EAS TC APITALEXPLO RER

Annua l Report 2007

Contact

Investor Relations- and media contact:

Louise Hedberg Head of Communications/IR +46 8 505 97 720 [email protected]

Visiting address: Kungsgatan 33, Stockholm

Postal address: Box 7214 SE-103 88 Stockholm Sweden

www.eastcapitalexplorer.com

Financial calendar

Monthly Net Asset Value report on the fifth working day after the end of each month
Annual General Meeting in Stockholm on April 21 2008
Interim report 1 January 31 March 2008 on 14 May 2008
Interim report 1 January 30 June 2008 on 21 August 2008
Interim report 1 January 30 September 2008 on 13 November 2008

Financial reports and press releases are available on www.eastcapitalexplorer.com where shareholders and otherinterested persons also may sign-up for a subscription to East Capital Explorer's future reports and press releases directly to their e-mail The printed annual report is sent to shareholders who have notified East Capital Explorer that they wish to receive financial information from the company.

AGM 2008

The Annual General Meeting of East Capital Explorer AB (publ) will be held at 16.00 CET on Monday, 21 April 2008 at the China Theater, Berzelii Park 9, Stockholm, Sweden. Entrance through Berns Salonger, Berzelii Park.

Participation

To be entitled to participation in the business of theAnnual General Meeting, shareholders must

Be recorded in the register of shareholders maintained by VPC AB on Tuesday, 15 April 2008
Have notified the company of their attendance no later than 16.00 CET on Tuesday, 15 April 2008.

Notification of attendance may be made:

On the web:

www.eastcapitalexplorer.com/agm

In writing to: East Capital Explorer AB (publ) Att: Katarina Persson Box 7214 SE-103 88 Stockholm Sweden

By telephone to: Katarina Persson +46 8 505 88 679

When notifying attendance please state name, personal/company registration number, address, daytime telephone number, number of shares and the name of any assistants (maximum two).

Please note that shareholders whose shares are registered in the name of a nominee must temporarily re-register their shares in their own name. Such registration must be effected with VPC no later than Tuesday, 15 April 2008. Shareholders are requested to inform their nominees in good time prior to this date.

A word from the CEO 2
The East Capital Explorer share 4
Net Asset Value 6 2 8
The Eastern European Markets 8
Where the potential is 12
How we invest 14
Our investments 18
The year in figures 33

18 11 4

Board and management 62

Dear shareholders,

2007 was truly a special year for us. It was the year when an idea became reality and East Capital Explorer was launched. I would like to thank all of our shareholders for their trust. We are very pleased that so many investors around the world share our enthusiasm for Eastern Europe and have trusted us with the mission to discover and manage unique investments in this region.

East Capital has a ten year history of opening up new and previously hard-toaccess opportunities in Eastern Europe for investors.With East Capital Explorer, we continue to build on this tradition. East Capital Explorer is the first listed company in the world that offers all investors, private as well as institutional, easy access to private equity and other less liquid investments in Eastern Europe. The listing on the OMX Nordic Exchange Stockholm brings liquidity and transparency to a new level for our markets and type of investments.

We spent a large part of 2007 preparing for our initial public offering. East Capital Explorer has been established as a company aspiring to meet the best resources spent on managing the investments. Our goal is that investors should be able to judge us based on our investment story and performance, and not be hindered by technicalities.

Our unique investment universe and focus are key to the success of East Capital Explorer. We are convinced that Eastern Europe, including Russia, is one of the most exciting investment regions globally. After having been virtually shut down for foreign investors for more than 50 years, Eastern Europe has in the last decade emerged as one of the most dynamic and interesting markets. Especially during the last five years the region has demonstrated very strong performance. This raises an growth and convergence in this region are abundant.

We do not claim that our region is immune to the troubles in Western markets, but we are confident that over the long term, Eastern Europe will converge with Western Europe and this process will last for decades. Also, so far, Eastern Europe has shown good resilience in the face of turbulence in Western markets. In fact, of all emerging markets, Eastern Europe is among the least dependent on the U.S. in terms of exports.

Although we are strong believers in the potential of this region, it has become more challenging to find great opportunities in the public markets. Partly this is due to the limited number of listed companies, partly to the fact that these markets have become more "discovered" over the recent years, seeing large inflows of capital. So we have to look harder, travel further and be more creative. We target a significant part of our capital to private equity fund investments in the sectors that benefit most directly from the fast growth of the

practices of governance, transparency and efficiency.We have carefully studied the experience of peers and worked diligently to structure the company in the best possible way. This has shaped everything we do from how we provide information about our activities to the obvious question: is it too late to start investing? How long can Eastern Europe continue to power on? We believe that the growth story has only just begun and for those investors with patience and foresight, the opportunities to benefit from the continuing

domestic economies, e.g. financial services, retail and consumer goods and real estate. These sectors tend to be under-represented on stock exchanges, so it is necessary to take the private equity route to get this exposure. It is more time-consuming and demanding, but this is where we can add value and best leverage on the knowledge, experience and network of East Capital. We are also convinced that it is this strategy that will allow us to deliver on our promise of providing attractive long term returns to our shareholders.

Within two months from the listing we had announced investments amounting to nearly 50% of the proceeds from the offering, as promised. Investments in four East Capital Bering Funds as well as the newly lauched East Capital Power Utilities Fund were decided. We intend to invest most of the remaining proceeds in new East Capital private equity funds. In the current volatile markets, having nearly 50% of the balance sheet in cash makes us well positioned to capture attractive investment opportunities as they arise. As described in the prospectus, we expect to be fully invested by May 2009, which is 18 months from the listing date.

2007 was a good start. We were humbled so many investors showed trust in East Capital Explorer and chose to join us on this exciting journey. We will continue to work hard to deserve your trust. We look forward to exploring Eastern Europe together with you!

Stockholm, March 2008

Gert Tiivas CEO

The East Capital Explorer Share

ECEX share price development vs indices

Trading

On 9 November 2007 the East Capital Explorer share started to trade on OMX Nordic Exchange Stockholm, Mid Cap. The listing price per share was SEK 100. The share also closed at SEK 100 per share on 28 December, the last trading day of the year.

During the same period the OMXSPI decreased 5.3%, while the RTS Index gained 1.8%, RTS 2 Index gained 10.9% and MSCI EM Europe Index gained 3.4%.

A total of 6,157,487 shares were traded between 9 November and 28 December 2007, corresponding to an average daily trading volume of 186,591 shares.

East Capital Explorer's total market capitalisation calculated on the number of outstanding shares amounted to approximately SEK 3,627m on 28 December 2007.

100

110

OMXSPI: includes all shares on OMX Nordic Exchange Stockholm

ECEX: East Capital Explorer share

RTS Index: includes the 50 largest companies traded on the Russian Trading System (RTS).

RTS 2 Index: includes 78 companies on the RTS that have limited trading volumes.

2007-11-09 2007-12-28

MSCI EM Europe Index: Includes Russian, Polish, Hungarian, Czech and Turkish equities.

Ownership structure

Based on the shareholder register at VPC AB, East Capital Explorer AB had 11,648 shareholders on 28 December 2007. The ten largest shareholders accounted for 33% of the share capital and votes. 46.8% of the share capital was owned by individuals or legal entities outside Sweden. A majority of the shares owned by foreign shareholders are registered through trustees, which means that the actual shareholders are not officially registered.

Name	% of votes and capital
Alecta	6.6
East Capital Eastern
European Fund	5.7
SEB-Stiftelsen	5.2
Stena Sphere	4.4
Nykredit Bank	3.0
East Capital Holding AB	2.6
Avanza Pension Försäkring AB	1.8
Volvo-related Foundations	1.7
SEB-Trygg Försäkring	1.3
Skandia Liv	1.0
Other foreign investors	43.8
Other	22.9
Total	100%

Share capital and number of shares

In conjunction with the initial public offering on OMX Nordic Exchange Stockholm on 9 November 2007, East Capital Explorer AB issued 33,795,350 shares. During December, the Board of Directors resolved to issue an additional 2,474,810 new shares following the Bookrunners' decision to exercise their over-allotment option to purchase additional shares relating to the offering. The total number of shares outstanding on 31 December 2007 was 36,270,160.

East Capital Explorer's share capital on 31 December 2007 amounted to EUR 3,627,016 distributed among 36,270,160 shares.

Basic facts:

Listing:

OMX Nordic Exchange Stockholm Mid Cap

Listed since: 9 November 2007

Number of shares outstanding: 36,270,160

Highest 2007: 108 SEK

Lowest 2007: 95.50 SEK

Market capitalisation on 28 December 2007: SEK 3,627m

ISIN-code:

SE0002158568

GICS-code: 40203010

Ticker symbol: ECEX

Reuters: ECEX.ST

Bloomberg: ECEX SS Equity

Ownership structure 28 December 2007

	Number of shareholders	% of shareholders	Number of shares	% shares and votes
1 - 500	9,666	83.0	2,083,620	5.7
501 - 1,000	853	7.3	751,040	2.1
1,001 - 5,000	799	6.9	2,088,534	5.8
5,001 - 10,000	138	1.2	1,086,446	3.0
10,001 - 15,000	38	0.3	477,633	1.3
15,001 - 20,000	32	0.3	590,293	1.6
20,001 -	122	1.0	29,194,594	80.5
Total	11,648	100.0	36,270,160	100.0

Source: VPC

Net Asset Value

On 31 December 2007, the net asset value (NAV) in East Capital Explorer amounted to EUR 394m, corresponding to a net asset value per share of EUR 10.87.

The net asset value comprises the value of the total portfolio amounting to EUR 350m and the value of fund units that had been paid, but not yet received, at year-end amounting to EUR 44m.

EUR 200m of the total portfolio value comprised cash that at year-end was placed in interest-bearing deposits.

Portfolio on 31 December 2007

	Number of units	Acquisition Value EURt	Fair Value EURt	Fair Value change %	NAV/ Share EUR	% of Portfolio
Semi-public Equity Funds
East Capital Bering Russia Fund	538,027	23,590	23,981	1.7%	0.66	6.1%
East Capital Bering Balkan Fund	2,089,038	24,938	25,684	3.0%	0.71	6.5%
East Capital Power Utilities Fund1	162,000	81,000	82,152	1.4%	2.26	20.8%
		129,528	131,818	1.8%	3.63	33.4%
Short-term Investments East Capital (Lux)
Eastern European Fund (EUR)	182,500	18,250	17,903	-1.9%	0.49	4.5%
Other short-term investments			200,403		5.53	50.8%
			218,306		6.02	55.4%
Total Portfolio			350,123		9.65	88.8%
Other assets and liabilities net 2			44,137		1.22	11.2%
Net Asset Value (NAV)			394,261	0.7%	10.87	100.0%

¹ The investment in the East Capital Power Utilities Fund is reported as an investment in the portfolio report above but is consolidated in the financial statements.

² Other assets and liabilities net mainly comprise paid, but not yet received, fund units in the East Capital Bering Ukraine and the East Capital Bering Central Asia Funds.

Note that certain numerical information may not sum due to rounding.

Net Asset Value and share price

East Capital Explorer's monthly net asset value per share and share price per the same date are presented in the graph to the left. East Capital Explorer has since the listing traded in a narrow range to the net asset value. On 31 December 2007 the share traded at a slight discount between the net asset value and the share price amounting to 2.5%.

Please note that the base currency for East Capital Explorer's net asset value is EUR while the base currency for the share price is SEK. Conversions of the net asset value to SEK and the share price to EUR are marked in brackets and are only made for informational purposes. The resulting figure may vary according to the source and time point for the conversion. East Capital Explorer has obtained exchange rates from Reuters at 16.00 GMT +01:00 on the respective dates.

* Includes funds reserved for paid but not yet received units in the East Capital Bering Central Asia Fund and the East Capital Bering Ukraine Fund.

The fall of the Berlin wall on 9 November 1989 was a historic turning point for Eastern Europe. The journey from planned economy to market economy could begin. Economic turbulence erupted in many countries in Eastern Europe. Turbulence, that in Russia and many other countries lasted throughout most of the 1990s.

But persistent work on economic reforms, inflationary measures and improved political stability has allowed the countries to regain momentum and return to a growth path. A solid foundation has been laid for long-term growth and functional market economies.

Today, 19 years after the fall of the Berlin wall, we are able to look back on a period of strong development. There are of course no guarantees, but the conditions for a continued growth and development on the Eastern European markets are good. We base this view on a number of important observations that are briefly outlined below.

Stronger economies and increased domestic demand

The abundance of natural resources is one of the key reasons for Russia assuming the position as one of the world's most important economies today. High world market prices on primarily oil, have contributed to a large currency reserve and an economy that stands strong. In 2007, real GDP growth for Russia was 8.1%, thereby exceeding all forecasts. According to the International Monetary Fund (IMF), Russia is forecasted to reach a growth rate of 6.5% in 2008.

A growing economy brings increased demand. Strong private consumption and increased investments are the most important factors driving future growth. The graph on page 10 shows the average historic growth from 2000 to 2007, as well as the estimated growth for 2008. The corresponding figures for the Eurozone, i.e. the 13 EU countries that have implemented the euro as their currency, are presented as a comparison.

The Eastern E

European Markets

first gates along the Berlin Wall were At midnight on 9 November 1989, the opened, marking the beginning of the end ^a new life by jubilant West Berliners. of the Cold War. Excited East Germans immediately crossed over, welcomed to

Turnley/Corbis/Scanpix

East Capital Explorer AB Annual Report 2007 9

Stabilising interest rates and inflation levels

A basic pre-requisite for a functional economy is control over monetary issues. Today, most of the countries have come down to acceptable, singledigit inflation and interest rate levels. This is the direct result of different measures to lower inflation, measures that have been implemented in an increasing number of Eastern European countries.

During 2007, inflationary pressures reappeared in some countries in the region. The increase in inflation levels was mainly due to heavy hikes in prices of food and other important basic commodities. As food constitutes a relatively large part of the consumer price index in Eastern Europe, this had a considerable impact on inflation.

Increasing convergence with the EU

Convergence in an EU context refers to the adaptation required of a country to become a member. Ten Eastern European countries are already full EU members and Slovenia adopted the Euro in January 2008. Croatia, Turkey and Macedonia are now candidate countries with negotiations under way and a number of other countries are on EU's doorstep.

EU membership provides a strong incentive for implementing necessary reforms, structural changes and privatisations. It has brought about vast improvements in the business climate for new member nations, opening up for more, larger foreign direct investments. Furthermore, many Eastern European companies have chosen to

Milestones along the Eastern European region's road to the EU

1 May 2004:

Estonia, Latvia, Lithuania, Poland, Czech Republic, Hungary, Slovakia and Slovenia become members

1 January 2007:

Romania and Bulgaria become members Slovenia adopts the Euro

1 January 2008:

Slovenia assumes the presidency of the EU

Turkey and Croatia have candidate status and accession negotiations are under way since October 2005

Macedonia also has candidate status (accession negotiations as yet to start)

Other Balkan countries are also potential candidates and either have, or are expected to sign Stabilisation and Association Agreements (SAA) with the EU in 2008.

adopt Western accounting standards, such as IFRS and US GAAP. The European Union is also an important trade partner for both member and candidate countries.

Extensive tax reforms

Several Eastern European countries have carried out sweeping changes to fiscal legislation in recent years. The primary purpose has been to facilitate and improve tax revenue collection. One measure has been the introduction of flat taxes by several countries. With a flat tax system, everybody pays the same taxrate, irrespective of income. In Russia for example, the income tax rate is currently 13%.

Low taxes mean higher disposable income for private individuals; another factor with a positive effect on domestic consumption. Moreover, these tax reforms have made it easier and more attractive for foreign investors to invest in the region.

Improved financial systems

We are seeing how the Eastern European capital markets and banking systems are constantly improving. This is an essential condition for the economies to mature. Availability of capital has improved and the costs have decreased. This can be seen in an increased number of IPOs and a fastdeveloping banking system, to name just two examples.

Long-term growth prospects

Despite several years of strong economic growth, it is worth noting that not all countries in Eastern Europe have managed to re-gain the GDP level they had in 1989. For Eastern Europe as a whole, there is still a long way to go before Western levels can be achieved.

However, the recent structural changes paired with the political reforms and the convergence with the EU, imply that the fundamentals are all there for a "catch-up" effect in the Eastern European countries. Our best estimate is that growth will continue, but in a more structured manner, and for a long time to come.

10 East Capital Explorer AB Annual Report 2007

Where the potential is to be found

Eastern Europe as a whole is an exciting region. But there are certain sectors which have greater potential to gain from the general positive trends and increasing domestic demand. The following pages give you a deeper insight into our favourite sectors and why we believe in them.

The power utilities sector

Russia is the fourth largest energy market in the world in terms of installed capacity and electricity output. The growing economy has increased energy consumption and the main limitation is currently the capacity of the country's power production facilities. Insufficient investments over the years have left the country with outdated technology, unable to produce enough power for the fast-growing economy, especially in major centres. It has been estimated that EUR 42bn is required to finance the upgrade of the Russian power grid, while additional investments of equally significant proportions are required in power generation and other important sub-sectors.

The Russian energy sector has been built as a national monopoly. The holding company RAO EES, which is 52.7% state-owned (September 2007), is at the heart of this. RAO EES owns majority shares in most of the Russian production and distribution companies and prices were previously fully regulated by the state.

In 2000, a restructuring programme was initiated, one aim of which was to reform the monopolistic situation. The first stage has been to ascertain which areas work as a monopoly and which would gain from being exposed to free competition. In 2006, a fiveyear plan was adopted for the development of the electricity and gas market. The plan stipulates that the market should be fully deregulated by 2011. We believe that the restructuring and price liberalisation will increase the valuations of Russian power companies considerably.

The financial sector

The financial sector is probably the sector with the greatest opportunities to benefit from the domestic growth. A growing economy creates the need for efficient capital markets and a banking system where transactions function well and capital is easily accessible. However, despite several years of growth, this sector is still relatively underdeveloped.

In the Eurozone, the ratio of banking assets to GDP is about 235%. In the least developed countries of Central Asia and Caucasus, the corresponding figure is below 25%. For other countries in Eastern Europe the ratio ranges from approximately 25% in Georgia and 61% in Russia to around 100% in Kazakhstan.

The mortgage market is especially interesting. In 2007 the average mortgage in Estonia was USD 5,000 per capita, which can be compared to around USD 25,000 in Sweden. In Russia, the corresponding number was just USD 141 per capita. With housing prices on the rise, an expanding middle class and a general need for more and better housing, the general view is that

Russian demand for mortgages will rise. During 2007, the Russian household lending market increased by 56%. Increasing salaries and favourable economic conditions are also driving the development of other retail banking products such as credit cards and savings products. The retail banking market is currently the most rapidly expanding sector in Russian banking.

The banking market is still heavily fragmented, with over 1,100 local banks in Russia alone. But there is clearly a consolidation process underway. Whilst the local banks are merging in attempt to create larger and more diverse businesses, an increasing number of foreign banks are establishing regional presence through acquisitions. This consolidation process is likely to create attractive returns for investors in the sector.

The retail and consumer goods sector

Salaries are increasing, taxes have decreased and it is easier to borrow money. Russians have a flat income tax of 13% and most Russians have no mortgage or other loans. Utilities and other fixed living costs are relatively low, which means high disposable incomes that can be used for consumption. More and more people strive to improve their standard of living and Eastern Europeans are today exhibiting the same consumption patterns as consumers in the West, buying clothes, cars, good food and holidays. In 2007, private consumption in Russia and Ukraine was up 15% and 31% respectively.

According to the A.T. Kearney Global Retail Development Index, a study that measures how attractive a market is for international retail expansion, Russia ranks second and Ukraine fifth, compared to 30 other emerging markets. An important reason for this is that the Russian food retail sector is still strongly fragmented. The combined market share for the five largest Russian retail companies is currently less than 10 percent. This leaves room for consolidation and creates opportunities for companies with a good capital base and strong management. According to the Economist Intelligence Unit, the retail market in Russia will double in size from USD 317bn in 2006 to USD 646bn in 2010. A number of large international retail companies have goods are sold through market places, small shops and kiosks.

The real estate sector

During the years of planned economy, investments in housing and property were limited. Increasing political stability, healthy GDP growth and an improved macroeconomic situation have all led to a general lack of modern property across Eastern Europe, especially in Russia and other CIS countries. The average living space per person in Moscow is 21 m2 , compared to an average in a typical Western European city of 36m2 . On top of that, more and more people are moving into the cities.

The same holds true for commercial property. There is a 2.6% vacancy rate for office space in Moscow. In Western Europe, the corresponding figure is 8.4%. Premises usually hold low standards and are unsuitable for new businesses, such as modern retail concepts. Furthermore, new financing opportunities contribute to the high demand for new development projects.

One great, and often over-looked potential, lies outside the biggest cities. Russia has – apart from Moscow and St. Petersburg – an additional eleven cities with over one million inhabitants.

Russia has – apart from Moscow and St. Petersburg – an additional eleven cities with over one million inhabitants.

either already established a presence on the Russian market, or have announced that they are about to.

There is also a great deal of potential to develop the general structure of the retail sector. Modern retail concepts, such as large supermarkets, shopping centres and retail chains, are still relatively unusual in many Eastern European countries. Instead, most daily The growth in many of these cities has been quite significant. One example is the Volga region where the retail sector was up 17% in the first half of 2007, compared to 14% for the country as a whole. So far most of the regional cities are unexploited, but many of them are becoming increasingly attractive to both real estate companies and other types of investors.

This is how we invest

Traditionally, investors seeking Eastern European exposure invest in open-ended daily-traded equity funds focusing on index-included public companies in the region. In today's rapidly developing Eastern Europe, this investment approach is not sufficient to unlock the full market opportunity. Indeed, a large number of the most interesting companies in the region are either unlisted or have limited trading volumes on the local stock markets. As a result, these assets are typically outside the investment scope for regular equity funds. This is why we decided to create East Capital Explorer.

Business idea

Our business idea is to offer all types of investors access to unique investments in unlisted and listed companies in Eastern Europe.

Goal

Our goal is to create long-term attractive value appreciation by investing in an otherwise inaccessible part of the Eastern European markets. Investing in emerging markets is often related with significant risks, therefore all investments in these markets should be made assuming a long-term perspective.

Dividend policy

East Capital Explorer does not intend to pay any dividends, although the Board of Directors retains the flexibility to propose to do so. Any returns will instead be reinvested in accordance with the investment policy. This dividend policy reflects the judgment that the continuous reinvestment of the capital will best allow us to build a strong investment base and generate long-term value for our shareholders.

>>> page 16

About East Capital

East Capital was founded in 1997 by a group of people with a common interest in Eastern Europe and the Eastern European markets. The founders were convinced that these markets were set to develop into functional and stable economies. East Capital was from an early stage aware that long-term success is built on focus, profound market knowledge and a broad local network.

By combining fundamental macroeconomic and political knowledge with insights and observations from visits and meetings in the region, East Capital continuously reviews and analyses the most important development trends in Eastern Europe. From these trends the investment teams ascertain interesting investment themes and select companies with the greatest potential for value growth within the respective countries and sectors. As a final step, the most appropriate financial instrument for the investment is chosen.

Per 31 December 2007, East Capital had EUR 5.7bn in assets under management and is thereby one of the largest independent asset managers in the world specialising in Eastern Europe. East Capital manages eight public equity funds, five semi-public equity funds, two private equity funds and one real estate fund. Several of the funds have received numerous awards, including Lipper Fund Awards and Golden Star Awards from Dagens Industri and Morningstar.

You can read more about East Capital at: www.eastcapital.com.

with a true passion for Eastern Europe. All of East Capital's funds are managed The track-record shows that the best way to invest in the region is using 100% focus, ^a long-term perspective and local presence.

East Capital Explorer AB Annual Report 2007 15

East Capital Explorer and the investment manager

East Capital Explorer is closely related to East Capital and has appointed East Capital to manage its ongoing investment operations. Thereby, East Capital Explorer's shareholders gain access to the experience, knowledge and network that East Capital has built up during more than ten years as a leading investor in Eastern Europe.

The manager's day-to-day work is carried out according to an investment policy and an investment management agreement. The agreement outlines the management services that the asset manager provides. These include identifying, evaluating and negotiating potential investments.

More significant investment decisions are made by the Board of East Capital Explorer. Some examples of such decisions are investments that constitute more than 15% of the net asset value of the portfolio, certain direct investments and investments that could imply a conflict of interest between East Capital Explorer and East Capital which are not contemplated by the investment policy. The Board also has an important supervisory function, and shall ensure that the investment activities are carried out in accordance with the investment policy and investment management agreement For further information on the specific functions of the Board and investment manager please see "Corporate Governance Report" on page 59.

The Investment policy

East Capital Explorer invests primarily in East Capital's existing and future semi-public funds as well as East Capital's future private equity, semi-public equity and real estate funds. East Capital Explorer also has the possibility to make certain direct investments in selected companies as well as smaller short-term investments in East Capital's open-ended daily-traded funds.

Target country weight when fully invested

Target sector weight when fully invested

Countries

East Capital Explorer may invest in Russia and the CIS countries, the Balkans, the Baltics, Central Asia and Central Europe.

Sectors

East Capital Explorer mainly targets investments in the following sectors: power, financial, retail and consumer goods and real estate. Investments in sectors that are in line with the investment policies for the semi-public funds in which East Capital Explorer invests are also permitted.

East Capital Explorer always takes a long-term view when making decisions on the target weighting of the portfolio. However, markets and sectors are monitored on an ongoing basis which may imply re-weighting of the sectors and countries as seen appropriate. Based on the current market and sector view, the graphs to the left present East Capital Explorer's target country and sector weight when the portfolio is fully invested.

Asset types

Investments can be made into several types of assets including fund units, shares, options, convertibles, derivative instruments and other equity related instruments. Debt investments are also permitted if related to an equity investment. In conjunction with investments in the real estate sector, permitted investments also include land, real estate and other property.

Investment restrictions

East Capital Explorer is subject to the following investment restrictions:

Investments in any one of East Capital's funds must not exceed 40% of East Capital Explorer's NAV at the time of the investment.

No single direct investment may exceed 15% of East Capital Explorer's NAV at the time of the investment.

Investments in East Capital's openended, daily-traded equity funds are regarded as short-term investments and may in total not exceed 5% of East Capital Explorer's NAV at the time of the investment.

Debt may not exceed 30% of East Capital Explorer's NAV at the time debt is incurred, except in real estate investments where a maximum debt-to-equity ratio of 80/20 may be applied. Such real estate investments may, however, not exceed 30% of East Capital Explorer's NAV at the time of investment.

East Capital Explorer's investment strategy

Main investment focus:

EAST CAPITAL'S FUTURE PRIVATE EQUITY FUNDS

New funds that we expect East Capital to launch

Strategically focused on our favourite sectors

EAST CAPITAL'S EXISTING AND FUTURE SEMI-PUBLIC EQUITY FUNDS

Well-diversified across number of countries/sectors

Mostly focused on second and third tier stocks, up to 30% in unlisted holdings

Possible investments:

DIRECT INVESTMENTS OR CO-INVESTMENTS

SHORT-TERM INVESTMENTS

Main differences between East Capital Explorer and other types of funds and investment companies

East Capital Explorer

East Capital Explorer is a Swedish limited company listed on the OMX Nordic Exchange Stockholm. We primarily invest in those of East Capital's funds that focus on unlisted companies and companies that otherwise are inaccessible via the local stock markets in Eastern Europe. East Capital Explorer does not have its own investment organisation, but has appointed East Capital to manage the investment activities in accordance with an investment policy and an investment management agreement.

Investment funds and other types of "funds"

Contrary to regular daily traded equity funds, East Capital Explorer does not have to comply with the UCITS regulation and the investment criteria and risk spreading requirements included in this regulation. Investing in East Capital Explorer is also different from investing in a typical venture capital or private equity where the latter is usually characterised by high minimum investment requirements and long commitment periods.

Investment companies

East Capital Explorer is not an investment company according to the traditional Swedish definition and taxation structure. These investment companies generally have the business concept of investing directly in other companies using an in-house investment organisation.

In the footsteps of Vitus Bering

Vitus Bering's orders from Peter the Great included constructing a map of the vast region stretching from St. Petersburg to what we today call the Bering Strait. The original map is currently archived in the Swedish National Library in Stockholm.

In 1725 Peter the Great commissioned Danish-born Captain Vitus Bering to lead a Russian expedition to Kamchatka. From here, he explored Northeastern Siberia, with the specific mission to see if Asia and America were united by land. The Bering Strait that runs between these two continents is naturally named after this explorer. As are East Capital's Bering Funds that explore Eastern Europe with the aim to discover new investment opportunities for its investors.

East Capital currently has four Bering Funds, each with its own geographic focus: East Capital Bering Russia, East Capital Bering Balkan, East Capital Bering Ukraine and East Capital Bering Central Asia. The funds are so-called semi-public equity funds with a broader investment mandate than regular daily-traded equity funds. This means that the funds may invest in both unlisted and listed companies. The listed companies that the funds target are generally second and third tier stocks with limited trading volumes. The exposure to unlisted companies in the different funds ranges from just below 10% to approximately 30%. All of the Bering Funds are currently closed for new investments but are registered on the Cayman Stock Exchange, which allows for some liquidity on a quarterly basis in the existing shares.

East Capital Explorer's investments in the East Capital Bering Funds provide shareholders with exposure to attractive investments that otherwise are inaccessible via the local stock markets in Eastern Europe. Although the general risk-level in the funds should be regarded as high, each of the fund portfolios is strategically diversified with 30 to 140 holdings across several countries and sectors.

East Capital Bering Russia Fund

Launch date: 1 June 2004 Assets under management, 31 December 2007: USD 311m Risk: High Sharpe ratio: 2.44 Alpha: 330.2%

Fees: 2% management fee, 20% performance fee ISIN code: KYG290611014 Bloomberg: BERINGF KY Benchmark index: RTS2 Index

Sector exposure, %

Per 31 December 2007

Banking & Finance	24.0
Power Utilities	22.1
Transportation	15.2
Metals & Mining	5.4
Engineering	5.3
Consumer Goods	4.2
Manufacturing	4.0
Retail	3.8
Forestry	3.8
Oil & Gas	3.7
Chemicals	2.3
Service	2.1
Pharmaceuticals	1.4
Other	2.7

East Capital Explorer's investment: EUR 24m (USD 35m) completed on 3 December 2007

Country exposure, %

73.7	Russia
20.7	Kazakhstan
5.4	Ukraine
0.2	Estonia

Investment strategy

This fund invests primarily in Russia and other former Soviet countries (the CIS), i.e. Armenia, Azerbaijan, Georgia, Kazakhstan, Kirgizstan, Moldavia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Belarus. The aim of the fund is to attain long-term value growth by primarily investing in small- and medium sized listed and unlisted companies in the region.

The Russian market sees continued good growth prospects. On the back of several years of high export volumes and high rawmaterial prices,Russia now has the world's third largest currency reserve. The oil and gas sector still dominates, but the Russian economy is becoming increasingly diversified. By seeking exposure to a wide range of sectors and primarily those positively affected by domestic consumption, the fund is less sensitive to issues such as falls in commodity prices.

Fund performance

The value of East Capital Bering Russia Fund units was up 0.9% in USD terms during December 2007. On 31 December 2007, the fund's NAV per unit was USD 65.67. The fund units gained 26.1% in 2007 and are up 556.7% since inception in June 2004.

Wolfgang

Kaehler/Corbis/Scanpix

Moscow and Vladivostok with 9,289 km of The Trans-Siberian railroad connects tracks, crossing 10 time zones. along this historic route. The East Capital Bering Russia Fund has discovered many interesting investments

East Capital Bering Balkan Fund

Launch date: 31 July 2006 Assets under management, 31 December 2007: USD 188m Risk: High Sharpe ratio: 2.59 Alpha: 35.3%

Fees: 2% management fee, 20% performance fee ISIN code: KYG290601031 Bloomberg: BERINGB KY

Benchmark index: MSCI Em Europe Index East Capital Explorer's investment: EUR 25m (USD 37m) completed on 3 December 2007

	Sector exposure, %		Country exposure, %
Per 31 December 2007	20.8	Banking & Finance	35.1	Romania
	20.2	Privatisation Funds	24.1	Serbia
	10.6	Insurance	19.3	Turkey
	7.5	Constr & Constr Mtrl	14.8	Slovenia
	7.3	Media	3.4	Bosnia
Privatisation	6.5	Hotels	1.4	Bulgaria
Funds	6.0	Metals & Mining	1.2	Macedonia
20.2%	4.3	Consumer Goods	0.4	Austria
Banking	4.1	Oil & Gas	0.3	Croatia
& Finance	3.0	Agriculture
20.8%	2.3	Real Estate
	2.1	Pharmaceuticals
	1.4	Equity Funds
	3.9	Other

Investment strategy

This fund invests in the countries in and around the Balkan Peninsula, including Albania, Bosnia and Herzegovina, Bulgaria, Greece, Croatia, Macedonia, Montenegro, Serbia and Turkey. The fund also invests in Armenia and Romania. A large part of this geographical area stood economically still during theBalkan wars. Today, many of the countries in the region are demonstrating powerful growth thanks to convergence with the EU.

The Balkan markets have been characterised by healthy growth in recent years. Privatisation and listing of several stateowned companies on the local stock markets is currently underway or being planned. These include companies in the oil and gas, telecom and financial services sectors that will continue to benefit from domestic growth. By seeking exposure to a large range of sectors and large number of countries, the fund is less sensitive to fluctuations on individual markets.

Fund performance

The value of the East Capital Bering Balkan Fund units was up 2.3% in USD terms during December 2007. The fund's NAV per unit was USD 18.14 at the end of the year. The fund units gained 44.9% in 2007 and are up 81.4% since inception in July 2006.

one of the largest single-pylon, cable-stayed The Dubrovnik Bridge completed in 2002, is EU, will mean attractive investment bridges in the world. Infrastructural opportunities in the region for the East Capital Bering Balkan Fund. development paired with fiscal and structural reforms on the path to the

East Capital Explorer AB Annual Report 2007 23

East Capital Bering Ukraine Fund

Launch date: 29 July 2005 Assets under management, 31 December 2007: USD 318m Risk: High Sharpe ratio: 2.36 Alpha: 73.0%

Fees: 2% management fee, 20% performance fee ISIN code: KYG290651028 Bloomberg: BERINGU KY Benchmark index: PFTS Index East Capital Explorer's investment:

EUR 24m (USD 35m) completed on 2 January 2008

Per 31 December 2007

Sector exposure, % 21.1 Real Estate 17.9 Power Utilities 17.0 Retail 16.2 Banking & Finance 8.1 Oil & Gas 7.6 Consumer Goods 3.8 Metals & Mining 3.0 Engineering 1.4 Constr & Constr Mtrl 1.1 Transportation 0.8 Agriculture 0.8 Pharmaceuticals 1.2 Other

Country exposure, %

.
3.9
2.3
1.2
0.8

91.8 Ukraine 3.9 Georgia 2.3 Russia 1.2 Estonia

Investment strategy

The fund invests in Europe's fourth largest country, Ukraine. After the collapse of the Soviet Union, Ukraine experienced one of the largest economic crises in Europe's history. Despite several years of healthy growth, the economy is still not back to its 1989 GDP-levels. But the government is carrying out a large number of market-friendly reforms aimed at improving the investment climate. In 2007, Ukraine also commenced talks with the EU regarding membership.

Since 2001, over 25,000 small and medium-sized companies have been privatised in the Ukraine. There are still relatively few companies registered on the country's largest stock market, the PFTS Stock Exchange, however. In order to develop the stock markets, the government plans to initially sell off parts of the state-owned companies in order to fully privatise them over time. This will create interesting investment opportunities. As in the rest of Eastern Europe, consumer goods and retail, construction, banking and finance are sectors that are targeted especially.

Fund performance

The value of the East Capital Bering Ukraine Fund units was up 75.6%. The fund's NAV per unit was USD 28.87 on 31 December 2007. Since the inception in July 2005, the fund's units have gained 188.7%.

largest country in Europe. The country East Capital Bering Ukraine Fund targets With 603,700 km2, Ukraine is the fourth include banking, retail and real estate. is known for its fertile plains suitable for farming. Important sectors that the

East Capital Explorer AB Annual Report 2007 25

East Capital Bering Central Asia Fund

Launch date: 28 February 2007 Assets under management, 31 December 2007: USD 130m Risk: High Sharpe ratio: n/a Alpha: -22.1%

Fees: 2% management fee, 20% performance fee ISIN code: KYG2906R1048 Bloomberg: BERINGF KY Benchmark index: MSCI EM Europe Index

Per 31 December 2007

Sector exposure, % 37.2 Oil & Gas 27.1 Banking & Finance 20.4 Metals & Mining 6.2 Real Estate 3.1 Transportation 2.6 Agriculture 1.5 Materials 1.3 Retail 0.6 Bonds

East Capital Explorer's investment:

EUR 20m (USD 28m) completed on 2 January 2008

Country exposure, %

76.7 Kazakhstan 7.6 Georgia 6.3 Turkmenistan 5.9 Azerbaijan 2.5 Ukraine 0.6 Uzbekistan 0.4 Armenia

Investment strategy

The term Central Asia usually describes the area between Siberia in the north, Iran in the South, the Caspian Sea in the West and China in the East. The region includes countries like Armenia, Azerbaijan, Georgia, Kirgizstan, Moldavia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Kazakhstan. The aim is to create long-term value growth by investing in under-valued companies in the region.

It took longer for the Central Asian countries to find their feet after the collapse of the SovietUnion than for those nearer the EU. In the beginning of 2000, growth started to pick up. High energy prices, combined with high levels of natural resources in the countries, has improved the economic fundamentals for many of these countries. And some parts of the region have seen annual growth of over 30%, for example Azerbaijan. Furthermore, inflation and interest rates have been kept under control.

The most interesting market in this region at the moment is Kazakhstan. The country has abundant natural resources as well as one of the most developed banking sectors in Eastern Europe today.

Fund performance

The East Capital Bering Central Asia Fund was launched in March 2007 and fund units gained 12.6% during 2007. The fund's NAV per unit was USD 11.26 on 31 December 2007.

26 East Capital Explorer AB Annual Report 2007

Antoine

Gyori/Corbis/Scanpix

East Capital Power Utilities Fund

Launch date: 5 December 2007 Assets under management, 31 December 2007: EUR 113m Risk: High Sharpe ratio: n/a Alpha: n/a

Per 31 December 2007

Vertically Integrated Utilities 18.8%

Hydro 12.4%

Distribution 12.8%

Fees: 2% management fee. 15% performance fee and 5% profit share after 7% hurdle1 and a 50/50 catch-up2 . Benchmark index: RTS Utilities Index

Sector exposure, %

Vertically Integrated Utilities	18.8
Distribution	12.8
Hydro	12.4
Generation	7.7
Cash	48.3

East Capital Explorer's investment: EUR 81m on 5 December 2007

Country exposure, %

51.7
48.3

51.7 Russia 48.3 Cash

Cash 48.3%

Investment strategy

The East Capital Power Utilities Fund invests in the energy sector of Russia and other CIS countries, such as Ukraine, Kazakhstan and Georgia. Investments are made in both listed and unlisted companies within several sub-sectors, including electricity generation, distribution, vertically-integrated utilities as well as power utilities repair and maintenance companies.

to the government's plan, the entire electricity market will be deregulated by 2011. In the long run, this is expected to improve cost structure and efficiency within the Russian energy sector, which is currently lagging that of Western Europe. The fund will concentrate on investment opportunities stemming from these reforms.

There are sweeping reforms taking place within the Russian energy sector. This primarily involves the privatisation of a large number of companies in order for them to operate in a competitive market, with market prices. According

¹ Hurdle = A level of the increase of the net asset value of the fund, calculated on a cumulative annual basis, which shall be achieved before catch-up, performance fee and profit share can be paid to East Capital.

² Catch-up = Allocation of the value increase after hurdle has been reached and with the purpose to achieve an allocation of the total value increase of the fund to a given allocation target. The allocation target (the fund/East Capital) is 85/15 for the performance fee and 95/5 for the profit share.

The much needed modernisation of the Russian Sector investors such as the East Capital power sector is gaining momentum. Here many opportunities arising from the major improve gas transportation to Europe. renovation is in progress on the Central infrastructural upgrades in the sector. Asian section of ^a Gazprom pipeline to Power Utilities Fund intend to target the

Some current holdings in the East Capital Funds

RAO EES has announced its intention to divest their holding as part of the national privatisation of the energy market. The continued privatisation of the market will mean higher demands on efficiency and most likely, improved margins. Furthermore, we feel that in case of successful divestment of RAO EES's stake, new valuation bench-

marks could be set.

Power Utilities Fund

East Capital

page 28-29

Bashkirenergo

Bashkirenergo generates and distributes electricity and heat in theRepublic of Bashkortostan in Russia. The company was founded in October 1992 during the privatisation of the Bashkirian energy market. State-run RAO EES still owns approximately 21% of the company. In 2006, the company produced 25 million MWh of electricity and 32.9 million Gcal of heat. That more than covers the needs for the whole of Republic of Bashkortostan and the company sells a large portion of the output on the federal electricity market. The dominant source of energy is gas, which is mainly supplied by Gazprom. Over the years, Bashkirenergo has broken off certain parts of the value chain, such as energy distribution, into separate, wholly-owned subsidiaries.

From an investment perspective there are several interesting future scenarios for the company.

East Capital Explorer AB Annual Report 2007

B92

B92 started out as an independent radio station inBelgrade as early as 1989. The station became somewhat of a voice of the youth during the disturbances that followed in the country, and in 1998 was awarded the MTV Free Your Mind Award. Over the years, the radio station has received several awards for its hard-hitting journalism and persistent struggle for human rights.

Today, B92 is a large company with several areas of business. The company's size and importance bring with it a lot of advantages. For example, the content created can be used in several media channels; TV, radio, web, teletext and various mobile applications. In addition to TV, radio and Internet, the company also operates in the publishing and music businesses. B92 also runs Rex Cultural Center, a laboratory for research into new areas of culture.

B92 Television

B92 Television was launched in September 2000, with the aim of entertaining, educating and inspiring viewers across Serbia. Today, 98% of the

Serbian population has access to the channel and it is one of the most popular in the country. Among the channel's more popular shows are local adaptations of different reality-TV formats. International programme formats such as "Who wants to be a Millionaire?", "Star Academy", "Under Construction" and "Deal or no Deal" are in the pipeline for coming seasons. 2008 will also see the launch of a new 24-hour news channel, transmitted via cable.

B92 Radio

B92 is now one of the most popular radio stations in Serbia and the market leader in the capital, Belgrade. The station has around 400,000 listeners, which is about 35% of all radio listeners in a country with 80 radio stations.

b92.net

For almost ten years now, b92.net has been Serbia's leading website. In 2007, b92.net received about 1 million page visits and nearly 130,000 unique visitors per day.

East Capital Bering Balkan Fund page 22-23

FESCO Transport Group

In 1880, Captain Chirikov of Steamship Moskwa and his crew set sail from Odessa on the Black Sea to Vladivostok on the coast of the Pacific. This was the beginning of freight and passenger traffic between Russia's European part and the remote regions of the Far East. It was also the start of the Far Eastern Shipping Company – FESCO Transport Group. FESCO is Russia's oldest transportation company and has developed from a pure shipping company to a full service provider of logistics solutions. In January 2008, FESCO ranked second in the Russian business paper, Kommersant's list of Russia's most rapidly growing companies.

Marine services

FESCO's fleet consists of 67 vessels and four ice-breakers. The fleet transports containers, dry cargo and bulk. The company has both service vessels and passenger ferries. The total fleet deadweight exceeds 1 million tons.

Railroad transportation

FESCO Transport Group is one of the leading privately-owned operators of railroad transportation in Russia. The company owns over 15,000 railcars and platforms.

Terminal operations

FESCO Transport Group also operates a number of port facilities in the largest and most important Russian and CIS sea ports, including St. Petersburg and Vladivostok.

East Capital Bering Russia Fund page 20-21

Important events in the region

during 2007...

1 January: Romania and Bulgaria join the EU. Slovenia changes from the Tolar to the Euro.

10 January: Market-friendly Karim Masimov is approved as the new prime minister of Kazakhstan.

February: RAO EES presents an updated investment programme for 2007-2010. The Board also makes a decision as to the break-up of the company.

5 March: Estonia's incumbent prime minister is re-elected. The coalition government presents an ambitious economic package involving a continued liberal taxation policy.

The Russian Central Bank's gold reserves and foreign currency reserves increase by USD 11bn in one single week in March. The currency reserve thereby reaches USD 333bn and becomes the third largest in the world.

18th April: UEFA announces that Poland and Ukraine will be hosting the European Football Championships in 2012

23 April: Russia's first democratically elected president, Boris Yeltsin, dies of a heart attack. Yeltsin was 76 years old. July: Russia's Sochi is chosen to host the 2014 Winter Olympics.

22 July: The governing AK Party wins a landslide victory in the Turkish parliamentary elections. AKP is thus able to continue to form a majority government.

28 August: Abdullah Gul is elected President of Turkey.

24 November: Donald Tusk and his liberal right-wing Civic Platform party win by an unexpectedly large margin in the Polish elections. The market welcomes the election result, as Tusk's policies are pro-EU and economically liberal.

21 December: The three Baltic states join Hungary, the Czech Republic, Poland, Slovakia, Malta and Slovenia as members of the Schengen zone.

...and during 2008

1 January: Slovenia is the first Eastern European country to assume the presidency of the EU. The country's agenda includes an increased Europeanisation of the Balkans.

3 February: Pro-EU Boris Tadic is reelected president of Serbia.

17 February: Kosovo declares its independence.

February: Elections in the Czech Republic where President Vaclav Klaus is re-elected for another five-year term and in Armenia where Prime Minister Serzj Sargisian is elected President.

2 March: Presidential elections in Russia. As expected, Dmitrij Medvedev is elected President and names Vladimir Putin as his prime minister.

29 March: Removal of the remaining border controls between the new and old EU countries. This will be yet another meaningful and symbolic event in the unification of Eastern and Western Europe.

2-4 April: NATO summit in Bucharest. Membership invitations are expected to be extended to Albania, Croatia and Macedonia.

24 May: Eurovision Song Contest in Belgrade after Marija Serifovic's victory last year.

October: Parliamentary elections in Lithuania, Slovenia and Belarus.

15 October: Presidential elections in Azerbaijan.

Administration Report

36 Income Statement
37 Balance Sheet
38 Changes in Equity
39 Cash Flow Statements
40 Notes
56 Consolidated Key figures
57 Certification by the Board
58 Audit Report
59 Corporate Governance Report
63 The Boards report on internal control
65 Articles of Association
66 Board of Directors
68 Management

East Capital Explorer AB financial year 01/07/2006 – 31/12/2007

Administration Report

The board of directors of East Capital Explorer AB ("the company"), corporate registration number 556693-7404, hereby submits the consolidated financial statements for the period 19 June 2007–31 December 2007 and the annual report for the Parent Company for the financial year 1 July 2006–31 December 2007.

Operations

East Capital Explorer AB is a Swedish company which business idea is to offer all types of investors access to unique investments in listed and unlisted companies in Eastern Europe. The listing on OMX Nordic Exchange Stockholm also entails advantages such as liquidity and transparency, which is new for our markets and our type of investments.

The Group consists of the Parent Company, East Capital Explorer AB and the subsidiaries, East Capital Explorer Investments AB, East Capital Power Utilities Fund AB and Consibilink Ltd. East Capital Explorer Investment AB manage the company's investment activities in accordance with the investment policy and manage the company's investment portfolio. East Capital Explorer Investments AB has a controlling stake in East Capital Power Utilities Fund AB, which means that this holding is consolidated. In the future East Capital Power Utilities Fund AB may be opened to additional investors, which could change the subsidiary status. Consibilink Ltd manage the East Capital Power Utilities Fund ABs investments.

The company's presentation currency is the euro.

Share information

The total number of outstanding shares at 31 December 2007 was 36,270,160. The average number of shares between 9 November 2007 and 31 December 2007 was 35,032,755. All shares entitles the holder to one vote per share and carry equal rights to the company's profits and assets, as well as equal rights in terms of dividends. A round lot consists of 100 shares.

Board of Directors

The board shall consists of three to five directors without deputies. Board members are elected annually at the annual general meeting for the time until the next annual general meeting is held. East Capital PCV Management AB, corporate registration No. 556729-6941, also has the right to appoint one board member for the same period of time, for as long as the Investment Management Agreement to which the company is a party, which is described in § 13 of the articles of association, is in force. Resolutions to amend such articles are only valid if supported by shareholders with at least 75% of the votes cast and of the shares represented at the meeting of shareholders. The complete articles of association can be found on page 63.

Key events during the financial year

East Capital Explorer AB was listed on the OMX Nordic Exchange Stockholm on 9 November 2007. The initial public offering and issue of 33,795,350 new shares was the equivalent of EUR 365m in proceeds from the share issue. Parallel to the share issue, all 550,000 shares issued before the floation were redeemed.

On 10 December 2007, the company announced that the board had resolved to issue an additional 2,474,810 new shares as a result of the bookrunners' decision to exercise their overallotment option from the initial public offering. This is equivalent to an additional EUR 26m in proceeds from the share issue, bringing total proceeds from the IPO to about EUR 391m.

On 31 December 2007 East Capital Explorer had invested a total of EUR 148m in various Semi-public Equity funds and Short-term Investments. East Capital Explorer has invested EUR 24m in the East Capital Bering Russia Fund and EUR 25m in the East Capital Bering Balkan Fund, EUR 81m in the newly launched East Capital Power Utilities Fund and EUR 18m in the East Capital (Lux) Eastern European Fund.

Decision have been made to invest additional EUR 44m, EUR 24m in East Capital Bering Ukraine Fund and EUR 20m in East Capital Bering Central Asia Fund.

Net profit for the Group was EUR 4.0m, which corresponds to earnings per share of EUR 0.094. The biggest profit and loss account items include EUR 3.5m in unrealised changes in the value of investments, EUR 1.8m in finance income from shortterm interest-bearing investments, EUR 1m in operating expenses and EUR 0.3m in tax.

The Parent Company's net profit was EUR 0.2m, of which EUR 0.7m represents financial income from short-term interestbearing investments of proceeds from the initial public offering held before issuing a shareholders' contribution to East Capital Explorer Investments AB for the Group's investing activities. Operating expenses were EUR 0.5m.

Net asset value and share price

Net asset value on 31 December 2007 was EUR 394m (EUR 10.87 per share).

On 31 December 2007, short-term liquid investments, cash and cash equivalents amounted to EUR 5.53 per share.

The closing price per share on 28 December, the last trading day of the year, was SEK 100 (corresponding to EUR 10.58). East Capital Explorer AB's share price therefore remained unchanged during the period, while the OMXSPI decreased 5.3%. By comparison, the RTS Index gained 1.8%, the RTS 2 Index gained 10.9% and the MSCI EM Europe Index gained 3.4% during the same period.

Key events after the end of the financial year

On 2 January 2008, East Capital Explorer received units from the previously announced investment of EUR 24m in the East Capital Bering Ukraine Fund and the investment of EUR 20m in the East Capital Bering Central Asia Fund.

On 31 January 2008, East Capital Explorer's indicative net asset value amounted to EUR 10.58 per share, compared with EUR 10.87 on 31 December 2007. The closing price per share on 31 January was SEK 91.25 (corresponding to EUR 9.65)1. On 29 February 2008, the indicative net asset value amounted to EUR 10.56 per share while the closing price per share on the same date was SEK 97 (corresponding to EUR 10.34)2.

Material risks and uncertainties

East Capital Explorer has an investment and finance policy that has the purpose of providing guidelines for managing and controlling the effects of the risks inherent in the investments.

¹ EUR = 9.46 SEK on 31 January 2008. Source: Reuters

² EUR = 9.38 SEK on 29 February 2008. Source: Reuters

Many risks are also associated with opportunities. The goal is to eliminate those risks that are not associated with opportunities (e.g., inadequate procedures). One material risk in East Capital Explorers' business is the commercial risk associated with exposure to certain industries, geographic regions or individual holdings. The Group's finance policy for management of financial risk has been prepared by the board and is a framework of guidelines and regulations in the form of risk mandates and limits for financial activities. The Parent Company's finance department is responsible for central management of the Group's financial transactions and risks.

Operational risk is defined as the risk of loss resulting from inadequate internal processes or systems, or from external events. Operational risks occur throughout the business and are managed by constantly improving the management of system-related issues, administrative processes, information security and legal matters. Moreover, the company monitors obligations arising from external regulations and laws, agreement-related undertakings and the company's internal rules.

For more information, please see Note 16 Financing risks and financing policies for the Group's material risks and uncertainties.

Accounting principles

The Parent Company's financial year has been extended to 18 months to cover the period from 1 July 2006 to 31 December 2007. The consolidated annual accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). The Swedish Financial Accounting Standards Council's recommendation RR 30:06, Supplementary Rules for Consolidated Financial Statements, has been applied. The Parent Company applies the same accounting policies as the Group, except for the limitations in the scope for IFRS conformity in the Parent Company due to its application of the Swedish Annual Accounts Act.

Personnel and remuneration guidelines

On 31 December 2007, the Group had three employees, two of whom are women.

In accordance with current guidelines, the board proposes the annual general meeting 2008 the following with regard to remuneration of senior executives, in this case the CEO, to: Remuneration to the CEO consists of fixed salary, variable salary and pension and insurance benefits. The board decides at its own discretion whether the CEO should be paid any variable salary. The CEO can receive a maximum variable salary corresponding to 50% of his fixed salary. The CEO has an individual premium-based pension plan, pursuant to which the company pays premiums corresponding to 10% of his fixed salary up to 10 Swedish income base amounts and premiums corresponding to 20% of his fixed salary on the portion of his fixed salary that exceeds 10 Swedish income base amounts. In the event the company terminates the CEO's employment, the company is required to observe a six-month notice period. In addition, the CEO is entitled to a severance payment corresponding to six months' salary.

Information about salaries and remunerations paid, other compensation and social charges for the board and CEO as well as other employees can be seen in Note 4.

Corporate governance and the work of the board

For information about how the company is governed and controlled, such as through the board and committees, and for information on the board's internal control report, please refer to the Corporate governance section on page 59.

Shareholders' meeting and dividend

East Capital Explorer AB's annual shareholders' meeting will be held on 21 April 2008 in Stockholm.

The board intends to recommend to the shareholders' meeting that no dividend be paid. Our dividend policy reflects our attitude that continually reinvesting capital in accordance with our investment policy optimally promotes our strategy of building a strong investment company and generating long-term value for our shareholders.

The board also intends to propose to the 2008 annual general meeting to resolve to authorise the board to repurchase up to 10% of the company's own shares in the market. Authorisation for repurchase is there for discount control, if needed.

Expectations for future performance

The company intends to be fully invested 18 months after its first day of trading on the OMX Nordic Exchange Stockholm. Per 31 December EUR 148m was invested and additional investments of EUR 44m had been announced. In total these investments amounted to EUR 192m, corresponding to 49% of the total portfolio. Investment activities will continue in accordance with the investment strategy. The main investment focus continues to be East Capital's Private Equity- and Semi-public Equity- and Real Estate funds. The company deems the supply of conceivable investments in underlying funds to continue to be large.

Proposed appropriation of profit

The following funds are at the disposal of the annual general meeting:

Total in EUR	387,812,004
Profit for the year	159,965
non-restricted reserves	387,652,039
Retained earnings and other

The board recommends that the profits be distributed as follows:

to be carried forward	387,812,004
Total in EUR	387,812,004

For further information about the company's financial position and performance, please see the following income statements, balance sheets and cash flow statements.

Income Statement

EUR thousands	Note	Group 19 June – 31 Dec 2007	Parent Company 1 July 2006 – 31 Dec 2007	Parent Company 14 Dec 2005– 30 June 2006
Unrealised changes in value		3,466	-	-
Total operating income	2	3,466	-	-
Other operating expenses	3	-871	-308	-
Staff expenses	4	-134	-134	-
Operating profit		2,461	-442	-
Financial income	6	1,794	665	-
Financial expense	6	-35	-	-
Profit after financial items		4,220	223	-
Income tax expense	7	-255	-63	-
Profit for the year		3,965	160	-
Profit distribution:
Shareholders of the Parent Company		3,298
Minority interest		667
		3,965
Earnings per share, basic and diluted (EUR)	8	0,094

Balance Sheet

EUR thousands		Group	Parent Company	Parent Company
	Note	31 Dec 2007	31 Dec 2007	30 Jun 2006
Assets
Financial fixed assets
Participations in group companies	9	-	390,174	-
Shares and participations in investing activities	10, 15	109,969	-	-
Deferred tax assets	7	97	-	-
Total non-current assets		110,066	390,174	-
Current receivables
Other short-term receivables	15	43 941	-	11
Accrued income and prepaid expenses	11	677	136	-
Total current receivables		44,618	136	11
Short-term investments	15	17,903	-	-
Cash and cash equivalents	15
Short-term investments comprising deposits		198,700	-	-
Cash		62,001	1,441	-
Total current assets		323,222	1,577	11
Total assets		433,288	391,751	11
Shareholders' equity	12
Share capital		3,627
Other contributed capital		387,652
Reserves		-316
Retained earnings including profit for the year		3,298
Equity attributable to shareholders of the Parent Company		394,261
Minority interest		32,313
Total shareholders' equity		426,574
Restricted equity
Share capital			3,627	11
Total restricted equity			3,627	11
Non-restricted equity
Share premium reserve			387,652	-
Profit for the year			160	-
Total non-restricted equity			387,812	-
Total shareholders' equity			391,439	11
Liabilities
Deferred tax liabilities	7	70	-	-
Total long-term liabilities		70	-	-
Tax liabilities		339	63	-
Other liabilities	13, 15	5,585	60	-
Accrued expenses and prepaid income	14	720	189	-
Total current liabilities		6,644	312	-
Total liabilities		6,714	312	-
Total equity and liabilities		433,288	391,751	11

Pledged assets and contingenT liabilities

Pledged assets - - -

Contingent liabilities - - -

Changes in Equity – Group

EUR thousands		Shareholders of the Parent Company
	Share capital	Other contri buted capital	Reserves	Retained ear nings incl. profit for the year	Total	Minority interest	Total equity
Opening equity 14 Dec 2005	-	-	-	-	-		-
Company formation	11	-	-	-	11		11
Opening equity 1 July 2007	11	-	-	-	11		11
New share issue 6 July 2007	44	-	-	-	44		44
Redemption of shares 9 Nov 2007	-55	-	-	-	-55		-55
New share issue 9 Nov 2007	3,380	361,628	-	-	365,008		365,008
New share issue 11 Dec 2007	247	26,024	-	-	26,271		26,271
Contribution from minority						31,761 1	31,761
Exchange rate difference	-	-	-316	-	-316	-115	-431
Net profit for the year	-	-	-	3,298	3,298	667	3,965
Closing equity 31 Dec 2007	3,627	387,652	-316	3,298	394,261	32,313	426,574

1Contribution from minority constitutes of conditional shareholders' contributions from Orkla ASA with EUR 30m and ECPUF AB with EUR 1,7m. Shareholders' contributions are in whole attributable to East Capital Power Utilities Fund AB.

Changes in Equity – Parent Company

EUR thousands	Restricted equity		Non-restricted equity
	Share capital	Share premium reserve	Profit/loss brought forward	Profit for the year	Total equity
Opening equity 14 Dec 2005	-	-	-	-	-
Company formation	11	-	-	-	11
Profit for the year	-	-	-	-	-
Closing equity 30 June 2006	11	-	-	-	11
Opening equity 1 July 2006	11	-	-	-	11
New share issue 6 July 2007	44	-	-	-	44
Redemption of shares 9 Nov 2007	-55	-	-	-	-55
New share issue 9 Nov 2007	3,380	361,628	-	-	365,008
New share issue 11 Dec 2007	247	26,024	-	-	26,271
Profit for the year	-	-	-	160	160
Closing equity 31 Dec 2007	3,627	387,652	-	160	391,439

Cash Flow Statements

EUR thousands	Group 19 June – 31 Dec 2007	Parent Company 1 Jul 2006 – 31 Dec 2007	Parent Company 14 Dec 2005 – 30 June 2006
Operating activities
Operating profit	2,461	-442	-
Adjusted for unrealised changes in value	-3,435	-	-
Interest received	1,254	665	-
Interest paid	-35	-	-
Tax paid	57	-	-
Cash flow from current operations before changes in working capital	302	223	-
Cash flow from changes in working capital
Increase in other current receivables	-136	-136	-
Increase in other current payables	6,305	249	-
Cash flow from operating activities	6,471	336	-
Investing activities
Acquisition of subsidiaries	-	-390,174	-
Investments in shares and participations	-168,810	-	-
Cash flow from investing activities	-168,810	-390 174	-
Financing activities
Company formation/new share issue	55	55	-
Redemption of shares 9 Nov 2007	-55	-55	-
New share issue 9 Nov 2007	365,008	365,008	-
New share issue 11 Dec 2007	26,271	26,271	-
Contribution from minority	31,761
Cash flow from financing activities	423,040	391,279	-
Cash flow for the year	260,701	1,441	-
Cash and cash equivalents, beginning of year	-	-	-
Exchange rate difference in cash and cash equiva lents	-	-	-
Cash and cash equivalents at the end of year1	260,701	1,441	-

1 Cash equivalents consists of deposits and cash.

Short-term investments have been classified as cash and cash equivalents based on the following assumptions:

• They are subject to an insignificant risk of changes in value

• They are readily convertible to cash

• They have a maturity of three months or less from the date of acquisition

Notes to the financial statements

NotE 1 accounting principles

Compliance with standards and legislation

The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") with the interpretive statements from the International Financial Reporting Interpretations Committee ("IFRIC"), as approved by the European Commission for application within the European Union. Furthermore, the Swedish Financial Accounting Standards Council recommendation RR30:06, Supplementary Accounting Regulations for groups, have been applied.

The Parent Company applies the same accounting principles as the East Capital Explorer Group except in the instances presented below in the section "Parent Company's accounting principles."

The annual report and the consolidated financial statements were approved for issue by the board on 18 March 2008. The income statements and balance sheet of the Parent Company and the Group will be submitted to the shareholders' meeting for adoption on 21 April 2008.

Measurement basis for preparing the Parent Company and Group's financial reports

Assets and liabilities are recognised at historical cost, except for shares and participations in investing activities and shortterm investments, which are recognised at fair value.

Functional currency and presentation currency

The Parent Company's functional currency is the euro (EUR), which is also the presentation currency for the Parent Company and the Group. This means that the financial statements are presented in EUR. All amounts, unless otherwise stated, are rounded off to the nearest thousand.

Estimates and assumptions in the financial statements

Preparing financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the application of the accounting principles and the reported amounts for assets, liabilities, revenue and expenses. Actual outcomes may differ from these estimates and assumptions, and the latter are reviewed regularly. Changes in estimates are recognised in the period in which they arise if the change affects that period alone or, alternatively, in the period in which they arise and during future periods if the change affects both the period in question and future periods.

Management has discussed with the audit committee the developments, choices and information regarding the Group's most important accounting principles and estimates, as well as the application of these principles and estimates.

Significant judgements in the application of the group's accounting principles

Some of the significant accounting judgements used in application of the Group's accounting policies are described below.

The measurement of financial assets at fair value will mainly be based on price quotes from active markets. In cases where the market for a financial instrument cannot be judged as active, such assets will be measured using market information as much as possible and company-specific information as little as possible. Whether a market for a specific financial instrument is considered active is largely a matter of professional judgement.

A judgement has been made to consolidate East Capital Explorer Investments AB despite the fact that the share of votes is less than 50%. This judgement was based on the fact that East Capital Explorer AB has all economic rights to East Capital Explorer Investments AB. The majority of the proceeds from the share issue have been transferred to East Capital Investments AB through conditional shareholders' contributions since all investing activities take place in this subsidiary. Another judgement was made that the holdings in East Capital Power Utilities Fund AB and Consibilink Ltd should be consolidated. Through its ability to terminate the shareholder agreement and by doing so place the subsidiaries in liquidation, the company can exercise a controlling influence over the party which is the formal holder of voting rights at the annual meeting of shareholders, and therefore in effect is the party that exercises substantial control over the subsidiaries.

Key sources of uncertainty in the estimates

The sources of uncertainty in the estimates below refer to those that entail significant risk of substantial adjustments to reported assets or liabilities for the next financial year.

In those cases where investments are not traded on a market classified as an active market and fair value is not set against the background of actual buying rate, but by means of valuation models (see below financial instruments), there is uncertainty that the holding will be assigned fair value. The Group applies its models consistently between the periods, but the calculation of fair value is characterised by uncertainty. Based on controls and reliability procedures,the Group considers the fair values recognised in the balance sheet to be carefully calculated and balanced and reflect the underlying economic values.

Significant accounting principles

The accounting principles presented below have been consistently applied to all periods presented in the Group's financial statements, unless otherwise stated below. Furthermore, the Group's accounting policies have been consistently applied by group companies.

Early adoption of newly issued standard

IFRS 8 Operating Segments was adopted early for 2007. IFRS 8 defines operating segments and specifies what information must be disclosed about such segments in the financial statements. The standard must be adopted on or after the financial year beginning 1 January 2009.

New IFRSs and interpretations not yet adopted.

A number of new standards, amendments to standards and interpretations are effective as of the 2008 financial year, and have not been applied in preparing these consolidated financial statements. The effects of the new standards on financial reporting have not been evaluated.

Classification, etc.

Noncurrent assets and noncurrent liabilities consist predominantly of amounts expected to be used or paid more than 12 months after the balance sheet date. Current assets and current liabilities consist predominantly of amounts expected to be used or paid within 12 months of the balance sheet date.

Segment Reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses whose operating results are regularly reviewed and for which discrete financial information is available. The Group has the following four operating segments: investments in Private Equity Funds, Semi-public Equity Funds, Direct-and Coinvestments as well as Short-term Investments. Per 31 December 2007, East Capital Explorer had invested in Semi-public Equity Funds and Short-term Investments. Segment information is presented in accordance with IFRS 8 only for the group.

Consolidated accounts

Subsidiary

Subsidiaries are companies under the controlling influence of East Capital Explorer AB. Controlling influence means the direct or indirect right to govern the financial and operating policies of an entity so as to obtain financial benefit. In assessing whether the controlling influence exists, potential shares conveying voting rights, and which can be converted or utilised without delay, will be taken into consideration.

Subsidiaries are accounted for using the purchase method. In accordance with this method, an acquisition is treated as a transaction in which the Group indirectly acquires the subsidiary's assets and assumes its liabilities and contingent liabilities. The consolidated cost is determined by an analysis at the time of the business combination. In such an analysis, the cost of the business combination is established, as are the fair values of recognised identifiable assets, liabilities and contingent liabilities. The difference between the cost of the shares of the subsidiary, including transaction costs directly attributable to the acquisition, and the fair value of acquired assets, assumed liabilities and contingent liabilities constitute, if the difference is positive, consolidated goodwill. When the difference is negative it is recognised directly in the income statement.

The financial statements of subsidiaries are consolidated from the date of the acquisition until the date when control ceases.

Transactions eliminated on consolidation

Intra-group balances and any unrealised income and expenses or gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Foreign currency transactions

Transactions in currencies other than euro are translated into the functional currency at the exchange rate prevailing on the transaction date. The functional currency is the currency in the primary economic environment in which the companies operate. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the closing rate of exchange. Exchange rate differences arising on currency translations are recognised net as either financial income or financial expense in the income statement.

Financial Statements of Foreign operations

The financial statements of the Group's foreign subsidiaries are translated into euro. The translation of the balance sheets is based on the exchange rates ruling at the balance sheet date, while the income statements are translated using an average rate for the period. The resulting translation differences are charged directly to shareholders' equity .

Income

Income consists primarily of realised and unrealised value changes regarding securities and of dividends. Revenue is recognised in the income statement when it is likely that the future economic benefits will accrue to the company, and when these benefits can be calculated in a reliable manner. Income is reported at the fair value of the amount expected to be received.

For balance sheet items included at both the beginning and end of the period, changes in value comprise the difference in the values at these times. For balance sheet items realised during the period, changes in value comprise the difference between the payment received and the value at the beginning of the period. For balance sheet items acquired during the period, changes in value comprise the difference between the value at the end of the period and the acquisition cost.

Income from dividends is recognised when the right to receive the dividends can be determined.

Expenses

Operating expenses refer to costs of an administrative nature, such as staff costs, notary fees and bank fees. Costs for operating leases are recognised in the income statement on a straightline basis over the term of the lease.

Financial income and expenses

Interest income and interest expenses on financial instruments are recognised in the income statement in the period to which the amounts refer. Financial income consists of interest income from bank balances, receivables, as well as interest-bearing securities and exchange rate differences. Financial expenses consist of interest expenses on borrowings and other interestbearing liabilities and exchange rate differences. Exchange rate gains and losses are reported net. Moreover, fair value changes in short-term investments classified as financial instruments measured at fair value through the income statement (fair value option) are reported as financial income or expense.

Interest income on receivables and interest expenses on liabilities are calculated applying the effective interest method. The effective interest is the interest required to be applied in order that the current value of all estimated future receipts and payments during the expected fixed-interest term is equal to the reported value of the receivable or liability.

Interest income includes the allocated amount of transaction costs and any discounts, premiums and other differences between the original value of the receivable and the amount to be received upon maturity.

Interest expenses include the allocated amount of issue expenses and similar direct transaction costs for loans raised.

Taxes

Income tax comprises current and deferred tax. Income tax is reported in the income statement, except when the underlying transaction is reported directly against equity. In such cases, associated tax effects are reported in equity.

Current tax is tax to be paid or received during the current year, using the taxrates that have been enacted or substantively enacted by the balance sheet date, and adjustments of current taxes attributable to previous periods.

Deferred tax is calculated according to the balance sheet method on the basis of temporary differences arising between the reported and tax values of assets and liabilities, applying the tax rates which have been enacted or announced as per the balance sheet date. Temporary differences are not considered in goodwill arising on consolidation or in differences attributable to subsidiaries and associated companies which are not expected to be taxed within the foreseeable future. Deferred tax assets attributable to deductible temporary differences and loss carryforwards are recognised only to the extent it is likely that they will be utilised and will result in lower tax payments in the future. The value of deferred tax assets is reduced when it is no longer considered likely that they can be utilised. Deferred tax assets and deferred income tax liabilities in the same country are reported net.

Financial Instruments

Financial Instruments recognised in the balance sheet include short-term investments and shares and participations investing activities, cash and cash equivalents and other short-term receivables on the asset side and accounts payable and other current liabilities on the liability side.

Recognition and derecognition

A financial asset or liability is recognised in the balance sheet when the company becomes party to the terms and conditions of the instrument. Acquisitions and sales of financial assets are recorded on the transaction date, which is the date on which the company becomes obligated to acquire or sell the asset. Borrowings are recognised on the date on which the transaction is completed, the settlement date.

Accounts receivable are recognised in the balance sheet when an invoice is sent. Liabilities are recognised when the counterparty has fulfilled its undertaking and a contractual payment obligation exists, regardless of whether or not an invoice has been received. Accounts payable are recognised when the invoice has been received.

A financial asset (or part thereof) is removed from the balance sheet when the rights in the agreement are realised or expire, or when the company has transferred substantially all of the risks and benefits associated with ownership. A financial liability (or part of thereof) is removed from the balance sheet when the obligation specified in the agreement is discharged or in any other manner extinguished. A financial asset and financial liability are offset and recognised in the balance sheet in a net amount only when there is legal right to offset and when it is intended to settle the item with a net amount or to simultaneously realise the asset and settle the liability.

Classification and measurement

Financial instruments are initially recognised at an acquisition cost equivalent to the fair value of the instrument, plus, in the case of receivables and liabilities valued at accrued acquisition cost, the addition of transaction costs. Financial instruments are classified upon first recognition based on the purpose for which the instrument was acquired. The classification determines how the financial instrument is valued after first recognition, as described below.

Loans and receivables

Loans, receivables and short-term investments comprising deposits in the balance sheet consist of immediately available balances at banks and equivalent institutions as well as other accounts receivable. Loans and receivables are recognised at amortised cost.

Financial assets at fair value through profit or loss

Shares and participations in investing activities and short-term investments are recognised in accordance with IAS 39 and the "Fair value option" at fair value including any change in value in the income statement. The Group uses the "fair value option" because it bases follow-up of its holdings on fair value. In accordance with IAS 28.1, equity-related investments where the Group has a significant influence are also recognised according to IAS 39 at fair value, with fair value changes recognised in the income statement ("fair value option"). Fair value is determined as follows:

Determination of fair value, subsequent measurement at fair value Financial instruments measured at fair value in the balance sheet are measured, when deemed possible, at fair value based on buy prices received in active markets. However, management has deemed that several of the Group's equity investments do not have prices quoted on an active market. Where prices from active markets are not available, accessible valuation models are used. The Group applied valuation models for those equities that do not have prices quoted in an active market as follows:

Price quoted on an inactive market

When buy share prices are not available or are not judged to be the equivalent of fair value for an investment at closing day, other alternatives should be considered in the following order, depending on availability and relevance:

1: Average of buy and sell prices from the respective stock exchange where in the company's professional judgement this best represents the equities fair value
2: Average price of price indications from two independent brokers who are active in the market where the share is traded.
3: Average price of price indications from two independent analysts who are active in the market where the share is traded.
4: Price according to a recently executed transaction, at "arm's length"
5: If none of the above are available measurement shall be based on EVCA Valuation Principles:
A. Valuation by an independent appraiser
B. Valuation at cost (revaluation within 12–18 months)

The objective of using this valuation technique is to establish what the transaction price would have been on the measurement date in a transaction between knowledgeable parties who are independent of one another and have an interest in the implementation of the transaction and who are motivated by normal business considerations. The company validates the valuation models in relation to transactions that take place on the market and adjusts the assumptions in the valuation model, if needed, if there should prove to be material and systematic differences between the values of the valuation model and the value in the actual transactions on the market. Potential transaction costs associated with disposal of the assets have not been considered.

Fair value of short-term investments is calculated and discounted with an interest rate on similar instruments on the closing day.

Other financial liabilities

This category includes loans and other financial liabilities, such as accounts payable. Liabilities are valued at amortised cost.

Classification of the Group's financial assets and liabilities and their carrying amounts can be seen in note 15. Recognition of financial income and expenses is also addressed under the principle financial income and expenses above.

Impairment of financial assets

The carrying values of the Group's assets, excluding financial assets reported at fair value with changes in value reported in the income statement in accordance with IAS 39, are tested each balance sheet date for indications of impairment.

On each reporting date, the company evaluates whether there is objective evidence that a financial asset or pool of assets is impaired. Objective evidence comprises observable conditions that occurred and that have a negative impact on the possibility of recovering the cost of the asset.

The recoverable amount of assets in the category loans and receivables, which are recognised at amortised cost, is determined as the present value of future cash flows discounted at the effective rate at initial recognition of the asset. Assets with short maturities are not discounted. An impairment loss is recognised as an expense in the income statement.

Impairment losses of loans and receivables that are reported at amortised cost are reversed if a later increase in the recoverable amount can objectively be attributed to an event that occurred after the impairment loss was made.

Earnings per share

Earnings per share are calculated by dividing the profit or loss in the Group attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. When calculating diluted earnings per share, earnings and the average number of shares are adjusted to take account of the dilutive effects of potential ordinary shares. There were no dilutive effects during the reported periods.

Employee remuneration

Defined contribution pension plans

Obligations related to contributions to defined contribution plans are expensed in the income statement as they arise.

Contingent liabilities

A contingent liability is recognised when there is a possible obligation relating to past events and whose existence is confirmed only by one or more uncertain future events or when there is an obligation that is not recognised as a liability or provision as it is not probable that an outflow of resources will be required.

Accounting principles of the Parent Company

East Capital Explorer AB applies the same accounting principles as the Group except in the instances specified below. The variances arising between East Capital Explorer AB and the Group's principles result from limitations in the possibility of applying IFRS in East Capital Explorer AB due to the Swedish Annual Accounts Act (1995:1554).

East Capital Explorer AB prepares its annual report in accordance with the Swedish Financial Accounting Standards Council's recommendation RR 32:06, Accounting for Legal Entities, as well as the pronouncements of the Swedish Emerging Issues Task Force for listed companies. Application of RR 32:06 stipulates that, in its preparation of the annual report for the legal entity, East Capital Explorer AB apply all of the IFRS and interpretive statements approved by the European Union to the extent possible within the framework of the Swedish Annual Accounts Act and with consideration for the relationship between reporting and taxation. The recommendation states which exceptions and additions to IFRS are to be made.

The accounting principles specified below for the Parent Company have been consistently applied to all periods presented in the financial statements, unless otherwise specified.

Change in accounting principles

The Parent Company applies RR 32:06 from and including this financial year. The changed accounting principles have not had any effect on the income statement or balance sheet.

Subsidiary

The Parent Company reports shares in subsidiaries according to the cost method. Dividends received are recorded as revenue only on condition that these derive from profits arising after the acquisition date. Dividends in excess of these profits are regarded as a repayment of the investment and reduce the carrying amount of the company's interest.

Shareholders' contributions

In accordance with the pronouncement from the Emerging Issues Task Force, shareholders' contributions are recognised directly against equity at the recipient and capitalised in shares and participations at the donor to the extent writedowns are not required.

NotE 2 Segment Reporting

East Capital Explorer has chosen to classify the segments based on the nature of its investments. The Group's operating segments consist of Private Equity Funds, Semi-public Equity Funds, Direct-and Co-investments as well as Short-term Investments. Per 31 December 2007, East Capital Explorer had invested in Semi-public Equity Funds and Short-term Investments

Segment results, assets and liabilities include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. Unallocated items of revenue and expense comprise all items except operating income and financial items. Unallocated assets and liabilities include all assets and liabilities except those assets found in shares and participations.

Group EUR thousands	Semi-public Equity-Funds	Short-term Investments	Unallocated	Total consolidated
	2007	2007	2007	2007
Unrealised changes in value	3,813	-347	-	3,466
Other expenses	-	-	-1,005	-1,005
Operating profit	3,813	-347	-1,005	2,461
Financial income	-	1,794	-	1,794
Financial expense	-	-35	-	-35
Profit after financial items	3,813	1,412	-1,005	4,220
Tax expense for the year	-	-	-255	-255
Net profit for the year				3,965

Group	Semi-public	Short-term
EUR thousands	Equity-Funds	Investments	Unallocated	Total consolidated
	2007	2007	2007	2007
Assets	109,969	278,604	44,715	433,288
Liabilities	-	-	6,714	6,714

The above table provides information about allocating revenues to segments for the Group. Expenses are not allocated to segments, since a majority of these expenses can not be attributed one certain segment.

NotE 3 Other external costs

EUR thousands	Group 2007	Parent company 2007	Parent company 2006
Directors' fees	69	69	-
Social charges on
directors' fees	20	20	-
Rent1	9	9	-
Other external costs	773	210	-
Total	871	308	-

¹ Rent is included in the service agreement with East Capital International AB. See note 17.

NotE 4 Employees, staff expenses and executive management compensation

Employee benefit costs

EUR thousands	Group 2007	Parent company 2007	Parent company 2006
Wages, salaries and remuneration	101	101	-
Social charges	31	31	-
Total	132	132	-

On 31 December 2007, the Group had three employees, two of whom are women.

Executive management compensation

Remuneration to the board

On 27 September 2007, the company's shareholders' meeting resolved that the chairman of the board will receive annual compensation of SEK 700,000 (corresponding to EUR 74 000) for the period until the next shareholders' meeting. Other board members will receive SEK 300,000 (corresponding to EUR 32 000) per person in compensation for the time until the next shareholders' meeting. No additional remuneration is paid for committee work.

Remuneration to senior executives and other terms of employment

Guidelines for salary and other remuneration to the company's CEO will be resolved on a yearly basis at the shareholders' meeting, based on proposals by the board. Remuneration to the CEO consists of fixed salary, variable salary and pension and insurance benefits. The board decides at its own discretion whether the CEO should be paid variable salary. The CEO can receive a maximum variable salary corresponding to 50% of his fixed salary. The CEO has an individual premium-based pension plan, pursuant to which the company pays premiums corresponding to 10% of his fixed salary up to 10 Swedish income base amounts and premiums corresponding to 20% of his fixed salary on the portion of his fixed salary that exceeds 10 Swedish income base. In the event the company terminates the CEO's employment, the company is required to observe a six-month notice period. In addition, the CEO is entitled to a severance payment corresponding to six months' salary. In the event the CEO terminates his employment, he is required to observe a six-month notice period. If the CEO terminates his employment, he is not entitled to any severance payment.

Remuneration and other benefits, parent company, 2007

EUR thousands
	Fixed	Board
	salary	fee	Total
Paul Bergqvist, Chairman	-	37	37
Lars Emilson, Board member	-	16	16
Alexander V. Ikonnikov,	-	16	16
Board member
Justas Pipinis, Board member	-	-	-
Kestutis Sasnauskas,	-	-	-
Board member
Gert Tiivas, CEO	34	-	34
Total	34	69	103

Board members Justas Pipinis and Kesutis Sasnauskas waived their directors' fees.

NotE 5 Fees and expenses for auditors

EUR thousands	Group 2007	Parent company 2007	Parent company 2006
KPMG
Audit assignments	58	53	-
Other assignments	-	-	-
Total	58	53	-

Audit assignment refers to auditing of the annual report, the accounting records and the administration of the board of directors and the CEO, other tasks incumbent on the company's independent auditor, and advice or other assistance prompted by observations from such audits or the performance of other such tasks. All other work constitutes other assignments.

NotE 6 Financial income and expense

EUR thousands	Group 2007	Parent company 2007	Parent company 2006
Interest income on financial assets meas ured at fair value (fair value option)	2	2	-
Interest income, bank balances	1,792	663	-
Financial income	1,794	665	-
Interest expense on financial liabilities measured at amortised cost	-7	-	-
Exchange rate difference	-28	-	-
Financial expense	-35	-	-

NotE 7 TAXES

Recognised in the income statement

EUR thousands	Group 2007	Parent Company 2007	Parent Company 2006
Current tax expense (-)
Tax expense for the period	-282	-63	-
Deferred tax income (+)
Deferred tax for temporary differences	27	-	-
Total recognised tax expense	-255	-63	-

Reconciliation of effective tax

Group EUR thousands		Group		Parent Company		Parent Company
	2007 (%)	2007	2007 (%)	2007	2006 (%)	2006
Profit after financial items		4,221		223		-
Tax as per applicable tax rate for the Parent Company	28.0	-1,182	28.0	-63		-
Tax effect of non-taxable income	25.3	1,068		-		-
Increase in loss carryforward without equivalent capitalisa
tion of deferred tax	3.3	-141		-		-
Recognised effective tax	6.0	-255	28.0	-63		-

Recognised in the balance sheet

Recognised deferred tax assets and liabilities

Deferred tax assets and -liabilities relate to the following:

Group EUR thousands	Deferred tax asset 2007	Deferred tax liability 2007	Net 2007
Financial fixed assets	97	-	97
Tax allocation reserve	-	-70	-70
Total	97	-70	27

The Group's loss carryforward is EUR 503,000.

Note 8 Earnings per share

Earnings per share

EUR	2007
Earnings per share, basic and diluted	0.094

The origin of the numerator and denominator used in the above calculations of earnings per share is shown below.

Earnings per share, basic and diluted

Profit for the year attributable to the holders of ordinary shares in the Parent Company EUR thousands	2007
Profit attributable to the holders of ordinary shares in the Parent Company, basic and
diluted	3,298

Weighted average number of outstanding ordinary shares	2007
In thousands of shares
Total number of outstanding shares, 1 January	1
New share issue 6 July 2007	549
Share redemption 9 Nov 2007	-550
New share issue 9 Nov 2007	33,795
New share issue 11 Dec 2007	2,475
Total number of outstanding shares,
31 December	36,270
Weighted average number of ordinary shares 9 Nov – 31 Dec 2007, basic and
diluted	35,033

The Group's investment activities began after 9 November 2007 after receiving the proceeds from the initial public offering on the OMX Nordic Exchange Stockholm. Therefore 9 November 2007 is the date deemed appropriate for calculating the weighted average number of ordinary shares.

NotE 9 Group companies

Holdings in subsidiaries

	Subsidiary's domicile, country	Share of Equity in %
		2007	2006
East Capital Explorer Investments AB	Stockholm, Sweden	100	-
East Capital Power Utilities Fund AB	Stockholm, Sweden	73	-
Consibilink Limited	Cyprus	100	-

Parent Company EUR thousands Acquisition	31 Dec 2007	30 June 2006
At 1 January	-	-
Acquisitions	390,174	-
At 31 December	390,174	-
Carrying amount 31 December	390,174	-

Specification of the Parent Company's direct holdings of participations in subsidiaries

		31 Dec 2007	30 June 2006
Subsidiary / Corporate
registration number /	No. of	Carrying	Carrying
Domicile	shares	amount	amount
East Capital Explorer
Investments AB
/556693-7370/
Stockholm	3,410	390,174	-
Total		390,174	-

East Capital Explorer AB owns all preference shares in the subsidiary. The percentage of votes is 4.3%.

Note 10 Shares and participations

Group EUR thousands	Shares and participations 31 Dec 2007
Acquisition
At 1 January	-
Acquisitions	106,156
At 31 December	106,156

Change in value through the income

statement
At 1 January	-
Unrealised change in the value through the
income statement for the year	3,813
At 31 December	3,813
Carrying amount 31 December	109,969

Unrealised changes in value in the income statement includes EUR -347,000 from Short-term Investments.

The Group has the following holdings:

Holdings	Number of
	shares/Units	Cost	Gains	Carrying amount
East Capital Bering Balkan Fund	2,089,038	24,938	746	25,684
East Capital Bering Russia Fund	538,027	23,590	391	23,981
East Capital Power Utilities Fund	162,000	57,628	2,676	60,304
Total		106,156	3,813	109,969

All shares and participations are classified as financial assets carried at fair value through profit or loss in the sub-category held for trading.

Note 11 Prepaid expenses and accrued income

EUR thousands	Group 31 Dec 2007	Parent company 31 Dec 2007	Parent company 30 June 2006
Accrued income	657	116	-
Prepaid expenses	20	20	-
Total	677	136	-

Note 12 Shareholders' equity

Share capital and share premium

In thousands of shares	Ordinary shares
	2007	2006
Issued at January 1	1	1
New share issue 6 July 2007	549	-
Share redemption 9 Nov 2007	-550	-
New share issue 9 Nov 2007	33,795	-
New share issue 11 Dec 2007	2,475	-
Issued at 31 December	36,270	1

Holders of common shares are entitled to dividends. The size and timing is to be proposed and approved at the Annual General Meeting each year. Additionally each share grants the right to one vote at the shareholders' meeting and all shares carry the same right to the company's remaining net assets.

Shareholders' equity in the group

Other contributed capital

Pertains to shareholders' equity contributions. The share premium paid in conjunction with new issues is included here.

Reserves – translation reserve

The translation reserve consists of all exchange differences arising on translation of the financial statements of foreign operations prepared in a currency other than that used by the Group. The Parent Company and the Group prepares their financial reports in euro.

Retained earnings including profit for the year

Retained earnings including profit/loss for the year include profits earned in the Parent Company and its subsidiaries.

Non-restricted equity – parent company

Share premium reserve

When new shares are issued at a premium, meaning that the price to be paid for a share is higher than the previous quota value of the share, an amount corresponding to the amount received in excess of the share's quota value is transferred to the share premium reserve.

Retained earnings

Retained earnings comprise retained profit from previous years after any provisions to reserves and after payment of any dividends. This consists of profit/loss for the year and total nonrestricted equity, which is the amount available for distribution to the shareholders.

Capital management

Capital is defined as total capital excluding minority interests, which amounts to TEUR 394,261. Total capital arises from the capital contribution in conjunction with the initial public offering and the additional new share issue. The company intends to be fully invested 18 months after the first trading day on OMX Nordic Exchange Stockholm. Per 31 December EUR 148m was invested and additional investments of EUR 44m had been announced. In total these investments amounted to EUR 192m, corresponding to 49% of the total portfolio. Investment activities will continue in accordance with the investment strategy. The main investment focus continues to be East Capital's Private Equity- and Semi-public Equity- and Real Estate funds.

The objective is to offer investors long-term capital appreciation. The risk of short-term fluctuations in capital appreciation is deemed to be high due to the high risk with which the markets in which the company invests are encumbered. The return for the period 9 November to 31 December is 0.7%.

As stated in the dividend policy, the company will not pay any dividends because it deems that continuous reinvestment of capital in accordance with the investment policy will best allow the company to build a strong investment base and generate long-term value for the shareholders.

The future liquidity will depend primarily on (i) the timing and sales of investments, (ii) the company's management of available cash, (iii) cash distributions from existing investments, (iv) capital contributions that are received in connection with the issuance of additional equity and (v) the issuance of indebtedness, if any.

The company may enter into a line of credit facility with one or more lenders for the purpose of obtaining an additional source of liquidity to fund short-term liquidity needs and for investments. The company does not anticipate drawing on a line of credit until the company has invested a significant portion of its capital. The aggregate amount drawn by the company under any line of credit facility may not exceed an amount equal to 30% of the company's net asset value, excluding the debt and net asset value attributable to direct investments in real estate. There are no externally imposed capital requirements on any of the companies in the Group.

Note 13 Other liabilities

EUR thousands	Group 31 Dec 2007	Parent Company 31 Dec 2007	Parent Company 30 June 2006
Other current liabilities
Accounts payable	4	3	-
Purchase of shares – shares
delivered but cash not paid	5,571	-	-
Other	10	57	-
Total	5,585	60	-

Note 14 Accrued expenses and prepaid income

EUR thousands	Group 31 Dec 2007	Parent Company 31 Dec 2007	Parent Company 30 June 2006
Prepaid income	11	-	-
Vacation pay	12	12	-
Management fee	155	-	-
Carried interest	365	-	-
Other accrued expenses	177	177	-
Total	720	189	-

Note 15 Financial assets and liabilities

Fair value
Group 2007 EUR thousands	Financial assets at fair value through profit or loss	Loans and receivables	Other liabilities	Total carrying amount	Fair value
Shares and participation in investing
activities	109,969	-	-	109,969	109,969
Other receivables	-	43,941	-	43,941	43,941
Short-term Investments	17,903	-	-	17,903	17,903
Short-term investments comprising
deposits	-	198,700	-	198,700	198,700
Cash	-	62,001	-	62,001	62,001
Total	127,872	304,642	-	432,514	432,514
Other liabilities	-	-	5,585	5,585	5,585
Total	-	-	5,585	5,585	5, 585

Parent company, 2007 EUR thousands	Other liabilities	Total carrying amount	Fair value
Other liabilities	60	60	60
Total	60	60	60

The Parent Company was dormant for the financial year 14 December 2005–30 June 2006 and therefore had no financial instruments.

Calculation of fair value

The following summarises the main methods and assumptions used to determine the fair value of the Group's financial instruments.

Financial instruments measured at fair value through profit and loss

For a description of the method used to measure financial instruments recognised at fair value through profit and loss, see note 1 above.

Financial instruments not measured at fair value through profit and loss

For accounts receivable and accounts payable, the carrying amount is deemed to reflect fair value since the remaining maturity is generally short.

NotE 16 Financial risks and financing policies

The Group is exposed to various types of financial risks through its business activities.

The term "financial risks" refers to fluctuations in the company's earnings and cash flow as a result of changes in exchange rates, interest rates, refinancing and credit risks. The Group's finance policy for the management of financial risk has been prepared by the board and is a framework of guidelines and regulations in the form of risk mandates and limits for financial activities. The parent company's finance department is responsible for central management of the Group's financial transactions and risks.

Market risk

Market risk is the risk that the value of a financial instrument will fluctuate due to changes in market prices. There are three types of market risks: currency risk, interest rate risk and other price risks. Equity price risk and currency risk are the most important market risks in the Group's business activities.

The Group's exposure to market risk generally consists of the risk of the value of its investments being affected by the markets in which such investments are located. The Group invests in enterprises based in Russia and the other CIS countries, the Balkans, the Baltic States, Central Asia and central Eastern Europe. Investing in companies based in these emerging markets involves market risks and certain other considerations, such as political risks, that are not typically associated with investments in companies established in other parts of Europe.

The Group limits risk by following an investment policy that provides guidelines based on the following factors:

Industry
Geography
Financial instruments
Reinvestments
Hedging

Equity price risk

Equity price risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Equity price risk is a key risk in the business activities, which consist of investing in various forms of equities and equity-related derivatives in emerging markets. Factors that affect this price risk are:

Investments in emerging markets
Country-specific risks
Investments in the power utilities sector
Investments in the financial sector
Investments in the retail and consumer goods sector
Investments in the real estate sector

Where the Group realises an investment and is seeking an alternative investment in which to re-invest the capital realised, suitable investment opportunities may not always be available. It may take a significant amount of time to re-invest the capital. Although the Group will adopt a policy of active management of cash and liquid investments portfolio to enhance returns, such management will probably generate returns that are substantially lower than the returns that the company anticipates receiving from investments in any East Capital Funds or any direct investments.

Concentration risk

The company and the subsidiaries are not classified as investment funds in accordance with the Swedish Investment Funds Act (lag 2004:46 om investeringsfonder) nor are they subject to the supervision of Finansinspektionen, the Swedish Financial Supervisory Authority. Therefore the Group is not required to comply with the investmentrestrictions and requirements forrisk diversification applicable for investment funds. Apart from the fact that no investment in any single East Capital Fund may represent more than 40% of East Capital Explorer's net asset value at the time of the investment, that no single direct investment may exceed 15% of East Capital Explorer's net asset value from at the time of the investment and that total direct investments in real estate may not exceed 30% of East Capital Explorer's net asset value, East Capital Explorer's investment policy only contains limited diversification requirements for the portfolio. In addition, East Capital Explorer's investment policy does not impose any limitations on the terms of the funds through which the company may invest, including with respect to fund size, affiliation with East Capital, geographic focus or other diversification, investment parameters or industry focus. In the event that the portfolio is concentrated on relatively few investments, adverse performance by even one of those investments could have a material adverse effect on East Capital Explorer.

Interest rate risk

Interest rate risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market rates.

Interest rate risk arises for the Group's business activities when cash from new issues is received before final investment takes place. During this period, the cash from the issue is invested on a short-term basis. Changes in the level of interest rates can affect the rate of return on the Group's cash and cash equivalents.

Changes in the level of interest rates can also affect, among other things: (i) the cost and availability of debt financing and hence the Group's ability to achieve attractive rates of return on its investments, and (ii) the debt financing capability of companies whose capital structures have a significant degree of leverage in which the Group has invested either through fund investments or direct investments.

The neutral position regarding the interest rate risk for the short-term investment portfolio has been estimated to be an average fixed interest term of three months.

The Group does not hold any derivatives as of the closing day.

Foreign exchange risk

Currency risk is the risk that the value of the assets will fluctuate due to changes in exchange rates.

The Group's exposure to exchange rates mainly arises through investments in East Capital's funds which are primarily denominated in euro (EUR) and US dollars (USD). However, a majority of the underlying investments may be denominated in currencies other than the euro, primarily the local currencies in the target region. Changes in rates of exchange may have an adverse effect on the value, price or income of the Group's investments.

Currency hedging may be carried out to provide protection against the impact of fluctuating exchange rates on the Group's performance and financial position. Spot, forward or option transactions may be used as part of the currency hedging strategy. Hedging transactions entail costs and may result in losses. The East Capital Funds in which the Group has invested does not use currency hedging.

The primary strategy in the financial policy is not to hedge foreign exchange risk in the underlying investments. In the future, however, the company may hedge any dividends and operating expenses, since these will mainly be denominated in Swedish kronor (SEK).

The consolidated income statement includes exchange differences of EUR 28,000 in net financial items.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk refers to the risk that a financial instrument cannot be divested without considerable extra costs, and to the risk that liquidity will not be available to meet payment commitments. Liquidity risk is always considered with respect to investments. The Group's investments in illiquid markets mean that liquidity risk is present with respect to the ability to quickly divest holdings, but this is calculated and offset by the assessed potential for returns. Because of the Group's high equity ratio the risk of suspension of payments is deemed low.

In accordance with the financial policy, liquidity risk will be minimised through continual evaluation of exposure in the portfolio with respect to investments in illiquid markets, taking liquidity risks into account.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

East Capital Explorer's exposure to credit risk is mainly through the investment of excess liquidity in interest-bearing securities. Credit risk also arises as a result of derivatives with positive market values.

The financial policy regulates counterparty exposure to minimise credit risk. According to this policy, credit risk is limited by only granting credit to counterparties with strong credit ratings, based on Standard & Poor's, Nordic Rating. and Moody's Rating. Investments in deposits in larger Swedish banks and investments in Swedish Treasury bonds without ratings are also accepted.

As of the closing day, the company does not have any derivative agreements or interest-bearing securities.

Sensitivity analysis

The table below indicates the effect of the most important factors on East Capital Explorer's results.

Factors	Change, %	Effect on operating profit, EUR thousands
Currency
EUR/USD	+/- 5	10,875
Interest	+/- 5	476
Equity price
(investments)	+/- 5	6,394

Note 17 Related parties

Related party relationships

East Capital Explorer AB has a related party relationship with its subsidiaries, see note 9, and with other companies in East Capital, see below.

License agreements

The company and East Capital Explorer Investments AB have entered into a licensing agreement with East Capital Explorer Licensing AB, pursuant to which East Capital Explorer Licensing AB has granted a non-exclusive, royalty-free license to use the trade name and trademark "East Capital Explorer."

Management agreement

East Capital PCV Management AB (the "Investment Manager"), a subsidiary of East Capital Holding AB, that implement investments according to the investment policy and provides investment management services pursuant to them Investment Management Agreement. The company has entered into the Investment Management Agreement with the Investment Manager and East Capital Explorer Investments AB.

Service agreement

The company has entered into a service agreement with East Capital International AB, a service company in East Capital, pursuant to which the company buys certain administrative and other services and sublets premises. During the year the Group purchased services for EUR 76,000 and the Parent Company for EUR 76,000.

Employees

All employees in the Group also have a contractual relationship with East Capital International AB where they perform certain tasks and duties.

The CEO is also board member of the following: Chairman of the board of the AVEC Baltic Property Fund AB, AVEC Baltic Property Fund Investors AB and AVEC Assets Management AS. Director in East Capital Power Utilities Fund AB, East Capital Explorer Investments AB, JSC Open Investments, AS Baltika and TEO LT.

Transactions with key management personnel and associated companies

The company's management, board members and their close relatives and associated companies control 9.5% of voting rights in the company. For information about remuneration of senior executives please refer to note 4.

Potential conflicts of interest

The investment management agreement entered into between the company and the Manager contains provisions and procedures to address potential conflicts of interest between the company and East Capital. Any conflict of interest which is not contemplated by the investment policy agreed between the company and the Manager from time to time, shall be referred to the board of the company for resolution. Such conflicts include for example any (i) investments in any East Capital Fund on terms which are materially adverse compared to existing East Capital Funds or any fund of similar type (it being understood that any increase with respect to fees and carried interest shall be deemed as "materially adverse"); and (ii) any co-investments made on terms which adversely deviate from the terms on which other co-investors make their investments. There are also other terms in the agreement designed to assure that fees payable by the company are always on market terms. The investment management agreement further provides that direct investments offered by the Manager with no co-investment by any other East Capital Fund or by East Capital itself, shall be referred to the board of the company for resolution. In any such matter referred to the board, the board members affiliated with East Capital will not take part, in accordance with the rules of conflict of interest under the Companies Act.

In addition, East Capital has in place a policy for managing conflicts of interests in relation to its investment business, the overriding principle of which is that East Capital, will treat its

Consolidated Key figures

31 December 2007
Return on equity	1%
Equity ratio	98.5%
Interest-bearing debt	-
Net asset value, EURt	394,261
Market capitalisation, SEKm	3,627
Market capitalisation, EURt	383,8101
Total number of shares	36,270,160
Average number of shares,
9 Nov–31 Dec 2007	35,032,755
Number of employees	3

clients fairly and will at all times act in accordance with its position as investment manager of the various East Capital Funds. The policy sets out a strategy and provides measures which will enable the Manager's team to actively identify, monitor and address any conflicts of interest that may arise in connection with the allocation of investment opportunities. Other

During the year East Capital Power Utilities Fund AB purchased shares in Russian companies from the East Capital Russian Fund for EUR 39.6m. The purchase was carried out at the current market prices.Transactions with related parties are priced on market-based terms.

Note 18 Events after balance sheet date

On 2 January 2008, East Capital Explorer received units from the previously announced investment of EUR 24m in East Capital Bering Ukraine Fund and the investment of EUR 20m in the East Capital Bering Central Asia Fund. On 31 December 2007 it is included in short term receivables.

Note 19 Information about the parent company

East Capital Explorer AB is a registered Swedish limited liability company domiciled in Stockholm. The Parent Company's shares are registered on the OMX Nordic Exchange Stockholm. The address to corporate headquarters is Kungsgatan 33, Box 7214, 103 88 Stockholm, Sweden. The consolidated financial statements for 2007 include the parent company and its subsidiaries, together comprising the Group.

Key figures/share	2007
Earnings per share, EUR	0.094
NAV, EUR	10.87
Change in NAV/share	0.7%
Price, SEK	100
Price, EUR	10.581

¹ EUR = 9.45 SEK on 28 December 2007. Source: Reuters

The consolidated accounts and the annual report have been prepared in accordance with the international financial reporting standards referred to in Regulation (EC) no. 1606/2002 of the European Parliament and of the council of 19 July 2002 on the application of international accounting standards, as well as generally accepted accounting principles, and give a true and fair view of the financial position and results of the Group and the Parent Company. The statutory Administration Report of the Group and the Parent Company provides a fair review of the development of the Group's and the Parent Company's operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.

Stockholm, 18 March 2008

Paul Bergqvist Gert Tiivas

Chairman of the board Chief Executive Officer

Board member Board member

Lars Emilson Alexander V. Ikonnikov

Board member Board member

Justas Pipinis Kestutis Sasnauskas

Our Auditors' Report was submitted on 18 March 2008

KPMG Bohlins AB

Carl Lindgren Authorised Public Accountant

The annual report and consolidated annual report, as indicated above, have been approved by the board for publication on 18 March 2008. The income statements and balance sheet of the Parent Company and the Group will be submitted to the shareholders' meeting for adoption on 21 April 2008.

Audit Report

To the annual meeting of the shareholders of East Capital Explorer AB (publ) Corporate identity number 556693-7404

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the CEO of East Capital Explorer AB (publ) for the financial year 2006-07-01 – 2007-12-31. The annual accounts and the consolidated accounts are included in the printed version of this document on pages 34-57. The board of directors and the CEO are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of International Financial Reporting Standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain high but not absolute assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the CEO and significant estimates made by the board of directors and the CEO when preparing the annual accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the CEO. We also examined whether any board member or the CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group's financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the annual meeting of shareholders that the income statements and balance sheets of the Parent Company and the Group be adopted, that the profit of the Parent Company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the CEO be discharged from liability for the financial year.

Stockholm 18 March 2008

KPMG Bohlins AB

Carl Lindgren Authorised Public Accountant

Corporate Governance Report For East Capital Explorer AB (publ)

Corporate governance at East Capital Explorer AB complies with the Articles of Association, the Swedish Companies Act, the listing agreement with the OMX Nordic Exchange including the Swedish Code of Corporate Governance and other applicable Swedish and foreign laws and rules. The company's corporate governance report has not been reviewed by the company's auditors.

Purpose and nature of the company

East Capital Explorer AB is a newly formed public limited liability company that invests in Russia and other countries within the Commonwealth of Independent States (CIS), the Balkans, the Baltic States, Central Asia and Central Eastern Europe, mainly indirectly through a selection of East Capital's current and future funds. In addition, the company may also invest directly in unlisted companies in this region.

Investment policy and the investment management agreement

The investment activities of the company are governed by an investment policy agreed between the company and East Capital PCV Management AB, a company within East Capital (the "Investment Manager"), under an Investment Management Agreement.

The investment policy prescribes the type of assets, investment themes and geographical segments in which investments may be made and certain limitations in order to assure diversification and an appropriate risk level. The investment policy may be revised from time to time, as the investing environment is changing. Any change in the investment policy would require approval of both the company and the Investment Manager. The abstract of the investment policy of the company can be seen under "This is how we invest" on page 14.

The Investment Management Agreement prescribes that terms and conditions upon which the investment activities will

be performed by the Investment Manager and how the duties and responsibilities of the Investment Manager and the company are allocated between them. It also assures the company preferential access to new Semi-public, Private Equity and Real Estate funds launched by East Capital.

Under certain circumstances the company has the right to terminate the Investment Management Agreement, for example if the Investment Manager does not act in accordance with the investment policy or the Investment Management Agreement. The company also has the right, at its total discretion and without any breach of the agreement, to give notice to terminate the Investment Management Agreement with the approval of a majority of at least 75% of the votes cast as well as shares represented at a general meeting of shareholders of the company.

Investment structure

The Investment Manager is providing investment management and certain other services and resources for the company in order to invest the capital within the framework of the investment policy and in accordance with the terms and procedures set out in the Investment Management Agreement. The investments are carried out through East Capital Explorer Investments AB, which holds the investment portfolio. The investment decisions, except for those decisions that are specifically in the power of the board of the company, are made by the board of East Capital Explorer Investments AB.

East Capital Explorer Investments AB is owned by the company and the Investment Manager. The company holds all financial rights, while the Investment Manager controls and manages East Capital Explorer Investments AB. Currently, the CEO of the company, Gert Tiivas and the board member Justas Pipinis are members of the board of East Capital Explorer Investments AB, alongside one additional member appointed by the Investment Manager.

1) The Investment Manager is ultimately controlled by East Capital Holding AB which also, through its various subsidiaries, manages the East Capital Funds. East Capital Holding AB is owned directly or indirectly by Peter Elam Håkansson, Jacob Grapengiesser, Albin Rosengren, Karine Hirn, Kestutis Sasnauskas, Justas Pipinis och Aivaras Abromavicius.

The current structure creates appropriate conditions for making investments in accordance with what is stated in the company's investment policy and the listing prospectus, while offering operational competitive advantages by allowing for a short decision-making process within the framework of the investment policy. It also creates stability and creates a clear division of responsibilities between the Investment Manager and the company's board.

Functions of the board and the executive management of the company

Although the ordinary investment management activities are assigned to the Investment Manager under the Investment Management Agreement, the company's board will always take decisions in conjunction with the following: (i) investments exceeding 15% of the company's net asset value, (ii) certain direct investments, and (iii) any investments that might give rise to a conflict of interest between East Capital and the company not contemplated by the investment policy.

The board and executive management of the company continuously monitors the investment policy and evaluates whether it continues to be in the best interest of the shareholders of the company. The board expects to initiate changes in the investment policy, should the board find that an update or revision is needed.

Another function of the board is to monitor the operations of the Investment Manager, for example by controlling that the investment activities are carried out in accordance with the investment policy and the Investment Management Agreement. This task is mainly carried out by the company's audit committee, which consists of the company's board members who are independent from East Capital, as well as the executive management of the company. The board members also have the right to attend the board meetings of East Capital Explorer Investments AB and have access to the board minutes and all supporting material for the investment decisions carried out. The company also has the right to appoint the auditor for East Capital Explorer Investments AB.

Share capital and voting rights

The company's share capital as at 31 December 2007 was EUR 3,627,016 distributed among 36,270,160 ordinary shares. All shares entitle the holder to one vote per share and carry equal rights to the company's profits and assets, as well as equal rights in terms of dividends.

Ownership structure

According to the share register held by VPC AB (the Swedish Central Securities Depository & Clearing Organisation), as at 31 December 2007 East Capital Explorer AB had 11,648 shareholders. The shares held by the ten largest owners, based on number of votes, corresponded to approximately 33% of voting rights and total share capital. Approximately 46.8% of the share capital was owned by foreign natural or legal entities. The majority of foreign-owned shares are nominee-registered, which means that the actual holders are not officially registered. See page 5 for a list of the 10 largest shareholders in East Capital Explorer AB per 31 December 2007.

Trading and market capitalisation

The East Capital Explorer share was listed on the OMX Nordic Exchange in Stockholm on 9 November 2007. A round lot consists of 100 shares. The company's market capitalisation was SEK 3,627 million as at 31 December 2007.

Shareholders' meeting

The shareholders' meeting is the company's highest decisionmaking body. The shareholders' meeting must be held within six months of the end of the financial year. All shareholders who are registered in the register of shareholders and who notify the company in time are entitled to take part at the meeting and may vote for the full number of shares they own. Shareholders who cannot attend may be represented by proxy and may be accompanied by a maximum of two assistants.

The 2008 shareholders' meeting will be held at 4:00 p.m. on 21 April 2008 at the China Theater in Stockholm. For more information please visit: www.eastcapitalexplorer.com.

Nomination committee

The nomination committee for the annual general meeting of 2008 consists of East Capital Explorer AB's chairman of the board, the Investment Manager's chairman of the board and three additional members, each appointed by the three largest shareholders in the company as at 31 December 2007.

The following persons comprise the nomination committee for the 2008 shareholders' meeting:

Ramsay Brufer, Alecta
Anders Klein, SEB
Robert Vikström, Handelsbanken (approved by the Stena Sphere)
Paul Bergqvist, as chairman of the board of East Capital Explorer AB
Peter Elam Håkansson, as chairman of the board of the Investment Manager

The role of the nomination committee is to prepare and present proposals to the shareholders' meeting on issues such as chairman of the meeting, members of the board, chairman of the board, as well as auditors. The nomination committee also proposes remuneration to the members of the board, remuneration (if any) for committee work and fees to be paid to the company's auditors, as well as propose the process for electing a nomination committee prior to the 2009 shareholders' meeting. All shareholders have had the opportunity to suggest nominees to the nomination committee.

Board

Composition of the board

According to the articles of association of the company, the board shall consist of three (3) to five (5) members without deputies. Further, the Investment Manager always has the right to appoint a board member. Board members are elected for a one-year term. The 2007 shareholders' meeting elected five board members to serve until the 2008 shareholders' meeting: Paul Bergqvist, chairman, Alexander V. Ikonnikov, Lars Emilson, Justas Pipinis and Kestutis Sasnauskas. Under applicable regulations, Paul Bergqvist, Lars Emilson and Alexander V. Ikonnikov are regarded as independent in relation to the company. Justas Pipinis and Kestutis Sasnauskas can not be regarded as independent in relation to the company as they are affiliated to East Capital that, due to the Investment Management Agreement and other relationships, must be regarded as having extensive business ties with the company and affiliates enterprises.

Regarding the board members independence in relation to major shareholders, it can be noted that as of 31 December 2007 there are no major shareholders of the company as the term is defined in the listing agreement and the Swedish Code of Corporate Governance.

For more information about each board member please see page 63.

The board and its work

The work of the board is governed by the rules of procedure adopted by the board at the statutory board meeting each year. The chairman of the board, Paul Bergqvist, directs the work conducted by the board and maintains continuous contact with the CEO, in order to monitor the company's operations.

Given the special nature and aims of the company, the work of the board mainly involves control and monitoring of investment activities handled by East Capital Explorer Investments AB and the Investment Manager.

Since it was appointed in its current composition, the board held 10 meetings during financial year 2007. The work of the board is continuously evaluated.

In addition, Gert Tiivas, in the capacity of board member of East Capital Explorer Investments AB, participated at 7 meetings for East Capital Explorer Investments AB (of which 4 were per capsulam) during 2007. Paul Bergqvist was also present at all physical meetings held after the lising of East Capital Explorer AB, as a non-member attendee.

Audit committee

The audit committee is appointed annually by the board, primarily to serve in an advisory function to the board with respect to financial reporting, valuation and auditing matters, the economic relationship with East Capital Explorer Investments and its investments, and the company's cooperation and contractual relationship with the Investment Manager.

The audit committee shall consist of at least three members appointed by the board from among the independent members of the board. The chairman of the board will be the chairman of the audit committee.

The audit committee consists of Paul Bergqvist, Alexander V. Ikonnikov and Lars Emilson. Paul Bergqvist is chairman.

The audit committee may, as it sees fit, invite persons from the company, East Capital Explorer Investments AB or the Investment Manager as non-member attendees and appoint appropriate legal counsel, audit expertise and independent valuation expertise for consultation in the performance of its duties.

Directors' fees

On 27 September 2007, the company's shareholders meeting resolved that the chairman of the board will receive annual compensation of SEK 700,000 (corresponding to EUR 74 000) for the period until the 2008 shareholders' meeting. Each member of the board, other than the chairman, will receive annual compensation of SEK 300,000 (corresponding to EUR 32 000) for the same period. Board members Justas Pipinis and Kestutis Sasnauskas waived their directors' fees. No additional compensation is paid for work in committees.

Senior management

The table below presents the name, age, year of employment and position.

Name	Born	Year appointed	Position
Gert Tiivas	23 April 1973	2007	Chief Executive
			Officer

Remuneration to the Chief Executive Officer

SEK	Fixed salary	Variable	Pension and
		salary	insurance cost
2007 (beginning 1 Sep. 2007)	320,000	Discretionary	48,700
2008	960,000	Discretionary	146,100

Remuneration to the CEO consists of fixed salary, variable salary and pension and insurance benefits. The board decides at its own discretion whether the CEO should be paid any variable salary. The CEO can receive a maximum variable salary corresponding to 50% of his fixed salary. The CEO has an individual premium-based pension plan, pursuant to which the company pays premiums corresponding to 10% of his fixed salary up to 10 Swedish income base amounts and premiums corresponding to 20% of his fixed salary on the portion of his fixed salary that exceeds 10 Swedish income base amounts.

Share-related incentive programme

East Capital Explorer AB does not have a share-related incentive programme.

Audit

External auditors

The extraordinary general shareholders' meeting on 25 May 2007 elected registered auditing company KPMG as auditors for East Capital Explorer AB for a four-year term, with authorised auditor Carl Lindgren as auditor in charge. Carl Lindgren is also auditor for Modern Times Group AB MTG, Tradedoubler, Nordea, Investor, Castellum, Affärsstrategerna, Intrum Justitia and Skistar. Carl Lindgren does not own any shares in the company.

Compensation to auditors

The company's auditors received compensation for audits and other requisite reviews, as well as for advisory services occasioned by observations made in the course of such reviews. During financial year 2007 the total compensation paid to the auditors was SEK 548,000 (corresponding to EUR 58 500), all relating to auditing services.

Financial reporting

External financial reporting

The company applies International Financial Reporting Standards (IFRS) in the preparation of the consolidated financial statements and monthly indicative net asset value reports. The quality of external financial reporting is ensured through a series of measures and procedures.

Communication with the company's auditors

The audit committee maintains regular contact with the auditors. In addition the auditors participate in the audit committee meeting at which the financial statements and full year report are addressed. The auditors report at that time on their observations from the audit and assessment of the company's internal controls.

	Function	Born	Board member since	Independent	Shares in company	Board meeting attendance
Paul Bergqvist	Chairman	1946	2007	Yes	1,300	10/10
Lars Emilson	Board member	1941	2007	Yes	1,500	9/10 1
Alexander V. Ikonnikov Board member		1971	2007	Yes	1,000	9/10
Justas Pipinis	Board member	1973	2007	No	1,000 own shares, an additional 1,500 shares through a company.	8/10
Kestutis Sasnauskas	Board member	1973	2007	No	10,000	7/10

¹ Lars Emilson was elected after the first board meeting.

Compliance with Swedish Code of Corporate Governance

The following table presents and explains East Capital Explorer AB's deviations from the Swedish Code of Corporate Governance.

Code rule	Description	Deviation	Explanation
4.2.1	Remuneration Committee	Has not been established	In light of the company's limited number of employees, the board concluded that no remuneration committee should be estab lished. The duties that would have been assigned to such committee are performed by the board as a whole.
2.1.1	Criteria for appointment of board members to the nomina tion committee	The criteria for the appointment of the current nomination committee were established by the Invest ment Manager, East Capital PCV Management AB, in consultation with chairman of the board.	The criteria for the appointment of the cur rent nomination committee were established by the Investment Manager in consultation with the chairman of the board during the listing process. The criteria for the nomina tion committee to be summoned before the 2009 annual general meeting will be pre sented to the shareholders for resolution at the 2008 annual general meeting.

The Board's report on internal control

According to the Swedish Companies Act and the Swedish Code of Corporate Governance the board is responsible for the company's internal controls. According to section 3.7 of the Code the board is responsible for ensuring that the company has a sound internal control system. This report has been prepared according to the Swedish Code of Corporate Governance, paragraphs 3.7.2 and 3.7.3, and is accordingly restricted to internal control over financial reporting. With reference to a pronouncement made by the Swedish Corporate Governance Board on 15 December 2005, no statement is made about how well controls have functioned. This report is an independent report and is not part of the formal annual report. The company's auditor has not reviewed the board's report on internal control.

Controlling function of the board

In accordance with the particular purpose of the company, one important function of the board is to monitor the investment activities carried out by East Capital Explorer Investments AB and East Capital PCV Management AB ("Investment Manager"). The company primarily monitors and controls that the investment activities are carried out in accordance with the investment policy and the Investment Management Agreement entered into with the Investment Manager.

Financial reporting, disclosure and monitoring

The company's accounting and reporting manual as well as its information policy, which are also appendices to the Investment Management Agreement with the Investment Manager, contain detailed provisions regarding how financial and other information in relation to East Capital Explorer Investments AB's portfolio shall be treated and provided to the company and stipulate, among other things, that the company shall receive all information required for it to fulfil its obligations pursuant to applicable law, regulations and stock exchange rules and that all information regarding the company must be treated in accordance with applicable law, regulations and stock exchange rules.

In addition to the accounting and reporting manual and the information policy, the company's board has the right to attend the board meetings of East Capital Explorer Investments AB and to review the board's minutes. The company may also request that the Investment Manager make presentations to the company's board on matters relating to the development of the portfolio in order to monitor compliance by the Investment Manager and East Capital Explorer Investments AB with the Investment Management Agreement and to obtain information. Furthermore, currently both the company's CEO, Gert Tiivas, and the company's board member, Justas Pipinis, are board members of East Capital Explorer Investments AB.

Most of this monitoring is carried out by the company's audit committee and executive management.

Duties of the audit committee

The duties of the audit committee are as follows:

Investment activities

To review the investment policy applicable to East Capital Explorer Investment AB's investment activities and discuss with the Investment Manager and the company's board any appropriate changes to be made to such policy over time.
To review the Investment Management Agreement and monitor compliance thereto by the Investment Manager and East Capital Explorer Investments AB, and recommend to the company's board any action that may be warranted under the terms contained therein.
To review the financial reporting and valuation methodologies of East Capital Explorer Investments AB and its portfolio investments.

Financial reporting

To discuss accounting matters with the company's management, the Investment Manager and the company's auditor.
To review the company's accounting and reporting manual and recommend amendments thereto, if needed.
To discuss with the company's management the format and level of disclosure in the monthly portfolio reports and quarterly and annual financial reports.

Auditing

To review the financial results of the company and East Capital Explorer Investments AB and the portfolio reports related to its investments.
To meet with the chief financial officer (CFO) on a regular basis in order to discuss and assure the effectiveness of the internal controls and procedures of the company.
To make recommendations to the board with regard to the appointment, retention and termination of the company's and East Capital Explorer Investments AB's auditor and as to auditor remuneration.
To monitor the auditing work by the company's auditor, including resolution of any conflicts between the auditor and the company's management regarding financial reporting.

Duties of the executive management team

The executive management team is responsible for the internal controls necessary to manage the material risks of current operating activities. These duties include identifying potential risks in the portfolio and financial reporting from East Capital Explorer Investments AB and the Investment Manager, including the reliability of the monthly reporting of the East Capital Explorer indicative net asset value. The executive management team is responsible for formulating a control system to prevent and detect these risks. The executive management team reports regularly to the board with respect to these matters.

Control activities

The company vigilantly works to eliminate and reduce material risks that affect internal control with respect to financial reporting. Examples of risk management control activities are:

• Active participation in the work of the board of East Capital Explorer Investments AB.
• Continuous discussion and contact with key individuals in East Capital.
• Continuous review of documentation for decision-making and formalities related to investment activities.
• Continuous review of the internal procedures and processes in order to assure the accuracy of the East Capital Explorer's indicative net asset value and portfolio reporting.

Articles of Association

Adopted at an extraordinary general meeting on 5 November 2007

§ 1 Registered name

The registered name of the company is East Capital Explorer AB (publ).

§ 2 Registered office

The company's registered office is located in the municipality of Stockholm.

§ 3 Operations

The object of the company's operations shall be to own and manage shares or other securities in East Capital Explorer Investments AB, org no. 556693-7370, other documents of value and liquid funds and to conduct activities compatible therewith.

§ 4 Accounting currency

The company's accounting currency shall be euro.

§ 5 Share capital

The share capital of the company shall amount to not less than EUR 2,000,000 and not more than EUR 8,000,000.

§ 6 Number of shares

The number of shares shall be not less than 20,000,000 and not more than 80,000,000.

§ 7 The board of directors and auditors

The board shall consist of 3–5 members without deputies. It is elected annually at the annual general meeting for the time up to the end of the next annual general meeting.

East Capital PCV Management AB, org. no. 556729-6941, has in addition the right, for the same period of time, to appoint one member as long as the Investment Management Agreement to which the company is a party, and which is described in § 13 of these articles of association, is in force.

1–2 auditors, with or without deputy auditors, are elected at the annual general meeting for the period extending to the close of the annual general meeting held during the fourth financial year after the election.

§ 8 Notice

Notice of a general meeting shall be given through an announcement in Post- och Inrikes Tidningar and in Svenska Dagbladet.

§ 9 Annual General Meeting

The annual general meeting shall be held within six months from the end of each financial year. At the annual general meeting, the following matters shall be addressed:

1) Election of a chairman of the meeting;
2) Preparation and approval of the voting list;
3) Approval of the agenda;
4) Election of one or two persons to verify the minutes;
5) Determination whether the meeting has been duly convened;
6) Presentation of the annual accounts and the auditors'

report and, if applicable, the consolidated annual accounts and consolidated auditors' report;

7) Resolutions:

a) on adoption of the income statement and balance sheet and, if applicable, the consolidated income statement and the consolidated balance sheet;

b) on the disposition of the company's profit or loss as shown in the adopted balance sheet;

c) on discharge of liability of members of the board and the managing director, as applicable;

8) Determination of the number of board members and, if applicable, auditors and any deputy auditors;
9) Determination of the fees to be paid to the board of directors and the auditors;
10) Election of the board of directors and, if applicable, auditors and deputy auditors; and
11) Other matters that may be brought before the meeting pursuant to the Swedish Companies Act or the articles of association.

§ 10 Financial year

The company's financial year is January 1–December 31.

§ 11 Participation at the general meeting

To be entitled to participate at the general meeting, shareholders must give the company notice of their intention to attend the meeting and, if applicable, state the number of assistants not later than 4 PM on the day stipulated in the notice of the general meeting. That day must not be a Sunday, any other public holiday, a Saturday, Midsummer's Eve, Christmas Eve or New Year's Eve and must not be earlier than the fifth weekday prior to the meeting. Attorneys do not need to notify the number of assistants. The number of assistants may not be more than two.

§ 12 Record day

The company's shares shall be registered in a CSD register (central securities depository) pursuant to the Financial Instruments Accounts Act (1998:1479).

§ 13 Majority resolutions in certain cases

The company is a party to an investment management agreement regarding, inter alia, the ownership and management of East Capital Explorer Investments AB, org. no. 556693-7370, as well as the company's rights and obligations as shareholder. A resolution by the company to terminate the agreement in accordance with section 16.2(e) of such agreement shall be resolved upon by a general meeting. Such resolution, as well as any resolution to amend section 3 or section 7 second paragraph of these articles of association, is valid only if supported by shareholders holding three-fourths of votes cast as well as three-fourths of the shares represented at the meeting.

Board of Directors in East Capital Explorer AB

Paul Bergqvist Alexander V. Ikonnikov Lars Emilson

Kestutis Sasnauskas Justas Pipinis

Paul Bergqvist

Chairman of the board

Born 1946. Engineering and business studies at Linköping University.

Chairman since 2007. Independent of the company, company management and the company's major shareholders.

2000–2006 Deputy CEO of Carlsberg A/S. 1995–2000 CEO Pripps-Ringnes AB. 1992–1995 CEO Procordia Beverage AB. 1988–1992 Deputy CEO PLM AB.

Board member and chairman of Carlsberg Sverige AB, Sveriges Bryggerier AB, HTC Sweden AB. Board member of Telenor ASA, TrygVesta AS, Pieno Zvaigzdes, Svenska Lantmännen, City-Mail Group AB, AB Svenska Returpack and Nova Liniya, (a portfolio company of The East Capital Bering Ukraine Fund).

Shareholding in East Capital ExplorerAB: 1,300 shares.

Kestutis Sasnauskas

Board member

Born 1973. Business studies at Vilnius University, Gotland University and the Stockholm School of Economics.

Board member since 2007. Not independent of the company's major shareholders.

Co-founder and partner of East Capital since 1997. 2004 CEO of East Capital Private Equity. Responsible for Baltic Research at Enskilda Securities prior to founding East Capital in 1997.

Member of the board and partner of Rytu Invest AB. Holds a number of board and other assignments within East Capital.

Shareholding in East Capital ExplorerAB: 10 000 shares.

Alexander V. Ikonnikov Board member

Born 1971. PhD in Economics, Moscow State University of Oil and Gas

Board member since 2007. Independent of the company, company management and the company's major shareholders.

Since 2005 Senior partner and co-founder of ZAO Board Solutions, a board and executive search services firm. 2001– 2004 co-founder of the Investor Protection Association.

Non-executive chairman of the Independent Directors Association. Director and head of the audit committee of Baltika, independent director in the National Depository Center, Russia.

Shareholding in East Capital ExplorerAB: 1,000 shares.

Lars Emilson Board member

Born 1941. Bachelor degree from Univeristy of Lund.

Board member since 2007. Independent of the company, company management and the company's major shareholders.

2004–2007 CEO Rexam PLC. 2000– 2004 Group Director Rexam Beverage Global can operations. 1999–2000 Managing Director PLM AB. 1970–1999 Various positions within PLM ABs packaging operations in Sweden and the US.

Chairman of Charter PLC. Nonexecutive director of Filtrona PLC and Luvata OY.

Shareholding in East Capital Explorer AB: 1,500 shares.

Justas Pipinis

Board member

Born 1973. B Sc from Stockholm University. Also studies at Vilnius University and Gotland University.

Board member since 2007. Not independent of the company's major shareholders.

Partner of East Capital since 2004. CEO of East Capital Holding AB (since 2005) and CEO of East Capital International AB (since 2007). 2002–2005 CEO of East Capital Asset Management AB. 2000 established the private equity fund East Capital Amber Fund. 1997–2000 Siemens Business Services AB.

Board member and owner of Stingray Holding AB. Holds a number of board and other assignments within East Capital.

Shareholding in East Capital ExplorerAB: 1,000 own shares, additional 1,500 shares through a company.

Management

Gert Tiivas CEO

Born 1973. Bachelor of Arts from Bentley College and a Master of International Affairs from George Washington University.

CEO since September 2007. Formerly Head of East Capital's Tallinn office. 2004–06 President of Growth Markets for OMX Group. 1998-2004 CEO of the Tallinn Stock Exchange.

Chairman of the board of the AVEC Baltic Property Fund AB, AVEC Baltic Property Fund Investors AB and AVEC Assets Management AS. Director in East Capital Power Utilities Fund AB, East Capital Explorer Investments AB, JSC Open Investments, AS Baltika and TEO LT.

Shareholding in East Capital ExplorerAB: 5,000 shares through a company.

Pia Tell Svensson CFO

Born 1970. Bachelor of Economics and Business Administration from the School of Economics at the University of Gothenburg.

CFO at East Capital since 2005 and retained as CFO in East Capital Explorer in July 2007 pursuant to the Services Agreement with East Capital.

2005 Regional Finance Manager, Nordics VERITAS Software AB. 1993–2005 various financial positions within the IT sector.

Shareholding in East Capital Explorer AB: 1,000 shares.

Louise Hedberg Head of Communications/IR

Born 1974. Master of Science in Economics and Business from the Stockholm School of Economics.

HeadofCommunications/IRsinceAugust 2007. 2002–2007 Head of Investor Relations Dometic Holding AB. 1998– 2002 communications consultant JKL Group AB.

Shareholding in East Capital ExplorerAB: 1,500 shares.

Accountants KPMG Bohlins AB Carl Lindgren Authorised Public Accountant

Definitions

Alpha

The result of active asset management measured in generated return in excess of a relevant benchmark index.

EVCA

The European Private Equity and Venture Capital Association. A member-based, non-profit trade association that represents the interests of the European private equity and venture capital industry. Has published guidelines for valuation of unlisted companies that is widely used as an industry standard.

Private Equity

Unlisted companies, meaning companies which shares are not listed on a stock exchange or other market place.

Semi-public Equity

Companies that, despite being listed on a stock exchange or market place, have shares with very limited trading volumes, and therefore are inaccessible for most investors. Trading is done on the so called second and third tier markets.

Sharpe-ratio

Risk-adjusted measurement used to compare how well the return of an investment compensates the investor for the risk taken. The higher the Sharpe ratio, the better the investments historical risk-adjusted performance.

Short-term investments

Investments that has the potential to generate attractive returns while remaining available for future investments.

Earnings per share

Net profit for the period divided by the total number of outstanding shares.

Equity ratio

Total equity including minority interests as a percentage of total assets.

Market capitalization

Total number of outstanding shares times price per share.

Net asset value (NAV)

Corresponds to the value of East Capital Explorer's net assets, i e total assets less net debt. An indicative NAV is calculated on a monthly basis and is published five working days after the end of the month.

Net debt

The net of interests bearing debt less financial assets, cash and cash equivalents.

Return on Equity

Net profit for the period divided by equity.

MSCI EM Europe Index

Includes Russian, Polish, Hungarian, Czech and Turkish equities.

OMXSPI

Equity index that includes all shares on OMX Nordic Exchange Stockholm.

PFTS Index

Includes equities traded on the the largest marketplace in Ukraine.

RTS Index

Includes the 50 largest companies traded on the Russian Trading System (RTS).

RTS 2 Index

Includes 78 companies on the RTS that have limited trading volumes.

Please note that the benchmark indices are provided solely as reference to evaluate fund performance. Although the provided indices may be regarded as the most suitable available benchmarks for the different funds in which we invest, these indices are not fully comparable benchmarks as the sector and country weighting in these indices currently are significantly different from the weighting in the respective funds.

Kungsgatan 33, Box 7214 SE-10388 Stockholm, Sweden Tel: +46 8 50597700 Coroporate identity no: 556693-7404 www.eastcapitalexplorer.com

AI assistant

Eastnine — Annual Report 2007

3037_10-k_2008-04-04_64f7dcbc-059f-4060-bb49-857355babad9.pdf

EAS TC APITALEXPLO RER

Annua l Report 2007

Contact

Financial calendar

AGM 2008

Participation

Notification of attendance may be made:

Table of contents

Dear shareholders,

The East Capital Explorer Share

Trading

Ownership structure

Share capital and number of shares

Basic facts:

Listing:

ISIN-code:

Ownership structure 28 December 2007

Net Asset Value

Portfolio on 31 December 2007

Net Asset Value and share price

Stronger economies and increased domestic demand

The Eastern E

European Markets

Stabilising interest rates and inflation levels

Increasing convergence with the EU

Milestones along the Eastern European region's road to the EU

1 May 2004:

1 January 2008:

Extensive tax reforms

Improved financial systems

Long-term growth prospects

Where the potential is to be found

The power utilities sector

The financial sector

The retail and consumer goods sector

The real estate sector

This is how we invest

Business idea

Goal

Dividend policy

About East Capital

East Capital Explorer and the investment manager

The Investment policy

Target country weight when fully invested

Countries

Sectors

Asset types

Investment restrictions

EAST CAPITAL'S FUTURE PRIVATE EQUITY FUNDS

EAST CAPITAL'S EXISTING AND FUTURE SEMI-PUBLIC EQUITY FUNDS

DIRECT INVESTMENTS OR CO-INVESTMENTS

SHORT-TERM INVESTMENTS

Main differences between East Capital Explorer and other types of funds and investment companies

East Capital Explorer

Investment funds and other types of "funds"

Investment companies

In the footsteps of Vitus Bering

East Capital Bering Russia Fund

Per 31 December 2007

Country exposure, %

Investment strategy

Fund performance

East Capital Bering Balkan Fund

Investment strategy

Fund performance

East Capital Bering Ukraine Fund

Per 31 December 2007

Sector exposure, % 21.1 Real Estate 17.9 Power Utilities 17.0 Retail 16.2 Banking & Finance 8.1 Oil & Gas 7.6 Consumer Goods 3.8 Metals & Mining 3.0 Engineering 1.4 Constr & Constr Mtrl 1.1 Transportation 0.8 Agriculture 0.8 Pharmaceuticals 1.2 Other

Country exposure, %

Investment strategy

Fund performance

East Capital Bering Central Asia Fund

Per 31 December 2007

Sector exposure, % 37.2 Oil & Gas 27.1 Banking & Finance 20.4 Metals & Mining 6.2 Real Estate 3.1 Transportation 2.6 Agriculture 1.5 Materials 1.3 Retail 0.6 Bonds

East Capital Explorer's investment:

Country exposure, %

Investment strategy

Eastnine Annual Report 2007