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East Capital (Lux) Société d’investissement à capital variable incorporated in Luxembourg Audited Annual Report 2007

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East Capital (Lux)

Société d’investissement à capital variable incorporated in Luxembourg

Audited Annual Report 2007

Subscriptions can only be received on the basis of the latest prospectus accompanied by the latest annual report as well as by the latest half year report, if published after the latest annual report. The details of the changes in portfolio composition are held at the disposal of the unit holders at the registered office of the Fund and are available upon request free of charge.

Contents

A word from the Chairman ........................................... 3

Developments in the funds and markets, plus the funds’ accounts:

East Capital (Lux) Convergence Eastern European Fund ................................................. 4East Capital (Lux) Russian Fund ................................. 8East Capital (Lux) Eastern European Fund ............... 14East Capital (Lux) ............................................................ 17Notes .................................................................................. 18

Invest in East Capital’s (Lux) funds ............................. 19East Capital Advisory Committee ............................... 20Portfolio Management Team ......................................... 20Management and administration ................................. 22Report of the Réviseur d’Entreprises .......................... 23

© East Capital, 2008. Photos: Victor Brott, Stig-Göran Nilsson, Shutterstock. Graphic design: Maria Sohlberg & Ilze Ivanova. Print & preprint: Alfaprint AB.

Front cover: Newly-built Moscow City area under intense development. The East Capital Summit in Moscow in autumn 2007 included a visit to the construction site of Moscow city area, and a presentation from Enka, one of our portfolio companies

from Turkey. Enka has been very active on the construction and real estate market in Moscow for many years.

Every year we visit more than 500 companies. This tells us more about the markets than any index in the world ever could.

Welcome to a new decade with East Capital!

On its 10th anniversary, the East Capital Group launched its first SICAV in Luxembourg. The plan to offer our award-winning investment style in different currency classes has turned out well. Less than one year from launch, East Capital (Lux) manages over EUR 160m, a number that we expect to increase significantly in the future.

Three compartments were launched in 2007; the East Capi-tal (Lux) Russian Fund and the East Capital (Lux) Convergence Eastern European Fund in January and the East Capital (Lux) Eastern European Fund in December. All funds are managed by the same investment team that manages East Capital’s Swedish-domiciled funds.

The recently-launched East Capital (Lux) Eastern European Fund is very similar to the Swedish-domiciled East Capital East-ern European fund that won no less than five Lipper awards for Best Emerging Europe Equity Fund during 2007. The cross-border registrations have started and we hope to have the fund available soon in many markets besides Luxembourg.

Our markets

The year 2007 may well go down in recent history as the year of the ”decoupling,” i.e. the previously unthinkable split of the American economy from the rest of the world. Previously, it was generally considered that the American economy generally determined developments in other countries. In 2007, this view was challenged, partly as a result of the American credit crisis and its side-effects. Whether or not this split is wishful thinking remains to be seen.

In Latin America and the emerging markets of Asia, total exports to the US make up 40% and 20% respectively, whilst the corresponding figure in Eastern Europe is just 4%. Although growth in our region will tail off slightly, it is expected to remain healthy. We feel that countries with strong, balanced economies will do relatively well when the outlook for the world economy is uncertain. Russia is a good example of this, with an economy that is maybe stronger than ever, with good underlying growth as well as large budget and current account surpluses. Poland is a good example of a growth engine in Central Europe, whilst the developments in countries with greater economic imbalances, such as the Baltics, Bulgaria and Romania, are more depend-ent on changes in the uncertainties of the world market. Growth in Eastern Europe in 2008 will be slower than in 2007, which comes as no surprise bearing in mind that the growth over the last two years has been the strongest since 1989. Furthermore, some of the economies have exceeded their potential, which has led to economic overheating. The most important driver of growth in Eastern Europe has been, and will remain, domestic demand. There are however, considerable variations within the region and the markets are likely to remain volatile. Once again, we emphasise the long-term perspective as the key to success for investments in Eastern Europe.

Important prospectus changes

In December, the new prospectus of East Capital (Lux) was approved by the CSSF. The prospectus also included, besides the new East Capital (Lux) Eastern European Fund, a number of other important changes:

• New cut-off time at 12.00 CET on a valuation day. • Minimum subscription/subsequent subscription/holding in

A Class shares of EUR/USD 1,000.• East Capital (Lux) Eastern European Convergence Fund has

been renamed to East Capital (Lux) Convergence Eastern European Fund.

• Compartments will be closed for trading on days where stock exchanges and regulated markets in countries where the Compartment is materially invested (more than 25% of the Compartment’s net assets) are closed for trading.

In November, East Capital celebrated its 10-year anniversary. And for the next decade we will work with the same determi-nation and long-term perspective that have brought us this far. We hope that you also plan to be with us on the continued explo-ration of the East Capital universe!

Yours faithfully,Justas PipinisChairman East Capital (Lux)

3

4

Management report

The fund’s development

The East Capital (Lux) Convergence Eastern European Fund Class A (EUR) gained 9.6% since inception in 2007, whereas the MSCI EM Europe Index gained 16.3% during the same peri-od (in EUR). The fund was launched on 31 January and had EUR 23,833,530 under management on 31 December. Net inflows amounted to EUR 23,913,280.

There are important differences in the underlying economies of the countries in the region. On the positive side, some of the largest economies are strong and maturing. The Polish econo-my is perhaps stronger than ever and the Turkish economy is developing rapidly in a positive direction. On the negative side, a number of the smaller countries in the region have accumulated large economic imbalances. Latvia and Estonia are the econo-mies with the largest imbalances, following years of very rapid GDP growth.

Southeastern Europe was the strongest sub-region, with gains ranging between 50 and 100% for a handful of markets. Turkey is the second largest market in the fund and contributed a lot to the positive performance, with its 73% gain in 2007. But it was Ukraine that was the best-performing market in Eastern Europe, with a 135% gain. Markets with a high degree of vul-nerability to the global credit market – such as Estonia, Latvia, Lithuania, Romania, Hungary and Kazakhstan – were more affected by the crunch, but all except for Estonia ended the year in positive territory.

Changes during the period

The fund was launched during the year and has accordingly been investing in stocks in order to mirror the East Capital East-ern European Fund, minus Russia. The largest purchases were made in Hungarian OTP Bank, Austrian Raiffeisen International and Erste Bank, as well as Bank TuranAlem and Kazmunaigas, the national oil company from Kazakhstan.

All fi gures in the management report are in USD and based on the full

year 2007 unless otherwise stated.

Fund facts

Risk Medium Investment manager East Capital Asset Management AB Type UCITS III Launch date Class A (EUR & USD) 31.01.2007 Class C (EUR) 07.05.2007 Class C (USD) 11.05.2007 Quotation Daily Benchmark MSCI EM Europe Index Dividend No Management fee Class A (retail) 2.5 %, Class C (institutional) 2 % Subscription fee Max 5 % Redemption fee Max 1 % (other rules may apply when redeeming units via our external partners) Conversion fee 0 % Domicile Luxembourg NAV currency EUR and USD ISIN Class A (EUR) LU0272825398 Class A (USD) LU0272828061 Class C (EUR) LU0272828574 Class C (USD) LU0272828731 Bloomberg Class A (EUR) ECEUEUA LX Class A (USD) ECECUSA LX Class C (EUR) ECEECUR LX Class C (USD) ECEECUD LX

East Capital (Lux) Convergence Eastern European Fund

Aim and investment strategy

The Compartment invests mainly in securities of issuers domiciled, significantly in-vesting or conducting significant operations in Albania, Armenia, Austria, Azerbai-jan, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Greece, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Tajikistan, Tur-key, Turkmenistan, Ukraine and Uzbekistan. The Compartment may also invest in securities (such as ADRs and GDRs) giving exposure to the above securities.

At least 75% of the Compartment’s assets are invested in equity or equity-related securities.

The Compartment may hold liquid assets on an ancillary basis. Under normal market conditions, investment in liquid assets and debt instruments of any kind does not exceed 25% of the Compartment’s net assets.

The Compartment may use derivative techniques and instruments for efficient management and hedging purposes on an ancillary basis.

5

Ten largest holdings of the fundCompany Country Operation % of the

fund’s NAV

OTP Bank Hungary Banking and Finance 6.1

Raiffeisen International Austria Banking and Finance 5.4

Erste Bank Austria Banking and Finance 4.5

Kazmunaygas GDR Kazakhstan Oil and Gas 4.5

PGNiG Poland Oil and Gas 3.6

Turkiye Garanti Bankasi Turkey Banking and Finance 3.5

AIK Banka Serbia Banking and Finance 3.0

Bank TuranAlem Kazakhstan Banking and Finance 2.6

CME Eastern Europe Media 2.5

Ericsson Nikola Tesla Croatia IT and Internet 2.3

NAV compared with adjusted MSCI EM Europe IndexIndex for NAV: 31.01.2007 = 100 EUR

80

85

90

95

100

105

110

115

120

125

130

Jan

2007

Feb 2

007

Mar

200

7

Apr 200

7

May

200

7

Jun

2007

Jul 2

007

Aug 2

007

Sep 2

007

Oct

200

7

Nov 2

007

Dec 2

007

Portfolio break-down

* Other assets and liabilities, net.** Eastern Europe holds: CME, a media company listed in USA, with business in Eastern Europe; Intl Personal Finance, a banking and finance company listed in the UK, with business in Eastern Europe; Strabag AG, a construction company listed in Germany, with business in Eastern Europe; Strabag SE, a construction company listed in Austria, with business in Eastern Europe.

Turkey 27.9%

Austria 11.7%

Poland 8.5%

Kazakhstan 8.1%

Hungary

7.2%

Lithuania 5.0%

Eastern Europe** 4.7%

Ukraine 4.5%

Czech Republic 4.5%Serbia 3.3%Romania 3.0%

Croatia 2.3%

Estonia 2.2%

Slovenia 1.8%

Greece 0.9%

Latvia 0.8%

Other* 3.5%

Banking and Finance 43.8%

Oil and Gas 16.3%Retail

5.6%

Constr. and Constr. Mtrl. 5.0%

Real Estate 4.7%

It and Internet 2.6%Media 2.5%Consumer Goods 2.5%

Power Utilities - Generation 2.0%Other Sectors 11.4%Other* 3.5%

East Capital (Lux) Convergence Eastern European Fund

MSCI EM Europe Index

(EUR)

Changes in number of shares outstandingShares outstandingat 31.01.07

Shares issued

Shares redeemed

Shares outstanding at 31.12.07

Class A (EUR) 0.00 119,219.13 25,933.82 93,285.31

Class A (USD) 0.00 52,771.04 6,770.32 46,000.72

Class C (EUR) 0.00 86,885.78 235.00 86,650.78

Class C (USD) 0.00 13,500.00 0.00 13,500.00

Key figures for the East Capital (Lux) Convergence EE Fund31.12.07 31.12.06 31.12.05

Total return Class A (EUR) 9.6 %* 0 0MSCI EM Europe Index (EUR) 16.3 %* 0 0Class A (USD) 23.4 %* 0 0MSCI EM Europe Index (USD) 31.7 %* 0 0

Class C (EUR) 0.7 %** 0 0MSCI EM Europe Index (EUR) 15.7 %** 0 0Class C (USD) 10.8 %*** 0 0MSCI EM Europe Index (USD) 29.5 %*** 0 0* Since launch date 31.01.2007. ** Since launch date 07.05.2007. *** Since launch date 11.05.2007.

Number of units outstandingClass A (EUR) 93,285 0 0Class A (USD) 46,001 0 0Class C (EUR) 86,651 0 0Class C (USD) 13,500 0 0

NAV per unitClass A (EUR) 109.62 0 0Class A (USD) 123.36 0 0Class C (EUR) 100.68 0 0Class C (USD) 110.78 0 0

6

Croatia ....................................................................................................................................................................................................559 ........................2.3Ericsson Nikola Tesla ** IT and Internet 1,198 559 2.3 Czech Republic .........................................................................................................................................................................1,073 ........................4.5CEZ Power Utilities - Integrated 8,037 412 1.7Orco Property GRP Real Estate 3,673 301 1.3Zentiva NV Pharmaceuticals 9,830 360 1.5 Eastern Europe .........................................................................................................................................................................1,127 ........................4.7CME 2 Media 7,561 597 2.5Intl Personal Finance 3 Banking and Finance 60,000 157 0.7Strabag AG 4 Constr. & Constr. Mtrl. 455 124 0.5Strabag SE 5 Constr. & Constr. Mtrl. 5,100 248 1.0 Estonia ...................................................................................................................................................................................................534 ...............2.2Baltika Retail 10,210 40 0.2Merko Ehitus Constr. & Constr. Mtrl. 8,195 107 0.4Olympic Entertainment Consumer Goods 28,788 101 0.4Tallinna Kaubamaja Retail 36,835 287 1.2 Greece.....................................................................................................................................................................................................217 ........................0.9Fourlis Holdings Retail 8,000 217 0.9 Hungary ............................................................................................................................................................................................1,705 ........................7.2FOTEX Retail 38,500 135 0.6MOL Oil and Gas 1,173 114 0.5OTP Bank Banking and Finance 41,890 1,456 6.1 Kazakhstan ...................................................................................................................................................................................1,921 ........................8.1Bank Tsentrkredit Banking and Finance 31,925 245 1.0Bank TuranAlem Banking and Finance 1,419 609 2.6Kazmunaygas GDR Oil and Gas 50,576 1,068 4.5 Latvia .......................................................................................................................................................................................................184 ........................0.8Grindeks Pharmaceuticals 9,211 73 0.3LASCO Transportation 60,000 112 0.5 Lithuania ..........................................................................................................................................................................................1,199 ........................5.0Apranga Retail 28,800 120 0.5DnB Nord Bankas Banking and Finance 2,521 318 1.3Pieno Zvaigzdes Consumer Goods 152,000 255 1.1TEO total 415 1.7 TEO LT Telecom 234,500 161 0.7 TEO LT GDR Telecom 36,930 254 1.1Rokiskio Suris Consumer Goods 40,000 91 0.4 Poland ................................................................................................................................................................................................2,015 ........................8.5Bank Millennium Banking and Finance 131,300 426 1.8ING Bank Slaski Banking and Finance 1,016 205 0.9PGNiG Oil and Gas 605,808 861 3.6PKN Oil and Gas 18,150 263 1.1Reinhold Polska Real Estate 12,500 104 0.4TPSA Telecom 24,860 156 0.7 Romania ................................................................................................................................................................................................365 ........................1.5Impact Real Estate 1,218,491 172 0.7Petrom Oil and Gas 1,327,000 193 0.8 Serbia ......................................................................................................................................................................................................793 ........................3.3AIK Banka ** Banking and Finance 5,667 705 3.0Energoprojekt Holding Constr. & Constr. Mtrl. 2,400 88 0.4 Slovenia.................................................................................................................................................................................................434 ........................1.8Mercator Retail 1,043 350 1.5Nova Kreditna Bank Maribor Banking and Finance 2,000 85 0.4 Turkey.................................................................................................................................................................................................6,658 .....................27.9Akbank Banking and Finance 78,198 396 1.7Albaraka Turk Banking and Finance 52,000 189 0.8Anadolu Hayat Insurance 53,506 153 0.6Anadolu Sigorta Insurance 218,415 254 1.1Asya Bank Banking and Finance 58,150 372 1.6Enka Insaat Ve Sanay Constr. & Constr. Mtrl. 25,026 299 1.3Finans Kiralama Banking and Finance 55,493 107 0.5Ipek Matbaacilik Metals and Mining 30,434 145 0.6Is Finansal Kiralama Banking and Finance 128,881 138 0.6Is Gyo Real Estate 191,151 191 0.8Karabuk Demir Celik Metals and Mining 240,000 193 0.8Migros Retail 13,877 185 0.8Sabanci Holding Holding Companies 55,260 208 0.9Sekerbank Banking and Finance 146,648 444 1.9Trakya Cam Sanay Constr. & Constr. Mtrl. 114,959 187 0.8Tupras Oil and Gas 16,900 337 1.4

Statement of net assets (EUR) 31.12.2007

Assets 24,848,672.09Securities portfolio at market value NOTE 2.1 23,000,084.82 Cost price 22,928,245.25 Unrealised profi t on the securities portfolio 71,839.57Cash at banks and liquidities 1,595,705.53Formation expenses NOTE 2.5 102,148.20Subscribers receivable 55,184.45Receivable on spot exchange 95,356.08Other assets 193.01

Liabilities 1,015,142.46Brokers payable 806,320.20Subscribers payable 8,914.38Accrued management fees NOTE 4 44,195.94Custody and administration NOTE 5 872.11Payable on spot exchange 95,610.07Other liabilities 59,229.76

Net asset value 23,833,529.63

Statement of operations and changes in net assets (EUR) 31.12.2007

Income 166,099.36Net dividends 150,851.19Bank interest on cash account 15,248.17

Expenses 545,379.90Amortisation of formation expenses NOTE 2.5 22,851.80Management fees NOTE 4 304,196.78Custodian & sub-custodian fees NOTE 5 20,305.97Taxe d’abonnement NOTE 3 5,504.50Administrative expenses 39,606.60Domiciliation fees 5,567.20Professional fees 11,040.77Bank interest on overdrafts 696.94Legal fees 19,197.44Other expenses 116,411.90

Net loss from investments -379,280.54Net realised profi t on sales of investment securities 256,076.82Net realised loss on foreign exchange -28,386.35

Net realised loss -151,590.07Movement in net unrealised appreciation / depreciation on investments 71,839.57

Decrease in net assets as a result of operations -79,750.50Subscription capitalisation shares 27,358,309.92 Convergence Eastern European Fund - Class A EUR 13,097,874.99 Convergence Eastern European Fund - Class A USD 4,342,724.54 Convergence Eastern European Fund - Class C EUR 8,918,302.69 Convergence Eastern European Fund - Class C USD 999,407.70Redemption capitalisation shares -3,445,029.79 Convergence Eastern European Fund - Class A EUR -2,819,006.29 Convergence Eastern European Fund - Class A USD -602,249.29 Convergence Eastern European Fund - Class C EUR -23,774.21Increase in net assets 23,833,529.63Net assets at the beginning of the period 0.00Net assets at the end of the period 23,833,529.63

Securities portfolio and other net assets 31.12.2007

Name Sector Number Market value % of of shares ‘000 EUR the fund

Shares 1 Austria ...............................................................................................................................................................................................2,790 .....................11.7Erste Bank Banking and Finance 22,087 1,071 4.5Immoeast Real Estate 29,500 217 0.9Meinl European Land Real Estate 15,000 141 0.6Raiffeisen International Banking and Finance 12,467 1,292 5.4S & T IT and Internet 1,480 68 0.3

Continued

East Capital (Lux) Convergence Eastern European Fund

7

Turcas Petrolculuk Oil and Gas 30,600 176 0.7Turk Ekonomi Bankasi Banking and Finance 142,255 243 1.0Turk Hava Yollari Transportation 24,000 120 0.5Turk Sise Cam Holding Companies 1 0 0.0Turkcell Telecom 23,500 175 0.7Turkiye Garanti Bankasi Banking and Finance 137,591 841 3.5Turkiye Halk Bankasi Banking and Finance 64,950 461 1.9Turkiye Is Bankasi Banking and Finance 112,655 482 2.0Turkiye Vakifl ar Bankasi Banking and Finance 86,830 209 0.9Unye Cimento Sanayi Constr. & Constr. Mtrl. 38,231 149 0.6 Ukraine ..............................................................................................................................................................................................1,076 ........................4.5Astarta Holding Consumer Goods 16,000 143 0.6Bank Aval total 308 1.3 Bank Aval ** Banking and Finance 1,984,700 293 1.2 Bank Aval Temp ** Banking and Finance 98,978 15 0.1Ukrnafta ADR Oil and Gas 478 153 0.6Zakhid Energo GDR Power Utilities - Generation 23,800 472 2.0

Units in investment funds Romania ................................................................................................................................................................................................352 ........................1.5SIF 1 (Banat Crisana) Funds Privatization 68,200 68 0.3SIF 2 (Moldova) Funds Privatization 75,100 73 0.3SIF 3 (Transilvania) Funds Privatization 104,400 68 0.3SIF 4 (Muntenia) Funds Privatization 101,200 68 0.3SIF 5 (Oltenia) Funds Privatization 61,900 75 0.3

Total investments ................................................................................................................................................................23,000 .....................96.5Other assets and liabilites, net 834 3.5The fund´s NAV ......................................................................................................................................................................23,834 ..................100.0

The Notes on page 18 are an integral part of these financial statements.

1 Indication of type of market place: No asterisk indicates transferable securities admitted to an official stock exchange listing. * Transferable securities dealt in on another regulated market. ** Other transferable securities.

2 Media company listed in USA, with business in Eastern Europe. 3 Banking and finance company listed in the UK, with business in Eastern Europe. 4 Construction company listed in Germany, with business in Eastern Europe. 5 Construction company listed in Austria, with business in Eastern Europe.

Continued

8

Management report

The fund’s development

The East Capital (Lux) Russian Fund Class A (EUR) gained 14.4% since inception in 2007, whereas the RTS-Index gained 9.7% during the same period (in EUR). The fund was launched on 31 January and had EUR 116,165,275 under management on 31 December. Net inflows amounted to EUR 111,910,902.

The main reason behind the outperformance is the fact that the fund is overexposed to domestic sectors, such as banking and power utilities, at the expense of the natural resources sec-tors, which had a weaker development during the period. The broader focus makes the fund less vulnerable to the export sec-tors and gives a better exposure to the economic growth, which is driven by domestic demand.

The underlying Russian economy is very strong – maybe stronger than ever – with robust economic growth driven by domestic demand. Fixed investment grew by more than 20% in 2007. The Russian economy also enjoys large budget and cur-rent account surpluses. Russia has also accumulated the third largest foreign currency reserves in the world, which makes Rus-sia less vulnerable to the global credit crunch and the expected slowdown in the world economy.

It is interesting to note that the Russian market was more or less flat during the first half of the year. There are certainly many reasons behind the weak performance during the first half of the year, but the perceived political risk associated with the political succession and the heavy issuance on the Russian market are two important factors.

The positive performance was obtained during the second half of the year when many markets around the world experi-enced sell-offs on the back of the global credit crisis and con-cerns about the US economy. Russian banks in particular have proved quite resilient to the difficulties financial sectors in other markets have experienced.

Changes during the period

The fund was launched during the year and has accordingly been investing in stocks in order to mirror the East Capital Rus-sian Fund. The largest purchases were made in the gas giant Gazprom, oil blue chips Lukoil and Rosneft, Russia’s largest and state controlled bank Sberbank as well as the holding company for most Russian power utilities, RAO EES.

All fi gures in the management report are in USD and based on the full

year 2007 unless otherwise stated.

East Capital (Lux) Russian Fund

Fund facts

Risk High Investment manager East Capital Asset Management AB Type UCITS III Launch date Class A (EUR & USD) 31.01.2007 Class C (EUR) 09.02.2007 Class C (USD) 11.05.2007 Quotation Daily Benchmark RTS-Index Dividend No Management fee Class A (retail) 2.5 %, Class C (institutional) 2 % Subscription fee Max 5 % Redemption fee Max 1 % (other rules may apply when redeeming units via our external partners) Conversion fee 0 % Domicile Luxembourg NAV currency EUR and USD ISIN Class A (EUR) LU0272828905 Class A (USD) LU0272829119 Class C (EUR) LU0272829465 Class C (USD) LU0272830042 Bloomberg Class A (EUR) ECRFAEU LX Class A (USD) ECRFAUS LX Class C (EUR) ECRFCER LX Class C (USD) ECRFCUS LX

Aim and investment strategy

The Compartment invests at least two-thirds of its net assets in securities of issu-ers domiciled, signifi cantly investing or conducting signifi cant operations in Russia. It may also invest in securities of issuers domiciled, signifi cantly investing or conducting signifi cant operations in the former Soviet Union states, including Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan, as well as Turkey. The Compartment may also invest in securities (such as ADRs and GDRs) giving exposure to the above securities.

At least 75% of the Compartment’s assets are invested in equity or equity-related securities.

The Compartment may hold liquid assets on an ancillary basis. Under normal market conditions, investment in liquid assets and debt instruments of any kind does not exceed 25% of the Compartment’s net assets.

The Compartment may use derivative techniques and instruments for effi cient management and hedging purposes on an ancillary basis.

When investing in Russia, the Compartment may only invest in securities listed on the RTS Stock Exchange, on the Moscow Interbank Currency Exchange and on any other regulated markets in Russia.

9

Ten largest holdings of the fundCompany Operation % of the fund’s

NAV

Lukoil ADR Oil and Gas 9.3

Gazprom ADR Oil and Gas 9.0

Sberbank Banking and Finance 8.0

Rosneft GDR Oil and Gas 6.6

RAO EES GDR Power Utilities – Integrated 4.9

FESCO Transportation 4.2

Kazmunaygaz GDR Oil and Gas 4.0

TNK-BP Holding Oil and Gas 3.3

GAZ Engineering 2.9

Surgutneftegaz ADR Oil and Gas 2.8

NAV compared with adjusted RTS-IndexIndex for NAV: 31.01.2007 = 100 EUR

80

85

90

95

100

105

110

115

120

Jan 2

007

Feb

2007

Mar

200

7

Apr 2

007

May

200

7

Jun 2

007

Jul 2

007

Aug 2

007

Sep 2

007

Oct

200

7

Nov 2

007

Dec 2

007

East Capital (Lux) Russian Fund

RTS-Index

Portfolio break-down

(EUR)

Oil and Gas45.4%

Engineering 6.9%Banking and Finance13.7%

Power Utilities - Integrated 6.2%

Telecom - Mobile 3 .3%

Metals and Mining 4.4%Power Utilities - Generation 2.3%

Other Sectors 7.4%

Other* 1.2%

Power Utilities - Hydro 4.6%

Transportation 4.6%

Pref.

6.8%

Common 93.2%

* Other assets and liabilities, net.

Key figures for the East Capital (Lux) Russian Fund31.12.2007 31.12.2006 31.12.2005

Total return Class A (EUR) 14.4 %* 0 0RTS-Index (EUR) 9.7 %* 0 0Class A (USD) 28.7 %* 0 0RTS-Index (USD) 24.3 %* 0 0

Class C (EUR) 10.8 %** 0 0RTS-Index (EUR) 7.5 %** 0 0Class C (USD) 22.7 %*** 0 0RTS-Index (USD) 24.1 %*** 0 0

* Since launch date 31.01.2007. ** Since launch date 09.02.2007. *** Since launch date 11.05.2007.

Number of units outstandingClass A (EUR) 180,862 0 0Class A (USD) 101,676 0 0Class C (EUR) 597,623 0 0Class C (USD) 243,696 0 0

NAV per unitClass A (EUR) 114.36 0 0Class A (USD) 128.69 0 0Class C (EUR) 110.77 0 0Class C (USD) 122.73 0 0

Changes in number of shares outstandingShares outstandingat 31.01.07

Shares issued

Shares redeemed

Shares outstanding at 31.12.07

Class A (EUR) 0.00 223,583.67 42,722.01 180,861.66

Class A (USD) 0.00 114,574.32 12,898.37 101,675.95

Class C (EUR) 0.00 598,372.78 750.14 597,622.64

Class C (USD) 0.00 243,695.89 0.00 243,695.89

10

Statement of net assets (EUR) 31.12.2007

Assets 130,409,722.07Securities portfolio at market value NOTE 2.1 114,766,499.00 Cost price 110,244,134.66 Unrealised profi t on the securities portfolio 4,522,364.34Cash at banks and liquidities 8,196,084.84Formation expenses NOTE 2.5 102,148.20Brokers receivable 582,385.39 Subscribers receivable 355,582.09Receivable on spot exchange 6,392,145.23Other assets 14,877.32

Liabilities 14,244,447.11Bank overdrafts 1,580.30Brokers payable 7,566,708.88Subscribers payable 9,216.09Accrued management fees NOTE 4 188,449.53Custody and administration NOTE 5 4,445.54Payable on spot exchange 6,409,171.17Other liabilities 64,875.60

Net asset value 116,165,274.96

Statement of operations and changes in net assets (EUR) 31.12.2007Income 159,338.34Net dividends 78,304.07Bank interest on cash account 81,034.27

Expenses 800,231.44Amortisation of formation expenses NOTE 2 22,851.80Management fees NOTE 4 539,054.79Custodian & sub-custodian fees NOTE 5 37,605.93Taxe d’abonnement NOTE 3 8,543.37Administrative expenses 45,726.15Domiciliation fees 3,776.72Professional fees 12,534.97Bank interest on overdrafts 1,960.34Legal fees 12,494.66Other expenses 115,682.71

Net loss from investments -640,893.10Net realised profi t on sales of investment securities 363,999.95Net realised profi t on foreign exchange 8,902.07

Net realised loss -267,991.08Movement in net unrealised appreciation / depreciation on investments 4,522,364.34

Increase in net assets as a result of operations 4,254,373.26Subscription capitalisation shares 117,787,345.91 Russian Fund - Class A EUR 24,498,554.80 Russian Fund - Class A USD 9,556,313.80 Russian Fund - Class C EUR 63,670,896.97 Russian Fund - Class C USD 20,061,580.34Redemption capitalisation shares -5,876,444.21 Russian Fund - Class A EUR -4,690,008.22 Russian Fund - Class A USD -1,102,870.69 Russian Fund - Class C EUR -83,565.30

Increase in net assets 116,165,274.96Net assets at the beginning of the period 0.00Net assets at the end of the period 116,165,274.96

Securities portfolio and other net assets 31.12.2007Name Country Number of Market value % of the shares ‘000 EUR fund Shares 1

Banking and Finance ......................................................................................................................................14,513 ......................................12.5Bank Aval total 810 0.7 Bank Aval ** Ukraine 5,449,575 805 0.7 Bank Aval Temp ** Ukraine 33,302 5 0.0

Bank of St Petersburg GDR ** 50,000 542 0.5Bank Tsentrkredit Kazakhstan 103,151 792 0.7Bank TuranAlem Kazakhstan 4,477 1,920 1.7Sberbank * 3,247,000 9,333 8.0VTB Bank GDR 164,000 1,117 1.0 Consumer Goods ..................................................................................................................................................2,052 .........................................1.8Gruppa Razgulyay * 443,092 2,052 1.8 Engineering .................................................................................................................................................................8,022 .........................................6.9GAZ * 29,230 3,385 2.9Kamaz * 233,706 828 0.7Severstal-Avto * 56,405 2,075 1.8TMK GDR REG S 44,048 1,350 1.2Vyksinsky MZ * 267 385 0.3 IT and Internet ......................................................................................................................................................................4 .........................................0.0RBK * 537 4 0.0 Metals and Mining .................................................................................................................................................5,091 .........................................4.4Evraz GDR 16,832 883 0.8GMK Norilsky Nikel total 2,542 2.2 GMK Norilsky Nikel * 3,100 560 0.5 GMK Norilsky Nikel ADR 10,749 1,982 1.7Mechel ADR 13,419 888 0.8NLMK GDR 11,169 311 0.3Severstal GDR 30,017 467 0.4 Oil and Gas ...............................................................................................................................................................52,722 ......................................45.4Bash Neft pref * 165,740 1,239 1.1Gazprom ADR 271,243 10,402 9.0Kazmunaygaz GDR Kazakhstan 219,787 4,641 4.0Lukoil ADR 182,859 10,774 9.3Novatek total 2,421 2.1 Novatek * 50,750 259 0.2 Novatek GDR 41,265 2,161 1.9Ritek * 95,097 641 0.6Rosneft total 8,448 7.3 Rosneft * 125,300 817 0.7 Rosneft GDR 1,154,955 7,631 6.6Surgutneftegaz ADR 77,786 3,248 2.8Tat Neft total 1,961 1.7 Tat Neft * 83,015 342 0.3 Tat Neft GDR 19,645 1,619 1.4TNK-BP Holding * 2,535,316 3,851 3.3Transneft pref * 2,284 3,104 2.7Ukrnafta ADR Ukraine 1,222 392 0.3Vostok Gas SDB 28,800 1,601 1.4 Power Utilities - Distribution ......................................................................................................................2,410 .........................................2.1Stavropol Energo pref * 9,830,000 817 0.7Voronezhenergo pref * 540,785 1,593 1.4 Power Utilities - Generation ........................................................................................................................2,721 .........................................2.3TGK-1 * 1,237,249,031 1,100 0.9TGK-5 GDR ** 4,018 10 0.0Zakhid Energo GDR Ukraine 81,263 1,611 1.4 Power Utilities - Hydro ......................................................................................................................................5,355 .........................................4.6Sayano-Shushenskaya GES * 678,000 924 0.8Stavropol GK * 364,400 57 0.0Stavropol GK pref * 2,843,000 356 0.3Volzhskaya GES * 1,016,000 678 0.6Votkinskaya GES * 874,000 744 0.6Zeiskaya GES * 650,000 247 0.2Zeiskaya GES pref * 1,018,500 373 0.3Zhigulevskaya GES * 4,916,065 1,976 1.7 Power Utilities - Integrated ...........................................................................................................................7,161 .........................................6.2Bashkir Energo * 1,039,816 1,502 1.3RAO EES GDR 63,918 5,660 4.9 Real Estate ...................................................................................................................................................................1,977 .........................................1.7EPH 6,200 368 0.3Otkrytye Investitsii * 7,621 1,609 1.4 Retail ...................................................................................................................................................................................... 260 .........................................0.2Sedmoy Kontinent * 14,756 260 0.2 Telecom ...........................................................................................................................................................................1,853 .........................................1.6Komstar GDR 123,962 1,013 0.9Dal Svyaz * 232,577 840 0.7

East Capital (Lux) Russian Fund

Continued

11

Continued

Telecom - Mobile ....................................................................................................................................................3,889 .........................................3.3MTS ADR 22,040 1,528 1.3Sistema GDR 48,370 1,376 1.2Vimpelkom ADR 34,765 985 0.8 Transportation ..........................................................................................................................................................5,320 .........................................4.6FESCO * 6,611,810 4,931 4.2Novoship pref * 317,000 389 0.3 Units in investment funds Banking and Finance .........................................................................................................................................1,416 .........................................1.2East Capital Explorer Financial Institutions Fund ** 2,360 1,416 1.2

Total investments ............................................................................................................................................114,766 ......................................98.8Other assets and liabilites, net 1,399 1.2The fund´s NAV ..................................................................................................................................................116,165 ...................................100.0

The Notes on page 18 are an integral part of these financial statements.

If not otherwise stated, the instrument is issued by an issuer domiciled in Russia or by a foreign company that has significant operations, or invests significantly in Russia.

1 Indication of type of market place: No asterisk indicates transferable securities admitted to an official stock exchange listing. * Transferable securities dealt in on another regulated market. ** Other transferable securities.

12

KARA SEA

BLACK SEA

BALT

IC S

EA

CAS

PIAN S

EA

Ne

w Z

e

ml y a

Pioner I.

Danube

Irtysh

Ishim

Lower Tungu

Ob

Ob

Irtysh

Kam

a

Yenisey

Yenisey

Volga

LakeBalkhashAral

Sea

Lake Zaysan

LakeLadoga

LakeOnega

Tigris

Euphrates

5642Elbrus

1895

7439 Pik Pobedy

4506Belukha

C

W e s t

S i b e r i a n

P l a i n

Ur

al

M

ou

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ai

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T a y m y r P

TASHKENT

DUSHANBEASHGABAT

BISHKEK

ASTANA

MOSCOW

VILNIUS

RIGA

TALLINN

MINSK

KIEVWARSAW

PRAGUE

BRATISLAVABUDAPEST

SARAJEVO

TIRANA

SOFIASKOPJEPODGORICA

BUCHARESTBELGRADELJUBLJANA ZAGREB

CHISINAU (KISHINEV)

ANKARABAKU

TBILISI

YEREVANIstanbul

Izmir

Arkhangel'sk

Almaty (Alma-Ata)

KTomsk

Novosibirsk

Barnaul

OmskChelyabinsk

YekaterinburgPerm'

Kazan'

Samara

Orenburg

Ufa

Nizhniy Novgorod

Saratov

Volgograd

Astrakhan'

Ryazan'

Penza

Rostov-na-Donu

Voronezh

Tula

Yaroslavl'

St Petersburg

TURKEY

GEORGIA

HUNGARY

MOLDOVACZECH REP. SLOVAKIA

POLAND

ROMANIASLOV.

ALBANIA

MONTENEGROMACEDONIA

BOSNIA& H.

BULGARIAKYRGYZSTAN

KAZAKH STAN

ESTONIA

LATVIA

LITHUANIA

BELARUS

UKRAINE

SERBIA

R U S S I A N F

TAJIKISTAN

UZBEKISTAN

TURKMENISTAN

ARMENIAAZERB.

CROATIA

ARCTIC CIRCLE

East Capital Universe

13

LAPTEV SEA

EAST

SIBERIAN

SEA

SEA OFOKHOTSK

Gulf ofYana

Sakhalin

Bol'shevikIsland

October Revolution Island

Kotel'nyy Island

Novaya Sibir' IslandLyakhov

Islands

New Siberian Islands

Wrangel Island

CommanderIslands

Kuril Isl

ands

Anjou Islands

Aldan

Lena

Lena

Amur

guska

Kolym

a

Lake Baikal(1637 m)

LakeTaymyr

4750Kronotskaya

Sopka

Ko

l y

ma R a n g

e

Ve

rk

ho

ya

ns k R a n g e

Dzhug

dzhu

r Ran

ge

C e n t r a l S i b e r i a n

P l a t e a u

Koryak R

ange

P e n i n s u l a

N o r t h S i b e r i a n L o w l a n d

Khabarovsk

Vladivostok

Irkutsk

Krasnoyarsk

F E D E R A T I O N

ARCTIC CIRCLE

14

East Capital (Lux) Eastern European Fund

Management report

The fund’s development

The East Capital (Lux) Eastern European Fund Class A (EUR) dropped 1.6% since inception in 2007, whereas the MSCI EM Europe Index dropped 3.1% during the same period (in EUR). The fund was launched on 12 December and had EUR 21,073,898 under management on 31 December. Net inflows amounted to EUR 21,414,006.

There are important differences in the underlying economies of the countries in the region. On the positive side, some of the largest economies are strong and maturing. The Russian economy is the most obvious example. The economy is very strong – maybe stronger than ever – with robust GDP growth driven by domestic demand. The Polish economy is also very strong and the Turkish economy is developing rapidly in a posi-tive direction. On the negative side, a number of the smaller countries in the region have accumulated large economic imbalances. Latvia and Estonia are the economies with the larg-est imbalances following years of very rapid GDP growth.

Southeastern Europe was the strongest sub-region, with gains ranging between 50 and 100% for a handful markets. Turkey is the second largest market in the fund and contrib-uted a lot to the positive performance, with its 73% gain in 2007. But it was Ukraine that was the best-performing market in Eastern Europe, with a 135% gain. Although the large Rus-sian market was considered a disappointment in 2007, the RTS index climbed 19%, most of it gained during the second half of the year when equity markets around the world were under a lot of pressure following the credit crunch. Markets with a high degree of vulnerability to the global credit market – such as Estonia, Latvia, Lithuania, Romania, Hungary and Kazakhstan – were more affected by the crunch, but all except for Estonia ended the year in positive territory.

Changes during the period

The fund was launched during the year and has accordingly been investing in stocks in order to mirror the East Capital East-ern European Fund. The largest purchases were made in Rus-sian energy companies Lukoil, Gazprom and Rosneft, Russian Sberbank as well as UES.

All fi gures in the management report are in USD and based on the full

year 2007 unless otherwise stated.

Fund facts Risk Medium Investment manager East Capital Asset Management AB Type UCITS III Launch date Class A (EUR & USD)12.12.2007 Class C (EUR & USD) 12.12.2007 Quotation Daily Benchmark MSCI EM Europe Index Dividend No Management fee Class A (retail) 2.5 %, Class C (institutional) 2 % Subscription fee Max 5 % Redemption fee Max 1 % (other rules may apply when redeeming units via our external partners) Conversion fee 0 % Domicile Luxembourg NAV currency EUR and USD ISIN Class A (EUR) LU0332315638 Class A (USD) LU0332315471 Class C (EUR) LU0332315398 Class C (USD) LU0332315125 Bloomberg Class A (EUR) ECESTAE LX Class A (USD) ECESTAU LX Class C (EUR) ECESTCE LX Class C (USD) ECESTCU LX

Aim and investment strategy

The Compartment invests principally in securities of issuers domiciled in, or exercis-ing a predominant part of their activity in Eastern Europe, namely in Albania, Arme-nia, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, The Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine. The Compart-ment may also invest up to one third of its assets in securities of issuers domiciled in, or exercising a predominant part of their activity in Austria, Azerbaidjan, Cyprus, Greece, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The Compartment may also invest in securities (such as ADRs and GDRs) giving expo-sure to the above securities.

At least 75% of the Compartment’s assets are invested in equity or equity-related securities.

The Compartment may hold liquid assets on an ancillary basis. Under normal market conditions, investment in liquid assets and debt instruments of any kind does not exceed 25% of the Compartment’s assets.

The Compartment may use derivative techniques and instruments for efficient management and hedging purposes on an ancillary basis.

When investing in Russia, the Compartment may only invest in securities listed on the RTS Stock Exchange, on the Moscow Interbank Currency Exchange and on any other regulated markets in Russia.

15

Ten largest holdings of the fundCompany Country Operation % of the

fund’s NAV

Gazprom ADR Russia Oil and Gas 8.3

Lukoil ADR Russia Oil and Gas 8.1

Sberbank Russia Banking and Finance 6.1

Rosneft GDR Russia Oil and Gas 4.3

RAO EES GDR Russia Power Utilities - Integrated 3.7

FESCO Russia Transportation 3.0

Raiffeisen International Austria Banking and Finance 2.8

TNK-BP Holding Russia Oil and Gas 2.5

Kazmunaygas GDR Kazakhstan Oil and Gas 2.5

OTP Bank Hungary Banking and Finance 2.4

Portfolio break-down

* Other assets and liabilities, net.** Eastern Europe holds: CME, a media company listed in USA, with business in Eastern Europe; Intl Personal Finance, a banking and finance company listed in the UK, with business in Eastern Europe; Strabag SE, a construction company listed in Austria, with business in Eastern Europe.

Russia 60.6%

Turkey 12.2%

Austria 5.5%

Kazakhstan 3.0%Poland 3.0%Hungary 2.7%Czech Republic 2.7%

Eastern Europe** 2.0%

Ukraine 1.6%

Serbia 1.0%

Romania 0.9%

Estonia 0.9%

Greece 0.4%

Slovenia 0.4%

Latvia 0.3%Other* 1.3%

Lithuania 1.3%

Transportation 3.3%Real Estate 3.1%Metals and Mining 3.0%

Telecom - Mobile 2.7%

Constr. & Constr. Mtrl. 2.0%

Other Sectors 10.0%

Other* 1.3%

Banking and Finance 26.6%

Oil and Gas 37.6%

Power Utilities - Integrated 5.9%

Engineering 4.4%

Changes in number of shares outstandingShares outstandingat 12.12.07

Shares issued

Shares redeemed

Shares outstanding at 31.12.07

Class A (EUR) 0.00 11,080.30 0.00 11,080.30

Class A (USD) 0.00 15,089.47 0.00 15,089.47

Class C (EUR) 0.00 182,500.00 0.00 182,500.00

Class C (USD) 0.00 15,113.99 0.00 15,113.99

Key figures for the East Capital (Lux) Eastern European Fund31.12.07 31.12.06 31.12.05

Total return Class A (EUR) -1.6 %* 0 0MSCI EM Europe Index (EUR) -3.1 %* 0 0Class A (USD) -1.6 %* 0 0MSCI EM Europe Index (USD) -3.1 %* 0 0

Class C (EUR) -1.6 %* 0 0MSCI EM Europe Index (EUR) -3.1 %* 0 0Class C (USD) -1.6 %* 0 0MSCI EM Europe Index (USD) -3.1 %* 0 0

* Since launch date 12.12.2007.

Number of units outstandingClass A (EUR) 11,080 0 0Class A (USD) 15,090 0 0Class C (EUR) 182,500 0 0Class C (USD) 15,114 0 0

NAV per unitClass A (EUR) 98.38 0 0Class A (USD) 98.38 0 0Class C (EUR) 98.41 0 0Class C (USD) 98.41 0 0

16

Statement of net assets (EUR) 31.12.2007

Assets 22,422,417.71Securities portfolio at market value NOTE 2.1 20,790,818.45 Cost price 21,035,881.14 Unrealised profi t on the securities portfolio -245,062.69Cash at banks and liquidities 1,048,589.53Receivable on spot exchange 583,009.73

Liabilities 1,348,519.89Brokers payable 737,842.50Accrued management fees NOTE 4 23,686.70Custody and administration NOTE 5 512.17Payable on spot exchange 584,135.87Other liabilities 2,342.65

Net asset value 21,073,897.82

Statement of operations and changes in net assets (EUR) 31.12.2007Income 6,689.04Bank interest on cash account 6,689.04

Expenses 28,450.65Management fees NOTE 4 24,557.67Custodian & sub-custodian fees NOTE 5 562.05Taxe d’abonnement NOTE 3 737.15Administrative expenses 1,533.58Bank interest on overdrafts 22.09Other expenses 1,038.11

Net loss from investments -21,761.61Net realised loss on sales of investment securities -454.50Net realised loss on foreign exchange -72,829.42

Net realised loss -95,045.53Movement in net unrealised appreciation / depreciation on investments -245,062.69

Decrease in net assets as a result of operations -340,108.22Subscription capitalisation shares 21,414,006.04 Eastern European Fund - Class A EUR 1,106,619.94 Eastern European Fund - Class A USD 1,027,858.10 Eastern European Fund - Class C EUR 18,250,000.00 Eastern European Fund - Class C USD 1,029,528.00

Increase in net assets 21,073,897.82Net assets at the beginning of the period 0.00Net assets at the end of the period 21,073,897.82

Securities portfolio and other net assets 31.12.2007Name Sector Number Market value % of of shares ‘000 EUR the fundShares 1

Austria ...............................................................................................................................................................................................1,155 ........................5.5Erste Bank Banking and Finance 7,700 373 1.8Immoeast Real Estate 16,000 118 0.6Meinl European Land Real Estate 7,800 74 0.3Raiffeisen International Banking and Finance 5,700 591 2.8 Czech Republic ..............................................................................................................................................................................564 ........................2.7CEZ Power Utilities - Integrated 4,000 205 1.0Orco Property GRP Real Estate 2,150 176 0.8Zentiva NV Pharmaceuticals 5,000 183 0.9 Eastern Europe ..............................................................................................................................................................................424 ........................2.0CME 2 Media 3,000 237 1.1Intl Personal Finance 3 Banking and Finance 37,000 97 0.5Strabag SE 4 Constr. & Constr. Mtrl. 1,850 90 0.4 Estonia ...................................................................................................................................................................................................186 ........................0.9Merko Ehitus Constr. & Constr. Mtrl. 7,500 98 0.5Tallinna Kaubamaja Retail 11,400 89 0.4

Greece........................................................................................................................................................................................................87 ........................0.4Fourlis Holdings Retail 3,200 87 0.4 Hungary .................................................................................................................................................................................................576 ........................2.7FOTEX Retail 21,500 76 0.4OTP Bank Banking and Finance 14,400 501 2.4 Kazakhstan ........................................................................................................................................................................................641 ........................3.0Bank Tsentrkredit Banking and Finance 15,000 115 0.5Kazmunaygas GDR Oil and Gas 24,900 526 2.5 Latvia ..........................................................................................................................................................................................................71 ........................0.3LASCO Transportation 38,000 71 0.3 Lithuania ...............................................................................................................................................................................................282 ........................1.3Pieno Zvaigzdes Consumer Goods 66,500 112 0.5TEO LT Telecom 248,000 170 0.8 Poland .....................................................................................................................................................................................................623 ........................3.0Bank Millennium Banking and Finance 47,000 152 0.7ING Bank Slaski Banking and Finance 400 81 0.4PGNiG Oil and Gas 206,000 293 1.4PKN Oil and Gas 6,700 97 0.5 Romania ...................................................................................................................................................................................................68 ........................0.3Petrom Oil and Gas 471,000 68 0.3 Russia .............................................................................................................................................................................................12,517 .....................59.3Bashkir Energo * Power Utilities - Integrated 183,000 264 1.3Evraz GDR Metals and Mining 2,800 147 0.7FESCO * Transportation 840,000 627 3.0GAZ * Engineering 4,000 463 2.2Gazprom ADR Oil and Gas 45,500 1,745 8.3GMK Norilsky Nikel ADR Metals and Mining 2,180 402 1.9Lukoil ADR Oil and Gas 29,000 1,709 8.1MTS ADR Telecom - Mobile 4,090 284 1.3Novatek GDR Oil and Gas 5,280 277 1.3Otkrytye Investitsii * Real Estate 1,330 281 1.3RAO EES GDR Power Utilities - Integrated 8,800 779 3.7Rosneft GDR Oil and Gas 138,500 915 4.3Sberbank * Banking and Finance 445,500 1,281 6.1Severstal-Avto * Engineering 7,700 283 1.3Surgutneftegaz ADR Oil and Gas 11,700 489 2.3Tat Neft pref * Oil and Gas 116,000 292 1.4TGK-1 * Power Utilities - Generation 169,000,000 150 0.7TMK GDR REG S Engineering 5,600 172 0.8TNK-BP Holding * Oil and Gas 347,000 527 2.5Transneft pref * Oil and Gas 325 442 2.1Vimpelkom ADR Telecom - Mobile 10,100 286 1.4Vostok Gas SDB Oil and Gas 5,284 294 1.4VTB Bank GDR Banking and Finance 24,000 163 0.8Zhigulevskaya GES * Power Utilities - Hydro 613,000 246 1.2 Serbia ......................................................................................................................................................................................................206 ........................1.0AIK Banka ** Banking and Finance 1,660 206 1.0 Slovenia....................................................................................................................................................................................................84 ........................0.4Mercator Retail 250 84 0.4 Turkey.................................................................................................................................................................................................2,580 .....................12.2Akbank Banking and Finance 37,000 187 0.9Albaraka Turk Banking and Finance 20,500 75 0.4Anadolu Hayat Insurance 24,800 71 0.3Anadolu Sigorta Insurance 97,000 113 0.5Asya Bank Banking and Finance 24,100 154 0.7Enka Insaat Ve Sanay Constr. & Constr. Mtrl. 11,800 141 0.7Is Finansal Kiralama Banking and Finance 64,000 69 0.3Karabuk Demir Celik Metals and Mining 116,000 93 0.4Sabanci Holding Holding Companies 23,600 89 0.4Sekerbank Banking and Finance 61,400 186 0.9Trakya Cam Sanay Constr. & Constr. Mtrl. 55,800 91 0.4Tupras Oil and Gas 8,400 168 0.8Turcas Petrolculuk Oil and Gas 15,500 89 0.4Turk Ekonomi Bankasi Banking and Finance 55,000 94 0.4Turkcell Telecom 9,700 72 0.3Turkiye Garanti Bankasi Banking and Finance 60,600 370 1.8Turkiye Halk Bankasi Banking and Finance 29,400 209 1.0Turkiye Is Bankasi Banking and Finance 49,600 212 1.0Turkiye Vakifl ar Bankasi Banking and Finance 40,000 96 0.5

East Capital (Lux) Eastern European Fund

Continued

17

East Capital (Lux)

Consolidated statement of net assets (EUR) 31.12.2007

Assets 177,680,811.87Securities portfolio at market value NOTE 2 158,557,402.27 Cost price 154,208,261.05 Unrealised profi t on the securities portfolio 4,349,141.22Cash at banks and liquidities 10,840,379.90Formation expenses NOTE 2 204,296.40Brokers receivable 582,385.39Subscribers receivable 410,766.54Receivable on spot exchange 7,070,511.04Other assets 15,070.33

Liabilities 16,608,109.46Bank overdrafts 1,580.30Brokers payable 9,110,871.58Subscribers payable 18,130.47Accrued management fees NOTE 4 256,332.17Custody and administration NOTE 5 5,829.82Payable on spot exchange 7,088,917.11Other liabilities 126,448.01

Net asset value 161,072,702.41

Ukraine ...................................................................................................................................................................................................341 ........................1.6Bank Aval ** Banking and Finance 901,000 133 0.6Zakhid Energo GDR Power Utilities - Generation 10,510 208 1.0 Units in investment funds Romania ................................................................................................................................................................................................121 ........................0.6SIF 1 (Banat Crisana) Funds Privatization 24,500 24 0.1SIF 2 (Moldova) Funds Privatization 25,000 24 0.1SIF 3 (Transilvania) Funds Privatization 36,000 23 0.1SIF 4 (Muntenia) Funds Privatization 36,000 24 0.1SIF 5 (Oltenia) Funds Privatization 20,500 25 0.1

Russia .....................................................................................................................................................................................................264 ........................1.3East Capital Explorer Financial Institutions Fund ** Banking and Finance 440 264 1.3

Total investments ................................................................................................................................................................20,791 .....................98.7Other assets and liabilites, net 283 1.3The fund´s NAV ......................................................................................................................................................................21,074 ..................100.0

The Notes on page 18 are an integral part of these financial statements.

1 Indication of type of market place: No asterisk indicates transferable securities admitted to an official stock exchange listing. * Transferable securities dealt in on another regulated market. ** Other transferable securities.

2 Media company listed in USA, with business in Eastern Europe. 3 Banking and finance company listed in the UK, with business in Eastern Europe. 4 Construction company listed in Austria, with business in Eastern Europe.

Continued

Consolidated statement of operations and changes in net assets (EUR) 31.12.2007Income 332,126.74Net dividends 229,155.26Bank interest on cash account 102,971.48

Expenses 1,374,061.99Amortisation of formation expenses NOTE 2 45,703.60Management fees NOTE 4 867,809.24Custodian & sub-custodian fees NOTE 5 58,473.95Taxe d’abonnement NOTE 3 14,785.02Administrative expenses 86,866.33Domiciliation fees 9,343.92Professional fees 23,575.74Bank interest on overdrafts 2,679.37Legal fees 31,692.10Other expenses 233,132.72

Net loss from investments -1,041,935.25Net realised profi t on sales of investment securities 619,622.27Net realised loss on foreign exchange -92,313.70

Net realised loss -514,626.68Movement in net unrealised appreciation / depreciation on investments 4,349,141.22

Increase in net assets as a result of operations 3,834,514.54Subscription capitalisation shares 166,559,661.87Redemption capitalisation shares -9,321,474.00

Increase in net assets 161,072,702.41Net assets at the beginning of the period 0.00Net assets at the end of the period 161,072,702.41

The Notes on page 18 are an integral part of these financial statements.

18

Notes

1. GeneralEast Capital (Lux) (the “Fund”) is an open-end investment fund with multiple sub-funds (“Société d’investissement à capital var-iable”) governed by Luxembourg law, established in accordance with the provisions of Part I of the Law of 20 December 2002 relating to undertakings for collective investment.

The Fund was incorporated for an indefinite period on 13 November 2006, with an initial capital of Euro 300,000. Its Arti-cles of Incorporation have been published in the official gazette “Mémorial C, Receuil des Sociétés et Associations du Grand Duché de Luxembourg” on 27 November 2006. The Fund is registered with the “Registre de Commerce et des Sociétés” of Luxembourg under number B 121 268.

As at December 31, 2007, the following sub-funds are open:• East Capital (Lux) – Convergence Eastern European Fund

(launched on January 31, 2007)• East Capital (Lux) – Russian Fund (launched on January 31, 2007)• East Capital (Lux) – Eastern European Fund (launched on December 12, 2007)

As at 12 December 2007, the name of the sub-fund East Capital (Lux) Eastern European Convergence Fund has been amended to East Capital (Lux) Convergence Eastern European Fund.

These sub-funds have issued Class A Shares and Class C Shares. Both classes are available in Euros and US Dollars. The Class C Shares are reserved for investments made by investors qualifying as institutional investors, within the measuring of arti-cle 129 of the Luxembourg law of 20 December 2002.

2. Summary of significant accounting principlesThe financial statements have been prepared using accounting principles generally accepted for funds in Luxembourg including the following significant accounting policies:

2.1. Valuation of investmentsSecurities admitted to official listing on an official stock exchange or traded on any other organised market will be valued at the last available mid-price, unless such a price is not deemed to be rep-resentative of their fair market value.

Securities not listed on stock exchanges or not traded on any regulated market and securities with an official listing for which the last available price is not representative of a fair market value will be valued, prudently and in good faith, on the basis of their estimated sale prices.

The units/shares of undertakings for collective investment will be valued on the basis of the last known net asset value.

2.2. Realised profit and loss on investmentsThe profits and losses on sales of investments are determined on the basis of average cost.

2.3. Foreign exchangeThe market value of the investments and other assets and lia-bilities expressed in currencies other than the base currency of each sub-fund have been converted at the exchange rates as at the year end date.

The costs of investments in currencies other than the base currency have been converted at the exchange rates as at the purchase date. Gains and losses arising on foreign exchange transactions are included in the result of operations.

The consolidated financial statements of the SICAV are established in EUR.

As at December 31, 2007, the following significant exchange rates were used:1 EUR = 1.4681 USD 1 EUR = 3.5850 RON1 EUR = 26.5726 CZK 1 EUR = 78.8223 RSD1 EUR = 252.8142 HUF 1 EUR = 9.4276 SEK1 EUR = 177.2290 KZT 1 EUR = 1.7176 TRY1 EUR = 3.4517 LTL 1 EUR = 7.4139 UAH1 EUR = 0.6971 LVL 1 EUR = 0.7330 GBP1 EUR = 3.5877 PLN 1 EUR = 7.3312 HRK

2.4. Income from investmentsDividend income is accounted for on an ex-dividend basis, net of withholding tax. Interest income is recognised on an accrual basis.

2.5. Formation expensesEstablishment costs estimated at Euro 250,000 are being amor-tised over a period of 5 years.

3. Tax considerationsIn accordance with current Luxembourg law, the Fund is not subject to any tax on income, capital gains tax or wealth tax.

The Fund’s net assets are subject to a subscription tax of 0.05% per annum payable at the end of each quarter and calcu-lated on the basis of the Fund’s total net assets at the end of the relevant quarter. Such tax rate is reduced to 0.01% in respect of the net assets attributable to such classes of shares or sub-funds which are reserved for institutional investors as defined from time to time by the Luxembourg Supervisory Authority.

4. Management feesFor its services the Investment Manager receives a management fee payable monthly, at a total annual rate. The annual manage-ment fees are as follows:

Class A: up to 2.50% per annumClass C: up to 2.00% per annum

5. Custodian feesThe Custodian is entitled to a variable fee (as percentage of the average of the net assets of the relevant sub-fund) between 0.05% and 0.50% per annum, depending on the assets, the geographical investment areas and/or the size of the relevant sub-fund.

6. Statement of changesA complete statement of changes in the portfolio is available upon request free of charge from East Capital.

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East Capital (Lux) funds

Trading instructionsWhen subscribing for shares in the funds an application form must be submitted prior to or alongside the payment to the respective fund´s account. See the table of account numbers below. If investing for the first time, please see the form for any required documents to be enclosed. As soon as the subscrip-tion has been processed, a confirmation will be sent to you by fax or post.

Orders for subscription, redemption or conversion of fund units must be submitted on East Capital (Lux) forms as these are the only acceptable forms. The forms can be downloaded at www.eastcapital.com/sicav or ordered from the transfer agent Fastnet, tel. +352 47 67 22 16, e-mail: [email protected]. The forms must be submit-ted in original by post to:

Fastnet Luxembourg S.A.31-33 Avenue PasteurL - 2311 Luxembourg

We are currently unable to receive telephone orders or scanned orders via e-mail. Please complete the form carefully and thor-oughly in order to avoid any processing delays due to missing or inaccurate information. When your order has been processed, you will receive a confirmation by fax or post.

When redeeming fund units, payments are usually made within two banking days, but it may take up to 15 days before the proceeds are paid out. Payments are made in the reference currency of the class.

Cut-off timeIn order to be processed on a specific valuation day, any requests for subscriptions, redemptions and conversions need to be received prior to 12.00 CET on the valuation day. Orders received after 12.00 CET will be processed the following busi-ness day.

Classes of sharesEach compartment contains the following classes of shares, available in both EUR and USD:

Class A sharesMinimum initial subscription: EUR 1,000 / USD 1,000Subsequent minimum subscriptions: EUR 1,000 / USD 1,000Minimum holding: EUR 1,000 / USD 1,000

Class C sharesThese shares are reserved for investments made by investors qualifying as institutional investors within the meaning of article 129 of the Luxembourg law of 20 December 2002.

Minimum initial subscription and minimum holding: EUR 2,000,000 / USD 2,000,000

Publishing of Net Asset Value The Net Asset Value (NAV) is calculated daily and published on our Web site www.eastcapital.com, on Morningstar sites in the Netherlands, France and Belgium and other Web sites.

Further information Questions regarding transactions in the funds: Fastnet Luxembourg Tel. +352 47 67 22 16; Fax +352 47 67 70 62E-mail: [email protected]

Information about our investment strategy and markets:East Capital (see contact details on page 22)

East Capital (Lux) funds are also available for daily trading through an increasing number of partners and distributors, please contact East Capital for a complete list of those.

Subscription currency Bank SWIFT Account No.

EUR Crédit Agricole S.A. AGRIFRPP FR7630006000012009280600085

USD Calyon New York CRLYUS33 0119413000100

JPY Bank of Tokyo Mitsubishi BOTKJPJT 653-0418285

CHF UBS AG UBSWCHZH80A 02300000060737050000Z

GBP HSBC Bank Plc Intl. MIDLGB22 35210915

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East Capital Portfolio Management Team

East Capital Advisory Committee

Örjan Berner Bengt Dennis Thorvald Stoltenberg

Peter Elam Håkansson

Jacob Grapengiesser

Aivaras Abromavicius

Andras Szalkai

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Peter Elam Håkansson Portfolio Manager

Peter Elam Håkansson, Chairman and co-founder of East Capital, has 24 years’ equity trading experience. He started working with the newly-established East-ern European capital markets in the early 1990s when he worked at Enskilda Secu-rities, his last positions as Head of Equi-ties and Global Head of Research. Peter has been awarded the Golden Star by Da-gens Industri (the biggest Swedish busi-ness daily) and Morningstar for Best Fund Manager in 2001, 2003, 2004, 2005 and 2006.

Jacob GrapengiesserSenior Advisor

Jacob Grapengiesser has worked with se-curities in Eastern Europe for nine years. Before joining East Capital in 2002, Jacob was an analyst with Brunswick Emerging Markets for three years. Prior to that, he worked at Khanty Mansiysk Oil Corpo-ration (KMOC) in Moscow. Jacob has studied at the Stockholm School of Eco-nomics, the Royal Institute of Technology and Cornell University, USA. Jacob is flu-ent in Swedish, Russian and English.

Aivaras AbromaviciusSenior Advisor

Aivaras Abromavicius has worked in se-curities trading for 13 years and has vast experience of the Eastern European stock markets. Aivaras started at East Capital in 2002 after a successful early career first as Head of Equities at Hansapank in Es-tonia for four years, then as Head of Trad-ing at Brunswick Emerging Markets for three years. Aivaras is from Lithuania and speaks fluent Russian, Lithuanian, Esto-nian and English.

Örjan Berner

Örjan Berner was Sweden’s ambassador to Moscow during the break up of the So-viet Union and when Russia and a number of other countries were forming (1989 – 1994). His latest roles were as ambas-sador to Germany and France. Over the years he has maintained a large network of contacts in Russia and has steadily built on his knowhow of the Russian economy and local politics. He is also the President of Transparency International Sweden.

Bengt Dennis

Bengt Dennis was Governor of the Bank of Sweden from 1982 – 1993 after hav-ing been Editor-in-chief at the Swedish newspaper Dagens Nyheter. He also led the work on the transportation route “Via Baltica” through the three Baltic States and was a member of the Hansapank and SEB Baltic Holding’s boards.

He is the world’s foremost expert on the economies and political situations in the Baltic countries and is also responsible for analyses of Poland.

Thorvald Stoltenberg

Thorvald Stoltenberg, Norway’s former Foreign and Defence Minister, has worked with Balkan issues for many years, among others as the UN General Secretary’s special envoy to the former Yugoslavia and Chairman of the UN’s Steering Com-mittee of the International Conference for the former Yugoslavia. From 1989 – 1991, Thorvald Stoltenberg worked as United Nations High Commissioner for Refugees and since 1998 he has been president of the Norwegian Red Cross.

Andras SzalkaiDirector

Andras Szalkai is from Hungary and he joined East Capital in 2006. Andras star-ted out as an analyst at OTP Securities in Budapest covering the Hungarian equity market. In 2000, Andras became the Head of Research at Erste bank in Hungary and at the end of 2001 he was offered a posi-tion as fund manager at Vontobel Bank in Vienna, Austria, with the responsibility of investing Eastern European equities. An-dras has lately been working as a regional telecom analyst at Erste Bank.

22

Registered Office5, allée SchefferL-2520 Luxembourg

Board of DirectorsMr. Justas Pipinis, Chairman Managing DirectorEast Capital Holding AB, Stockholm

Mr. Jean-Marie LaporteSenior AdvisorEast Capital AB, Stockholm

Mr. Albin Rosengren (until February 27, 2007)Head of SalesEast Capital AB, Stockholm

Mr. José-Benjamin LongréeManaging DirectorCACEIS Bank Luxembourg

Mr. Yves WagnerDirector and Co-FounderThe Directors’ Office S.A., Luxembourg

Ms. Mia Jurke (since February 27, 2007)Product ManagerEast Capital Asset Management AB, Stockholm

Delegates of the Board of DirectorsMs. Mia JurkeProduct ManagerEast Capital Asset Management AB, Stockholm

Mr. Yves WagnerDirector and Co-FounderThe Directors’ Office S.A., Luxembourg

CustodianCACEIS Bank Luxembourg 5, allée SchefferL-2520 Luxembourg

Central Administration AgentCACEIS Bank Luxembourg 5, allée SchefferL-2520 Luxembourg

Investment ManagerEast Capital Asset Management ABKungsgatan 31-33, Box 1364SE-111 93 StockholmSweden

AuditorKPMG Audit S.à r.l.9, allée SchefferL-2520 Luxembourg

Legal AdvisorElvinger, Hoss & Prussen 2, Place Winston ChurchillL-1340 Luxembourg

Questions about investment strategy and market information:

Sweden:East Capital ABKungsgatan 31-33, Box 1364SE-111 93 StockholmTel. +46 (0)8 505 88 555E-mail: [email protected]

France and Luxembourg:East Capital ABTel. +33 1 72 74 11 89 E-mail: [email protected]

Questions regarding transactions in the funds:

Fastnet Luxembourg S.A.31-33 Avenue PasteurL - 2311 Luxembourg Tel. +352 47 67 22 16E-mail: [email protected]

Management and Administration

Justas Pipinis Jean-Marie Laporte José-Benjamin Longrée Yves Wagner Mia JurkeChairman Director Director Director Director

Luxembourg, March 28, 2008

23

We have audited the accompanying financial statements of East Capital (Lux) (the “SICAV”) and of each of its sub-funds, which comprise the statement of net assets and the securities portfolio as at December 31, 2007 and the statement of operations and changes in net assets for the period from November 13, 2006 (date of incorporation) to December 31, 2007, and a summary of significant accounting policies and other explanatory notes to the financial statements.

Responsibility of the Board of Directors of the SICAV for the financial statementsThe Board of Directors of the SICAV is responsible for the preparation and fair presentation of these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation of financial statements. This respon-sibility includes: designing, implementing and maintaining inter-nal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropri-ate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Responsibility of the Réviseur d’EntreprisesOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopt-ed by the “Institut des Réviseurs d’Entreprises”. Those stand-ards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the financial state-ments. The procedures selected depend on the judgment of the Réviseur d’Entreprises, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d’Entreprises considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the SICAV, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropri-ate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of East Capital (Lux) and of each of its sub-funds as of December 31, 2007, and of the results of their operations and changes in their net assets for the period from November 13, 2006 (date of incorporation) to December 31, 2007, in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial state-ments. Other matterSupplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observa-tion to make concerning such information in the context of the financial statements taken as a whole.

Luxembourg, March 28, 2008

KPMG Audit S.à r.l.Réviseurs d’Entreprises

Nathalie Dogniez Patrice PerichonPartner Director

Report of the Réviseur d’Entreprises

Wednes day Thursday

Monday Tues day

Friday

Important Notice: The information contained in this advertisement shall not be construed as constituting an offer or any other inducement to invest in the funds managed by East Capital. Please contact East Capital to obtain all necessary information and documentation, including complete investment prospectuses, about investing in the East Capital funds.

How to invest in Eastern Europe.

Rather than sit in an office all day, we travel around Eastern Europe visiting companies – over 500 of them a year. This tells us more about the markets than any index in the world ever could.

Read more about our top-performing and award-winning funds at: www.eastcapital.com or call +46 8 505 885 05.