BUSINESS AND FINANCIAL RATIOS PARENT COMPANY FINANCIAL RESULTS... 16

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G5 Group

G5 Entertainment AB (publ) unites a group of companies: G5 Holdings Limited (Hong Kong), G5 UA Holdings Limited (Hong Kong), G5 Mo-bile LLC (Russia), G5 Software LLC (Russia) and G5 Holding RUS LLC (Russia). G5 Entertainment AB (publ) also owns 51% of shares in Shape Games Inc (Virginia). G5 Entertainment AB (publ) is a holding company listed on Aktietorget exchange in Stockholm since November 19th

2008. Before that, G5 Entertainment AB was listed on NGM Nordic MTF since 2nd_October

2006.

Board of Directors

Vlad Suglobov (CEO, Co-Founder) was born in 1977. Vlad Suglobov possesses over 14 years of industry experience. Before co-founding G5 in 2001 and serving for 7 years as CEO of the group, Vlad graduated from Lomonosov Moscow State University, and worked in a number of Russian and US companies in games and IT industry. Growing with G5, Vlad was active in many essen-tial roles, establishing company's strategy, client relations, product development and sales. Today, Vlad is concentrating on expanding G5's business internationally.

Anders Nilsson was born in 1973. Entrepreneur, international business development executive and later venture capitalist, Anders has many years of experience in the field, including starting and running a cross-border IT company to an industrial exit. Today Anders’ main focus is financial and legal aspects of international business development, as well as mergers and acquisitions in both private and public companies.

Adam Cowburn (Chairman), born 1958, is an IT and game indus-try veteran. Since moving to Swe-den in 1984, Adam has worked within the IT sphere in many differ-ent capacities. He has been involved

in several start ups of both IT and game develop-ment businesses, worked as a consultant support-ing industrial simulator purchase and served as HR & managing director for a number of IT / game companies, including Nordic subsidiaries of NAS-DAQ corporations. Adam possesses an in depth knowledge of mobile, PC and Console game de-velopment.

Ein Stadalninkas (Deputy board member)

Auditor

Tomas Ahlgren, Authorized Public Accountant, SET Revisionsbyrå AB.

Management

Vlad Suglobov (CEO, Co-Founder), see above.

Alik Tabunov (COO, Co-Founder), Alexander Tabunov, born in 1974, is an experienced IT man-ager with background in software engineering. During his 17+ years career Alexander participated in numerous IT and game projects in Russian and US companies, before co-founding G5 in 2001. Alex-ander is responsible for building G5's develop-ment team on multiple platforms and technolo-gies. Alexander received his MS degree in com-puter science from Moscow State Institute of Elec-tronics and Mathematics.

Sergey Shultz (CFO, Co-Founder), Sergey Shultz was born in 1976. Sergey started his career as software engineer and project man-ager and participated in numerous projects in Russian and US game development and IT companies before co-founding G5 in 2001 and becoming group's CFO. Sergey possesses deep understanding of software development which helps him in his CFO posi-tion. He received MS degree in Physics from Mos-cow State Institute of Engineering and Physics.

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CEO Word

Dear Shareholders!

2008 became a record year for G5. During the year, G5 continued advancement in all business areas and delivered substantial growth. In games business area, G5 expanded its work on premium mobile games for the leading mobile publishers like EA Mobile, THQ Wireless, Konami Digital Entertainment, and others. Also, the foundation for own-IP driven growth was laid with the release of Supermarket Mania on PC, the development of Supermarket Mania for iPhone, and the acquisition of Shape Games Inc, the developers of several successful PC casual franchises. In Business Solutions area, the group completed the development of the first version of MIDS solution and supplied it to the first customer – Vimpel Communications.

The downturn in the economic situation affected G5’s business starting Q4 2008 by changing the behavior of G5’s customers and delaying expected deals. The management used the changes in the economic situation to speed up the transition of the company to rely more on revenue from own products. One way to describe the poten-tial of own IP and direct sales model is that the profit made by Supermarket Mania on iPhone during March and April 2009 is equivalent to the average profit G5 makes on 3-4 contract game development projects. Going into 2009, the group retains all of its core values: experienced team of seasoned profes-sionals in Moscow and Kharkov, expertise in game development, mobile and PC technology, intellectual property rights in MIDS and successful game franchises like Supermarket Mania, Stand o’Food, and Mahjongg Artifacts, and group’s high profile customers.

In 2009, G5’s strategy going forward is to:

Continue developing premium quality mobile games for high profile publishers Develop new own IP games

Bring group’s successful game franchises like Supermarket Mania, Stand o’Food and Mahjongg Arti-facts to iPhone and other smart phone, portable, and home gaming platforms

Adjust MIDS strategy for present economic conditions and work on further improving and licensing the system

By the end of the year G5 will be less dependent on publishers’ orders, owning valuable IP rights and have recurring revenue streams not directly dependent on the company’s development capacity. At the same time, new strategy increases risk as well as reward, and the results will depend a lot on the success of the particular games. In this situation, the management is not providing a guidance for 2009 until several more own products are released.

Vlad Suglobov

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Directors’ Report

The Board of Directors and Chief Executive Of-ficer of G5 Entertainment AB (publ), corporate identity number 556680-8878, hereby submit the Annual Report and Consolidated Financial State-ments for the operations of the parent company and group in the financial year 1 January 2008 - 31 December 2008. G5 Entertainment AB (publ) with registered office in Stockholm, Sweden, is the parent company of the G5 group. The compa-ny was incorporated in May 2005 as Startskottet P 40 AB (publ) and carried no operations until the formation of G5 group.

There are two major areas of G5 group’s business: Entertainment and Business Solutions.

Entertainment

G5 Entertainment is the world’s leading mobile game development studio. The company produces premium quality mobile games based on the most popular licenses for the leading mobile publishers: EA Mobile, THQ Wireless, Konami Digital En-tertainment, and others, constantly working on expanding its customer base. Company’s track record includes best-selling original games and games based on popular videogame and movie brands like The Sims 2, Star Wars, The Simpsons, Hellboy, Saints Row 2, Pirates of the Caribbean, and others. More information about the games G5 developed is available here:

http://www.g5e.com/games.

In 2008, G5 entered casual game market with original intellectual property by producing suc-cessful debut game title Supermarket Mania and acquiring Shape Games Inc, an independent de-veloper of a number of successful proprietary casual games and franchises. The group’s strategy includes increasing the number of proprietary original products distributed to customers over digital distribution networks: mobile, PC, home and portable game consoles.

In game development, G5 team has extensive experience with downloadable mobile and PC games. Company’s unique competitive advantage is its proprietary Talisman™ cross-platform tech-nology unavailable to other developers, which

allows effective development of innovative tech-nologically advanced games across numerous plat-forms and devices: J2ME, BREW, iPhone, Win-dows Mobile, Symbian, Blackberry, PC, Nintendo DS, and others. More information about Talisman

is available here:

http://www.g5e.com/company/technology. G5 also offers publishers mobile handset porting services, supporting over 400 mobile devices across a range of European and US operators. G5 is authorized developer for a number of pro-prietary mobile, portable and home platforms including Qualcomm BREW, Apple iPhone, Nin-tendo DS, Sony PlayStation 3, Sony PlayStation Portable, and Microsoft Xbox 360.

Business Solutions

G5 develops and licenses complex solutions like MIDS for wireless operators, content providers and media companies, including Russia‘s leading wireless operator Vimpel Communications (Bee-line).

MIDS is created for interface design groups and laboratories within wireless operators, handset manufacturers and service providers. MIDS auto-mates the work of designers, researchers, and usability testers, and provides benefits of reduced design lab costs, reduced time to market, and improved interface usability.

Development Base

G5’s development offices are located in Moscow, Russia and Kharkiv, Ukraine. The company also uses workers contracted through each co-workers individual private firm located in Russia, Eastern Europe, and USA. As of December 2008, G5’s aggregate employees including co-workers were 50.

2008 Results

Consolidated revenue for the period January-December 2008 is 14 177 KSEK, up 42% com-pared to 9 980 KSEK for the same period of 2007.

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Operating result after financial items for the pe-riod January-December 2008 is 1 957 KSEK, up 6% compared with 1 849 KSEK operating result in the same period 2007. Earnings per share for the period are 0,23 SEK.

Revenue structure for the period January-December 2008: mobile games: 59%, business solutions: 21%, PC casual games: 20%. Mobile games revenue for the period is up 5% compared to the same period of 2007, business solutions (mobile products not connected to gaming) – up 53% compared to the same period of 2007. The result is below management forecast of 17.5 MSEK revenue with 3.5 MSEK operating result, due to delayed negotiations on MIDS deal and two contract mobile game projects caused by the sharp downturn in the economic situation during Q3-Q4 2008. The deals in question are still on the table, but management is not issuing specific guid-ance for Q1 2009, as further development of the economic situation and its effects on G5’s custom-ers is difficult to foresee.

G5’s Stock

Share

As of 31 December 2008, G5 Entertainment’s share capital was SEK 741 957 divided between 7 419 574 shares, at quoted value of 0,10 SEK per share. The average number of outstanding shares during the period is 6 479 894 shares. Each share confers equal rights to participation in G5’s assets and earnings and confers the holder with one vote. There were no outstanding warrants regarding the shares.

The G5 share has been quoted on the NGM Nor-dic MTF exchange in Stockholm since 2nd_October

2006 under symbol G5EN. The introduction rate was 3 SEK per share. Since November 19th₂₀₀₈

G5’s share is quoted on Aktietorget exchange in Stockholm. At year-end 2008, the share price was SEK 2.89 and total market capitalization was 21 443 KSEK.

Share Capital History

The trading of G5’s shares on NGM Nordic MTF exchange in Stockholm started on 2nd_October,

2006. Before that, in 2006, the company com-pleted an issue of 1 000 000 shares and placement of 1 000 000 of owner shares at 3 SEK per share, attracting new shareholders. In July 2008, G5 completed a new non-cash issue of 375 000 shares in order to acquire 51% of Shape Games Inc. In October 2008, G5 completed preferential rights issue and placement of 1 044 574 shares in order to raise funds to finance the development of com-pany’s original own IP game products and MIDS solution. In November 2008, trading in G5’s shares was moved to Aktietorget exchange in Stockholm.

Largest Stockholders as of 30 December 2008

Stockholder _SharesNo. of

Hold-ing / Votes NORDNET PENSION 1 050 250 14,16% SUGLOBOV, VLAD 681 999 9,19% SHULTS, SERGEY 670 000 9,03% TABUNOV, ALIK 660 000 8,90% SVENSK, TOMMY 360 500 4,86% OSCARSSON, DAVID 347 000 4,68% AVANZA PENSION 320 936 4,33% NORDNET LUXEM-BURG 289 000 3,90% ALTAPLAN BERMUDA 158 750 2,14% LILJEDAL, TORBJORN 138 000 1,86% Total 4 676 435 63,03% Source: VPC AB Insiders as of 31 December 2008

Stockholder _SharesNo. of Hold-ing / Votes SUGLOBOV, VLAD 681 999 9,19% SHULTS, SERGEY 670 000 9,03% TABUNOV, ALIK 660 000 8,90% NILSSON, ANDERS 59 500 0,80% COWBURN, ADAM 51 000 0,69% Total 2 122 499 28,61% Source: VPC AB

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Activities during 2008

Entertainment

Four mobile games developed by G5 Entertain-ment were released in 2008: Sims 2 Castaway (EA Mobile), Saints Row 2 (THQ Wireless), Hellboy 2

(Konami Digital Entertainment), Simpsons: Itchy and Scratchy Land (EA Mobile). It has also been revealed that G5 is the developer of Ultimate Fight-ing Championship 2009 Undisputed and Red Faction Guerilla mobile games for THQ Wireless. Both games were completed and delivered to publisher during 2008-early 2009. All games were devel-oped using G5’s proprietary Talisman game en-gine.

Four PC casual games developed by the group were released in 2008: Supermarket Mania, Mystery Cookbook, Stand o’Food 2, and Paranormal Agency. During 2008, G5 has signed 6 deals for contract development of mobile games. In October, G5 has signed an agreement with a leading mobile game publisher to co-fund the development of a game for mobile phones and iPhone, based on widely recognizable media brand. In December 2008, G5 has started the development of two original premium PC casual games for release in 2009. In August 2008, G5 has started the devel-opment of Supermarket Mania for iPhone.

In September, G5 Entertainment has become licensed developer for a number of game plat-forms supporting digital distribution – iPhone, Xbox 360, PlayStation 3, PlayStation Portable, and Nintendo DS.

During Q4 2008 and continuing into 2009, G5 was building direct distribution network for group’s PC casual games. As of now, the group has contractual relationships with all leading casual game distributors. Group’s Paranormal Agency and

Success Story games are distributed through this network, and so will be group’s new PC casual games.

Business Solutions

During 2008, G5 has completed the development of the first version of innovative MIDS solution,

and delivered it to the first customer – _Vimpel

Communications (Beeline).

Company representatives attended multiple indus-try events during the year, identifying and con-tacting potential licensor for MIDS solution.

The trial version of MIDS was distributed to a shortlist of 10 potential customers (wireless oper-ators, handset manufacturers, content providers) during Q4’08-Q1’09.

Corporate

The company has opened lower-cost QA and de-velopment office in Kharkiv, Ukraine. To stream-line G5’s entry to the local human resource mar-ket and achieve desired production cost in a short time period, a JV with the local partner Pipe Stu-dio (www.pipestuStu-dio.ru) was established – G5 UA Holdings Limited (Hong Kong). G5 Holdings LTD owns 70% of G5 UA Holdings Limited, while other 30% of the company is owned by private person.

On May 29th G5 Entertainment signed an agree-ment to acquire 51% of shares in Shape Games Inc. for the consideration of 375 000 newly non-cash issued shares in G5, with additional consider-ation up to US$ 100 000 to be paid after 1 year, based on Shape Games performance in 2008. Ac-tual performance in Shape Games Inc for 2008 didn’t reach conditions for additional considera-tion. G5 also received 3-year option to purchase remaining 49% of Shape Games for the total of US$ 490 000, exercisable in whole or partially. On July 8th G5 announced the completion of the transaction. For more information, see Note 22. On September 8th, extraordinary meeting of shareholders in G5 Entertainment AB has ap-proved Board’s decision to conduct new issue up to 1,593,750 new shares with preferential rights to subscribe for existing shareholders, at subscrip-tion price of 3,90 SEK per share. The purpose of the issue is to invest in the development and digi-tal distribution of original games for PC, iPhone, PlayStation Network, and other platforms sup-porting digital distribution (Xbox LiveArcade, WiiWare, etc.); co-funding of games based on popular brands together with the leading

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ers, in exchange for revenue share from the sales; development and marketing of MIDS solution. During the subscription period 18 September – 13 October which coincided with high turbulence on financial markets, 66% of the issue has been sub-scribed, bringing company 4 074 KSEK before issue expenses, and 90 new shareholders.

In September G5 has announced the intention to move trading in G5 shares from Nordic MTF to Aktietorget trading place following the closing of the rights issue.

Significant Events after Year End

Paranormal Agency and Success Story PC casual games were released on a number of casual game distri-bution portals under direct deals with G5.

Supermarket Mania for iPhone was released and achieved 100.000 paid downloads in 2 months following the release. G5 has started work on bringing group’s successful PC casual games to iPhone.

G5 announced plans to bring the count of released iPhone games to at least 8 before the end of Q3’09.

Two contract game development deals were signed, one of them with a new customer.

The management has finished processing feedback from potential customers who evaluated MIDS and concluded that changes to the business model and system functionality are needed in order to successfully license the system in the new eco-nomic conditions. The management sees oppor-tunities in the growing number of smaller compa-nies developing smart phone applications for iPhone, Android, Blackberry, and Windows Mo-bile, and wants to target this market with afforda-ble MIDS configurations.

Research and development

G5 developed and owns unique Talisman™ cross-platform mobile technology and Development Tools to keep G5’s games at the highest quality level and optimize development process.

Talis-man™ technology is being continuously improved to be adapted to rapid technological progress. Also, G5 developed proprietary products and solutions under the brand G5 Business Solutions available for licensing to customers such as mobile operators and handset manufacturers.

In 2008, Research and development cost amounted to 3 540 KSEK (1 472 in 2007). Of this amount, 1 261 KSEK (731 in 2007) was capita-lized as Intangible assets, as it was deemed that it will generate financial benefits in following 3 years.

Environment

G5 group does not work in an area where the environment will be affected in any material mat-ter.

Financial result for the period

Consolidated revenue for the period January-December 2008 is 14 177 KSEK, up 42% com-pared to 9 980 KSEK for the same period of 2007. Operating result after financial items for the pe-riod January-December 2008 is 1 957 KSEK, up 6% compared with 1 849 KSEK operating result in the same period 2007. Earnings per share for the period are 0,23 SEK.

Revenue structure for the period January-December 2008: mobile games: 59%, business solutions: 21%, PC casual games: 20%. Mobile games revenue for the period is up 5% compared to the same period of 2007, business solutions (mobile products not connected to gaming) – up 53% compared to the same period of 2007. The result is below management forecast of 17.5 MSEK revenue with 3.5 MSEK operating result, due to delayed negotiations on MIDS deal and two contract mobile game projects caused by the sharp downturn in the economic situation during Q3-Q4 2008. The deals in question are still on the table, but management is not issuing specific guid-ance for Q1 2009, as further development of the economic situation and its effects on G5’s custom-ers is difficult to foresee.

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Given the situation and the amount of uncertainty on the market, the management decided in first half of 2009 to pause growth plans, gather more information about the market trends, consolidate on the achieved levels, and balance group’s re-sources between contract development and in-vestment in the original games and products in accordance with earlier announced strategy. Even-tually, publishers will be actively investing in building their product lineup for late 2009 and 2010, and when they do, G5 will be ready to con-tinue growing contract development, while in-vestment in original games in the first half of 2009 will generate additional revenue stream in the second half 2009.

The management expects that this strategy will result in the significant part of G5’s revenue in second half 2009 to be generated by royalty and revenue from the distribution and licensing of G5’s original and own games and products. G5’s management believes that the market for casual games digitally distributed across PC, consoles and wireless platforms is going to grow, and the de-mand for MIDS as cost-saving platform will be strengthening during 2009, therefore in this year G5 is well-positioned to become stronger and better-diversified business with higher reliance on revenue from own product line in games and business solutions areas.

Liquidity

Current assets of the group as of December 31st

2008 were 8 027 KSEK. Current liabilities: 1 103 KSEK. Working capital (CA-CL): 6 924 KSEK. Current ratio (CA divided by CL): 7.28.

Operational Risks

Dependency on Publishers and Opera-tors

It is essential that G5 constantly receives orders from its main customers – game publishers and mobile operators, and receives license payments and payments for the work done. There is a risk that game publishers and operators will choose to order services from G5’s competitors, or cancel the projects in development with G5 due to changes in the market situation. To minimize this risk, G5 constantly endeavors to satisfy and

ex-ceed customer expectations in terms of produc-tion values and delivery timing. Addiproduc-tionally, the dependence on the individual customers reduces with an expanding customer base.

Forecasting Reliability

G5 Entertainment is active on relatively young and unstable market, limiting the possibility to accurately evaluate the future progress of opera-tions. Inaccurate assessment of market progress may adversely affect group’s aggregate earnings and liquidity.

Regional Risks

Activities in Russia are exposed to various politi-cal, regional and legal risks. It cannot be guaran-teed that G5 will not be hit in negative ways, which can weaken group’s ability to carry out its activities. However, G5’s activities in Russia do not depend on extensive physical investments and can therefore be moved to other regions with certain advance planning.

Tax Risk

The Company’s operating activities are within the Russian Federation (RF), the United States (USA) and Asia. Laws and regulations affecting business operating in the RF are subject to rapid changes and the company’s assets and operations could be at risk due to negative changes in the political and business environment.

While the Company believes it has complied with local tax legislation, there have been many new tax and foreign currency laws and related regula-tions introduced in recent years which are not always clearly written.

Insurance Risk

The insurance market is still undeveloped in Rus-sia, and many risks that in developed countries can be insured, cannot be insured in Russia. Costs for unforeseen risks can therefore arise.

Financial Risks

The board considers G5 Entertainment is exposed to currency risk i.e. the risk of the value of the

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financial instrument changing due to fluctuations in exchange rates. Interest and credit risks are considered marginal, because at present G5 does not have any external funding, while almost all sales are generated through major telecom and media companies, with consistently high credit ratings.

Currency Translation and Exposure Risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in for-eign exchange rates. The company is exposed to foreign exchange risk arising from various curren-cy exposures primarily with respect to the US Dollar and the Russian Ruble.

Group Financial State

Given the situation and the amount of uncertainty on the market, the management decided in first half of 2009 to pause growth plans, optimize ex-penses and balance group’s resources between contract development and investment in the origi-nal games and products in accordance with earlier announced strategy. The G5 group have enough

financial resource to continue investment in origi-nal games in the first half of 2009 that will gener-ate additional revenue stream in the second half 2009.

Proposed allocation of profits

The Board of Directors will suggest to the Annual General Meeting paying no dividend in 2009. The following non-restricted equity in the Parent Company is at the disposal of the Annual General Meeting:

Share premium reserve 7 411 Profit\Lost carried forward 886 Net profit for the year 1 023

Total 9 320

The Board proposed no dividend shall

be distributed to shareholders 0

To be carried forward as:

Share premium reserve 7 411 Profit\Lost to be carried forward 1 909

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Group Financial Results

Group Income Statement is presented in accordance with IFRS consolidation principles, for the period 1 January - 31 December 2008.

Income Statement

GROUP INCOME STATEMENT NOTE 2008 2007

Reporting period 2008-01-01

2008-12-31

2007-01-01 2007-12-31

Operating income

Net turnover (revenue) 4 14 177 9 980 Production costs 5, 6, 12 -10 937 -5 510

Gross profit 3 240 4 470

General and administrative expenses 5, 6, 13 -1 590 -2 180

Other operating losses 16 -275 -218

Operating Results before financial

items 1 375 2 072

Financial income 17 611 8

Financial expense 18 -29 -231

Operating Results after financial items 1 957 1 849

Taxes 8 -172 -369

NET RESULT FOR THE YEAR 1 785 1 480

Attributed to:

Parent Company's shareholders 1 504 1 480

Minority interest 281 -

Weighted average number of shares 10 6 479 894 6 000 000 Earnings per share (SEK) before and after

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Balance Sheet

GROUP BALANCE SHEET NOTE 2008-12-31 2007-12-31

ASSETS Fixed Assets

Intangible fixed assets

Capitalized development costs 7 2 432 731

IP Rights 87 -

Goodwill 7, 24 2 727 282

5 246 1 013

Tangible fixed assets

Equipment 7 1 484 1 112

1 484 1 112

Financial Assets

Other long-term receivables - -

- -

Total fixed assets 6 730 2 125

Current Assets

Account receivables 25 1 719 2 948

Worked up, non-invoiced revenues 1 793 -

Other receivables 703 83

Liquid funds 3 812 1 132

Total current assets 8 027 4 163

TOTAL ASSETS 14 757 6 288

EQUITY AND LIABILITIES Equity

Share capital 9 742 600

Other capital contribution 7 451 2 255

Other reserves 821 -21

Profit\Loss Brought Forward 3 878 2 374

Total shareholder’s equity 12 892 5 208

Minority 762 -

Total equity 13 654 5 208

Current Liabilities

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Other liabilities 9 152

Tax liabilities 169 146

Accrued expenses 19 382 208

Total current liabilities 1 103 1 027

Long-term liabilities

Deferred tax 8 0 53

Total Long-term liabilities 0 53

TOTAL EQUITY AND LIABILITIES 14 757 6 288

Memorandum items

Pledged assets 27 709 -Contingent liabilities 26 None None

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Cash Flow Statement

GROUP CASH FLOW NOTE 2008-01-01

2008-12-31

2007-01-01 2007-12-31

Operating activities

Profit after financial items 1 957 1 849

Adjusting items not included in cash flow 21 575 76

2 532 1 925

Taxes paid 8 -172 -345

Cash flow before changes in working

capital 2 360 1 580

Cash flow from changes in working capital

decrease in operating receivables -909 -890 increase in operating liabilities -528 428

Cash flow from operating activities 923 1 118

Investing activities

Purchase of property and equipment 7 -326 -1 065 Capitalized development costs 7 -1 261 -731

Acquisition of subsidiaries 22 145 -

Decrease of long-term receivables 0 105

Cash flow from investing activities -1 442 -1 691

Financial activities

New share issue 4 076 -

Issue expense -986 -

Dividend paid - -600

Cash flow from financial activities 3 090 -600

CASH FLOW 2 571 -1 173

Cash at the beginning of the year 1 132 2 262

Cash flow 2 571 -1 173

Exchange Rate diff 109 43

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Changes in Equity

GROUP CHANGES IN EQUITY Share Capit al Other Capital Contribution Other Reserv es Prof t/loss broug h t forward Total Sharehold-er’s Equ ity Minori ty Total Shareholder’s Equity as of 2006-12-31 600 2 255 -174 1 604 4 285 Exchange differences 153 -110 43 Dividend -600 -600

Net result for the year 1 480 1 480

Shareholder’s Equity as of

2007-12-31 600 2 255 -21 2 374 5 208 0 5 208

Exchange difference 842 842 134 976

Net result for the year 1 504 1 504 281 1 785

Share issue 142 6 182 6 324 6 324

Share issue expense -986 -986 -986

Acquisition 347 347

Shareholder's Equity as of

2008-12-31 742 7 451 821 3 878 12 892 762 13 654

Business and Financial Ratios

Ratios 2008 2007

Financial Strength 93 83 Return on Equity 21 39 Return on Total Assets 13 37 Current Ratio 7,28 4,05 Quick Ratio 7,28 4,05

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Parent company Financial Results

G5 Entertainment AB (publ) was incorporated in May 2005 as Startskottet P 40 AB (publ), and carried no business activity before the formation of G5 group in the beginning of Q3 2006. The share capital of the company was 500.000 SEK distributed among 5.000.000 shares before the new issue of 1.000.000 shares in Q3 2006 which was performed before the listing of the company on Nordic MTF exchange in October 2006. In 2008 G5 completed two new issues of 375 000 shares and of 1 044 574 shares. Since then, there are 7 419 574 shares in the company.

Income Statement

PARENT COMPANY INCOME STATEMENT NOTE 2008 2007

Net Sales 4 9 498 7 746

Production costs 12 -8 056 -6 088

Gross profit 1 442 1 658

General and administrative expenses 13 -1 196 -1 115

Other operating gains 15 608 98

Other operating losses 16 0 -231

Operating profit 854 410

Income from participation in Group Companies 20 - 517

Profit after financial items 854 927

Change tax allocation reserve 190 -100

Profit before taxes 1 044 827

Taxes 8 -21 -87

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Balance Sheet

PARENT COMPANY BALANCE SHEET NOTE 2008-12-31 2007-12-31

ASSETS Fixed assets

Financial assets

Shares in Group Companies 7, 23 2 750 500

2 750 500

Current assets

Account receivables 810 1 846

Worked up, not invoiced income 1 793 0

Receivables from Group Companies 11 2 511 1 803

Other receivables 277 55

Cash at bank 2 217 93

7 608 3 797

TOTAL ASSETS 10 358 4 297

EQUITY AND LIABILITIES Restricted equity

Share capital 9 742 600

Non-restricted equity

Share premium reserve 7 411 2 213

Profit\Loss carried forward 886 146

Net result for the year 1 023 740

9 320 3 099

Total equity 10 062 3 699

Untaxed reserves/Tax allocation reserve 0 190 Liabilities

Accounts payable 69 136

Liabilities to Group companies 11 -

-Income tax liability 12 146

Accrued expenses 215 126

Total Liabilities 296 408

TOTAL EQUITY AND LIABILITIES 10 358 4 297

Memorandum items

Pledged assets 27 709 None

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Cash Flow Statement

PARENT COMPANY CASH FLOW NOTE 2008 2007

Operating activities

Profit after financial items 854 927

Paid tax -155 -19

Cash before changes in working capital 699 908 Cash flow from changes in working capital

Increase in operating receivables -1 687 -22 Increase in operating liabilities 22 - 2 024

Cash flow from operating activities -966 - 1 138

Investing activities

Purchase of shares in subsidiaries 22

-Cash Flow from investing activities

Financing activities

New share issues 4 076

-Issues expenses 986

-Paid dividend - -600

Cash flow from financing activities 3 090 - 600

CASH FLOW 2 124 - 1 738

Cash and bank at the beginning of year 93 1 831

Cash flow 2 124 -1 738

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Changes in Equity

PARENT COMPANY CHANGES IN EQUITY Share Ca pita l Share Pre m ium R ese rv e Profit\Los s carried forw ard Net Res u lt o f the ye ar Total Share -holder’s Equ ity Shareholder’s Equity as of 2005-12-31 500 0 0 0 500

Net result for the year 746 746

Share issue 100 2 900 3 000

Share issue expense -687 -687

Shareholder’s Equity as of 31

December 2006 600 2 213 0 746 3 559

Allocation of profit 746 -746 0

Paid dividend - 600 - 600

Net result for the year 740 740

December 2007 600 2 213 146 740 3 699

Allocation of profit 740 -740 0

Net result for the year 1 023 1 023

Share issue 142 6 182 6 324

Share issue expense -984 -984

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Notes

NOTE 1. General Information and

Accounting Principles

GeneralInformation

G5 Entertainment AB (publ) Reg. nr. 556680-8878 unites a group of the companies: G5 Hold-ings Limited (Hong Kong), G5 Mobile LLC (Rus-sia), G5 Software LLC (Russia) and Shape Games Inc (USA). G5 Entertainment AB is an umbrella holding listed on Aktietorget.

G5 group is one of the world’s leading mobile game development studios. The group produces premium quality mobile games based on the most popular licenses for the world‘s leading mobile publishers: EA Mobile, THQ Wireless, Konami, and others, constantly working on expanding its customer base. G5 group also develops and li-censes solutions for wireless operators, handset manufacturers, and service providers. Among G5’s clients are Russian wireless operators Vimpel Communications (trademark “Beeline”) and Sky Link, with the aggregate subscriber base over 60 million people.

The Annual Report and the consolidated financial statements were approved for Issue by the Board of Directors on May the 21st_{, 2009.}

Contacts

MAIL: BOX 5339, 102 47 STOCK-HOLM SWEDEN

PHONE: +7-495-978-54-79 FAX: +46-8-545-075-49;

+7-495-673-62-98

E-MAIL: CONTACT@G5E.COM

WEB SITE: HTTP://WWW.G5E.COM

Accounting Principles

G5 group consolidated accounts have been pre-pared in accordance with International Financial Reporting Standards (IFRS), including interpreta-tions committee (IFRIC) approved by the Euro-pean Commission for application as per 31 De-cember 2008, the Swedish Financial Reporting

Standard Board number RFR 1.2. Suplement Ac-counting Regulations for Group has been applied. Accounting policy for the Parent Company, see Note 2.

New accounting principles for 2009.

In the preparation of the consolidated accounts at 31 December 2008, a number of standards and interpretations were published that have not yet come into effect. Only one of these changes is preliminary assessed to have effect for G5 Group: IAS 1 amendment Presentation of financial state-ments. This amendment came into effect on 1 January 2009 and applies to the financial year starting on this date. The amendment deals with the presentation of the balance sheet, the income statement and cash flow. The Group will apply the IAS amendment from 1 January 2009 onward, which will not impact the Group’s accounts, but in a limited capacity impact the presentation style of the Group’s accounts.

Fiscal Year Info

Fiscal year 2008 is from 1st_{January, 2008 up to}

31st_{December, 2008.}

Conditions for Preparing the Parent Company and Consolidated Financial Statements

The parent company’s functional currency is the Swedish krona, which is also the reporting curren-cy of the parent company and group. Thus, the financial statements are published in Swedish kro-nor. All amounts are rounded to the nearest thou-sand Swedish kronor (KSEK) unless stated other-wise.

Preparing the financial statements pursuant to IFRS necessitates the corporate management mak-ing evaluations, estimates and assumptions that influence the application of the accounting prin-ciples and the stated amounts for revenues, ex-penses, assets and liabilities.

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21 Classification, etc.

Essentially, fixed assets and non-current liabilities exclusively comprise amounts expected to be recovered or paid after more than 12 months from year-end. Essentially, the parent company’s and group’s current assets and current liabilities exclu-sively comprise amounts expected to be recovered or paid within 12 months of year-end.

Consolidated Financial Statements

The Consolidated Financial Statements encompass the parent company and subsidiaries. All subsidiar-ies are accounted pursuant to acquisition account-ing. The acquisition value is calculated as the total of the fair value of assets received, arising, or lia-bilities taken over, and the equity instruments issued in exchange for the controlling influence over the acquired unit, and all expenses directly attributable to the business combination, as of the transaction date. When the acquisition value of the business combination exceeds the net fair val-ue of the acquired share of identifiable assets, lia-bilities and accounted contingent lialia-bilities, the difference is accounted as goodwill. When this difference is negative, it is accounted directly in the Income Statement.

Subsidiaries are consolidated from the acquisition date. Intergroup receivables and liabilities, reve-nues and expenses and unrealized gains and losses are eliminated in their entirety when the Consoli-dated Financial Statements are prepared.

In the income statement, net profit/loss is re-ported without deductions for minority shares in profit/loss for the year. The minority share in subsidiaries’ equity is reported as a separate item in the consolidated shareholders’ equity in the balance sheet.

Foreign currency translation Transaction and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the set-tlement of such transactions and from the transla-tion at year-end exchange rates are recognized in

the income statement. Exchange rate differences on trading and liabilities are included in operating profit and loss as other operating gains or other operating losses. Difference in financial recei-vables and liabilities are accounted in financial items.

Group companies

The result and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet

Income and expenses for each income state-ment are translated at average exchange rates All resulting exchange differences are recog-nized as a separate component of equity

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are translated as assets and liabilities of the foreign entity and trans-lated at the closing date.

Revenue Recognition

Revenues are license payments, advances and royalties paid by customers. Ongoing projects are accounted for at the percentage of completion method. License payments are accounted as reve-nue at the date when license rights are actually transferred to customer. Royalties are accounted as revenue at the date when royalty report was received from customer. Interest income is re-ported continuously and dividends received are reported after the right to the dividend is deemed secure. In the consolidated accounts, intra-group sales are eliminated.

Income recognition of projects based on percentage-of-completetion method

Application of the percentage-of-completion me-thod entails Income recognition in pace with the degree of completion of The project. To deter-mine the amount of income worked up at a

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ic point in time, the following components are Required:

Project revenue – Revenues related to the contract. The revenues must be of such a cha-racter that the recipient can credit them to in-come in the form of actual payment received or another form of payment.

Project cost – Costs attributable to the con-struction assignment, which correspond to project revenues.

Completion rate (work-up rate) – Recognized costs in relation to estimated total assignment costs.

The fundamental condition for income recognition based on percentage of completion is that project revenues and costs can be quantified reliably. As a consequence of income recognition based on the percentage-of-completion method, the trend of earnings is reflected immediately in the finan-cial accounts. However, percentage of completion gives rise to one disadvantage. Due to unforeseen events, the final profit may occasionally be higher or lower than expected. It is particularly difficult to anticipate profit at the beginning of the project period and for technically complex projects or projects that extend over a long period. For projects that are difficult to forecast, revenue is recognized in an amount corresponding to the worked-up cost, meaning that zero earnings are entered until the profit can be reliably estimated. As soon as this is possible, the project switches to the percentage-of-completion method. Provisions posted for potential losses are charged against income for the relevant year. Provisions for losses are posted as soon as they become known.

Balance-sheet items such as “worked up, non-invoiced revenues” and “project invoicing not yet worked up” are recognized in gross amounts on a project-by-project basis. Projects for which worked-up revenues exceed invoiced revenues are recognized as current assets, while projects for which invoiced revenues exceed worked-up reve-nues are recognized as a current interest-free lia-bility.

Financial Revenue and Expenses

Financial revenue and expenses comprise interest income on bank balances and receivables, interest expenses on liabilities and exchange rate differ-ences.

Intangible Assets Goodwill

Goodwill is the positive difference between the acquisition value of a business combination and the net fair value of acquired identifiable assets, liabili-ties and contingent liabililiabili-ties. Goodwill can be viewed as a payment for future financial benefits that cannot be separately identified, nor accounted separately.

Goodwill is valued at acquisition value less poten-tial accumulated write-downs. Goodwill is divided to cash-generating units and is no longer amor-tized but subject to impairment tests at least an-nually, see the ‘write-downs’ heading below.

Other Intangible Assets

Acquired intangible assets are accounted at acqui-sition value less accumulated depreciation and write-downs. Development costs are only capita-lized if the expenses are expected to result in iden-tifiable future financial benefits that are under the control of the group, and it is technologically and financially possible to complete the asset. The costs that can be capitalized are costs that are in-voiced externally, direct costs for labor and a rea-sonable portion of indirect costs. Other develop-ment costs are expensed in the Income Statedevelop-ment as they arise. Capitalized development costs are accounted at acquisition value, less deductions for accumulated depreciation. Supplementary ex-penditure for capitalized intangible assets is ac-counted as an asset only if it increases the future financial benefits for the specific asset to which they are attributable. The carrying amount of the asset is removed from the Balance Sheet upon disposal or investment, or when no future finan-cial benefits are expected from the use or dispos-al/divestment of the asset. The gain or loss result-ing when an intangible fixed asset is removed from the Balance Sheet is accounted in the Income Statement. The gain or loss is calculated as the

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difference between the potential net revenue from the divestment and the asset’s carrying amount.

Tangible Fixed assets

Expenditure for tangible fixed assets is accounted in the Balance Sheet when it is likely that the fu-ture financial benefits associated with the asset will arise for the group and the asset’s acquisition value can be reliably calculated. Tangible fixed assets are accounted at acquisition value less accumulated depreciation according to plan and potential write-downs. The acquisition value comprises the purchase price directly attributable to the asset to bring it to the place and condition for use in the manner the group intended. The carrying amount of the asset is removed from the Balance Sheet upon disposal or divestment, or when no future financial benefits are expected from the use or disposal/divestment of the asset. The gain or loss that results when a tangible fixed asset is removed from the Balance Sheet is accounted in the Income Statement. The gain or loss is calculated as the difference between the potential net revenue from the divestment and the asset’s carrying amount.

Depreciation

Intangible Fixed Assets

After first-time accounting, intangible fixed assets are accounted in the Balance Sheet at acquisition value less deductions for potential accumulated depreciation and write-downs. For intangible fixed assets with finite useful lives, depreciation is calculated using the straight-line method to allo-cate their cost to their residual values over their estimated useful lives. Intangible fixed assets with indeterminable useful lives are not depreciated. Instead, an impairment test is applied pursuant to IAS 36 by comparing the asset’s recoverable value and its carrying amount. This test is conducted annually, or at any time there are indications of value impairment of the intangible asset. Evalua-tions of depreciation methods and useful lives are conducted annually.

Subject of Depreciation Depreciation Period, (Years)

Capitalized development costs 1-3

Tangible Fixed Assets

After first-time accounting, tangible fixed assets are accounted in the Balance Sheet at acquisition value less accumulated depreciation and potential accumulated write-downs. The depreciation is calculated using the straight-line method to allo-cate their cost to their residual values over their estimaited useful lives. Evaluations of depreciation methods and useful lives are conducted annually. The following depreciation periods are applied:

Subject of Depreciation Depreciation Period, (Years) Office furniture 10 Computer equipment 5 Write-downs

Carrying amounts for the group’s assets are veri-fied at each year-end to determine whether there is any indication that the asset’s value may have reduced. If so, the asset’s recoverable value is calculated, defined as the greater of fair value less selling expenses and value in use. When calculat-ing value in use, future payments surpluses the asset is expected to generate are discounted at a rate corresponding to risk-free interest and the risk associated with the specific asset. The reco-verable value of the cash-generating unit to which the asset belongs is calculated for assets that do not generate cash flow that is essentially independent of other assets. If the recoverable value of the asset is less than the carrying amount, a write-down is effected. Write-downs are posted to the Income Statement.

Tax

The group accounts income tax pursuant to IAS 12, Income Taxes. Tax is accounted in the Income Statement apart from when the underlying trans-action is accounted directly against equity. Cur-rent tax is tax to be paid or received in the curCur-rent year, including potential adjustments of current tax attributable to previous periods. Deferred tax is calculated pursuant to the balance sheet me-thod, proceeding from temporary differences between the carrying amounts and taxable values of assets and liabilities. The amounts are calculated based on how the temporary differences are

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pected to even out, and by applying those tax rates and rules that are resolved or announced as of year-end.

Temporary differences are not considered in con-solidated goodwill, nor in differences attributable to participations in subsidiaries that are not ex-pected to become subject to tax in the foreseeable future. For legal entities, untaxed reserves are accounted including deferred tax liabilities. How-ever, the Consolidated Financial Statements divide untaxed reserves between deferred tax liabilities and equity.

The deferred tax receivables in deductible tempo-rary differences and loss carry-forwards are only accounted to the extent that it is likely that they will imply lower future tax payments.

Local taxes of subsidiaries such as value added and property taxes are accounted according to local tax rules in Hong Kong, Russian Federation and USA.

Benefits for Employee

The group accounts employee benefits according to local regularity rules of subsidiary company. These benefits are accounted with salaries paid, contract fees and accrued remuneration using various assumptions such as vacations, social secu-rity contributions and pensions as required by local regularity rules of subsidiary company. Provisions are only accounted coincident with termination of employees if the group has demon-strably committed to conclude employment be-fore the normal time, or when remuneration is paid to encourage voluntary redundancy. In those cases the group issues redundancy notices, a de-tailed plan, which as a minimum, includes infor-mation on workplaces, positions and the approx-imate number of people affected, and the remune-ration for each employee category, or positions and the time for conducting the plan.

Financial Instruments

A financial asset or financial liability is reported in the balance sheet when the Company is party to the contractual conditions of the instrument. A financial asset is eliminated from the balance sheet

when the rights contained in the contract are rea-lized, mature or when the Company losses control over them. A financial liability is eliminated from the balance sheet when the commitment in the agreement has been completed or has in any other manner been terminated. Acquisitions and sales of financial assets are reported on the trade date, which is the date on which the company commits itself to acquire or sell the assets, apart from cases in which the company acquires or sells listed se-curities when liquidity date reporting is applied. At the end of each accounting period, the compa-ny assesses whether there are objective indications that a financial asset or group of financial assets requires impairment.

The group classifies its financial instruments in the following categories: Loans and receivables and financial liabilities measured at amortized costs.

Loans and receivables

Accounts receivable and other receivables are classified as “loans and receivables” and are meas-ured at amortized cost using the effective interest method.

Accounts receivable and other receivables are reported in the amounts that are expected to be received after deductions for bad debts, which are assessed on an individual basis. The expected term of accounts receivable and other receivables in the Group is short, which is why the amount is re-ported at nominal value without discounting. Any impairment is reported in operating expenses.

Financial liabilities measured at amortized costs

In the group Account Payable and other short-term liabilities are classified as “financial liabilities measured at amortized costs”.

The Account Payable and other liabilities are rec-ognized initially at fair value, net of transaction costs and subsequently measured at amortized costs.

The expected term of accounts payable and other short-term liabilities in the Group is short, which is why the amount is reported at nominal value without discounting.

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25 Earnings per Share

Earnings per share have been calculated pursuant to IAS 33. Earnings per share are calculated by earnings attributable to holders of ordinary shares of the parent company are divided by the weighted average number of ordinary shares at the end of the period.

Provisions

Provisions are accounted in the Balance Sheet when a legal or informal commitment arises as a consequence of an event that has occurred and it is likely that an outflow of financial benefits will be necessary to settle the commitment and a reliable estimate of the amount is possible. The provision is accounted at an amount corresponding to the best estimate of the disbursement necessary to settle the commitment. Provisions are liabilities that are uncertain in terms of the amount or tim-ing of when they will be settled.

Contingent Liabilities

Contingent liabilities are potential commitments sourced from events that have occurred and whose incidence may be confirmed only by one or more uncertain future events occurring or not occur-ring, which do not lie entirely within the group’s control. Contingent liabilities may also be existing commitments sourced from events that have oc-curred but that are not accounted as a liability or provision because it is unlikely that an outflow of resources will be necessary to settle the commit-ment, or the size of the commitment cannot be estimated with sufficient reliability.

Cash Flow Statement

The Cash Flow Statement has been prepared pur-suant to the indirect method. Cash flow from operating activities is calculated proceeding from net profit/loss. The profit-loss is adjusted for transactions not involving payments made or re-ceived changes in trade-related receivables and liabilities, and for items attributable to investing or financing activities.

Liquid Funds

Liquid funds comprise cash and bank balances. At present, the group has no short-term investments.

Segment Reporting

Pursuant to IAS 14, the group should submit in-formation on business segments and geographical regions. A business segment is a part of the group identifiable in accounting terms that provides goods and services, and that is exposed to risks and opportunities that differ from other business segments. Geographical regions means a part of the group identifiable in accounting terms that provides goods and services within a defined geo-graphical region, and that is exposed to risks and opportunities that differ from other geographical regions. The group must consider whether busi-ness segments or geographical regions are its pri-mary basis for division. The type of risks and op-portunities that predominate are decisive to this choice.

Income statement, assets, liabilities and invest-ments cannot be divided by segment in a reasona-ble and reliareasona-ble manner because operations are fully integrated into common development process.

Leasing

G5 group does not have any leasing.

Critical accounting estimated and judg-ment

Management makes estimates and assumption concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assump-tions that have a significant risk of causing a ma-terial adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated at headline

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downs” and “Goodwill”. For more details, please see Note 24.

NOTE 2. Parent Company

Ac-counting Principles

The parent company prepares its Annual Report pursuant to the Swedish Annual Accounts Act (1995:1554) and Swedish Financial Reporting Standard Board number RFR 2.2, Accounting for Legal Entities. RFR 2.2 is based on legal entities whose securities are quoted on a Swedish stock market or recognized marketplace, whose general rule is to apply the IFRS/IAS applied in the Con-solidated Financial Statements. Accordingly, in its Annual Report for the legal entity, the parent company applies those IFRS and statements en-dorsed by the EU where this is possible within the auspices of the Swedish Annual Accounts Act and with consideration to the relationship between accounting and taxation in Sweden. RFR 2.2 states the exceptions and supplements to be made from and to IFRS. The difference between the group’s and the parent company’s accounting principles are stated below. The stated accounting principles of the parent company have been ap-plied consistently for all periods published in the parent company’s financial statements.

Classification and Presentation

The parent company’s Income Statement and Balance Sheet are presented in the format stipu-lated by the Swedish Annual Accounts Act. The primary discrepancy from IAS 1 relates to the accounting of equity and the incidence of provi-sions as an independent title in the Balance Sheet.

NOTE 3. Definitions of business

and financial ratios.

Financial strength

Adjusted equity divided by total assets.

Return on equity

Result after financial items divided by average equity.

Return on total assets

Operating profit/loss with addition to interest income divided by average total assets.

Current ratio

Current assets divided by current liabilities.

Quick ratio

Current assets excluding stock divided by current liabilities

NOTE 4. Net Sales per revenue

classification

The Group Revenue Classifica-tion 2008 2007 Licenses 11 579 9 917 Royalties 2 598 63 Parent Company Revenue Classifica-tion 2008 2007 Licenses 8 887 7 746 Royalties 611 0

NOTE 5. Staff

The staff consists of employees of the Russian companies and G5’s co-workers contracted through each co-workers individual private firm in Russia, Ukraine, Czech Republic, UK and USA.

Average Group

Em-ployees Quantity 2008 2007

Men 7 9

Women 1 1

Average Group Co-workers Through Contract Quantity 2008 2007 Men 34 36 Women 6 7 Average Parent Company Employees Quantity 2008 2007 Men 0 0 Women 0 0

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27 Board of Directors Quantity 2008 2007 Men 3 4 Women 0 0 Top Management Quantity 2008 2007 Men 2 2 Women 0 0

Total Staff

Remune-ration for the Group 2008 2007

Board of Directors 141 200

CEO 353 281

Top management 606 522 Employees salary 131 306

Social tax 34 80

Other social costs 48 69 Co-workers through

contract 4 052 3 532

CEO is elected by the Board for 3 years. The pe-riod of notice for the CEO is three months. If termination of employment is on the part of the company then severance pay of 3 months’ pay will be awarded. If termination of employment is on the part of CEO, there will be no severance pay. Employment conditions of CEO do not have any additional benefits such as stock options, or other remunerations.

NOTE 6. Board remuneration

Board of Directors Remuneration 2008 2007 Adam Cowburn 54 80 Anders Nilsson 54 40 Ein Stadalninkas 33 80 Total 141 200

NOTE 7. Fixed Assets

The Group

Goodwill

Intangible Fixed

As-sets Changes 2008 2007

Intangible fixed assets at

the beginning of year 282 282

Investment during the

year (Note 22) 1 889 -Currency exchange

difference 556 0

Intangible fixed assets

at the end of year 2 727 282

Capitalized development costs and IP Rights

Intangible Fixed

As-sets Changes 2008 2007

Intangible fixed assets at the beginning of

year 731

-Investment in

subsidi-ary (Note 22) 414 Investments to

intang-ible fixed assets 1 261 731 Depreciation /

write-downs - 325 0

Currency exchange

difference 438 0

Intangible fixed assets

at the end of year 2 519 731

Tangible Fixed

As-sets Changes 2008 2007

Tangible fixed assets at the beginning of

year 1 112 123

Investment in

subsidi-ary (Note 22) 107 Investments to

tangi-ble fixed assets 326 1 065 Depreciation -250 -76 Currency exchange

difference 189 Tangible fixed assets

at the end of year 1 484 1 112

Tangible Fixed

As-sets 2008 2007 Accumulated costs 1 810 1 188 Accumulated deprecia-tion -326 -76 Net amount 1 484 1 112 Parent Company Financial Assets Changes 2008 2007

Financial assets at the

beginning of year 500 500 Investments to

finan-cial assets 2 250 0 Depreciation /

write-downs 0 0

Financial assets at the

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NOTE 8. Taxes

The Group

Group Income Tax

Expenses 2008 2007

Current tax -172 -341

Deferred tax - -28

Total tax expenses -172 -369

The tax on the Group´s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicated to profit of the consolidated entities as follows:

2008 2007

Profit before tax 1 957 1 849 Tax according to

cur-rent tax rate 28% -548 -518 Income not subject for

tax purpose 276 113 Expenses not

deduc-table -5

-Adjustment for tax rates in foreign

subsid-iaries 105 36

Tax charge -172 -369

Deferred tax liability in 2008 is zero and 53 KSEK in 2007. This was calculated based on untaxed reserves in the Parent Company.

Parent Company

Parent Company Income Tax

Ex-penses 2008 2007

Current tax -21 -87

Total tax expenses -21 -87

2008 2007

Profit before tax 1 044 827 Tax according to

cur-rent tax rate 28% -292 -232 Income not subject for

tax purpose 276 145 Expenses not

deduc-table -5 -

Tax charge -21 -87

NOTE 9. Share Capital and

Divi-dends

G5 Entertainment AB has only one share class, with all shares having equal voting rights. The

quoted value is 0,10 SEK per share. No treasury shares were repurchased or sold.

Dividends

The Board of Directors has decided to propose to the Annual general meeting no dividends to be paid for the financial year 2008.

NOTE 10. Earnings per share

Weighted average shares and shares at the End of the year:

2008 Shares at the End of the period Weighted average shares Jan. - May. 6 000 000 2 500 000 Jun - Sep 6 375 000 2 125 000 Oct - Dec 7 419 574 1 854 894 Total 7 419 574 6 479 894

NOTE 11. Related Parties

The parent company has close relations with its subsidiaries. Transactions between group compa-nies are conducted at cost plus a certain margin. As of 31 December 2008, the parent company had 2 511 KSEK (1 803 KSEK in 2007) in receivables from group companies and no liabilities to group companies. This amount was eliminated from consolidated receivables and liabilities. Parent company has no sale to subsidiaries. Parent com-pany purchases from subsidiaries amount to 8 056 KSEK (6 088 KSEK in 2007).

Except for transaction within the Group, there are no transactions with other related parties.

NOTE 12. Production costs

Production cost of the group consists of the fol-lowing items split by nature:

Group 2008 2007

Cost of goods

(out-sourcing) 3 890 88 Staff remuneration 5 705 4 790 Office rent 997 487 Equipment deprecia-tion 250 76 Additional services 95 69 TOTAL 10 937 5 510

BUSINESS AND FINANCIAL RATIOS PARENT COMPANY FINANCIAL RESULTS... 16

Contents

G5 Group

Board of Directors

Auditor

Management

CEO Word

Directors’ Report

Entertainment

Business Solutions

Development Base

2008 Results

G5’s Stock

Activities during 2008

Significant Events after Year End

Research and development

Environment

Financial result for the period

Liquidity

Operational Risks

Financial Risks

Group Financial State

Proposed allocation of profits

Group Financial Results

Income Statement

Balance Sheet

Cash Flow Statement

Changes in Equity

Business and Financial Ratios

Parent company Financial Results

Income Statement

Balance Sheet

Cash Flow Statement

Changes in Equity

Notes

NOTE 1. General Information and

Accounting Principles

NOTE 2. Parent Company

Ac-counting Principles

NOTE 3. Definitions of business

and financial ratios.

NOTE 4. Net Sales per revenue

classification

NOTE 5. Staff

NOTE 6. Board remuneration

NOTE 7. Fixed Assets

NOTE 8. Taxes

NOTE 9. Share Capital and

Divi-dends

NOTE 10. Earnings per share

NOTE 11. Related Parties

NOTE 12. Production costs