of the market's history. HF Development Ltd. is wholly owned by the Compensation Fund of Estonia which is a state-owned company established for contributing to privatisation process in Estonia. The Compensation Fund is today one of the Estonian leading financial organisations with the balance volume of more than DEM142.6 million. The main business units of HF Development Ltd. are brokerage, portfolio management and financial investments on the Estonian securities market. In the nearest future it is intended to expand the company's business even to Latvia, Lithuania and Russia. There are six people working in the company and personnel requirements are high - higher economic education, specialist securities licence from Securities Board of Estonia and good knowledge of language.

The aim of the HF Development Ltd. is to provide professional high quality brokerage and portfolio management services. The target group of the company is the wealthier group of the Estonian population and companies, and also international investors. HF Development Ltd. has advantages over many other investment companies in the shape of high flexibility and information accessibility. Any client of the company is able to access information about the market situation and about his/her investment portfolio any time of day. At the end of every day every HF Development Ltd. client gets an overview of market changes during the day.

To make securities transactions via HF Development Ltd. the investor only has to call a broker and the deal will be done. After that all transactions have be confirmed by the investor and this procedure is usually carried out by fax. Regarding portfolio management service, HF Development Ltd.'s professional dealers make as many profitable portfolios as possible paying much attention to the risk diversification. Of course, the client's special wishes and visions about his/her portfolio will be taken into account. Until now the yields of portfolios managed by HF Development Ltd. have been considerably higher than changes in TSE Index or in ECDS Index. According to HF Development Ltd. brokers, the expected average portfolio yield in 1997 will be 70-80 per cent on the annual bases. Fees for brokerage and portfolio management services depend on the volume of transactions and are on a level with other European countries. More precise information about HF Development Ltd. services and fees is available by mail (hfa@online.ee) or by phone (372 6 103500).