Eastnine — Interim / Quarterly Report 2020

Jul 17, 2020

EASTNINE INTERIM REPORT JANUARY – MARCH 2020

Interim report January–June 2020

The real estate activities are delivering strong results, making evident the advantages of a growing portfolio. Profit from property management increases by a full 83 per cent in comparison to rental income, which increases by 48 per cent. During the second quarter, the unrealised value changes are positive in properties as well as in other investments. During the first quarter, the coronavirus pandemic affected the values negatively.

January−June 2020

• Rental income increased by 48 per cent to EUR 8,942k (6,046). The increase is primarily attributable to a larger property portfolio, but also due to a higher occupancy rate and higher rent level. Rental income in a comparable portfolio increased by 7 per cent.
• Net operating income increased by 49 per cent to EUR 8,031k (5,401).
• Profit from property management increased by 83 per cent to EUR 4,432k (2,420).
• Unrealised value changes amounted to EUR -15,755k (7,305) during the period. The value change was negative in the first quarter, but positive in the second.Of the change in the period, EUR 2,584k (3,483) is attributable to real estate, EUR -17,678k (5,219) to investments and EUR -661k (-1,396) to derivatives.
• Profit/loss for the period amounted to EUR -12,513k (10,621), corresponding to EUR -0.59 per share (0.50).
• Average rent level increased to EUR 14.9 per sq.m. per month (14.7) and occupancy rate to 96.1 per cent (92.7).
• Net leasing amounted to EUR -899k. The average rent level on newly signed agreements amounted to EUR 16.4 per sq.m. per month, and renegotiated agreements to EUR 15.0.

Key events during the quarter

• Unrealised value changes amounted to EUR 8,501k (3,503) in the second quarter, of which EUR 5,322k (3,483) is attributable to real estate, EUR 3,605k (760) to investments and EUR -426k (-740) to derivatives.
• The acquisition of the S7-3 property in Vilnius was completed in June. The property comprises around 14,500 sq.m. at a purchase consideration of EUR 42.4m.

Events after the end of the period

• No significant events have occurred after the end of the period.

Comparative figures in the Interim Report refer to the period January -June 2019 for income statement items and as per 31 December 2019for balance sheet items. The Company refers to the Eastnine Group.

SELECTED KEY FIGURES

	2020	2019	2020	2019
	Jan-Jun	Jan-Jun	Apr-Jun	Apr-Jun
Rental income, EURk	8,942	6,046	4,467	3,099
Profit from property management, EURk	4,432	2,420	2,170	1,141
Net profit/loss for the period	-12,513	10,621	9,726	5,664
Average yield requirement, %	6.1	-	6.1	-
Return on equity, %	-9.7	8.8	15.0	9.3

	2020	2019	2019
	30 Jun	30 Jun	30 Dec
Investment properties, EURk	336,200	199,882	290,256
Occupancy rate, %	96.1	87.7	92.7
Equity / asset ratio, %	57	71	64
Loan-to-value, %	49	43	47
Environmentally certified properties2 , % of sq.m.	84	75	72
Long-term NAV per share, EUR	12.3	11.8	13.1
Long-term NAV per share, SEK	129	125	137

¹ EUR = 10.46 SEK as of 30 June 2020 (source: Reuters). ² Area with environmental certification in proportion to total area (excluding area expected to undergo significant redevelopment).

This is Eastnine

Eastnine shall be the leading, long-term provider of modern and sustainable office premises in prime locations in the Baltic capitals.

Swedish real estate company

Listed on Nasdaq Stockholm Mid Cap and headquartered in Stockholm.

Nordic tenants

Primarily large Nordic companies with international operations.

Baltic prime office properties

Invests in modern and sustainable office properties in firstclass locations in the Baltic capitals.

GOALS

Operational	Status 30 June 2020
The portfolio to be comprised exclusively of real estate by the end of 2020.	76 %1
The profit from property management in Real Estate Direct shall have an annual capacity of EUR 15m by the end	EUR 12.1m (annualised Q2 2020)
of 2020.
Financial	Status 30 June 2020
Dividend to amount to at least 50 % of profit from property management while at least 2 % of equity until the	2.0 % of equity
company is converted into a pure real estate company at the end of 2020.
Return on equity, in the directly owned real estate segment, to amount to at least 13‒15 % over a five-year	13.2 % (last 12 months)
period.
Interest coverage ratio of at least 2.0x	3.5x (quarter)
The loan-to-value ratio shall not exceed 65 %.	49 %

1Proportion of total assets.

Stable development and strong performance in real estate operations

The real estate operations continue to develop well, with rising rent levels and a higher occupancy rate. The increase in efficiency accompanying growth of the property portfolio can be recognised in how the profit from property management is increasing almost twice as fast as rental income.

Strong earnings in real estate operations

Summing up the first half of the year, we can conclude that the real estate business developed steadily and that we are delivering strong results, in spite of the large challenges posed by the pandemic. Rent income grew by 48 per cent compared to the same period last year, and profit from property management increased nearly twice as much, by 83 per cent. Clearly, our ambition to grow the property portfolio boosted the profit from property management.

Rent income in a comparable portfolio grew by 8 per cent during the quarter and 7 per cent during the first six months of the year. This is a result of strong lettings efforts in 2019. The occupancy rate increased somewhat further, to around 96 per cent, and new lettings are being agreed on at higher rent levels. At the end of the second quarter, we also see an increase in the number of inquiries from premise tenants. Even if we have some known tenant departures in the second half of 2020, the position appears considerably more stable and optimistic than we may have expected at the onset of the pandemic.

Limited discounts

The strong restrictions imposed in order to limit the spread of the contagion in the Baltics, closing many important societal functions, had a considerable effect on the economy. Of our tenants, restaurants, gyms and beauty salons were the most impacted. The public restrictions have had an effect since relatively few were physically impacted by covid-19, which we can all be happy about. Now, the Baltic countries are beginning a return to normal, easing lockdown and less travel restrictions. Our local organisations, in both Vilnius and Riga, have prioritised availability to tenants during these turbulent times. The financial effects of the pandemic on Eastnine have thus far been limited, with discounts amounting to around EUR 125k during the period, corresponding to 0.6 per cent of annual rent.

Completed S7-3 acquisition

Even if the transaction market has essentially been "quarantined" in the quarter, we still completed the acquisition of the third stage of the S7 project. This will contribute around EUR 2.5m in annual income, and at nearly 98 per cent occupancy, a nearly identical increase in profit from property management. With the acquisition, Eastnine is the largest office property owner in the Vilnius CBD. We expect a higher intensity in the transaction market during the third quarter, as travel restrictions are lifted and the financial markets start to return to normal.

Upward turn for Melon Fashion Group

Melon Fashion Group (MFG), which was heavily affected by the coronavirus pandemic and subsequent closing of all stores in April and most of May, is gradually returning to normal. At the end of June, around 600 stores, corresponding to 75 per cent of all shops, had opened, even if sales in the shops are still under certain restrictions. The company has exhibited considerable strength and adaptability during the crisis and achieved a positive EBITDA of 0.4 per cent during the first six months. Though most stores have been closed, during large parts of the second quarter,sales only declined by 2 per cent. Sales through e-commerce continued to increase strongly, growing by 140 per cent compared to the same period last year. The value of our holding in MFG increased during the second quarter by EUR 3.2m, corresponding to 7.1 per cent, as a result of a stronger ruble, after a decline in value due to the pandemic in the first quarter.

Offices of the future

When the first shock of the pandemic settles, the longerterm effects on our lifestyle will be reviewed. No doubt, we can conclude that it's possible -for a limited period, at least to carry out some duties remotely and to have meetings online. For some, working remotely means an increased quality of life, while it's been a challenge for others. To build and nurture a corporate culture and a sense of community will require a place to meet. Therefore, I believe in a need of well-situated, modern, flexible and efficient offices, even if the way we use offices will change over time. We are wellequipped to find new solutions, create added value and competitive advantages for our tenants.

Kestutis Sasnauskas CEO

The ambition to grow the property portfolio has boosted the profit from property management

Effects of the coronavirus pandemic

The coronavirus pandemic has affected Eastnine negatively during the period, just as it has many other companies around the world. Its impacts are clearest in an unrealised value loss in Eastnine's share of the associated company MFG, despite a certain recovery during the second quarter. Real estate operations, however, are only marginally affected.

Rental income

Q2

Eastnine has a robust tenant structure. The majority of Eastnine's tenants are large Nordic companies with international operations. The average remaining lease term of the ten largest tenants is 5.2 years, corresponding to 4.7 years across the entire portfolio. 96 per cent of the premises are offices.

Eastnine's lease rents are chiefly due monthly, meaning that any issuesthat tenants may have in paying rent are quickly identified. Eastnine has granted discounts amounting to around EUR 127k, corresponding to 0.6 per cent of total annual rentfor premises, during the period.

Financing

Eastnine enjoys robust liquidity, and the maturities of loans are well into the future. Cash and cash equivalents amounted to EUR 22m and unutilised credit facilities to EUR 3m at the end of the period.

The loan-to-value ratio amounted to 49 per cent, capital tie-up period to 3.1 years, and the fixed interest term to 2.5 years. No loans are maturing in 2020. The first loan maturation, comprising EUR 14.7m, occurs in September 2021. Financing is distributed between three of the larger banks in the Baltics and does not include capital market financing.

Transaction and property valuations

A general market anxiety has meant reduced transaction volumes. Up until February, property yields on offices were heading to record-low levels on our markets. At the end of June, a larger office transaction took place in Tallinn indicating continued market stability. At the end of June, market yields for prime office properties is unchanged compared to the turn of the year.

100 per cent of Eastnine's property portfolio has been externally valued as of 31 March and internally valued as of 30 June, using the same valuation model. Unrealised value changes in Eastnine's property portfolio amounts to 0.8 per cent during the period. The changes have been positively

affected by the acquisition of S7-3, where delays in taking possession meant that missed net operating income was replaced by a lower purchase consideration, and thus a difference considered as an unrealised value change. Rising rent levels in the rest of the properties have also contributed positively during the second quarter. Decreasing inflation expectations and expectations of some rent losses contributed negatively in the first quarter.

Melon Fashion Group

Eastnine's associated companyMFG is gradually opening its stores after having been closed from April onwards. At the end of the period, around 75 per cent of just under 800 stores are open. E-commerce has worked well throughout the period. The store closures have affected the valuation of Eastnine's holding negatively. The unrealised value change amounted to EUR -18.4m during the whole period, but the change has been positive during the second quarter, EUR 3.2m, due to a strengthening of the ruble..

Staff

The health and safety of our staff is a priority. Eastnine follows the official guidelines concerning the work and the employees in the countries in which we operate. The Company has recommended all employees, using public transport to and from work, to work from home as much as possible given their duties. Both in the Baltics as well as in Sweden, the majority of employees are now working in the offices at the end of the period. Face-to-face meetings and business travel have been reduced to a minimum.

Community initiatives

Eastnine ordered 230 meals per day through the month of April and the first half of May to be delivered to staff caring for covid-19 patients at Vilnius university hospital. The meals have been delivered by three restaurants that are Eastnine tenants.

Market

Q2

The Baltic countries have largely lifted the restrictions previously imposed, and the Baltic economies are not expected to be harder hit by the coronavirus pandemic than other countries in Europe. The rental market for offices has been stable and the first large office transaction since the onset of the pandemic indicates that the transaction markets will continue to be stable.

Market development

Macro

The global spread of the coronavirus pandemic is a considerable strain on the global economy, even after governments and central banks have put in place extensive support programmes. 2020 appears to be a year marked by historic reductions in GDP, rising unemployment and suppressed inflation. The Baltics are no exception. However, the Baltic countries went into this crisis in much better shape than at the onset of the 2009 financial crisis and are not expected to be harder hit than the rest of Europe. By mid-March, the Baltic countries locked down large portions of their societies, which reduced the spread of Covid-19 but also had negative impacts on other parts of society. Sectors such as transportation, consumer durable goods and tourist facilities have been heavily affected, and Baltic export companies are sensitive to a global downturn and interruptions in supply chains.

Some countries around the world are gradually trying to re-open their economies, even if there remain large uncertainties about any return to normal. From mid-May, the Baltic countries eased restrictions, after having applied varying degrees of lockdown. At the time of this report, restrictions are still imposed on inbound travel from some countries, e.g. Sweden. Since the last crisis, bank lending in the Baltics to households and businesses has been restrained. In addition, the sovereign debts of the Baltic states are relatively low compared to many other countries, comprising around 37 per cent of GDP in Lithuania and Latvia, and only around 9 per cent of GDP in Estonia, at the onset of the pandemic.

Rental market

The office market has fared well during the pandemic. Offices have generally been kept open, even if many companies have opted to allow all or parts of their staff to

work from home at certain times. Owners of hotel and retail properties as well as property developers have, however, been negatively impacted due to the lockdowns and general market anxiety. The demand for offices during the first quarter was relatively healthy. Demand was very low at the beginning of the second quarter, but started to recover from the end of May. Vacancy rates was at the end of the period of 3.1 in Vilnius, 18.5 per cent in Riga and 7.9 per cent in in Tallinn. In Riga, vacancies increased due to completion of several projects Z-Towers and Origo One.

Rent levels in the markets were unchanged during the first half of the year. The increased demand recorded since the end of May meant that the risk of sinking rent levels due to higher vacancies was reduced. The office market in Vilnius has a particular dynamic, where demand is generated from Nordic tenants noting the advantages of lower costs. This picture has not changed during the first half of 2020.

Transaction market

After two record-breaking years with property transactions amounting to around a billion EUR per year in the Baltics, transaction volumes are expected to sink in 2020. Transaction volumes were limited during the first six months, largely due to uncertainties and travel restrictions. At the end of the period, a large office property transaction was carried out in Tallinn. Furthermore,two acquisitions previously announced, were completed in Vilnius. Among them Eastnine's acquisition of S7-3.

In direct conjunction with the spread of the virus, banks focused on handling existing credits rather than granting new ones. At the end of the first half of the year, the situation appears to have normalised for low-risk borrowers, margins having returned to essentially the same level as before the pandemic.

The period January−June 2020

Rental income increased during the period due to a larger property portfolio, higher occupancy rate and higher rent levels. The property value increased through acquisitions and unrealised value changes. The holding in MFG has decreased in value during the period as a consequence of the coronavirus pandemic, but partially recovered in the second quarter due to a stronger ruble.

Rental income

Q2

The income, which is entirely composed of rental income, increased by 48 per cent during the period to EUR 8,942k (6,046), primarily due to a larger property portfolio, but also due to a higher occupancy rate and higher rent level. The S7-3 property was taken into possession on 23 June and is included from that date.

Rental income in a comparable portfolio increased, due to a higher average occupancy rate and higher rent level, by 7 per cent compared to the same period in 2019. In the second quarter, the increase amounted to 8 per cent.

The average rent level in the property portfolio increased to EUR 14.9 per sq.m. per month at the end of the period, compared to EUR 14.7 at the end of 2019. During the period, new lease agreements have been signed at an average level of EUR 16.4 per sq.m. per month, and renegotiations at EUR 15.0.

Property expenses

Property expenses rose by 41 per cent to EUR -911k (-645) due to a larger real estate portfolio.

Earnings

Net operating income was EUR 8,031k (5,401), and the surplus ratio amounted to 90 per cent (89). The high surplus ratio is attributable to the fact that a majority of the tenants, in addition to rent, also pay for e.g. electricity, heating, cooling, water and wastewater, as well as repairs, maintenance and property management. The increase of 49 per cent in net operating income is mainly related to the acquisition of the properties S7-1 and S7-2 in Vilnius and

RENTAL INCOME AND PROFIT FROM PROPERTY MANAGEMENT, EURk

Rental income Profit from property management

Valdemara Centrs in Riga. Central administration expenses amounted to EUR -1,689k (-1,863) and profit from property management increased by 83 per cent to EUR 4,432k (2,420). Unrealised value changes in properties amounted to EUR 2,584k (3,483). Unrealised value changes in investments amounted to EUR -17,678k (5,219), of which EUR -18,406k (4,338) is attributable to Melon Fashion Group and EUR 728k (881) to East Capital Baltic Property Fund II. Unrealised value changes in derivatives amounted to EUR - 661k (-1,396). Realised value changes and dividends amounted to EUR 0k (1,617). Profit before tax amounted to EUR -11,323k (11,342) and the net profit/loss for the period to EUR -12,513k (10,621).

Segment Reporting

The Real Estate Direct segment, comprising the directly owned property subsidiaries, generated a profit before tax of EUR 8,044k during the period. The Real Estate Fund segment, comprising solely the East Capital Baltic Property Fund II, generated a profit before tax of EUR 728k. The Other segment, comprising the holding in Melon Fashion Group, generated a loss before tax of EUR -18,406k, wholly attributable to an unrealised value change. The unrealised value change in MFG is primarily due to the coronavirus pandemic and its consequences, in the form of e.g. closed retail stores and the thereby expected loss of sales and profits.

Unallocated central administration expenses and other operating expenses amounted to EUR -1,689k. Reported group loss before tax amounted to EUR -11,323k, and net profit/loss to EUR -12,513k.

UNREALISED CHANGES IN VALUE, PROPERTIES, EURk

Unrealised value changes

EARNINGS AND FINANCIAL POSITION

	2020	2019
Summary, EURk	Jan -Jun	Jan -Jun
Rental income	8,942	6,046
Property expenses	-911	-645
Net operating income	8,031	5,401
Central administration	-1,689	-1,863
Financial income/ expenses	-1,910	-1,118
Profit from property management	4,432	2,420
Unrealised value changes	-15,755	7,305
Realised value changes	-	1,617
Tax	-1,190	-721
Net profit /loss for the period	-12,513	10,621

	2020	2019
Summary, EURk	30 Jun	31 Dec
ASSETS
Investment properties	336,200	290,256
Long -term securities holdings	71,031	88,709
Cash and cash equivalents	21,688	37,406
Other assets	13,077	3,951
TOTAL ASSETS	441,996	420,322
EQUITY AND LIABILITIES
Equity	250,253	268,192
Interest -bearing liabilities to credit institutions	165,121	137,771
Derivatives	2,624	1,963
Deferred tax liabilities	7,504	6,315
Other liabilities	16,494	6,081
TOTAL EQUITY AND LIABILITIES	441,996	420,322

EARNINGS BY SEGMENT

	2020	2019
EURk	Jan -Jun	Jan -Jun
Profit from property management	6,121	4,303
Unrealised changes in value of properties	2,584	3,483
	-661	-1,396
ContributionReal Estate Direct	8,044	6,390
Unrealised value changes	728	881
Realised value changes and dividends	-	683
ContributionReal Estate Funds	728	1,564
Unrealised value changes	-18,406	4,338
Dividends	-	933
ContributionOthers	-18,406	5,271
Central administration expenses and other operating expenses	-1,689	-1,863
Unallo cated central administration	-	-20
Profit before tax	-11,323	11,342
Tax	-1,190	-721
Net profit /loss for the period	-12,513	10,621

Financing

Q2

Liabilities to credit institutions amounted to EUR 165,121k (137,771) at the end of the period, corresponding to a loan-tovalue ratio of 49 per cent (47). Unutilised credit facilities amounted to EUR 3,000k (23,700), and referred entirely to an unutilised overdraft facility. The average interest rate at the end of the period amounted to 2.3 per cent (2.3) and the share of liabilities to credit institutions with fixed interest was 73 per cent (79), of which 100 per cent (100) were fixed using swaps.

At the end of the period, the average capital tie-up period on liabilities to credit institutions was 3.1 years (3.5). Average fixed interest term was 2.5 years (3.1). 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 -2,624k (-1,963). At the end of the term, the value is always zero.

Tax

The tax expenses for the period amounted to EUR -1,190k (-721), 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 the stated value of properties and their tax value, as well as tax losses carried forward. No corporate income tax is paid in Estonia or Latvia, where a 20 per cent corporate income tax is levied only on distributed profits.

Financial position and net asset value

Equity amounted to EUR 250,253k (268,192) and the equity/asset ratio to 57 per cent (64). Long-term net asset value per share was EUR 12.3 (13.1) corresponding to 129 SEK per share (137). Equity per share was EUR 11.8 (12.7) corresponding to 124 SEK per share (133).

Cash flow

Cash flow from operating activities before changes in working capital amounted to EUR 4,415k (4,155) for the period. Change in working capital was EUR -1,460k (-1,682). Investment activities had an impact of EUR -43,363k (-37,544). Financing activities had an impact of EUR 24,699k (12,743). Total cash flow amounted to EUR -15,709k (-22,328). Cash and cash equivalents amounted to EUR 21,688k (42,772) at the end of the period.

MATURITY STRUCTURE, DEBT FINANCING

	Debt maturity				Interest maturity
	Credit agreement,			Of which, available,
Year of maturity	EURm	Utilised, EURm	Unutilised, EURm	EURm	EURm
Variable	-	-	-	-	44.5
2020	3.0	-	3.0	3.0	-
2021	14.7	14.7	-	-	-
2022	12.2	12.2	-	-	-
2023	69.7	69.7	-	-	61.4
2024	68.5	68.5	-	-	59.2
Total	168.1	165.1	3.0	3.0	165.1

FIXED INTEREST TERM AND CAPITAL TIE-UP PERIOD, YEAR AVERAGE INTEREST RATE, %

Property portfolio

The property portfolio consisted, on 30 June, of around 114,000 sq.m. lettable area in Vilnius and Riga after S7-3 in Vilnius, comprising ca. 14,500 sq.m., was taken into possession during the second quarter. Property value increased by around EUR 46m, primarily due to the acquisition. The occupancy rate was 96.1 per cent.

Property portfolio

Eastnine's property portfolio consists of modern office properties in two of the three Baltic capitals. At the end of the period, the portfolio consisted of ten investment properties. Total lettable area amounted to around 114,000 sq.m. and the market value to EUR 336,200k.

At the end of the period, the occupancy rate was 96.1 per cent (92.7). Compared with the end of the previous year, the occupancy rate has risen by 3.4 percentage points. The vacancy rate is expected to rise somewhat during the second half of 2020, due to known, upcoming tenant departures in Riga.

There are currently no ongoing development projects in Eastnine's portfolio. Two projects, The Pine and Kimmel, both in Riga, are currently in the planning stages.

Vilnius

Eastnine's property portfolio in central Vilnius consisted on 30 June of six properties with a total lettable area of 93,971 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 combined property value in Vilnius on 30 June 2020 was EUR 273,000k.

The S7-3 property, comprising around 14,500 sq.m., was taken into possession at the end of the period, completing the acquisition of all three properties which were announced in February 2019. The property is fully let to Danske Bank with an agreement in place until December 2024.

Riga

Eastnine's property portfolio in central Riga consists of four properties with a total lettable area of 19,970 sq.m., corresponding to around 20 per cent of the market share of the estimated premium market for offices. The properties Kimmel and Alojas Kvartals are expected to undergo significant development in the future. The combined property value in Latvia was EUR 63,200k on 30 June 2020.

PROPERTY PORTFOLIO

	Area, sq.m.	Proportion, %	Vacancy, sq.m.	Proportion, %	Value, EURk	Proportion, %
Vilnius	93,971	82	2,564	57	273,000	81
Riga	19,970	18	1,929	43	63,200	19
Total	113,941	100	4,493	100	336,200	100

PROPERTY PORTFOLIO BY REGION, VALUE PROPERTY PORTFOLIO BY CATEGORY, VALUE

Vilnius Riga

Tenants

Q2

Eastnine has around 160 lease agreements with around 120 tenants. The majority of Eastnine'srents are due monthly. Danske Bank is the largest tenant, contributing 28 per cent of total annual rent, after an increase by 11 percentage points compared to 31 March 2020 as a result of the S7-3 acquisition. The ten largest tenants leases 77,271 sq.m. at a total annual rent of EUR 13,617k. The average remaining lease term for the ten largest tenants amounted to 5.2 years, and for all tenants to 4.7 years.

Investments and divestments

Eastnine completed the acquisition of S7-3 at the end of June. The property comprises around 14,500 sq.m. and the purchase consideration to around EUR 42.4m.

Value changes in properties

The fair value of the properties increased during the period, chiefly due to the acquisition of S7-3. The value at the end of the period was EUR 336,200k (290,256). Unrealised value changes amounted to EUR 2,584k (3,483), corresponding to 0.8 per cent (2.2) of opening property values. Half of the

LARGEST TENANTS

unrealised positive value change during the period is a result of a lower purchase consideration for S7-3, which was reduced to compensate for lost earnings due to a delay in taking possession. The difference is accounted for as a positive value change. In the first quarter, lower inflation forecasts and minor expected rent losses, both results of the coronavirus pandemic, had a slight negative impact on property values. During the second quarter, rising rent levels have had a positive impact.

CHANGE IN PROPERTY VALUES, EURk

	2020 Jan-Jun	2019 Jan-Jun
Property value at the
beginning of the period	290,256	158,862
Property acquisitions	42,389	36,822
Investments in existing
properties	971	715
Unrealised value changes	2,584	3,483
Property value at the end of
the period	336,200	199,882

Tenant	Annual rent, EURk	Share of annual rent under contract, %	Sq.m.	Lease agreement term1 , years	Lease agreement term2 , years (break option)
Danske Bank	5,434	28	30,935	3.2	3.2
Telia	2,856	15	15,960	8.7	8.7
Swedbank	1,821	9	11,266	11.2	5.3
Visma	959	5	5,605	3.5	3.5
Citco	647	3	3,009	7.1	2.1
Webhelp	538	3	2,726	2.1	2.1
LIDL	470	2	2,755	0.4	0.4
Cobalt	323	2	1,816	4.5	4.5
Europos Socialinio fondo agentura	286	1	1,769	2.8	1.0
Transact Pro	283	1	1,430	8.0	2.0
Total	13,617	69	77,271	5.2	3.3

¹Weighted average of remaining lease term.

²Weighted average remaining lease term calculated up to "break option" date.

OCCUPANCY RATE AND SURPLUS RATIO, % PROPERTY VALUE AND LOAN-TO-VALUE RATIO

Valuation model

Q2

Eastnine has changed its valuation model as of the first quarter of 2020. All properties have been externally valued as of 31 March 2020. The external valuations were carried out by Colliers in Latvia and Lithuania. During the second quarter, all properties were internally valued using the same valuation method.

The new valuation model is based on the present values of future cash flows, net operating income less remaining investments, calculated for a five to ten-year period. The cash-flow determinations with a longer calculation period than five years is normally applied to properties with only one or a handful of tenants with long lease terms, where the cash flow is more predictable.

Eastnine normally orders an external valuation of its properties at least once over a rolling 12-month period. Inbetween external valuations, the properties are internally valued using the same model.

Inflation, discount rate, yield requirements and longterm vacancy are significant parameters in the valuation model. Inflation is based on the market forecast both in the short and long term, where a long-term inflation normally corresponds to a country's inflation target. The discount rate and yield requirement is based on estimations of the market return requirement for similar investment objects, with the addition of risks related to real estate, such as geographical location, the condition of the property, and future vacancy risk. Long-term vacancies are affected by the expected market development, geographical location and condition, and relates to an estimation of a normalised vacancy rate.

Valuation of properties

Property valuations are based on assessments and assumptions at the time of the valuation of both observable and non-observable input data. Observable data which has a considerable impact on the value are current rent levels, property expenses, determined and known future investments and actual inflation. Non-observable data are yield requirements and expected future rent levels and vacancies.

Cash-flow from rent payments are estimated based on current lease agreements and known and agreed-upon future changes. The rent development is expected to follow inflation, taking into consideration active indexing clauses in existing agreements. At the end of lease terms, the currently applicable market rent is estimated. Vacancies are assessed based on both the current vacancy rate on the market and the property, but also based on the property's location and condition. Operating and maintenance costs are based on historical outcomes and budgeted costs. A reservation for repair costs and property investments are normally calculated as a cost per square meter or as a percentage of estimated rent income.

Initial inflation has been estimated, as on 30 June, to be very low, and then to rise in following periods. The longterm inflation is estimated to be 2.0 per cent.

VALUATION MODEL

	2020
Valuation assumptions	30 Jun
Long-term inflation, %	2.0
Average discount rate, %	7.4
Average yield requirement, %	6.1
Long-term vacancy rate, %	4.5

Current earning capacity

In order to facilitate the assessment of the Company's current position, Eastnine reports on current earning capacity. Earning capacity is a theoretical assessment to describe the Company's current earnings on 30 June 2020.

Earning capacity provides a snapshot

Earning capacity is not to be regarded as a forecast for the coming twelve months, but as a snapshot of the potential earnings the Company can generate under given circumstances. It is based on the property portfolio held on the reporting day.

Earning capacity does not take into account an assessment of the development of rent levels, vacancy, property expenses, interest rates, value changes or other factors that may affect earnings.

Eastnine's calculated earning capacity is based on the following assumptions about income and costs:

• Rental income comprises contracted income including rent supplements, with deductions for any rental discounts, on the reporting day.
• Property costs are based on an assessment of a normal year's operating expenses, maintenance costs, property taxes and site leasehold feeds. Property expenses includes property administration expenses.

• Financial income and expenses has been calculated based on the Company's debt liability and average interest level on the reporting day. Central administration expenses have been calculated based on the existing organisation and the current property portfolio on the reporting day.

Comments to earning capacity

Rent income from the portfolio, according to earning capacity, is on 30 June 15 per cent higher than at the end of March. This is chiefly due to the completion of the S7-3 acquisition in Vilnius. The property is fully let with annual rent income of around EUR 2.5m and a surplus ratio of 98 per cent. A higher occupancy rate in the property portfolio has also contributed to the increase in rent income. Some staff expenses which are directly attributable to property administration has been redistributed from central administration expenses to property expenses between the quarters.

The percentual change in profit from property management is higher than the increase in rent income and net operating income, which is a typical example of economies of scale, where e.g. central administration expenses do not increase at the same rate as income.

	2020	2020
Current earning capacity, EURk	30 June	31 March	Change, %
Rental income	20,728	18,085	+15
Property expenses	-1,960	-1,418	+38
Net operating income	18,768	16,667	+13
Central administration expenses	-3,500	-3,900	-10
Interest expenses	-3,763	-3,254	+16
Other financial income and expenses	-	-202	-
Profit from property management	11,505	9,311	+24

	2020	2020	Change,
Key figures, current earning capacity	30 June	31 March	unit
Surplus ratio, %	91	92	-1
Interest coverage ratio, multiple	4.1	3.9	+0.2
Average interest rate, %	2.3	2.3	0.0
Investment properties, EURk	336,200	288,020	+48,180

Property fund

The value of Eastnine's holding in East Capital Baltic Property Fund II increased by EUR 728k during the period, corresponding to a total return of 3.3 per cent. The dividend amounted to EUR 0k during the first half of the year. Eastnine intends to free up invested capital in the fund.

East Capital Baltic Property Fund II

Operations

Q2

East Capital Baltic Property Fund II has a total of five properties in logistics, retail and offices. Four of the properties, corresponding to 93 per cent of the area, are located in Tallinn and one in Riga. The fund, which at yearend 2019 was extended until May 2020, was extended again in the first half of 2020 until May 2021.

Value of and dividends from Eastnine's holding

Eastnine does not carry out its own valuation of the fund holding. Instead, the reported value consists of a share of the

	2020	2019
Key figures, EC Baltic Property Fund II	Jan-Jun	Jan-Jun1
Unrealised value change, EURk	728	195
Realised value changes and dividends,
EURk	-	640
Total return, %	3.3	3.8
	2020	2019
Key figures, EC Baltic Property Fund II	30 Jun	31 Dec
Eastnine's share of fund returns, %	44	45
Fair value of Eastnine's holding, EURk	22,540	21,812
Proportion of Eastnine assets,%	5.1	5.2

¹By the end of June 2019, Eastnine also held shares in East Capital Baltic Property Fund III, which is excluded in the summary above.

fund's total value. On 30 June, the fund value is affected by e.g. temporary disounts, rent losses and increased costs. The value of Eastnine's holding in the fund amounted to EUR 22,540k (21,812) by the end of the period. The unrealised value change of EUR 728k, corresponding to 3.3 per cent, is entirely a result of net operating income during the period. The dividend from the fund in the period has amounted to EUR 0k (640).

Eastnine's intention is to free up invested equity in the fund to enable further investments in directly-owned real estate.

PROPERTY FUND, % OF ASSETS

Others

Q2

The coronavirus pandemic has negatively affected the value of Eastnine's holding in the associated company MFG during the period. In the second quarter, however, a positive value change was contributed by a strengthened ruble. At the end of the period, 75 per cent of stores were open, after having been completely locked down. E-commerce has worked well throughout the pandemic.

Melon Fashion Group

Operations

Melon Fashion Group had a good start to 2020 with increased sales during the first two months of the year. The coronavirus pandemic meant that all stores were closed in April and the beginning of May, and were then gradually reopened. At the end of the period, 75 per cent of all stores were open. E-commerce has worked well throughout the period.

According to preliminary figures from MFG the combined income during the first six months amounted to RUB 8,808m (8,992), after a decrease of 2 per cent compared to the same period in the previous year. MFG's aggregate ecommerce increased by 140 per cent up until the end of MFG's EBITDA for the first six months, excluding effects of IFRS 16, amounted to RUB 37m (416) and the EBITDA margin to 0.4 per cent (4.6).

The number of stores amounted to 786, of which 235 were operated by franchisees. Retail area amounted to around 161,000 sq.m.(199,000 including franchise stores).

Value of and dividends from Eastnine's holding

The fair value of Eastnine's holding in MFG decreased, as a result of the coronavirus pandemic, by EUR -18,406k during the period to EUR 48,491k (66,897) at the end of the period. The value change is unrealised. During the second quarter, however, the unrealised value change was positive, at EUR 3,225k, and was entirely due to a strengthening of the ruble. The dividend from MFG in the period has amounted to EUR 0k (933).

Eastnine's intention is to free up invested equity in the MFG to enable further investments in directly-owned real estate.

	2020	2019
Key figures	Jan-Jun	Jan-Jun
Unrealised value change, EURk	-18,406	4,338
Realised value changes and dividends,
EURk	-	933
Total return, %	-27.5	10.8
	2020	2019
Key figures	30 Jun	31 Dec
Eastnine's shareholding in the company, %	36	36
Fair value of Eastnine's holding, EUR	48,491	66,897
Proportion of Eastnine assets,%	11.0	15.9

OTHER, % OF ASSETS

Accounting principles and other information

General information

Q2

Eastnine AB (publ), corporate ID no. 556693-7404, is a Swedish limited company, listed on Nasdaq Stockholm, with its registered office in Stockholm. The Group's real estate operations are managed through the Estonian subsidiary Eastnine Baltics OÜ, with subsidiaries in Latvia and Lithuania, which together comprise the Eastnine Group. At the end of the period, the Eastnine Group employed 20 fulltime employees, of which nine were employed at the head office in Stockholm, eight in Vilnius and three in Riga.

The Company and the Group's interim report concern the period January−June 2020. All figures are presented in EUR thousands unless otherwise stated. Rounding differences may occur.

Risks and uncertainties

The dominant risks in Eastnine's operations is commercial risks in the form of changes in rent levels, vacancies and interest rates, as well as changes in the economic or 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 2019 on pages 28−29. Risks associated with the coronavirus pandemic are presented on p. 4 in this interim report and a market analysis for the coming months is provided in the Market section on p. 5.

Parent Company

Net profit/loss for the period amounted to EUR -18,322k (7,871). The result is primarily attributable to an unrealised value change in Melon Fashion Group of EUR -18,406k (4,338), and operating expenses and financial income. See p. 24 for the Parent Company's income statement and balance sheet.

Dividend

The Annual General Meeting has decided on a dividend of SEK 2.70 per share (2.30). In May, SEK 1.35 per share was paid out, and the same amount per share will be paid out in November.

Sustainability

Eastnine undertakes active sustainability efforts. At the end of the period, 84 per cent of the property area (excluding properties expected to undergo significant redevelopment) was environmentally certified, attaining either LEED Platinum or BREEAM Excellent. During the second quarter, the property Alojas Biroji attained a LEED Platinum certification, and at the end of the period, Eastnine took possession of the S7−3 property in Vilnius which has attained BREEAM Excellent. A LEED certification process is underway for another property in Vilnius. 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.

Eastnine has also begun efforts around green lease agreements, green financing, and is working on implementing a web-based system for supplier review.

Eastnine's sustainability report, which was produced according to the Global Reporting Initiatives guidelines and published as part of the 2019 Annual Report, contains information about the company's primary concerns, sustainability goals and indicators. Eastnine AB is a member of GRESB.

Summary of material accounting principles

Eastnine AB (publ) prepares its consolidated accounts according to the International Financial Reporting Standards (IFRS), approved by the European Union as well as interpretations of these (IFRIC). The interim report has been prepared in accordance with the International Accounting Standards (IAS) 34 Interim Financial Reporting and the Swedish Annual Accounts Act (Årsredovisningslagen).

The Group applies the same accounting principles and valuation methods as in the latest annual report, with the exception mentioned below regarding IFRS 3. Other new or revised IFRS standards or other IFRIC interpretations applying from 1 January 2020 have not had a material effect on the Group's financial statements.

The Parent Company prepares its accounts in accordance with RFR 2, Reporting of a legal entity, as well as the Swedish Annual Accounts Act (Årsredovisningslagen) and apply the same accounting principles and valuation methods as at the last annual report.

Changes in accounting principles

IFRS 3 Business Combination has entered into force as of 1 January 2020. The changed definition results in a simplified assessment of whether an acquisition is to be considered as an asset acquisition or not. If the fair value in all material respects is concentrated to an identifiable asset or group of assets, the acquisition can be regarded as an asset acquisition. If not, the acquisition is to be tested against the criteria for business combinations. All of the Group's property acquisitions have been classified as asset acquisitions, and the Company regards the change of standard as a simplification and reinforcement of future assessments.

The change in accounting principles has not had a material impact on theGroup's of Parent Company's financial reports.

Estimates and assumptions in the financial statements

In preparing these financial statements according to the IFRS, the executive management makes judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may deviate from these estimates and assessments. Estimates and underlying assumptions are regularly reviewed. Revisions to estimates are reported in the period that the change takes place and in the future periods that are affected.

Key sources of uncertainty

Q2

The sources of uncertainty in the estimates below refer to such sources that result in a significant risk that the value of assets and liabilities may have to be substantially adjusted during the financial year. For valuation of investment properties, assessments and assumptions can have a significant effect on the Group's income and financial position. These valuations require estimates and assumptions of future cash flows as well as determination of the discounting factor (required yield). To reflect the inherent uncertainty of these assessments and assumptions, property valuations typically specify an uncertainty range of +/- 5–10 per cent.

In regards to other investments that are not traded on an active market and where fair value is determined not by actual bid quotes but by means of valuation models, there is a risk that the holdings fair value can be assesed differently in future periods. The Company applies its models consistently from period to period, but the determination of fair value is inherently uncertain. Given the control procedures applied, the group considers the fair values reported in the balance sheet to have been carefully calculated and considered in order to reflect the underlying financial values.

Important considerations in the application of the Group's accounting policies

The holdings in JSC Melon Fashion Group, one of the holdings in which Eastnine invested during its period as an investment entity, constitutes an associated company as Eastnine has considerable influence over MFG. The holding has beenrecognised at fair value through profit/loss, using the exemption from the equity method in IAS28. Eastnine has made the assessment that this exemption is applicable to the Company. The assessment is the same as that made in the Annual Accounts for 2019.

Eastnine has shares in East Capital (Lux) SCA, SICAV-SIF (umbrella fund) amounting to 12 per cent. For Eastnine the shares give rise to a 44 per cent share of the returns from the sub-fund East Capital Baltic Property Fund II. The shares have been assessed not to constitute associated company, as Eastnine can not and has not been able to exert significant influence over the fund. Considering that the Company is not able to exert any influence over the fund, the holding is reported in accordance with IFRS 9 Financial Instruments.

Segment Reporting

Business segments are reported in the way which corresponds to the internal classification which is submitted to the Company's senior management and Board of Directors. Eastnine classifies and evaluates its various segments based on the nature of the investments. The following segments are used in the internal reporting: Real Estate Direct, Real Estate Fund and Other.

Related parties

Eastnine AB has a related party relationship with its subsidiaries, see Note 28 in the 2019 Annual Report, as well as with Board members and employees.

Eastnine AB's management, Board members and their close relatives and related companies control 29 per cent (30) of voting rights in the Company.

Events after the end of the period

No significant events have occurred after the end of the period.

Assurance from the Board and CEO

The Board and 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, 17 July 2020

Liselotte Hjorth Chairman of the Board Peter Elam Håkansson Board member

Peter Wågström Board member

Christian Hermelin Board member

Ylva Sarby Westman Board member

Kestutis Sasnauskas Chief Executive Officer

This interim report has not been subject to review by the Company's auditors.

Share

Q2

Eastnine's share price decreased during the first quarter and increased during the second. At the end of the period, the price had decreased by 15 per cent since the turn of the year, to SEK 117. The market capitalisation amounted to SEK 2.5bn. Long-term net asset value amounted to SEK 129 per share.

Number of shares

Eastnine's share is listed on Nasdaq Stockholm Mid Cap, Real Estate. The total number of shares in Eastnine amounted to 22,370,261 on 30 Jun 2020. Adjusted for repurchased shares held in treasury, the number of listed shares amounted to 21,149,061. The proportion of shares held by Swedes amounted to 72.7 per cent.

The number of shareholders amounted to around 5,338 (5,634) and the free float to 62.8 per cent (62.9). At the end of the period, the share price was SEK 117.0 (137.4) and the market capitalisation to SEK 2.5 billion (2.9).

Dividend

The Annual General Meeting has decided on a dividend of SEK 2.70 per share (2.30) for the 2019 financial year, paid semiannually in SEK 1.35 payments each. The first payment took place in May and the second is planned for November 2020.

LARGEST SHAREHOLDERS AS AT 30 JUNE 2019

The dividend corresponds to a dividend growth of 17 per cent, compared to the previous year.

A dividend of SEK 2.70 per share amounts to 2.0 per cent of equity, which is in accordance with the current dividend policy.

Buy-back

On 30 June 2020, the Company held 1,221,200 own shares in treasury, corresponding to 5.5 per cent of all shares. No shares have been repurchased since the first quarter of 2019.

At the AGM 2020, 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.

Number of shares	%
6,067,090	27.1
2,268,884	10.1
1,799,303	8.0
1,491,577	6.7
1,130,680	5.1
767,071	3.4
453,018	2.0
322,632	1.4
300,000	1.3
167,861	0.8
14,768,116	65.9
1,221,200	5.5
6,380,945	28.6
22,370,261	100.0

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

KEY FIGURES

2020	2019
30 June	31 Dec
11.8	12.7
12.3	13.1
11.2	13.1
124	133
129	137
117.0	137.4

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

EUR thousands	2020 Jan-Jun	2019 Jan-Jun	2020 Apr-Jun	2019 Apr-Jun	2019 Jan-Dec	2019/2020 Jul/Jun
Rental income	8,942	6,046	4,467	3,099	13,348	16,244
Property expenses	-911	-645	-480	-387	-1,402	-1,668
Net operating income	8,031	5,401	3,987	2,712	11,946	14,576
Central administration expenses	-1,689	-1,863	-865	-936	-3,873	-3,699
Interest expenses	-1,715	-938	-852	-526	-2,225	-3,002
Other financial income and expenses	-195	-181	-100	-109	-359	-373
Profit from property management	4,432	2,420	2,170	1,141	5,489	7,501
Unrealised changes in value of properties	2,584	3,483	5,322	3,483	10,208	9,309
Unrealised changes in value of derivatives	-661	-1,396	-426	-740	-1,006	-271
Unrealised changes in value of investments	-17,678	5,219	3,605	760	17,742	-5,155
Realised value changes and dividends from investments	-	1,617	-	1,595	5,403	3,786
Profit/loss before tax	-11,323	11,342	10,671	6,239	37,836	15,171
Tax	-1,190	-721	-931	-575	-2,570	-3,039
Net profit/loss for the year/period1	-12,513	10,621	9,740	5,664	35,266	12,132

Number of shares issued, adjusted for repurchased shares, thousand	21,149	21,149	21,149	21,149	21,149	21,149
Weighted average number of shares before dilution, thousand	21,149	21,227	21,149	21,149	21,187	21,149
Weighted average number of shares after dilution, thousand	21,149	21,263	21,203	21,186	21,231	21,197
Earnings per share before dilution, EUR	-0.59	0.50	0.46	0.27	1.66	0.57
Earnings per share after dilution, EUR	-0.59	0.50	0.46	0.27	1.66	0.57

1 Total comprehensive income for the period/year corresponds to net profit/loss for the period/year.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR thousands	2020 30 Jun	2019 30 Jun	2019 31 Dec
ASSETS
Non-current assets
Intangible assets	2	3	2
Investment properties	336,200	199,882	290,256
Right-of-use assets, leaseholds	1,251	465	1,204
Equipment	194	89	216
Long-term securities holdings	71,031	98,117	88,709
Other non-current receivables	175	175	175
Total non-current assets	408,853	298,730	380,562
Current assets
Other current assets	11,455	897	2,355
Cash and cash equivalents	21,688	42,772	37,406
Total current assets	33,143	43,668	39,761
TOTAL ASSETS	441,996	342,399	420,322
EQUITY AND LIABILITIES
Equity
Share capital	3,660	3,660	3,660
Other contributed capital	252,255	252,184	252,252
Retained earnings including net profit/loss for the period	-5,662	-12,364	12,280
Total equity	250,253	243,480	268,192
Non-current liabilities
Liabilities to credit institutions	159,338	84,297	132,571
Derivatives	2,624	2,353	1,963
Deferred tax liabilities	7,504	4,465	6,315
Lease liability	1,226	465	1,175
Other non-current liabilites	1,613	1,567	1,745
Total non-current liabilities	172,304	93,148	143,769
Current liabilities
Liabilities to credit institutions	5,783	1,780	5,200
Other liabilities	12,846	3,433	2,211
Accrued expenses and deferred income	810	558	951
Total current liabilities	19,439	5,771	8,361
TOTAL EQUITY AND LIABILITIES	441,996	342,399	420,322

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Other
	Share	contributed	Retained	Total
EUR thousands	capital	capital	earnings	equity
Opening equity 1 January 2019	3,660	260,145	-22,985	240,819
Net profit/loss for 1 January-30 June	-	-	10,621	10,621
Dividend to shareholders	-	-4,519	-	-4,519
Share buy-back	-	-3,525	-	-3,525
Long-term incentive program (LTIP)	-	84	-	84
Closing equity 30 June 2019	3,660	252,184	-12,364	243,480
Net profit /loss for 1 July-31 December	-	-	24,645	24,645
Long-term incentive program (LTIP)	-	67	-	67
Closing equity 31 December, 2019	3,660	252,252	12,280	268,192
Net profit/loss for 1 January-30 June	-	-	-12,513	-12,513
Dividend to shareholders	-	-5,403	-	-5,403
Long-term incentive program (LTIP)	-	-23	-	-23
Closing equity 30 June 2020	3,660	246,826	-233	250,253

CONSOLIDATED STATEMENT OF CASH FLOW

	2020	2019	2020	2019	2019
EUR thousands	Jan-Jun	Jan-Jun	Apr-Jun	Apr-Jun	Jan-Dec
Operating activities
Profit/loss before tax	-11,323	11,342	10,671	6,239	37,836
Adjustments not included in cash flow from operating activities	15,738	-7,187	-8,592	-3,407	-27,868
Income tax paid	-	-	-	-	-
Cash flow from operating activities before changes in working capital	4,415	4,155	2,079	2,832	9,968
Cash flow from changes in working capital
Increase (-)/decrease(+) in other current receivables	-9,097	-285	-9,184	-83	-1,742
Increase (+)/decrease(-) in other current payables	7,637	-1,397	8,408	-183	210
Cash flow from operating activities	2,955	2,473	1,303	2,566	8,436
Investing activities
Investments in existing properties	-971	-715	-430	-428	-1,965
Acquisition of properties	-42,389	-36,822	-42,389	-	-119,221
Purchase of equipment	-3	-7	-1	-7	-152
Cash flow from investing activities	-43,363	-37,544	-42,820	-435	-98,230
Financing activities
New loans	29,950	20,200	23,314	-	74,029
Repayment of loans	-2,600	-1,673	-1,300	-890	-3,808
Payment of lease liabilities	-48	-	-25	-	-55
Dividend to shareholders	-2,702	-2,259	-2,702	-2,259	-4,519
Own share buy-back	-	-3,525	-	-	-3,525
Cash flow from financing activities	24,699	12,743	19,331	-3,149	62,122
Cash flow for the period	-15,709	-22,328	-22,186	-1,018	-27,672
Cash and cash equivalent at the beginning of the period	37,406	65,119	43,883	43,794	65,119
Exchange rate differences in cash and cash equivalents	-9	-19	-9	-5	-41
Cash and cash equivalent at the end of the period	21,688	42,772	21,688	42,772	37,406

KEY FIGURES

		2019	2020	2019	2019
EUR thousands	Jan-Jun	Jan-Jun	Apr-Jun	Apr-Jun	Jan-Dec
Surplus ratio, %	90	89	89	88	89
Loan-to-value ratio (LTV), %	49	43	49	43	47
Debt ratio, multiple	15.2	14.1	15.2	14.1	17.1
Interest coverage ratio, multiple	3.6	3.6	3.5	3.2	3.5
Return on equity Real Estate Direct, %	9.2	12.2	19.2	16.7	14.3
Return on equity, %	-9.7	8.8	15.7	9.3	13.9
Cashflow per share, EUR	-0.74	-1.05	-1.04	-0.05	-1.31
Earnings per share before dilution, EUR	-0.59	0.50	0.46	0.27	1.66
Profit from property management per share, EUR	0.21	0.11	0.10	0.05	0.26

SEGMENT REPORTING

Eastnine classifies and evaluates the 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 Fund and Other.

EUR thousands	Real Estate	Real Estate
1 Jan-30 Jun, 2020	Direct	Fund		Other Unallocated	Total
Rental income	8,942	-	-	-	8,942
Property expenses	-911	-	-	-	-911
Net operating income	8,031	-	-	-	8,031
Central administration expenses	-	-	-	-1,689	-1,689
Interest expenses	-1,715	-	-	-	-1,715
Other financial income and expenses	-195	-	-	-	-195
Profit from property management	6,121	-	-	-1,689	4,432
Unrealised changes in value of properties	2,584	-	-	-	2,584
Unrealised changes in value of derivatives	-661	-	-	-	-661
Unrealised changes in value of investments	-	728	-18,406	-	-17,678
Realised value changes and dividends from investments	-	-	-	-	-
Profit/loss before tax	8,044	728	-18,406	-1,689	-11,323
Deferred tax	-1,190	-	-	-	-1,190
Net profit/loss for the period	6,854	728	-18,406	-1,689	-12,513
Investment properties	336,200	-	-	-	336,200
Long-term securities holdings	-	22,540	48,491	-	71,031
Liabilities to credit institutions	165,121	-	-	-	165,121

EUR thousands	Real Estate	Real Estate
1 Jan-30 Jun, 2019	Direct	Fund	Other	Unallocated	Total
Rental income	6,046	-	-	-	6,046
Property expenses	-645	-	-	-	-645
Net operating income	5,401	-	-	-	5,401
Central administration expenses	-	-	-	-1,863	-1,863
Interest expenses	-938	-	-	-	-938
Other financial income and expenses	-160	-	-	-21	-181
Profit from property management	4,303	-	-	-1,883	2,420
Unrealised changes in value of properties	3,483	-	-	-	3,483
Unrealised changes in value of derivatives	-1,396	-	-	-	-1,396
Unrealised changes in value of investments	-	881	4,338	-	5,219
Realised values and dividends from investments	-	683	933	-	1,617
Profit/loss before tax	6,390	1,564	5,271	-1,883	11,342
Deferred tax	-721	-	-	-	-721
Net profit/loss for the period	5,669	1,564	5,271	-1,883	10,621
Investment properties	199,882	-	-	-	199,882
Long-term securities holdings	-	44,867	53,250	-	98,117
Liabilities to credit institutions	86,077	-	-	-	86,077

LONG-TERM SECURITIES HOLDINGS

Tables below reflect the long-term securities holdings measured at fair value in level 3. Segment "Real Estate Fund" consist the holdings in East Capital Property Fund II (end of year 2019 and during year 2020) and segment "Other" consist the holdings in JSC Melon Fashion Group. The asset of properties in the fund are normally valued internally by fund manager at quarterly basis and externally at year end. JSC Melon Fashion Group is valued internally by Eastnine.

Changes in long-term securities holdings measured at fair value in level 3, EUR thousands

	Real Estate
1 Jan-30 Jun, 2020	Fund	Other	Total
Opening balance 1 January 2020	21,812	66,897	88,709
Unrealised changes in values recognised net in profit/loss	728	-18,406	-17,678
Closing balance 30 June 2020	22,540	48,491	71,031
	Real Estate
1 Jan-31 Dec, 2019	Fund	Other	Total
Opening balance 1 January 2019	43,986	48,912	92,898
Purchases/additions	1,982	-	1,982
Divestments/Reductions	-25,090	-	-25,090
Unrealised changes in values recognised net in profit/loss	-243	17,985	17,742
Realised changes in values recognised net in profit/loss	1,177	-	1,177
Closing balance 31 December 2019	21,812	66,897	88,709

Valuation assumptions, securities holdings

Holdings	Segment	Valuation method1	Valuation assumptions1
East Capital Baltic Property Fund II	Real Estate Fund	DCF	WACC 8-9 %, yield requirement 6-8 %.
			Long-term growth 3.5 %, long-term operating margin 9.6
			%, WACC 18.4 %, minority and liquidity discount of 25%
JSC Melon Fashion Group	Other	DCF	is applied.

¹Discounted cash flow model (DCF), weighted average cost of capital (WACC).

SENSITIVITY ANALYSIS

INVESTMENT PROPERTIES					Assumptions	Impact, EUR thousands
Market rental level, %					+/- 5.0		+11,584 / -11,561
Long-term floor space occupancy rate, percentage points					+/- 1.0		+4,652 / -4,780
Yield requirement, percentage points			+/- 0.25		+12,710 / -11,707
Assumptions valuation model, investment properties							30 Jun, 2020
Long-term inflation, %							2.0
Average discount rate, %							7.4
Weighted yield requirement, %							6.1
Long-term vacancy rate, %							4.5
LONG-TERM SECURITIES HOLDINGS					Real Estate Fund		Other
Yield requirement 0.5 percentage points movement, EUR thousands				-1,009	1,158	-	-
Weighted average cost of capital (WACC) movement 0.5 percentage points on Real Estate Fund and 1.0 percentage points on Other, EUR thousands				-200	206	-3,722	4,284
Long-term growth 0.4 percentage points movement, EUR thousands				-	-	936	-888
Long-term operating margin 0.5 percentage points movement, EUR thousands		-	-	1,663	-1,663
Sensitivity analysis of market risks
		EUR thousands				EUR thousands
Effect on profit/loss and equity	Change, %	30 Jun, 2020	31 Dec, 2019	Cash flow and current earning		Effect at 30 Jun, 2020
Currency rate, EUR/RUB	+/- 10	4,849	6,690	Market interest rate, +/- 50 bps			-14 / +87
Value of Real Estate Fund and Other	+/- 10	7,103	9,290	Market interest rate, +/- 100 bps			+211 / +175
Assets and debts of foreign currency
	Cash and liabilities, EUR thousands 30 Jun, 2020		31 Dec, 2019
Currency in SEK			233	82
Lease liabilities in SEK			519	567
Long-term securities

holdings1 , EUR thousands	30 Jun, 2020	31 Dec, 2019
Currency in ruble (RUB)	48,491	66,897

¹Holdings in JSC Melon Fashion Group.

INCOME STATEMENT - PARENT COMPANY

				2019
				Jan-Dec
869	44	434	22	74
-1,451	-1,616	-774	-791	-3,210
-582	-1,572	-340	-769	-3,136
-	-	-	-	-16
-18,406	4,338	3,225	669	17,985
-	4,482	-	4,461	2,873
687	643	343	320	1,383
-21	-20	-16	-5	-52
-18,322	7,871	3,212	4,676	19,037
-	-	-	-	-
-18,322	7,871	3,212	4,676	19,037
	2020 Jan-Jun	2019 Jan-Jun	2020 Apr-Jun	2019 Apr-Jun

BALANCE SHEET - PARENT COMPANY

	2020	2019	2019
EUR thousands	30 Jun	30 Jun	31 Dec
ASSETS
Fixed assets
Right-of-use asset, leaseholds	545	-	596
Equipment	79	-	88
Shares in group companies	142,433	146,976	143,433
Long-term securities holdings	48,491	53,250	66,897
Loans to group companies	27,527	27,527	27,527
Total non-current assets	219,075	227,754	238,541
Current assets
Other current assets	2,127	2,157	2,818
Cash and cash equivalents	1,794	4,663	3,038
Total current assets	3,921	6,819	5,856
TOTAL ASSETS	222,996	234,573	244,396
EQUITY AND LIABILITIES
Equity
Restricted capital
Share capital	3,660	3,660	3,660
Unrestricted capital
Share premium reserve	252,252	252,184	252,252
Retained earnings including net profit/loss for the year	-36,567	-24,011	-12,845
Total equity	219,345	231,832	243,066
Non-current liabilities
Lease liability	519	-	567
Other non-current liabilites	43	33	63
Total non-current liabilities	562	33	631
Current liabilities
Other liabilities	2,843	2,435	242
Accrued expenses and deferred income	246	273	457
Total current liabilities	3,089	2,708	699
TOTAL EQUITY AND LIABILITIES	222,996	234,573	244,396

QUARTERLY OVERVIEW

INCOME STATEMENT

EUR thousands	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Rental income	4,467	4,475	4,161	3,142	3,099	2,947	2,516	2,339
Property expenses	-480	-431	-410	-347	-387	-258	-396	-235
Net operating income	3,987	4,044	3,751	2,795	2,712	2,689	2,120	2,104
Central administration expenses	-865	-824	-1,184	-826	-936	-927	-1,055	-621
Interest expenses	-852	-863	-790	-498	-526	-411	-350	-266
Other financial income and expenses	-100	-95	-78	-101	-109	-72	369	-
Profit from property management	2,170	2,262	1,699	1,370	1,141	1,279	1,085	1,217
Unrealised changes in values:
Properties	5,322	-2,738	3,914	2,810	3,483	-	863	3,675
Derivatives	-426	-235	702	-311	-740	-656	-618	342
Investments	3,605	-21,283	10,741	1,782	760	4,459	6,941	-1,060
Realised values and dividends from investments	-	-	3,765	22	1,595	22	2,928	25
Profit before tax	10,671	-21,994	20,821	5,673	6,239	5,103	11,199	4,199
Tax	-931	-259	-1,246	-604	-575	-146	-273	-748
Net profit/loss for the period	9,740	-22,253	19,575	5,069	5,664	4,957	10,925	3,451

BALANCE SHEET - CONDENSED

	2020	2020	2019	2019	2019	2019	2018	2018
EUR thousands	30 Jun	31 Mar	31 Dec	30 Sep	30 Jun	31 Mar	31 Dec	30 Sep
Investment properties	336,200	288,020	290,256	203,276	199,882	195,972	158,862	156,102
Long-term securities holdings	71,031	67,426	88,709	101,881	98,117	97,357	92,898	85,957
Other assets	13,077	3,831	3,951	2,595	1,628	1,548	887	1,401
Cash and cash equivalents	21,688	43,883	37,406	40,596	42,772	43,794	65,119	58,515
TOTAL ASSETS	441,996	403,160	420,322	348,348	342,399	338,670	317,767	301,976
Shareholders' equity	250,253	245,917	268,192	248,583	243,480	242,300	240,819	232,415
Long-term liabilities to credit institutions	159,338	137,907	132,571	81,628	84,297	84,297	64,474	55,772
Current liabilities to credit institutions	5,783	5,200	5,200	3,560	1,780	2,670	3,076	2,729
Other liabilities	26,622	14,136	14,359	14,577	12,842	9,402	9,398	11,060
TOTAL EQUITY AND LIABILITIES	441,996	403,160	420,322	348,348	342,399	338,670	317,767	301,976

KEY FIGURES

	100	101
PROPERTY-RELATED	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Leasable area, sq.m. thousand	113.9	99.5	99.5	74.5	74.5	74.9	62.8	62.7
Number of properties	10	9	9	6	6	6	5	5
Investment propterties, EURk	336,200	288,020	290,256	203,276	199,882	195,972	158,862	156,102
Surplus ratio, %	89	90	90	89	88	91	84	90
Floor space occupancy rate, %	96.1	95.7	92.7	90.2	87.7	92.0	88.8	97.5
Average rent, EUR/sq.m./month	14.9	15.0	14.7	14.7	14.7	14.8	14.5	14.3
WAULT, years	4.7	4.9	5.0	3.0	3.3	2.8	2.8	2.8
Average yield requirement, %	6.1	6.1	-	-	-	-	-	-

KEY FIGURES CONT.

FINANCIAL	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Rental income, EURk	4,467	4,475	4,161	3,142	3,099	2,947	2,516	2,339
Net operating income, EURk	3,987	4,044	3,751	2,795	2,712	2,689	2,120	2,104
Profit from property management, EURk	2,170	2,262	1,699	1,370	1,141	1,279	1,085	1,217
Loan-to-value ratio (LTV), %	49	50	47	42	43	44	43	37
Capital tie-up period on Liabilities to credit institutions, year	3.1	3.3	3.5	4.0	4.2	4.5	4.6	4.9
Interest tie-up period on Liabilities to credit
institutions, year	2.5	2.8	3.1	3.9	4.2	4.5	4.6	4.9
Debt ratio, multiple	15.2	15.0	17.1	13.0	14.1	16.3	15.7	18.7
Equity/asset ratio, %	57	61	64	71	71	72	76	77
Interest coverage ratio, multiple	3.5	3.6	3.2	3.8	3.2	4.1	4.1	5.6
Average interest rate, %	2.3	2.3	2.3	2.3	2.3	2.4	2.5	2.4
Return on equity Real Estate Direct, %	19.2	-0.4	20.3	15.7	16.7	6.2	9.8	24.1
Return on equity, %	15.7	-34.6	30.3	8.2	9.3	8.2	18.5	5.9
Cashflow per shares, EUR	-1.05	0.31	-0.15	-0.10	-0.05	-1.00	0.30	-0.23
SHARE-RELATED	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Equity, EURk	250,253	245,917	268,192	248,583	243,480	242,300	240,819	232,415
Long-term net asset value (LT-NAV), EURk	260,381	254,689	276,470	256,316	250,298	247,804	245,521	236,226
Market capitalisation, EURk	236,472	212,439	276,546	225,322	213,772	229,466	197,085	194,321
Market capitalisation, SEK thousand	2,474,440	2,309,477	2,905,881	2,415,223	2,258,720	2,389,844	1,997,452	2,007,332
Number of shares issued at period end, thousand	22,370	22,370	22,370	22,370	22,370	22,370	22,370	22,370
Number of shares issued at period end, adjusted for repurchased shares, thousand	21,149	21,149	21,149	21,149	21,149	21,149	21,501	21,795
Weighted average number of shares, adjusted for repurchased shares, thousand	21,149	21,149	21,187	21,200	21,227	21,305	22,128	22,290
Profit from property management per share, EUR	0.10	0.11	0.08	0.06	0.05	0.06	0.05	0.05
Earnings per share, EUR	0.46	-1.05	0.93	0.24	0.27	0.23	0.50	0.16
Equity per share, EUR1	11.8	11.6	12.7	11.8	11.5	11.5	11.2	10.7
Equity per share, SEK1	124	126	133	126	122	119	114	110
Long-term net asset value per share, EUR	12.3	12.0	13.1	12.1	11.8	11.7	11.4	10.8
Long-term net asset value per share, SEK	129	131	137	130	125	122	116	112
Share price, EUR	11.2	10.0	13.1	10.7	10.1	10.8	9.2	8.9
Share price, SEK	117.00	109.20	137.40	114.20	106.80	113.00	92.90	92.10
OTHER	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
SEK/EUR	10.46	10.87	10.51	10.72	10.57	10.41	10.14	10.33
INTERPRETATION FOR KEY FIGURES	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Rental income	4,467	4,475	4,161	3,142	3,099	2,947	2,516	2,339
Net operating income	3,987	4,044	3,751	2,795	2,712	2,689	2,120	2,104
Surplus ratio, %	89	90	90	89	88	91	84	90
Investment properties	336,200	288,020	290,256	203,276	199,882	195,972	158,862	156,102
Liabilities to credit institutions	165,121	143,107	137,771	85,187	86,077	86,967	67,550	58,501
Loan-to-value ratio, %	49	50	47	42	43	44	43	37
Equity	250,253	245,917	268,192	248,583	243,480	242,300	240,819	232,415
Add back derivatives	2,624	2,198	1,963	2,665	2,353	1,614	957	339
Add back deferred tax	7,504	6,574	6,315	5,069	4,465	3,891	3,745	3,472
Long-term net asset value, EURk	260,381	254,689	276,470	256,316	250,298	247,804	245,521	236,226
Profit from property management	2,170	2,262	1,699	1,370	1,141	1,279	1,085	1,217
Interest expenses	852	863	790	498	526	411	350	266
Profit before interest expenses	3,022	3,125	2,489	1,868	1,667	1,690	1,434	1,483
Interest coverage ratio, multiple	3.5	3.6	3.2	3.8	3.2	4.1	4.1	5.6
Net profit Real Estate Direct, annualised Weighted equity Real Estate Direct	28,004 146,071	-586 138,342	25,129 124,092	16,376 104,349	17,003 101,870	5,673 91,975	8,341 85,372	20,460 84,879
Return on equity Real Estate Direct, %	19.2	-0.4	20.3	15.7	16.7	6.2	9.8	24.1

¹Equity after deduction of dividend decided for 2020, SEK 2.70 per share corresponding to EUR 0.26 per share.

Definitions and glossary

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 rental income

Average rent at the end of the period.

Lettable area

Total area available for letting.

Net letting

Q2

Annual rent income from contracts signed, less that of contracts terminated, during the period.

Net operating income

Rental income less property expenses.

Occupancy rate, by area Occupied area in relation to lettable area.

Occupancy rate, financial

Contracted annual rent at the end of the

period in relation to the rent value. This indicator is used to facilitate the estimation of rental income for vacant premises and other financial vacancies.

Profit from property management

Earnings before value changes, dividends received and taxes.

Rental income

Debited rents, rental accruals, and rental guarantees less rental discounts.

Rent value

Contracted annual rents which are current at the end of the period with supplements for discounts and estimated market rent for vacant premises.

Surplus ratio

Net operating income in relation to rental income.

Triple-net lease

Lease agreements where the tenant, in addition to the base rent, also pays costs related to the leased area. These costs include operational and maintenance costs, property taxes, site leasehold fees, insurance and property caretaking.

Yield requirement, investment properties

The yield requirement is used in valuations and are based on yield rate at end of the period. The yield requirement are estimations of the market return requirement for similar investment objects, with the addition of risks related to real estate, such as geographical location, the condition of the property, and future vacancy risk.

Vacancy rate, by area

Vacant area in relation to lettable area.

Vacancy rate, financial

Annual rent for vacant premises at the end of the period in relation to the rent value at the end of the period.

WAULT

Average remaining lease term of lease agreements weighted according to contracted rental income (weighted average unexpired lease term).

The indicator shows the weighted risk of future vacancies.

FINANCIAL KEY FIGURES

Average capital tie-up period

Average remaining term for liabilities to credit institutions by the end of the period.

Average interest rate

Average interest rate on the Group's liabilities to credit institutions at the end of the period.

Debt coverage ratio

Liabilities to credit institutions at the end of the period in relation to net operating income on a 12-month basis after deduction of central administration expenses on a 12-month basis.

EBITDA

Profit before depreciation, amortisation and impairment (earnings before interest, tax, depreciation and amortisation).

Equity/asset ratio

Equity in relation to total assets.

Interest coverage ratio

Profit from property management, with reversal of interest expenses, in relation to interest expenses.

LTV (loan-to-value) ratio

Liabilities to credit institutions in relation to property value.

Return on equity

Net profit/loss for the quarter, recalculated on a 12-month basis, in relation to average equity.

Return on equity, Real Estate Direct

Net profit/loss for the quarter, recalculated on a 12-month basis, in the Real Estate Direct segment in relation to average equity attributable to the segment.

SHARE-RELATED KEY FIGURES

Earnings per share

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

Equity

Total equity.

Equity per share

Equity in relation to the total number of issued shares (excluding shares held in treasury).

Long-term net asset value (LT-NAV)

Total equity with reversal of derivatives and deferred tax liabilities according to the balance sheet.

Long-term net asset value per share

LT-NAV in relation to the number of outstanding shares (excluding shares held in treasury).

Profit from property management per share

Profit from property management divided by the average number of shares during the period.

GLOSSARY

Break option

Unilateral option allowing the tenant to terminate the lease agreement prematurely. The clause usually refers to a right on the part of the tenant to terminate a lease without additional rent payments.

Fair value

Fair value is the price at which a property transfer may take place between independent and informed parties which have an interest in the transaction taking place. Fair value is considered to be equal to the acquisition value at the acquisition date, after which the fair value may change over time.

Gross area

Gross area is the sum of the area of all the floors up to the exterior of the surrounding building sections. The term is used e.g. with regards to property valuations.

IFRS

Abbreviation for International Financing Reporting Standard. IFRS is an international reporting standard for the preparation of group statements.

Interest derivatives

Agreements for the purchase and sale of interest, the price and conditions of which depend on factors such as time, inflation rates, and market. Derivative agreements are usually entered into in order to ensure predictable interest rate levels for some part or the entirey of interest-bearing loans. Interest rate swaps are a type of derivative where the value on balance day is zero and which expires without further payment flows.

Property

Relates to real estate in possession through ownership or site leaseholds.

Share buy-back

Purchasing of own shares on the stock market. Swedish companies have the option to own up to 10per cent of their own outstanding shares, given approval from the AGM.

Zero-interest floor

Clause in credit agreements meaning that a negative reference interest rate is considered as zero.

– JUNE 2020 27

Financial calendar

EASTNINE INTERIM REPORT JANUARY

Q 2

Interim report January – September 2020: 5November 2020 Year -end report 2020: 17 February 2021

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The information in this interim report is the information whichEastnine AB is required to disclose under the EU Market Abuse Regulation and the Securities Markets Act. It was released for publication at 0 7.00 a.m on 1 7 July 2020.

This is a translation of the original Swedish language interim report. In the event of discrepancies, the original Swedish wording shall prevail.

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 Registration no. 556693 -7404