Eastnine — Interim / Quarterly Report 2019

Nov 8, 2019

Interim Report January ‒ September 2019

FS

1 January – 30 September 2019¹

• Rental income increased by 39 per cent to EUR 9,187k (6,614) due to an expanded property portfolio. On an identical portfolio, rental income decreased by 12 per cent due to lower average occupancy rate during the period.
• Net operating income increased by 47 per cent to EUR 8,196k (5,569).
• Profit from property management increased by 81 per cent to EUR 3,790k (2,095).
• Unrealised value changes amounted to EUR 11,587k (1,201) of which EUR 6,294k (4,620) is attributable to Real Estate Direct, EUR -1,707k (-164) to interest rate derivatives, and EUR 7,000k (-3,256) to investments.
• Realised changes in value and dividends from investments amounted to EUR 1,638k (2,474).
• Profit/loss for the period amounted to EUR 15,691k (4,716), corresponding to EUR 0.74 (0.21) per share.
• The equity/asset ratio as per 30 September amounted to 71 per cent (76) and the loan-to-value ratio to 42 per cent (43). The occupancy rate increased by 1.4 percentage points to 90.2 per cent (88.8).

¹Comparative figures for income statement items refer to the period January - September 2018 (pro-forma) and for balance sheet items as per 31 December 2018.

Key events during the third quarter

• On 25 September, a press release announced the acquisition of the 8,600 sq.m. office property Valdemara Centrs in Riga for EUR 25m.
• Net leasing during the quarter was positive and amounted to EUR 853k, with an average rent level of EUR 15.3 per sq.m. and month.

Key events after the third quarter

• Saule Zabulionyte started as country manager in Latvia on 1 October 2019.
• On 11 October 2019 Eastnine took possession of the office property S7-2 in Vilnius and on 15 October Valdemara Centrs in Riga.
• On 22 October 2019, a contract was signed for sale of the whole of Eastnine's holding in East Capital Baltic Property Fund III. The purchase price was around EUR 25.1m, corresponding to fair value on 30 September 2019.

		Reported	Pro-forma¹	Reported	Reported	Reported	Pro-forma¹
		2019	2018	2019	2018	2018/2019	2018
Key figures		Jan-Sep	Jan-Sep	Jul-Sep	Jul-Sep	Oct-Sep	Jan-Dec
Rental income	EURk	9,187	6,614	3,142	2,339	11,703	9,130
Net operating income	EURk	8,196	5,569	2,795	2,104	10,316	7,690
Profit from property management	EURk	3,790	2,095	1,370	1,217	4,875	3,180
Unrealised changes in value	EURk	11,587	1,201	4,281	2,957	18,772	8,386
Realised changes in value and dividends	EURk	1,638	2,474	22	25	4,566	5,402
Profit before tax	EURk	17,015	5,770	5,673	4,199	28,213	16,969
Net profit/loss for the period/year2	EURk	15,691	4,716	5,069	3,451	26,616	15,641
Surplus ratio	%	89	84	89	90	88	84
Property value	EURk	203,276	156,102	203,276	156,102	203,276	158,862
Loan-to-value	%	42	37	42	37	42	43
NAV per share2, 3	EUR	11.8	10.7	11.8	10.7	11.8	11.2
	SEK	126	110	126	110	126	114
	EUR	12.1	10.8	12.1	10.8	12.1	11.4
EPRA NAV per share3	SEK	130	112	130	112	130	116

¹Deviates from reported financial statements due to changes in accounting principles (see p. 10). ²All periods correspond to reported figures. ³Adjusted for share buybacks. 1 EUR = 10.72 SEK on 30 September 2019 (source: Reuters). Tables in this report may not add up due to rounding.

Significant accounting changes: As of 1 July 2018, Eastnine applies consolidated financial reporting (per IFRS). Previously, Eastnine AB applied the investment entity consolidation exemption, with subsidiaries recognised at fair value through profit or loss. Historic numbers have not been restated in the financial statements on p. 15-17. This report does include historical pro-forma statements (p. 21) using the same new consolidation method as in the financial statements, for comparative purposes. Any references to pro-forma numbers are marked "pro-forma". All other financial information is based on actual non-restated financial statements as they were reported.

This is Eastnine

• Swedish real estate company Listed on Nasdaq Stockholm Mid Cap and headquartered in Stockholm
• Nordic tenants Primarily large Nordic companies with international operations
• Baltic premium properties Investing in sustainable prime real estate in the office segment in the Baltic capitals

Eastnine aims to be a pure real estate company at the latest by the end of 2020, having previously operated as a diversified Eastern European investment company.

Targets for Real Estate Direct 2020	Status 30 September 2019
Loan-to-value ratio below 65 %	42 %
Interest coverage ratio at least 2.0x	3,8x
The portfolio1 to be comprised exclusively of real estate by the end of 2020	54 %
The profit from property management in Real Estate Direct shall have an annual capacity of EUR 15m by the end of 2020	EUR 8.8m (annualised Q3 2019)
Dividend at least 50 % of profit from property management or at least 2 % of NAV (up to and including completed streamlining as at 2020)	2.0 % of NAV per 31 Dec 2018
Return on equity of 13-15 % in the segment Real Estate Direct (over a five-year period)	12.2 % (last 12 months)

¹Excluding liabilities to credit institutions and cash

Property value, Real Estate Direct

Growth in profit from property management

The property portfolio is expanding quickly and vacancies are being filled

Growing real estate company

Eastnine's property portfolio is growing rapidly. During the third quarter we announced the acquisition of the office property Valdemara Centrs in central Riga. Through our new properties Valdemara and S7-2 in Vilnius CBD, both added to the portfolio in October, we are increasing our presence and our offering in two of our markets. Together with the acquisition of S7-1 in Vilnius in February, the property portfolio has increased in value by approximately 70 per cent year to date and at the turn of the year, we will take possession of S7-3 in Vilnius with an additional 14,500 sq.m.

Aiming for streamlining

During October, we divested our whole holding in East Capital Baltic Property Fund III, providing us with additional liquidity of over EUR 25m. The liquidity can be used for further acquisitions in our prioritised cities Vilnius, Riga and Tallinn. After the sale, we are approaching our goal of becoming purely a real estate company. There now remain only two non core holdings with a total value of around EUR 77m.

The benefits of greater volume

A larger portfolio is beneficial in many ways. Becoming a bigger player is an advantage for both our tenants and our shareholders. We put liquidity from earlier divested investments to work and fixed costs are spread over a larger portfolio, which improves yield. The acquisition of additional properties and space means that we can more easily offer our customers alternative premises regardless of whether they want more or less space. A larger portfolio also means that we have more tenants, which is good from the point of view of spreading risk.

Strong new letting

New letting has been strong during the quarter and the occupancy increased by 2.5 percentage points to 90.2 per cent compared to the end of June.

A majority of the new tenants will move in during the last quarter 2019 and the first quarter 2020. New leasing is taking place both to existing tenants, which are expanding, and to new customers attracted by modern premises in the best commercial locations. Lower vacancies do not just mean higher rental income but also lower property costs for the same space as Eastnine's lettings are mainly triple net contracts with the tenant being responsible for all property costs. This is also noticeable in our earnings, where net operating income is increasing more than rental income.

We expect a further increase in occupancy in the last quarter of the year due to lease contracts where the tenant has not yet taken up occupation. Rental levels are also developing positively. The average rent level was EUR 14.7 per sq.m. at the end of September compared with EUR 14.5 per sq.m. at the year-end. The average rent level for new leasing during the quarter is EUR 15.3 per sq.m.

Good footwork increases property values

The general trend with stable, slightly rising market rents for our type of premises is continuing. Rising rent levels and decreasing vacancies have an impact on property values. For the second quarter running, we are reporting unrealised value changes for the properties where we have succeeded in letting previously vacant areas at higher rent levels than previously and simultaneously increasing income from parking. We see further potential in both these areas.

Good business climate on our markets

The business climate is good in all three Baltic capitals. Demand for sustainable premises is increasing at the expense of premises in less favourable locations. There are a number of attractive properties for acquisition in our niche of first-class offices in central business districts. Overall, we are looking forward to a good end of 2019.

Kestutis Sasnauskas, CEO

Market

Geographic breakdown,

All segments¹

Real Estate Direct¹

¹Real Estate Direct: property value less liabilities to credit institutions. Real Estate Funds and Other: Net Asset Value

Market

Macro

The economies of the Baltics are continuing to be resistant to the increasingly uncertain global environment, without any weakening of the manufacturing and export sectors and with a strong labour market that drives forward private consumption. In the first half of 2019, GDP increased by 2.6 per cent in Latvia and 4.2 per cent in Lithuania. However, confidence in the industry and export sectors has started to weaken and GDP growth is expected to slacken slightly from over 3 per cent in 2019 to around 2 per cent in 2020. Inflation expectations remain at around 2.5 per cent.

Migration trends are developing positively. During the first half of 2019, there was positive net migration in Lithuania for the first time since independence in 1990. Net migration became positive some years ago in Estonia, while it is still negative in Latvia.

Rental market

Demand for office premises is stable in the Baltics with strong demand from Nordic and international companies, especially in Vilnius. Demand from local companies that are expanding, upgrading and consolidating office space is strong in all the Baltic capitals.

At the same time, development activity continues to be high. The volume of development projects in Tallinn, Riga and Vilnius corresponds to 15-20 per cent of the existing office stock.

Many projects are already let and absorption of new office space is high. However, the vacancy rates in the market are expected to rise slightly from their present low level of 5-6 per cent. Demand for centrally located modern sustainable offices is expected to stay high, while demand for offices in less favourable locations and lower standard will probably decrease.

Transaction market

Despite lower European interest rates, real estate financing has become more expensive and less available with less competition in the Baltic bank sector. It is mainly small investors and retail properties that have been affected, while transaction activity in the office segment has not experienced any slackening. On the contrary, the two largest office transactions ever in the Baltics took place during 2019. In February, Eastnine acquired three of the four properties in the S7 complex in Vilnius for EUR 128m and recently the German Deka Immobilien acquired the adjacent Quadrum complex for EUR 156m.

The yield requirement for high quality office properties in the Baltic capitals has decreased to 6 per cent or just below.

Earnings January – September 2019¹

During the first nine months of 2019, rental income and the profit from property management of directly owned real estate assets increased greatly due to a larger real estate portfolio. A stronger ruble led to increased value of the holding in MFG and the real estate funds made a positive contribution to earnings.

Quarter 3 in brief

• Rental income increased by 34 per cent to EUR 3,142k (2,339) due to a larger real estate portfolio.
• Net operating income increased by 33 per cent to EUR 2,795k (2,104).
• Profit from property management increased by 13 per cent to EUR 1,370k (1,217).
• Unrealised changes in value amounted to EUR 4,281k (2,957), of which EUR 2,810k (3,675) was attributable to directly owned real estate assets, EUR 822k (-1,702) to Melon Fashion Group (MFG), EUR 959k (727) to real estate funds and EUR -311k (342) to interest rate derivatives.
• Realised changes in value and dividends from investments amounted to EUR 22k (25).
• Net profit amounted to EUR 5,069k (3,451), corresponding to EUR 0.24 (0.16) per share.
• Occupancy rate has increased by 2.5 percentage points during the quarter to 90.2 per cent.
• Net leasing was once again positive and amounted to EUR 853k in the quarter, with an average rent level of EUR 15.3 per sq.m.

Rental income

EURk	2019 Jan-Sep	2018¹ Jan-Sep
Comparable	4,484	5,094
properties
Completed
development	1,670	45
Acquisitions	3,033	1,475
Total rental income	9,187	6,614

¹Pro-forma

New financial reporting

Eastnine AB has made the assessment that the Company no longer falls within the IFRS classification of an investment entity, as a majority of the portfolio now consists of directly owned real estate assets. As of 1 July 2018, Eastnine Group reports consolidated financial statements of the Parent Company and its subsidiaries, including directly owned real estate subsidiaries. Until and including 30 June 2018, Eastnine's financial statements refers only to the Parent Company alone, while subsidiaries were recognised at fair value through profit or loss.

The change in status is accounted for prospectively, meaning that historic numbers have not been restated in the actual financial statements on p. 15-17. However, this report does include consolidated pro-forma numbers for the period Q3 2017 - Q2 2018, for comparative purposes (see p. 21). Any references to pro-forma numbers are marked "pro-forma".

Revenues

During the period January-September, rental income rose by 39 per cent to EUR 9,187k (6,614), mainly attributable to a larger real estate portfolio. Rental income in an identical portfolio decreased by 12 per cent compared with the same period last year, due to lower occupancy rate during the period. New lease agreements, for vacant premises, have been signed at higher levels, leading to an increase in the average rental level in the portfolio from EUR 14.5 per sq.m. and month at the yearend 2018 to 14.7 at the end of September 2019.

Earnings

Net operating income was EUR 8,196 EUR (5,569), corresponding to a surplus ratio of 89 per cent (84). The high surplus ratio is due to the majority of lease agreements being triple-net, meaning that tenants cover costs related to the leased premises. The increase of 47 per cent in net operating income is mainly attributable to the acquisition of S7‒1 in Vilnius in February 2019 and 3Bures-3 in Vilnius in September 2018. Profit from property management increased to EUR 3,790k (2,095). Central administration expenses amounted to EUR -2,689 (-2,331).

Unrealised value changes in properties amounted to EUR 6,294k (4,620), in other investments amounted to EUR 7,000k (-3,256), of which EUR 5,160k (-5,144) is attributable to Melon Fashion Group which increased as a result of a stronger ruble, and EUR 1,840k (1,974) to East Capital Baltic Property Funds II and III. Unrealised value changes in derivatives amounted to EUR -1,707k (-164).

Realised value changes and dividends amounted to EUR 1,638k (2,474), of which EUR 930k (997) is attributable to dividends from Melon Fashion Group and EUR 640k (625) from East Capital Baltic Property Fund II.

Profit before tax amounted to EUR 17,015k (5,770). Net profit/loss for the period amounted to EUR 15,691k (4,716).

¹Comparative figures refer to the period January - September 2018 (pro-forma) for income statement items and as per 31 December 2018 for balance sheet items.

Contribution to earnings, Segment

	2019
EURk	Jan-Sep
Profit property management	6,501
Unrealised value changes in
properties	6,294
Unrealised value changes in
derivatives	-1,707
Contribution Real Estate Direct	11,087
Unrealised value changes	1,840
Realised values changes
and dividends	705
Contribution Real Estate Funds	2,545
Unrealised value changes	5,160
Realised values changes
and dividends	933
Contribution Other	6,094
Central administration and
other operating expenses	-2,689
Financial net, central	-22
Profit before tax, Group	17,015
Net profit for the period, Group	15,691

Investments and divestments

EURm	2019 Jan-Sep	2018 Jan-Sep	2018 Jan-Dec
S7-1	36.9	-	-
3Burės-1,2	0.8	-	0.1
3Burės-3	0.1	14.2	16.3
Vertas	0.1	-	0.1
Alojas Biroji	0.1	25.6	25.6
Alojas Kvartals	-	4.0	4.0
EC Baltic Property Fund III	2.0	3.5	3.5
Total Investments	40.1	47.3	49.6
EC Eastern Europe Small Cap Fund	-	16.2	16.2
Komercijalna Banka Skopje	-	13.9	13.9
EC Global Frontier Markets Fund	-	12.3	12.3
Total divestments	-	42.4	42.4

Segment reporting

Pro-forma statements are not available on a segment level for January - September 2018. The Real Estate Direct segment, comprising the directly owned real estate subsidiaries, generated a profit before tax of EUR 11,087k for the period January-September 2019. The Real Estate Funds segment, comprising the East Capital Baltic Property Fund II and III, generated a profit before tax of EUR 2,545k. The segment Other, which during the period only included the holding in Melon Fashion Group, generated a profit before tax of EUR 6,094k. The fair value of Eastnine's holdings was unchanged from the beginning of the year in RUB, but increased by 10.6 per cent in EUR as a result of a stronger ruble. Unallocated central administration and other operating expenses amounted to EUR 2,689k and other unallocated items to net EUR -22k. Group profit before tax amounted to EUR 17,015k, and net profit to EUR 15,691k.

Financing

Liabilities to credit institutions amounted to EUR 85,188k (67,550), corresponding to a loan-to-value ratio of 42 per cent (43), at the end of the period. The increase in interest-bearing liabilities is primarily due to new financing in connection with the acquisition of S7‒1 in the first quarter. Unutilised credit facilities amounted to EUR 77,600k (102). The average interest rate on bank loans for the period was 2.3 per cent (2.3).

As of 30 September 2019, the average capital tie-up period on interest-bearing loans was 4.0 years (5.0). The average fixed interest term was also 4.0 years (5.0), as interest on 100 per cent of liabilities to credit institutions were fixed using interest derivatives. The derivatives are measured at fair value and the change in value is recognised through profit or loss, with no effect on cash flow. At the end of the period, the fair value of derivatives was EUR -2,665k (-957). At the end of the term, the value is zero.

Income tax

The tax expenses for the period amounted to EUR -1,324k (-1,054), all of which relates to deferred tax in Lithuania where a corporate income tax of 15 per cent is applied. The stated deferred tax liability is primarily attributable to the difference between stated value and tax value as well as tax losses carried forward. No corporate income tax is reported in Estonia or Latvia, where a 20 per cent tax essentially is levied only on distributed profits.

Financial position and net asset value

Equity amounted to EUR 248,583k (240,819) and the equity/asset ratio to 71 per cent (76). EPRA NAV per share was EUR 12.1 (11.4) corresponding to SEK 130 per share (116). Net asset value per share was EUR 11.8 (11.2) corresponding to SEK 126 per share (114).

Cash flow

Cash flow from operating activities before changes in working capital amounted to EUR 5,584k for the period. Change in working capital was EUR -1,795k. Investing activities had an impact of EUR -40,149k, of which EUR -36,822k related to the S7‒1 acquisition in Vilnius. Financing activities had an impact of EUR 11,853k, of which EUR -3,525k refers to share buybacks, EUR -2,259k refers to dividend to shareholders and EUR 20,200k refers to loans raised in connection with the S7‒1 acquisition. Total cash flow for the period amounted to EUR -24,507k. Cash and cash equivalents amounted to EUR 40,596k at the end of the period.

Investments and divestments

Eastnine has entered into an agreement for the acquisition of the S7 office park in Vilnius for a total purchase price of around EUR 128m. The acquisition is being carried out in three stages, of which the first was completed in February and the second in October 2019. The third stage is calculated to amount to around EUR 43m. Eastnine's total investments during the period, including capital expenditures in existing real estate assets, amounted to EUR 40.1m (47.3). No properties have been divested.

Real Estate Direct

The directly owned real estate portfolio is growing and consisted of 74,500 sq.m. of prime office space in Vilnius and Riga per the end of September. Two new properties that were acquired during the period have been taken possession of during October, as a result of which the area increased to around 100,000 sq.m. Occupancy has been rising during the period as well as the last quarter.

¹Property value less liabilities to credit institutions

Portfolio 30 September 2019

	GLA (sq.m.)	Value (EURk)
Total Vilnius	63,279	173,566
Total Riga	11,271	29,710
Real Estate Direct	74,550	203,276

Property portfolio

Eastnine's portfolio of directly owned real estate is concentrated on prime office properties in the Baltic capitals. On 30 September 2019, the portfolio consisted of six investment properties, four in Vilnius and two in Riga, with a total gross lettable area (GLA) of 74,550 sq.m. (62,730) and a fair value of EUR 203,276k (158,862). Floor space occupancy was 90 per cent (89) at the end of the period. Compared with the end of the previous quarter, the occupancy rate has risen by 2.5 percentage points. The yield of the properties amounts to 5.5 per cent of annualised net operating income for Q3 2019 compared with 6.8 per cent in Q3 2018 and 5.5 per cent in Q2 2019. The reduction compared with the same period last year is mainly due to higher vacancy during the measurement period and rising property values. There are currently no development projects in Eastnine's portfolio.

Over the coming years, Eastnine will gradually build a long-term property portfolio in the Baltic capitals, with the aim of being fully transformed into a pure real estate company by the end of 2020. The increase will mainly take place through acquisitions and development of first-class sustainable offices.

Vilnius

Eastnine's property portfolio in central Vilnius consisted on 30 September of four properties with a total lettable area of 63,279 sq.m., which is estimated to correspond to a market share of 25 per cent of the market for premium offices in the city. The aggregate property value as at 30 September 2019 was EUR 173,566k.

In February 2019, Eastnine entered an agreement to acquire the three properties S7‒1,2,3 in Vilnius central business district. In the transaction, which takes place in three stages, properties with a total of 42,500 sq.m. were acquired for EUR 128,300k. The acquisition of S7‒1 was completed in February and S7-2 in October 2019. As S7- 2 was acquired later than originally expected, the resulting loss of net operating income was compensated for by a lower cash payment. The difference between final cash payment and the agreed purchase price will be reported as unrealised positive change in value during the fourth quarter of 2019.

The property of 3Bures-1,2 which had a higher vacancy than previously during the first half of 2019 has been gradually filled with new tenants. New letting has taken place at higher market rent levels. The Vertas property is practically fully let.

Given the strong demand for modern office premises, the generally low vacancy in Vilnius and newly signed leases where the tenant has not yet moved in, the occupancy rate is expected to continue to rise during the last quarter of 2019.

Riga

Eastnine's property portfolio in central Riga comprises two commercial properties with a gross lettable area of 11,271 sq.m., corresponding to a 15 per cent market share of the estimated prime office market. The aggregate property value in Latvia as at 30 September 2019 was EUR 29,710k.

Rental income and surplus ratio

Property value and loan-tovalue ratio

The Alojas properties were acquired fully occupied at the end of February 2018. The purchase price discounted a temporary uptick in vacancy in mid-2019 when the lease contract of the anchor tenant expired. New tenants have moved in and new lease agreements have been signed at a level of around EUR 15 per sq.m. per month, which is typical of the market.

Acquisitions and pipeline

In February, the property portfolio in central Vilnius increased with the acquisition of S7-1 and after the end of the period by taking possession of S7-2. Ít is expected that possession of S7-3 will be taken at the end of 2019 or the beginning of 2020. In September, acquisition of the fully let 8,600 sq.m. office property Valdemara Centrs in central Riga was announced, which was subsequently taken into possession in October. Further acquisitions and development projects are continually evaluated in all three Baltic capitals.

Value changes

The properties fair value amounted to EUR 203,276k (158,862) on 30 September 2019, after an unrealised value change of EUR 6,294k (4,620) during the period.

In the financial statements, the investment properties are valued at fair value in compliance with IAS 40. The fair value of investment properties that have been acquired in the most recent quarter is equal, at the time of the first report after the acquisition, to its purchase price. Other properties are internally valued according to a yield-based location price model. The valuation takes into account significant and unforeseen changes in rental income, demands on market returns or other events that may significantly change the property's market value. All properties are normally valued by an external, well-known valuation company at least once a year in order to validate the internal valuations. Properties that have been recently acquired are normally externally valuated for the first time in a quarter 12 months from the acquisition.

Four properties have been externally valued during the period, of which one was valued in the last quarter. The external valuations were carried out by Newsec and Colliers.

Real Estate Funds

% of portfolio

EC Baltic Property Fund II

EC Baltic Property Fund III

East Capital Baltic Property Fund II

Eastnine's holdings in East Capital Baltic Property Fund II, measured at fair value, increased by 3.0 per cent during the period. Eastnine received a dividend of EUR 640k this period. The fund has a total of five properties in offices, logistics and retail, of which four are in Tallinn and one in Riga.

Eastnine's share of the fund, %	44
Fair value of Eastnine's holding, EURk	22,719
% of Eastnine's equity	9.1
Unrealised changes in value Jan – Sep, EURk	663
Realised changes in value and dividends Jan – Sep, EURk	640
Total return Jan – Sep, %	5.9

East Capital Baltic Property Fund III

Eastnine's holdings in East Capital Baltic Property Fund III, measured at fair value, increased by 4.9 per cent during the period. The fund has a total of five properties in hotels, logistics and retail, of which three are in Tallinn and two in Riga. In September, Eastnine made its last investment commitment in the fund of EUR 1,982k. At the end of the period, the total investment amount in the fund was EUR 19,562k. Eastnine's entire holding in the fund has been divested during October, see Events after the end of the period, page 11.

Eastnine's share of the fund, %	20
Fair value of Eastnine's holding, EURk	25,090
% of Eastnine's equity	10.1
Unrealised changes in value Jan – Sep, EURk	1,177
Realised changes in value and dividends Jan – Sep, EURk	-
Total return Jan – Sep, %	4.9

Other

% of portfolio

Melon Fashion Group

Melon Fashion Group

During the period, MFG's aggregate sales rose by 28 per cent to RUB 15,755m, compared with RUB 12,273m for the same period last year. The increase in sales was mainly due to strong growth in e-commerce and the increase of the retail area in connection with the acquisition of the brand name SELA. MFG took over 141 of SELA's own stores and 130 franchise stores. MFG's aggregate e-commerce via its own and third party channels increased by 105 per cent during the period and made up 19 per cent (12) of MFG's total sales during January to September.

MFG's EBITDA margin, excluding effects of IFRS 16 and the one-off effect of reported negative goodwill in connection with the SELA acquisition, amounted to 9.7 per cent during the period (10.9) and to 16.4 per cent during the third quarter (15.4). The number of stores was 837 and the store area 157,000 sq.m.

Eastnine's share of the company, %	36
Fair value of Eastnine's holding, EURk	54,072
% of Eastnine's equity	21.8
Unrealised changes in value Jan – Sep, EURk	5,160
Realised changes in value and dividends Jan – Sep, EURk	933
Total return Jan – Sep, %	12.5

Other information

Risks and uncertainties

The dominant risk in Eastnine's operations is commercial risk in the form of changes in rent levels, vacancies and interest rates, as well as changes in the business climate, and exchange rates in the markets where Eastnine is present. A more detailed description of Eastnine's material risks and uncertainties is provided in the Company's Annual Report 2018 on pages 64-65. An assessment for the coming months is provided in the Market comment on p. 4.

Properties are recognised at fair value, and value changes are recognised through profit or loss. In the sensitivity analysis on p. 19 in this report, the effect on earnings etc. in case of a value change in the property values is shown.

Organisational and investment structure

Eastnine AB (publ) (the Parent Company) is a real estate company listed on Nasdaq Stockholm, Mid Cap. With the exception of Melon Fashion Group, which is owned directly by the Parent Company, the activities are managed by the Estonian operating subsidiary Eastnine Baltics OÜ with local subsidiaries in Latvia and Lithuania, together called the Eastnine Group.

At the end of the period, the Eastnine Group employed 17 full-time employees. Seven were employed at the head office in Stockholm, eight in Vilnius, as well as one in Tallinn and Riga respectively.

Parent Company

Profit before tax for the period amounted to EUR 4,862k (-572). This result is primarily attributable to an unrealised value change in the sole holding, Melon Fashion Group (MFG) of EUR 5,160k (-5,144), dividends from MFG of EUR 933k (930), and operating expenses and financial income. See p. 20 for the Parent Company's income statement and balance sheet.

Related parties

On 30 September 2019, Eastnine AB had a related party relationship with its subsidiaries, Board members and employees. Eastnine AB's management, Board members and their close relatives, and related companies control around 29.5 per cent of voting rights in the Company, most of which is controlled by the East Capital Group. There has been no material related party transaction during the period.

Sustainability

In Q1 2019 the third tower of the 3Burės complex in Vilnius received a LEED Platinum Core & Shell certification, in addition to the LEED Platinum certification awarded 3Bures-1,2. Both S7-1 and S7-2 have attained Breeam Excellent. After acquisition of S7-3, five out of nine Eastnine properties will have been awarded an environmental certificate, in each case with the high classifications LEED Platinum or Breeam Excellent. Environmental classification efforts have begun for two of the remaining office properties. Eastnine's first sustainability report, which was produced according to the Global Reporting Initiatives guidelines (GRI referenced) and published as part of the 2018 annual report, contains information about the company's primary concerns, aims and indicators. The company is a member of GRESB.

Eastnine have begun assessing a new development of a wooden office building in Riga - The Pine. This building is planned to receive double sustainability certificates: LEED Platinum and WELL.

Commitments

In February 2019, Eastnine entered an agreement to acquire S7-1,2,3 in Vilnius for EUR 128m. S7-1 was taken possession of in February and S7-2 in October 2019. Completion of the acquisition of S7-3 is expected at the end of 2019 or at the beginning of 2020.

Accounting principles

This interim report has been prepared in accordance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) 34 Interim Financial Reporting and applicable provisions in the Swedish Annual Accounts Act (Årsredovisningslagen). The interim report for the Parent company has been prepared in accordance with the Swedish Financial Reporting Board's standard RFR 2 and the Swedish Annual Accounts Act Chapter 9, Interim report.

During the period 1 January 2014 – 30 June 2018, Eastnine AB applied the investment entity consolidation exemption in IFRS 10, which means that all holdings, including holdings in subsidiaries, are recognised at fair value through profit or loss. In assessing Eastnine AB, it has been concluded that the Company no longer falls within the classification of an investment entity, as a majority of the portfolio consists of directly owned real estate assets. As of 1 July 2018, the Eastnine Group reports consolidated financial statements of the Parent Company and its subsidiaries, including directly owned real estate subsidiaries. This change in status is accounted for prospectively, meaning that historic numbers have not been restated.

The Group applies the same accounting principles and valuation methods as in the latest annual report, with the exception mentioned below regarding IFRS 16. Other new or revised IFRS standards or other IFRIC interpretations applying from 1 January 2019 have not had a material effect on the Group's financial statements.

New accounting principles applying after 1 January 2019 onwards

IFRS 16 Leasing contracts

As of 1 January 2019, IAS 17 was replaced by IFRS 16 Leasing contracts. Eastnine does not apply this standard retroactively, meaning that comparative numbers for 2018 have not been restated. The standard means that essentially all lease agreements will be taken up in the accounts as a usage right and a leasing liability. The usage right and the liability is initially valued at the present value of all future lease payments.

As a lessor, this change will not affect Eastnine's accounts. For Eastnine as a lessee, this change primarily concerns site leasehold fees. As of 1 January 2019, the leasing liability amounted to EUR 358k, all of which relates to site leasehold fees. A corresponding usage right asset has been stated in the balance sheet. As the leasing term is infinite, this leasing liability is not amortised. Instead, the value is unchanged

until the fee is renegotiated. For the same reason, the usage right does not depreciate. The cost for site leasehold fees is stated as a financial expense, which differs from previously, when it was stated as a property expense. The expected site leasehold fees for 2019 amount to EUR 15k. The profit from property management will be unchanged. There will be a minor effect on some key figures such as equity/asset ratio.

Events after 30 September 2019

Saule Zabulionyte started her employment as country manager in Latvia on October 1, 2019. On 11 October 2019, the 16,000 sq.m. office property S7-2 in Vilnius and on 15 October the 8,600 sq.m. Valdemara Centrs in Riga were taken possession of.

On 22 October 2019, a contract was signed for sale of the whole of Eastnine's holding in East Capital Baltic Property Fund III. The purchase price was around EUR 25.1m, corresponding to its fair value on 30 September 2019.

The CEO certifies that the interim report presents a true and fair view of the Parent Company's and the Group's operations, financial position and profits and describes the significant risks and uncertainties facing the Company and the Group.

Stockholm, 8 November 2019

Kestutis Sasnauskas CEO

Review Report

To the Board of Directors of Eastnine AB (publ)

Corp. id. 556693-7404

Introduction

We have reviewed the condensed interim financial information (interim report) of Eastnine AB (publ) as of 30 September 2019 and the nine-month period then ended except for the pro-forma information on pages 1, 5, 21 and 22. The Board of Directors and the Managing Director 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, 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 8 November 2019

KPMG AB

Peter Dahllöf Authorized Public Accountant

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

The share

The Eastnine share is listed on Nasdaq Stockholm Mid Cap. The share price increased by 23 per cent during the period to SEK 114.2, and as of 30 September market cap amounted to SEK 2.4bn.

Number of shares

The total number of shares in Eastnine amounted to 22,370,261 as of 30 September 2019. Adjusted for treasury shares, the number of outstanding shares was 21,149,061. The weighted average number of outstanding shares for the period, adjusted for buy-back, was 21,200,442. The number of shareholders amounted to nearly 5,300 at the end of the period, and the free float to 63 per cent. At the end of the period, the share price stood at SEK 114.2 after an increase of 23 per cent since the beginning of the year.

Dividend

According to the dividend policy established by the Board in September 2017, Eastnine's annual dividend shall amount to at least 50 per cent of the profit from property management. During Eastnine's transformation into a pure real estate company, the annual dividend is to be at least 2.0 per cent of the NAV per share, as per the end of the previous year. In addition, with respect to the Company's financial position and investment opportunities, the Board may decide on a share redemption or buy-back programme.

Largest shareholders, 30 September 2019

Shareholder	Number of shares	%
Peter Elam Håkansson1	6,048,551	27.0
Keel Capital	2,240,117	10.0
Mertiva AB	1,515,205	6.8
Lazard Asset Management	1,489,951	6.7
Nordnet Pensionsförsäkring	872,017	3.9
Norges Bank	688,770	3.1
Kestutis Sasnauskas	437,343	2.0
Dimensional Fund Advisors	340,193	1.5
Prioritet Finans	300,000	1.3
Jacob Grapengiesser	167,861	0.8
10 largest	14,100,008	63.0
Eastnine AB (repurchased shares)	1,221,200	5.5
Others	7,049,053	31.5
Total	22,370,261	100.0

¹ Private and via companies (East Capital Holding AB and Rytu Invest AB). Source: Monitor

Key figures

Data per share	2019 30 Sep	2018 31 Dec	2018 30 Sep
NAV, EUR	11.8	11.2	10.7
EPRA NAV, EUR	12.1	11.4	10.8
Share price, EUR	10.7	9.2	8.9
NAV, SEK	126	114	110
EPRA NAV, SEK	130	116	112
Share price, SEK	114.2	92.9	92.1

At the Annual General Meeting on 15 May 2019, it was decided to pay a dividend for 2018 of SEK 2.30 per share with six-monthly payment. On 22 May, SEK 1.15 per share was paid and the record date for the second payment is 18 November. The dividend, which corresponds to EUR 0.22 per share, represents 2.0 per cent of NAV per share and a dividend growth of 5 per cent.

Buy-back

During the period 1 January - 31 March 2019, Eastnine repurchased 352,041 shares for an average price of SEK 104 per share according to the decision on the AGM 2018 and the mandate of the Board. Eastnine's Board has decided not to renew the repurchase mandate after it expired on 31 March 2019, and therefore no further shares have been repurchased. On 30 September 2019, the Company held 1,221,200 own shares in treasury, corresponding to 5.5 per cent of total outstanding shares.

At the AGM 2019, the Board received a new mandate to decide on share buy-back, providing that the company's holding of treasury shares not exceed at any time 10 per cent of all shares in the company.

EASTNINE share price vs OMX Stockholm Real Estate GI

OMX Stockholm Real Estate GI

Income Statement - Group

	20191	20182	20191	20181	2018/20191, 3
EUR thousands	Jan-Sep	Jan-Sep	Jul-Sep	Jul-Sep	Oct-Sep
Rental income	9,187	2,339	3,142	2,339	11,703
Property expenses	-991	-235	-347	-235	-1,387
Net operating income	8,196	2,104	2,795	2,104	10,316
Central administration expenses	-2,689	-621	-826	-621	-3,744
Interest expenses	-1,435	-266	-498	-266	-1,785
Other financial income and expenses	-282	0	-101	0	88
Profit from property management	3,790	1,217	1,370	1,217	4,875
Unrealised changes in value of properties	6,294	3,675	2,810	3,675	7,156
Unrealised changes in value of derivatives	-1,707	342	-311	342	-2,325
Unrealised changes in value of investments	7,000	-1,060	1,782	-1,060	13,941
Realised value changes and dividends from investments	1,638	25	22	25	4,566
Changes in fair value of subsidiaries and associated companies	-	1,035	-	-	-
Dividends received	-	930	-	-	-
Other income	-	119	-	-	-
Staff expenses	-	-880	-	-	-
Other operating expenses	-	-582	-	-	-
Financial income	-	683	-	-	-
Financial expenses	-	-40	-	-	-
Profit/loss before tax	17,015	5,463	5,673	4,199	28,213
Deferred tax	-1,324	-748	-604	-748	-1,597
Net profit/loss for the period4	15,691 15,691	4,716 4,716	5,069	3,451	26,616
Number of shares outstanding, adjusted for repurchased shares, thousand	21,149	21,795	21,149	21,795	21,149
Weighted average number of shares before dilution, thousand	21,200	22,290	21,149	21,967	21,314
Weighted average number of shares after dilution, thousand	21,240	22,296	21,189	21,988	21,352
Earnings per share before dilution, EUR	0.74	0.21	0.24	0.16	1.25
Earnings per share after dilution, EUR	0.74	0.21	0.24	0.16	1.25

¹Eastnine as a consolidating real estate company

²Eastnine as an investment entity

3 Rolling twelve months

4 Net profit/loss for the period corresponds to Total Comprehensive Income

Balance Sheet - Group

	20191	20181	20181
EUR thousands	30 Sep	31 Dec	30 Sep
ASSETS
Non-current assets
Intangible assets	3	6	7
Investment properties	203,276	158,862	156,102
Right-of-use assets, leaseholds	1,086	-	-
Equipment	120	94	88
Other long-term securities holdings	101,881	92,898	85,957
Other non-current receivables	175	213	202
Total non-current assets	306,541	252,074	242,356
Current assets
Current receivables	677	377	675
Prepaid expenses and accrued income	534	198	431
Cash and cash equivalents	40,596	65,119	58,515
Total current assets	41,807	65,694	59,620
TOTAL ASSETS	348,348	317,767	301,976
EQUITY AND LIABILITIES
Equity
Share capital	3,660	3,660	3,660
Other contributed capital	252,218	260,145	262,666
Retained earnings including other reserves	-22,986	-38,626	-38,626
Net profit/loss for the year	15,691	15,641	4,716
Total Equity	248,583	240,819	232,415
Non-current liabilities
Liabilities to credit institutions	81,628	64,474	55,772
Derivatives	2,665	957	339
Deferred tax liabilities	5,069	3,745	3,472
Lease liability	1,085	-	-
Other non-current liabilites	1,470	1,251	2,338
Total non-current liabilities	91,916	70,427	61,921
Current liabilities
Liabilities to credit institutions	3,560	3,076	2,729
Other liabilities	3,679	2,645	4,265
Accrued expenses and deferred income	610	801	646
Total current liabilities	7,849	6,521	7,640
TOTAL EQUITY AND LIABILITIES	348,348	317,767	301,976

¹Eastnine as a consolidating real estate company

Statement of Changes in Equity - Group

		Other
	Share	contributed	Retained	Total
EUR Thousands	capital	capital	earnings	equity
Opening equity 1 January, 2019	3,660 3,660	260,145 260,145	-22,985 -22,985	240,819
Net profit/loss for the period	-	-	15,691	15,691
Total comprehensive income	-	-	15,691	15,691
Dividend to shareholders	-	-4,519	-	-4,519
Share buy-back	-	-3,525	-	-3,525
Long-term incentive programme (LTIP)	-	117	-	117
Closing equity 30 September, 2019	3,660 3,660	252,218252,218 252,218	-7,295	248,583 248,583

		Other
	Share	contributed	Retained	Total
EUR Thousands	capital	capital	earnings	equity
Opening equity 1 January, 2018	3,658	277,425	-38,626	242,457
Net profit/loss for the period	-	-	4,716	4,716
Total comprehensive income	-	-	4,716	4,716
Bonus issue	3	-3	-	-
Dividend to shareholders	-	-4,480	-	-4,480
Share buy-back	-	-10,304	-	-10,304
Long-term incentive program (LTIP)	-	26	-	26
Closing equity 30 September, 2018	3,660 3,660	262,666 262,666	-33,911 -33,911	232,415

Statement of Cash Flow - Group

	2019	2018	2019	2018
EUR thousands	Jan-Sep	Jan-Sep	Jul-Sep	Jul-Sep
Operating activities
Profit/loss before tax	17,015	5,463	5,673	4,199
Adjustments not included in cash flow from operating activities	-11,430	-3,801	-4,243	-2,766
Cash flow from operating activities before changes in working capital	5,584	1,662	1,429	1,433
Cash flow from changes in working capital
Increase (-)/decrease(+) in other current receivables	-599	-62	-314	-154
Increase (+)/decrease(-) in other current payables	-1,196	-4,009	201	-2,912
Cash flow from operating activities	3,789	-2,409	1,316	-1,633
Investing activities
Investments in existing properties	-1,298	-2,864	-583	-2,864
Acquisition of properties	-36,822		-	-
Purchase of equipment	-47	-4	-40	-4
Investments in other financial assets	-1,982		-1,982	-
Cash flow from investing activities	-40,149	-2,868	-2,605	-2,868
Financing activities
New loans	20,200	3,340	-	3,340
Repayment of loans	-2,563	-505	-890	-505
Repayment of shareholder contributions		11,513	-	-
Dividend to shareholders	-2,259	-2,240	-	-
Own share buy-back	-3,525	-10,304	-	-3,368
Cash flow from financing activities	11,853	1,804	-890	-533
Cash flow for the period	-24,507	-3,473	-2,179	-5,034
Cash and cash equivalent at the beginning of the period	65,119	13,168	42,772	14,689
Effect of consolidating subsidiaries from 1 July 2018 1	-	48,869	-	48,869
Exchange rate differences in cash and cash equivalents	-17	-49	3	-9
Cash and cash equivalent at the end of the period	40,596	58,515	40,596	58,515

Until 30 June 2018, cash in subsidiaries was included in the fair value of subsidiaries

Segment Reporting

Eastnine classifies and evaluates the Company's various segments based on the nature of the investments. Segments are presented from the point of view of management and are divided into the following segments: Real Estate Direct, Real Estate Funds and Other. The segment report for 2018 presents Eastnine as an investment entity. The segment report for 2018 presents Eastnine as an investment entity during the first six months and as a consolidating real estate company for the last three months.

EUR thousands	Real Estate	Real Estate
1 January – 30 September, 2019	Direct	Funds		Other Unallocated	Total
Rental income	9,187	-	-	-	9,187
Property expenses	-991	-	-	-	-991
Net operating income	8,196	-	-	-	8,196
Central administration expenses	-	-	-	-2,689	-2,689
Interest expenses	-1,435	-	-	-	-1,435
Other financial income and expenses	-259	-	-	-22	-282
Profit from property management	6,501	-	-	-2,711	3,790
Unrealised changes in value of properties	6,294		-	-	6,294
Unrealised changes in value of derivatives	-1,707		-	-	-1,707
Unrealised changes in value of investments	-	1,840	5,160	-	7,000
Realised value changes and dividends from investments	-	705	933	-	1,638
Profit/loss before tax	11,087	2,545	6,094	-2,711	17,015
Deferred tax	-1,324	-	-	-	-1,324
Net profit/loss for the period	9,763	2,545	6,094	-2,711	15,691
Value of properties	203,276 203,276	- -	-	-	203,276
Value of securities holdings	- -	47,809 47,809	54,072	-	101,881 101,881
Liabilities to credit institutions	85,187 85,187	- -	-	-	85,187

EUR thousands	Real Estate	Real Estate
1 January – 30 September, 2018	Direct	Funds		Other Unallocated	Total
Rental income	2,339	-	-	-	2,339
Property expenses	-235	-	-	-	-235
Net operating income	2,104 2,104	- -	-	-	2,104
Central administration expenses	-	-	-	-621	-621
Interest expenses	-266	-	-	-	-266
Other financial income and expenses	8	-	-	-9	0
Profit from property management	1,847 1,847	- -	-	-630	1,217
Unrealised changes in value of properties	3,675		-	-	3,675
Unrealised changes in value of derivatives	342		-	-	342
Unrealised changes in value of investments	-	727	-1,702	-86	-1,060
Realised values and dividends from investments	-	25	-	-	25
Changes in fair value of subsidiaries and associated companies	2,196	1,886	-2,632	-415	1,035
Dividends received	-	-	930	-	930
Other income	-	41	79	-	119
Staff expenses	-	-	-	-880	-880
Other operating expenses	-	-	-	-582	-582
Financial income	683	-	-	-	683
Financial expenses	-	-	-	-40	-40
Profit/loss before tax	8,742 8,742	2,680 2,680	-3,326	-2,632	5,463
Deferred tax	-748	-	-	-	-748
Net profit/loss for the period	7,994 7,994	2,680 2,680	-3,326	-2,632	4,716
Value of properties	156,102 156,102	- -	-	-	156,102
Value of securities holdings	- -	42,489 42,489	43,468	-	85,957
Liabilities to credit institutions	58,501 58,501	- -	-	-	58,501

Long-term securities holdings

The following table analyses securities holdings measured at fair value in compliance with level 3. Derivatives are measured continuously at fair value according to level 2. Changes in fair value are recognised in profit and loss. At the end of the period, the fair value of liabilities to credit institutions essentially corresponded with the carrying amounts.

30 September, 2019

	Real Estate
Changes in financial assets and liabilities in Level 3, EUR thousands	Funds	Other	Total
Opening balance 1 January, 2019	43,986 43,986	48,912 48,912	92,898
Purchases/additions	1,982	-	1,982
Unrealised changes in values recognised net in profit/loss	1,840	5,160	7,000
Closing balance 30 September, 2019	47,809 47,809	54,072 54,072	101,881 101,881

31 December, 2018

	Real Estate
Changes in financial assets and liabilities in Level 3, EUR thousands	Funds	Other	Total
Opening balance 1 January, 2018	37,064	48,613	85,677
Purchases/additions	3,451	-	3,451
Unrealised changes in values recognised net in profit/loss	3,471	299	3,770
Closing balance 31 December, 2018	43,986 43,986	48,912 48,912	92,898

Real Estate Funds consists of holdings in East Capital Baltic Property Fund II and East Capital Baltic Property Fund III. Other consists of the holdings in Melon Fashion Group. These holdings are valued externally normally at year-end, and the fair value of the holdings is assessed on a quarterly basis. More information on the holdings, including fair value changes during the period, can be found on page 9 in this report.

Holding	Class	Valuation method	Valuation assumptions
East Capital Baltic Property Fund II	Real Estate Funds	DCF	WACC 8-12%, Exit yield 6-8%
East Capital Baltic Property Fund III	Real Estate Funds	DCF	WACC 8-9%, Exit yield 7-8%
			Long-term growth 3.5%, Long term operating margin 10.9%, WACC 16.4%. A 25% minority and liquidity discount is
Melon Fashion Group	Other	DCF	applied

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

For the fair values of Real Estate Funds and Other - reasonably possible changes at the reporting date to one of the significant unobservable inputs, provided other inputs constant, would have the following effects:

Effect in EUR thousands

30 September, 2019	Real Estate Funds		Other
Sensitivity analysis	Fair value		Fair value
Exit yield (+/- 0.5% movement)	-2,086	2,406	-	-
Weighted average cost of capital (WACC) (movement +/- 0.5% on funds and +/- 1.0% on Other)	-922	938	-4,317	5,065
Long term growth rate (+/- 0.4% movement)	-	-	1,169	-1,099
Long term operating margin (+/- 0.5% movement)	-	-	1,619	-1,620

Sensitivity analysis - Properties

30 September, 2019	Impact on			30 September, 2019
	pre-tax	Equity /	Loan-to			Effect,
Change in property value	profit, EURk	asset ratio,	value ratio,	Cash flow and earnings	Change	EURk
+5%	10,164	72%	40%	Rental income	5%	628
0	0	71%	42%	Property expenses	5%	69
-5%	-10,164	70%	44%

Earnings and key ratios are affected by realised and unrealised changes in the value of properties. The table shows the effect of a 5 per cent change in value before deferred tax deduction.

Loan-to			Effect,
value ratio,	Cash flow and earnings	Change	EURk

The sensitivity analysis shows the effects on the Group's cash flow and earnings on an annualised basis after taking into account of the full effect of each parameter. A change in market interest rates has no immediate effect on interest expenses as currently 100 per cent of the interest is fixed using fixed-interest derivates.

Income Statement - Parent Company

	2019	2018	2019	2018
EUR thousands	Jan-Sep	Jan-Sep	Jul-Sep	Jul-Sep
Other income	66	145	22	25
Operating expenses	-2,294	-1,961	-677	-501
Operating profit/loss	-2,228	-1,816	-655	-475
Profit/loss from shares in group companies	-15	4,477	-15	-
Unrealised changes in value of investments	5,160	-5,144	822	-1,702
Dividend received from investments	933	930	-	-
Financial income	1,035	1,029	348	347
Financial expense	-23	-49	-3	-9
Profit/loss before tax	4,862	-572	497	-1,839
Income tax	-	-	-	-
Net profit/loss for the period	4,862	-572	497	-1,839

Balance Sheet - Parent Company

	2019	2018	2018
EUR thousands	30 Sep	31 Dec	30 Sep
ASSETS
Fixed assets
Right-of-use asset, leaseholds	622	-	-
Equipment	34	-	-
Shares in group companies	143,421	146,946	146,937
Other long-term securities holdings	54,072	48,912	43,468
Loans to group companies	27,527	27,527	27,527
Total non-current assets	225,676	223,385	217,932
Current assets
Other receivables	45	2	79
Accrued interest income	2,405	1,376	1,029
Prepaid expenses and accrued income	75	74	68
Cash and cash equivalents	4,088	7,898	10,852
Total current assets	6,613	9,350	12,029
TOTAL ASSETS	232,290	232,736	229,961
EQUITY AND LIABILITIES
Equity
Restricted capital
Share capital	3,660	3,660	3,660
Unrestricted capital
Share premium reserve	252,218	260,145	262,666
Retained earnings including other reserves	-31,882	-38,626	-38,626
Net profit/loss for the year	4,862	6,744	-572
Total equity	228,858	231,922	227,127
Non-current liabilities
Lease liability	620	-	-
Other non-current liabilites	43	11	6
Total non-current liabilities	663	11	6
Current liabilities
Other liabilities	2,407	259	2,356
Accrued expenses and deferred income	362	543	473
Total current liabilities	2,769	803	2,829
TOTAL EQUITY AND LIABILITIES	232,290	232,736	229,961

PRO-FORMA

As of 1 July 2018, Eastnine Group reports consolidated financial statements of the parent company and its subsidiaries, including directly owned real estate subsidiaries. This change in status is accounted for prospectively, meaning that historic numbers have not been restated in the actual financial statements. However, consolidated pro-forma numbers for the period Q3 2017 - Q2 2018 are presented below for comparative purposes. The pro-forma consolidations are based on the actual subsidiaries and holdings within the group during the comparative periods.

Income Statement - Group

EUR thousands	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017	Q3 2017
Rental income	3,142	3,099	2,947	2,516	2,339	2,282	1,993	1,634	1,657
Property expenses	-347	-387	-258	-396	-235	-249	-562	-745	-327
Net operating income	2,795	2,712	2,689	2,120	2,104	2,034	1,431	888	1,330
Central administration expenses	-826	-936	-927	-1,055	-621	-1,008	-702	-991	-1,115
Interest expenses	-498	-526	-411	-350	-266	-319	-278	-219	-216
Other financial income and expenses	-101	-109	-72	369	0	20	-299	-86	-15
Profit from property management	1,370	1,141	1,279	1,085	1,217	727	151	-408	-16
Unrealised change in values:
- Properties	2,810	3,483	-	863	3,675	945	-	4,546	-
- Derivatives	-311	-740	-656	-618	342	-372	-134	306	474
- Investments	1,782	760	4,459	6,941	-1,060	-2,233	37	10,181	2,263
Realised values and dividends
from investments	22	1,595	22	2,928	25	1,668	781	2,368	875
Profit before tax	5,673	6,239	5,103	11,199	4,199	735	836	16,992	3,596
Deferred tax	-604	-575	-146	-273	-748	-182	-125	-739	-95
Net profit/loss for the period	5,069	5,664	4,957	10,925	3,451	553	711	16,253	3,501

Condensed Balance Sheet - Group

EUR thousands	30 Sep 2019	30 Jun 2019	31 Mar 2019	31 Dec 2018	30 Sep 2018	30 Jun 2018	31 Mar 2018	31 Dec 2017	30 Sep 2017
ASSETS
Investment properties	203,276	199,882	195,972	158,862	156,102	122,843	121,995	92,395	89,455
Development properties	-	-	-	-	-	26,721	19,768	15,110	10,248
Right-of-use assets, leaseholds	1,086	465	465	-	-	-	-	-	-
Long-term securities holdings	101,881	98,117	97,357	92,898	85,957	86,932	92,769	127,277	129,645
Other non-current assets	297	266	270	313	296	419	430	335	457
Total non-current assets	306,541	298,730	294,063	252,074	242,356	236,915	234,961	235,116	229,806
Other receivables	1,211	897	813	574	1,105	1,014	5,331	1,652	578
Cash and cash equivalents	40,596	42,772	43,794	65,119	58,515	63,558	56,497	44,991	41,918
Total current assets	41,807	43,668	44,607	65,694	59,620	64,572	61,827	46,642	42,495
TOTAL ASSETS	348,348	342,399	338,670	317,767	301,976	301,487	296,789	281,759	272,301
EQUITY AND LIABILITIES
Share capital	3,660	3,660	3,660	3,660	3,660	3,660	3,658	3,658	3,658
Other contributed capital	252,218	252,184	256,669	260,145	262,666	266,007	274,982	280,027	286,115
Retained earnings incl. net profit/loss
for the period	-7,295	-12,364	-18,029	-22,986	-33,911	-37,362	-40,518	-41,228	-57,481
Total shareholders' equity	248,583	243,480	242,300	240,819	232,415	232,305	238,122	242,457	232,292
Liabilities to credit institutions	81,628	84,297	84,297	64,474	55,772	54,638	48,534	30,727	32,545
Derivatives	2,665	2,353	1,614	957	339	682	309	176	315
Deferred tax liabilities	5,069	4,465	3,891	3,745	3,472	2,724	2,542	2,417	1,678
Lease liability	1,085	465	465	-	-	-	-	-	-
Other non-current liabilites	1,470	1,567	1,452	1,251	2,338	2,045	1,745	893	595
Total non-current liabilities	91,916	93,148	91,719	70,427	61,921	60,089	53,130	34,213	35,133
Liabilities to credit institutions	3,560	1,780	2,670	3,076	2,729	1,029	1,533	1,818	455
Other liabilities	4,289	3,991	1,981	3,445	4,911	8,065	4,003	3,270	4,422
Total current liabilities TOTAL EQUITY AND LIABILITIES	7,849 348,348	5,771 342,399	4,651 338,670	6,521 317,767	7,640 301,976	9,094 301,487	5,536 296,789	5,088 281,759	4,876 272,301

Key figures

The below key figures are deemed to be relevant for the type of operations conducted by Eastnine and to contribute to an increased understanding of the financial report. The table presents the key figures and performance measures that are not defined by IFRS which is why a reconciliation of key figures is also provided. Definitions can also be found on page 23.

	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017	Q3 2017
Property-related
Leasable area, sqm k1	74.5	74.5	74.9	62.8	62.7	49.4	49.4	37.8	37.8
Number of properties1	6	6	6	5	5	5	5	3	3
Property value, EUR k1	203,276	199,882	195,972	158,862	156,102	149,564	141,762	107,505	99,703
Surplus ratio, %1	89.0%	87.5%	91.2%	84.3%	90.0%	89.1%	71.8%	54.4%	80.3%
Occupancy rate, %1	90.2%	87.7%	92.0%	88.8%	97.5%	99.6%	99.6%	97.0%	98.1%
Average rent, EUR/sqm/month1	14.7	14.7	14.8	14.5	14.3	14.5	14.5	13.8	13.8
WAULT, years1	3.0	3.3	2.8	2.8	2.8	1.9	2.2	2.5	2.4
Property yield, investments properties %1	5.5%	5.5%	6.1%	6.0%	6.8%	6.9%	5.4%	4.1%	6.1%
Financial
Rental income, EUR k1	3,142	3,099	2,947	2,516	2,339	2,282	1,993	1,634	1,657
Net operating income, EUR k1	2,795	2,712	2,689	2,120	2,104	2,034	1,431	888	1,330
Profit from property management, EUR k1
LTV (loan-to-value) ratio, %1	1,370	1,141	1,279	1,085	1,217	727	151	-408	-16
	42%	43%	44%	43%	37%	37%	35%	30%	33%
Equity / asset ratio, %	71%	71%	72%	76%	77%	77%	80%	86%	85%
Interest coverage ratio, multiple1	3.8x	3.2x	4.1x	4.1x	5.6x	3.3x	1.5x	n.m.	n.m.
Average interest, %1	2.3%	2.4%	2.2%	2.3%	2.2%	2.4%	2.5%	2.7%	2.6%
Return on equity, Real Estate Direct, %1	15.7%	16.7%	6.2%	9.8%	24.1%	9.9%	4.5%	29.2%	9.9%
Return on equity, %	8.2%	9.3%	8.2%	18.5%	5.9%	0.9%	1.2%	27.4%	6.0%
Share-related
Net asset value (NAV), EUR k	248,583	243,480	242,300	240,819	232,415	232,305	238,122	242,457	232,292
EPRA NAV, EUR k1	256,316	250,298	247,804	245,521	236,226	235,711	240,974	245,050	234,285
Market capitalisation, EUR k	225,322	213,772	229,466	197,085	194,321	198,618	190,256	190,817	184,385
Market capitalisation, SEK k	2,415,223	2,258,720	2,389,844	1,997,452	2,007,332	2,074,547	1,959,635	1,876,016	1,779,227
Number of shares outstanding, thousand	22,370	22,370	22,370	22,370	22,370	22,370	24,816	24,816	24,816
Number of shares outstanding, adjusted
for repurchased shares, thousand	21,149	21,149	21,149	21,501	21,795	22,164	22,370	22,948	23,723
Weighted average number of shares,
adjusted for repurchased shares,	21,200	21,227	21,305	22,128	22,290	22,454	22,591	24,334	24,670
Earnings per share, EUR	0.24	0.27	0.02	0.50	0.16	0.02	0.03	0.70	0.15
Dividend per share, EUR	-	-	-	0.22	-	-	-	0.21	-
NAV per share, EUR	11.8	11.5	11.5	11.2	10.7	10.5	10.6	10.6	9.8
NAV per share, SEK	126	122	119	114	110	109	110	104	94
EPRA NAV per share, EUR1	12.1	11.8	11.7	11.4	10.8	10.6	10.8	10.7	9.9
EPRA NAV per share, SEK1	130	125	122	116	112	111	111	105	95
Share price, EUR2	10.7	10.1	10.8	9.2	8.9	9.0	8.5	8.3	7.8
Share price, SEK2	114.20	106.80	113.00	92.90	92.10	93.60	87.60	81.75	75.00
Other
SEK/EUR	10.72	10.57	10.41	10.14	10.33	10.44	10.30	9.83	9.65
Number of employees at the end of the
period	17	16	13	13	14	13	12	11	10
Basis for key figures	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017	Q3 2017
Rental income	3,142	3,099	2,947	2,516	2,339	2,282	1,993	1,634	1,657
Net operating income	2,795	2,712	2,689	2,120	2,104	2,034	1,431	888	1,330
Surplus ratio, %	89.0%	87.5%	91.2%	84.3%	90.0%	89.1%	71.8%	54.4%	80.3%
Property value	203,276	199,882	195,972	158,862	156,102	149,564	141,762	107,505	99,703
Liabilities to credit institutions	85,187	86,077	86,967	67,550	58,501	55,666	50,067	32,545	33,000
LTV (loan-to-value) ratio, %	42%	43%	44%	43%	37%	37%	35%	30%	33%
Profit from property management	1,370	1,141	1,279	1,085	1,217	727	151
Interest expenses	498	526	411	350	266	319	278
Profit before interest expenses	1,868	1,667	1,690	1,434	1,483	1,046	429
Interest coverage ratio, multiple	3.8x	3.2x	4.1x	4.1x	5.6x	3.3x	1.5x	n.m.	n.m.
Equity	248,583	243,480	242,300	240,819	232,415	232,305	238,122	242,457	232,292
Add back derivatives	2,665	2,353	1,614	957	339	682	309	176	315
Add back recognised deferred tax	5,069	4,465	3,891	3,745	3,472	2,724	2,542	2,417	1,678
EPRA NAV, EUR k	256,316	250,298	247,804	245,521	236,226	235,711	240,974	245,050	234,285

1 Key figures for the period Q3 2017 - Q2 2018 are based on pro-forma figures

2 Not adjusted for dividend

Definitions

Eastnine applies European Securities and Markets Authority (ESMA) guidelines on alternative performance measures. According to these guidelines, an alternative performance measure is a financial metric of historical or future earnings performance, financial position, financial results or cash flows, which is not defined or stated in applicable rules for financial reporting (IFRS and the Swedish Annual Accounts Act).

Property-related key figures

Average rent

Average rent at the end of the quarter/period.

Lettable area Total area available for letting.

Net operating income Rental income less property expenses.

Occupancy rate, by area

Occupancy rate in relation to lettable area.

Rental income

Debited rents, rent supplements, and rent guarantees less rental discounts.

Surplus ratio

Net operating income in relation to rental income.

Triple-net rent

Rental agreement where the tenant is responsible for costs attributable to the premises which are being rented, in addition to the agreed rent.

Vacancy rate, by area

Vacant area in relation to lettable area.

WAULT

Average remaining agreement term of rental agreements, weighted according to contracted rental income (Weighted average unexpired lease term). If the lease agreement includes a break option at a certain date, this date is used in the calculation of WAULT.

Yield, investment properties

Net operating income (annualised) divided by the average value of investment properties.

Financial key figures

Average capital tie-up period Average remaining term for liabilities to credit institutions by the end of the period.

Average interest

Interest expenses divided by average liabilities to credit institutions.

EBIT

Operating profit before interest and taxes. (Earnings before Interest and Tax).

EBITDA

Profit before interest, tax, and impairment (Earnings before Interest, Tax, Depreciation and Amortisation).

Equity/asset ratio

Equity divided by total assets.

Fair value See market value.

Interest coverage ratio

Profit from property management before interest expense in relation to interest expense.

LTV (loan-to-value) ratio

Liabilities to credit institutions as a percentage of property value.

Market value

The estimated value at which the property could be sold at a given point in time. The market value of private holdings is determined through the use of various valuation method appropriate for the specific holding.

Net asset value discount/premium

The difference between net asset value and market capitalisation. If market cap is lower than NAV the shares are traded at a NAV discount; if market cap is higher, they are traded at a premium.

Return on equity

Net profit/loss for the period (annualised) as a per cent of average equity.

Return on equity, Real Estate Direct

Net profit/loss for the period (annualised) in the Real Estate Direct segment as a per cent of average equity attributable to the segment.

Share-related key figures

EPRA NAV (long-term net asset value)

Equity discounted by derivatives and deferred tax liabilities according to the balance sheet.

EPRA NAV per share

EPRA NAV in relation to the number of outstanding shares (excluding treasury shares).

Earnings per share

Period earnings attributable to equity holders of the Parent Company in relation to the average number of outstanding shares (excluding treasury shares).

Equity per share

Equity attributable to the shareholders of the Parent Company in relation to the number of outstanding shares (excluding treasury shares.)

NAV (net asset value)

Total equity.

NAV per share

NAV in relation to the total number of outstanding shares (excluding treasury shares.).

Financial calendar

Year-end report 2019: 21 February 2020 Annual General Meeting 2020: 12 May 2020 Interim report January - March 2020: 12 May 2020 Interim report January - June 2020: 17 July 2020 Interim report January - September 2020: 11 November 2020 Year-end report 2020: 24 February 2021

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The information in this interim report is the information which Eastnine AB is required to disclose under the EU Market Abuse Regulation and the Securities Markets Act. It was released for publication November 8, 2019 at 08.00 a.m.

Contact information

Kestutis Sasnauskas, CEO, +46 8 505 977 00 Britt-Marie Nyman, CFO and deputy CEO, +46 70 224 29 35

Eastnine AB

Kungsgatan 30, Box 7214 SE-103 88 Stockholm, Sweden Tel: +46 8 505 977 00

www.eastnine.com