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A N N U A L R E P O R T

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CEO comments 4

Board of Directors report 6

Consolidated Financial Statements 11

Company Financial Statements 15

Notes to the financial statements 20

Signature by the Board of directors 47

Auditors report 48

EOS share 56

Definitions 58

Financial Calendar 60

Contacts 60

List of content

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CEO comments

Dear Shareholder,

2008 was a most unfortunate year to own equities globally and even worse in Russia. The financial crisis in the world created indiscriminate sellers of almost everything that appeared to contain an element of risk. Sadly, our shares in the Russian electricity sector among them and a major part of the market value for our investment portfolio disappeared.

We managed to limit our losses by removing almost all our leverage already during the summer. Further, we have actively moved our investments towards the distribution sector that we believe is more defensive.

At the same time, the reform of the Russian electricity sector continues as anticipated. During 2008 we saw important parts of the reform materialising, the break-up of Unified Energy Systems, further sizable privatisations of generating assets, a larger part of electricity sold on a free market and introduction of pilot projects for RAB regulation for distribution com- panies. We expect the reforms to continue as planned over the coming years giving Russia one of the most deregulated and largest electricity sectors in the world. With the reforms we look forward to the sector’s increasing attractiveness for investments and significant profits to appear.

Sven Thorngren, CEO

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Board of Directors report

The board of directors and CEO hereby submit this annual report and consolidated annual accounts for the financial year 2008 for EnergyO Solutions Russia AB (publ), corpo- rate identity number 556694-7684.

”EOS AB” or “the Company” refers to EnergyO Solutions AB, the parent company. “EOS Ltd” refers to EnergyO Solutions Russia (Cyprus) Limited, the subsidiary of EOS AB. “EOS Russia” or “the Group” refers to EOS AB and EOS Ltd.

EOS Russia

EOS Russia was founded in April 2007 in order to capitalize on investment opportunities arising as a result of the dereg- ulation, restructuring and privatization of the Russian elec- tricity industry. A comprehensive reform program is gradu- ally being implemented until 2011, affecting all elements of the sector: structure, ownership and electricity pricing. The reason for the reform is the considerable investment need that has emerged as a result of rapidly increasing electricity demand. EOS Russia utilises the expertise, experience and network that the founders possess to identify investment opportunities within the power sector.

Group structure

EOS AB is the Group’s parent company and is headquar- tered in Stockholm, Sweden. The board of EOS AB consists of six members. The CEO, the CFO and the Head of Risk and Compliance are based at the headquarters of EOS Russia.

EOS Ltd is a subsidiary of EOS AB and is located in Limassol, Cyprus. The Board of Directors of EOS Ltd con- sists of six members. The Head of Research and a trader are based on Cyprus.

Operations began on April 17, 2007 and EOS AB was listed on the First North marketplace, part of OMX Nordic Exchange Stockholm (OMX) on June 25, 2007.

The shares in the company are issued and traded in SEK and the Group investments are in USD or RUB. EOS Ltd has preference shares and ordinary shares. The ordinary shares are held by EOS AB. The preference shares are solely held, indirectly or directly, by the founders.

The ongoing reform of the electricity market in Russia is set to be finalized in 2011. Therefore, it will be decided at the annual shareholder’s meeting in 2013 whether EOS

EOS AB

CEO, CFO, Risk & Compliance

EOS Ltd Head of Research & Trading

Investment portfolio

Board

100% of ordinary shares

Preference shares owned by founders

Board

Listed on First North

Operational structure and management

The board of EOS AB is responsible for the group’s overall guidelines, strategies and operational policies and the management team of EOS Russia has overall responsibil- ity for ongoing operations, financial control, performance, monitoring and information issues.

EOS AB raises capital for EOS Russia and also provides the Group with corporate and administrative functions such as financial reporting, marketing and investor relations. The Board of EOS AB sets the scope for investments and lever- aging for EOS Russia.

EOS Ltd makes all investment decisions within the framework set by the parent company. All investments are conducted entirely by the subsidiary, which holds the com- plete investment portfolio of EOS Russia.

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EOS Russia’s financial performance

EOS Russia recorded a net loss from investing activities of SEK -3,776 million (186) for the full year. Operating expens- es amounted to SEK -46.1 million (-61.2) for the full year.

Net financial items amounted to SEK -36.3 million (-18.4) for the full year. Net financial items for the full year include interest income of SEK 2.1 million (1.0) and interest ex- penses totaling SEK -34.8 million (-9.9). The remaining part is made up of results from hedging activities.

The net loss for EOS was SEK -3,858 million (107) for the full year. Net loss per share was SEK -81.38 (4.97).

EOS Russia’s net asset value at December 31, 2008 was SEK 1,330 million (2,807). The net asset value was positively impacted by exchange rate translation differences of SEK 240 million (-114).

EOS AB

The parent company’s income for the period amounted to SEK 17.3 million (9.8) Operating expenses amounted to SEK -29.2 million (-23.7) for the period. Net financial items amounted to SEK -3,500 million (14.0) for the period due to write-down of shares in group companies of SEK 3,510 mil- lion. The net loss for the period was SEK -3,512

million (0.1).

The total number of shares outstanding at December 31st, 2008 was 56,673,177.

Significant events during 2008 and after the balance sheet closing date

January

At the extraordinary shareholders’ meeting on January 24 it was resolved to authorize the board to make decisions on new share issues until the next AGM, up to a new maxi- mum amount of 112,650,936 shares in the company April

EOS AB applied for a listing of the company’s shares on OMX Nordic list

On April 11, EOS AB raised a total of SEK 406 million through the first of a series of private placements.

On April 21, EOS AB raised a total of SEK 537 million through a second private placement.

On April 29, EOS Russia announced that it would con- tinue to trade on First North as it had not been given an exemption from the rule of three years of published annual

After balance sheet closing date

The board of EOS Russia AB decided at the board meeting 2009-02-25 the following changes to the shareholders agree- ment with preferred shareholders in EOS Cyprus Ltd.:

• To exclude from “operational expenses” board remunera- tion to other board members than the Founders and legal costs associated with the work of the board of directors.

• To replace cash payments with liabilities in case of nega- tive Quarterly interim dividends.

• To define ”change of control” as if one or several share- holders acting jointly implement significant changes to the investment strategy or the cost structure of the Group or successfully support a resolution to liquidate the Parent Company prior to 2013.

Shareholder structure

At the end of 2008, EOS AB had 56,673,177 shares out- standing. The majority of EOS AB´s shares are held by institutional investors and a large proportion of the shares are owned by individuals or legal entities domiciled outside of Sweden.

Covenants

EOS Ltd has issued 180 preference shares that are owned, directly or indirectly, by the founders, Sven Thorngren, Lauri Sillantaka and Seppo Remes. In case one or several shareholders (other than the preference shareholders, their affiliates, or their designated individuals) acting jointly, implement significant changes to the investment strategy or the cost structure of EOS Russia or successfully support a resolution to liquidate EOS AB prior to 2013 (“change of control”), the preference shareholders have the right to request that EOS AB purchases the preference shares from the preference shareholders at a sum of:

The nominal value of the relevant preference shares (EUR 180 ); an amount equal to any right to dividend accrued on the relevant preference shares but which has not yet been paid out; an amount equal to the relevant preference share’s pro rata portion of:

a. if a positive number, zero point five (0.5) per cent of the net asset value, as reflected in the last quarterly report preceding the date of the change of control event minus the average operational expenses per quarter calculated on the basis of the last four (4) quarterly reports, preced-

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five per cent of (i) the appreciation of the market capitalisa- tion as of January 1 of the year during which the change of control event occurred up to the date immediately pre- ceding the day of the change of control event; plus (ii) an assumed appreciation of the market capitalisation of twenty per cent per annum as of the date of the change of control event up until December 31, 2012; and five per cent of the appreciation of the net asset value from January 1, 2008 up to December 31, 2012. For the purpose of this provision, the net asset value as per December 31, 2012, shall be deemed to be the higher of (in either case increased by twenty per cent per annum as of the date of the change of control event up until December 31, 2012)

a. the net asset value as reflected in the most recent quar- terly report preceding the day of the change in control event; and

b. the value of the shares in the parent company as set out in a completed public tender offer made by the acquirer(s)

Risk and risk management

The Board of Directors of EOS AB is ultimately responsible for the management of risks to which EOS Russia is ex- posed. EOS Russia’s investment strategy is implemented by EOS Ltd, based on Cyprus, through which our investments are made and owned. EOS Ltd makes all investment deci- sions within the framework set by the parent company. This means that the board of EOS Ltd, will, based on recommen- dations from the Head of Research, make decisions about the sale and purchase of Russian shares within the electric- ity sector. The execution of decisions made by the board of EOS Ltd will be carried out by the trader or either a director or employee, on the mandate of the board of EOS Ltd.

EOS Russia has assessed its risk exposure with the objective to:

• Identify key risks

• Ensure that management has controls in place

• Allocate necessary staff resources to risk management The major risks were defined to be financial risk and coun- try and sector-specific risk. The financial risk includes price risks, interest rate risk, liquidity risk and credit risk.

Through the chosen investment strategy, EOS Russia has a high exposure to country-specific risk factors for Russia,

Through its operations, the Group is exposed to various types of financial risks, which are assessed and monitored by EOS Russia on a daily basis, see Note 19. Price risk is the risk that the fair value of or future cash flow from a financial instrument will vary due to changes in market prices. In EOS Russia’s operations, share price risk (other price risk) and exchange rate risk are the most important price risks.

Share price risk is the risk that the fair value of our future cash flows from a share will vary due to changes in market prices. Share price risk is a central risk in the Group’s opera- tions, since these consist of making investments in various forms of shares and share-based derivatives in the Russian stock market, with a specific focus on the Russian electric- ity sector. Share prices of shares held in the portfolio will fluctuate. This risk is part of EOS Russia’s business concept and will generally not be hedged.

Exchange rate risk is the risk that exchange rate fluctua- tions may have a negative impact on our income statement, balance sheet and/or cash-flow.

EOS Russia’s exchange rate risks largely derive from translation exposure that arises from recalculation of a foreign subsidiary’s assets and liabilities (USD) to EOS AB’s functional currency (SEK), known as recalculation expo- sure. EOS Russia also has certain exposure in the Russian ruble (RUB), in respect of those shares that are priced and traded in RUB. Translation-related exposure is not hedged.

Interest rate risk is the risk that the fair value or future cash flows from a financial instrument will vary due to changes in market interest rates, and for EOS Russia’s oper- ations, the interest rate risk arises when surplus liquidity is invested temporarily in interest-bearing securities. Interest rate risk also arises when EOS Russia finances operations by leveraging the stock portfolio. These interest rate risks are generally low, because the holding period is generally short in respect of investments in interest-bearing securities and is very short in respect of temporary leveraging of the stock portfolio.

Liquidity risk is the risk that EOS Russia will be affected negatively by inefficient handling and control of cash and payment flows, in part because investments can only be converted to liquid funds with a certain loss of value or time.

Credit risk is the risk that a party to a financial instru- ment cannot fulfill an obligation and thereby causes a finan- cial loss for the counterparty. Credit risk can arise if EOS Russia enters into derivative agreements, and in certain cases, if EOS Russia invests temporary liquidity surpluses in

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TGK-2

In August 2008, RWE/Sintez, through Kores Invest, ten- dered a buyout offer of RUB 0.0025 per share to minority shareholders of TGK-2. This buyback offer was compul- sory, since Kores Invest had consolidated 43.3% of TGK-2 earlier in 2008, thereby crossing the 30% threshold which by Russian Federation law triggers a mandatory offer. The buyout offer was supported by a banking guarantee by Sberbank, which would ensure fulfilment of the buyout in the event of insolvency on the part of Kores Invest.

EOS Russia tendered all shares owned in TGK-2 in the buyback offer in October 2008, and payment was to be received by the end of that month.

Payment for the buyout was not received by EOS by the October deadline. The buyout offer and the banking guaran- tee are currently being challenged in the courts by

Kores Invest.

TGK-4

In July 2008, Onexim tendered a buyout offer of RUB 0.0027 per share to minority shareholders of TGK-4. This buyback offer was compulsory, since Onexim had consolidated more than 50% of TGK-4 earlier in 2008, thereby crossing the 30%

threshold which by Russian Federation law triggers a man- datory offer. The buyout offer was supported by a banking guarantee by Rosbank, which would ensure fulfillment of the buyout in the event of insolvency on the part of Onexim.

EOS Russia tendered all shares owned in TGK-4 in the buyback offer in October 2008, and payment was to be received by the end of that month.

Payment for the buyout was not received by EOS by the October deadline and the buyout offer is currently being challenged in the courts by Onexim. Further, the bank guar- antee issued by Rosbank has been declared invalid by a lower court.

Legal opinion received by EOS Russia supports our view that the buyouts are still valid according to Russian Federation law. The shares of TGK-2 and TGK-4 are ac- counted for as a receivable and valued at buyback prices in the Annual Report. For more information please

see note 19.

Investment portfolio in securities

During spring 2008, EOS Russia raised a total of SEK 2,118 million in several placements in kind and cash. Almost all investments were placed in UES (Unified Energy Systems) ahead of the company’s break-up on July 1st. Furthermore,

In July and August 2008, EOS received it’s pro-rata stakes in the by then liquidated UES. The portfolio divided by sub- sector consisted of approx. 65% in generating assets (OGKs, TGKs and hydro), 14% in distribution assets (MRSKs), 16%

in transmission (FGC) assets and 5% in intergrated (IRAO) and other.

In July, as equity markets globally started to appear less stable, EOS decided to pay back most of the loan it had taken before the break-up of UES in order to decrease over- all market risk. This was mainly done in July and August through selling stakes in generating assets. Further, EOS believed in a faster profit growth and a lower risk level in the distribution sector, and rebalanced its portfolio accord- ingly. For more information about the current and year-end portfolio structure, please see the graphs in the Definitions section on page 58.

In October, EOS participated in the buyouts of TGK-2 and TGK-4. These shares are accounted for as tendered shares in the above mentioned graphs. For more informa- tion see the risk and risk management section.

Going forward, EOS will constantly work with allocat- ing the portfolio where the best value is seen within the power sector. You will find a description of the main sub- sectors making up the Russian power utility universe in the Definitions section on page 58.

Russian energy reform

EOS Russia invests in the Russian power utility sector which is currently undergoing a reform process. The restructur- ing of the sector aims at a liberalization of generation and supply by 2011, whereas transmission and distribution will remain regulated monopolies.

The reformation process affects the structure, ownership and electricity pricing within the sector.

The main goals are to:

• increase the efficiency of the existing energy companies

• create an attractive climate for private investments

Dividends

EOS Russia’s main objective is to generate shareholder value by investing in Russian electricity sector assets until 2012.

EOS Russia plans to reinvest capital gains. According to EOS AB’s Balance Sheet, the funds available for distribution by the Annual General Meeting amount to SEK 763,057 thousand, of which SEK -3,511,537 thousand is net loss for the year. The Board of Directors and the CEO of EOS AB

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Consolidated Income Statement

January 1 - December 31

In thousands of SEK Note 2008 2007*

Net change in fair value of securities -3,776,095 185,873

Dividends 106 507

Net profit/loss – Investing activities 2 -3,775,989 186,381

Employee benefit expenses 4 -11,078 -4,369

Depreciation of property, plant and equipment 11 -426 -12

Other expenses 5,6,7 -34,608 -56,785

Result from operating activities -3,822,101 125,214

Finance income 8 2,149 1,022

Finance expenses 8 -38,404 -19,457

Profit/loss before income tax -3,858,356 106,779

Income tax expense 8 4 -103

Profit/loss for the period -3,858,352 106,676

Attributable to:

Equity holders of the Company -3,858,352 106,676

Earnings per share 10

basic (SEK) -81.38 4.97

diluted (SEK) -81.38 4.97

*The comparative financial year for the Group in 2007 covers the period April 17 - December 31

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Consolidated Balance Sheet

As at December 31

In thousands of SEK Note 2008 2007

Assets

Property, plant and equipment 11 8,330 4,665

Total non-current assets 8,330 4,665

Income tax receivables 27 25

Prepaid expenses and accrued income 12 1,028 2,756

Other receivables 13 133,446 2,173

Shares and participations 13 1,171,364 2,967,710

Cash and cash equivalents 45,427 19,376

Total current assets 1,351,292 2,992,040

Total assets 1,359,622 2,996,705

Equity 14

Share capital 566,732 281,627

Other contributed equity 4,274,524 2,533,105

Reserves 240,209 -114,122

Retained earnings -3,751,676 106,676

Equity attributable to equity holders of EOS AB 1,329,789 2,807,287

Total equity 1,329,789 2,807,287

Liabilities

Provisions 15 11,794 27,402

Total non-current liabilities 11,794 27,402

Loans and borrowings 16 0 121,227

Trade and other payables 1,325 2,883

Other liabilities 17 4,724 21,900

Accrued expenses and deferred income 18 11,990 16,005

Total current liabilities 18,039 162,016

Total liabilities 29,834 189,418

Total equity and liabilities 1,359,622 2,996,705

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Consolidated Statement of Changes in Equity 2007

Attributable to equity holders of the Company

In thousands of SEK Note Share

capital

Other contributed equity

Translation reserve

Retained earnings

Total equity

Balance April 17 2007 14 100 - - - 100

Translation gains/

losses on consolidation - - -114,122 - -114,122

Total change in equity not recognised in the Income Statement, excl. transactions with

and distribution to owners 0 0 -114,122 0 -114,122

Profit for the period - - - 106,676 106,676

Total change in equity, excl. transactions

with and distributions to equity owners 0 0 -114,122 106,676 -7,446

New share issue 281,527 2,602,635 - - 2,884,162

Share issue costs - -69,530 - - -69,530

Consolidated Statement of Changes in Equity 2008

Attributable to equity holders of the Company

In thousands of SEK Note Share

capital

Other contributed equity

Translation reserve

Retained earnings

Total equity

Balance January 1 2008 14 281,627 2,533,105 -114,122 106,676 2,807,287

Translation gains/

losses on consolidation - - 354,331 - 354,331

Total change in equity not recognised in the Income Statement, excl. transactions with

and distribution to owners 0 0 354,331 0 354,331

Loss for the period - - - -3,858,352 -3,858,352

Total change in equity, excl. transactions

with and distributions to equity owners 0 0 354,331 -3,858,352 -3,504,021

New share issue 285,105 1,832,816 - - 2,117,921

Share issue costs - -91,397 - - -91,397

Balance at December 31 2008 566,732 4,274,524 240,209 -3,751,676 1,329,789

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Consolidated Statement of Cash Flows

January 1 - December 31

In thousands of SEK Note 2008 2007**

22 Cash flows from operating activities

Profit before income tax -3,858,356 106,779

Adjustments for:

Net change in fair value of securities 3,776,650 -201,619

Depreciation 426 12

Other 4,981 27,402

Income tax paid -35 -100

Net cash from operating activities before

changes in working capital -76,334 -67,525

Cash flow from changes in working capital

Increase (-)/Decrease (+) in operating receivables -97,281 -5,051

Increase (+)/Decrease (-) in operating liabilities -51,760 41,065

Net cash from operating activities -225,375 -31,510

Cash flows from investing activities

Acquisition of property, plant and equipment -3,492 -4,798

Acquisition of investments* -3,820,477 -3,597,818

Proceeds from sale of investments 3,083,720 1,509,901

Net cash from investing activities -740,249 -2,092,715

Cash flows from financing activities

Borrowings -120,661 124,799

Proceeds from issue of new shares* 1,108,659 2,018,740

Net cash from financing activities 987,998 2,143,539

Net increase in cash and cash equivalents 22,375 19,314

Cash and cash equivalents at January 1 19,376 100

Effect of exchange rate fluctuations on cash held 3,676 -38

Cash and cash equivalent at December 31 45,427 19,376

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Company Income Statement

January 1 - December 31

In thousands of SEK Note 2008 2007

Other income 3 17,280 9,750

Other external expenses 6,7 -12,481 -6,567

Employee benefit expenses 4 -7,259 -3,576

Depreciation of property, plant and equipment 11 -255 -12

Other expenses 5 -9,209 -13,535

Results from operating activities -11,924 -13,940

Results from financial items

Result from participations in Group companies 8 -3,501,046 13,522

Other interest income and similar income 8 1,640 559

Interest expense and similar charges 8 -242 -47

Profit/loss before income tax -3,511,572 95

Income tax expense 9 36 -27

Profit/loss for the period -3,511,537 68

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Company Balance Sheet

As at December 31

In thousands of SEK Note 2008 2007

Assets

Non-current assets

Property, plant and equipment 11 1,308 583

Financial assets

Participation in Group companies 21 1,310,871 2,803,205

Other deposits 491 481

Total non-current assets 1,312,670 2,804,269

Current assets Short-term receivables

Receivables from Group companies 4,320 9,750

Income tax receivables 27 25

Other receivables 647 911

Prepaid expenses and accrued income 12 982 351

Total short-term receivables 5,976 11,037

Cash and bank 23,757 18,026

Total current assets 29,733 29,063

Total assets 1,342,402 2,833,331

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Company Balance Sheet

As at December 31

In thousands of SEK Note 2008 2007

Equity and liabilities

Equity 14

Restricted equity

Share capital, 56,673,177 shares at SEK 10 566,732 281,627

Unrestricted equity

Share premium reserve 4,274,526 2,533,107

Retained earnings 68 0

Profit/loss for the period -3,511,537 68

Total equity 1,329,789 2,814,802

Current liabilities

Accounts payable 1,325 2,883

Other liabilities 17 609 562

Accrued expenses and prepaid income 18 10,679 15,084

Total current liabilities 12,613 18,529

Total equity and liabilities 1,342,402 2,833,331

Pledged assets - -

Contingent liabilities - -

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Summary of Changes in Company Equity

Restricted equity Unrestricted equity Total equity

In thousands of SEK Share Capital Share

premium reserve

Retained earnings

Equity at January 1, 2008 281,627 2,533,107 68 2,814,802

Loss for the period - - -3,511,537 -3,511,537

New share issue 285,105 1,832,816 - 2,117,921

Share issue costs - -91,397 - -91,397

Equity at December 31, 2008 566,732 4,274,526 -3,511,469 1,329,789

Restricted equity Unrestricted equity Total equity

In thousands of SEK Share Capital Share

premium reserve

Retained earnings

Equity at January 1, 2007 100 - 0 100

Profit for the period - - 68 68

New share issue 281,527 2,602,637 - 2,884,164

Share issue costs - -69,530 - -69,530

Equity at December 31, 2007 281,627 2,533,107 68 2,814,802

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Company Statement of Cash Flows

January 1 - December 31

In thousands of SEK Note 2008 2007

22 Cash flows from operating activities

Profit/loss before income tax -3,511,572 95

Adjustments for:

Depreciation 255 12

Other 10 -

Write-down of shares in group companies 3,510,255 -

Income tax paid -4 -23

Net cash from operating activities before changes in working capital -1,056 84

Cash flows from changes in working capital

Increase (-)/Decrease (+) in operating receivables 5,091 -11,521

Increase (+)/Decrease (-) in operating liabilities -5,916 18,529

Net cash from operating activities -1,881 7,091

Cash flows from investing activities

Acquisition of property, plant and equipment -980 -595

Investment in shares in subsidiaries and other investment* -1,100,067 -2,007,313

Net cash used in investing activities -1,101,047 -2,007,908

Cash from financing activities

Proceeds from issue of new shares* 1,108,659 2,018,742

Net cash from financing activities 1,108,659 2,018,742

Net increase in cash and bank 5,731 17,926

Cash and bank at January 1 18,026 100

Cash and bank at December 31 23,757 18,026

*Total share issues in 2008 amounted to SEK 2,026,523 thousand (2,814,632) including issues in kind of SEK 917,864 thousand (795,892), net of SEK 91,397 thousand (69,530) share issue costs.

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Notes to the financial statements

Note 1 Accounting policies

Accordance with accounting standards and legal requirements

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations announced by the International Financial Reporting Interpretations Committee (IFRIC), as approved by the EC Commission for application within the EU. In addition, the Swedish Financial Reporting Board’s recommendation RFR 1.2, Supplementary Accounting Rules for Groups is applied.

The Company applies the same accounting principles as the Group, except in the cases stated below in the section

“Company accounting principles”. The deviations that occur between the accounting policies of the Company and the Group is attributable to limitations to apply IFRS in EOS AB due to the Annual Accounts Act, in certain cases for tax reasons. The Annual Report and consolidated accounts were approved for publication by the Board of Directors on April 6, 2009. The Group’s income statement and balance sheet and EOS AB’s income statement and balance sheet are subject to approval by the Annual General Meeting on April 24, 2009.

The basis of measurement for establishing the financial reports of the Company and the Group

Assets and liabilities are measured at historical cost, except for some financial assets and liabilities measured at fair value. Financial assets and liabilities measured at fair value are derivatives, shares and participations.

Functional and reporting currency, reporting periods

The Company’s reporting currency is Swedish kronor , which is also the reporting currency of the Group. This means that the financial statements are presented in Swedish kronor. Unless otherwise indicated, all amounts are rounded off to the nearest thousand SEK. By rounding the numbers in tables, totals may not always equal the sum of the included rounded numbers. The comparative financial year for the Group in 2007 covers the period April 17 (the date when the Group was founded) - December 31.

Assessments and estimates in the financial statements

Preparation of the financial reports in accordance with IFRS requires that the Group management makes assessments and estimates and also makes assumptions that affect the application of the accounting policies and the recognised amounts of assets, liabilities, revenue and expenses. The actual outcome may deviate from these assessments and estimates.

The assessments and assumptions are reviewed regularly.

Changes in estimates are reported in the period when the change is made if the change only affects this period, or in the period when the change is made and future periods if the change affects the period in question and future periods.

(i) Significant assessments in applying the Group’s accounting principles

The assessments made by Group management in applying the Group’s accounting principles that have the most signifi- cant influence on the financial statements are as follows:

• The instruments that have the legal form of preference shares and that are issued by subsidiaries and related payment do not comprise equity instruments, instead their financial implication is as a liability where the related payments consequently are allocated expenses in the income statement and are not treated as dividends.

• The preference share payments that relate to the group’s net assets do not represent payments on derivatives.

• The payments that relate to EOS Ltd’s net assets do not represent payments on derivatives.

• EOS Russia’s investment portfolio comprises shares that, according to the assessment of Group management, do not have prices quoted on an active market.

• In the evaluation of preference share related remunera- tion, no consideration is given to valuation consequences of future share issues. Valuation only takes into account issues completed on the balance-sheet date.

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(ii) Important sources of uncertainty in estimates

The important sources of uncertainty in estimates made that carry a significant risk of a material adjustment to the carrying amounts of assets and liabilities in the next finan- cial year are as follows:

• Estimates of the fair value of shares and participations that are not listed on an active market, see note 13.

• The calculation of liabilities, provisions and the related expenses for share-related remuneration, see note 4. This uncertainty is primarily related to uncertainty in the as- sumption on volatility that is dependent on, for example, the structure of the future asset portfolio.

• Estimates used in the calculation of provisions for certain remuneration to preference shareholders are dependent on the trend in the Group’s net assets, which in turn is dependent on such factors as the trend in the value of the underlying share, see note 4.

• Estimates for the carrying value for the receivables for the sale of TGK-2 and TGK-4 since payments are past due, see note 13.

New standards, amendments to standards and inter- pretations, effective as from January 1, 2008

The following changed and new standards and interpreta- tions were to be applied for the first time in the annual financial statements for 2008:

Amendments to IAS 39 Financial Instruments:

Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures - Reclassification of Financial Assets.

IFRIC 11 IFRS 2 - Group and Treasury Share Transactions

IFRIC 14 IAS 19 - The limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction.

These new accounting policies have not had any effect on EOS Russia’s financial statements for 2008 and are not expected to have significant future effects.

New IFRS and interpretations not yet applied

The following new and changed standards and interpreta- tions that cover areas that may be relevant for EOS Russia have not been applied early in these financial reports:

Amendments to IAS 1 Presentation of Financial Statements are to be applied from January 1, 2009. A main change is a requirement that income and expense items cur- rently are recognised directly in equity are to be recognised in a new extended income statement titled statement of total comprehensive income or in a second statement for other comprehensive income following after a traditional income statement. Another change is that the financial statements have new non-mandatory titles. EOS Russia has not yet decided which choices to make in these respects.

Amendments of IFRS 2 Share-based payment are to be applied from January 1, 2009. The changes cover how to define vesting and non-vesting conditions and how non- vesting conditions are to be dealt with in accounting terms.

The share-based payment arrangements that EOS has will not be affected by these changes to IFRS 2.

New IFRS 8 Operating Segments replaces IAS 14 Segment Reporting, starting January 1, 2009. IFRS 8 introduces a management approach to the reporting of operating seg- ments. EOS is assessed as having one segment and the introduction of the new standard will not change this fact.

Some changes in required disclosures will be introduced, but these changes do not appear to be significant.

Amendments to IAS 23 Borrowing Costs are to be applied from January 1, 2009. The change eliminates the currently existing choice to recognise as an expense the borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily takes a substantial pe- riod of time to get ready for use. Such borrowing costs must be capitalised. This change is not expected to affect EOS Russia’s future reporting, since buildings and equipment acquired by EOS Russia are not qualifying as such assets.

Revised IFRS 3 Business Combinations and amended IAS 27 Consolidated and Separate Financial Statements are to be applied from January 1, 2010. These revisions will have a number of effects on the treatment of business combina- tions and on group accounting. EOS Russia does not plan to undertake such business combinations and do not expect to be significantly affected in any other ways by these changes.

All other news and changes currently issued by the IASB but not yet applicable cover aspects that will not be relevant for EOS Russia.

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Segment reporting

A segment is part of the Group that is identifiable in accounting terms which either provides goods or services (business activities) or goods or services in a certain eco- nomic environment (geographic area), which is exposed to risks and opportunities that is distinct from other segments.

EOS Russia has not identified any parts that are identifi- able in accounting terms regarding business activities or geographic area and accordingly no segment reporting has been prepared.

Basis of consolidation

The consolidated financial statements comprise EOS AB, and its subsidiaries. A subsidiary is a company which EOS AB controls. Control gives an indirect or direct right to shape a company’s financial and operational strategies with the purpose of obtaining financial advantages.

Subsidiaries are included in the consolidated financial statements using the purchase method. According to the purchase method, the acquisition is considered a transac- tion by which the group indirectly acquires the assets of the subsidiary and assumes its liabilities and contingent liabilities. An acquisition analysis in connection with the ac- quisition establishes both the cost of acquisition and the fair value of acquired identifiable assets and liabilities and con- tingent liabilities assumed. The cost of acquisition consists of the fair value of assets transferred, liabilities incurred or assumed and for equity instruments issued as consideration for acquired net assets, plus any transaction costs directly attributable to the acquisition.

Where the cost exceeds the net fair value of acquired identifiable assets and liabilities, the difference is accounted for as goodwill. When the difference is negative, it is di- rectly recognised in the income statement. A subsidiary is included in the consolidated financial statements from the time of acquisition until the date on which control ceases.

Inter-company assets, liabilities, income, expenses and unrealised profits and losses arising from inter-company transactions between group companies are eliminated in their entirety.

EOS Russia is not involved in any entities that are to be classified as associated companies, joint ventures or special purpose entities.

Foreign currency transactions

Transactions in foreign currency are translated to the functional currency at the rate of exchange on the transac- tion date. Monetary assets and liabilities in foreign currency are translated to the functional currency at the exchange rate on the reporting date. Foreign currency differences that arise from translations are recognised in profit or loss. Non- monetary assets and liabilities recognised at historical cost are translated at the exchange rate on the transaction date.

Non-monetary assets and liabilities reported at fair value are translated to the functional currency at the rate prevail- ing on the date of the determination of fair value. Foreign exchange rate gains and losses on investments in equity instruments that are traded in Ruble are presented in the income statement as net profit from investing activities. All other foreign exchange rate gains and losses are presented as finance income or finance expenses.

Foreign operations

Assets and liabilities in foreign operations, including good- will and fair value adjustments arising on acquisition, are translated from their functional currency to the reporting currency of the Group (Swedish krona), at the exchange rate at the reporting date. Income and expenses of foreign op- erations are translated to Swedish kronor at an average ex- change rate comprising an approximation of exchange rates prevailing at each transaction date. Translation differences that arise from currency translation of foreign operations are recognised directly in equity as translation reserve.

Change in value of securities

Changes in value of securities, which are reported as rev- enue in operating income, consist of both realised and un- realised changes in value of securities in the portfolio man- agement. Realised changes in value refer to the difference between settlement received and the value at the beginning of the period. Unrealised changes refer to the changes in the value of the securities reported in EOS Russia’s balance sheet on the balance sheet date. This item also includes the changes in value of equity options.

Operating leases

The Group has only one operating lease agreement. Costs regarding operating lease agreements are recognised straight-line in the income statement over the leasing period.

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Finance income and expenses

Finance income comprises interest income on temporary excess liquidity that is invested in fixed-income securities and that in the accounts is classified as financial assets avail- able for sale. Finance income also includes gains from the divestment of such items and gains in the change in value of currency futures used for financial hedging of the price of shares. For more information, see the “Financial instru- ments” section of the accounting principles.

Finance expenses comprise interest expenses on loans, losses in the change in value of currency futures used for financial hedging of the price of shares and impairment of financial assets.

Exchange rate gains and losses are reported at net amount.

Taxes

Income tax expense comprise current and deferred taxes.

Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is tax that is to be paid or received for the current year by applying the tax rates enacted or sub- stantively enacted at the reporting date. Current tax also includes adjustments to current tax attributable to previous periods.

Deferred tax is recognised using the balance sheet meth- od, providing for temporary differences between amounts used in financial reporting and taxation. The valuation of deferred tax is based on how underlying assets or liabilities are estimated to be accounted for or regulated. Deferred tax is measured by applying tax rates or tax regulations enacted at the reporting date. Deferred tax assets related to deductible temporary differences and loss carry-forwards are only reported to the extent that it is likely that they will be utilised. The value of deferred tax assets is reduced when it is no longer deemed likely that they can be utilised.

Financial instruments

When a financial asset or financial liability is recognised initially, EOS Russia measures it at its fair value plus, in the case of financial assets and liabilities not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability. For financial instruments measured at fair value through profit and loss, transaction costs are recognised directly as expenses when they are incurred.

A financial asset or a financial liability is recognised in the balance sheet when the company becomes party to the instrument’s contractual terms. A financial asset is derecog- nised in the balance sheet when the rights in the agreement have been realised, become due or when the company loses control over them. This applies also for part of a financial asset. A financial liability is derecognised in the balance sheet when the obligations in the contract are fulfilled or extinguished in some other way. This applies also for part of a financial liability.

A financial asset and a financial liability are offset and recognised as a net amount in the balance sheet only if there is a legal right to offset the amount and there is an intention to settle the items as a net amount or to realise the asset and settle the liability at the same time.

Acquisitions and divestments of financial assets are rec- ognised on the transaction date, which is the date when the company commits to acquire or divest the asset.

Categories of financial instruments and measurements

(i) Financial instruments held for trading

Investments in equity instruments are classified as held for trading and are measured at fair value (without any deductions for future transaction costs) with changes in fair values recognised in the income statement. Being the main activity of EOS Russia, the change in value of and dividends received from these securities are recognised as revenue in operating income.

Stand-alone and any potential embedded derivatives that are not closely related to the host contract also belong to the category financial instruments held for trading and are measured at fair value through the income statement.

Derivatives utilised for financial hedging consist of equity options and currency futures. The change in value of equity options is reported in “Net change in value of securities.”

Changes in the value of currency futures are reported in

“Finance income” and “Finance expenses”, since these fu- tures are utilised to hedge financing.

(ii) Loans and receivables

Loans and receivables in the balance sheet consist of cash equivalents and receivables. Loans and receivables are measured at amortized cost less charges for impairment.

A loan and receivable is regarded by the company as impaired

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and accounted for with an amount corresponding to the best estimate considering all available information prior to the release of the financial statements, with the conditions prevailing on the balance sheet date. Objective evidence that a financial asset or group of assets is impaired includes observ- able data that comes to the attention of the company e.g.

a. significant financial difficulty of the obligor;

b. a breach of contract, such as a default or delinquency in interest or principal payments;

c. it is becoming probable that the obligor will enter bankrupt- cy or other financial reorganisation

(iii) Financial assets available for sale

In cases when the Group is temporarily over-funded await- ing the appropriate opportunity for additional investments, the liquidity surplus is invested in interest rate bearing financial instruments and the investments for measurement and recognition purposes, belong to the category financial assets available for sale, since the Group has no intention to hold the securities to maturity. The instruments are ac- cordingly measured at fair value with changes in fair values recognised directly in equity.

(iiii) Other financial liabilities

Issued debt instruments and other financial liabilities are measured at amortised cost.

Valuation at fair value

Financial instruments that are measured at fair value are, when possible, measured at fair value based on prices that are quoted on active markets. According to management’s judgment all of the investment portfolio does not how- ever have prices quoted on an active market, meaning that valuation techniques are used. The groups applied valu- ation models for the shares that are not traded on active markets use the mid-market price on the market (RTS) as a basis. The objective of using this valuation technique is to establish what the transaction price would have been on the measurement date between knowledgeable partners that would consider setting a price that is consistent with accepted methods for pricing similar financial instruments

and have an intrest in finalizing the transaction. The entity regularly validates its valuation techniques by comparisons to actual transactions that take place in the market and make any adjustments to the assumptions in the valua- tion model if material and systematic differences emerge between the values of the valuation model and the value of the actual transactions in the market. Potential transaction costs arising in conjunction with the divestment of assets are not taken into account.

Property, plant and equipment

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any impairment losses. Cost includes the purchase price and any expendi- ture directly attributable to bringing the asset to a working condition for its intended use.

Depreciation

Depreciation is made on a straight-line basis over the estimated useful life. The estimated useful life is assessed annually.

Property 40 years

Plant and equipment 5-10 years

Computers 3 years

Equity

Financial liabilities and issued equity instruments are clas- sified and presented in accordance with the substance of the transactions rather than the legal form, in cases where substance and form diverge. Also payments from these instruments are classified in accordance with the financial substance of the contract.

Dividends

Dividends are reported as liabilities in the consolidated ac- counts after the Annual General Meeting has approved the dividend proposal.

Earnings per share

Earnings per share comprise net profit for the year in the Group attributable to the Company’s shareholders divided by the weighted average number of outstanding shares dur- ing the year.

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Remuneration to employees

Share-based payments

Only cash-settled share-based payments currently exist.

The Company reports the services paid by the share-based payments over the period when the services are received.

EOS Russia values the services purchased and the liabilities arising at the fair value of the liability. Until the liability is settled, the fair value of the liability is revalued on each reporting date and on the settlement date, whereby each change in fair value is reported in the income statement for the period.

Other long-term remuneration to employees

Other long-term remuneration to preference share holders is valued in the following manner. EOS Russia’s best as- sessment of the final amount of the future remuneration is discounted with an interest rate determined with respect to the market return on high-quality corporate bonds on the reporting date. An amount corresponding to the portion of the total services that EOS Russia has received by the end of the reporting period is reported as a provision in the bal- ance sheet. The change in the provision during the account- ing period is reported as a cost in the income statement.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term variable cash remu- nerations if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Provisions

A provision is reported in the balance sheet when there is an existing legal or informal obligation as a result of an event that has occurred, and it is probable that an outflow of financial resources will be required to settle the commit- ment and a reliable estimate of the amount can be made.

The amount recognised as a provision is the best estimate of the amounts required to settle the existing commitment at the balance sheet date. Where the effect of the point in time that payment is to take place is important, the provi- sion comprises the present value of the payments expected

Contingent liabilities

A contingent liability is reported when there is a possible obligation deriving from a past event and whose existence is confirmed only by the occurrence of one or more uncer- tain future events or when there is an obligation that is not reported as a liability or provision because it is not probable that an outflow of resources will be required.

EOS AB’s accounting principles

EOS AB prepared its Annual Report in accordance with the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial reporting Board’s recommendation RFR 2.1 Accounting for Legal Entities. The UFR statements of the Board are also applied. RFR 2.1 entails that EOS AB in the Annual Report for the legal entity shall apply all IFRSs and statements as far as possible within the framework of the Annual Accounts Act and with respect to the connection between accounting and taxation. The Recommendation states the exceptions from and additions to IFRS that are to be applied.

Difference between the Group’s and EOS AB’s ac- counting principles

The differences between the Group’s and EOS AB’s account- ing principles are stated below. The accounting principles for EOS AB described below were applied consistently to all period presented in EOS AB’s financial statements.

Classification and presentation

EOS AB’s income statement and balance sheet have been presented in accordance with the structure stipulated by the Annual Accounts Act. The difference compared with IAS 1 Presentation of Financial Statements that is applied to the presentation of the consolidated financial statements is primarily the reporting of financial income and expenses, fixed assets and shareholders’ equity.

Subsidiaries

Participations in EOS AB are reported in accordance with the cost method with deductions for any impairment losses.

Only dividends are reported as income, on the condition that such dividends derive from profit earned after the acquisition. Dividends exceeding these earned profits are considered to be a repayment of investments and reduce the carrying amount of the participation.

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Group

In thousands of SEK 2008 2007

Fair value gains and losses of shares and participations* -3,776,649 201,620

Transaction exchange rate effect 554 -15,746

Dividends 106 507

Total -3,775,989 186,381

Company

In thousands of SEK 2008 2007

Advisory services fee to Group companies 17,280 9,750

Total 17,280 9,750

*Financial assets held for trading

Note 2 Net Profit – Investing activities

Note 3 Other income

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Senior management by gender

2008 At the end of period

2007 At the end of period

2008 Of whom Men, %

2007 Of whom Men, % Company

Board of Directors 6 6 100% 100%

Group management 3 2 100% 100%

Group

Board of Directors 12 10 92% 90%

Group management 4 3 100% 100%

Average number of employees

2008 2007 2008 Of whom Men, % 2007 Of whom Men, %

Company

Sweden 3 2 100% 100%

Total Company 3 2 100% 100%

Subsidiaries

Cyprus 2 2 100% 100%

Total subsidiaries 2 2 100% 100%

Total Group 5 4 100% 100%

Employee benefits Group Company

In thousands SEK 2008 2007 2008 2007

Wages and salaries 8,884 3,501 5,213 2,709

Mandatory social security contributions 1,864 867 1,715 867

Total 10,748 4,369 6,928 3,576

No pension benefits exist within the Group.

Note 4 Employee benefits, expences and remuneration paid to senior executives

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Salary, other remuneration and social security contributions

In thousands of SEK 2008 2007 2008 2007

Salary and other remuneration

Social security contributions

Company 5,213 2,709 1,715 868

(of which pension cost) 0 0 0 0

Salary and other remuneration by country and between Board and CEO and other employees

In thousands of SEK 2008 2007 2008 2007

Senior Executives/

Group Mgt Other employees

Company 5,213 2,701 0 9

Subsidiary in Cyprus 1,140 660 2,530 132

Total Group 6,353 3,361 2,530 141

(of which bonuses) etc.) 30 131 - -

Remuneration and other benefits to Group management

Wages and fees

Remuneration is paid to the CEO in the form of a fixed monthly salary. The period of notice for EOS AB is 6 months and for the CEO six months. Remuneration to EOS Russia’s Head of Research is paid in the form of a fixed monthly salary. The period of notice for EOS Ltd is 12 months and for the Head of Research six months. EOS Ltd can not ter- minate the employment before December 31, 2012. Remuneration to the CFO is paid in the form of a fixed monthly salary. The period of notice for EOS AB is 12 months and for the CFO six months. Remuneration to the Head of Risk and Compliance is paid in the form of a fixed monthly salary and the possibility of a bonus. The period of notice for EOS AB is 12 months and for the head of risk and compliance six months. Should EOS Russia terminate the employ- ment of the CFO or the head of risk and compliance up to and including December 31, 2011, after the end of the notice period, the chief financial officer and the head of risk and compliance are also entitled to monthly severance pay amounting to the monthly salary. From the monthly severance pay, EOS Russia shall deduct any income that they may earn from another employment or business up to and including December 31, 2012.

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Remuneration and other benefits to Group management 2008

In thousands of SEK Salary/

board fees

Variable Remuneration

Share-based pay- ments*^

Other*^ Total

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007

Chairman of the board,

Seppo Remes 495 365 - - -2,634 6,566 9,333 6,956 7,194 13,887

Board member,

Morten Ahlström 330 250 - - - 330 250

Board member,

Pontus Lesse 330 244 - - - 164 - 493 244

Board member,

Paul Swigart 330 244 - - - 330 244

Board member,

Marc Winer 330 244 - - - 330 244

Chief Executive Officer,

Sven Thorngren 1,238 660 - - -2,634 6,566 9,333 10,809 7,937 18,035

Head of Research,

Lauri Sillantaka 1,140 660 - - -2,634 6,566 9,333 10,809 7,839 18,035

Other members of Group

management (2) 2,131 562 30 131 - - - - 2,161 693

Total 6,324 3,229 30 131 -7,903 19,697 28,163 28,574 26,614 51,631

Of which is expensed in

EOS AB 5,184 2,569 30 131 -2,634 6,566 9,497 6,956 12,077 16,222

*Related to remuneration to preference shareholders and accounted for as other expenses.

^An amount of SEK 11,794 thousand (27,403) relates to provisions made for vested possible future outcome of preference share component (i) and (ii) based on assumptions of positive future share-price and net asset value (NAV) development, see below for more details. This amount has not been paid to the preference shareholders and may never be paid depending on the NAV and share-price performance in the future.

Compensation to preference share holders in EOS Ltd as of December 31, 2008 has been accrued as a cost of SEK 19.9 million (48.3) and a debt of SEK 15.7 million (48.3), of which SEK 3.9 million (20.9) is accounted for as a liability and SEK 11.8 million (27.4) represents a provision in ac- cordance with the current agreement with the preference shareholders. The preference shares give no residual right to a part of the group’s net assets or profit, but instead guarantee dividend depending on the result of (i) EOS AB’s yearly share price development, (ii) the development of EOS Russia’s net asset value from 2008-2012 and (iii) the differ-

(i) 5% of EOS AB’s yearly share price development

Dividends, which are settled in cash, shall be paid out an- nually according to the below formula. Accounting is based on the development of the share price of EOS AB during the period January 1 to December 31 for the years 2008- 2012. The total vesting period runs from May 8, 2007 to December 31, 2012. Expenses are recognised on a straight line basis from grant date May 8, 2007 (graded vesting).

Annual dividend = 5% x [annual change in share price x number of outstanding shares]

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The valuation on December 31, 2008 is based on the fol- lowing conditions: The dividends relating to the preference shares can be considered as five options with a term of 1 year during the respective years from 2008-2012. Valuation of the options takes place on the basis of the application of the Black-Scholes formula for option value calculation whereby the value of a stock option is calculated based on the following parameters: value of underlying share,15.1055 (94.5), term of the option 1 (1) year, exercise price 15.1055 (94.5), risk-free interest rate for a term equivalent to the one applying to the option, 1.78-2.61% (4.67-4.75%), the under- lying share’s expected volatility over the term of the option, 50% (29.5%) and expected dividends during the term of the option 0 (0). The value of each preference share amounts to five percent of the value of the option.

During 2008, charges to the consolidated income state- ment were reversed with SEK -7,903 thousand (19,697) and the charges to the Company income statement were re- versed with SEK -2,634 thousand (6,566) as other expenses with a provision of SEK 11,794 thousand (19,697) accounted for in the consolidated balance sheet pertaining to share- based payments vested during the year.

No preference share dividend payments are made by any party when the development of the share price for any given year is zero or below zero.

(ii) 5% of the development of EOS Russia’s net asset value from 2008-2012

Dividends, which are settled in cash, shall be paid out ac- cording to the below formula based on the development of the net asset value during the period January 1, 2008 to December 31, 2012 or upon the suggested liquidation date in 2013.

The Group applies different principles for recognising and measuring the dividend depending on the change of NAV during 2008-2012. For two persons IAS 19 applies which means that the present value of expected future payment on settlement is recognised over the service period May 8, 2007 to December 31, 2012. For one person IAS 37 applies, which means that the amount that at each balance sheet date would be required to settle the obligation is recognised as a provision. The amount is equal to five percent of the change in NAV from January 1, 2008 to the balance sheet date and hence no provision and expense has been account- ed for in 2008. The change in the provision is recognised as expense. The final dividend to be paid after the end of 2012 is calculated according to the following formula:

One-time dividend = 5% x [change NAV per share Jan. 1, 2008 – Dec. 31, 2012 x number of outstanding shares]

An assessment of the future share price development for the EOS Russia share is required for estimating the net asset value development over the five-year period for IAS 19.

During 2008, charges to the consolidated income state- ment were reversed with SEK - 7,531 thousand (7,705) as other expenses with a corresponding reversal of provisions in the consolidated balance sheet which means that no debt or provision exists for this component as of December 31, 2008.

No preference share dividend payments are made by any party when the development of the net asset value is zero or below zero.

(iii) The difference between a total of 0.5% per quarter of EOS Russia’s’s net asset value less actual operating costs

Dividends, which are settled in cash, shall be paid out ac- cording to the below formula based on the development of the net asset value per the balance sheet date and the operating costs per quarter.

The dividend is payable after each quarter, starting with the second quarter 2007 and ending with the fourth quarter 2012.

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Group Company

In thousands of SEK 2008 2007 2008 2007

KPMG

Audit assignment 2,257 1,205 1,963 1,048

Other assignments 2,051 895 2,051 895

Total 4,308 2,100 4,014 1,943

Group Company

In thousands of SEK 2008 2007 2008 2007

Preference share remuneration

EOS AB’s yearly share price development* -7,903 19,697 -2,634 6,566

Net increase in EOS Russia’s net asset value from 2008-2012* -7,531 7,705 - -

Quarterly dividend on preference shares 35,529 20,869 11,843 6,956

Other 14,513 8,514 - 13

Total 34,608 56,785 9,209 13,535

*See Note 4 for more details.

Note 5 Other expenses

Note 6 Fees and expenses of auditors

Quarterly dividend = 0.5% x quarter NAV – adjusted operating costs

Adjusted operating costs include costs in operating activi- ties less costs for e.g. preference share related compensa- tion, auditing and potential extraordinary legal costs related to any legal proceedings.

If the zero point five (0.5) percent of the net asset value as reflected in the quarterly report for any given quarter exceeds the operating costs for the relevant quarter, the Company shall pay out the difference to the holders of the preference shares.

If the operating expenses for any given quarter exceeds zero point five (0.5) percent of the net asset value as reflected in the quarterly report for the relevant quarter, the preference share holders are obliged to compensate the

Company with an amount corresponding to the operating expenses for the relevant quarter minus zero point five (0.5) percent of the net asset value as reflected in the quarterly report for the relevant quarter.

As evident from note 21 the agreement with the prefer- ence shareholders has been changed after the balance sheet date which affects the adjusted operating costs and how the preference shareholders should compensate the company in case the operating costs would exceed 0,5 percent of NAV for any quarter.

During 2008, the consolidated income statement was charged with SEK 35,529 thousand (20,869) and the Company income statement SEK 11,843 thousand (6,956) as other expenses, an amount of SEK 3,916 thousand (20,869) was accounted for as a liability in the consolidated balance sheet.

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Leases as lessee

Non-cancellable operating lease rentals are payable as follows: Group Company

In thousands of SEK 2008 2007 2008 2007

Less than one year 679 679 679 679

Between one and five years 679 1,358 679 1,358

More than five years - - - -

Total minimum lease payments 1,358 2,037 1,358 2,037

The Group’s leasing expenses for operating lease agreements amounted to SEK 679 thousand (34) in 2008 and was made up entirely of office rent.

Group Company

In thousands of SEK 2008 2007 2008 2007

Interest income on financial assets measured at amortised cost 1,572 901 1,063 438

Income from participations in Group companies* - - 9,209 13,522

Net foreign exchange gain 572 118 572 118

Other 5 3 5 3

Finance income 2,149 1,022 10,849 14,081

Interest expense on financial liabilities measured at amortised cost -38,226 -19,414 -65 -4

Income from participations in Group companies* - - -3,510,255 -

Net foreign exchange loss -178 -43 -178 -43

Finance expenses -38,404 -19,457 -3,510,498 -47

* Value of services charged to EOS AB’s subsidiary but received by EOS AB, which is equivalent to dividend income.

Note 7 Operating leases

Note 8 Finance income and finance expense

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Reported in the income statement

Group Company

In thousands of SEK 2008 2007 2008 2007

Current income tax

Income tax for the period -32 -103 0 -27

Adjustment of taxes attributable to prior years 36 - 36 -

Total reported Group taxes 4 -103 36 -27

Reconciliation of effective tax rate Group

In thousands of SEK 2008 (%) 2008 2007 (%) 2007

Profit/loss before tax - -3,858,356 - 106,779

Income tax using EOS AB’s domestic tax rate 28.0% -1,080,340 28.0% 29,898

Withholding tax on profit before tax 0.0% 32 0.1% 76

Effect of tax rate in foreign jurisdictions* -18.0% 692,609 -20.3% -21,637

Tax exempt profit 0.1% -2,663 -16.2% -17,350

Non-deductible expenses and losses -10.0% 384,915 7.0% 7,455

Increase in tax-losses carried forward without

capitalisation of deferred tax -0.1% 5,487 1.6% 1,661

Adjustment of taxes attributable to prior year 0.0% -36 - -

Effective tax rate 0.0% 4 0.1% 103

Company

In thousands of SEK 2008 (%) 2008 2007 (%) 2007

Profit/loss before tax -3,511,572 95

Income tax using EOS AB’s domestic tax rate 28.0% -983,240 28.0% 27

Tax exempt profit 0,0% -2,579 - -

Non-deductible expenses and losses 28.0% 985,489 - -

Increase in tax-losses carried forward without

*The subsidiary acquired in 2007 operates in a tax jurisdiction with lower tax rates.

The main part of the Group’s income from investing activities derives from capital gains and is tax exempt.

Note 9 Income tax expense

References

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