Eastnine — Interim / Quarterly Report 2011

Aug 5, 2011

Interim Report 1 January – 30 June 2011

Interim Report 1 January – 30 June 2011

• Net asset value per share on 30 June 2011 amounted to EUR 10.97 (EUR 11.00 on 30 June 2010¹ ). The total net asset value amounted to EUR 382m (EUR 383m), corresponding to a change of -9.1% (-6.5%) during the second quarter and a change of -11.0% (12.3%) during the first six months of the year. Since 30 June 2010 the net asset value changed -0.3% (34.1%)
• For the first six months 2011, the net result for the Group was EUR -40m (EUR 49m). For the shareholders of the Parent Company the net result was EUR -35m (EUR 38m) and earnings per share amounted to EUR -1.00 (EUR 1.08)
• Exchange rate changes in EUR vs. USD during the period had an impact of EUR -14m (EUR 12m) reported in "Other Comprehensive Income," due to exchange rate differences on translation of foreign operations
• Cash, cash equivalents and other short-term investments on 30 June 2011 amounted to EUR 66m (EUR 92m), corresponding to EUR 1.89 (EUR 2.65) per share
• In April 2011, the AGM of East Capital Explorer approved the Board"s proposal under the Company"s new dividend policy to pay a dividend to the shareholders of SEK 0.80 (-) per share from the 2010 results. This was paid out on 20 April 2011
• Also in April, East Capital Explorer sold units worth EUR 13m in the East Capital Special Opportunities Fund and EUR 20m in the East Capital Power Utilities Fund. The annualized return realized in these exits amounted to 26.5% and 7.2% respectively
• In April, Komercijalna Banka Skopje paid a dividend of EUR 0.7m and in May, TEO LT paid a dividend of EUR 1.2m to East Capital Explorer
• In June, East Capital Explorer sold its holding in Wimm-Bill-Dann Foods for EUR 7.4m, and realized an annualized pre-tax return of 17.4% on its initial EUR 6.8m investment

EVENTS AFTER THE END OF THE PERIOD

• In July, East Capital Explorer, agreed to buy an additional 15 percent of the shares in Melon Fashion Group for EUR 14m from Swedfund. The final deal size is dependent on actions of other shareholders
• The total net asset value on 31 July 2011 amounted to EUR 383m, corresponding to EUR 10.99 (SEK 99) per share. Cash, cash equivalents and other short-term investments per the same date amounted to EUR 66m (SEK 551m) corresponding to EUR 1.89 (SEK 17) per share. EUR 61m (SEK 551m) of those were available for future investments

¹ Comparable figures for the corresponding period 2010 are stated in parentheses.

Portfolio on 30 June 2011

	Fair Value 30 June 2011, mEUR	NAV/ Share, EUR	% of NAV	Fair Value 31 Mar 2011 mEUR	Fair Value 31 Dec 2010, mEUR	Value change Jan-Jun 2011, %1)	Value change Apr-Jun 2011, %1)
Fund Investments
East Capital Bering Russia Fund	37.2	1.07	10	41.5	42.8	-13.1	-10.4
East Capital Bering Ukraine Fund Class A	7.2	0.21	2	7.9	7.9	-8.2	-8.1
East Capital Bering Ukraine Fund Class R	5.9	0.17	1	6.0	6.4	-7.5	-1.2
East Capital Bering Balkan Fund	47.9	1.37	12	50.9	42.0	1.9	-5.9
East Capital Bering Central Asia Fund	21.2	0.61	5	24.3	25.4	-16.4	-12.8
East Capital Bering New Europe Fund	18.3	0.53	5	19.2	19.1	-4.0	-4.5
East Capital Power Utilities Fund	49.4	1.42	13	86.0	93.4	-25.5	-19.1
East Capital Special Opportunities Fund	41.1	1.18	11	57.7	58.6	-8.4	-7.1
East Capital Special Opportunities Fund II	35.2	1.01	9	37.2	37.1	-5.1	-5.5
East Capital (Lux) Eastern European Fund	9.8	0.28	3	10.7	15.4	-3.9	-9.0
Total Fund Investments	273.1	7.84	71	341.4	347.9	-11.9	-10.4
Direct Investments
Melon Fashion Group	13.8	0.40	4	13.8	13.8	0.0	0.0
TEO LT	14.9	0.43	4	15.7	15.2	-1.2	3.0
East European Debt Finance	0.3	0.01	0	0.3	0.3	5.1	1.2
Populi	2.7	0.08	1	2.3	3.6	-35.7	0.0
Wimm-Bill-Dann	-	-	-	7.2	7.1	-	-
Komercijalna Banka Skopje	14.0	0.40	4	13.1	0.0	13.0	0.0
Total Direct Investments	45.7	1.31	12	52.4	40.0	0.6	2.4
Short-term Investments
Short-term Investments	26.4	0.76	7	26.8	26.5
Cash and cash equivalents	39.4	1.13	10	3.0	17.8
Total Short-term Investments	65.7	1.89	17	29.8	44.3
Total Portfolio	384.6	11.04	101	423.6	432.3
Other assets and liabilities net	-2.2	-0.06	-1	-3.0	-2.4
Net Asset Value (NAV)	382.4	10.97	100	420.6	429.9	-11.0	-9.1

1) The value change calculation is adjusted for investments and distributions during the relevant period, i.e. it is the percentage change between the starting fair value plus any added investment during the period and the ending fair value plus any proceeds from divestments or dividends received during the period. It includes additional investments in East Capital Bering Balkan Fund of EUR 5.0m, in TEO of EUR 1.1m, in Populi of EUR 0.5m, in Komercijalna Banka Skopje of EUR 13.0m, as well as divestments of EUR 5.0m from East Capital (Lux) Eastern European Fund, EUR 12.5m from East Capital Special Opportunities Fund, EUR 20.3m from East Capital Power Utilities Fund. It is also adjusted for pre-tax dividends of EUR 1.2m and EUR 0.7m received from TEO LT and Komercijalna Banka Skopje respectively.

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

CEO COMMENTS ON THE SECOND QUARTER

The second quarter was characterized by negative sentiment and falling markets in our investment universe. Our NAV decreased by nine percent during the quarter. All fund investments contributed to the decline, and the performance was therefore not satisfactory. On a more satisfying note, our direct investments had a positive development.

"Our direct investments had a positive development, while all fund investments caused decline in our NAV"

The quarter was dominated by global macro concerns, primarily US and Eurozone debt situation, which hit investor confidence everywhere. Our target countries have been growing nicely, and have been mostly standing out for positive reasons, but their markets have been hit nevertheless, as the global risk appetite continued to decrease.

Our investments into the utitlies sector went down the most. On top of the general market decline, utilities shares were negatively affected as investors were concerned about the continuing progress with sector reforms in the election year. Fortunately, just before the correction began, our Investment Manager had decided to reduce the size of the East Capital Power Utilitities Fund and return capital to investors, thus substantially limiting the impact of the downturn.

Two of our direct investments, Komercijalna Banka Skopje and TEO LT paid out dividends during the second quarter. The dividend yield of TEO is continuing to be strong and we see good potential in this investment. The CEO of TEO was recognized as the CEO of the Year by the leading business daily in Lithuania. We are proud that managers of our investee companies continue to be recognized for leadership in their countries and industries.

"We made a successful exit from our direct investment in Wimm-Bill-Dann"

We made a successful exit from our direct investment in Wimm-Bill-Dann, releasing EUR 7m that is now available for new investments. This represented a seventeen percent annualized return on investment since December 2010 (39% in USD).

Recently we announced an additional investment into the Russian fashion retailer Melon Fashion Group as we agreed to buy Swedfund"s stake in the company. The company has grown very fast and is one of the most exciting retail companies in our investment universe with potential for further value growth. As the clear market leader in fashion retail, it is an attractive IPO candidate. Conny Karlsson, Chairman of Swedish Match and board member of TeliaSonera, among others, has recently been elected Chairman of the Board of Melon Fashion Group. Thus, we are pleased to have Melon Fashion Group as the single

largest position in our portfolio once the deal closes. The final outcome of the transaction will depend on other shareholders, however, together with East Capital we expect to gain a stake of approximately 40% in this exciting company.

"We are pleased to have Melon Fashion Group as the largest position in our portfolio"

The investment pipeline looks promising. As always, we continue to work actively with our investment portfolio with the aim to maximize returns for our shareholders.

Gert Tiivas, CEO

Top 10 in East Capital Explorer on a see-through basis1)
	% of	Value in portfolio 30 Jun,
Company	NAV	EURm	Country	Sector	East Capital Explorer's Investment Vehicles
TEO LT	5.1	19.5	Lithuania	Telecommunication Services	East Capital Special Opportunities Fund East Capital (Lux) Eastern European Fund Direct investment
Komercijalna Banka Skopje	4.3	16.6	Macedonia	Financials	Direct investment East Capital Bering Balkan Fund
Melon Fashion Group	3.6	13.8	Russia	Consumer Discretionary	Direct Investment
Elko	3.1	11.9	Baltics	Information Technology	East Capital Bering New Europe Fund East Capital Bering Russia Fund East Capital Bering Ukraine Fund A East Capital Bering Ukraine Fund R
Fondul Proprietatea	2.9	11.1	Romania	Financials	East Capital Bering Balkan Fund East Capital Special Opportunities Fund East Capital (Lux) Eastern European Fund
Integra	2.4	9.2	Russia	Energy	East Capital (Lux) Eastern European Fund East Capital Special Opportunities Fund East Capital Special Opportunities Fund II
Sollers	1.5	5.7	Russia	Consumer Discretionary	East Capital Special Opportunities Fund East Capital (Lux) Eastern European Fund
OGK-6	1.3	5.0	Russia	Utilities	East Capital Power Utilities Fund
Bank Of Georgia	1.3	5.0	Georgia	Financials	East Capital Bering Central Asia Fund East Capital (Lux) Eastern European Fund
Zavarovalnica Triglav	1.3	4.8	Slovenia	Financials	East Capital Special Opportunities Fund II East Capital (Lux) Eastern European Fund East Capital Bering Balkan Fund
Total Top 10	26.8	102.6

1) As if East Capital Explorer AB had owned its pro-rata share of all the underlying securities in the different funds it had invested in.

* Includes cash, cash equivalents and other short-term investments of EUR 66m in addition to any cash in the underlying funds per 30 June 2011

NET ASSET VALUE

The net asset value on 30 june 2011 amounted to EUR 382m (EUR 383m), corresponding to EUR 10.97 (EUR 11.00) per share. This corresponds to a change of -11.0% compared to the net asset value on 31 December 2010 which was EUR 430m (EUR 12.33 per share) and a decrease of 0.3% compared to the net asset value on 30 June 2010.

On 30 June 2011, cash, cash equivalents and other short-term investments amounted to EUR 66m (EUR 92m) corresponding to EUR 1.89 (EUR 2.65) per share, which was 17% (24%) of the total net asset value per share. The closing price per share on 30 June 2011 was SEK 73.50 (corresponding to EUR 8.01).

Net asset value, share price and index development

	1 Jan – 30 Jun	1 Jan – 30 Jun
(% change in EUR)	2011	2010
Net asset value	-11.0	14.3
East Capital Explorer share	-15.2	15.1
SAX1)	-5.9	12.4
RTS Index2)	-0.6	8.5
RTS 2 Index3)	-9.0	32.9
MSCI EM Europe4)	-2.0	3.3

1) SAX Index includes all equities listed on NASDAQ OMX Stockholm. 2) RTS Index includes the 50 largest companies traded on the Russian Trading System.

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

4) MSCI EM Europe Index includes Russian, Polish, Hungarian, Czech and Turkish equities.

Portfolio overview

Per 30 June 2011, East Capital Explorer had fund and direct investments totaling EUR 319m compared to EUR 292m on 30 June 2010.

EAST CAPITAL BERING RUSSIA FUND

The aim of the fund is to achieve long term capital appreciation from investments in Russian equities, both listed and unlisted.

At the end of the reporting period East Capital Explorer´s share of the fund was 34%.

Fund Performance
	Q2 2011		6m 2011 Since Dec 07
East Capital Bering Russia Fund, EUR1)	-10%	-13%	-47%
RTS-2 Index, EUR2)	-9%	-9%	-8%

Source: Bloomberg

1) Data representing the fund's master series.

2) The Russian Trading System Second-tier Stock Index is the Russian mid-cap stock market index composed of 78 companies on the RTS that have limited trading volumes.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Industrials	24.6	Russia	85.5
Materials	20.4	Ukraine	6.9
Energy	15.7	Kazakhstan	5.6
Financials	13.5	Baltics	2.0
Consumer Discretionary	11.8
Health Care	5.9
Utilities	4.0
Information Technology	2.0

10 largest holdings
	Weight % of fund
Company	Q2 2011	Q1 2011	% Perf.1	Country	Sector
FESCO	10.5	11.1	-14.7	Russia	Industrials
Kuzbassrazrezugol	7.3	7.4	-9.1	Russia	Energy
Korshunovsky GOK	5.7	6.0	-14.4	Russia	Materials
Bank Tsentrkredit	5.4	6.0		-17.8 Kazakhstan	Financials
Verofarm	5.3	4.3	-1.2	Russia	Health Care
Neftekamsky Avto	5.3	5.0	-3.0	Russia	Industrials
Rosinter	4.6	6.8	-38.8	Russia	Cons. Discr.
Nova Liniya	4.3	4.0	0.0	Ukraine	Cons. Discr.
Highland Gold Mining	3.9	2.5	4.9	Russia	Materials
Ufimsky NPZ	3.6	3.0	10.5	Russia	Energy
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
56			10		98

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Jacob Grapengiesser, Partner and member of the Portfolio Management team, East Capital

Our largest holding, FESCO, a leading Russian transportation company, was down 15% during the second quarter, after strong performance in previous quarters and due to uncertainty over the privatisation of Transcontainer. FESCO underperformed its peers Globaltrans (+0.6%) and Transcontainer (+14%). Down 25% from its peak, FESCO trades at a discount to its peers on multiples, which, given the strong operational update for half-year 2011, is not justified; rail turnover grew by 25% year-on-year and container turnover by almost 50%. Going forward, we expect that FESCO will likely take over Transcontainer, and that the resulting synergies could

be significant. Also, size matters: the resulting combined company will have more than USD 3bn in market capitalization. The East Capital board representative is taking an active role in shaping the new strategy of the company.

Another poor contributor for the quarter was Rosinter. The stock continued to fall, declining another 39% and over 50% year-todate. In the first quarter of 2011, the stock valuation was rich after posting a 200% return since January 2010 and 33% over fourth quarter 2010 alone. That was a result of a successful turnaround in 2010 and optimistic guidance. Unfortunately, after a very good 2010, food price inflation negatively affected operating earnings. The first quarter 2011 financial results were unexpectedly weak, with operating earnings contracting by 99% year-on-year. We expect improvements in second half of 2011 as inflation levels off.

Bank Tsentrkredit shares were down 18% over the quarter. Loan growth was weak in 2010 and the bank has been flooded with cash, putting pressure on margins. It currently trades below book value at 0.8 times book equity, and if lending is resumed the bank"s return on equity could return to normalised levels. A base case scenario implies a price-earnings multiple of around 5 times for 2012. That is in line with Russian peers that trade at 5-8 times earnings, based on aggressive assumptions.

Ufimsky NPZ was the best contributing stock. The share was up more than 10%. The market now anticipates a consolidation of Bashneft subsidiaries by September after various comments from top management. Ufimsky NPZ traded at a 60% discount to its sister companies on asset multiples and at around 50% on recent transaction multiples. A deep discount supported the shares and we decided to hold Ufimsky NPZ and to sell the other subsidiaries.

Highland Gold Mining was finally up. The quarterly gain was 5%. The stock remains the cheapest in the domestic gold universe, despite the complete operational and financial turnaround that took place under the Millhouse ownership. Highland Gold is on track to reach 20% production growth in 2011 and trades at 4-5 times Ebitda, whereas its mid-cap peers, Polyus Gold and Polymetal, trade at around 9 times Ebitda.

Also, during the quarter the fund accepted PepsiCo's buyout offer to purchase its holding in Wimm-Bill-Dann Foods. We realised an annualised pre-tax return of 40% (17% pre-tax IRR when measured in EUR).

EAST CAPITAL BERING UKRAINE FUND CLASS A

The aim of the fund is to achieve long term capital appreciation from investments in Ukrainian equities. Since 1 January 2010, the East Capital Bering Ukraine Fund is split into two classes: East Capital Bering Ukraine Fund Class A, comprising listed holdings; and East Capital Bering Ukraine Fund Class R that comprises the illiquid private equity assets.

At the end of the reporting period East Capital Explorer´s share of the Class A shares of the fund was 30%.

Fund Performance
	Q2 2011	6m 2011	Since Jan 2008
East Capital Bering Ukraine Fund Class A, EUR1) PFTS Index, EUR2)	-8% -21%	-8% -17%	-50% -51%
Source: Bloomberg

1) Data representing the fund's master series.

2) The PFTS Index is the Ukraine stock market index composed of the twenty largest shares on the stock exchange in Kiev.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Consumer Staples	50.0	Ukraine	96.7
Utilities	13.1	Russia	2.8
Consumer Discretionary	9.7	Baltics	0.5
Financials	8.1
Materials	7.9
Telecomm. Services	5.1
Health Care	2.8
Industrials	1.5
Energy	1.3
Information Technology	0.5

10 largest holdings
	Weight % of fund
	Q2	Q1	1
Company	2011	2011	% Perf.	Country	Sector
Creativ Industrial Group	10.2	8.5	11.5	Ukraine	Consumer Staples
Tsentrenergo	10.1	14.2	-25.2	Ukraine	Utilities
Anthousa	9.5	8.8	-1.3	Ukraine	Consumer Staples
Slavutich	9.3	8.8	-2.8	Ukraine	Consumer Staples
Retail Group	8.8	8.1	-0.5	Ukraine	Consumer Staples
Galnaftogaz	5.0	4.5	2.4	Ukraine	Energy
Ukrtelecom	4.9	4.1	10.3	Ukraine	Telecom. Services
Chumak Loan	3.8	0.8	0.0	Ukraine	Consumer Staples
Poltavsky GOK	3.0	3.4	-16.6	Ukraine	Materials
Bank Forum	2.9	3.7	-26.2	Ukraine	Financials
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
68	0				38

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Aivaras Abromavicius, Partner and member of the Portfolio Management team, East Capital

One of the major events during the quarter was the decision by the Frankfurt Stock Exchange to tighten listing requirements for companies. As a result, a handful of Ukrainian companies either got delisted for failing to submit the required documents or are still facing delisting. Anthousa, our third largest holding, was one of the companies removed from trading. The company, together with the investment banks, is actively looking for a solution to either relist the shares in Frankfurt or enter another stock exchange as soon as possible. Two other smaller

holdings, real estate developer Davento with a weight of 1.9% and pharmaceutical company Darnitsa, 0.5% of the fund, have also been affected by the new rules. We are in contact with the management of all three companies urging them to either relist promptly or buy-out the minority shareholders. We currently value all three companies in line with our valuation policies using the last available mid-market prices. This implied a drop of 1.3% for Anthousa during the quarter, while Davento and Darnitsa gained 22% and 16% respectively.

The second downbeat event occurred on 16 June, when amendments to banking legislation prohibiting mutual funds from having any shareholding interest in banks came into effect. The underlying objective was to increase the transparency of banks" ownership structures as required by the IMF, particularly by improving disclosure of ultimate holders of controlling or significant (over 10%) stakes. The law fails however to clarify whether the funds ought to sell the shares acquired prior to the law entering force. Local mutual funds held an estimated 5 to 10% of Ukrainian listed banks" free float, which is less than USD 100m. Even if the mutual funds" ownership is not significant, share overhang in case of a sell-off remains a risk. The bank stocks lost up to 5% on the news and have remained weak ever since. During the quarter, Bank Forum declined 26%, accounting for a loss of almost one percentage point from the fund"s performance. Similarly, Bank Aval slid 17%. An association of local mutual funds has already proposed new legislative amendments that, if adopted, would moderate or invalidate the new law. However, the story has already exacerbated negative sentiment on the local equity market.

In June, we participated in the IPO of Westa, the leading producer of industrial batteries in the CIS, which floated a 25% stake on the Warsaw Stock Exchange raising USD 46m. We acquired a smaller stake at a post-money valuation of USD 185m. Since the start of trading in mid-June, Westa"s stock has decreased 1.2%. Taking advantage of the short-term correction of some 8% in the share price of MHP, the largest poultry producer in the CIS, we also added a small stake to the fund.

EAST CAPITAL BERING UKRAINE FUND CLASS R

The aim of the fund is to achieve long term capital appreciation from investments in Ukrainian equities. Since 1 January 2010, the East Capital Bering Ukraine fund is split into two classes: East Capital Bering Ukraine Fund Class A, comprising listed holdings; and East Capital Bering Ukraine Fund Class R that comprises the illiquid private equity assets. The East Capital Bering Ukraine Fund Class R currently comprises eight unlisted companies.

At the end of the reporting period East Capital Explorer´s share of the Class R shares of the fund was 12%.

Fund Performance
	Q2 2011	6m 2011	Since Dec 2009
East Capital Bering Ukraine Fund Class R, EUR1)	-1%	-8%	-67%
PFTS Index, EUR2)	-21%	-17%	-51%

Source: Bloomberg

1) Data representing the fund's master series.

2) The PFTS Index is the Ukraine stock market index composed of the twenty largest shares on the stock exchange in Kiev.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Financials	46.8	Ukraine	94.3
Consumer Discretionary	33.4	Baltics	5.7
Consumer Staples	14.1
Information Technology	3.9
Industrials	1.8

Largest holdings

	Weight % of fund
Company	Q2 2011	Q1 2011	% Perf.1	Country	Sector
Nova Liniya	33.7	34.2	0.0	Ukraine	Consumer Discr.
Kantik	23.4	22.4	6.0	Ukraine	Financials
Henryland	20.6	20.5	2.1	Ukraine	Financials
Chumak	14.2	14.4	0.0	Ukraine	Consumer Staples
Elko	3.9	4.0	0.0	Baltics	IT
RTC Irpin	1.9	2.2	0.0	Ukraine	Financials
TREV-2 Grupp	1.8	1.8	2.3	Estonia	Industrials
Sablink	1.2	1.1	4.1	Ukraine	Financials
Largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
100	99				8

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Aivaras Abromavicius, Partner and member of the Portfolio Management team, East Capital

During the second quarter, the NAVs of our sister property companies Kantik and Henryland increased by 6.0% and 2.1% respectively. The value of the property portfolio remained unchanged during the quarter and the change in NAV is attributable to income generated during the period and a reduced level of debt. Higher leverage in Kantik justified its outperformance relative to Henryland. After this quarter"s increase in value, the two companies combined now constitute 44% of the fund, up from 42% just a quarter ago.

We continue to see a recovery in the underlying retail property market as retail operators are once again starting to think about expansion plans, and real estate players claim the retail segment has the most supporting fundamentals of all. While

this still has to find its way into increased valuations of our properties, we consider this a very important factor in terms of sentiment. On the operational side, as expected, we are seeing improved communication with Kantik and Henryland"s largest tenant, Nova Liniya, which is a result of recent top management change in the retail operator. We are now in active discussions about launching new property developments and together with Nova Liniya"s management, actively studying which of our existing land plots would be most attractive in the current market environment to open a new store. On the financial side, Kantik is in active discussions to refinance its most expensive debt facility on more favourable terms to even further improve the company"s cash flow situation. Also, some time during the third quarter of 2011 Kantik is considering paying out a dividend for the first time.

Nova Liniya"s first five months of 2011 performance came out in line with the previous year: revenues for the period were 1% higher than in 2010, and the Ebitda margin was 2.8%, compared to 1.5% for the same period last year. As part of the strategy to strengthen Nova Liniya"s results, the new CEO of the company has launched a restructuring plan that would improve Nova Liniya"s structure and performance. During the second quarter, the team was strengthened by adding a new purchasing director and a new operations director. Several additional key recruitments are planned for the third and fourth quarters. The company has started to re-construct its store in Zaparozhe, which was completely demolished by a fire in February. The re-opening is expected for spring 2012. Nova Liniya is also planning to build two new stores in Kyiv, with expected openings in the spring of 2013.

During the quarter, Chumak"s export sales were negatively affected by the financial melt-down and devaluation in Belarus, which is Chumak"s second largest export market. Despite that, Chumak showed strong revenue growth of 24% year-on-year during the first six months of the year, the bulk of which was generated in the pasta and tomato paste categories. The growth in the top line failed unfortunately to translate into higher profitability, due to input costs continuing to rise and high marketing expenses. Although Chumak raised its prices several times during the period, it has still not been able to fully pass over the cost increases to the customers. As a result, the gross margin of 31% for half-year 2011 was 4 percentage points below that of 2010, and half-year 2011 Ebitda margin was therefore only 1%, compared to 9.9% during the corresponding period last year.

EAST CAPITAL BERING BALKAN FUND

The aim of the fund is to achieve long term capital appreciation from investments in Balkan equities, both listed and unlisted.

At the end of the reporting period East Capital Explorer´s share of the fund was 56%.

Fund Performance
	Q2 2011	6m 2011	Since Dec 07
East Capital Bering Balkan Fund, EUR1)	-6%	3%	-46%

Source: Bloomberg

1) Data representing the fund's master series.

% of fund	Country	% of fund
60.6	Romania	27.0
13.2	Serbia	20.5
13.0	Slovenia	14.7
5.2	Turkey	13.1
3.0	Bosnia	9.0
2.7	Macedonia	6.1
1.6	Croatia	4.5
0.4	Montenegro	3.1
0.4	Bulgaria	2.0
			Country weighting

10 largest holdings
	Weight % of fund
Company	Q2 2011	Q1 2011	% 1 Perf.	Country	Sector
Fondul Proprietatea	9.0	10.1	-7.6	Romania	Financials
Pinar Et Ve Un	6.5	6.4	7.6	Turkey	Cons.Staples
Komercijalna Banka Skopje	5.1	4.7	7.4	Macedonia	Financials
B92	4.9	4.6	2.4	Serbia	Cons. Discr.
Nova Kreditna Banka Maribor	4.0	0.0	-31.7	Slovenia	Financials
Abanka	3.9	4.3	-13.3	Slovenia	Financials
Aik Banka	3.2	3.0	-3.7	Serbia	Financials
Zavarovalnica Triglav	3.2	3.3	-14.0	Slovenia	Financials
PIF Big	3.1	2.9	0.2	Bosnia	Financials
Pinar Sut	2.7	2.7	19.8	Turkey	Cons. Staples
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
45	8				74

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Jacob Grapengiesser, Partner and member of the Portfolio Management team, East Capital

The Romanian restitution fund, Fondul Proprietatea, remained the largest holding in the fund by the end of the second quarter, with a 9% weight. The stock lost 7.6% during the last quarter. The restitution process resumed at the beginning of May, after a halt of several months, and investors were concerned about the large share overhang expected to weigh on the stock. Since the restart of the restitution process, the Romanian state"s stake in the company decreased significantly, and by the end of June it stood at 19%.

We continue to believe in the upside potential of Fondul Proprietatea and see several triggers for a rerating of the stock. These include: a) a large discount to NAV (56% based on end-May reported NAV), b) a change in voting rights, resulting in the Romanian state losing control in the company, c) an increased liquidity through planned secondary public offerings or new listings of some of the companies in the portfolio of Fondul Proprietatea, d) the continuation of the share buyback program

and e) the planned secondary listing on the Warsaw Stock Exchange expected during first half of 2012.

In Macedonia, Komercijalna Banka Skopje gained 7.4% during the quarter. The bank"s first quarter results were in line with our expectations and profitability remained strong, with a return on equity trailing twelve months of 18%. We held two meetings with the bank"s management and other major shareholders to discuss the strategy of the bank going forward. Komercijalna Banka Skopje remains one of the most attractively-valued banks in the region, trading at 5.6 times estimated earnings and 0.9 times estimated 2011 book value.

Zavarovalnica Triglav, a Slovenian insurance company with significant presence in other Balkan countries, lost 14% during the quarter. The company reported encouraging first quarter 2011 numbers showing a 50% increase in net profit year-onyear and making the company"s guidance look realistic. However, the slump in the company"s share price has mainly been the result of negative news flows within Slovenian politics and the economy combined with the consequent poor performance of the Ljubljana stock exchange. However, Zavarovalnica Triglav now trades at 5.9 times estimated 2011 earnings, 0.6 times estimated 2011 book value and at 0.3 times "gross premiums written." The company also carries significant non-core assets valued at cost on its balance sheet, so we believe that the stock will rerate in the future.

The performance of the second-largest Slovenian bank, Nova Kreditna Banka Maribor, was not spared either in a soft Slovenian market. Although we bought the shares in a capital increase, at a 20% discount to an already depressed market price, the shares lost an additional 15% since the placement. Trading at below 0.6 times estimated 2011 book value, we believe there is deep value in the stock, but we will probably need to wait for the bank to show several quarters of improving results to see interest among investors return.

EAST CAPITAL BERING CENTRAL ASIA FUND

The aim of the fund is to achieve long term capital appreciation from investments in Central Asian equities, both listed and unlisted.

At the end of the reporting period East Capital Explorer´s share of the fund was 43%.

Fund Performance
	Q2 2011	6m 2011	Since Jan 2008
East Capital Bering Central Asia Fund, EUR1)	-13%	-16%	-52%
KASE Index, EUR2)	-13%	-15%	-51%

Source: Bloomberg

1) Data representing the fund's master series.

2) The Kazakhstan Stock Exchange index is composed of the seven most traded companies on the exchange.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Financials	54.4	Kazakhstan	43.7
Energy	24.3	Georgia	40.6
Consumer Staples	13.2	Turkmenistan	9.5
Materials	6.4	Ukraine	4.3
Utilities	1.3	Armenia	1.4
Telecom. Services	0.3	Russia	0.3
Industrials	0.2	Uzbekistan	0.2

10 largest holdings
	Weight % of fund
	Q2	Q1	% 1
Company	2011	2011	Perf.	Country	Sector
Bank of Georgia	23.1	27.0	-18.0	Georgia	Financials
Kazmunai Gas EP	10.0	14.9	-7.1	Kazakhstan	Energy
Dragon Oil	8.8	10.2	-10.8	Turkmenistan	Energy
Bank Tsentrkredit	7.6	8.1	-17.8	Kazakhstan	Financials
Caucasus Agro Development	7.4	6.4	1.7	Georgia	Cons. Staples
Chagala Group	6.1	5.6	-4.2	Kazakhstan	Financials
Halyk Bank	4.7	4.7	-11.1	Kazakhstan	Financials
Henryland	4.0	3.4	1.6	Ukraine	Financials
Populi	3.3	2.4	0.0	Georgia	Cons. Staples
Kazakhmys	3.0	1.7	0.4	Kazakhstan	Materials
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
78	17				29

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Aivaras Abromavicius, Partner and member of the Portfolio Management team, East Capital

The downward trend already noticeable in the first quarter 2011 became more pronounced in the second quarter as the Middle East events, Greek debt situation and worries about global growth caused a pick-up in investor risk-aversion.

The oil stocks in our portfolio did not perform well during the quarter. The share price of Kazmunai Gas EP (KMG EP), the largest listed Kazakh oil producer and one of our largest holdings, felt downward pressure from the continuing strike at the company"s core production facility, the Uzen field. As a result, the stock declined 7.1% over the quarter. The company expects its output to fall 4% short of the target of 13.5m tons this year due to the strike. Last year's output was 13.3m. On the positive side, during KMG EP"s investor day held in London we were told by the management about a new strategy aimed at achieving at least 3% annual production growth from intensified

exploration efforts. KMG EP seems to be more eager than ever to discuss its potential in the offshore exploration and does not shy away from expressing its ambitions to eventually enter either the Karachaganak or Kashagan projects. Currently, the company is among the cheapest oil stocks in the CIS, trading at 4.6 times estimated 2011 earnings and an enterprise value 2.3 times estimated Ebitda. Our second largest holding in the oil sector, Dragon Oil, lost 11% on no specific news, but rather as a reaction to increasing downside risk to the oil price. As we wrote in the last quarterly report, we decreased the weight of Dragon Oil towards the end of the first quarter.

In the banking sector we continue to see sporadic data pointing at recovery in the real estate sector, but it remains to be seen when this slow recovery transforms into steady profits for the Kazakh banks. The amendments to the legislation expected to simplify the write-offs and allowing the banks to manage assets acquired as a result of foreclosures are now pushed into the second half of the year with positive effects if any likely to impact the banks" balance sheets only later in 2012. The lack of short-term triggers has been detrimental for the share price of Halyk Bank and Bank Tsentrkredit, which declined 11% and 18% respectively. Despite being in a different league compared to the Kazakh banks in terms of financial strength and profitability, Bank of Georgia GDR"s shared the same fate, dropping 18%. The bank is now trading at 1.2 times expected book value, representing a 20% discount to the CIS average.

The only listed stock among our ten largest holdings that showed a marginal gain (+0.44%) over the period was Kazakhmys, a LSE-traded copper producer from Kazakhstan. We had increased Kazakhmys in the first quarter and also added ENRC, a Kazakh ferrochrome producer. However, shortly after the news of serious disputes in the ENRC boardroom started hitting the press, we realized that this decision was made prematurely as the downside still prevailed. As a result, we closed the ENRC position early in the quarter.

In the mid-cap space we added more of Steppe Cement, the only listed Kazakh cement producer. Our recent discussions with the management provided evidence for the improving situation in the sector as cement prices had picked up compared to the previous year. The demand pattern over the summer period will provide more guidance as to the speed of recovery in the sector.

EAST CAPITAL BERING NEW EUROPE FUND

The aim of the fund is to achieve long term capital appreciation from investments in Central European and Baltic equities, both listed and unlisted.

At the end of the reporting period East Capital Explorer´s share of the fund was 86%.

Fund Performance
	Q2 2011	6m 2011	Since May 2008
East Capital Bering New Europe Fund, EUR1)	-5%	-4%	16%

Source: Bloomberg

1) Data representing the fund's master series.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Financials	17.7	Poland	57.1
Industrials	17.3	Hungary	27.4
Materials	16.0	Baltics	5.2
Utilities	14.0	Slovakia	4.9
Consumer Staples	14.0	Czech Rep.	2.7
Consumer Discretionary	9.5	Estonia	1.5
Information Technology	8.0	Lithuania	1.1
Energy	3.2
Health Care	0.3

10 largest holdings
Weight % of
Q2	Q1	%
2011	2011		Country	Sector
11.0	13.6	-3.8	Hungary	Utilities
10.9	13.5	-3.6	Poland	Cons. Staples
8.2	2.7	-1.0	Hungary	Financials
6.2	7.4	1.0	Poland	Materials
5.8	6.4	-11.7	Hungary	Materials
4.8	4.6	0.0	Baltics	IT
4.0	4.6	2.6	Poland	Industrials
3.3	3.8	-16.7	Poland	Financials
2.9	3.6	-4.8	Poland	Energy
2.7	4.0	-9.9	Slovakia	IT
Unlisted holdings (% of portfolio)				Total number of holdings
		fund	Perf.1

60 7 63

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Andras Szalkai, Member of the Portfolio Management team, East Capital

Looking at the small and mid-cap stocks in Poland, the valuations still remain relatively high, where the average is 14 times current year earnings. However, the expected earnings per share growth for 2012 are relatively strong at 25%, reflecting 11 times estimated 2012 earnings. In other markets, we see a similar situation in many companies as the economic recovery is resulting in profit growth. Baltic stocks are trading at around 12 times and Hungarian and Czech around 10-11 times estimated 2011 earnings. During the quarter, the fund was mostly affected by the increased volatility and the worries regarding the European debt crisis. On the positive side, some of the smaller portfolio bets have contributed positively to the fund.

The two best contributing stocks during the quarter were Tatra Banka and Fortuna Group contributing 0.4% and 0.3% respectively to the fund"s performance. Tatra Banka, the second largest Slovak bank, gained 24% after strong earnings and a good outlook. The bank is still very cheap compared to its regional peers, trading at 8.3 times 2010 earnings and 0.9 times book value. Fortuna Group, which is a Czech gaming company, was bought last year after a flop IPO and reached a new record high, gaining 28% as the company took over its bankrupt competitor in the Czech gaming market significantly increasing its market share.

The two largest portfolio holdings, E-star and Morpol, contributed negatively to the performance. The earlier star performer of the fund, E-star was down 3.8% after an extremely strong first quarter 2011. This company provides energy efficiency improvement services for the out-dated heating systems in Hungary and Romania, and it was one of the best contributors to the fund"s performance since the acquisition rising almost four-fold. Despite the dual listing in Warsaw and newly-announced lucrative Polish acquisition, the stock reacted negatively to the announced secondary public offering at below market price, which put temporary pressure on the stock.

Fish processing company Morpol lost 3.6% after a rather volatile quarter. After a negative performance in April and May, the stock has sharply recovered in June on the back of strongly improving fundamentals as fish input prices for the company have dropped more than 10%, significantly raising future margin expectation.

The third-largest holding in the fund, newly-added real-estate company Ablon Group, had a volatile quarter. After a 31% drop in April as the company announced a rights issue 30% below the market, the stock had rebounded in May and June and ended the quarter down 1%. We actively participated in the rights issue, further increasing our position at this attractive level. The stock started trading on the London Stock Exchange from 1 July 2011 and there are active talks about a potential dual listing in Warsaw or Budapest, which might trigger a revaluation. The company still trades at 0.3 times book value, making it one of the cheapest real estate companies in the region.

In April we participated in the IPO of Polish Kruk SA, which is a leading debt collection company in Poland and Romania, with market shares of 20% and 40% respectively. The company trades at 11 times estimated 2011 earnings and is expecting strong earnings growth in 2011 and 2012 with the management"s ambition to double profits within 3-4 years.

* * *

Andras Szalkai, a member of our portfolio management team, has decided to leave East Capital as of the end of July and Eglé Fredriksson has assumed responsibility for the East Capital Bering New Europe Fund.

EAST CAPITAL POWER UTILITIES FUND

The aim of the fund is to target the many investment opportunities arising from the ongoing power sector reform in Russia. The fund invests in both listed and unlisted companies across sub-sectors of the industry including electricity generation, distribution and services.

At the end of the reporting period East Capital Explorer´s share of the fund was 73%.

Fund Performance
	Q2 2011	6m 2011	Since Dec 2007
East Capital Power Utilities Fund, EUR RTS Electric Utilities Index1)	-24% -12%	-30% -17%	6% -44%

Source: Bloomberg

1) The RTS Electric Utilities index is a sector index comprising 15 utility equities listed on RTS.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Utilities	98.2	Russia	98.5
Industrials	1.2	Georgia	1.3
Energy	0.7	Ukraine	0.2

10 largest holdings
	Weight % of fund
	Q2	Q1
Company	2011	2011	% Perf.1	Country	Sector
OGK-6	9.8	7.2	-17.5	Russia	Utilities
OGK-4	9.1	7.2	-11.0	Russia	Utilities
MRSK Tsentra	8.5	7.7	-27.3	Russia	Utilities
TGK-5 extra	8.4	6.1	-2.3	Russia	Utilities
MRSK Tsentra i Privolzhya	8.0	7.1	-29.5	Russia	Utilities
OGK-2	6.8	5.3	-15.5	Russia	Utilities
MRSK Holding	5.3	4.5	-24.3	Russia	Utilities
OGK-5	5.1	3.5	-11.9	Russia	Utilities
TGK-6	5.0	2.7	12.4	Russia	Utilities
MRSK Volgi	3.7	3.6	-37.5	Russia	Utilities
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
70			1		70

1) Share price development in EUR during the second quarter 2011

Portfolio comment second quarter

Aivaras Abromavicius, Partner and member of the Portfolio Management team, East Capital

The underperformance of the fund is largely attributed to three distribution companies that were marked down considerably during the last 3 days of the quarter due to a very large sell off from one of our peer"s dedicated utilities funds facing redemptions by its investors. MRSK Volgi, MRSK Tsentra i Privolzhya and MRSK Tsentra, which together total 20% of the fund, were down 38%, 30% and 27% respectively during the quarter. The holding company MRSK Holding also declined substantially, down 24%, as the company"s decision to pass over operational control of MRSK Moscow to Gazprombank has forced investors to start pricing the loss of revenue. MRSK Moscow"s results will no longer be consolidated at the holding level. This could be a turning point for MRSK Holding to return to a discount to its sum-of-the-parts valuation after a long history of trading at a premium due to much better liquidity in the stock than in the underlying MRSKs.

Almost all TGKs stocks (power generating companies) collapsed during the quarter, as it seems that the TGKs together with MRSKs will bear the heaviest burden of the limited electricity tariff hike. Through June, government representatives indicated that the most likely scenario with regard to an electricity tariff ceiling for 2012 will be consumer price index plus 1-2%, which implies a tariff cap of approximately 7-8%. Investors seem to be pricing in worsethan-expected revenue growth. Several large TGK holdings of the fund decreased significantly, notably TGK-2, TGK-4 and TGK-13, lost 27%, 26% and 19% respectively.

OGK-2 and OGK-6, which together represent 17% of the fund, were down 16% and 18% during the quarter. Current buyback as a part of the OGK-2 and OGK-6 consolidation process suggests 27% and 29% premiums on the OGK-2 and OGK-6 market prices respectively. As the money to minorities who voted against OGK-2 and OGK-6 consolidation or abstained from voting is to be distributed in early September 2011, we should see a positive contribution to our fund performance after tendering shares in both names.

The best-performing stocks were Far East Energy Company and TGK-6, which posted gains of 15% and 12% during the quarter, as both stocks were performing on restructuring achievements. The progress in the consolidation of IES Holding"s assets has supported the TGK-6 stock. And Far East Energy Company has advanced on news regarding restructuring of the entire Far East electricity system.

During the first week of July, the selling pressure on utilities has eased. There is still a considerable amount of uncertainty in the electricity tariff regulation ahead of parliamentary and presidential elections, but the negative news flow has possibly peaked and share prices are expected to start a gradual rebound.

EAST CAPITAL SPECIAL OPPORTUNITIES FUND

The aim of the fund is to invest in companies with a solid business model and outlook which for market or owner specific reasons could be acquired at low valuation levels. The fund has targeted investments with both a clear trigger for revaluation and an exit opportunity within four years from the launch of the fund. The strategy implies that the fund manager will, when appropriate, take a more active role in the company through board representation or other means.

Investment focus is listed, or otherwise traded, equity securities, but other financial instruments can also be utilized. Distributions to investors can be made throughout the lifetime of the fund. All proceeds on divestments after three years will be distributed to the investors.

At the end of the reporting period East Capital Explorer´s share of the fund was 82%.

Fund Performance
	Q2 2011	6m 2011	Since May 09
East Capital Special Opportunities Fund, EUR	-8%	-10%	43%

Source: Bloomberg

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Materials	19.6	Russia	59.7
Financials	18.6	Romania	16.8
Consumer Discretionary	16.8	Lithuania	11.4
Energy	16.3	Ukraine	9.3
Telecom. Services	11.4	Serbia	1.9
Health Care	8.3	Croatia	0.9
Consumer Staples	5.6
Information Technology	2.9
Industrials	0.5

10 largest holdings
		Weight % of fund
	Q2	Q1
Company	2011	2011	% Perf.1	Country	Sector
Fondul Proprietatea	17.1	14.1	-7.6	Romania	Financials
Sollers	14.6	11.7	-9.8	Russia	Cons. Discr.
Integra	13.3	10.3	-7.0	Russia	Energy
TEO	11.6	8.5	5.9	Lithuania	Telecom. Services
Sibirskiy Cement	8.8	5.9	7.3	Russia	Materials
Korshunovsky GOK	7.0	5.9	-14.4	Russia	Materials
Verofarm	6.8	4.9	-1.2	Russia	Health Care
Sintal	4.7	4.1	-18.7	Ukraine	Consumer Staples
Mashstroy	3.2	2.9	-20.7	Russia	Energy
Stirol	3.1	3.2	-29.7	Ukraine	Materials
10 largest holdings (% of portfolio)	Unlisted holdings (% of portfolio)				Total number of holdings
90	0				18

1) Share price development in USD during the second quarter 2011

Portfolio comment second quarter

Jacob Grapengiesser, Partner and member of the Portfolio Management team, East Capital

The Romanian restitution fund, Fondul Proprietatea, remained the largest holding in the fund by the end of the second quarter, with a 17% weight. The stock lost 7.6% during the period. The restitution process resumed in the beginning of May, after several months halt, and investors were concerned about the large share overhang expected to weigh on the stock. Since the restart of the restitution process, the Romanian state"s stake in

the company decreased significantly, and by the end of June it stood at 19%. As we wrote in our previous publication, we reduced our exposure to the company in the fund by disposing half of the position during the first quarter of 2011 and returned the proceeds to the fund unit holders. However, we continue to believe in the upside potential of Fondul Proprietatea and see several triggers for a rerating of the stock. See portfolio comment regarding the East Capital Bering Balkan Fund above for more information regarding Fondul Proprietatea.

The shares in cement producer Sibirskiy Cement (8.8% of the NAV) gained 7.3% during the quarter. This is connected with higher prices and demand for cement. Construction activity in both residential housing and infrastructure (roads, power plants etc.) has picked up in Russia during 2011, partially connected to lower interest rates. Cement prices are steadily going up and there are signs that there will be a significant shortage on the market, which might push prices up further. Sibirskiy Cement increased its production by 23% in the first half of 2011.

There is an ongoing debate in Russia regarding tax reforms for the oil sector. The problem is that the upstream part of the industry simply does not make money on new developments without tax relief. Longer term, this will lead to a production decline in Russia, unless the government reforms the tax system. We know that the government is taking the issue very seriously and has asked several consultants to come up with proposals. An important step was the positive comments, by Prime Minister Putin, that certain tax reforms for the oil sector will soon be implemented. This would be the first significant change in the tax regime over the past two years, and it would mark an important first step for further changes that would stimulate more investment in increasing production.

The tax reform proposal would increase the profitability of upstream oil production. The point is very simple: if the tax regime was changed, oil companies would invest more in new and old fields. This would lead to significantly more business for oil field services companies which would provide new seismic surveys, drilling, various construction projects and so on. One of the key holdings in the fund, Integra (13% of NAV), is specialised in oil field services and would therefore directly benefit from this. The stock however dropped 7% during the quarter, as investors were not paying attention to the longerterm story but rather to the first quarter results, which did not meet expectations.

EAST CAPITAL SPECIAL OPPORTUNITIES FUND II

The fund aims to invest in companies with a positive outlook but which, due to market or owner-specific reasons, can be acquired at valuations much lower than those suggested by the companies' fundamentals. The target is to achieve a 30% IRR from a concentrated portfolio of our top picks selected on return potential. Proceeds will be distributed as investments are realized but no later than within four years from inception.

At the end of the reporting period East Capital Explorer´s share of the fund was 67%.

Fund Performance
		Q2 2011 6m 2011	Since Oct 2010
East Capital Special Opportunities Fund II, EUR	-5%	-5%	1%

Source: Bloomberg

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Financials	39.8	Russia	38.0
Consumer Staples	22.2	Slovenia	23.8
Energy	15.8	Serbia	20.4
Materials	14.6	Ukraine	12.1
Utilities	4.1	Hungary	5.7
Industrials	3.5

10 largest holdings
	Weight % of fund
	Q2	Q1
Company	2011	2011	% Perf.1	Country	Sector
Integra	12.9	10.0	-9.2	Russia	Energy
Zavarovalnica Triglav	10.6	9.1	-16.0	Slovenia	Financials
Anthousa	9.9	7.1	-0.6	Ukraine	Cons.Staples
Bambi	8.2	5.1	7.3	Serbia	Cons.Staples
AIK Banka	8.1	7.2	-19.0	Serbia	Financials
Rusforest AB	7.8	0.1	-21.3	Russia	Materials
Nova Kreditna Banka Maribor	4.9	0.0	-33.2	Slovenia	Financials
Ablon Group	4.7	1.6	-3.2	Hungary	Financials
Sibirskiy Cement	4.1	2.8	4.9	Russia	Materials
NFD 1 Delniski Investicijski Sklad DD	34.0	3.4	-16.7	Slovenia	Financials
10 largest holdings (% of portfolio)			Unlisted holdings (% of portfolio)		Total number of holdings
75			0		13

1) Share price development in EUR during the second quarter 2011

Portfolio comment second quarter

Jacob Grapengiesser, Partner and member of the Portfolio Management team, East Capital

Some of the Balkan markets recorded large losses in the second quarter. In Serbia, the reason was simply profit taking, as Serbia was the best-performing market in the world during the first four months of 2011, beating Mongolia which was second best. The market is still up 13% year-to-date. In Serbia, there was one notable exception; Bambi (8.2% of NAV), a biscuit producer, gained 7.3% during the quarter. The company is being put up for sale to a strategic buyer. Shareholders in Bambi received a dividend representing a 6% yield during the quarter. We are in an active dialogue with the majority shareholder regarding the strategic sale of the company and are positive that the company will be sold at a good price. AIK Banka (8.1% of NAV), the most profitable bank in Serbia, lost 19% during the quarter, in line with the market. We slightly increased the position in AIK Banka during the quarter, but only by buying preferred shares at a 65% discount. Pre-crisis, the

preferred shares traded at a 30% discount, towards which the shares should eventually converge. The preferred shares might even be swapped to common shares.

The Slovenian market has been the only market in the Balkans not to recover since the crisis. The reason for this is twofold; 1) A lingering situation related to overleveraged companies and financial groups. It has taken a very long time to sort out the situation related to imploding financial groups, and still shares are being dumped in the market to free up cash to pay off debt. 2) The political situation is also somewhat problematic, with the government de facto blocking privatisations and asset sales, all of which would be necessary in order to inject new money into the country"s financial system. However, there are now plenty of talks about a number of strategic deals that could take place before year-end. This could serve as a trigger for the country"s stock market, which is still down 70% from its peak.

In order to increase our exposure to Slovenia, we acquired shares in Nova Kreditna Banka Maribor during the secondary public offering of the company in May. The reasons for acquiring shares were 1) The bank is one of the cheapest in Eastern Europe, trading at 0.6 times estimated book and 4 times estimated earnings for 2012, 2) The placement was made at a 20-25% discount to the market, depending on which date you use, and 3) The underlying business of the bank is making money, but it recorded significant write offs related to lending with shares as collateral. All losses from this have been written off, but any increase in price for this portfolio would lead to significant trading gains. Unfortunately, the investment in Nova Kreditna Bank Maribor has so far been a disappointment, with the shares down 16% since acquisition, but without any specific news.

The Hungarian real estate holding Ablon Group, listed on the London Stock Exchange as of 1 July 2011, carried out a capital increase during the quarter. We picked up our pre-emptive rights plus 4 times our pre-emptive allocation additionally by bidding for rights that had not been picked up by other investors. The price in the capital increase was GBP 0.33 per share, and for the additional allocation, GBP 0.34. At the time of writing, the share price is GBP 0.545, representing a gain of 60.4%. The company is still very cheap, trading at a 70% discount to NAV.

In Russia we tendered our shares in Wimm-Bill-Dann, a leading Russian dairy and juice producer. A majority stake in the company was acquired by PepsiCo, which offered minorities to tender their shares at the same price. For the fund, this was an advanced form of cash management; shares were acquired in December at USD 114 per share, just after PepsiCo had bought its stake. In June, USD 4.2m worth of shares were tendered for USD 139 per share, representing a gain of 21% and an annualised pre-tax return of 45% in dollar terms.

EAST CAPITAL (LUX) EASTERN EUROPEAN FUND

The East Capital (Lux) Eastern European Fund is a daily traded UCITS fund that invests in shares of companies in the whole of Eastern Europe. More information can be found at the East Capital website (www.eastcapital.com).

At the end of the reporting period East Capital Explorer´s share of the fund was 14%.

Fund Performance
	Q2 2011	6m 2011	Since Dec 07
East Capital (Lux) Eastern European Fund, EUR MSCI EM Europe Index, EUR1)	-9% -7%	-6% -2%	-21% -28%

Source: Bloomberg

1) MSCI EM Europe Index includes Russian, Polish, Hungarian, Czech and Turkish equities.

Sector weighting		Country weighting
Sector	% of fund	Country	% of fund
Financials	34.8	Russia	55.7
Energy	32.1	Turkey	12.1
Materials	7.9	Eastern Europe	8.6
Consumer Discretionary	6.3	Poland	6.6
Industrials	5.8	Romania	3.4
Telecom. Services	4.6	Hungary	3.1
Utilities	4.3	Czech Rep.	2.2
Consumer Staples	3.2	Slovenia	1.4
Health Care	0.6	Lithuania	1.3
Information Technology	0.3	Other	5.6

10 largest holdings
	Weight % of fund
Company	Q2 2011	Q1 2011	% Perf.1	Country	Sector
Sberbank	5.9	6.5	-6.1	Russia	Financials
Gazprom	5.4	6.4	-11.7	Russia	Energy
Lukoil	5.3	6.2	-10.8	Russia	Energy
Surgut NG	3.0	3.1	-12.6	Russia	Energy
Transneft	2.7	2.7	-4.5	Russia	Energy
Raiffeisen International	2.3	3.0	-8.0	Eastern Europe	Financials
Rosneft	2.3	3.0	-10.1	Russia	Energy
M.Video	1.9	1.8	-8.1	Russia	Cons. Discr.
LSR Group	1.8	1.9	-17.7	Russia	Materials
Bashneft	1.6	1.4	-6.1	Russia	Energy
10 largest holdings (% of portfolio)			Unlisted holdings (% of portfolio)		Total number of holdings
32			0		157

1) Share price development in EUR during the second quarter 2011

Direct Investments

Gert Tiivas, CEO of East Capital Explorer, comments below on the development of the Group"s direct investments during the second quarter.

MELON FASHION GROUP

During the second quarter of 2011 Melon Fashion Group"s (MFG) revenue reached RUB 1,078m (EUR 27.9m), an increase of 42% over the second quarter of 2010 (36% increase in EUR). These comparative numbers for 2010 do not include revenue from three concepts in Ukraine which were acquired last year. The Ukrainian business, however, including own concepts, accounted for only 6% of the Group"s consolidated revenue.

Since the beginning of the year MFG's sales in comparable shops increased by 12% compared to the same period of 2010 in RUB terms. During the quarter the company opened 20 new stores and closed down two poorly performing ones. This resulted in a net increase in store count by 18 stores during the period, and as of 30 June 2011 MFG operated 528 stores.

The Ukrainian operations acquired last year are still experiencing some problems reaching initial business plan targets. We believe that the main reason for such underperformance is low brand recognition in Ukraine, where MFG is still a new player in the market. We appreciate increased marketing efforts of the management in Ukraine and believe that this will help bring the Ukrainian subsidiary performance in line with the targets.

After the end of the quarter, East Capital Explorer agreed to acquire Swedfund International AB"s approximately 15% stake in MFG for approximately EUR 14m. The transaction is subject to regulatory approval in Russia, and another shareholder of MFG has an option to acquire up to 50% of Swedfund"s stake in MFG. In addition, the deal may result in the obligation to make a mandatory offer to buy out the shares of remaining shareholders of the company at the same valuation. Upon successful completion of the transaction, East Capital Explorer together with East Capital expect to jointly hold approximately 40% of the company"s shares.

Completion of the transaction is expected during the third quarter of 2011. The current transaction is carried out at a 4% premium to the current valuation of company, which will result in an upward valuation of the existing holding in the company by the same percentage.

Conny Karlsson, Chairman of Swedish Match and board member of TeliaSonera, among others, has recently been elected Chairman of the Board of Melon Fashion Group.

TEO LT

TEO LT is a leading telecommunications operator in the Baltic region, providing fixed line, internet and TV services in Lithuania. East Capital Explorer has been investing into the company since the end of the third quarter of 2009, and as of 30 June 2011 East Capital Explorer held 2.9% of TEO shares, corresponding to a total value of EUR 14.9m. Our holding of TEO shares increased in value by 3% during the second quarter. The combined shareholding of East Capital Explorer and East Capital funds is 6.8%.

TEO"s revenue for the second quarter of 2011 came in at EUR 53m or just 0.9% lower than the first quarter and 5.6% less than a year ago. TEO revenue has been decreasing at a slower rate than the overall Lithuanian telecommunications market and TEO market share in fixed telephony increased to 91%.

Share of revenue from voice telephony services continued to shrink and amounted to 51% of total revenue (52% last quarter) due to the decreased number of telephone lines in service, lower traffic volume and lower average revenue per user. Revenue from this segment declined by 10%.

Internet and data communication services, comprising over 34% of TEO"s revenues during the quarter, suffered a slower 3.8% year-on-year contraction, despite an 8% year-on-year increase in the number of customers. By the end of June, the number of FTTH (Fiber to the home) and FTTB (Fiber to the building) connections increased by 41.3% and TEO had 593,000 households passed (+2.4% quarter-on-quarter), or around 49% of the country"s households, by the FTTH network. This number puts Lithuania among the leaders in the EU in FTTH penetration.

The company"s market share of the total Internet providers market in terms of revenue during the first quarter of 2011 amounted to 39% while its share of the market of broadband Internet using fixed connection was 51%. On 31 March 2011 Internet penetration per 100 residents of Lithuania was 28%, while the penetration of broadband Internet using fixed connection was 22%. In terms of revenue TEO had 62% of the leased lines market and 66% of the data communication market.

TV and IT services segments increased by 25% and 26% yearon-year respectively and mitigated the overall decline. TEO market share of the total pay-TV services market in terms of customers was 22%. On 31 March 2011 digital pay-TV penetration per 100 households of Lithuania was still just 21% signifying further growth potential.

TEO continued to show good cost control in the second quarter resulting in 5.8% lower operating expenses year-on-year due especially to the decreasing interconnection expenses and other lower operating costs. Considering the declining revenues operating margin shrank moderately just from 24% to 23% and net profit decreased by 5.8%. Ebitda has declined just by 1.8% and Ebitda margin remained comfortably above 40% at 42%.

To sum up, TEO"s second quarter results again confirmed its strong investment case as a very cost efficient cash generator yielding an attractive cash flow and having a very strong balance sheet and interesting growth opportunities in new Internet technologies, IT and TV services.

EAST EUROPEAN DEBT FINANCE

EEDF AG, a joint venture between East Capital Explorer, East Capital Financials Fund and the Swedish credit management company Intrum Justitia was established in early 2010, for the purpose of acquiring non-performing loans (NPL) portfolios in Russia. In October 2010, a cooperation agreement was signed between EEDF AG and the EBRD, culminating on 22 December 2010 with the founding of a new investment company, owned by EBRD and EEDF AG. The new joint venture is aiming at expanding the financial capabilities of EEDF AG and making acquisitions of bigger NPL portfolios possible.

The overall commitments from East Capital Explorer, East Capital Financials Fund and Intrum Justitia remain unchanged. The investment capacity of this joint venture for the coming three years, however, could be increased. The current commitment of East Capital Explorer amounts to EUR 5m, of which EUR 0.3m had been drawn down at the end of the

quarter, while the remaining funds were held in short-term investments.

As of the end of the quarter, East Capital Explorer held 25% of the shares of EEDF AG.

POPULI

The Georgian food retailer Populi recorded a turnover in local currency of GEL 25.2m (EUR 10.5.m) for the second quarter 2011, an increase of 12% compared to the same period 2010. Like-for-like sales (same store) increased by 7% during the quarter compared to the second quarter of 2010. The revenue increase is slightly lower than projected.

On June 15, Teodora Ticeric was appointed new CEO of Populi, replacing the interim CEO. Ms Ticeric, a Serbian national, has spent most of her career as a consultant to retail businesses, and she was a consultant to Populi for a large part of 2010. The new CEO will present an updated business- and action plan during the end of the summer.

During the second quarter, the company finalized the USD 2m capital increase that was approved in February 2011. After the capital increase, East Capital Explorer"s holds 28% of Populi directly and an additional 8.8% indirectly through East Capital Bering Central Asia making it the single largest shareholder of the company. East Capital Explorer also has an outstanding free option whereby it expects to receive an additional 3% of the company"s shares. Together with East Capital we hold 48% of Populi"s shares and have taken an active role to strengthen the management team and corporate governance in the company.

WIMM-BILL-DANN

During the quarter, East Capital Explorer accepted PepsiCo"s buyout offer to purchase its holding in Wimm-Bill-Dann Foods, a leading Russian dairy and juice company listed in Moscow and New York for EUR 7.4m. East Capital Explorer realized an annualized pre-tax return of 17.4% on its initial EUR 6.8m investment made in December 2010 (39.7% pre-tax IRR when measured in the transaction currency USD).

On 2 December 2010, PepsiCo announced it had agreed to acquire 66% of Wimm-Bill-Dann for USD 3.8 billion at a price of USD 132 per common share (USD 139 based on exchange rates at the time of the buyout) pending the required government approvals. In accordance with Russian Law, PepsiCo was required to purchase the remaining 34% of the company within 35 days after the close of the transaction at buyout price not below the deal price.

KOMERCIJALNA BANKA SKOPJE

Komercijalna Banka Skopje (KBS), the largest bank in Macedonia, reported six month unaudited accounts showing asset growth of 5.3% since year-end and net profit in line with expectations. Deposit growth has been ahead of expectations, and this growth has been achieved despite lower interest rates on deposits - interest expenses have decreased by 12% compared to six months 2010 figures. In turn, the deposit growth facilitated slightly better than expected loan growth over the period. Based on current numbers the bank could well

outpace its modest forecast of 8% loan growth for full-year 2011.

On the profit and loss statement of KBS, core income numbers were encouraging, with both net interest income and net fee and commission income above half-year 2010 levels. Net interest income grew mostly thanks to the savings on interest expense. Total interest income declined compared to the six month 2010 figure, but not by as much as expenses. Despite slightly higher provisioning costs, net profit for six months still came in 2.7% higher than for the comparable period last year. These figures represent very satisfactory performance, and the bank looks well positioned for a good second half, which is traditionally the period when banks post the bulk of their profits.

Our representative was elected to the bank"s supervisory board during the quarter.

During the quarter, we acquired additional shares of KBS on the market for approximately EUR 1m and now hold 10.0% of bank"s shares. Also during the quarter, we received a dividend of EUR 0.7m from KBS.

SHORT-TERM INVESTMENTS

East Capital Explorer has investments in a portfolio of USD and EUR denominated liquid bonds as a short-term cash management tool to create more attractive returns on cash while remaining liquid for future investments. On 30 June 2011, the fair value of the bond portfolio amounted to EUR 26.4m (40.6m).

The net result from bond portfolio for the reporting period 2011 was EUR -0.3m. This included EUR 2.4m in interest income, EUR -0.4m in loss from exchange rates changes from forward contract on bonds and fair value change in the bond portfolio of EUR -2.0m and EUR -0.3m in management fees.

Cash and cash equivalents

The EUR 39.4m (EUR 29.0m) that had not yet been invested or drawn-down, were placed in cash and cash equivalents. Interest income from cash and cash equivalents during the first six months amounted to EUR 0.2m (EUR 0.0m).

Results

The Group consists of the Parent Company East Capital Explorer AB, the subsidiary East Capital Explorer Investments AB as well as the consolidated funds East Capital Power Utilities Fund AB, East Capital Special Opportunities Fund, East Capital Bering Balkan and the East Capital Bering New Europe Fund. East Capital Explorer currently holds 73% of the share of equity in the East Capital Power Utilities Fund AB and its subsidiary Consibilink Ltd, 82% of the share of equity in the East Capital Special Opportunities Fund, 56% of the share of equity in the East Capital Bering Balkan Fund and 86% of the share of equity in the East Capital Bering New Europe Fund. These funds are therefore regarded as subsidiaries and consolidated with the East Capital Explorer Group. The investments in the consolidated funds are reported as

investments in the portfolio report on page 3 but are consolidated in the financial statements.

During the first quarter of 2011 new investors entered the East Capital Special Opportunities Fund II. As a result East Capital Explorer, from an accounting perspective, no longer had a controlling influence over the fund and therefore did not need to treat it as a subsidiary. Consequently, the fund was reclassified from a subsidiary to shares and participations in investing activities.

Group

Total comprehensive income for the reporting period 1 January – 30 June 2011 amounted to EUR -53.9m (EUR 60.3m), which included exchange rate differences on translation of foreign operations of EUR -13.9m (EUR 11.5m).

Net loss for the period amounted to EUR 40.1m (EUR 48.8m). Of this a net loss of EUR 34.7m (profit of EUR 37.8m) was attributable to the shareholders of the Parent Company corresponding to earnings per share of EUR -1.00 (EUR 1.08).

For the reporting period, the main items of the net loss include EUR -61.2m (EUR 29.1m) in unrealized change in the value of investments, EUR 23.9m (EUR 18.7m) in realized change in the value of investments, which relates to sale of shares in direct investments, sale of fund units as well as shares held in consolidated funds and EUR 5.2m (1.8m) in dividends.

Financial income amounted to EUR 0.0m (EUR 5.0m). The bond portfolio net result included EUR 2.4m (EUR 1.0m) in interest income, result from exchange loss from forward contract on bonds EUR -0.4m (EUR 4.7m) and fair value change in the bond portfolio of EUR -2.0m (EUR 5.7m) and EUR -0.3m in management fees.

Financial expenses amounted to EUR -2.3m (EUR 0.0m) which largely came from exchange rate losses in consolidated funds and subsidiaries.

Other items included EUR -5.4m (EUR -5.8m) in operating expenses (described further below) and EUR -0.3m (EUR 0.1m) in income taxes.

Of the total operating expenses of EUR -5.4m (EUR -5.8m) during the reporting period, EUR -1.1m (EUR -1.0m) relates to ordinary operating expenses within the Parent Company. The remaining EUR -4.4m (EUR -4.9m) relates to operating expenses in consolidated funds and subsidiaries.

In order to calculate the fees related only to the shareholders in East Capital Explorer AB, we should exclude the non-controlling interest in the consolidated fund and add back fees generated in non-consolidated funds. Then the total fees payable to the Investment Manager generated by the fund investments and direct investments held by East Capital Explorer amounted to EUR 4.0m for the period. Of this EUR 0.4m was related to performance. It is worth noting that the performance for many of the fund investments are measured in USD and that the EUR strengthened 8.3 percent against the dollar during the period which explains the existence of performance fees, generated during the first quarter, in funds that measured in EUR have not

increased in value. For more details about fees, please see the Annual Reports available at our website.

Parent Company

The Parent Company"s net loss for the reporting period amounted to EUR -0.7m (profit EUR 45.3m) of which EUR 0.0m (EUR 46.0m) referred to a reversal of write down of shares in Group companies. Such shares are held at the lower of fair value and acquisition value. Operating expenses amounted to EUR -1.1m (EUR -1.0m). No investment activities were carried out within the Parent Company.

Business Environment and Market

While the global economy has continued its slow and irregular recovery, impacted in part by recent political and natural crises as well as deteriorating creditworthiness of certain states, there are still major and hard to assess risks which remain and could affect our investments. In addition, the global financial markets remain volatile which may increase the level of risk associated with our investments. The volatility in global capital markets also impacts various unlisted holdings, including prospects for new investments and divestments.

Our consolidated funds and fund investments are also exposed to commercial risks, financial risks, and market risks. In addition, through the business activities of their holdings, i.e. their offerings of products and services, within the respective sector, the funds are also exposed to legal/regulatory risks and political risks, for example political decisions on healthcare budgets and industry regulations.

For the coming months we remain in the same scenario as at the end of 2010 where we anticipate a continued trend of economic growth but at levels below long-term potential. While the current market comes with a high degree of risk, it also provides significant opportunities for positive profitability growth and development in sound portfolio companies.

Tax

East Capital Explorer"s consolidated tax of EUR -0.3m (EUR 0.1m) for the reporting period comprises the net effect of deferred income tax within the Parent Company of EUR 0.3m (EUR 0.3m), actual tax related to subsidiaries of EUR -0.8m (EUR -0.2m) and deferred tax related to subsidiaries of EUR 0.2m (EUR 0.0m).

Dividend

The Board of Directors earlier this year decided to change the dividend policy to start paying dividends. On 12 April 2011 the Annual General Meeting decided to pay out SEK 0.80 (-) per share to shareholders for the fiscal year 2010. The dividend was paid out on 20 April 2011 corresponding to an aggregate of EUR 3.1m (-).

Financial position

Cash flow from operating activities during the first six months was EUR -13.2m (EUR 0.5m).

The Group"s cash, cash equivalents and other short-term investments at the end of the period amounted to EUR 79.1m (EUR 97.9m). The Group"s cash, cash equivalents and other short-term investments differ from the portfolio on page three since cash and cash equivalents in the consolidated funds attributable to non-controlling interest are included in the Group. Excluding the consolidated funds, cash, cash equivalents and other short-term investments amounted to EUR 65.7m (EUR 92.5m) and interest income from these amounted to EUR 0.0m (EUR 1.0m) during the reporting period.

The reclassification from subsidiary to share and participation of the holdings in East Capital Special Opportunities Fund II has affected the cash flow analysis in the investment activities by EUR 17.2m, of which EUR 16.0m refer to cash and EUR 1.2m to other balance sheet items relating to the fund, included in the closing balance as of 31 December 2010.

The major cash inflows in the investing activities refer to sales of shares held within two of the consolidated funds, East Capital Power Utilities Fund and East Capital Special Opportunities Fund, made to facilitate the redemption of investor units in the funds as well as the sale of shares in the direct investment Wimm-Bill-Dann.

East Capital Explorer had no financial debt on 30 June 2011.

Commitments and draw-downs

Since 2010 EUR 5.0m had been committed to a direct investment in a joint venture, which together with Intrum Justitia and East Capital Financial Funds, seeks to invest in portfolios of non-performing consumer loans mainly in Russia. On 30 June, total draw-downs of EUR 0.3m had been made.

Other information

Risks and uncertainty factors

The dominant risk in East Capital Explorer"s and the Group"s operations is commercial risk in the form of exposure to certain sectors, geographic regions or individual holdings and financial risk in the form of market risk, equity price risk, foreign exchange risk and interest rate risk. A more detailed description of East Capital Explorer"s and the Group"s material risks and uncertainties is provided in the company"s 2010 Annual Report. An assessment for the coming months is provided in the Results section above.

Related party transactions

No changes or transactions have occurred during the year other than fee payments according to agreements. For information on related party transactions please see page 89 in the 2010 Annual Report.

Organizational and investment structure

East Capital Explorer is a public limited liability company that indirectly and directly invests in Russia and other countries within the Commonwealth of Independent States (CIS), the Balkans, the Baltic States, Central Asia and Central Eastern Europe. Our indirect investments are made through a selection of East Capital"s current and future funds.

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

In addition to the related party transactions referenced above, East Capital Explorer has made direct investments into companies where East Capital Group also invests through one of its controlled companies or products, which during the period included investments in Melon Fashion Group, TEO LT, East European Debt Finance, Populi, Komercijalna Banka Skopje and Wimm-Bill-Dann.

For further information about the organization and investment structure of the Company, please see the corporate governance report for 2010 that has been included in the Annual Report and on our web site www.eastcapitalexplorer.com in the section, "About East Capital Explorer/Corporate Governance".

Share buy-back mandate

On 12 April 2011, the Annual General Meeting 2011 issued a new repurchase authorization for the Board to decide on acquiring the company"s own shares until the Annual General Meeting 2012. The new authorization has not been utilized.

EVENTS OCCURING AFTER THE END OF QUARTER

After the end of the quarter, East Capital Explorer agreed to acquire Swedfund International AB"s approximately 15% stake in MFG for approximately EUR 14m. The transaction is subject to regulatory approval in Russia, and another shareholder of MFG has an option to acquire up to 50% of SwedFund"s stake in MFG. In addition, the deal may result in the obligation to make a mandatory offer to buy out the shares of remaining shareholders of the company at the same valuation. Upon successful completion of the transaction, East Capital Explorer together with East Capital expect to jointly hold approximately 40% of the company"s shares.

Completion of the transaction is expected during the third quarter of 2011. The current transaction is carried out at a 4% premium to the current valuation of company, which will result in an upward valuation of the existing holding in the company by the same percentage.

NAV on 31 July 2011

NAV per share per 31 July 2011 amounted to EUR 10.99 (corresponding to SEK 99), compared to EUR 10.97 (corresponding to SEK 101) on 30 June 2011. The share price on 31 July 2011 was SEK 69 (corresponding to EUR 7.63). Cash, cash equivalents and other short-term investments on 31 July 2011 amounted to EUR 66m (SEK 594m) corresponding to EUR 1.89 (SEK 17) per share. Of those, EUR 61m (SEK 551m) were available for future investments.

	NAV
	per		%
	share,	NAV,	of
Portfolio on 31 july 2011	EUR	EURm	NAV
Fund Investments
East Capital Bering Russia Fund	1.08	37.7	10%
East Capital Bering Ukraine Fund A	0.19	6.8	2%
East Capital Bering Ukraine Fund R	0.17	5.9	2%
East Capital Bering Balkan Fund	1.33	46.3	12%
East Capital Bering Central Asia Fund	0.61	21.3	6%
East Capital Bering New Europe Fund	0.51	17.9	5%
East Capital Power Utilities Fund	1.54	53.7	14%
East Capital Special Opportunities Fund	1.18	41.0	11%
East Capital Special Opportunities Fund II	0.97	33.8	9%
East Capital (Lux) Eastern European Fund	0.28	9.8	3%
	7.87	274.3	72%
Direct Investments
Melon Fashion Group	0.41	14.3	4%
TEO LT	0.41	14.2	4%
East European Debt Finance	0.01	0.3	0%
Populi	0.08	2.7	1%
Komercijalna Banka Skopje	0.38	13.1	3%
	1.28	44.7	12%
Short-term Investments
Short-term Investments (incl. bonds)	0.58	20.3	5%
Cash and cash equivalents	1.30	45.4	12%
	1.89	65.7	17%
Total Portfolio	11.04	384.7	100%
Other assets and liabilities net	-0.05	-1.7	0%
Net Asset Value (NAV)	10.99	383.0	100%

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

ACCOUNTING PRINCIPLES

The consolidated interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable provisions in the Swedish Annual Accounts Act. The interim report for the Parent Company has been prepared in accordance with The Swedish Annual Accounts Act Chapter 9, interim report. The accounting principles that have been applied for the Group and Parent Company are in agreement with the accounting principles and the methods of computation used in last year"s annual report.

New or revised IFRS principles effective as of 1 January 2011 have not had any material effect on the financial position or results of the Group or Parent Company.

Stockholm, 5 August 2011

Paul Bergqvist Gert Tiivas Chairman of the Board Chief Executive Officer

Board member Board member

Anders Ek Lars Emilson

Karine Hirn Alexander V.Ikonnikov Board member Board member

Justas Pipinis Board member

CONTACT INFORMATION

Gert Tiivas, CEO, +46 8 505 977 30 Mathias Pedersen, CFO, +46 8 505 977 48

FINANCIAL CALENDAR

• Monthly net asset value report on the fifth working day after the end of each month
• Interim Report, 1 January 31 September 2011 on 11 November 2011

The information in this interim report is that which East Capital Explorer AB is required to disclose under Sweden's Securities Market Act. It was released for publication at 07:00 a.m. CET on 5 August 2011.

Review Report

To the Board of East Capital Explorer AB (publ)

Corporate identity number 556693-7404

Introduction

We have reviewed the interim report for East Capital Explorer AB (publ) as of 30 June 2011, and the six-month reporting period ending on that date. The Board of Directors and the President are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Focus and Scope of the Review

We conducted our review in accordance with the Standard on Review Engagements (SÖG) 2410, "Review of Interim Financial Information Performed by the Independent Auditors of the Entity". A review consists of making inquiries, primarily to persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices in Sweden. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed on the basis of a review does not give the same level of assurance as a conclusion expressed on the basis of an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not, in all material respects, prepared for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.

Stockholm, 5 August 2011 KPMG AB

Carl Lindgren Authorized Public Accountant

This review report is a translation of the original review report in Swedish.

Statement of Comprehensive Income

	2011	2010	2011	2010
EUR thousands	Jan-June	Jan-June	Apr-June	Apr-June
Result from financial assets at fair value through profit and loss	-61,191	29,064	-46,775	-57,970
Realized gains/losses from financial assets through profit and loss	23,867	18,728	2,295	10,915
Received dividends	5,156	1,805	5,123	1,610
Total operating income	-32,168	49,597	-39,357	-45,445
Staff expenses	-611	-380	-440	-201
Other operating expenses	-4,768	-5,451	-739	6,052
Operating profit/loss	-37,547	43,766	-40,536	-39,594
Financial income	49	4,962	-270	2,354
Financial expense	-2,252	-19	-854	8
Profit/loss before tax	-39,750	48,710	-41,660	-37,231
Income tax	-311	80	386	510
NET PROFIT/LOSS FOR THE PERIOD	-40,061	48,790	-41,274	-36,721
Other comprehensive income:
Exchange differences on translation of foreign operations	-13,880	11,515	-3,638	6,598
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	-53,941	60,305	-44,912	-30,124
Net profit/loss for the period distribution:
Shareholders of the Parent Company	-34,741	37,839	-32,898	-29,944
Non-controlling interest	-5,320	10,951	-8,376	-6,777
	-40,061	48,790	-41,274	-36,721
Total comprehensive income distribution:
Shareholders of the Parent Company	-44,313	47,362	-35,074	-23,347
Non-controlling interest	-9,628	12,943	-9,837	-6,777
	-53,941	60,305	-44,911	-30,124
Earnings per share, EUR
- shareholders of the Parent Company	-1.00	1.08	-0.95	-0.86
No accumulated dilution effects
No dilution effects during the period

Statement of Financial position

	2011	2010	2010
EUR thousands	30 June	31 Dec	30 June
ASSETS
Shares and participations in investing activities	379,248	455,302	339,282
Total non-current assets	379,248	455,302	339,282
Other short term receivables	873	2,092	893
Accrued income and prepaid expenses	1,235	76	93
Short-term Investments	26,385	26,494	63,012
Cash and cash equivalents	52,737	62,874	34,843
Total current assets	81,230	91,536	98,840
TOTAL ASSETS	460,478	546,838	438,122
EQUITY AND LIABILITIES
Equity
Share capital	3,628	3,628	3,628
Other contributed capital	376,018	379,149	379,118
Translation reserve	-6,239	3,333	8,406
Retained earnings	43,743	-45,517	-45,518
Profit/loss for the period	-34,741	89,260	37,839
Equity attributable to shareholders of the Parent Company	382,409	429,853	383,473
Non-controlling interest	68,638	95,581	45,190
Total Equity	451,047	525,434	428,663
Deferred tax liabilities	631	1,182	713
Total long-term liabilities	631	1,182	713
Current liabilities
Tax liabilities	159	252	141
Other liabilities	508	8,670	185
Accrued expenses and deferred income	8,133	11,300	8,421
Total current liabilities	8,800	20,222	8,747
TOTAL EQUITY AND LIABILITIES	460,478	546,838	438,122

Statement of Changes in Equity

EUR thousands 2011	Share capital	Other contributed capital	Translation reserve	Retained earnings incl. profit /loss for the period	Total equity shareholders in Parent Company	Non controll ing interest	Total equity
Opening equity 1 Jan 2011	3,628	379,149	3,333	43,743	429,853	95,581	525,434
Net loss for the period	-	-	-	-34,741	-34,741	-5,320	-40,061
Other comprehensive income	-	-	-9,572	-	-9,572	-4,308	-13,880
Total comprehensive income	-	-	-9,572	-34,741	-44,313	-9,628	-53,941
Reclassification from subsidiary to investment Paid dividend to shareholders Dividend and redemption to/from non-controlling interest	- - -	- -3,131 -	- - -	- - -	- -3,131 -	-1,812 - -15,503	-1,812 -3,131 -15,503
Per 30 June 2011	3,628	376,018	-6,239	9,002	382,409	68,638	451,047

				Retained
				earnings	Total equity	Non
		Other		incl. profit	shareholders	controll
	Share	contributed	Translation	/loss for	in Parent	ing	Total
EUR thousands 2010	capital	capital	reserve	the period	Company	interest	equity
Opening equity 1 Jan 2010	3,628	384,376	-1,117	-45,517	341,370	40,171	381,541
Net profit for the year	-	-	-	37,839	37,839	10,951	48,790
Other comprehensive income	-	-	9,523	-	9,523	1,992	11,515
Total comprehensive income	-	-	9,523	37,839	47,362	12,943	60,305
Dividend and redemption to/from
non-controlling interest	-	-	-	-	-	-7,924	-7,924
Share buy-back	-	-5,258	-	-	-5,258	-	-5,258
Per 30 June 2010	3,628	379,118	8,406	-7,678	383,473	45,190	428,663

Statement of Cash Flow

EUR thousands	1 Jan – 30 June 2011	1 Jan – 30 June 2010
Operating activities
Operating profit/loss	-37,547	44,472
Adjusted for unrealized change in value	61,191	-29,099
Capital gain/loss from divestment	-23,867	-19,441
Interest received	229	798
Interest paid	-427	-11
Tax paid	-947	-1,729
Cash Flow From Current Operations Before Changes In Working
Capital	-1,368	-5,010
Cash flow from changes in working capital
Increase (-)/decrease (+) in other current receivables	-1,704	688
Increase (+)/decrease (-) in other current payables	-10,140	4,860
CASH FLOW FROM OPERATING ACTIVITIES	-13,212	538
Investing activities
Investment in shares and participations	-52,868	-64,233
Reclassification from subsidiary to investment1	-17,246	-
Sale of shares and participations	91,921	53,518
CASH FLOW FROM INVESTING ACTIVITIES	21,807	-10,715
Financing activities
Dividend and redemption to/from non-controlling interest	-15,503	-7,924
Paid dividend to shareholders	-3,131	-
Share buy-back	-	-5,258
CASH FLOW FROM FINANCING ACTIVITIES	-18,634	-13,182
CASH FLOW FOR THE PERIOD	-10,039	-23,359
Cash and cash equivalents at beginning of the year2	62,874	57,909
Exchange rate differences in cash and cash equivalents	-98	293
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	52,737	34,843

1) Holdings in East Capital Special Opportunities Fund II have been reclassified from subsidiary to investments, please refer to Financial Position section above for more information.

2) Cash equivalents comprise deposits and cash.

Segment reporting

East Capital Explorer classifies the Company"s segments based on the nature of its investments. Segment results and assets include items directly attributable to the segment as well as those that can be allocated on a reasonable basis.

Fund	Direct	Short-term		Total
Investments	Investments	Investments	Unallocated	consolidated
-59,324	-1,867	-	-	-61,191
23,290	577	-	-	23,867
3,271	1,885	-	-	5,156
-	-	-	-611	-611
-3,842	-463	-	-463	-4,768
-36,606	132	-	-1,074	-37,547
5	-	-	44	49
-1,973	-	-279	-	-2,252
-38,574	132	-279	-1,030	-39,750
348,972	45,736	65,742	28	460,478

EUR thousands	Fund	Direct	Short-term		Total
1 Jan – 30 June 2010	Investments	Investments	Investments	Unallocated	consolidated
Result from financial assets at fair value
through profit or loss	27,796	923	345	-	29,064
Realized gains on financial assets through profit or loss	18,728	-	-	-	18,728
Received dividends	788	1,017	-	-	1,805
Staff expenses	-	-	-	-380	-380
Other operating expenses	-4,633	-222	-3	-594	-5,451
Operating profit/loss	42,679	1,718	342	-973	43,766
Financial income	2,999	0	1,964	0	4,962
Financial expense	-10	0	0	-9	-19
Profit/loss before tax	45,668	1,718	2,306	-982	48,710
Assets	325,093	20,531	92,467	31	438,122

Consolidated key figures

	6m	3m	12m	9m	6m	3m	12m	9m
Key figures	2011	2011	2010	2010	2010	2010	2009	2009
Net asset value, EURm	382	421	430	398	383	410	341	325
Change in NAV during the quarter	-9.2%	-2.2%	8.0%	3.8%	-6.5%	20.2%	5.1%	11.2%
Equity ratio, %	98.0%	97.4%	96.1%	97.2%	97.8%	95.8%	98.4%	97.7%
Market capitalisation, SEKm	2,562	2,980	2,954	2,501	2,492	2,884	2,378	2,245
Market capitalisation, EURm	279	333	329	273	261	296	232	220
Outstanding number of shares, m	34.9	34.9	34.9	34.9	34.9	35.0	35.5	35.5
Weighted average number of shares, m	34.9	34.9	35.0	35.0	35.1	35.3	35.7	35.7
Number of employees	4	4	4	4	3	3	4	4
	6m	3m	12m	9m	6m	3m	12m	9m
Key figures per share	2011	2011	2010	2010	2010	2010	2009	2009
Earnings per share, EUR	-1.00	-0.05	2.55	1.70	1.08	1.92	2.26	1.80
NAV, SEK	101	108	111	105	105	114	99	93
NAV, EUR	10.97	12.07	12.33	11.42	11.01	11.73	9.61	9.12
Share price, SEK	73.50	85.50	84.75	71.75	71.50	82.5	67	63.25
Share price, EUR	8.01	9.55	9.43	7.84	7.50	8.47	6.53	6.19
SEK/EUR	9.18	8.95	8.99	9.15	9.53	9.74	10.26	10.21

Income statement – Parent company

	2011	2010	2011	2010
EUR thousands	Jan-June	Jan-June	Apr-June	Apr-June
Staff expenses	-611	-380	-440	-201
Other operating expenses	-463	-594	-156	-432
Operating profit/loss	-1,074	-973	-596	-633
Financial income1	44	46,006	44	-
Financial expense	0	-9	2	-
Profit/loss before tax	-1,030	45,023	-550	-633
Income tax	330	258	330	166
NET PROFIT/LOSS FOR THE PERIOD	-700	45,282	-220	-467

1) Financial income in Parent Company comprises reversal of write down of shares in Group companies.

Statement of Comprehensive Income – Parent Company

	2011	2010	2011	2010
EUR thousands	Jan-June	Jan-June	Apr-June	Apr-June
NET PROFIT/LOSS FOR THE PERIOD	-700	45,282	-220	-467
Other comprehensive income	-	-	-	-
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	-700	45,282	-220	-467

Balance Sheet – Parent Company

	30 June	31 Dec	30 June
EUR thousands	2011	2010	2010
Participations in group companies	375,576	380,576	380,576
Deferred tax assets	330	-	258
Total non-current assets	375,906	380,576	380,834
Receivables from group companies	2,566	2,566	1,040
Accrued income and prepaid expenses	28	39	31
Cash and cash equivalents	1,064	272	597
Total current assets	3,659	2,878	1,668
Total assets	379,564	383,454	382,503
Share capital	3,628	3,628	3,628
Share premium reserve	376,018	379,149	379,149
Profit/loss brought forward	146	-44,361	-45,854
Net profit/loss for the period	-700	44,507	45,282
Total equity	379,093	382,924	382,205
Other liabilities	188	99	99
Accrued expenses and prepaid income	283	431	199
Total current liabilities	471	530	298
Total equity and liabilities	379,564	383,454	382,503

PLEDGED ASSETS AND CONTINGENT LIABILITIES

Pledged assets	-	-	-
Contingent liabilities	-	-	-