Eastnine — Annual Report 2017

Mar 21, 2018

CONTENTS

The year in brief	2
This is Eastnine	4
Message from the CEO and Chairman of the board	6
Megatrends in the Baltics	8
The real estate market 2017	10
Strategy and financial targets	12
Sustainability and value creation	14
Our portfolio
Portfolio Overview	16
Real Estate Direct	18
Real Estate Funds	24
Other	26
The share	28
GOVERNANCE
Risks and risk management	30
Corporate governance report	32
The Board of directors	36
Management	38
Employees	39
FINANCIAL STATEMENTS
Administration report	40
Financial reports	42
Notes	44
Five-year summary	58

Auditor's report 60 Definitions 64

TM

Long-term provider of sustainable prime office space in the Baltics

2017 – a strong year

During 2017 Eastnine's transformation gained speed. We divested holdings, grew our property portfolio through acquisition and development, and strengthened the management organisation. Today we have a strong position in Vilnius and we recently acquired our first property in Riga. With a strong cash position, low loan-to-value in the existing properties and more holdings to divest, we have a unique opportunity to become the most attractive landlord and partner for Baltic and international businesses.

NET ASSET VALUE

EUR242m

Comprising 46% real estate holdings, 37% other investments and 17% cash

NET ASSET VALUE PER SHARE EUR10.6

Record high, except for 2010 when oil price was at USD 100 and over 50% was invested in Russia

KEY FIGURES	2017	2016
NAV per share, EUR	10.57	9.67
NAV per share, SEK	103.9	92.6
Closing price per share, SEK	81.75	66.75
Net Asset Value, EURm	242.5	247.6
Market cap, EURm	206.3	196.2
Investments during the year, EURm	42.5	5.0
Divestments during the year, EURm	24.9	117.4
Property value total, EURm	107.5	66.8

SHARE PRICE

24%

Dividend adjusted return, SEK

VALUE CHANGE

9.3%

Growth in NAV per share, EUR

PROPERTY VALUE EUR

107.5m Directly owned property value as of 31 December 2017

All segments contributed positively to Eastnine's NAV performance in 2017. Real Estate Direct contributed the most by EUR 0.31 per share. Share buybacks had a positive effect of EUR 0.29 per share, as the company bought back shares at a discount to net asset value.

Important events during the year

• EASTNINE WAS BORN In May, the Annual General Meeting approved the change of name from East Capital Explorer to Eastnine, an important milestone in our transformation towards becoming a real estate company
• NEW CEO In July, Kestutis Sasanuskas, one of the company's founders with more than 20 years' experience from Eastnine's markets, was appointed new CEO after Mia Jurke chose to step down
• STREAMLINING OF THE PORTFOLIO In March, Eastnine sold its stake in the Estonian infrastructure company Trev-2, and streamlining of the portfolio continued throughout the year. Divestments of noncore holdings were made totalling EUR 24.9m
• NEW FINANCIAL GOALS AND DIVIDEND POLICY In September, a new dividend policy and new financial targets were set to reflect the ongoing transformation into a real estate company
• PROPERTY ACQUISITION IN VILNIUS In June, Eastnine acquired the A class property Vertas in Vilnius at a purchase price of EUR 29m, with 0% vacancy and a yield of 6.5%
• CONTINUED BUY-BACK Eastnine bought back 2,656,258 shares during the year for EUR 19.9m

This is Eastnine

EASTNINE is a Swedish investment company focusing on commercial real estate, mainly office properties, in the Baltic capitals. Today the operation consists of three segments: Real Estate Direct, Real Estate Funds and Other holdings and the aim is to transform into a pure real estate company by the end of 2020.

"As a long-term real estate company with a strong balance sheet, we have the capacity to invest in and take care of our properties.

Kestutis Sasnauskas, CEO

Vision

Leading long-term provider of sustainable prime office space in the Baltics

Portfolio overview

REAL ESTATE DIRECT

Eastnine's main activity is to be a long-term owner of and actively manage office properties in the best locations in the Baltic capitals.

Read more on page 18

REAL ESTATE FUNDS

Eastnine has existing holdings in real estate funds that invest in commercial properties in the Baltic capitals Tallinn, Riga and Vilnius.

Read more on page 24

OTHER

Investments comprise private equity and listed holdings, including East Capital funds of primarily listed equity. Read more on page 26

Why real estate in the Baltics?

The Baltic region, consisting of Estonia, Latvia and Lithuania, offers a unique mix of growth, financial stability and a well educated workforce. The region is being internationalised because of its technological competence and development, combined with competitive wage levels and office rents compared with Nordic countries, which in turn attracts global companies to locate there. All in all, this fuels demand for smart and sustainable office solutions.

Eastnine Annual Report 2017 5

RIGA

VILNIUS

TALLINN

The launch of Eastnine CEO Kestutis Sasnauskas:

2017 was the launch of Eastnine. The acquisitions and divestments we made during the year marked a good start to the transformation into a leading long-term provider of sustainable A-Class offices in the Baltic capitals. We also laid out our strategic goal to complete this transformation process by the end of 2020, with explicit return and dividend targets.

T he new company name Eastnine refers not only to our geographical focus east of the Baltic Sea, but also to the date of the fall of the Berlin wall 9 November 1989, which enabled investments in this region. Although the ongoing transformation of Eastnine to a pure Baltic real estate company might seem like a fundamental change, it has transpired both naturally and gradually. Going back to 2007 when I was a part of the IPO of East Capital Explorer, now Eastnine, Baltic properties were already one of the company's expressed focus areas. However, because of the financial crisis, five years passed before we made our first Baltic real estate investment in 2012, followed by several other successful investments in the segment. So when we decided to focus the strategy it was quite clear, for a number of reasons, where we saw the most potential.

BALTIC GROWTH WITH NORDIC RISK LEVELS

The main reason for the Baltic focus is the three Baltic economies' steady growth and convergence with the Nordic countries. GDP growth was particularly high in 2017, ranging between four and five per cent. The real estate sector clearly benefits from this growth, which in the long term should be reflected in rents and higher property values. We also find current yields attractive, especially considering that the risk level is not very different from that in the Nordic countries in terms of tenants, bank financing, currency and investment climate. Further, Estonia, Latvia and Lithuania are all among the top twenty in the global Ease-of-doing-business ranking, higher than countries such as Germany, Switzerland and the Netherlands.

SIGHTS SET ON MODERN OFFICES

Our focus segment within the broader Baltic real estate sector is A-class offices in prime locations in the capital cities, a segment we view as the most attractive today and in the longer term. The supply of modern offices is still small compared to other cities in the Nordics and in Central and Eastern Europe, while demand is strong, not least from international companies wanting to re locate not only support functions such as back office or shared services, but also IT development here. Nasdaq, Barclays, Visma and Danske Bank, to name a few, have already established operations in Vilnius, the most student-dense city in the Baltics, with lower cost levels compared to for example Krakow and Warsaw.

Having specialisation and scale means that we build internal expertise, which in turn makes us a natural partner for the interna-

tional or local company that seeks modern office space, while enabling us to meet our tenants' continuously changing needs. Another result of this position is efficient management costs. As a long-term real estate company with a strong balance sheet, we also have the capacity to invest in and take care of our properties. This is our new company Eastnine as of 2017.

UNIQUE OPPORTUNITY TO BUILD REAL ESTATE COMPANY

For us to transform the company into a market leader within prime office spaces in the Baltic capitals, we need to not only acquire new properties, but also divest non-core holdings. Furthermore, we need structures, new processes and new colleagues. In 2017, we furthered all of these missions. Today we have a strong position in Vilnius and we recently acquired our first property in Riga. With a strong cash position, low loan-to-value, a long-term horizon and more holdings to divest, we have a unique opportunity. We admit that we have an extensive challenge in the limited market and transaction size of our target segment, but we also know that we have a strong pipeline of potential acquisitions and that we are determined to carry out the transformation to become one of the leading real estate companies in the Baltics.

Kestutis Sasnauskas, CEO

A Europe reunited Chairman Lars O Grönstedt:

On the last night of 1979, at the dawn of a new decade, I celebrated the New Year together with a high-spirited bunch of students from the Stockholm School of Economics. Most of us would go on to complete our studies during the coming year, and it was clear that the New Year this time was also to some extent marked by a sudden awareness of the inevitable seriousness of this situation. What would we do with our lives? We put on a great show of bravado that evening. But near the end, when only a few of us were left, we invented this game. Which event in what remained of our lives would be at the same time the most desirable and the most implausible?

E liminating world hunger or all the diseases in existence were obvious answers, but these were given the thumbs down after heated discussions, since both well-being and personal health are subjective experiences anyway, and therefore impossible to determine with certainty as actually having happened. The water-fuelled car was a finalist for quite a while. But in the end the vote was won by "the fall of the Berlin Wall" as being the most desirable and the most implausible event that could happen in our lifetime. Modesty prevents me from revealing who came up with that proposal.

This year, the Berlin Wall has been down for longer than it stood.

The parts of Europe that were then liberated, have since experienced extraordinary progress in terms of freedom and welfare. I am not naive enough to deny the problems, and worse, that rose in the wake of the fall of the Wall. On balance, however, one must conclude that the result is stunningly positive.

The outcome has been helped not only by the efforts of the countries themselves and the generous subsidies persistently provided by the EU and the entire Western Alliance. An important factor was also the swift rise of market economy and industries. Eastnine has always been at the forefront of this development. Our aim has always been to give our investors the key to assets that are not easily accessible for those without true local knowledge and networks. During recent decades, clearly regulated markets have evolved across Eastern Europe and investors now have direct access to local stock exchanges. A large range of funds investing in the region further reduces the need of a listed company that makes direct investments here.

However, there are still highly attractive asset classes in Eastern Europe that are not easily accessible for investors. Real estate is one of them. The three Baltic states offer not only solid returns, but also investment conditions just as stable as those of the Nordic capitals. That is why we have during recent years redirected our investments to real estate in the Baltic capitals. By focusing on A Class office properties, we have the capability to become one of the leading real estate managers in Tallinn, Riga and Vilnius. All three are growing cities with a real estate market that is powered by local demand as much as by Nordic and other European businesses locating their back office and similar operations here. We are also confident that our focus on good corporate governance and best-in-class environmental standards will allow us to not only become a good corporate citizen, but also a popular property owner for tenants, the public and the urban community.

This shift is part of an ongoing process that has taken place over several years, and that has also included an explicit shareholder-friendly dividend policy combined with buybacks, establishing a regular cash-flow that can cover running costs and dividends, a clear separation from East Capital, halving our costs as a proportion of NAV and, finally, establishing an in-house management team under a new CEO.

I would like to finish my tenure as Chairman by thanking the whole organisation of Eastnine, and explicitly the two conscientious and devoted CEOs whom I have had the pleasure of working with. First Mia Jurke, who diligently carried out the separation from East Capital and consequently enabled the cost savings. And now Kestutis Sasnauskas who is, with his infinite local knowledge, business sense and working capacity, transforming Eastnine into a real estate company with Scandinavian management culture and Baltic returns.

Lars O Grönstedt, Chairman

Megatrends boost the Baltics

A megatrend is a global change, which has emerged from social, economic, political, environmental or technological perceptions. Megatrends influence a wide range of activities and processes, possibly for decades. They are the underlying forces that drive trends. By understanding these megatrends and which particularly affect Eastnine's activities, we can better understand our market and customers, so as to be able to offer what is in demand.

G lobal megatrends continue to have wider societal implications, affecting individuals, where Eastnine has recognized three megatrends as particularly important, namely urbanisation, climate change and digitalisation. By identifying these trends, Eastnine can act faster and develop office solutions demanded by our tenants in order to administer an effective business. Eastnine will also better understand the modern company and their needs for continued development.

URBANISATION

The global trend of increasing urbanisation is taking shape in the Baltics as well. Urbanisation affects the region in two ways; firstly by movement towards western European cities meaning a decreasing population, and secondly by national urbanisation, with a growing population in the capitals Tallinn, Riga and Vilnius, where an estimated one third of each country's population lives. The Baltic capitals have a young and well educated workforce, especially within IT and innovation, and most are also multilingual. More than half of the

population in Lithuania speak at least two languages. In spite of decreasing populations, the countries continue to show high economic growth. The capital cities are blossoming and the proportion of young people is among the highest in Europe, where the Baltic capitals attract with their mix of education, job opportunities and experiences.

CLIMATE CHANGE

Climate change is becoming an ever more important issue for society. Reduced emissions must be achieved at all levels, and global and regional regulatory requirements are increasing. The issue was also in focus in autumn 2017 when Estonia held the EU presidency. The increased awareness of the acute situation has changed consumer attitudes. In the real estate sector, both property owners and tenants are raising their requirements for exist-

"Estonia has the third largest number of start-up companies per capita in Europe.

ing properties' technical solutions, so as to be as energy efficient as possible, while new development projects must use sustainable materials and preventive measures so as to reduce climate impact from the start. Tenants consider the importance of their offices to be consistent with the companies' own values higher than ever.

DIGITALISATION

Digitalisation has been identified as an important driving force for Eastnine. This changes how we communicate with each other, how companies run their businesses and how office space is used. Digitalisation has created a new type of company and in recent years the three Baltic countries have been at the forefront of technology and innovation. New smart services simplify communication between employees and enable us to do our jobs anywhere in the world.

The Baltic capitals are rapidly establishing themselves as new hubs for start-up companies, while the established international IT and technology companies continue to grow. Latvia was the first Baltic country to legislate a specific start-up tax and define start-up companies by law, while Estonia has tertiary education specialised in start-ups and entrepreneurship. Starting a company in any Baltic country takes no more than three days and clusters of innovation companies benefiting the most from digitalisation are growing. This is creating a strong ecosystem for start-up companies in the Baltic capitals. The growing service sector, especially in Vilnius, has drawn great benefits from the digitalisation and enabled more international companies to establish their service centres here. Thus far, only a small percentage of the population is employed in the service centre industry and there is a considerable growth potential. Eastnine's current tenants include many Swedish, Nordic and international IT companies, which all benefit from digitalisation and have chosen to establish their service centres here, supported by the highly skilled labor force and rapid technological progress. Estonia especially has distinguished itself as the Baltic country with the

A DIGITALIZED ESTONIA WITH E-ESTONIA

• More than 24,000 e-Residents in 150 countries and over 4,300 companies owned by e-residents. Edward Lucas, journalist for The Times, was the first person to become an e-resident and today Angela Merkel, Shinzo Abe and Prince Andrew are all e-residents, to name a few.
• The programme enables non-Estonians to:
• Create an Estonian company online in less than one day
• Manage the company from anywhere in the world
• Use e-banking and make remote transfers
• Access international payment service providers
• Digitally sign and send documents and contracts
• Handle accounting and declare Estonian taxes online.

strongest start-up culture. The country has the third largest number of start-up companies per capita in Europe, with many small, growing companies in need of IT-educated staff and smaller, more flexible offices.

The digital revolution enables for completely new office solutions such as coworking, activity-based offices as well as new technical solutions that create a better work environment and reduce the environmental impact. In addition, Lithuania has the world's fastest Wi-Fi which greatly simplifies for employees to work from anywhere. Along with Estonia's great initiative "e-Estonia" for a digitalised governing body and community, which for example in the last local elections resulted in 32 per cent of the population voting online. During the last six months of 2017, Estonia held the European Presidency and focus was on contributing to digitalisation by promoting the free movement of information and on data security.

THE NUMBER OF SERVICE CENTRES IN THE BALTICS IS STEADILY GROWING

DID YOU KNOW...

• The three people who developed Skype, and later had financial backing from Niklas Zennström of Sweden and Janus Friis of Denmark, come from Estonia and about 45 per cent of the company's employees are still in Tallinn?
• The tailor Jacob W. Davis, who created the trousers that came to be the model for the first pair of Levi Strauss jeans, was born and raised in Riga before emigrating to the USA?
• It is a Lithuanian company that develops new laser techniques for processing glass in collaboration with the American market leader in extra resistant glass, whose Gorilla Glass products can be found in more than 4.5 billion smartphones over the world?

The capitals lead the way

The year was marked by a great interest in office properties in prime locations and a high level of transaction activity in the Baltics, with the Baltic capitals Tallinn, Riga and Vilnius accounting for most transactions, and yields still attractive compared with the Nordic region. New developments are gaining speed and over the next few years the total office stock will increase significantly in the capitals.

F or the Baltic countries, 2017 was characterised by continued recovery and development. All three countries displayed strong growth, supported by the general recovery in Europe and Russia. EU investments in infrastructure and foreign direct investment in the region increased, while rising real wages and falling unemployment stimulated consumption. The euro was strengthened and the oil price stabilised.

The countries showed particularly high economic growth, around four per cent in Lithuania and Latvia, and five per cent in Estonia for the year. Inflation, mainly influenced by stronger domestic demand and rising commodity prices, has risen to almost four per cent in Estonia and Lithuania and just below three per cent in Latvia. In spite of strong growth, pay levels are considerably lower than in Sweden. The average total cost per employee per month varies between EUR 1,000 and EUR 1,500, while the equivalent figure in Sweden is estimated at EUR 5,000.

ACTIVE TRANSACTION MARKET

Attractive market and financing terms, high economic growth and the countries' EMU membership have continued to attract international real estate investors to the Baltics during the year. Since the record year of 2015, transaction volumes have continued to be fairly high in Estonia and Lithuania, with available capital and investors who are actively seeking quality properties. The lower transaction pace in 2017 compared to previous years is explained by the lack of high quality objects, while demand is continued strong. In recent years, the Estonian and Lithuanian transaction markets have been dominated by foreign, and especially Nordic, investors and funds. Tallinn experienced an active transaction market in 2017. Vilnius also had a high level of activity, with retail and office properties accounting for the majority of transactions. The Latvian market on the other hand was dominated by Baltic investors. Nordic and international investors are increasingly to be found in Latvia, but thus far to a limited extent. Interest in quality properties in prime locations is strong and supply is limited, which resulted in lower yields, which were between 6.5 and 7 per cent for A class offices at the end of 2017.

STRONG DEMAND FOR OFFICES

High demand for offices in prime locations and a still not fully developed central business district (CBD) enabled a high pace of new developments of A class offices, which is expected to continue this year. The limited supply of existing property means that investors are increasingly acquiring development properties

and undeveloped land in order to expand their portfolios at a desired pace. Owners of older properties are also considering rebuilding, to be able to compete with new properties and meet tenants' expectations for modern office spaces. Both existing and new properties are increasingly being adapted to conform with international environmental certification, BREEAM or LEED.

Vacancy levels remain low with a slight increase during the year due to exceptionally high growth in the office stock and there are signs that the market is beginning to saturate, an effect that is expected to be most notable for B class offices. Although the vacancy level is expected to rise as many development projects are completed, we can see continuing high demand and absorption for A class offices. There is strong demand from IT, banking and insurance companies, and these are usually seeking large premises with expansion opportunities. Primarily international companies are colocating a number of offices or expanding their activities, often by establishing shared service centres for IT, back office, security and other functions. Demand for smaller offices is mainly driven by start-up companies that need flexibility and high-tech offices to grow in.

PENT-UP DEMAND INCREASED THE PRODUCTION RATE

After many years with an almost unchanged office stock, new development has taken off again in recent years and many new projects were completed during the year. A number of major projects are in the final stages of planning, although many are awaiting the building start until key tenants have been secured. Because of the shortage of office space, there is an increase of pre-leasing for development projects, which in some cases has

also been a requirement for obtaining project finance. This has been accepted because of the temporary shortage of large office spaces in particular.

In Riga, most investments and new build projects are focused to the prospering Skanste area, which is slowly but surely turning into a new CBD. Skanste is now the most attractive area, which shows in the significantly lower vacancy levels compared with the rest of Riga. Vilnius saw a high pace of production in 2017, ending just under the expected level for the year due to some delayed projects that are expected be completed in 2018 instead. The production rate is expected to slow somewhat during the year, but will still be high in terms of historical levels for Vilnius with approximately 40,000 square metres completed in 2018, mainly in A class properties. Tallinn has seen stable growth in its office stock for a number of years and this is expected to continue. Construction has started on many large-scale projects and the office stock, especially in the CBD, will increase over the next few years. For example, the A class office Maakri Quarter is expected to be completed in 2018 with a leasable area of about 18,000 square metres.

STABLE RENT GROWTH IN PRIME LOCATIONS

The office stock will grow rapidly over the next few years and may temporarily slow rent growth, but in the long term, steadily increasing and sustainable rent levels are forecasted in all three capitals. However, offices outside the CBD and older properties will most likely experience increased competition with a consequent adjustment of rent levels, leading to a greater gap between properties in prime locations and those in the outer urban areas.

Strategy and financial targets

Eastnine's strategy consists of six parts, with the common goal of developing the company into a leading provider of sustainabe prime office space in the Baltic capitals.

Specialise in direct ownership of A class office properties in the best locations in Vilnius, Riga and Tallinn

Eastnine shall be a leading, long-term real estate company in the Baltic capitals focusing on A class offices in central locations, for the purpose of creating real estate operations that generate value in the form of rental and value growth.

Rapid development is occurring in the Baltic capitals in terms of economic growth, thanks to the growing international service sector, the outstanding technological development and urbanisation. Although the supply of modern premises is limited and Baltic rent levels are relatively low, demand is increasing because of the business-promoting environment in the Baltics, providing good conditions for Eastnine to run its operations with low costs compared to Nordic real estate companies, with a higher potential for returns.

Offer tenants flexibility and top service, to help them to grow

be able to offer advanced and environmentally effective

Selective investments in development projects

Eastnine intends to invest in existing property and participate to some extent in the development of selected business centres where the company has greater opportunities to influence property design, energy consumption and a sustainable society.

Strict requirements at the time of acquisition on the predictability of cash flows, through low vacancy levels, good location and stable tenants

At the time of acquisition, there are strict requirements for the predictability of future cash flows, through low vacancy levels, good locations and quality tenants. Eastnine's current tenants include many well-known Nordic and international IT companies and banks who have chosen to establish shared service centres for their global support functions in the Baltic capitals, thanks to the availability of a well-educated workforce and the technological progress in the Baltics.

Maintain high sustainability standards in the properties for improved energy efficiency and lower total costs for tenants

Eastnine's properties shall maintain overall high environmental standards especially in terms of energy efficiency, which will also reduce total costs for Eastnine's tenants. To ensure that the properties have high environmental standards, they will to the extent possible be certified to LEED Platinum.

Gradually dispose of non-core holdings in line with investment opportunities in real estate, while taking liquidity needs into consideration at all times

Eastnine shall gradually dispose of non-core holdings in line with investment opportunities in real estate, while taking liquidity needs into consideration at all times.

LOAN TO VALUE RATIO

Loan-to-value ratio below 65% on portfolio level 2017: 30.3%

INTEREST SERVICE COVERAGE RATIO

2.0X

Interest service coverage ratio above 2.0x 2017: 4.4x

RETURN ON EQUITY

The return on equity target, over a 5-year period, is 13–15% 2017: 11.2%

FINANCIAL TARGETS AND RISK MEASURES

Eastnine's overall business concept is to create the highest possible risk adjusted returns for its shareholders. As the business is increasingly focused on direct ownership of real estate investments in the Baltics, Eastnine's governance will be increasingly characterised by the financial goals and risk measures for the real estate direct activities.

DIVIDEND POLICY

Eastnine's annual dividends shall amount to at least 50% of profit from property management from the real estate direct segment. Furthermore, taking into consideration the company's financial position and investment possibilities, the board may decide on share redemption or buy backs. During Eastnine's transformation phase into a focused real estate company, which is expected by be completed by the end of 2020, annual dividends shall amount to at least 2.0% of the net asset value at the end of the previous year.

The proposed dividend for the 2017 financial year amounts to SEK 2.10 per share, corresponding to 2.0% of net asset value.

Profit from property management capacity shall reach EUR 15m by the end of 2020 2017: EUR 3.1m

EASTNINE'S FUTURE DEVELOPMENT

The first real estate investment was made in 2012 and the target is to transform the portfolio by the end of 2020.

Sustainability and value creation

Eastnine creates value for investors through responsible investments and active work on property development. Through energy efficient offices that reduce tenants' costs and help create a better working climate, Eastnine creates value for tenants, who have high demands for flexible and sustainable solutions.

E astnine respects the UN Global Compact Ten Principles and the Sustainable Development Goals. The company's work is regulated by a code of conduct, which is based on the principle of respect, focusing on responsibility and strict ethical values.

All employees shall be offered the same opportunities, regardless of gender, nationality or ethnic origin, sexual orientation or religious faith. All employees are also entitled to a work environment that respects the integrity of the individual and is free of all forms of discrimination and harassment.

Eastnine is continuously working on a number of initiatives to facilitate the more effective use of resources and encourages its employees to take an active role in this. The objective is to reduce the volume of material consumed and to encourage recycling and more use of recycled materials.

Investments are an important contributory factor to growth and innovation in the Baltics. Substantial investments also bring more opportunities for influence and increased responsibility. Eastnine shall use these opportunities responsibly and work to achieve a more effective and conscious real estate market in the Baltics. Decisions on future real estate investments are based on an in-depth analysis of factors that could influence future returns. The analyses involve financial factors, as well as factors relating to environmental impact and diligence work on the other parties in transactions. By including these factors in its investment decisions, Eastnine can minimise risk and contribute to sustainable development.

During 2018, Eastnine will further develop its sustainability activities, including by preparing a sustainability plan and investigating possibilities for participation in external collaboration and initiatives in sustainability issues. Another important aspect is dialogue with stakeholders, where issues can be identified that are most important for them, such as the requirements tenants have for their workplaces.

Eastnine has zero tolerance of any form of corruption or bribery. The requirements for ethical standards and principles that Eastnine sets for its employees also apply to the company's business partners.

FOCUS ON THE ENVIRONMENT

Energy consumption in buildings and in the construction of buildings accounts for more than a third of all global energy consumption and almost a quarter of the world's greenhouse gas emissions. Buildings account for almost 40 per cent of energyrelated carbon dioxide emissions. In the real estate sector, both owners and tenants are raising their requirements for existing properties' technical solutions, to be as energy efficient as possible, while new development projects must use sustainable materials and preventive measures so as to reduce climate impact from the start. Eastnine therefore works continuously to reduce the environmental impact of the properties, both existing properties and new builds, for example by changing to energy-saving lighting and reducing water and energy consumption. Improving energy efficiency is not only good for the environment – but also reduces costs.

In building projects, Eastnine requires its suppliers to ensure a good work environment that focuses on safety. Thanks to its strict environmental requirements for buildings, Eastnine also creates a good work environment for tenants, in the form of clean air and good ventilation for example.

Eastnine's real estate holdings consist of 3Burės in Vilnius, which currently consists of two towers with a third under construction, Vertas, also in Vilnius, and Alojas Biznesa Centrs located in Riga. Vertas was the first commercial building in the Baltics to achieve BREEAM In-Use classification and it is expected to comply with LEED certification requirements by 2019 at the latest. For the two towers of 3Burės, there is an ongoing process to certify the buildings to LEED Platinum, which will be completed in 2018. The third tower has been pre-certified during the design phase and when completed will comply with LEED Platinum.

Eastnine creates value for the company's stakeholders in many ways.

SHAREHOLDERS AND FINANCE MARKET

Eastnine's overall business concept is to create the highest possible risk adjusted returns for its shareholders. Focus is on creating a real estate operation that will generate value growth in the form of rent income.

CUSTOMERS

To help tenants evolve, Eastnine shall offer flexibility and first class service. Through active property development, Eastnine helps to create positive work environments for the customers' employees, in terms of both physical work environment such as the indoor climate and also the social work environment, with opportunities for cooperation with others in the same industry.

EMPLOYEES

Eastnine has a narrow organisation and offers competitive employment conditions and a positive work environment for employees. The company has a small number of local employees in the Baltics and will increase its expertise and local presence in order to handle further acquisitions.

SUPPLIERS

Eastnine strives to develop long-term relationships with its suppliers. Requirements are set at an early stage that suppliers and business partners shall follow the guidelines of the company's code of conduct. In addition to financial value, Eastnine also contributes, for example, to a safer working environment at suppliers through the requirement for safety measures in projects.

SOCIETY

Substantial investments also bring more opportunities for influence and increased responsibility. Eastnine wants to embrace its responsibilities in the local community and there are great opportunities for influencing its development by focusing on specific areas. Eastnine strives to take an active role in the development of the areas where the company's properties are located, for example in the design of green areas and infrastructure. Through property development and acquisition, Eastnine also contributes to social development by creating new job opportunities when international companies become established in the Baltics and employ a local workforce.

Strict requirements for sustainability in design and construction

Construction has commenced on the third tower of 3Burės and sustainability requirements have been part of the process from the start. A sustainability strategy was determined during the design phase, specifying requirements for materials and design that would reduce the property's environmental impact. The building shall be certified to LEED Platinum, which is the highest level of LEED certification. The requirements needed

to achieve this rating have been observed throughout the project. The building was pre-certified to LEED Platinum during the design phase.

The third tower is being constructed using advanced techniques for energy use and follow up, for the purpose of reducing energy consumption. Smart solutions make use of the heat and cold generated in the building, thanks to the design of the roof, for example. Renewable energy sources are used wherever possible and a geothermal energy plant has been built to reduce the use of conventional cooling systems based on Freon.

At least 20 per cent of the building material comes from recycled materials. A similar percentage of the material has been bought from local producers, thus reducing transportation and promoting the local economy.

Portfolio overview

	Value	Net asset value		Value	Value change
NET ASSET VALUE	31 Dec 2017 EURM	per share EURM	% of NAV	31 Dec 2016 EURM	Jan–Dec 2017 %¹
Real estate direct
3Burės	30.7	1.34	12.7	25.4	20.6
Vertas	29.9	1.30	12.3	0.0	2.6
3Burės development	13.6	0.59	5.6	5.0	12.0
Total real estate direct	74.2	3.23	30.6	30.4	11.2
Real estate funds
East Capital Baltic Property Fund II	20.8	0.91	8.6	27.8	13.8
East Capital Baltic Property Fund III	16.2	0.71	6.7	8.8	9.1
Total real estate funds	37.1	1.62	15.3	36.7	12.2
Total real estate	111.2	4.85	45.9	67.1	11.6
Other
Melon Fashion Group	48.6	2.12	20.0	42.9	18.0
East Capital Eastern Europe Small Cap Fund2	19.2	0.84	7.9	28.7	–4.7
East Capital Global Frontier Markets Fund	12.1	0.53	5.0	10.2	18.4
Komercijalna Banka Skopje	10.3	0.45	4.2	10.7	1.2
Investments fully divested in 20173	0.0	0.00	0.0	7.2	–1.8
Total Other	90.2	3.93	37.2	99.6	8.1
TOTAL PORTFOLIO	201.4	8.78	83.1	166.7	9.9
Cash and cash equivalents	41.1	1.79	17.0	83.5
Other assets and liabilities, net	–0.1	0.00	0.0	–2.7
Net asset value	242.5	10.57	100.0	247.6	9.34

1. The calculation has been adjusted for investments, divestments and distributions during the relevant period, i.e. it is the percentage change between:

the ending value plus any proceeds from dividends or divestments during the period, divided by the starting value plus any added investment during the period 2. Previously named East Capital Deep Value Fund

1. Trev-2 Group was sold in Q1 2017 for an amount of EURM 5.7. East Capital Bering Ukraine Fund Class R sold in Q4 2017 for an amount of EURM 1.3 4. NAV per share development

The number of shares used in NAV/ share 31 Dec 2017 is 22,948,205 and is adjusted for repurchased shares held by the company.

EUR 1 = SEK 9.83 on 31 Dec 2017. Source: Reuters

Note that certain numerical information may not add up due to rounding.

REAL ESTATE DIRECT

Eastnine's portfolio consisted of two directly owned properties by year-end, 3Burės and Vertas, both located in central Vilnius. In addition to the two existing buildings, a third building is now being constructed on the site adjacent to 3Burės: 3Burės development. This segment is the company's primary focus and where future acquisitions will occur. The company shall acquire cash flow generating A class properties and invest in selective development projects. The focus is on office properties in prime locations in the Baltic Capitals.

REAL ESTATE FUNDS

In the Real Estate Funds segment, Eastnine's portfolio consisted of eight properties by year-end, seven of them in Tallinn and one in Riga. East Capital Baltic Property Fund II started in 2012, is fully invested and duration is until 2019, with an option to extend for three years. East Capital Baltic Property Fund III started in 2015 and is in the investment phase with a duration until 2023 and a possible extension up to two years. Its focus is on the acquisition of primarily retail property and shopping centres. Obs! Mittcirkelns färg beroende på bottenfärg i Indesign

OTHER

The Other segment contains all holdings that are not Real Estate Direct or Real Estate Funds, such as Russian Melon Fashion Group, Komercijalna Banka Skopje listed on the Macedonian stock exchange, and East Capital Eastern Europe Small Cap Fund and East Capital Global Frontier Markets Fund. Holdings in this segment are gradually divested and exit opportunities are being explored to finance further real estate acquisitions.

SEGMENT DISTRIBUTION

In Q2 2017, Eastnine changed its segment reporting so as to better reflect the ongoing strategic shift. The real estate segment represented 46 per cent of the portfolio by year-end, compared with 27 per cent at the end of 2016. Real Estate Direct accounted for 31 per cent and Real Estate Funds for 15 per cent, compared with 12 and 15 per cent respectively the previous year. The Other segment amounted to 37 per cent of the portfolio, compared with 40 per cent the previous year. At year end, cash and cash equivalents amounted to 17 per cent, compared with 34 per cent at year end 2016.

GEOGRAPHICAL DISTRIBUTION

The Baltics represents Eastnine's largest geographical exposure with 56 per cent of the portfolio by yearend, compared with 45 per cent at the end of 2016. Russian exposure fell to 27 per cent from 28 per cent, with Melon Fashion Group the largest holding. A further significant portion of the portfolio, 9 per cent, is invested in the Balkans, with Komercijalna Banka Skopje the largest holding. The corresponding figure for 2016 was 14 per cent. Holdings in other countries decreased to 8 per cent, from 12 per cent at the end of the previous year.

Real Estate Direct

Eastnine's Real Estate Direct portfolio consisted of the office properties 3Burės and Vertas by year-end, both located in the heart of Vilnius. During 2018 Eastnine made its first investment in Riga, by acquiring Alojas Biznesa Centrs, an A class office property in central Riga, with an adjacent land plot and additional B class office, offering a total gross leasable area of 11,600 sqm and EUR 2.4m in annual rental income. New investments will be made in the Real Estate Direct segment, focusing on high quality properties in prime locations in the Baltic capitals.

T he real estate segment grew during the year and represented 30.6 per cent of Eastnine's net asset value by year-end, with the acquisition of Vertas. The segment's total leasable area was 50,600 square metres, including the ongoing development project and the total property value amounted to EUR 107m after revaluation of the 3Burės properties. Thus far, Eastnine's real estate portfolio is small and the focus for the future is on acquiring office properties and development projects in attractive locations.

3BURĖS

Eastnine's first direct investment in real estate was made in 2014 when 3Burės,

one of the Baltic's first A class office properties, was acquired. The property consists of two skyscrapers with a total leasable area of 28,400 square metres located in the central business district of Vilnius. A number of lease contracts have been renegotiated during the year and rental income increased by just over 2 per cent, while vacancy at year-end was 4 per cent. Since year-end, the vacancy level has been reduced to 1 per cent, an even lower level than earlier in the year. An external valuation was made at year end, and the property value amounts to EUR 63.8m.

During the year a gym was opened as an additional service for the tenants and a number of events have been organised in the building as examples of measures

to ensure service quality and maintain the premium status of the building. During the year the roof of 3Burės has been repainted and a new building management system installed, as further steps towards a more energy efficient building and to comply with the requirements for LEED environmental certification.

Focus for 3Burės will this year remain on continued development of services in the building for existing tenants, energy efficiency measures and renegotiation of lease contracts expiring during 2018. These renegotiations are expected to mean an increase in average rents, which for some contracts are low in relation to current market levels.

Read more about 3Burės at www.3bures.lt

3BURĖS DEVELOPMENT

Leasable area: 12,800 sqm Property value: EUR 15.1m Vacancy level: 2 per cent Anchor tenants: Swedbank and Visma

Leasable area: 9,400 sqm Property value: EUR 28.5m Vacancy level: 0 per cent Anchor tenants: Delfi and Citco

3BURĖS

Leasable area: 28,400 sqm Property value: EUR 63.8m Vacancy level: 4 per cent Anchor tenants: Telia, Huawei and Cobalt

The year in brief

• VERTAS WAS ACQUIRED in 2017 for EUR 29m, corresponding to a yield of 6.5 per cent
• 3BURĖS CONTINUES to show increasing cash flows
• CONSTRUCTION OF 3BURĖS DEVELOPMENT is proceeding according to schedule and it is expected to be completed at the end of 2018

of net asset value by year-end

3BURĖS DEVELOPMENT

On the site adjacent to 3Burės, a third office building is being developed by Eastnine with a total leasable area of 12,800 square metres. 98 per cent of this property has been pre-leased to Swedbank and Visma and construction is proceeding on schedule. The building is expected to be competed by the end of 2018 and it will then live up to its name, as 3Burės means three sails in lithuanian. The building will obtain environmental certification, and during the design stage it was pre-certified in accordance with LEED Platinum. Eastnine's investment during the year amounted to approximately EUR 7m. An external valuation of the property was made at year end, resulting in a valuation of EUR 15.1m. Thus far, the project has been entirely equity financed and at the time of completion the loan-to-value ratio of the property will be 65 per cent.

VERTAS

The office property Vertas, located in the heart of Vilnius opposite the parliament buildings and only a few minutes walk from the old city, is Eastnine's second direct investment in real estate. The property was acquired in 2017 for a purchase price of EUR 29m, corresponding to a yield of around 6.5 per cent. The building, with a leasable area of 9,400 square metres, was built in 2007 and was the first commercial building in the Baltics to be certified in accordance with BREEAM In-Use Sustainability. The property's waste is separated at source and solutions for reducing energy and water consumption are in place. The building also has a separate bicycle parking in the underground car park and is close to public transport.

At year-end, Vertas was fully leased, as a result of some tenant customizaitions and improvements, and the average rent was unchanged. The value of the property has not changed since acquisition and it will be valued by an external appraiser after 12 months of ownership. Vertas was by year-end financed without bank loans, due to Eastnine's strong cash position, but refinanced through bank loan in January 2018.

Read more about Vertas at www.vertas.lt

Central location and modern office environments

Audrius Tutlys, Country Manager at Teva Lithuania, 3Burės tenant. Teva is a global pharmaceutical company with operations in more than 80 countries.

Why did you choose to expand operations to Vilnius?

In Vilnius it is easy to find a qualified and competitive workforce in the pharmaceutical industry, and we can see affordable cost and qualitative living standards compared with many other EU cities. All kinds of authorities, government institutions and customers can be reached quickly and Lithuania has favourable tax conditions.

How does the staff experience working in 3Burės?

The office is centrally located, well equipped and there is parking for the all employees driving to work. Thanks to its central location, 3Burės is within walking distance of several hotels and it is also close to government institutions, cafes, shops and the old city. The building is well preserved, clean, has modern fittings and maintains traditions, all of which makes it a nice place to work.

Property data

SEGMENT RESULT, EURM	Q4	Q3	Q2	Q1
Rental income	1.6	1.7	1.3	1.1
Property costs1	(0.5)	(0.2)	(0.1)	(0.2)
Management and administratative costs	(0.3)	(0.1)	(0.2)	(0.1)
Other income and expenses	(0.0)	0.0	0.0	0.0
Net operating income	0.9	1.3	1.0	0.8
Surplus ratio, %	54	80	78	72
Net interest	(0.2)	(0.2)	(0.2)	(0.3)
Profit from property management	0.7	1.1	0.8	0.5
Changes in value of properties	4.5	0.0	0.0	0.0
Profit before tax	4.9	1.1	0.8	0.5
Income tax	0.0	0.0	0.0	0.0
Deferred tax	(1.0)	(0.1)	(0.1)	(0.1)
Net profit	3.9	1.0	0.7	0.5
SEGMENT KEY FIGURES
Property related
Number of properties	3	3	3	2
Income-producing properties	2	2	2	1
Development properties	1	1	1	1
Leasable floor space, k sqm	50.6	50.6	50.6	41.2
Income-producing properties	37.8	37.8	37.8	28.4
Development properties	12.8	12.8	12.8	12.8
Floor space vacancy level2 , %	3.0	1.9	2.4	3.9
Average rent1 , EUR/ sqm/ month	13.8	13.8	13.5	12.7
WAULT2 , years	2.5	2.4	2.6	2.3
Rental value, offices2 , EURm	6.3	6.3	6.1	4.3
Property value, EURm	107.5	99.6	98.1	68.3
Income-producing properties	92.4	89.4	89.4	60.9
Development properties	15.1	10.2	8.7	7.4
Land plots	0.0	0.0	0.0	0.0
Direct yield 2,3, %	5.4	5.8	6.1	6.1
Financial items
Return on equity, 12-month rolling, %	11.2	8.6	10.8	11.2
Equity ratio, %	66.1	64.5	63.5	47.2
Interest coverage ratio, multiple	4.7	6.1	4.7	3.1
Loan to value ratio, %	30.3	33.1	34.1	49.6
Average interest, %	2.6	2.6	2.6	3.0
Average capital tie-up period, years	5.8	6.1	6.3	6.6
Average fixed interest period, years	5.8	6.1	6.3	6.6
Gross debt, EURm	32.5	33.0	33.5	33.9
Long-term equity (EPRA)4 , EURm	76.8	69.2	66.1	36.1
Equity, EURm	74.2	67.2	64.2	33.8

1. Including costs of tenant improvements

2. Income-producing properties

3. Net operating income including costs for tenant improvements for the last twelve months divided by property value

4. Excluding deferred taxes on property value surpluses and the fair value of financial derivatives

Portfolio expands to Riga by acquiring Alojas

Eastnine's focused work with an active pipeline continues, and in February 2018 the first real estate investment in Riga was made when A class office property Alojas Biznesa Centrs was acquired. The acquisition also includes retail property "Alojas Kvartals" located on the same land plot and a B class office property on Alojas iela 6.

I n the beginning of February 2018 Alojas Biznesa Centrs was acquired. The investment is Eastnine's first in Riga, a market with a shortfall of modern office buildings. The property is located on Kr. Valdemãra iela, one of the main arterial streets in Riga close to both the city centre and the Skanste area, the nowadays most attractive and modern area in Riga where a new CBD is developing. In addition to property owners' focus in the area, several infrastructure investments have been made in Skanste.

Alojas Biznesa Centrs is one of the most modern office buildings in Riga, and was built in 2009. The purchase price for the A class property amounted to EUR 24.8m and the leasable area amounts to 9,000 square metres. The property is fully let to tenants such as Luminor (previously Nordea) and Ellex Klavins. The transaction was also comprised of two fully let

properties adjacent to Alojas Biznesa Centrs. The retail property "Alojas Kvartals", which is located on the same land plot, and a B class office property on Alojas iela 6, offering a future opportunity to extend Alojas Biznesa Centrs. The two properties have a total leasable area of 2,600 square metres and the purchase price amounted to EUR 4,8m.

The total purchase price was EUR 29.6m and corresponds to a direct yield of

approximately 7%. The investment will initially be financed by 100% equity in regard to Eastnine's strong cash position. The acquisition will add approximately EUR 2.4m in annual rental income to Eastnine and with the completion of the third tower in 3Burės, the company will have a real estate portfolio of approximately EUR 153m and a yearly rental income of circa EUR 11m, compared to EUR 6.5m by year end.

" Alojas is in excellent quality and highly conformable for its tenants. Neighbouring Miera Street is popular among hipster society and valued by the younger generation of employees.

Ivars Pommers, Head of Real Estate Practice Ellex Klavins

ALOJAS BIZNESA CENTRS

Leasable area: 9,000 sqm Purchase price: EUR 24.8m Vacancy: 0 per cent Anchor tenants: Luminor (previously Nordea) and Ellex Klavins

Pro forma numbers

EURM	Pro forma	31 Dec 2017	2016	2015
Number of properties	4	2	1	1
Leasable area, k sqm	62.2	37.8	28.4	28.4
Rental income	10.9	6.5	4.4	4.4
Net operating income	9.1	5.0	3.9	4.0
Profit from property management	7.6	4.2	2.8	2.9
Occupancy rate, %	97.8	97.0	95.1	99.3
WAULT, years	3.1	2.5	2.3	2.1
Loan-to-value ratio, %	44.1	30.3	56.4	60.6
Average interest, %	2.3	2.6	3.0	3.0
Direct yield, %	5.9	5.4	6.4	6.7
Property value	152.7	107.5	60.9	59.7
Property value, EUR per sqm	2,455	2,443	2,143	2,102

PRO FORMA ADJUSTMENTS

• Closing of acquisition of Alojas Biznesa Centrs in Q1 2018

• Delivery of 3Burės development,

• expected in Q3 2018
• New bank loan in Vertas raised in Q1 2018

The table shows key figures of properties owned at the end of the period, based on performance over the last 12 months or estimates for properties held less than 12 months. The table provides an overview but is not a forecast.

PRO FORMA PROPERTY VALUE OF EUR 153M

Real Estate Funds

Eastnine's portfolio consists of real estate holdings through indirect investment, by Eastnine's holdings in East Capital Baltic Property Fund II and East Capital Baltic Property Fund III. In total there are eight properties in the funds, seven of which are located in Tallinn and one is located in Riga.

T he purpose of the funds is to invest in and manage properties in the Baltics, focusing on prime locations in the capitals. Focus is on properties with stable cash flows and improvement potential by changes in the tenant mix and renovation, redevelopment or expansion. Investments are made in hotel, office, logistics and retail properties .

EAST CAPITAL BALTIC PROPERTY FUND II

East Capital Baltic Property Fund II was launched in 2012 and is fully invested. The portfolio consists of five properties, four located in Tallinn and one in Riga. The Tallinn properties include Rimi Logistics, Metro Plaza, Tänassilma Logistics and Mustamäe Keskus, Deglava is located in Riga. The fund aims to acquire and manage properties with well established tenants and sustainable rent terms.

The retail property Deglava has been closed during the year for the repair of previously discovered construction faults and has thus made a negative contribution to the fund during the year. The management team has developed the property into a multi-tenant concept and is now negotiating with potential new tenants. The fund's first divestment was performed in October when GO9 shopping centre was sold and Eastnine received EUR 9m of the proceeds during 2017. All other properties show a continuing strong development with Tänassilma Logistics as the strongest contributor to the fund's positive development.

EAST CAPITAL BALTIC PROPERTY FUND III

East Capital Baltic Property Fund III was launched in 2015 and primarily invests in shopping centres and other retail properties with well established tenants, as well as logistics and office properties. Focus is on properties with opportunities for adding value through changes in the tenant mix, modernisation or rebuilding. The fund's three holdings are all located in Tallinn. Eastnine's investment commitment amounts to EUR 20m and just over EUR 14m of which had been invested by the end of 2017.

The fund's first investment was made in 2016 when Vesse Retail Centre was acquired, a well known shopping area in Tallinn with a total leasable area of 23,300 square metres. Hilton Tallinn Park Hotel was the second acquisition, completed in August 2016. Both properties have shown strong development during the year with stable cash flows. Nehatu Logistics, with a leasable area of 77,000 square metres, was acquired in September 2017. The property consists of five A class buildings suitable for logistics, as well as industrial and commercial activities.

EAST CAPITAL BALTIC PROPERTY FUND II

Eastnine's holding in the fund: 46% Value change 2017: 13.8% The fund continues until 2019 with a possible extension up to three years.

EAST CAPITAL BALTIC PROPERTY FUND III

Eastnine's holding in the fund: 27% Value change 2017: 9.1% The fund continues until 2023 with a possible extension up to two years.

REAL ESTATE FUNDS

The year in brief

• G09 SHOPPING CENTRE IN VILNIUS was divested in October 2017 and Eastnine's share of the proceeds of the sale amounted to EUR 9m
• TALLINN BASED NEHATU LOGISTICS was acquired in September 2017 and Eastnine invested a further EUR 6m in the fund as a draw-down from its investment commitment
• RIGA BASED DEGLAVA retail center remained closed after detected construction issues in 2016

of net asset value by year-end

Other

This segment includes all holdings that are not real estate; Russian fashion retailer Melon Fashion Group, Macedonian bank Komercijalna Banka Skopje and holdings in East Capital's funds Eastern Europe Small Cap Fund (formerly East Capital Deep Value Fund) and Global Frontier Markets Fund. Disposals within this segment occur gradually and all holdings in this segment will be divested in due course.

Melon Fashion Group (MFG) is one of the largest and fastest growing fashion chains in Russia. Under its three brands Zarina, befree and Love Republic, the company had 551 shops at the end of 2017. The Russian economy continued to recover during the year, supported by low inflation, strengthened rouble and real wage growth. The improved macro economic environment favoured the retail sector, with increased consumer confindence and rising footfall. A favourable climate for MFG, which showed a strong sales growth of 11% for the full year and reached a record high EBITDA of RUB 1.5bn. The first six months showed weaker development, mainly affected by the weaker rouble against the euro, however total sales showed positive growth. MFG had a very strong second half-year, with earlier initiatives now showing profitability and a very strong sales growth.

Focus for the year was on evaluation of new store concepts, continued optimisation of selling area through relocation and closing of stores with low potential. Investments have also been made within the fast fashion segment and IT. Online sales took off, both own and third-party channels, and represented 6.7% of total sales. Further IT investments enabled the launch of a faster and more functional platform for brand web shops. Read more about Melon Fashion Group at www.melonfashion.ru

EAST CAPITAL EASTERN EUROPE SMALL CAP FUND

Eastern Europe Small Cap Fund, previously named Deep Value Fund, invests in small and medium sized, mainly listed,

Eastern European companies. The first half-year showed red figures for the fund, but experienced a turn-around as a result of the improved macro economic environment throughout Eastern Europe, especially in Russia and the Balkans. These countries, which are the primary focus of the fund's new strategy, saw GDP growth figures in 2017 among the highest in Europe and liquidity is returning. Eastnine continued to gradually divest its holding in the fund, and sold around EURM 9 in 2017.

EAST CAPITAL GLOBAL FRONTIER MARKETS FUND

East Capital Global Frontier Markets Fund has a global focus on young, growing markets. To combine high growth, attractive valuations and risk adjusted returns, the fund invests in listed, liquid shares in a wide spectrum of countries and sectors. The fund saw very positive development during the year and the expectation is that growth and cautious revaluations, as well as returning investor interest, will form the basis for the fund's future value

development. The fund remains in the portfolio until further notice as a liquid investment.

KOMERCIJALNA BANKA SKOPJE

Komercijalna Banka Skopje (KBS) is listed on the Macedonian stock exchange and is the country's largest bank in terms of assets and capital. The bank's lending portfolio is dominated by corporate business at more than 80 per cent, while deposits come mainly from private customers, where the bank's market share amounts to about 30 per cent. The country entered 2017 with continued political instability, but the position stabilised with the formation of a new government, which published its programme of measures for the next four years. KBS benefited from the improved macro economic environment and had a modest, but positive, value change over the full year. The bank reported for the full year a net profit of MKD 820.6m, an increase of 5.3% yearon-year.

Read more about Komercijalna Banka Skopje at www.kb.com.mk

KEY FINANCIALS MELON FASHION GROUP, RUBM

2017	2016	2015	2014
13,869	12,474	12,563	11,192
1,507	647	798	481
769	131	273	44
11.2	–0.7	12.3	24.8
52.5	47.6	46.0	53.3
10.9	5.2	6.4	4.3
551	558	642	669
6.5	–2.2	3.9	0.2

Eastnine's holding in the company: 36% Value change 2017: 18.0%

EAST CAPITAL EASTERN EUROPE SMALL CAP FUND

Eastnine's holding in the fund: 59% Value change 2017: -4.7%

EAST CAPITAL GLOBAL FRONTIER MARKETS FUND

Eastnine's holding in the fund: 20% Value change 2017: 18.4%

KOMERCIJALNA BANKA SKOPJE

Eastnine's holding in the company: 10% Value change 2017: 1.2%

Zarina AW 2017 campaign

OTHER

37% The year in brief of net asset value by year-end

• MELON FASHION GROUP saw a growth in sales during the year of 11 per cent, mainly driven by domestic consumption and the development of online sales
• APPROXIMATELY EUR 9M of Eastnine's holding in East Capital Eastern Europe Small Cap Fund was divested
• EASTNINE'S HOLDING IN EAST CAPITAL GLOBAL FRONTIER MARKETS FUND had a strong year and the fund remains in the portfolio until further notice as a liquid investment
• KOMERCIJALNA BANKA SKOPJE is benefiting from the strong macro environment in Macedonia and reported net profits of MKD 820.6m

The share

SHARE CAPITAL

On 31 December 2017, Eastnine's share capital amounted to EUR 3.66 million (EUR 3.66 million) made up of 24,816,033 (28,161,563) shares. The difference in the number of shares in circulation compared to the previous year end is due to shares that were cancelled in 2017. Each Eastnine share gives entitlement to one vote.

SHARE PRICE DEVELOPMENT AND TURNOVER

During 2017 the share price (SEK) rose by 22% in nominal terms. Eastnine's dividend-adjusted return was 24%, which can be compared with MSCI Emerging Markets Europe (SEK), which increased by 9%. The highest closing price was noted on 28 December at SEK 82.00 and the lowest on 12 January at SEK 65.50. The market cap on 31 December 2017 amounted to SEK 2,029m, or EUR 206m. During the year a total of 12,608,827 Eastnine shares were traded, with 100% of sales made on

Nasdaq Stockholm. The average daily volume was 50,210 shares, which corresponds to approximately SEK 3.6m.

NET ASSET VALUE

Eastnine's net asset value per share is calculated as the value of the total of assets (all investments plus all other assets such as cash and cash equivalents) minus debts divided by the number of shares in circulation, excluding any shares bought back by the company. The total net asset value is published in the company's interim reports.

DIVIDEND

Eastnine's annual dividend shall amount to at least 50% of the profits from the management of directly owned real estate, according to a new dividend policy that was adopted by the board in September 2017. Furthermore, taking into consideration the company's financial position and investment possibilities,

the board may decide on share redemptions or buybacks. During Eastnine's transformation phase into a focused real estate company, which is expected to be completed by the end of 2020, annual dividends shall amount to at least 2.0% of the net asset value per share at the end of the previous year. Eastnine will propose to the 2018 Annual General Meeting payment of an ordinary dividend for 2017 of SEK 2.10 (SEK 0.9) per share, corresponding to EUR 0.21 (EUR 0.09) per share, with semi-annual payments.

SHARE BUYBACKS

On 20 May 2016, the company initiated a buy-back programme of the company's own shares provided the shares are traded with a discount of more than 20% on the most recently published net asset value in SEK. By the fourth quarter of 2017, the 20 per cent threshold was removed and the company continued to buy back its own shares provided they were traded below net asset value. During 2017 the company bought back 2,656,258 shares, corresponding to 10.7% of the company's shares in circulation at a value corresponding to EUR 19.9m and an average price of SEK 72.20 per share.

OWNERS

As of 31 December 2017, Eastnine had 5,124 shareholders. The ten largest shareholders controlled 48.5% of the number of the company's shares in circulation, corresponding to 12,077,894 shares. Eastnine has one major shareholder, East Capital, which on 31 December 2017, through direct and indirect holdings, represented 19.9% of the votes and shares in the company.

"Eastnine's dividendadjusted return was 24 per cent

SHORT FACTS

Listed on	Nasdaq Stockholm, Mid Cap
Sector	Finance
Listed since	November 9 2007
ISIN	SE002158568
Ticker	EAST
Reuters	EAST9.ST
Bloomberg	EAST SS
Latest share price	www.eastnine.com

THE DEVELOPMENT OF THE NET ASSET VALUE AND THE SHARE	2017	2016	2015
Net asset value per share, EUR	10.57	9.67	9.00
Net asset value per share, SEK	104	93	82
Net asset value as per 31 Dec, SEKm	2,384	2,372	2,322
Share price at year end, SEK	81.75	66.75	50.75
Lowest paid, SEK	65.50	45.10	41.50
Highest paid, SEK	81.75	67.50	62.00
Market value at year end, SEKm	2,029	1,880	1,429
Premium/discount against NAV as per 31 Dec	–21%	–28%	–38%
Total turnover number of shares, million	12.6	14.0	8.7
Average turnover per trading day, number of shares	50,210	55,510	34,490
Development of comparison index
MSCI Emerging Markets Europe Total Return Index, EUR	7%	30%	–7%
MSCI Emerging Markets Europe Total Return Index, SEK	9%	36%	–8%

	Number of
THE 10 LARGEST SHAREHOLDERS	shares	Holding, %
East Capital Holding Aktiebolag	4,941,155	19.9
Luxembourg AIF Clients Account	1,745,355	7.0
SIX SIS AG. W8IMY	1,176,736	4.7
Försäkringsaktiebolaget, Avanza Pension	751,165	3.0
CBNY – Norges Bank	748,770	3.0
Nordnet Pensionsförsäkring AB	600,148	2.4
Nordea Investment Funds	592,000	2.4
JPM Chase NA	563,474	2.3
Ruty Invest AB	549,748	2.2
Kestutis Sasnauskas	409,343	1.6
Total 10 largest shareholders	12,077,894	48.5
Other shareholders	12,738,139	51.5
Total	24,816,033	100.0

KEY FIGURES AS PER 31 DECEMBER 2017 EUR SEK NAV per share 10.57 104 Closing price per share 8.32 81.75 NAV development per share 9.3 9.9 Share price development (dividend adjusted) 20.7% 23.8%

OWNERSHIP DISTRIBUTION PER COUNTRY (TOP FIVE)

Source: Euroclear Sweden AB

SHARE PRICE DEVELOPMENT 2017, INDEXED SHARE PRICE DEVELOPMENT 2015-2017, INDEXED

Risks and risk management

RISK MANAGEMENT

In its activities, Eastnine is exposed to various kinds of risk. As the focus increasingly shifts to directly owned property investments in the Baltics, the total risk level in the portfolio is limited, since Eastnine's real estate strategy is long-term ownership of commercial properties in prime locations with stable tenants and low vacancy, which has been historically shown to mean lower volatility in cash flow and lower commercial risk. The focus on real estate in the Baltic capitals also limits risks such as currency risk, share price risk and geopolitical risk, while exposure to interest rate and credit risks increases. Our risks are subdivided into operational risk, portfolio risk and liquidity

risk at group level. Risk assessments are also made of rent income, development projects, financing, value changes, the environment and property transactions for the Real Estate Direct segment.

It is Eastnine's objective to offer shareholders returns that are as well adjusted for risk as possible, which means that the management and follow up of risk is an important and integral part of our activities. We endeavour to always have low overall financial risk and use various tools to continuously identify, evaluate and limit our risks. Eastnine performs quarterly risk assessments in the form of an internal analysis of the company's exposure to different risk factors. This assessment is then presented

to the board. If needed, the company produces an action plan that is then followed. When investment decisions are taken, attention is given to the potential new investment's effect on Eastnine's total risk. Eastnine uses tools such as interest rate derivatives and currency hedging to manage and limit financial risk.

Risk management is performed by company management according to relevant policies that are determined by the board. Management of financial risks is mainly performed by Eastnine's finance function according to the company's finance policy.

Risks and risk management are described in more detail in note 17 on pages 55–56.

GROUP LEVEL – EASTNINE AB

RISK MANAGEMENT

Operational risk

The risk of loss as a result of defective routines or systems or because of lack of knowledge of new rules that affect activities.

Monitoring and updating internal routines and systems are performed on an ongoing basis. As part of their duties, Eastnine's auditors scrutinise the internal routines and report directly to the board once per year.

During 2017 the company has refined its structure, which has been assessed to reduce operational risk by closing the formerly owned companies in Luxembourg and Cyprus and moving these activities to Estonia and Sweden.

Since the company has only a small number of employees there is a dependency on individuals. The board has adopted a continuity policy that covers the company's central functions and is reviewed annually.

The operational risks are assessed to be low.

risk with lower volatility and more predictability.

Portfolio risk

The risk of loss as a result of the value of the assets in Eastnine's investment portfolio falling. Factors that might affect portfolio development include volatility, diversification and liquidity, as well as market risks such as currency risk, interest rate risk and share price risk.

reduced. On the other hand, diversification and liquidity are also gradually reduced, which leads in turn to a higher portfolio risk. In Eastnine's judgement, the newly adopted strategy of investing in first class commercial real estate with stable tenants in the Baltic capitals means an overall lower portfolio

As Eastnine increases its exposure in the Baltics and reduces its exposure in Russia and eastern Europe and totally listed holdings, the portfolio's volatility and market risks are

Liquidity risk

The risk that liquidity needs cannot be covered.

By means of ongoing cash flow forecasts for the next 12 months, Eastnine can predict its liquidity needs and plan financing accordingly. At the end of 2017, the company had cash and bank deposits equivalent to 17% of the total asset value. Liquidity risk in the ongoing activities is assessed to be low.

The company's future acquisition opportunities in the real estate sector depend on being able to dispose of non-core assets. A great deal of these are less liquid, which could affect the pace of the company's acquisition and increase the risk of the company missing value creating investment opportunities.

REAL ESTATE DIRECT

RISK	MANAGEMENT
Rental income Rental income is vital for cash flow in the Real Estate Direct segment and also affects the value of the properties.	Rental income risk is limited by Eastnine's concentration on real estate in the most attrac tive commercial locations, which historically have low vacancy and secure rent levels.
Rent level	Lease agreements are normally signed for 3 to 5 years, longer in newly built properties, which gives regular adaptation to market rents. Most rents are linked to the consumer price index. On the other hand lease agreements are generally little affected by falls in the index.
Vacancy	The risk of increased vacancy is assessed to be low, bearing in mind the properties' attractive locations, modern premises and stable tenants. Market indicators show continuing economic growth in the region. The vacancy level at the end of 2017 was 3.0%.
Tenant structure	The risk in the tenant structure is managed by offering first class office premises that attract stable tenants with a high ability to pay. The tenants represent different industries, with many well known names, in the Nordic region and internationally. Tenants are deemed solid and rent losses were negligible 2017.
Development projects Development projects are associated with risk of increased building costs and schedule delays, as well as leasing risk.	At the end of 2017, Eastnine had a large development project in Vilnius, 98% of which was already leased. It is scheduled for completion in the fourth quarter of 2018. The project is proceeding according to plan, in terms of both costs and time.
Financing The risk of loss as a result of access to capital being reduced and/or of the cost of capital increasing, which can also limit opportunities of making acquisi tions.	Financing risk is limited by Eastnine's finance policy, which stipulates an interest coverage ratio of at least 2.0x and a loan to value ratio of maximum 65%. Eastnine also uses finan cial derivatives (interest rate swaps) to hedge interest levels. At the end of 2017, 100% of the interest rates on real estate loans were hedged, with a fixed interest period of 5.8 years. Loan to value ratio was 30.3% and interest coverage ratio 4.4x. The financial risk is assessed to be low and access to capital is assessed to be good, with room for refinanc ing within the framework of existing credit.
Value change The risk of loss from negative value changes in the real estate stock. Prop erty values are affected by external fac tors such as the market's required return and interest rates, as well as by changes in rent levels and vacancy.	The risk of negative value changes is primarily managed by offering attractive, modern office premises in the best locations and thus attracting and keeping stable tenants, which reduces the risk of vacancy and rent reductions. Property values are determined by having all properties externally valued once per year. The fair value of all properties is then adjusted quarterly using the operating cash flow, accrued tax and value changes in any derivatives, using the external valuations as a basis. Significant and unforeseen changes in vacancy or rent terms can lead to revalua tion in addition to the annual external valuation.
Real estate transactions The risk of lack of acquisitions or acqui sitions on unfavourable terms because of limited supply.	For Eastnine, transaction risk is exclusively related to acquisitions and is managed by Eastnine having an organisation with genuine and extensive real estate experience and a wide network in the relevant markets, which means that Eastnine can participate in trans actions that are of interest to the company. Eastnine's buy and hold strategy means that the supply of interesting objects increases, while the company's strategic and financial goals set clear limits for the risk levels that are acceptable.
The environment The risk of negative consequences as a result of environmental impact.	Eastnine works actively to reduce negative impact on the environment by means of energy efficient properties. The company's aim is that all real estate projects shall be executed in accordance with certification requirements and that work shall commence immediately on new acquisitions, if they do not already have environmental certification. The purpose is to reduce the company's overall environmental impact and to keep costs down for tenants.

Corporate governance report

For Eastnine AB (publ) ("the company") corporate governance involves the way in which the company works and is organised for the purpose of safeguarding all the shareholders' interests and achieving the company's objective of providing good returns in the long term.

C orporate governance at Eastnine is based on both external and internal rules. The external rules are the Companies Act, Nasdaq Stockholm's Rules for Issuers, the Swedish Code of Corporate Governance ("the code"), as well as other applicable Swedish and foreign legislation and provisions. The company's internal rules include the articles of association, rules and guidelines for corporate governance, the board's rules of procedures, instructions to the CEO and the policy documents adopted by the company. The company follows the code.

THE PURPOSE AND NATURE OF THE COMPANY

Eastnine is a public limited company, established in 2007, the intention of which is to invest in real estate located in the Baltic capitals. The company is in the process of transformation from having been a diversified eastern European investment company into a Baltic real estate company and the transformation is expected to be complete by the end of 2020.

The company's purpose is to create the highest possible riskadjusted return for the company's shareholders through long-term ownership and active management.

CORPORATE GOVERNANCE STRUCTURE

THE BOARD OF EASTNINE The composition of the board

According to the articles of association the board shall consist of three to six members without deputies. Board members are elected by the general meeting for a period of one year. Göran Bronner, Lars O Grönstedt, Peter Elam Håkansson, Liselotte Hjorth and Nadya Wells were re-elected as board members at the annual general meeting 2017. Lars O Grönstedt was re-elected as chairman of the board.

The board's independence

According to applicable regulations, Göran Bronner, Lars O Grönstedt, Liselotte Hjorth, and Nadya Wells are considered independent of the company and its management, as well as in relation to the company's major shareholders. The independent members of the board have been appointed because of their considerable experience of international corporate management and business activities, as well as their executive positions and board membership in various listed companies.

Peter Elam Håkansson is not considered to be independent in relation to major shareholders since he is closely related to East Capital, which was a major shareholder as defined in the code in 2017. On 31 December 2017 there were no other major shareholders in the company as this term is defined by Nasdaq Stockholm's Rules for Issuers and the code.

More information about each of the board members may be found on pages 36–37.

The board's responsibilities and duties

The company's board has overall responsibility for the company's organisation, administration and financial reporting. The board is also responsible for evaluating and taking decisions on all investments and divestments that the CEO and management implement through the company's investment organisation. The board also decides on issues that are related to the equity structure, such as initiating distributions to shareholders or increasing the capital available for investments, by issuing new shares or taking up loans for example.

The board regularly oversees the investment strategy and evaluates whether it is in the best interests of the company's shareholders. The board also evaluates existing investments, investigates how management performs its tasks and decides on remuneration to management.

The work of the board is governed by the rules of procedures that have been adopted. The chairman of the board Lars O Grönstedt leads the work of the board and maintains ongoing contact with the CEO and the company's other executive functions, for the purpose of monitoring the company's activities. The board has also formulated and approved defined work intructions for the CEO, as well as a number of policy documents.

The company's resigning CEO Mia Jurke, CFO Lena Krauss, as well as the CIO and subsequently appointed CEO Kestutis Sasnauskas also attended board meetings during 2017 to report on their respective areas.

The board holds at least five ordinary meetings per year. More meetings may be held, for example to discuss and decide on investment proposals and other strategic issues.

BOARD MEETINGS AND MAIN TOPICS

During 2017 a total of 22 board meetings were held. The main topics discussed during the meetings were:

MEETING MAIN TOPICS

1/2017	Inaugural meeting following election of Göran Bronner
2/2017	Meeting to discuss strategy
3/2017	Meeting to approve Year-end Report 2016
4/2017	Meeting to discuss strategy
5/2017	Meeting to discuss strategy
6/2017	Meeting to discuss strategy
7/2017	Meeting to discuss investment proposal
8/2017	Meeting for approval of Annual Report 2016
9/2017	Meeting to approve notice and statements to the annual general meeting 2017 per capsulam
10/2017	Meeting to discuss rebranding
11/2017	Meeting to approve Q1 2017 Report
12/2017	Inaugural meeting
13/2017	Meeting to discuss strategy
14/2017	Meeting regarding CEO recruitment
15/2017	Meeting to approve Q2 2017 Report
16/2017	Strategy meeting
17/2017	Meeting reg. reorganisation of company structure
18/2017	Meeting to approve Q3 2017 Report
19/2017	Meeting reg. reorganisation of company structure
20/2017	Meeting reg. reorganisation of company structure
21/2017	Meeting to discuss investment opportunity
22/2017	Meeting for approval of minutes per capsulam

Evaluation of the board

The work of the board is continuously evaluated and the evaluation is used to develop the work of the board and as a basis for the nomination committee's evaluation of the composition of the board. In 2017 the board was evaluated by the company's chairman as well as by the independent members of the nomination committee in order to provide supplementary information for the nomination committee's work of preparing proposals to the 2017 annual general meeting.

The audit committee

The duties of the audit committee have been performed by the board as a whole since June 2016. The board discusses the financial reporting, as well as valuation and auditing issues. The company's authorised auditor from KPMG reported to the board on the general oversight and audit of interim reports during the year.

Remuneration to board members

On 15 May 2017, the annual general meeting decided that remuneration to the chairman of the board should amount to SEK 1,200,000 for the period up until the 2018 annual general meeting. Other board members should receive an annual remuneration of SEK 400,000 each for the same period. The annual general meeting decided, following the nomination committee's proposal, that fees to board members could, by special agreement with the company, be invoiced through one company or entity. If this is done, the invoiced fees shall be adjusted for social charges and VAT for the purpose of achieving cost neutrality for the company.

Remuneration committee

In view of the limited number of employees in the company, the board has decided that no remuneration committee is needed. The duties that would have been performed by a remuneration committee are instead performed by the entire board.

THE MANAGEMENT OF EASTNINE

The CEO and management are responsible for ensuring that the ongoing administration of activities is performed in line with the board's guidelines and directions. Management is also responsible for the internal controls that are necessary for the board's supervision of the investment activities. Management regularly reports to the board on these issues.

Remuneration to management

During the year, remuneration to the CEO and CFO consisted of fixed and variable salary, as well as pension and insurance benefits. The board decides on a discretionairy basis whether variable salary shall be paid to management. This decision is based on internal evaluation criteria, the two most important of which are the development of the share price and the NAV discount. Targets are determined and evaluated by the board annually. Maximum variable salary is 50 per cent of fixed salary. During 2017, the board granted both the resigning CEO and the CFO variable salary for 2016 of 50 per cent of the fixed salary. Kestutis Sasnauskas received no variable salary during the year. The board also granted the resigning CEO a variable salary of 50 per cent of fixed salary for 2017.

During 2018 variable salary for 2017 of 37.5 per cent of fixed salary was granted to the CEO and 50 per cent of the fixed salary to the CFO, of a maximum variable salary of 50 per cent of fixed salary.

During 2017 the CEO and CFO had individual, premium based pension plans according to which the company pays premiums

corresponding to 10 per cent of fixed salary up to 10 income base amounts and premiums corresponding to 20 per cent of fixed salary for the amount of salary that exceeds 10 income base amounts. The board intends to propose an update of the executive group's individual pension plans in 2018, so as to reflect ITP/market pension levels for senior executives.

Detailed information about remuneration to management may be found in note 6 on page 48.

CEO

The CEO is responsible for the day-to-day activities of the company according to the instructions from the board and other guidelines and policy documents. Together with the chairman of the board, the CEO prepares the agenda for board meetings and is responsible for producing the necessary data for decision making. The CEO also ensures that the board regularly receives information about Eastnine's development and market information, so that well-grounded decisions can be taken.

The CEO Kestutis Sasnauskas has two board appointments outside the company, Agro Region and Rytu Invest, and has a significant shareholding in the latter. Rytu Invest is one of the company's 10 biggest shareholders. More information about the CEO may be found on page 38.

Share related incentive programmes

Eastnine has no share related incentive programmes.

INTERNAL CONTROL

Internal control at Eastnine is designed to manage risks associated with financial reporting and investment activities. It includes ensuring that the buying and selling of securities is reliably reported, that holdings are valued correctly and that information is conveyed to the market effectively and correctly. The board is responsible for monitoring investment activities and ensuring, by means of defined reporting routines and relevant policies, that it has access to the necessary information. All policies are tested for accuracy and approved by the board annually.

The board maintains a good, effective control environment for investment activities and financial reporting by means of a clear distribution of responsibilities and authority to management and employees. The board discusses reporting issues, valuations and the financial reporting. Company management constantly oversees that policies, instructions and administrative agreements are followed.

Each year, the board of Eastnine assesses whether the company is in need of an internal auditing function, an independent investigative function that performs ongoing scrutiny and presents reports to the board and management with recommendations for improvements to internal control of the company's activities, such as outsourced service functions and internal procedures, in order to maintain good governance and compliance with the company's policies.

During 2017, the board decided that, because of its limited size and its adequate competencies in evaluating service functions and internal activities itself, the company did not need an internal auditing function.

Eastnine acts in accordance with generally accepted practice on the stock market and regularly follows-up that the company is in compliance with the listing agreement.

ANNUAL GENERAL MEETING

The annual general meeting is the company's highest decision-making body and is where the shareholders can exercise their influence. The annual general meeting shall be held within six months after the end of the financial year. All shareholders who are registered in the shareholders register and who have announced their attendance in time are entitled to attend the annual general meeting. Shareholders can vote according to the total number of shares that they own and may be accompanied by a maximum of two assistants. Shareholders who cannot be present may be represented by a proxy.

Among other things, the annual general meeting addresses issues relating to election of the board, where appropriate the election of an auditor, dividend, adoption of the income statement and balance sheet and release from liability for the board members and the CEO. Shareholders are entitled to have issues discussed at the meeting provided that these have been properly notified to the company in ample time before the publication of the notice of the annual general meeting.

The annual general meeting is an important channel for communicating with shareholders. At the time of the annual general meeting, all shareholders are also invited to a seminar on the company's markets and development. Shareholders are encouraged to attend the annual general meeting and all shareholders receive a written notice and invitation. The board and company management attend the general meeting to answer questions from shareholders.

Annual general meeting 2017

The 2017 annual general meeting was held on 15 May 2017 at the IVA Conference Centre in Stockholm. All documents from the annual general meeting – notice, documents presented at the meeting and the minutes – are available on www.eastnine.com.

The 2017 annual general meeting was attended by 60 persons, including shareholders representing a total of 45.6% of the company's shares, the chairman of the board and available board members, all employees and a number of invited guests.

The 2017 annual general meeting approved the adoption of financial results for the 2016 financial year, release from liability of the management and board, dividend proposals, the number of board members and fees to the board. The meeting also approved the updating of the articles of association with regard to the company name. The meeting also approved the board's proposal to reduce the share capital by way of retirement of own shares and to increase share capital by means of a bonus issue. The board was authorised to decide on the acquisition of own shares in accordance with the proposal presented to the meeting.

THE NOMINATION COMMITTEE

The task of the nomination committee is to evaluate the board and its work before the annual general meeting, to prepare and present proposals to the meeting regarding the chairman of the meeting, chairman of the board and board members, and to propose an auditor where appropriate. The nomination committee also proposes fees to the board, any fees to sub-committees and fees to the company's auditor, as well as proposing a process for the appointment of a nomination committee before the next annual general meeting. All shareholders have the opportunity to present proposals to the nomination committee.

The work of the nomination committee during 2017/2018

According to the decision of the annual general meeting on 15 May 2017, Eastnine shall have a nomination committee consisting of at least three and no more than four members, a maximum of three of whom shall be appointed by the three largest shareholders (or ownership groups) in the company who wish to appoint a representative. The chairman of the board is also a member. Before the 2018 annual general meeting, the nomination committee has consisted of:

• David Bliss, as representative of Lazard Asset Management
• Lars O Grönstedt, as the chairman of Eastnine
• Magnus Lekander, as representative of East Capital (chairman)
• Mathias Svensson, as representative of Keel Capital.

The composition of the nomination committee was announced in a press release and on the company's website on 4 October 2017.

No remuneration has been paid to the members of the nomination committee for their work.

The shareholders have been given the opportunity to present suggestions to the nomination committee. The nomination committee's proposals to the 2018 annual general meeting appear in the notice to the annual general meeting and may also be found on www.eastnine.com.

Annual general meeting 2018

The 2018 annual general meeting will be held on Tuesday 24 April 2018 at 15.00 at IVA Conference Centre, Grev Turegatan 16, Stockholm. More information may be found on www.eastnine.com.

AUDITORS

External auditors

On 21 April 2015, the annual general meeting decided to re-elect the registered auditing company KPMG as auditor for the period until the end of the 2019 annual general meeting. For this reason, no decision on this was taken at the 2017 annual general meeting. KPMG has advised the company that Anders Malmeby will act as principal auditor as long as the company and the Companies Act permit.

Auditor's fees

The company's auditor has received fees for auditing and other prescribed review and for counselling in respect of observations from auditing and review. During the 2017 financial year, fees to the auditors totalled EUR 51,000.

Communication with the company's auditors

The board of directors, which has assumed the duties of the audit committee since June 2016, maintains regular contact with the auditors. The auditors attend board meetings when annual reports and interim reports audited by the auditors are discussed. The auditors then present their observations from auditing and report on their assessment of the company's internal control. The board also meets the auditor once per year for the auditor to report observations directly to the board in the absence of the CEO and CFO.

AUDITOR – KPMG AB

Principal auditor: Anders Malmeby Born 1955

Authorised Public Accountant for KPMG AB. Responsible auditor for Eastnine since 2013. Other auditing assignments: Concentric, Bravida, UC, Bankgirocentralen (BG), Teracom.

Board

LARS O GRÖNSTEDT Chairman since 2015, board member since 2012

Independent in relation to the company, company management and the company's major shareholders. Born 1954.

Education

Bachelor of language and literature from Stockholm University and degree in Business Management from Stockholm School of Economics.

Work experience

Currently senior consultant to Nord Stream. 2001–2006 CEO of Svenska Handelsbanken and chairman of the bank 2006–2008.

Other board memberships

Chairman of Vostok Emerging Finance, Vostok New Ventures, Manetos Group and Manetos Smart Buildings, Chairman of Realcap Ventures, Vice Chairman of Riksgälden and Chairman of Trygg-Stiftelsens Presidium.

Own holdings and those of closely related parties:

3,282 shares as per 1 Mar 2018.

PETER ELAM HÅKANSSON Board member since 2014

Not independent in relation to the company's largest shareholder. Born 1962.

Education

Degree in Business Management from Stockholm School of Economics, studied at EDHEC in Lille.

Work experience

Founder, chairman and head of investment at East Capital. Experience of emerging and frontier markets since the early 1990s and capital markets since the early 1980s. A number of management positions at Enskilda Securities, most recently as Head of Equities for the Nordics and Global Head of Research.

Other board memberships

Chairman of East Capital as well as a number of board positions in the East Capital group. Board member of Bonnier Business Press and Atlantic Group in Croatia. Chairman of the foundation behind Swedish Music Hall of Fame and member of the board of the foundation Inter Peace Sweden.

Own holdings and those of closely related parties:

5,780,253 shares as per 1 Mar 2018.

LISELOTTE HJORTH

Board member since 2014

Independent in relation to the company, company management and the company's major shareholders. Born 1957.

Education

Economics degree from Lund University.

Work experience

More than 30 years experience in the financial sector, focused on share- and capital markets, real estate and risk. Held several leading positions at SEB, as deputy CEO and Group Credit Officer, and Global Head of Commercial Real Estate and Member of the Management Board of SEB, Frankfurt.

Other board memberships

Chairman of White arkitekter, board member of Kungsleden, Rikshem. and Hoist Finance.

Own holdings and those of closely related parties:

2,000 shares as per 1 Mar 2018.

GÖRAN BRONNER Board member since 2017

Independent in relation to the company, company management and the company's major shareholders. Born 1962.

Education

Degree in economics from Stockholm University.

Work experience

A number of positions at Swedbank, most recently as Chief Financial Officer and before that Chief Risk Officer, with 30 years experience of global financial markets. Founder of Tanglin Asset Management and served as the company's Chief Investment Officer. Has had a number of positions at SEB. Has served since 2017 as advisor to EQT.

Other board memberships

Chairman of MaBro, board member at Bluestep and CTT Systems, and has a number of board duties in the Lovima group, a wholly owned private company.

Own holdings and those of closely related parties:

150,000 shares as per 1 Mar 2018.

NADYA WELLS

Board member since 2016

Independent in relation to the company, company management and the company's major shareholders. Born 1970.

Education

MBA from INSEAD, MA in Modern History and Modern Languages from Oxford University, MSc in Global Health from the University of Geneva.

Work experience

More than 20 years experience in growth and border markets as investor and corporate governance expert. Worked at Capital Group for 13 years, most recently as portfolio manager and analyst of EMEA markets. Former investment manager at INVESCO Asset Management.

Other board memberships

Board member of Sberbank Russia and Barings Emerging Europe, and responsAbility Investments.

Own holdings and those of closely related parties:

0 shares as per 1 Mar 2018.

THE COMPOSITION OF THE BOARD				Shareholding as of		Attended board meetings
Name	Function	Nationality	Independence	1 March 2018	Elected	2017
Lars O Grönstedt	Chairman	Sweden	Yes	3,282	2012	22/22
Peter Elam Håkansson	Board member	Sweden	No	5,780,253	2014	17/22
Liselotte Hjorth	Board member	Sweden	Yes	2,000	2014	22/22
Nadya Wells	Board member	Switzerland/United Kingdom	Yes	0	2016	22/22
Göran Bronner	Board member	Sweden	Yes	150,000	2017	22/22

Management

KESTUTIS SASNAUSKAS CEO since 2017

Not independent in relation to the company's largest shareholder. Born 1973.

Education

Studied economics at Stockholm School of Economics, Vilnius University and Gotland University.

Work experience

2016–2017 Chief Investment Officer, Eastnine, 1997– 2016 Co-founder and Partner of East Capital, responsible for private equity and real estate. 1995–1997 Analyst at Enskilda Securities.

Own holdings and those of closely related parties:

409,343 shares as per 1 Mar 2018.

LENA KRAUSS

CFO since 2014

Born 1976

Education

Degree in business management, specialising in finance, from the Swedish Business School (Hanken) in Helsinki.

Work experience

2008–2013 Bureau manager and senior consultant Diplomat Communications AB, Stockholm, 2004–2007 Investor Relations Director Tele 2 AB, Stockholm, 2004 Partner Shared Value Ltd, London, 2000–2003 Share analyst Alfred Berg ABN Amro, Stockholm, London and Helsinki.

Own holdings and those of closely related parties:

3,258 shares as per 1 Mar 2018.

Employees

EMIL HOLMSTRÖM Analyst, Stockholm

ERIC STADLER Project Manager & Corporate Secretary, Stockholm

FARZAD BAHADOR Financial Controller, Stockholm

GRETA DORTHÉ Administrative & Executive Coordinator, Stockholm

IRMANTAS TRIMONIS Project Administration Manager, Vilnius

JULIUS NIEDVARAS Head of Lithuanian Operations, Vilnius

LILIA KOUZMINA Senior Analyst, Stockholm

MEELIS ŠOKMAN Head of Estonian Operations, Tallinn

RUTA NARUTAVICE Business Centre Manager, Vilnius

TATJANA POTREBKO Finance Manager, Vilnius

Administration Report

The board of Directors of Eastnine AB (publ), (Eastnine AB, the Company) Corporate registration Number 556693-7404, hereby submits the annual report for the financial year 1 January–31 December 2017.

THE GROUP

Eastnine is a Swedish investment company listed on Nasdaq Stockholm. Eastnine's business concept is to maximise risk-adjusted shareholder return by offering shareholders exposure to a portfolio of primarily real estate investments in the Baltic capitals, mainly through direct ownership. Eastnine also holds other private equity and fund investments in Eastern Europe, that are expected to be divested within the next few years.

With exception of Melon Fashion Group (MFG), the investment activities of Eastnine AB (publ) (the Company) are managed in the operating subsidiaries Baltic Cable Holding OÜ and East Capital Explorer Investments AB. The shares in MFG are held at Eastnine AB. Transactions in the operating subsidiaries and MFG are referred to as the investment activities in this report. Presentation currency is euro (EUR).

RESULT

The net result for the year was EUR 17.1m (EUR 13.3m), including value changes of shares in subsidiaries and associated companies of EUR 17.6m (EUR 16.9m), corresponding to earnings per share of EUR 0.70 (EUR 0.49).

Melon Fashion Group appreciated by EUR 5.7m. The underlying asset in rouble appreciated by EUR 8.7m because of improving profitability supported by stronger local currency and good performance of new concepts, as well as decreased interest rates in Russia which results in a lower weighted average cost of capital (WACC). The translation from rouble to euro had a negative effect of EUR –2.9m.

Together with the appreciation of MFG, the main contributors to the change in value of shares in subsidiaries and associated companies in the Income statement for the period were fair value adjustments in Vertas of EUR 0.8m, 3Burės of EUR 5.2m, 3Burės development of EUR 1.5m, East Capital Baltic Property Fund II of EUR 2.8m, East Capital Baltic Property Fund III of EUR 1.4m, East Capital Eastern Europe Small Cap Fund of EUR –1.4m, East Capital Global Frontier Markets Fund of EUR 1.9m and in Komercijalna Banka Skopje of EUR –0.4m.

Furthermore, dividends were received from East Capital Baltic Property Fund II of EUR 1.1m, Komercijalna Banka Skopje of EUR 0.5m and from Melon Fashion Group of EUR 2.0m. Please see Note 2 Segment Reporting for more information.

The result for the period includes dividend from East Capital Explorer Investments AB of EUR 0.5m (redistribution of dividend from Komercijalna Banka Skopje, as mentioned above), other income of EUR 0.9m (EUR 0.7m) mainly from repayment of charged management fees in funds, and expenses of EUR 3.5m (EUR 4.5m), all of which refer to the Parent company. Net financial income and expenses was EUR +0.6m (EUR +0.1m).

KEY EVENTS DURING THE YEAR

An EGM in January voted in favour of electing Göran Bronner as a new Board Member.

An AGM in May approved the name change from East Capital Explorer AB to Eastnine AB (publ).

In July, Eastnine's Chief Investment Officer Kestutis Sasnauskas was appointed new CEO after Mia Jurke chose to resign.

In September, decision on new dividend policy and financial targets to reflect the transformation into a real estate company, and continued repurchases of own shares up to NAV/share.

In December, Eastnine's Baltic team was strengthened with recruitment of Meelis Šokman as head of Estonian operations.

INVESTMENTS AND DIVESTMENTS

2017	2016
29.1	–
7.2	0.3
6.0	4.8
42.4	5.0
9.8	–
8.1	12.2
5.7	–
1.3	–
–	21.6
–	83.6
24.9	117.4

* East Capital (EC)

REAL ESTATE DIRECT

In June 2017, Eastnine acquired office property Vertas in Vilnius for EUR 29.1m and invested EUR 7.2m in total in 3Burės development.

REAL ESTATE FUNDS

Since 2015, the Company have a commitment to invest EUR 20m in total in East Capital Baltic Property Fund III. EUR 14.1m has been drawn down by the fund so far, of which EUR 6.0m during 2017, and the remaining commitment amounts to EUR 5.9m. Further, shares in East Capital Baltic Property Fund II were sold for a total amount of EUR 9.8m.

OTHER

Trev-2 was sold for a total cash consideration of EUR 5.7m. Shares in East Capital Eastern Europe Small Cap Fund was sold for a total amount of EUR 8.1m. Furthermore, all the shares in East Capital Bering Ukraine Fund Class R were sold for EUR 1.3m.

SHARE INFORMATION

Eastnine AB's share capital amounted to approximately EUR 3.7m. The total number of shares outstanding in Eastnine as of 31 December 2017 amounted to 24,816,033. Adjusted for repurchased shares held in treasury, the number of shares outstanding amounted to 22,948,205. The weighted average number of shares outstanding for the reporting period was 24,334,377, adjusted for the repurchased shares. In January and May 2017, the Company reduced its share capital by cancelling 2,500,000 and 845,530 repurchased shares, respectively.

The closing price per share on 29 December 2017, the last trading day of the year, was SEK 81.75, equivalent to EUR 8.32 (SEK 66.75 equivalent to EUR 6.97). Eastnine AB's share price, consequently and adjusted for dividend, increased by 20.7 percent (27.3 percent) in EUR during the year. By comparison, the MSCI EM Europe Index increased by 7 percent (30 percent) in EUR. In SEK and adjusted for dividend, Eastnine AB's share price increased by 23.8 percent (33.2 percent) during 2017.

REPURCHASE OF SHARES AND DIVIDEND

On 20 May 2016, the Company launched a buyback program. As announced on 26 September 2017, buybacks may be carried out as long as the Eastnine share trades at a discount to its most recently reported Net Asset Value (NAV) per share in EUR. This is an alteration of the original program carried out since May 2016, whereby buybacks could not be made at a price higher than 80% of NAV per share. The Company has a mandate to repurchase until the AGM 2018, but may not, at any time, hold more than 10 percent of the outstanding shares in its own treasury.

The Company repurchased a total of 2,656,258 shares during the period 1 January through 31 December 2017, corresponding to 10.7 percent of the Company's outstanding shares, at an average price of SEK 72.20 per share. After cancellation of shares, the Company has a total of 1,867,828 repurchased shares held in treasury, corresponding to 7.5 percent of outstanding shares.

At the Annual General Meeting 2017, it was resolved to pay an ordinary dividend for 2016 of SEK 0.90 per share, corresponding to EUR 0.09 per share. Payment to shareholders was made in May 2017.

Eastnine is transforming from a diversified Eastern European investment company, into a Baltic real estate company. The transformation is expected to be finalised by the end of 2020. Eastnine's dividend policy states that dividend shall correspond to at least 50% of profit from property management. During the build-up phase, the annual dividend shall be at least 2.0% of the net asset value per share at the preceding year-end.

Eastnine will propose to the Annual General Meeting 2018 to pay an ordinary dividend for 2017 of SEK 2.10, or EUR 0.21, per share, corresponding to 2.0% of NAV/share. Furthermore, it is proposed semi-annual payments.

KEY EVENTS AFTER THE END OF THE FINANCIAL YEAR

The Company repurchased a total of 539,944 shares during the period 1 January–15 March 2018, corresponding to 2.2 percent of the Company's outstanding shares, at an average price of SEK 86.27 per share.

Shares in East Capital Eastern Europe Small Cap Fund were sold for an amount equivalent to EUR 2.0m and in East Capital Global Frontier Markets Fund for EUR 5.6m. Additional investment of EUR 3.5m was made in East Capital Baltic Property Fund III, and the remaining commitment amounts to EUR 2.4m.

Eastnine expands its portfolio to Riga by acquiring A Class office property Alojas Business Centre and two adjacent properties for EUR 29,6m, adding 11,600 sqm leasable area and annual rental income of EUR 2.4m. The transaction closed in February 2018.

The Nomination Committee of Eastnine has resolved to nominate Johan Ljungberg and Peter Wågström for election as new Members of the Board of Directors at the company's Annual General Meeting on 24 April 2018. In addition, current member Liselotte Hjorth is nominated as new Chairman of the Board. Current board members Göran Bronner and Chairman Lars O Grönstedt have declined re-election.

RISKS AND FACTORS OF UNCERTAINTY

The Company is through its operations exposed to a variety of risks. Financial risk management is handled by management in accordance with the Board's established finance policy. The Board may in special cases approve deviations from the policy.

The Company has exposure to the following risks arising from financial instruments: market risk (equity price risk, currency risk and interest rate risk), liquidity risk, credit risk and operational risks. The financial policy stipulates that the parent company in the context of their daily activities normally not be leveraged. The portfolio companies have an independent funding and manage independently their liquidity risk. For more information, please see note 17, "Financial risks and Risk management".

FUTURE DEVELOPMENT

The Company is currently transitioning into a pure Baltic real estate company, with an aim to generate predictable cash flows by being a long-term owner of attractive commercial properties with stable tenants in prime locations in the Baltic capitals.

PERSONNEL AND REMUNERATION GUIDELINES

On 31 December 2017, Eastnine AB had seven employees, of which three women and four men. In accordance with current guidelines, the Board proposed the Annual General Meeting 2017 the following with regard to remuneration of executive management: remuneration is comprised of fixed salary, variable salary, pension and insurance benefits, as well as other non-monetary benefits and other compensation. The Board determines at its own discretion on the basis of specific key performance indicators whether the executive management should be paid any variable salary. The executive management may receive a maximum variable salary corresponding to 50 percent of their fixed salary. The executive management have an individual premium-based pension plan, pursuant to which the Company pays premiums corresponding to 10 percent of their fixed salary up to 10 Swedish income base amounts and premiums corresponding to 20 percent of their fixed salary on the portion of the fixed salaries exceeding 10 Swedish income base amounts. In the event the Company terminates the CEO's employment, the Company is required to observe a six-month period of notice. The CEO is entitled to a severance payment corresponding to six months' salary.

Information about salaries and current remunerations guidelines, other compensation and social charges for the Board and executive management, as well as other employees, is found in note 6.

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

The Board shall be comprised of three to six directors without deputies. Board Members are elected annually at the Annual General Meeting for the period up and until the next Annual General Meeting. The complete Articles of Association can be found on www. eastnine.com.

For information as to the manner in which the Company is governed and controlled, such as via the Board and committees, and for information on internal control and risk management, please refer to the Corporate Governance section on pages 32–39.

PROPOSED DISPOSITION OF EARNINGS

The Board of Directors proposed that the unappropriated earnings in Eastnine AB (publ) are distributed as follows:

Total available funds for distribution:

Total EUR	238,799,188
Profit for the year	17,084,945
Retained earnings	–55,711,238
Share premium reserve	277,425,481

To be allocated as follows:

Total EUR	238,799,188
(Of which share premium reserve 277,425,481)
Funds to be carried forward	234,032,498
Dividend to shareholders SEK 2.10/share1)	4,766,689

1) No dividend is paid for the Company's holding of own shares, whose exact number is determined on the record date for cash payment of the dividend. EUR 1 = SEK 10,11 on 28 February 2018 (Source: Reuters).

Income Statement

EUR thousands	Note	1 Jan–31 Dec 2017	1 Jan–31 Dec 2016
Changes in fair value of subsidiaries and associated companies	2	17,583	16,931
Dividend received	3	1,497	–
Other income	4	892	691
Staff expenses	6	–2,262	–1,894
Other operating expenses	5, 7	–1,259	–963
Advisory costs for termination of the Investment Agreement		–	–1,604
Operating profit/loss		16,451	13,161
Financial income	8	749	203
Financial expenses	8	–115	–61
Profit/loss before tax		17,085	13,303
Income tax	9	–	–
Net profit/Loss for the year1)		17,085	13,303
Earnings per share, EUR
Attributable to shareholders of the Parent Company	10	0.70	0.49

No dilutive effects during the periods.

1) Net Profit/Loss for the year corresponds to Total Comprehensive income for the year.

Balance Sheet

EUR thousands	Note	31 Dec 2017	31 Dec 2016
Assets
Shares in subsidiaries	15, 16, 17	153,963	195,993
Shares in associated companies	15, 16, 17	48,613	–
Loans to group companies	15, 16, 17, 18	25,100	20,900
Total non-current assets		227,676	216,893
Other short-term receivables	16	0	2
Accrued interest income	18	2,430	1,680
Accrued income and prepaid expenses	12, 16	218	427
Cash and cash equivalent	16	13,168	30,338
Total current assets		15,816	32,447
TOTAL ASSETS		243,492	249,340
Equity	11
Share capital1)		3,658	3,655
Other contributed capital/Share premium reserve2)		277,425	299,613
Retained earnings including other reserves2)		–55,711	–69,014
Net profit/loss for the period2)		17,085	13,303
Total equity		242,457	247,558
Current liabilities
Other liabilities	13, 16	180	334
Accrued expenses and prepaid income	14, 17	855	1,449
Total current liabilities		1,035	1,783
TOTAL EQUITY AND LIABILITIES		243,492	249,340

1) Restricted capital

2) Unrestricted capital

Statement of Changes in Equity

		Other contributed	Retained earnings	Total equity
EUR Thousands	Share capital	capital/Share premium reserve	incl. Profit/loss for the year	shareholders in the Parent company
2017
Opening equity 1 January 2017	3,655	299,613	–55,711	247,558
Net profit/loss for the period	–	–	17,085	17,085
Total comprehensive income	–	–	17,085	17,085
Bonus issue	3	–3	–	–
Dividend to shareholders	–	–2,267	–	–2,267
Share buy-back	–	–19,920	–	–19,920
Closing equity 31 December 2017	3,658	277,425	–38,626	242,457
EUR Thousands
2016
Opening equity 1 January 2016	3,654	318,920	–69,014	253,561
Net profit/loss for the period	–	–	13,303	13,303
Total comprehensive income	–	–	13,303	13,303
Bonus issue	1	–1	–	–
Dividend to shareholders	–	–2,335	–	–2,335
Share buy-back	–	–16,971	–	–16,971
Closing equity 31 December 2016	3,655	299,613	–55,711	247,558

Statement of Cash Flow

EUR Thousands	1 Jan–31 Dec 2017	1 Jan–31 Dec 2016
Operating activities
Operating profit/loss	16,451	13,161
Changes in fair value of subsidiaries and associated companies	–17,583	–16,931
Cash flow from current operations before changes in working capital	–1,132	–3,770
Cash flow from changes in working capital
Increase (–)/decrease(+) in other current receivables	210	–414
Increase (+)/decrease(–) in other current payables	–747	1,272
Cash flow from operating activities	–1,669	–2,912
Investing activities
Repayment of shareholder contributions	11,000	52,700
Aquisition of remaining shares in ECEX Holding SA	–	–2,000
Loan to group company	–4,200	–
Cash flow from investing activities	6,800	50,700
Financing activities
Dividend to shareholders	–2,267	–2,335
Share buy-back	–19,920	–16,971
Cash flow from financing activities	–22,187	–19,306
Cash flow for the period	–17,056	28,482
Cash and cash equivalent at the beginning of the period	30,338	1,918
Exchange rate differences in cash and cash equivalents	–115	–61
Cash and cash equivalent at the end of the period	13,168	30,338

Notes to the financial statements

1 ACCOUNTING PRINCIPLES

STATEMENT OF COMPLIANCE

The financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") as approved by the European Commission for application within the European Union. In addition, the Swedish Financial Reporting Board recommendation RFR 1 has been applied.

The accounting policies have been consistently applied to all periods presented in the financial statements, unless otherwise stated.

The annual report was approved for issue by the Board on 20 March 2018. The financial statements will be submitted to the shareholders' meeting for adoption on 24 April 2018.

ACCOUNTING PRINCIPLES OF THE PARENT COMPANY

As Eastnine AB, in accordance with IFRS, is classified as an investment entity, consolidated accounts are not produced, but instead separate financial statements in accordance with IFRS are presented below. Furthermore, as before, the separate financial statements of the Parent company are produced in accordance with RFR 2. There are for Eastnine currently no differences between the requirements in accordance with RFR 2 and the reports according to IFRS.

NEW IFRS

No new or amended IFRS, effective from 2017, have changed the Company's financial statements.

A number of new or revised IFRS effective for reporting periods beginning 1 January 2018 or later have been published by the IASB. The Company does not plan early adoption of these standards and they are not assessed to have any material impact on the financial statements, including the new standards IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases.

Eastnine's value creation through return on investments is not in the scope of IFRS 15. The accounting of minor non-core activities that are in the scope of IFRS 15 are judged not to be significantly affected by the new standard (which is applied from 2018). Material financial instruments consist of investments in the investment entity business – shares in subsidiaries and associated companies and loans to group companies – which are recognised at fair value through profit or loss, and cash and cash equivalents. IFRS 9, which is applied from 2018, will not affect the accounting for these items. The application of IFRS 16, from 2019, will mean that all leases, including rent for office facilities, are capitalised as assets and liabilities and that expenses consist of depreciation and interest. Eastnine rents office facilities to a minor extent and other leasing contracts will not either have a material effect.

BASIS FOR MEASUREMENT FOR PREPARING FINANCIAL STATEMENTS

Shares and participations in investing activities and short-term investments are recognised at fair value through Profit or Loss. Other financials and non-financials assets and liabilities are recognised at cost or amortised cost.

FUNCTIONAL AND PRESENTATION CURRENCY

The Company's functional currency is euro (EUR). This means that the financial statements are presented in EUR. All amounts, unless stated otherwise, are rounded off to the nearest thousand. Note that certain figures may not sum exactly due to rounding.

ESTIMATES AND ASSUMPTIONS

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Management has discussed the developments, decisions made and information regarding the Company's most important accounting principles and estimates, as well as the application of these principles and estimates with the Board of Directors.

SIGNIFICANT JUDGMENTS MADE IN THE APPLICATION OF THE ACCOUNTING POLICIES

The significant accounting assessments used in applying the accounting policies are described below:

INVESTMENT ENTITIES

As of 1 January 2014, Eastnine applies the investment entity consolidation exception in IFRS 10, which implies that all holdings are recognised at fair value through profit or loss. In assessing Eastnine AB, it has been concluded that the Company falls within the classification of an investment entity.

Eastnine AB has brought several investors (the shareholders) together for the purpose of making investments in portfolio companies where Eastnine AB's investment strategy is to acquire attractive assets and sell them in the foreseeable future at a profit. Also, Eastnine AB's strategy in optimising the long-term return for the shareholders is to actively manage the portfolio of investments. The capital invested in the portfolio is of a long-term nature and enables making investments over a full economic cycle. However, implicit in the active management is the strategy to exit direct investments through trade sales or IPOs and to exit fund investments either through the closure of the funds or through sales.

KEY SOURCES OF UNCERTAINTY

The sources of uncertainty in the estimates below refer to the significant risk of substantial adjustments to reported assets or liabilities for the next financial year. In those cases, where portfolio investments are not traded on a market seen as an active market and fair value is not set against the background of actual bid quote, but by means of valuation models (see below under financial instruments), there is uncertainty that the holding will not be assigned a correct fair value. The Company applies its models consistently between the periods, but the calculation of fair value is characterised by uncertainty. Based on controls and reliability procedures, the Company considers the fair values recognised in the Balance Sheet to be carefully calculated and balanced and to reflect the underlying economic values. For more information, please see Sensitivity analysis in note 15.

CLASSIFICATION ETC.

Non-current assets and non-current 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 utilised or paid within 12 months after the Balance Sheet date.

SEGMENT REPORTING

Eastnine AB classifies the Company's various segments based on the nature of the investments. Management monitors the holdings on the basis of fair value, and all holdings are reported at fair value through profit or loss. The value change of holdings held by the subsidiaries has been allocated to value changes, dividends received and other operating expenses that are directly attributable to the underlying investments in Real Estate Direct, Real Estate Funds and Other. All other revenues and expenses are classified as unallocated.

INCOME

Income consists primarily of value changes in portfolio, advisory services to group companies and of dividends.

For Balance Sheet items included at both the beginning and the 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.

EXPENSES

Operating expenses refers to costs of an administrative nature, such as staff costs, management fees, notary fees and bank fees. The cost for variable remuneration is estimated and accrued at the end of the year. Obligations related to contributions to defined contribution plans are expensed in the Income Statement when the related services are provided.

TAXES

Income tax comprises current and deferred tax. Income tax is reported in the Income Statement except when the underlying transaction is reported in Other Comprehensive Income or directly in equity. In such cases, associated tax effects are reported in Other Comprehensive Income or directly in equity.

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

FINANCIAL INSTRUMENTS

Financial instruments recognised in the Balance Sheet on the asset side includes shares and participations in investing activities, loans to group companies, short-term investments, cash and cash equivalents and other short-term receivables. On the liabilities side there are accounts payables and other current liabilities.

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 the terms and conditions of the agreement are met. 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 thereof) is removed from the Balance Sheet when the obligation specified in the agreement is discharged or in any other manner extinguished.

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 amortised 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.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Fair value is determined as follows:

Unlisted holdings and holdings where market data is not reliable

(a) Real Estate

At initial recognition, any acquired noncurrent investment property is carried at acquisition cost. In the financial statements, investment property is subsequently measured at fair value in accordance with IAS 40. The fair value of investment property is adjusted at each time when drawing up financial statements where its change is recognized as profit or loss in the income statement.

On a yearly basis, the value of the investment property is established by independent asset valuers applying a fair value method. During the financial year an on-going revaluation takes place, taking into account the operating cash flow of the property and other items such as deferred tax and market valuation of derivative instruments, and is reported on the basis of internal valuation.

A building which is under construction for future use as investment property is measured at fair value in accordance with IAS 40. Valuation is made by independent asset valuers annually, as actual construction costs are supplemented with present value assessments of future cash flow and the price level that is expected to be achieved in future sales at market condition.

See note 16 for description of valuation methods.

(b) Other unlisted holdings

Other unlisted holdings shall be initially measured at their acquisition price and subsequently at fair value in accordance with IFRS 13, using the International Private Equity and Venture Capital Valuation Guidelines (IPEVC Guidelines). In brief, the following methods are used, ranked: the price of recent transactions; independent reliable valuation that can be substantiated; any other valuation methodology that clearly and indisputably provides a better estimate of the fair value, or; the fair value at the previous reporting date remains the best estimate of fair value, taking into account changes in value due to events or changes in circumstances. The Company may request, when it considers that there is a requirement to do so, an independent appraiser to perform a valuation of any investment.

Listed holdings on active markets

Financial instruments listed on active markets are measured primarily, at fair value based on, ranked: official closing price on active market; last traded price; mid-price if official closing price or last traded price is not available or older than 5 days.

A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring transactions on an arm's length basis.

Listed holdings on non-active markets

If the conditions for an active market are not met, the market is seen as non-active. Listed holdings on a non-active market will be measured according to IPEVC Guidelines as all unlisted holdings described above.

Note 1 cont.

Other holdings

Redeemable funds are measured based on official NAV, as soon as such is published.

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.

IMPAIRMENT OF FINANCIAL ASSETS

The carrying values of the Company's financial assets, excluding financial assets reported at fair value with changes in value reported in profit or loss, are tested at the end of each reporting 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 as a consequence of events having negative impact on future cash flow which is significant or extended. Objective evidence comprises observable conditions which have occurred and which 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 profit or Loss.

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 taking place after the impairment loss was made.

EQUITY

REPURCHASE OF SHARE CAPITAL

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.

DIVIDENDS

Holders of ordinary shares are entitled to dividends. The amount and timing is to be proposed and approved at the Annual General Meeting each year. The dividend reduces equity when approved by the Annual General Meeting. Additionally, each share entitles the right to one vote at the shareholders' meeting and all shares entitle the same right to the Company's remaining net assets.

EARNINGS PER SHARE

Earnings per share are calculated by dividing the profit or loss 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.

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.

2 SEGMENT REPORTING

Eastnine AB classifies the Company's various segments based on the nature of the investments. Management monitors the holdings on the basis of fair value, and all holdings are reported at fair value through profit or loss. The value change of holdings held by the subsidiaries has been allocated to value changes, dividends received and other operating expenses that are directly attributable to the underlying investments in Real Estate Direct, Real Estate Funds and Other. All other revenues and expenses are classified as unallocated in the table below. As of Q2 2017, Eastnine has changed its segment reporting to reflect the ongoing strategic shift. Previously, the segment reporting was classified as Private Equity, Real Estate, Public Equity and Short-term Investment. Comparable numbers for 2016 are restated according to the new segment reporting.

EUR thousands	Real Estate	Real Estate
1 Jan–31 Dec 2017	Direct	Funds	Other	Unallocated	Total
Changes in value of portfolio	6,695	4,140	5,699	–	16,534
Dividends received	–	1,067	990	–	2,057
Other operating expenses	–	–	–	–1,008	–1,008
Changes in value of subsidiaries	6,695	5,207	6,689	–1,008	17,583
Dividends received	–	–	1,497	–	1,497
Other income	–	52	666	175	892
Staff expenses	–	–	–	–2,262	–2,262
Other operating expenses	–	–	–	–1,259	–1,259
Operating profit/loss	6,695	5,259	8,851	–4,354	16,451
Financial income	749	–	–	–	749
Financial expense	–	–	–	–115	–115
Profit/loss before tax	7,444	5,259	8,851	–4,469	17,085
Assets	74,164	37,064	90,213	42,051	243,492

Note 2 cont.

EUR thousands	Real Estate	Real Estate
1 Jan–31 Dec 2016	Direct	Funds	Other	Unallocated	Total
Changes in value of portfolio	2,326	1,808	31,119	–	35,254
Dividends received	–	854	1,175	–	2,029
Other operating expenses (incl. management fees)	–172	–	–2,717	–447	–3,336
Items affecting comparability1)	–935	–	–6,682	–9,400	–17,017
Changes in value of subsidiaries	1,219	2,662	22,896	–9,847	16,931
Other income	–	27	550	115	691
Staff expenses	–	–	–	–1,894	–1,894
Other operating expenses	–	–	–	–963	–963
Advisory costs for termination of
the Investment Agreement2)	–	–	–	–1,604	–1,604
Operating profit/loss	1,219	2,689	23,446	–14,193	13,161
Financial income	203	–	–	–	203
Financial expense	–	–	–	–61	–61
Profit/loss before tax	1,421	2,689	23,446	–61	13,303
Assets	30,419	36,656	99,631	82,634	249,340

1) Costs related to the transition and termination agreement with East Capital (Real Estate Direct and Unallocated), and carried interest related to the sale of Starman (Other)

2) Advisory costs related to the termination of the Investment Agreement with East Capital

3 DIVIDEND RECEIVED

EUR thousands	2017	2016
East Capital Explorer Investments AB	500	–
Melon Fashion Group	997	–
Summa	1,497	–

4 OTHER INCOME

EUR thousands	2017	2016
Repayment of charged managment fees in the funds	717	576
Advisory and management services to group companies	175	115
Total	892	691

5 OTHER OPERATING EXPENSES

EUR thousands	2017	2016
Marketing and PR	293	140
Legal services	138	104
Services from related parties1)	39	65
Rent	116	95
Audit assignments2)	51	52
IT and accounting services	79	–
Other external costs	544	506
Total	1,259	963

1) Services from related parties are included in the service agreement with East Capital International AB. See note 18.

2) Audit assignments 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. See note 7.

6 EMPLOYEES, STAFF EXPENSES AND EXECUTIVE MANAGEMENT COMPENSATION

Salaries, other remunerations and social charges, EUR thousands	2017	2016
Board and directors and CEO	885	534
of which variable	183	89
Other employees	769	835
Total	1,654	1,370
Social charges	585	512
of which pensions	132	107
Total	2,239	1,882
Average number of employees, Parent Company	2017	2016
Men	4	3
Women	4	4
Total	8	7

EXECUTIVE MANAGEMENT COMPENSATION REMUNERATION TO THE BOARD

On 15 May 2017, the Company's shareholders' meeting determined that the Chairman of the Board will receive annual compensation of SEK 1,200,000 for the period until the next shareholders' meeting. Other Board members will receive SEK 400,000 per person in compensation for the time until the next shareholders' meeting.

REMUNERATION TO SENIOR EXECUTIVES AND OTHER TERMS OF EMPLOYMENT

Guidelines for salary and other remuneration to the Company's senior executives will be resolved on a yearly basis at the annual general meeting, based on proposals by the Board. Remuneration to senior executives consists of fixed salary, variable salary and pension, insurance and customary benefits. The Board decides at its own discretion whether the senior executives should be paid variable salary. The senior executives can receive a maximum variable salary corresponding to 50 percent of their fixed salary. The senior executives have an individual premiumbased pension plan, pursuant to which the Company pays premiums corresponding to 10 percent of the fixed salary up to 10 Swedish income base amounts and premiums corresponding to 20 percent of the fixed salary on the portion of the 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. In the event the CEO terminates his employment, he is required to observe a six-month notice period.

			2017					2016
Remuneration and other benefits, EUR thousands	Fixed salary	Variable salary 1)	Board fee	Pension expenses	Total	Fixed salary	Variable salary 1)	Board fee	Pension expenses	Total
Lars O Grönstedt, Chairman2)	–	–	132	–	132	–	–	121	–	121
Peter Elam Håkansson, Board member2)	–	–	44	–	44	–	–	30	–	30
Liselotte Hjorth, Board member2)	–	–	44	–	44	–	–	44	–	44
Nadya Wells, Board member from 9 juni 2016	–	–	42	–	42	–	–	28	–	28
Göran Bronner, Board member from 15 maj 2017	–	–	31	–	31	–	–	–	–	–
Alexander V.Ikonnikov, Board member until 9 juni 2016	–	–	–	–	–	–	–	12	–	12
Mikael Nachemson, Vice Chairman 21 april 2015–9 juni 2016	–	–	–	–	–	–	–	22	–	22
Jenny Rosberg, Board member 21 april 2015–9 juni 2016	–	–	–	–	–	–	–	12	–	12
Kestutis Sasnauskas, CEO fr.o.m. 3 juli 2017, CIO 9 maj 2016–2 juli 2017	260	94	–	44	398	164	–	–	26	190
Mia Jurke, CEO until 2 July 2017	149	88	–	22	259	178	89	–	29	296
Other executive management	143	69	–	23	235	142	70	–	21	233
Total	552	252	294	88	1 186	485	158	267	76	987

1) During 2018 the board resolved to pay out EUR 163 thousands for executive management for 2017. According to decision by the Board of Directors, the resigned CEO Mia Jurke received a compensation corresponding to EUR 88 thousands.

2) Board members who invoice their Board fees. In order to keep their Board fee neutral in relation to the other Board members, the fee invoiced has been adjusted for social security contributions and VAT.

7 FEES AND EXPENSES FOR AUDITORS

EUR thousands	2017	2016
KPMG
Audit fee	51	52
Audit assignments except audit fees	10	24
Tax assignments	39	48
Other assignments	7	69
Total	107	193

10 EARNINGS PER SHARE

EUR thousands	2017	2016
Earnings per share, basic and diluted	0.70	0.49

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	2017	2016
Profit/loss attributable to the holders of ordinary shares in the Parent company	17,085	13,303
Weighted average number of outstanding ordinary shares in the Parent company, In thousand of shares	2017	2016
Weighted average number of ordinary shares, basic and diluted, adjusted for the effects of the redemption program and share buy-back	24,334	27,027

8 FINANCIAL INCOME AND EXPENSE

EUR thousands	2017	2016
Interest income from Group companies	749	203
Total financial income	749	203
Net foreign exchange loss1)	–115	61
Total financial expense	–115	61

1) Exchange rate gain/loss on cash and cash equivalent.

9 TAXES

	2017		2016
Reconciliation of effective tax	%	EURt	%	EURt
Profit/loss before tax		17,085		13,303
Tax as per applicable tax rate for the Parent Company	22.0	–3,759	22.0	–2,927
Tax effect on non-taxable fair value adjustments	–22.6	3,868	–28.0	3,725
Tax effect on non-taxable income from dividend	–16.3	329	–	–
Tax effect on non tax deductible expenses	0.0	–4	0.0	–2
Not recognized tax on tax losses carried forward for the year	–2.5	–435	–6.0	–796
Recognised effective tax	0.0	0	0.0	0

The average applicable tax rate was 0.0% (0.0%) due to non-taxable fair value adjustments.

Deferred tax assets are reported to the extent it is possible that they can be utilised by future taxable profits. Potential unrealised tax effects on tax losses forward amount to EUR 2.1m, which has not been recognised in the balance sheet as future profits will mainly deemed to be attributable to direct investments which are not taxable according to Swedish tax law.

11 SHAREHOLDERS EQUITY

Outstanding shares	2017	2016
Issued at 1 January	28,162	28,477
Repurchased shares, cancelled	–3,346	–315
Issued at 31 December	24,816	28,162

SHAREHOLDERS'S EQUITY

OTHER CONTRIBUTED CAPITAL

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

RETAINED EARNINGS INCLUDING PROFIT/LOSS FOR THE YEAR

Include profit or losses attributable to shareholders in the Parent Company.

NON-RESTRICTED EQUITY SHARE PREMIUM RESERVE

When new shares are issued at a premium, implying that the price to be paid for a share is higher than the previous quotient value of the share, an amount corresponding to the amount received in excess of the share's quotient 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. Previous provisions to the statutory reserve, less transferred share premium reserves are included in this item under equity.

CAPITAL MANAGEMENT

Capital is defined as total equity, and amounted to EUR 242m (EUR 248m) per 31 December 2017. EUR 201m (EUR 167m) was invested in Real Estate Direct, Real Estate Funds and Other. Cash in the investment activities amounted to EUR 41.1 (EUR 83.5m).

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 debt, 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.

PROPOSED DISPOSITION OF EARNINGS

The Board of Directors proposed that the unappropriated earnings in Eastnine AB (publ) are distributed as follows:

Total available funds for distribution:

Total EUR	238,799,188
Profit for the year	17,084,945
Retained earnings	–55,711,238
Share premium reserve	277,425,481

To be allocated as follows:

Total EUR	238,799,188
(Of which share premium reserve 277,425,481)
Funds to be carried forward	234,032,498
Dividend to shareholders SEK 2.10/share1)	4,766,689

1) No dividend is paid for the Company's holding of own shares, whose exact number is determined on the record date for cash payment of the dividend. EUR 1 = SEK 10,11 on 28 February 2018 (Source: Reuters).

12 ACCRUED INCOME AND PREPAID EXPENSES

EUR thousands	2017	2016
Repayment of charged managment fees in the funds	175	265
Other accrued income and prepaid expenses	43	46
Advisory and management services to group companies	—	115
Total	218	427

13 OTHER LIABILITIES

EUR thousands	2017	2016
Account payables	72	219
Other	108	115
Total	180	334

14 ACCRUED EXPENSES AND PREPAID INCOME

EUR thousands	2017	2016
Vacation pay	36	67
Share buy-back	231	–
Other accrued expenses	588	381
Aquisition of remaining shares in ECEX Holding SA	–	1,000
Total	855	1,449

15 SHARES AND PARTICIPATIONS IN THE PORTFOLIO

All shares and participations are recognised at fair value through profit or loss.

Entities in which the ownership interest is over 50% Non consolidated entities 2017	Domicile, Country	Number of shares	Book value, EUR thousands	Ownership capital
Baltic Cable Holding OÜ	Tallinn, Estonia	2,502	142,416	100%
UAB Portarera	Vilnius, Lithuania	9,500	74,164	100%
UAB 3Burės	Vilnius, Lithuania	100	30,674	100%
UAB Vertas	Vilnius, Lithuania	100	29,851	100%
UAB Solverta (3Burės development)	Vilnius, Lithuania	100	13,639	100%
East Capital Explorer Investments AB	Stockholm, Sweden	11,000	10,392	100%
ECEX HoldingsSA (under liquidation)	Bertrange, Luxembourg	100,000	1,155	100%

Shares and participations in the portfolio 2017	Place of business	IFRS classification	Classification	Carrying amount	Holdings1)
3Burės	Lithuania	Subsidiary2)	Real Estate Direct	30,674	100%
Vertas	Lithuania	Subsidiary2)	Real Estate Direct	29,851	100%
3Burės development	Lithuania	Subsidiary2)	Real Estate Direct	13,639	100%
East Capital Baltic Property Fund II	Luxembourg	Associated company3)	Real Estate Funds	20,842	46%
East Capital Baltic Property Fund III	Luxembourg	Associated company3)	Real Estate Funds	16,222	27%
Melon Fashion Group	Russia	Associated company3)	Other	48,613	36%
East Capital Deep Value Fund	Luxembourg	Associated company3)	Other	19,191	59%
East Capital Frontier Markets Fund	Luxembourg	Associated company3)	Other	12,124	20%
Komercijalna Banka Skopje	Macedonia	Investment4)	Other	10,286	10%

Shares and participations in the portfolio 2016	Place of business	IFRS classification	Classification	Carrying amount	Holdings1)
3Burės	Lithuania	Subsidiary2)	Real Estate Direct	25,442	100%
3Burės development	Lithuania	Subsidiary2)	Real Estate Direct	4,977	100%
East Capital Baltic Property Fund II	Luxembourg	Associated company3)	Real Estate Funds	27,821	49%
East Capital Baltic Property Fund III	Luxembourg	Associated company3)	Real Estate Funds	8,834	27%
Melon Fashion Group	Russia	Associated company3)	Other	42,884	36%
East Capital Deep Value Fund	Luxembourg	Associated company3)	Other	28,697	74%
East Capital Frontier Markets Fund	Luxembourg	Associated company3)	Other	10,236	29%
Trev-2 Group	Estonia	Associated company3)	Other	5,701	38%
Komercijalna Banka Skopje	Macedonia	Investment4)	Other	10,659	10%
East Capital Bering Ukraine Fund Class R	Cayman Islands	Investment4)	Other	1,453	11%

1) Holdings

Represents the ownership of the holding at year-end, either as a percentage of equity for certain Funds or of share capital for the remaining holdings. The number also represent the voting power of the holding.

2) Subsidiaries

Baltic Cable Holding OÜ holds direct investment 3Burės, 3Burės development and Vertas. 3Burės - One of Vilnius' most modern and well located A Class office buildings. 3Burės development - Construction of a 23-floor office complex next to 3Burės. The property is expected to be completed by the end of 2018. Vertas – An A class office building in Vilnius acquired in June 2017. Risks associated with Real Estate industry are mainly market and tenant risk. For information regarding strategy of our investments please see note 1 Accounting principles (section Investment entities).

3) Associated companies

Eastnine AB holds direct investments in Melon Fashion Group (MFG). Melon Fashion Group – One of the fastest growing Russian fashion retail companies. Risks associated with the retail industry are mainly market and political risks. For information regarding strategy of our investments please see note 1 Accounting principles (section Investment entities).

All of the unconsolidated Funds are managed by East Capital and the capital is distributed by different investors. East Capital, is a specialist in emerging and frontier markets. Basing its investment strategy on thorough knowledge of the markets, fundamental analysis and frequent company visits by its investment teams. Holdings in the Funds are valued at fair value on a current basis according to the valuation principles included in note 1, Accounting Principles. For risks, please refer to note 17. Eastnine have commited to invest EUR 20m in total in the new fund East Capital Baltic Property Fund III, of which, EUR 14.1m has been drawn down by the fund and the outstanding commitment on 31 December 2017 amounted to EUR 5.9m.

4) Investment

Holdings in funds and other financial assets that does not fall into the classification of subsidiaries, associated companies or joint ventures. There are no outstanding commitments in relations to investments.

16 FINANCIAL INSTRUMENTS – CATEGORIES, CLASSES AND FAIR VALUES

For a better understanding of the business, the information regarding financial instruments below is presented on a see-through basis as the fair value of the holdings in the subsidiaries. Shares and participations in the investment activities as well as the Company's holdings in subsidiaries are all valued at fair value.

CALCULATION OF FAIR VALUE

The following summarises the main methods and assumptions applied in determining the fair value of the financial instruments.

Financial instruments measured at fair value through profit or loss

For a description of the method applied to measure financial instruments recognised at fair value through profit or loss, see Note 1 Accounting Principles.

Loans to Group Companies, which are a part of 3Burės valuation, are monitored by management on a fair value basis. Changes in credit risk has not led to any significant fair value changes of the loans.

Financial instruments not measured at fair value through profit or loss

For accounts receivable and accounts payable, the carrying amount is assessed to reflect fair value since the remaining maturity is generally short. This is also the case for cash and bank.

FAIR VALUE ESTIMATION

The Company applies IFRS 13 for fair value measurement and IFRS 13 and IFRS 7 for disclosures. This requires the Company to classify, for disclosure purposes, fair value measurements using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level of input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs requiring significant adjustment based on unobservable inputs, such measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the financial asset or liability. For fair value estimation, see Note 1 Accounting Principles.

The determination of what constitutes 'observable' requires significant judgment by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The remaining equity funds are classified in the level where underlying equities to a predominant proportion have been classified.

31 December 2017 Financial assets and liabilities, EUR thousands	Financial assets at fair value through profit or loss	Loans and receivables	Other financial receivables/ liabilities	Total carrying amount
Shares in subsidiaries	153,963	–	–	153,963
Shares in associated companies	48,613	–	–	48,613
Loan to Group Companies incl. accrued interest1)	27,530	–	–	27,530
Cash and cash equivalent	-	13,168	–	13,168
Total	230,105	13,168	–	243,274
Other financial liabilities	–	–	180	180
Total	–	–	180	180

31 December 2016 Financial assets and liabilities, EUR thousands	Financial assets at fair value through profit or loss	Loans and receivables	Other financial receivables/ liabilities	Total carrying amount
Shares in subsidiaries	195,993	–	–	195,993
Loan to Group Companies incl. accrued interest1)	22,580	–	–	22,580
Other current receivables	–	2	–	2
Cash and cash equivalent	–	30,338	–	30,338
Total	218,573	30,340	–	248,914
Other financial liabilities	–	–	334	334
Total	–	–	334	334

1) Se note 18 för more information.

SHARES IN SUBSIDIARIES AND ASSOCIATED COMPANIES/ FINANCIAL INSTRUMENTS

In the Parent Company, financial instruments consist of shares in subsidiaries of EUR 154.0m, shares in accociated companies of EUR 48.6, loans to group companies incl. accrued interest of EUR 27.5m and cash and cash equivalent of EUR 13.2m. The carrying amount of these assets constitutes the fair value on the balance sheet date.

		Book value, EURt		Share of capital, %
Shares in subsidiaries and associated companies, including loans to group companies	Domicile, country	31 Dec 2017	31 Dec 2016	31 Dec 2017	31 Dec 2016
Baltic Cable Holding OÜ1)	Tallinn, Estonia	142,416	–	100	–
Melon Fashion Group1)	Moscow, Russia	48,613	–	36	–
Humarito Limited1)	Nicosia, Cyprus	–	173,321	–	100
East Capital Explorer Investments AB	Stockholm, Sweden	10,392	10,808	100	100
ECEX Holding SA (under liquidation)	Bertrange, Luxembourg	1,155	11,864	100	100
UAB Portarera (loan)	Vilnius, Lithuania	25,100	20,900	100	100

1) Due to reorganisation in the group, shares in Melon Fashion Group was transferred from Humarito to Eastnine, while the remaining holdings were transferred to Baltic Cable Holding. Following the completion of the reorganisation, Humarito was sold to an independent service provider for a nominal consideration.

As the holdings in the subsidiaries are presented on a see-through basis, the tables below reflect the fair value hierarchy in the investment activities. The values of the shares in subsidiaries and

associated companies, including loans to group companies, are directly and indirectly made up by the following assets:

31 December 2017

Closing balance 31 December 2017	71,734	37,064	90,213	27,957	708	227,676
Changes in fair value recognised net in profit/loss	6,695	4,140	5,699	–	–	16,534
Dividend paid to Parent company	–	–	–	–500	–	–500
Dividend received	–	–	–	1,917	640	2,557
Repaid shareholders contributions	–	–	–	–11,000	–	–11,000
Other	–	–	–	–2,410	1,402	–1,008
Divestments/Reductions	–	–9,765	–16,441	26,206	–	0
Purchases/additions	36,300	6,033	1,324	–39,457	–	4,200
Opening balance 1 January 2017	28,739	36,656	99,631	53,201	–1,334	216,893
Breakdown of values in subsidiaries and associated companies including loans to group companies, EUR Thousands	Real Estate Direct	Real Estate Funds	Other	Cash and bank	Other assets and liabilities, net	Total

31 December 2016

Closing balance 31 December 2016	28,739	36,656	99,631	53,201	–1,334	216,893
Changes in fair value recognised net in profit/loss	2,326	1,808	31,119	–	–	35,254
Dividend received	–	–	–	2,029	–	2,029
Repaid shareholders contributions	–	–	–	–52,700	–	–52,700
Other	–	–	–	–17,116	–1,236	–18,352
Divestments/Reductions	–	–	–117,416	117,416	–	0
Purchases/additions	250	4,770	–	–5,020	–	0
Movement of accrued interest income to Parent company	–1,477	–	–	–	–	–1,477
Opening balance 1 January 2016	27,641	30,077	185,927	8,593	–98	252,140
Breakdown of values in subsidiaries and associated companies including loans to group companies, EUR Thousands	Real Estate Direct	Real Estate Funds	Other	Cash and bank	Other assets and liabilities, net	Total

Note 16 cont.

Real Estate Direct consists of holdings in 3Burės, 3Burės development and Vertas. Real Estate Funds consists of holdings in East Capital Baltic Property Fund II and East Capital Baltic Property Fund III. These holdings are valued internally or externally normally at yearend, and the fair value of the holdings is assessed on a quarterly basis.

Other consists of the holdings in Melon Fashion Group (MFG), the fair value of which is assessed on a quarterly basis, East Capital Eastern Europe Small Cap Fund with a majority of public holdings managed by East Capital, East Capital Global Frontier Markets Fund, Komercijalna Banka Skopje, which are publicly traded. These holdings are valued at fair value according to the valuation principles described on page 52.

Valuation methods for unlisted holdings

Holding	Class	Valuation method	Valuation assumptions
3Burės	Real Estate Direct	DCF	WACC 7.9%, Exit yield 6.75%
3Burės development	Real Estate Direct	DCF	WACC 7.2%, Exit yield 6.75%
Vertas	Real Estate Direct	Acquisition value
EC Baltic Property Fund II	Real Estate Funds	DCF	WACC 8–12%, Exit yield 6–8%
EC Baltic Property Fund III	Real Estate Funds	DCF	WACC 8–9%, Exit yield 7–8%
Melon Fashion Group	Other	DCF	Long-term growth 4.6%, Long term operating margin 11.5%, WACC 16.1%. A 25% minority and liquidity discount is applied

Discounted Cash Flow model (DCF), weighted average cost of capital (WACC)

For the fair values of Real Estate Direct (3Burės and 3Burės development), Real Estate Funds and Other – reasonably possible changes

at the reporting date to one of the significant unobservable inputs, provided other inputs constant, would have the following effects:

Sensitivity analysis

Effect in EUR thousands	Real Estate Direct Profit or loss		Real Estate Funds Profit or loss
31 December 2017	Increase	Decrease	Increase	Decrease
Weighted average cost of capital (WACC) (0.5% movement)	–1,472	1,529	–587	598
Exit yield (0.5% movement)	–2,495	2,892	–1,380	1,464

Effect in EUR thousands		Other Profit or loss
31 December 2017	Increase	Decrease
Long term growth rate (0.5% movement)	1,738	–1,593
Weighted average cost of capital (WACC) (0.5% movement)	–2,429	2,659
Long term operating margin (0.5% movement)	1,622	–1,621

FAIR VALUE HIERARCHY OF SHARES AND PARTICIPATIONS IN THE INVESTMENT ACTIVITIES

The following table analyses, within the fair value hierarchy, the investments in the investment activities measured at fair value:

Total	41,601	159,840	201,441
Other	41,601	48,613	90,213
Real Estate Funds	–	37,064	37,064
Real Estate Direct	–	74,164	74,164
31 December 2017, EUR thousands Shares and participations in invest ment activities at fair value through profit or loss11)	Level 1	Level 3	Total

1) Following investments are classified in:

Level 1: East Capital Eastern Europe Small Cap Fund, East Capital Global Frontier Markets Fund and Komercijalna Banka Skopje Level 3: East Capital Baltic Property Fund II, East Capital Baltic Property Fund III, 3Burės, 3Burės development, Vertas and MFG

31 December 2016, EUR thousands Shares and participations in investment activities at fair value through profit or loss Level 1 Level 3 Total

Total	49,592	117,114	166,706
Other	49,592	50,039	99,631
Real Estate Funds	–	36,656	36,656
Real Estate Direct	–	30,419	30,419

31 December 2017, EUR thousands	Real Estate	Real Estate
Changes in financial assets and liabilities in Level 3	Direct	Funds	Other	Total
Opening balance 2017	30,419	36,656	50,039	117,114
Purchase/additions	36,300	6,033	–	42,333
Divestments/Reductions	–	–9,765	–7,026	–16,791
Changes in fair value recognised net in profit/loss	7,444	4,140	5,600	17,184
Closing balance 2017	74,164	37,064	48,613	159,840
31 December 2016, EUR thousands	Real Estate	Real Estate
Changes in financial assets and liabilities in Level 3	Direct	Funds	Other	Total
Opening balance 2016	27,641	30,077	105,957	163,675
Transfers out of level 31)	–	–	–71,839	–71,839
Purchase/additions	250	4,770	–	5,020
Changes in fair value recognised net in profit/loss	2,529	1,808	15,921	20,258
Closing balance 2016	30,419	36,656	50,039	117,114

1) Starman was moved from level 3 to level 2 before the divestment was finalised; the unobservable input was not a significant part of the value of the holding.

EUR 16,408 thousands (EUR 20,258 thousands) of changes in fair value recognised net in profit/loss relate to investments still held at the end of the period.

17 FINANCIAL RISKS AND RISK MANAGEMENT

The Company is through its operations exposed to a variety of risks. The main identified risks are financial risks, operating risks and commercial risks. Financial risk management is handled by management in accordance with the Board's established finance policy. The Board may in special cases approve deviations from the policy.

The Company has exposure to the following risks arising from financial instruments: market risk (equity price risk, currency risk and interest rate risk), liquidity risk, credit risk and operational risks. The financial policy stipulates that the company in the context of their daily activities normally not be leveraged. The portfolio companies have an independent funding and manage independently their liquidity risk.

FINANCIAL RISKS

The Company has exposure to the following risks:

(A) MARKET RISK

Market risk is the risk that changes in market prices, such as equity prices, foreign exchange rates and interest rates, will affect the value of the Company's holdings in financial instruments.

The table "Sensitivity analysis for market risks" on the following page summarises the effect of the most important market risks on the Company's profit or loss and equity.

(i) Equity price risk

Equity price risk is the risk that arises from security price volatility, i.e. the risk of a decline in the value of a listed investment. The proportion of listed investment in Eastnine's investment portfolio as a result of the Company's strategic focus has decreased considerably in recent years.

The principal factors that affect the equity price risk are, in addition to the individual portfolio company's development, the markets and sectors in which the Company invests. The largest exposures are towards listed investment in Balkans and Russia, and the largest sector exposures are towards consumer goods and finance.

On 31 December 2017, the total fair value of Eastnine's investments exposed to equity price risk amounted to EUR 35.9 (EUR 41.1m) as specified in the table below.

Fair value of investments exposed to price risk,	31 Dec	31 Dec
EUR thousands	2017	2016
Listed shares and participations in invest ment activities designated at fair value through Profit or Loss at inception	35,909	41,106

(ii) Currency risk

Currency risk is the risk that arises from volatility in currency exchange rates, as the value of recognized monetary assets and liabilities denominated in other currencies fluctuates due to changes in foreign exchange rates. The Company operates and invests internationally and holds both monetary (cash and cash equivalents) and nonmonetary (investments in shares and participations) financial assets denominated in currencies other than the functional currency EUR. The main currency exposures in the Company's investment activities are towards the rouble (RUB) and the US dollar (USD).

The Company is exposed to currency risk primarily through its non-monetary assets, i.e. through direct and indirect investments in companies that are domiciled and operate in countries outside the Eurozone, or whose shares are denominated in other currencies than EUR. Some funds, in which the Company has invested, use USD as reporting currency. However, the underlying investments are exposed to various local currencies. This exposure relating to non-monetary assets is considered a component of equity price risk, not currency risk, and the Company's general policy is not to hedge this exposure.

To avoid currency risk, cash and cash equivalents are mainly held in EUR.

The Parent Company's operating expenses are mainly denominated in Swedish kronor (SEK) and it pays shareholder distributions in SEK. The Parent Company may decide to hedge these transactions. Spot, forward or option transactions may be used as part of the currency hedging strategy. Hedging transactions entail costs and may result in losses.

Not 16 forts.

The table "Concentration of foreign currency assets" below presents the Company's monetary and non-monetary assets, which are denominated in currencies other than EUR.

The Sensitivity analysis for market risks below summarizes the sensitivity of the Company's monetary and non-monetary assets and liabilities to changes in foreign exchange movements as at 31 December 2017.

(iii) Interest rate risk

Interest rate risk is the risk of increased volatility due to a change of interest rates. The Parent Company is exposed to interest rate risk in its cash and short-term investments, and in any debt or debt-related instruments. Changes in the level of interest rates can also affect Eastnine's portfolio holdings through, among other things the cost and availability of debt financing and hence the Company's ability to achieve attractive rates of return on its investments.

On 31 December 2017, the had no exposure in interest-bearing securities. Cash and cash equivalent in the investment activities amounted to EUR 41.1m (EUR 83.5m), with a weighted average interest rate of –0.02 percent (–0.11 percent).

The sensitivity analysis below summarizes the sensitivity to changes in the average interest rate on cash and cash equivalents on December 31, 2017.

(B) LIQUIDITY- AND FINANCING RISK

Liquidity risk is the risk that financial investments cannot be divested without considerable extra costs, and the risk that liquidity will not be available to meet payment obligations. The Company's activities should primarily be financed by available liquid assets. Liquidity risk is always considered with respect to investments. The Company's investments in unlisted and less liquid assets mean that liquidity risk is present in terms of the capacity to quickly divest holdings. Due to the Company's high equity ratio, the risk of suspension of payments is deemed low. The Board reviews on a quarterly basis the Company's liquidity position relative to the known payment obligations for the next twelve months.

In addition to ongoing operations, the Company has commitments in investing activities, primarily relating to property investment.

Financing risk is the risk that the costs associated with raising new debt increases and the ability to raise debt is limited. Normally, the Parent company shall not take on financial debt or provide collateral.

On 31 December 2017, the Company has EUR 13.2m (EUR 30.3m) in cash and no exposure in interest-bearing securities. The Company believes that current liquidity needs are well met.

(C) CREDIT RISK

Credit risk is the risk that a party in a business transaction will cause a financial loss for Eastnine by failing to discharge its obligation.

The Company is exposed to credit risk mainly through the investment of excess liquidity in interest-bearing securities, but also through loans made to companies in the investment portfolio. Reporting to the Board regarding the credit risk is made quarterly.

Credit risk could also arise from derivative financial instruments. The credit risk for cash and cash equivalents is limited by only granting credit to counterparties with an investment grade by a well-known rating agency and with a rating of two of three of the following levels; A (S&P), A (Fitch) and A1 (Moody's). Deposits in one single bank will not normally exceed 15 percent of the Company's total net asset value.

(D) OPERATIONAL RISK

Operational risk is the risk of loss resulting from inadequate internal procedures or systems. Review and update of procedures and systems are made on an ongoing basis to continuously reduce this risk. In the audit assignment, Eastnine's auditors review internal procedures and reports directly to the Board once a year. Since the Company has only a few employees, it is dependent on a few key persons. The Board has adopted a policy of continuity which is reviewed annually, to ensure continuity in the company's central functions. The operational risk is assessed as low.

Concentration of foreign currency assets, EUR thousands

31 December EUR SEK USD Total Monetary assets, 2017 39,169 650 1,306 41,125 Monetary assets, 2016 83,466 73 1 83,540 31 December EUR USD RUB MKD Total Non-monetary assets 2017 111,228 31,315 48,613 10,286 201,441 Non-monetary assets 2016 72,776 40,386 42,884 10,659 166,705

Sensitivity analysis for market risks, EUR thousands	31 Dec 2017		31 Dec 2016
Risk factors	Change	Effect on profit or loss and equity	Change	Effect on profit or loss and equity
Currency rate EUR/RUB	+/– 10%	4,861	+/–10%	4,288
Currency rate EUR/USD	+/– 5%	1,566	+/–5%	2,019
Equity price	+/– 10%	19,936	+/–10%	16,503
Value of level 3 holdings	+/– 10%	15,984	+/–10%	11,711
Interest on cash	+/– 0,5%*	206	+/–0,5%*	418

*Percentage

18 RELATED PARTIES

RELATED PARTY RELATIONSHIPS

East Capital Explorer AB has a related party relationship with its subsidiaries, see Note 15 and 16, Board members and employees.

INVESTMENT AGREEMENT

Following the termination of the Investment Agreement between Eastnine and East Capital on 9 May 2016, all management fee payments to East Capital were halted, with the exception of the real estate funds East Capital Baltic Property Fund II and East Capital Baltic Property Fund III. As a consequence, during the period Jan– Dec 2017, the Company received repayments of EUR 0.7m (EUR 0.6m) regarding management fees originated in the other East Capital funds. Management fees originated in the real estate funds during the period Jan–Dec 2017 amounted to EUR 0.5m (EUR 0.4m).

The management fee for East Capital Baltic Property Fund II is 1.75 percent and the rebated management fee for East Capital Baltic Property Fund III is 1.25 percent. The carried interest for these funds is 20 percent, on the premise that a threshold value increase of 7 and 8 percent, respectively, per year has been achieved.

OTHER TRANSACTIONS WITH RELATED PARTIES

Due to reorganisation in the group, shares in Melon Fashion Group was transferred from Humarito Ltd to Eastnine AB, while the remaining holdings were transferred to Baltic Cable Holding OÜ. Following the completion of the reorganisation, Humarito Ltd was sold to an independent service provider for a nominal consideration. The reorganisation had no impact on the Net Asset Value.

During 2017 additional add-on investments, amounting to EUR 7.2m, was made in 3Burės development, of which EUR 4.2m from Eastnine AB.

Loan to Group Companies EUR thousands	Loan	Interest during the year	Total accrued interest	Average interest rate, %	Maturity
UAB Portarera	7,850	275	923	3.50	2019
UAB 3Burės	8,800	308	1,002	3.50	2019
UAB Solverta (3Burės development)	8,450	166	505	2.75	2019, 2021
31 december 2017	25,100	749	2,430	3.25
Loan to Group Companies1) EUR thousands	Loan	Interest during the year	Total accrued interest	Average interest rate, %	Maturity
UAB Portarera	7,850	75	647	3.50	2019
UAB 3Burės	8,800	86	694	3.50	2019
UAB Solverta (3Burės development)	4,250	42	339	3.50	2019
31 december 2016	20,900	203	1 680	3.50

1) On 20 September 2016, loans to group companies and accrued interest was transferred from ECEX Holding to Eastnine AB.

SERVICE AGREEMENT

The Company had, until 31 July 2017, a service agreement with East Capital International AB, a service company within East Capital, pursuant to which the Company bought certain administrative and other services. During the year the Group purchased services for EUR 0.0m (EUR 0.1m), all of it through the Parent Company, see note 5.

19 INFORMATION ABOUT THE PARENT COMPANY

Eastnine AB is a registered Swedish limited liability company domiciled in Stockholm. The Parent Company's shares are registered on the Nasdaq Stockholm. The address to corporate headquarters is Kungsgatan 35, Box 7214, 103 88 Stockholm, Sweden.

TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND RELATED COMPANIES

Eastnine AB's management, Board members and their close relatives and related companies control 26 (22) percent of voting rights in the Company. For information about remuneration of senior executives please refer to note 6.

20 EVENTS AFTER THE END OF THE FINANCIAL YEAR

The Company repurchased a total of 539,944 shares during the period 1 January–15 March 2018, corresponding to 2.2 percent of the Company's outstanding shares, at an average price of SEK 86.27 per share.

Shares in East Capital Eastern Europe Small Cap Fund were sold for an amount equivalent to EUR 2.0m and in East Capital Global Frontier Markets Fund for EUR 5.6m. Additional investment of EUR 3.5m was made in East Capital Baltic Property Fund III, and the remaining commitment amounts to EUR 2.4m.

Eastnine expands its portfolio to Riga by acquiring A Class office property Alojas Business Centre and two adjacent properties for EUR 29,6m, adding 11,600 sqm leasable area and annual rental income of EUR 2.4m. The transaction closed in February 2018.

The Nomination Committee of Eastnine has resolved to nominate Johan Ljungberg and Peter Wågström for election as new Members of the Board of Directors at the company's Annual General Meeting on 24 April 2018. In addition, current member Liselotte Hjorth is nominated as new Chairman of the Board. Current board members Göran Bronner and Chairman Lars O Grönstedt have declined re-election.

Five-Year Summary

Consolidated key figures	2017	2016	2015	2014	2013
Net asset value, EUR thousands1)	242,457	247,558	253,561	261,314	309,387
Share redemptions, EUR thousands	–	–	13,170	13,609	14,269
Proposed dividend, EUR thousands3)	4,767	2,267	2,335	–	–
Share buy-back, EUR thousands	19,920	16,971	1,851	–	–
Equity ratio, %1)	99.6	99.3	99.8	99.8	99.9
Market capitalisation, SEKm	2,029	1,880	1,429	1,273	1,956
Market capitalisation, EUR thousands	206,348	196,179	156,057	134,345	225,149
Number of outstanding shares, m	22.9	25.6	28.2	29.9	31.4
Number of outstanding shares including repurchased shares, m	24.8	28.2	28.5	29.9	31.4
Weighted average number of shares, m	24.3	27.0	29.3	31.8	33.1
Number of employees	7	9	4	4	4
Key figures/share	2017	2016	2015	2014	2013
Earnings per share, EUR1, 2)	0.70	0.49	0.25	–1.06	0.7
Dividend per share, EUR3)	0.21	0.09	0.09	–	–
NAV, SEK1)	104	93	82	83	87
NAV, EUR1)	10.57	9.67	9.00	8.73	9.85
Share price, SEK	81.75	66.75	50.75	42.5	62.25
Share price, EUR	8.32	6.97	5.54	4.49	7
SEK/EUR	9.83	9.58	9.16	9.47	8.89

1) 2013 is recalculated due to amendments to IFRS 10 and IAS 27 regarding accounting by Investment entities.

2) Following the company's share redemptions all historical earnings per share calculations have been adjusted accordingly.

3) Proposed dividend for 2017, SEK 2.10 per share corresponding to EUR 0.21 per share.

The Board and the CEO assure that this annual report has been prepared in accordance with generally accepted accounting principles in Sweden and the consolidation has 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. The annual report give a true and fair view of the financial position and results of the Company. The statutory Administration Report of the Company provides a fair review of the development of the Company's operations, financial position and results of operations and describes material risks and uncertainties facing the Company.

Stockholm, 20 March 2018

Lars O Grönstedt Chairman of the Board

Peter Elam Håkansson Board member

Kestutis Sasnauskas Chief Executive Officer

Liselotte Hjorth Board member

Nadya Wells Board member Göran Bronner Board member

Our Auditors' Report was submitted on 20 March 2018

KPMG AB

Anders Malmeby Authorised Public Accountant

The annual report, as indicated above, have been approved for publication by the Board on 20 March 2018. The statement of income statement and balance sheet of the Company will be submitted to the shareholders' meeting for adoption on 24 April 2018.

Auditor's Report

To the general meeting of the shareholders of Eastnine AB (publ), corp. id 556693-7404

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS OPINIONS

We have audited the annual accounts and consolidated accounts of Eastnine AB (publ) for the year 2017, except for the corporate governance statement on pages 32–39. The annual accounts and consolidated accounts of the company are included on pages 40–59 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act, and present fairly, in all material respects, the financial position of the parent company as of 31 December 2017 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2017 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 32–39. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.

Our opinions in this report on the the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's Board of directors in accordance with the Audit Regulation (537/2014) Article 11.

BASIS FOR OPINIONS

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

KEY AUDIT MATTERS

Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

Valuation of unlisted investments

See disclosure 16 and accounting principles on pages 45–46 in the annual accounts and consolidated accounts for detailed information and description of the matter.

DESCRIPTION OF KEY AUDIT MATTER

The company has unlisted investments measured at fair value, which is determined with reference to market information as well as significant unobservable input.

Some of the investments constitute illiquid instruments which are valued based on models and assumptions ("level 3" investments in accounting terms). The fact that sales transactions of similar investments are rare, makes it difficult to support the estimated fair values with reference to other transactions. Therefore, valuation of level 3 investments are inherently risky and subsequent transactions in such securities may have significantly different outcomes compared to the previous valuations.

As at 31 December 2017 the company's assets classified as Level 3 amounted to EUR 160 m, which corresponds to 66 percent of the company's total assets.

RESPONSE IN THE AUDIT

We have assessed Eastnine valuation approach against the accounting framework (IFRS).

We have also tested the key controls over the valuation process including management's assessment and approval of assumptions and methodologies used in model-based calculations, as well as management's review of valuations provided by external parties.

We have involved our internal valuations specialists to assist us in performing audit procedures to challenge the methodology and assumptions used in the valuation of unlisted investments.

We have assessed the methods of valuation models in comparison with industry practices and valuation guidelines.

We have considered the completeness and adequacy of the information disclosed in the Financial Statements relating to valuation of unlisted investments.

OTHER INFORMATION THAN THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–31 and 64–65. The Board of Directors and the Managing Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITY

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of the company's internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director.
• Conclude on the appropriateness of the Board of Directors' and the Managing Director's, use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the company's and the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause a company and a group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.

We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor's report unless law or regulation precludes disclosure about the matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS OPINIONS

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Eastnine AB (publ) for the year 2017 and the proposed appropriations of the company's profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

BASIS FOR OPINIONS

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner.

The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.

AUDITOR'S RESPONSIBILITY

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

• Has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
• In any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations of the company's profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company's situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.

THE AUDITOR'S EXAMINATION OF THE CORPORATE GOVERNANCE STATEMENT

The Board of Directors is responsible for that the corporate governance statement on pages 32–39 has been prepared in accordance with the Annual Accounts Act.

Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 The auditor´s examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2–6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.

KPMG AB, Box 382, 101 27, Stockholm, was appointed auditor of Eastnine AB (publ) by the general meeting of the shareholders on June 9th, 2016. KPMG AB or auditors operating at KPMG AB have been the company's auditor since 2007.

Stockholm, 20 March 2018

KPMG AB

Anders Malmeby Authorized Public Accountant

Definitions

PROPERTY RELATED KEY FIGURES

AVERAGE INTEREST Interest expense divided by average interest-bearing debt for

AVERAGE CAPITAL TIE-UP PERIOD Average maturity of gross debt at end of period.

AVERAGE RENT, EUR PER SQ.M

Rental income in relation to average leasable floor space.

EARNINGS CAPACITY

the period.

Key figures of properties owned at the end of the period, based on performance over the last 12 months or estimates for properties held less than 12 months. The figures provide an overview but is not a forecast.

FLOOR SPACE VACANCY LEVEL

Unlet floor space in relation to total floor space.

GROSS DEBT

Total interest-bearing debt at end of period.

LEASABLE FLOOR SPACE

Total floor space available for leasing.

LONG-TERM EQUITY (EPRA)

Reported equity including deferred taxes on property value surpluses and excluding the fair value of financial derivates.

NET OPERATING INCOME

Total revenues less property costs.

PROFIT FROM PROPERTY MANAGEMENT

Operating net, administration costs and net financial items.

RENTAL INCOME

Charged rents, rent surcharges and rental guarantees less rent discount.

RENTAL VALUE

Rental income and estimated market rent for vacant units.

SURPLUS RATIO

Operating net in relation to total revenues.

WAULT

Average remaining lease term to maturity of the portfolio weighted according to contracted rental income (Weighted average unexpired lease term).

FINANCIAL KEY FIGURES

DEBT/ EQUITY RATIO

Interest-bearing net debt in relation to equity.

EBIT

Operating profit after amortisation of goodwill/acquisition-related surplus value and depreciation/amortisation of non-current assets. (Earnings before Interest and Tax)

EBITDA

Profit before depreciation, amortisation and impairment (Earnings before Interest, Tax, Depreciation and Amortisation).

EQUITY RATIO

Total equity as a percentage of total assets.

FAIR VALUE

See market value.

INTEREST COVERAGE RATIO

Operating profit excluding financial expenses, in relation to financial expenses.

IRR (INTERNAL RATE OF RETURN)

Annual average return on the invested amount calculated from the original investment, final selling amount and other capital flows, considering when in time these payments were made to or from Eastnine.

LOAN-TO-VALUE RATIO

Interest-bearing liabilities less cash in relation to fair value of the holdings.

MARKET VALUE

The value of which a holding is assumed to be able to be sold for at a given time. Listed holdings at the bid quote on the balance sheet date. To establish the market value of unlisted holdings, various valuation methods are used as applicable.

NET ASSET VALUE (NAV)

The value of the Company's net assets, i.e. total assets less net debt.

NAV DISCOUNT

The difference between net asset value (NAV) and market capitalisation in relation to NAV. If market cap is lower than NAV the shares are traded with an NAV discount; if market cap is higher, they are traded with a premium.

NET DEBT

Interest-bearing liabilities including pension liabilities, less cash, short-term investments and interest-bearing receivables.

OPERATING EXPENSES

Expenses directly related to Eastnine's business.

RETURN ON EQUITY

Profit/ loss for the year as a percentage of average shareholders' equity.

SHARE-RELATED KEY FIGURES

AVERAGE NUMBER OF OUTSTANDING SHARES Registered number of shares less shares held by the Company

EARNINGS PER SHARE

Net profit for the period attributable to equity holders of the Parent Company, divided by average number of shares outstanding during the year.

EQUITY PER SHARE

Shareholders' equity, attributable to equity holders of the Parent Company, divided by number of outstanding shares at the end of the period.

NET ASSET VALUE PER SHARE

Net asset value per share in relation to the total number of registered shares on the balance sheet date (excluding any repurchased shares).

SHARE BUY-BACK

Purchasing of own shares on the stock market. Swedish companies have had the option to own up to 10 percent of their own outstanding shares on the condition that the AGM approves.

Financial information and calendar

Annual General Meeting 2018 24 April 2018 Interim Report 1 January–31 March 2018 16 May 2018 Interim Report 1 January–30 June 2018 29 August 2018 Interim Report 1 January–30 September 2018 13 November 2018

The annual report, other financial reports and information as well as press releases, are available on www.eastnine.com. Shareholders

and other interested persons may sign-up on the website for a subscription to Eastnine's reports and press releases to be sent directly to their e-mail address.

The printed annual report is sent to shareholders who have notified Eastnine that they wish to receive printed financial information.

Annual General Meeting 2018

The Annual General Meeting of Eastnine AB (publ) will be held at 3.00 p.m. CET on 24 April 2018 at Wallenbergsalen, IVA Konferenscenter, Grev Turegatan 16 in Stockholm.

PARTICIPATION

In order to be entitled to participate at the Annual General Meeting, shareholders must: be recorded in the register of shareholders maintained by Euroclear Sweden AB on Wednesday, 18 April 2018 and have notified the company of their attendance no later than 4.00 p.m. CET on Wednesday, 18 April 2018.

NOTIFICATION OF ATTENDANCE MAY BE MADE:

On the web:

www.eastnine.com/agm

In writing to:

Eastnine AB (publ) "Annual General Meeting" C/O Euroclear Sweden AB P.O. Box 191 101 23 Stockholm

By telephone to: +46 8-402 90 46

When notifying regarding attendance, please state name, personal/ company registration number, address, daytime telephone number, e-mail, number of shares as well as any assistants attending (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 in effect with Euroclear Sweden AB no later than on Wednesday, 18 April 2018. Shareholders are requested to inform their nominees well in advance of this date.

Eastnine Annual Report 2017 65

Eastnine AB (publ)

Box 7214, 103 88 Stockholm, Sweden, Visiting address: Kungsgatan 35 Tel: +46 8 505 97 700, E-mail: info@eastnine.com www.eastnine.com

Eastnine AB

Solberg • Göteborgstryckeriet

Annual Report 2017

Images and image processing: Eastnine's own, Leonas Garbacauskas, Peter Hoelstad, East Capital, Nordbeck Creative, Solberg.