REP O R T 2 0 1 9 AL ANNU

ALM EQUITY AB ANNUAL REPORT 2019

CONTENTS

ALM Equity in brief 3 The year at a glance 4 Message from the CEO 6 History of the business 8 The ALM Equity Group 10 Business areas 14 Market 40 Sustainability Report 42 Risks & risk management 54 Board of Directors & auditors 64 Group management 66 Corporate governance 68

The ALM Equity share 80 Comparative overview 82 Directors’ report 83 Financial statements 86 Notes 94 Auditor’s report 141 Calendar 144 Contact information 144 1,681 Revenue, SEK million

434 Profit/loss after tax, SEK million

557 Units in property management

1.5 Fair value of investment properties, SEK billion

881 Units in production

12,621 Number of development rights

2.5 Surplus value in development rights portfolio according to market valuation, SEK billion

Södra Häggvik in Sollentuna

2 alm equity ab | 2019 Key financial indicators at 31/12/2019 ABOUT ALM EQUITY ALM EQUITY IN BRIEF

QUICK FACTS BUSINESS CONCEPT Founded 2006 • Listed on Nasdaq First North Growth ALM Equity aims to invest in and develop companies in Market since 2012 • Approx. 100 employees • Five Sweden’s real estate sector based on future market needs. business areas • Operates in locations with good Through active ownership, ALM Equity pursues those communications within Stockholm County. initiatives that it believes will create the highest risk-adjusted return on equity for each individual business, with the aim BUSINESS of generating maximum risk-adjusted return on equity for The Group is divided into five business areas: Real shareholders. Estate Management, Project Development, Construction Management, Financing and Digital Services. Find out OBJECTIVE more about the business areas on pages 14–37. The objective is for each business to achieve maximum risk- adjusted return on equity combined with optimised growth. SHARES ALM Equity has two types of share: 10,154,600 ordinary VISION shares and 9,818,275 preference shares. At year-end ALM Equity aims to be the most profitable and the most the company had 482 holders of ordinary shares and innovative group in selected segments of the Swedish real 3,945 holders of preference shares. The total number of estate market. shareholders was 4,130. SHAREHOLDER OBJECTIVE To maximise risk-adjusted return on equity in each business through a flexible business model with an adaptable financing model and a sustainable investment strategy.

alm equity ab | 2019 3 THE YEAR AT A GLANCE ALM EQUITY LOOKS TO THE FUTURE

KEY FINANCIAL INDICATORS* 2019 2018 Revenue (SEK million) 1,681 2,314 Operating profit/loss (SEK million) 139 106 Operating margin (%) 8 5 Profit/loss (SEK million) 434 5 Earnings per ordinary share (SEK) 19.79 -5.24 Equity (SEK million) 3,310 2,138 Equity per ordinary share (SEK) 97.91 34 Equity per preference share (SEK) 120.00 120.00 Return on equity (%) 10 -4 Equity/assets ratio (%) 39 31 Cash and cash equivalents 699 390

*The financial statements have been recalculated according to new accounting policies. Further information about the new accounting policies can be found under Note 1 on pages 94–105 and the restatement effects are presented under Note 36 on pages 133–138.

SIGNIFICANT EVENTS DURING THE YEAR IN ALM EQUITY AB

• Implemented a private placement (offset share issue) of 1,285,926 preference shares with a subscription price of SEK 96.94 per preference share. Kopparnäset Kapitalförvaltning AB was entitled to subscribe and payment for the preference shares was made by offsetting liabilities between the parties.

• Issue carried out of 207,222 new preference shares with a subscription price of SEK 109 per share. The preference shares were offered as payment for a bolt-on acquisition in an existing project.

• ALM Equity AB decided to revise its accounting policies regarding consolidation for tenant-owner associations and investment properties. The revised accounting policies also mean that the revenue recognition date has changed.

SIGNIFICANT EVENTS AFTER YEAR-END

• The Board of Directors proposes a dividend of one (1) • 2020 began with concern and uncertainty surrounding the preference share per 100 ordinary shares through a spread of the new coronavirus and illness Covid-19, and its bonus issue rather than a cash dividend, equivalent impact on society and the economy. In the short term, up until to a redemption value of SEK 1.20 (1.20) per ordinary the drafting of this annual report, the impact on the Group’s share. Furthermore, the Board of Directors proposes revenue, earnings and cash flow has been minimal. In the a dividend of SEK 8.40 (8.40) in cash per preference current situation it is difficult to judge what the long-term share, payable quarterly in an amount of SEK 2.10 (2.10). impact will be on society and the economy, and the knock-on effects for ALM Equity.

4 alm equity ab | 2019 SIGNIFICANT EVENTS IN OPERATIONS DURING THE YEAR

REAL ESTATE MANAGEMENT BUSINESS AREA

Investment property portfolio (Units***) 2019 2018 Investment property portfolio 4,033 1,817 • Took possession of and began operating 557 new-builds which

Under own management** 557 - are fully let and expected to generate annual net operating income of SEK 73 million. Contracted in production 635 763 Contracted, production not started 2,453 666 • Recognised unrealised changes in fair value of SEK 120 million in connection with the investment properties being measured at fair **In addition to these, 388 units are also managed for external parties. value.

• Agreements signed to acquire a further 2,215 new-builds for management purposes; counterparty is the Project Development PROJECT DEVELOPMENT BUSINESS AREA business area.

Project Development (Units***) 2019 2018 • Start of construction on 467 units, of which 410 will be Development rights portfolio 13,502 11,837 delivered to the Real Estate Management business area. In production 881 1,318 • Sold 977 units, of which 69 were sold to the external market; Completed development rights 5,322 4,711 in addition signed conditional contracts with Real Estate Under detailed zoning plan 7,299 5,808 Management business area on a further 1,342 units. Total sales 977 291 • Completed and delivered 852 units, of which 295 were to the Of which private market 69 47 external market. Of which real estate management market 908 244 Units where production has started 467 100 • Expanded development rights portfolio with 1,136 units via Delivered units 852 419 three land allocations.

Of which private market 295 419 • External market valuation of development rights portfolio Of which real estate management market 557 - at year-end indicates surplus value in the total portfolio of approximately SEK 2.5 billion, of which ALM Equity’s portion amounts to roughly SEK 2 billion.

• After year-end construction started on 467 units in Södra CONSTRUCTION MANAGEMENT BUSINESS AREA Häggvik • Signed agreements for approximately SEK 750 million in Construction Management (Units***) 2019 2018 capital from investors and partners. Construction portfolio 1,114 450 • Signed four future construction contracts with an order Production in progress 533 360 value of around SEK 600 million. Orders 581 90 • Start of construction on 467 units in a turnkey contract with Project Development business area.

• Completed and delivered 320 units via former construction OTHER BUSINESS AREAS arrangements within Småa AB.

• The Financing business area has arranged financing for the benefit of the Project Development and Real Estate Management business areas totalling roughly SEK 2.4 billion.

• The Digital Services business area has shifted from a free app to a premium version to pave the way for continued development and upgrading of the tool. Existing customers choose whether they wish to continue using the app or cancel their subscription. This has also enabled the removal of inactive users.

***Units include residential units, premises and hotel rooms.

alm equity ab | 2019 5 ALM Equity’s CEO Joakim Alm

MESSAGE FROM THE CEO ALM EQUITY’S PRODUCT IN DEMAND NOW AND IN THE FUTURE When we established ALM Equity, the goal was mainly to develop theme is that the concept of a ‘home’ has taken on a broader tenant-owner projects, from undeveloped land to homes ready to meaning for ALM Equity compared with the company’s early years, move into. Back then we were already paying close attention to who when it was exclusively about developing tenant-owner projects. would buy and live in these homes. We used this information to guide our planning and inform the design. Over the past few years, Plans were already emerging in 2011 to produce homes for other operations have been redirected to various types of rental projects target groups besides the traditional tenant-owner buyer. Most in which we develop, build, let and in the long term also plan to own people buy a tenant-owned apartment to use permanently and manage the properties. But our interest in developing projects for a number of years. But demand on the housing market for specific target groups still remains. We place great emphasis on extends beyond just permanent housing. Hotels are probably producing and managing carefully designed homes to help establish the most common home from home of which we have all made long-standing relationships between us and our customers. use on occasion. But a temporary home can be needed in other circumstances. Service quarters, when an employer needs to In 2019, ALM Equity operated according to the new structure that resolve a housing issue because the ordinary market is not has been forged over the past few years. The Parent Company has functioning. Student accommodation or housing for young adults a small number of group-wide functions, while revenue-generating who have not managed to save up the several hundred thousand operations are in the subsidiaries, specialising in the development, krona needed for a down payment on a tenant-owned apartment. improvement and management of our properties. One pervading

6 alm equity ab | 2019 For quite a few years now housing construction has been carried Rental income is often higher for this type of letting arrangement, out according to a standard model: 10 percent studio apartments, 20 based on the level of service required in the building. Future percent one-beds, 40 percent two-beds, 25 percent three-beds and management of the property can also be streamlined depending on 5 percent four-beds. In Stockholm, with its housing shortage, almost the agreement. half are single households that in most cases neither can nor want to pay for space that is not needed. Clearly a market that is desperate From the start, ALM Equity has worked with partner financing in for housing that is low-carbon and makes efficient use of space. which our contribution has involved developing land through to Particularly since awareness has grown when it comes to the carbon the completion of a residential property ready to move into. Our footprint produced by construction and homes. partners have contributed capital in addition to traditional bank financing. The business model has proved to be extremely stable All things being equal, the carbon footprint of a 50-square-metre and successful. Our established contacts have been very useful, apartment is twice as big as that of a 25-square-metre apartment. Not particularly when traditional lines of credit dried up. Partnerships only during construction but also for the subsequent 100 years that entered into for individual projects have been concluded via the the building remains standing. The young people who constitute a handover of completed tenant-owned apartments and properties significant target group for our homes know this. It is important to to tenant-owner association members, and repayment of project have the right product to offer them. financing.

ALM Equity has led the way when it comes to producing the type of The model for our partner financing can also be regarded as homes that are currently in demand and that we believe will continue a distribution of risk that we sometimes use in our real estate to be in demand going forward. Smart, customised homes with good management business as well. Our partners’ contribution is front- public transport connections. end financing. Remuneration in addition to regular interest on preference shares also includes co-ownership of half the project via One success factor for ALM Equity from the start has been controlling ordinary shares; the remaining ordinary shares are owned by ALM and limiting the level of risk in operations. From the outset, in our Equity. Before the ordinary shareholders can benefit from the profits project development we have chosen to work with various partners generated by the properties, the preference shares must be paid who have bought into parts of the projects. We have surrendered back. The quicker this happens, the better it is for ALM Equity, and of some of the profit in favour of reduced risk. We have seen evidence of course for the partner who had their capital repaid. projects’ commercial viability into the bargain, and created relationships for future business. ALM Equity will gradually be able to build up a portfolio of half-owned investment properties that can generate a steady contribution to our We have also worked with different lenders, including banks and shareholders each year. The well-built properties in selected locations institutions, which have contributed project and property financing. with good communications also allow considerable opportunities for When the tenant-owned market was on its knees, the banks became healthy value increases in the portfolio. more restrictive with their lending. In those circumstances it was useful to have alternative channels for financing. Similarly, our tenant- ALM Equity entered 2020 with the aim of fulfilling its transformation owned portfolio was flexible and it was possible to a great extent in recent years from being solely a housing developer, to developing to reclassify them from tenant-owned apartments to investment property-related operations by taking the next step in being defined apartments. as an investment company operating within the real estate sector.

Our business model still focuses on minimising risk. We build and rent As we look ahead, it is hard to avoid mentioning the effects of the out residential apartments but essentially, both the apartments and Covid-19 virus. In the short term it is impacting those who have the property are owned by an association. If the market shifts, the been infected by the virus or lost loved ones, but many companies apartment can potentially change its purpose and be offered to the are also feeling the effects as they have suddenly lost significant market as a tenant-owned apartment. sources of income and risk going under. For us, the short-term impact is limited and it is difficult to predict what the long-term Those projects that have gone into production in recent years have effects will be for society, employment, growth, and the lending and mainly been apartment blocks for renting and property management. capital market. This will affect everyone, including us. Regardless of A few minor, traditional tenant-owner projects including detached whether the aftermath is mitigated and stimulus packages enable and terraced houses have also been launched and successfully us to reboot the economy once things have calmed down, or we sold. Even when we build apartment blocks we maintain a focus on encounter a bleak period of recession, I would not exchange space- reducing risks via multiple letting alternatives. Once construction efficient, low-carbon investment apartments in locations with good starts, financing is secured based on what the property can support communications in Stockholm for any other asset. as a traditional apartment building. During construction, however, we can offer the apartments as single or multiple leases to a municipality Stockholm, April 2020 or a company. Joakim Alm, CEO

alm equity ab | 2019 7 ABOUT ALM EQUITY HISTORY OF THE BUSINESS

ALM Equity was founded by Joakim Alm, who teamed up with investors in co-owned housing projects to implement a merger in which they exchanged their shares in the various projects for shares in the company ALM Equity AB. At that time, a few million were invested at a time in residential projects totalling just over 200 apartments across 10 areas. The company has experienced rapid growth since then, and the projects and investments are now significantly larger. The company has gone from being a single housing developer, to becoming a strong group operating within the various segments of the real estate sector.

2006 ALM Equity AB began operating via an investment in seven small real estate development projects. The company has since been characterised by innovation, organic growth and expansion.

2011 The first project was launched with space-efficient investment apartments which then formed the basis of the real estate management business.

2012 The company was listed on NASDAQ First North Growth Market with two classes of share: ALM Stam and ALM Pref.

2015 The first agreements were entered into regarding management of completed apartments, while the first contracts for forthcoming acquisitions of newly-built investment properties were signed.

2017 Småa AB was acquired together with its employees and project portfolio. In connection with the acquisition, operations were refined and split into five independent business areas with independent companies and brands. The move was made to make ALM Equity the strongest property group in the sector.

2018 Construction began on the first units under the now more refined construction business within 2xA Entreprenad AB in the Construction Management business area.

2019 Real Estate Management business area grew considerably with the completion and operation of 557 units under Svenska Nyttobostäder, while additional agreements were signed in relation to 2,215 units.

8 alm equity ab | 2019 2009 – Smögenbaden 2013 – Stadsterrassen 2 29 units 46 units

2015 – Slottsallén 2016 – Mälarutsikten 73 units 128 units

2019 – Terra 2020 – Skalden and Poeten 345 units 507 units

alm equity ab | 2019 9 THE ALM EQUITY GROUP DEVELOPING THE REAL ESTATE SECTOR

ALM Equity develops and invests in businesses operating in the real estate sector. The businesses are organised into five business areas with independent companies and brands operating within real estate management, project development, construction, financing and digital services. There is a central Group staff organisation that provides expertise and resources for general functions.

BUSINESS MODEL Businesses are developed within business areas representing different branches of the real estate sector. The business model means that each business area is to be managed in a cost-effective manner based on their individual circumstances, and be independent of the others by maintaining their own corporate structure and financing. Each business area is established based on its own business needs in terms of expertise and resources, supported by shared Group functions such as finance, HR, IT and marketing.

INVESTMENT STRATEGY Developing and strengthening businesses that contribute to the Group’s performance in the real estate sector to ensure continued growth with a healthy risk-adjusted return.

FINANCING MODEL • The business areas’ activities must be fully financed • No collateral may be pledged or loans issued between • Each business area works to achieve a healthy business areas risk-adjusted return. • Ongoing identification and realisation of potential financing opportunities.

BUSINESS AREA OVERVIEW

ALM EQUITY AB

GROUP STAFF

REAL ESTATE PROJECT CONSTRUCTION DIGITAL FINANCING MANAGEMENT DEVELOPMENT MANAGEMENT SERVICES

REAL ESTATE MANAGEMENT CONSTRUCTION MANAGEMENT The business area owns and manages a space-efficient The business area designs, plans and coordinates turnkey property portfolio in locations with good communications contracts for real estate projects. in Stockholm where potential tenants include companies, Find out more on page 28 authorities and private individuals. Find out more on page 14 FINANCING The business area creates and develops various financing PROJECT DEVELOPMENT solutions with a focus on efficient processes with the The business area develops apartments through strong minimum number of intermediaries, benefitting both the conceptualisation adapted to suit identified target groups. borrower and the investor. Find out more on page 34 Projects are managed based on analyses in early stages up until completion and handover to the end customer. Find DIGITAL SERVICES out more on page 20 The business area is under development and has created a communication platform that simplifies communication with companies and associations. Find out more on page 36

10 alm equity ab | 2019 Rinkebyterrassen, Stockholm

alm equity ab | 2019 11 THE ALM EQUITY GROUP A QUINTET IN PERFECT HARMONY

ALM Equity’s focus is on developing and investing in businesses in the real estate sector, creating business opportunities in various parts of the value chain. In every deal and business transaction, the aim is for both the Group and its partners to generate a healthy return and to constantly improve. Whether cooperation is with external parties or between business areas, transactions take place on commercial terms and with the same focus on development and business. Building the business in recent years to create a space-efficient portfolio of investment apartments in locations with good communications with modern solutions has meant that the Group’s business areas have both grown stronger and completed successful transactions.

ACQUISITIONS AND CONCEPT STRUCTURAL ENGINEERING EXPERTISE AND The Project Development business area has a development CONSTRUCTION rights portfolio totalling almost 550,000 sqm, which has The Construction Management business area has potential the potential to be developed into tenant-owned apartments business in assisting the project via the construction and investment apartments. Today the majority are adapted company 2xA Entreprenad in the early stages to verify to reach the market for various types of letting, but with designs and drawings at a point where it may affect both the possibility of reverting to tenant-owned apartments production costs and risk in forthcoming stages. When it in the future. The Real Estate Management business is time to implement the project, the Project Development area is a potential customer, with its focus on long-term business area leads a procurement process to conclude a management of a space-efficient portfolio. turnkey contract for the project.

Once a development right has been acquired, it is developed At this stage the Project Development business area can opt by the Project Development business area based on the to enter into an agreement either with an external party or prospective target group. Architects are procured, designs with the internal construction company 2xA Entreprenad. determined and the future property’s floor space allocated The internal alternative in turn involves procuring and preparations made to provide services of various kinds subcontractors, planning, management and control of the at a later stage. The layout and allocation of space for entire production process for 2xA Entreprenad. residential purposes, shared areas and premises adds value for the end customer. Common elements include gyms, FINANCING AND LETTINGS dining areas, chemists, food and service shops or shared Meanwhile, the Financing business area may be tasked spaces for use by all residents. with assisting by acquiring all or part of the capital for the project financing required by the Project Development Structural engineering expertise is involved at an early stage business area, and for the management financing needed to ensure the project is viable during the conceptualisation by the Real Estate Management business area. and planning permission process. When the prospective customer is the Real Estate Management business area, Once agreements on future acquisitions have been signed they are also involved in the final design to adapt the and the financing is in place, the Real Estate Management product to demand on the rental market. Agreements are business area, under the management of Svenska concluded to acquire investment properties, and then Nyttobostäder, is able to begin work on offering investment turnkey contracts and financing for production enter the properties to companies, institutions and municipalities for final negotiation phase. letting of the entire, or parts of the building.

12 alm equity ab | 2019 The rent level can be higher than the assumption in the If the investment property has been financed via capital original costing, depending on how well customisations contributions from investors, ownership is allocated can be made and the added value that can be created equally between the financial partner and Real Estate for the individual customer. This raises both the future Management. The capital contribution is made via regular return and the value of the investment property. preference shares in connection with the property handover, and this is then repaid regularly via the DIGITAL OPPORTUNITIES surplus from net operating income and/or via increased The Digital Services business area has potential business borrowing as the value of the investment property grows. by entering into agreements with the Real Estate Once the preference shares have been repaid, future surplus Management business area to provide the investment is allocated equally between the financial partner and Real property and its residents with the Your Block app. Your Estate Management. Block manages everything from booking the laundry room, car pool and managing digital locks, to sharing resources VALUE CREATION AT ALL STAGES of various kinds. This also has the advantage of being able ALM Equity’s shareholders share in the return resulting to further enhance and improve the application’s functions from the value creation and development work that takes to increase the level of service and functionality for users. place along the way within the various business areas: Real Estate Management, Project Development, Construction HANDOVER AND MANAGEMENT Management, Financing and Digital Services. The Real Estate Management business area takes over possession of the investment property on completion and at this point it is tasked with managing the property. The investment property is a company in itself.

alm equity ab | 2019 13 BUSINESS AREA REAL ESTATE MANAGEMENT

The Real Estate Management business area includes the companies and brands Svenska Nyttobostäder, which targets companies and authorities, and Smarta Hyresbostäder, whose primary customers are in the private housing market.

Real Estate Management acquires properties with space-efficient portfolios in locations with good communications to manage and rent out apartments and premises. Looking to the future, property management is developed using a modern, digital approach.

The foundations of the business were laid back in 2011, and since the start the business area has established partnerships with investors and created additional value both for them and for the Group.

The business area lets new-builds and efficient apartments to companies, authorities and private individuals. In addition to its main activities, the business area also carries out assignments on behalf of external property owners, managing and renting out their portfolios. The business area also supports the Group’s other areas with property management and letting.

BUSINESS CONCEPT THE CUSTOMER To own and manage space-efficient property portfolios Primary customers include companies, authorities and in locations with good communications for long-term private individuals. management and value creation. FINANCIING OBJECTIVE Each investment property must be fully financed, ideally with To increase the value of the property portfolio by acquiring preference share co-owners. No collateral may be pledged space-efficient and target-group adapted homes with a or loans issued between the business area’s companies and focus on digital service. investment properties. Ongoing identification and realisation of potential property management financing opportunities. VISION Property management is to be operated in a cost-effective To be the most flexible and responsive property manager manner with healthy margins for a high risk-adjusted return. within lettings of apartments and premises to companies, authorities and private individuals. INVESTMENT STRATEGY To acquire smart and space-efficient apartments in locations EXPERTISE with good communications in Stockholm. Supplemented The business area has expertise within acquisitions and with a local range of services for attractive homes. Promote letting, along with financial and technical management. sharing economy and mobility in each investment property and area.

PROCESS

RE AL ESTATE ACQUISITIONS CONCEPT LETTINGS MANAGEMENT

ACQUISITIONS LETTINGS Locations with good communications close to services are a The letting form is adapted to market demand and the best primary factor when acquiring a property. opportunities for generating profit.

CONCEPT REAL ESTATE MANAGEMENT A strong driver is being able to offer the customer services that During the property management phase, the focus is on are a little different from the rest. During the conceptualisation the customer and on securing the property’s long-term phase the focus is on a dynamic digital approach. value.

14 alm equity ab | 2019 KEY FINANCIAL INDICATORS AT 31/12/2019 2019 2018

Number of units in ongoing property management 945 387

- of which management for external parties 388 387

- of which managed by Svenska Nyttobostäder 557 -

- of which managed by Smarta Hyresbostäder - -

Number of contracted units, Svenska Nyttobostäder 2,561 902

- of which in production 289 701

- of which future production 2,272 201

Number of contracted units, Smarta Hyresbostäder 527 528

- of which in production 346 62

- of which future production 181 466

Ingenting, Solna

alm equity ab | 2019 15 REAL ESTATE MANAGEMENT BUSINESS AREA INVESTMENT PROPERTY PORTFOLIO

Roughly 90 percent of the units in the property management portfolio are located right next to Stockholm’s rail connections.

8

9 6 5 4

32

11 1

10

7

16 alm equity ab | 2019 REAL ESTATE MANAGEMENT BUSINESS AREA INVESTMENT PROPERTY PORTFOLIO

The investment property portfolio contains investment properties that are completed and taken over, and they are classified in the balance sheet as Investment properties. The portfolio also includes properties under production and contracted for future production, which are classified as investment properties under construction in the balance sheet. The investment property portfolio includes a total of 116,601 sqm (38,300), 21,272 sqm (0) of which are completed properties.

To follow is a presentation of the investment property portfolio excluding external commitments of 388 units being managed on behalf of other property owners at 31/12/2019. After year-end an additional 159 units were completed and are now in use, and 451 of the contracted units have entered the production phase.

CONSTRUCTION NUMBER ESTIMATED NET PROPERTY UNDER MANAGEMENT MUNICIPALITY YEAR OF UNITS* OPERATING INCOME 1 Mälarterrassen Stockholm 2019 164 SEK 16 million

2 Poeten Solna 2019 236 SEK 32 million 3 Skalden** Solna 2019 112 SEK 15 million Brygghusen i Väsjön Sollentuna 2019 45 SEK 10 million

TOTAL NUMBER OF COMPLETED UNITS 557 SEK 73 million

CONSTRUCTION NUMBER OF ESTIMATED NET CONTRACTED, UNDER PRODUCTION MUNICIPALITY YEAR UNITS* OPERATING INCOME 4 Ängshuset Stockholm 2020 78 SEK 6 million 5 Esplanaden Stockholm 2020 52 SEK 4 million 6 Kronan Stockholm 2021 280 SEK 20 million 7 Torghuset Rönninge Salem 2020 66 SEK 7 million 3 Skalden** Stockholm 2020 159 SEK 20 million

TOTAL CONTRACTED, UNDER PRODUCTION 635 SEK 57 million

CONSTRUCTION NUMBER OF ESTIMATED NET CONTRACTED, PRODUCTION NOT STARTED MUNICIPALITY YEAR UNITS* OPERATING INCOME 8 Häggvik 7 Sollentuna 2022 325 SEK 22 million 8 Häggvik 8 Sollentuna 2022 126 SEK 9 million 8 Häggvik 9 Sollentuna 2023 272 SEK 23 million 8 Häggvik 10 Sollentuna 2023 153 SEK 11 million 9 Kista Square Garden Stockholm 2022–2025 1,047 SEK 110 million 10 Lignum Stockholm 2023 207 SEK 21 million 11 Hesselby Slott Stockholm 2022 142 SEK 13 million Skogshusen Nacka 2022 181 SEK 12 million

TOTAL CONTRACTED, PRODUCTION NOT STARTED 2,453 SEK 221 million

*Units include residential units, premises and hotel rooms. **One of three stages had been completed and transferred at year-end; the remainder were completed and transferred in the first quarter of 2020.

alm equity ab | 2019 17 MESSAGE FROM THE BUSINESS AREA MANAGER STREAMLINED MANAGEMENT PHASE

The Real Estate Management business area currently manages In the longer term the most important aim is to build up 945 units. As of next year we will be expanding our business a good and profitable investment property portfolio of to include significantly more investment apartments in the new-builds within the framework of our criteria: space- investment property portfolio. Within three years the business efficient, energy-efficient homes in locations with good area will be managing around 5,000 units. We are delighted communications, primarily in Stockholm. to have attracted investors who recognise the advantages of building up a portfolio of newly-produced, space-efficient OUR INVESTMENT PROPERTY PROJECTS investment apartments where digitalisation and the sharing To establish a good investment property portfolio, it is important that economy add value for everyone. The fact that the portfolio we order the right product. Building the right homes is a challenge, comprises newly-built, space-efficient and low-carbon not just for us but also for the market. Generally speaking, the homes investment apartments means that both running costs and that have been built for many years have been too big, mainly in the carbon footprint remain at a low level per resident. Many look big cities. One major reason for the housing shortage in Stockholm’s at costs and carbon footprint per square metre, but what really municipalities is that there are not enough smaller homes. There matters is cost and carbon footprint per resident. has always been a market for the standard one- and two-bedroom apartments of 60–80 square metres, but not any more. Our primary focus is on locations with good communications in the Stockholm region, which we expect to be the region The business area is working proactively on ordering the right that experiences the strongest trend going forward. This product to make it easier to retain and boost value. We know enables us to create added value, while the risk of owning what we want and which product is easiest to let to each customer investment apartments is low. group; what generates the most optimised rental income. This is why we are actively involved as a buyer right from the detailed A RAPIDLY EXPANDING ORGANISATION zoning plan stage in how the properties will look: what type of The biggest challenge in the short term is to expand the organisation homes they will be, how they will be allocated, what the standard in order to manage the growing volume of investment properties. will be, whether or not they will have balconies, surface layer There is a lot happening right now and we are continually taking material, etc. We have received proposals to acquire projects over properties, which means we are under a great deal of pressure that from the outset were not optimised for our type of profile. to find the right organisation and the right people. Working in partnership with the Project Development business area we have redesigned these proposals to suit our business. One The business area should grow more on the basis of such example is Barkarbystaden. The project was redesigned, the number of properties than the number of staff, and renegotiated with the municipality and thus grew from 106 managing this is part of our business. Thus far much of the tenant-owned apartments to 276 investment apartments. It resources have been internal within the Group, where there optimised the use of the property, while retaining the same have been people who saw the development potential and footprint and a very similar facade and roofline. It has been a opportunity to come on board. This shows the considerable huge challenge, but as I have already said, we know what we flexibility we have both in the organisation and among our want and that our customers do not want to pay for floor space personnel to identify opportunities and new approaches. that is surplus to requirements. This is what I mean by creating conditions for finding the right investment property portfolio.

Barkarbystaden, Järfälla

18 alm equity ab | 2019 CO-LIVING: A CONCEPT FOR THE FUTURE AUTOMATION AND CLOUD-BASED SOLUTIONS One way that we are trying to make more efficient use of space One key word in being cost-effective and resource-efficient is is by developing co-living in many projects, which we regard as automation. We want to automate our business, which means part of the future investment property portfolio. Co-living is not that our solutions and services will, as far as possible, be digital just about using space more effectively. It also has a significant and cloud-based. social aspect. Traditionally it has been mostly student accommodation and homes for the elderly that have worked Communication with our tenants is digital and conducted via in this way, but we are now seeing considerable demand from Your Block. When it comes to property management finances other age categories as well. The opportunity to live in a slightly too, we adopt a smarter approach using automated solutions. smaller, but smarter space that is more manageable financially, The physical key is disappearing from our properties. It is while making more effective use of resources, making them fantastic! Digital keys provide greater security and are safer and available to many more people. People are keen to retain their simpler for the tenant. Codes and loose keys are a thing of the private space, their own kitchen and bathroom, but also have past. We can reset any code remotely and assign new access. more room available and be able to live alongside like-minded people. Co-living does not just mean common areas; people This also means that caretakers and 24-hour services can be live together in this way because they like it. The opportunity to given a temporary digital key to order when they need to enter a have your own space, but at the same time not be alone, where property quickly, which is a huge advantage. Digital management the social context in itself is more important than the shared like this simplifies fault reporting and any action that needs to be areas. Co-living, with all it entails, is enabled and facilitated taken, as we are not required to be on site. This both cuts costs through our social sharing platform Your Block. and is better for the environment as we avoid having to make a journey for each individual fault. ACCOMMODATION FOR EXCHANGE STUDENTS One example of how we create value enhancement for The right organisation, the right people, the right products, the society and the Stockholm region via the concept is when we right portfolio, streamlining and automating – that is how we work. resolved a situation for the Stockholm School of Economics. Their exchange programme is an important element of their Stockholm, April 2020 educational activities, which means that they offer students Tommy Johansson from across the world the chance to come to Stockholm to study Business Area Manager, Real Estate Management and make significant contacts. Before they came across our concept they were finding it hard to arrange accommodation for their exchange students. The students were being referred to the rental situation in Stockholm, where there is an immediate risk of being duped into paying advance rent by criminal operators offering fake contracts. They are now working with us to offer a cohesive community for all exchange students in the same property instead, and it is a vast improvement for everyone involved.

Another example where we have created added value is in Väsjön in Sollentuna, where we acquired a property from the Project Development business area with homes adapted for families. This became the solution to a challenge that an Indian IT consulting firm was facing, with many consultants travelling to Sweden to contribute key skills within IT and programming.

The challenge was mainly for the more senior consultants with TOMMY JOHANSSON Business Area Manager, Real Estate Management. families accompanying them. In this situation a property could Degree in Marketing Management. Has been working in the real create an Indian community in Väsjön for the customer. It estate sector since 2000, primarily within shopping centres and provides both their consultants and their families with a sense retail with letting, conceptualisation and property development, but of security in their everyday lives, where people in the same also within both commercial and housing management. situation can easily get together and support one another. Holding in ALM Equity, private: 2,500 warrants.

alm equity ab | 2019 19 BUSINESS AREA PROJECT DEVELOPMENT

The business area includes the Parent Company ALM Småa Bostad AB, with the Group companies and brands Småa and ALM Bostad.

Project Development is about analysing and acquiring potential property acquisitions and land allocations, and then organising, financing, conceptualising and developing homes for end customers. The aim in each project is to maximise its market value through development and optimisation of the property’s development rights, contents and form of tenure. In order to successfully achieve this, the focus is on analysis, conceptualisation, risk management and implementation. Projects are adapted to their specific circumstances and are entirely independent of other projects in the business area by means of their own corporate structure and financing.

BUSINESS CONCEPT THE CUSTOMER Acquiring, organising, developing, conceptualising and Customers include property management companies selling real estate projects, primarily in the Stockholm area. and private individuals via purchases in tenant-owner associations and own homes. OBJECTIVE Maximising value via target-group adapted conceptualisation FINANCIING and optimised use of property. Each project must be fully financed, ideally with preference share co-owners. No collateral may be pledged or loans issued VISION between projects and companies within the business area. To be the natural choice in all stages of life by being the best Projects are to be managed cost-effectively with healthy margins housing and urban developer in Stockholm. for a high risk-adjusted return. Ongoing identification and realisation of potential project-specific financing opportunities. EXPERTISE The business area has expertise within analysis and acquisitions, INVESTMENT STRATEGY planning and urban development, conceptualisation, To acquire and develop projects in locations in Stockholm with marketing and sales, as well as implementation. good communications with areas in excess of 5,000 sqm GFA. To maintain a balanced development rights portfolio with the flexibility to be adapted to market conditions and demand. PROCESS

ANALYSIS & PLANNING CONCEPT SALE PRODUCTION COMPLETION ACQUISITION

ANALYSIS AND ACQUISITION SALE The business area works actively with private and The residential units are primarily sold based on drawings, commercial property owners and municipalities and land which imposes high standards in terms of presentation allocations to acquire development rights with the potential material and marketing so that projects, homes and to market to both the rental and tenant-owned market. the home environment are visualised and conveyed as accurately and realistically as possible. PLANNING Value appreciation occurs as the land use changes PRODUCTION during changes to planning, or via improvements to All new-builds or redevelopments are constructed in turnkey the development rights through the requisite authority contracts and procured on commercial terms with minimal approvals and start of construction. risk. Regardless of whether the contract is procured via the Group or externally, the same focus is applied in relation to CONCEPT price, risk, quality and time. All projects undergo clear and project-specific conceptualisation tailored to the circumstances of the COMPLETION development right, the target group and market. During the completion period the project is closed to all internal and external stakeholders, while the property is handed over to the customer.

20 alm equity ab | 2019 KEY FINANCIAL INDICATORS AT 31/12/2019 2019 2018

Number of units in total development rights portfolio 13,502 11,837

- of which units in production 881 1,318

- of which completed development rights 5,322 4,711

- of which development rights in planning process 7,299 5,808

Number of units where production has started 467 100

Number of units sold to private market 69 47

Number of units sold to Real Estate Management 908 244

Selling rate in production 82% 84%

Number of units supplied to private market 295 419

Number of units supplied to property management 557 -

The Brick, Stockholm

alm equity ab | 2019 21 PROJECT DEVELOPMENT BUSINESS AREA DEVELOPMENT RIGHTS PORTFOLIO

Roughly 80 percent of the units in the development rights portfolio are located right next to Stockholm’s rail connections.

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22 alm equity ab | 2019 PROJECT DEVELOPMENT BUSINESS AREA DEVELOPMENT RIGHTS PORTFOLIO

The development rights portfolio is an overview of the Project Development business area’s projects and activities. It encompasses three elements: scheduled development rights, completed development rights and development rights under production. The development rights portfolio includes a total of 51 (51) projects corresponding to 541,246 sqm (543,445), 186,558 sqm (234,490) of which is land allocations or acquisitions yet to be handed over.

Projects under production for the private market are shown in the balance sheet under ‘work in progress’, while projects sold to the Real Estate Management business area are included under the item ‘investment properties under construction’, along with contracted projects in the Real Estate Management business area where production has not started.

The development rights portfolio at 31/12/2019 is detailed below. Since year-end, the portfolio has increased by 278 units through additional land allocation and three detailed zoning plans have gained legal force with a total of 1,032 units. Meanwhile, it has decreased by 228 units which have been completed and handed over to customers. An external market-based valuation of development rights for which construction has not yet started revealed a surplus value of approximately SEK 2.5 billion, of which ALM Equity’s share amounts to SEK 2 billion.

R – RISK LEVELS IN DEVELOPMENT RIGHTS PORTFOLIO

Risk level Project phase R1 Completion underway R2 Production in progress R3 Construction financing in place and/or selling rate 75 percent R4 Turnkey contract signed R5 Authority approval granted and sales underway R6 Property with detailed zoning plan in place R7 Detailed zoning plan process underway R8 Detailed zoning plan process not yet initiated

SCHEDULED DEVELOPMENT RIGHTS MUNICIPALITY NUMBER OF UNITS* RISK LEVEL MARKET**

1 Archimedes Stockholm 964 R7 Management/Private 2 Svindersberg Nacka 515 R7 Management/Private 3 Åbyholm Vallentuna 412 R7 Management/Private 4 Kista Square Garden Stockholm 1,047 R7 Management 5 Saltsjö-Järla Nacka 400 R7 Management 6 Jarlaberg Nacka 147 R7 Management 7 Tingshuset Huddinge 567 R7 Management 8 Jämlikheten Stockholm 100 R8 Management 9 Skärholmsdalen Stockholm 217 R8 Management 10 Bägersta Byväg Stockholm 498 R7 Management 11 Tyska Botten Stockholm 22 R7 Private 12 Bergholmsbacken Stockholm 81 R7 Management 13 Årstafältet 2 Stockholm 353 R7 Management 13 Årstafältet 4 Stockholm 420 R7 Management 14 Aspudden Entré Stockholm 130 R8 Management 15 Lampan Parkering Sundbyberg 40 R8 Management Karlsviks Strand Stockholm 458 R7 Management

Mariehovsviken Strängnäs 368 R7 Management

Hemmesta Värmdö 128 R7 Management

Pausgallerian Enköping 159 R8 Management

Tändstickan Västervik 1 R8 Management

Högantorp Salem/Södertälje 70 R8 Private

Ektorp Österåker - R8 Private

Gunsta Uppsala 93 R7 Private

Kungsberga Ekerö 45 R7 Private

Utsikten Sollentuna 24 R7 Private

Tunadalen Stockholm 40 R7 Private

TOTAL SCHEDULED DEVELOPMENT RIGHTS* 7,299

*Units include residential units, premises and hotel rooms. **‘Management’ means that projects are conceptualised into units adapted for the real estate management company target group. ‘Private’ means that projects are conceptualised into residential units aimed at the private housing market.

alm equity ab | 2019 23 PROJECT DEVELOPMENT BUSINESS AREA DEVELOPMENT RIGHTS PORTFOLIO CONTINUED

COMPLETED DEVELOPMENT RIGHTS MUNICIPALITY NUMBER OF UNITS* RISK LEVEL MARKET**

16 The Brick 1.0 Stockholm 207 R5 Management/Private 16 The Brick 2.0 Stockholm 808 R6 Management/Private

17 Södra Häggvik Sollentuna 2,158 R5/R6/R7 Management/Private

18 Rönninge Centrum Salem 113 R5/R6 Management/Private

19 Hesselby Slott Stockholm 142 R5 Management 20 Dragonen Upplands Väsby 176 R6 Management 21 Råcksta Stockholm 58 R6 Private

22 Skeppsviken Danderyd 14 R5 Private

23 West Village Sundbyberg 34 R6 Private 24 Drabanten Nynäshamn 39 R6 Private 25 Eds Allé Upplands Väsby 54 R6 Private 26 Segersäng etapp F Nynäshamn 16 R5 Private 27 Ekerövallen Ekerö 59 R6 Private

Telegrafberget Nacka 232 R4/R6 Management/Private

Eddahuset Uppsala 67 R6 Management

Rosendal Uppsala 92 R6 Management

Norra Sjötorget Sollentuna 561 R6 Management

Sala Backe Uppsala 133 R6 Management

Ulleråker Uppsala 90 R6 Management

Guldkaggen Gotland 29 R6 Private

Oaxen Skärgårdshamn Södertälje 53 R6 Private

Kalksilo Södertälje 39 R6 Private

Skölsta Uppsala 34 R6 Private

Elfvik Lidingö 114 R6 Private

TOTAL COMPLETED DEVELOPMENT RIGHTS* 5,322

UNDER PRODUCTION MUNICIPALITY NUMBER OF UNITS* RISK LEVEL MARKET**

28 Esplanaden Stockholm 52 R2 Management

29 Ängshuset Stockholm 78 R2 Management

30 Kronan Järfälla 280 R2 Management

31 Torghuset Rönninge Salem 66 R2 Management

32 Terra Stockholm 165 R2 Private

33 Skalden Solna 159 R1 Management

Torparen Sollentuna 24 R1 Private

Grönskan Tyresö 24 R1 Private

Slottsholmen On Water Västervik 33 R1 Management

TOTAL UNITS IN PRODUCTION AT YEAR-END 881

*Units include residential units, premises and hotel rooms. **‘Management’ means that projects are conceptualised into units adapted for the real estate management company target group. ‘Private’ means that projects are conceptualised into residential units aimed at the private housing market.

24 alm equity ab | 2019 Södra Häggvik, Sollentuna alm equity ab | 2019 25 MESSAGE FROM THE BUSINESS AREA MANAGER FLEXIBLE DEVELOPMENT RIGHTS AND STRONG CONCEPTUALISATION

The past few years have seen major shifts in the housing Our strategy has been to establish a quality, flexible portfolio market, with price increases, speculative buying, overheating, with the opportunity to offer homes to a broad customer group: political regulation and temporary saturation, which have first-time buyers, couples moving in together, families who in turn created uncertainty with regard to property values, want to live in either a house or an apartment, and for those demand, bank terms and financing on the private market. who want to live alongside others in a co-living arrangement. When operating rules and conditions change so drastically, Our strategy is to acquire and develop development rights with we need to analyse the situation and be ready to respond to the opportunity to adapt them to target groups and markets. alternative opportunities. Demand and the best financial outcome will determine what we choose to offer the market. An insight into the market, Given the changes that have taken place in our operating transparency and the ability to adapt – these are our strengths. environment, we have had to rethink and adjust the concept for several of our apartment block projects. One example is And we do not work based on systems or models that leave our Kronan project in Barkarbystaden, which from the outset us locked into a certain type of home or standard. We base had a traditional design with around a hundred tenant-owned our decisions on the development right and project’s specific apartments comprising studios to four-bed apartments with conditions and customer group – what we choose to produce generous floor space. We won the land allocation based on will always be governed by what creates the most value. this variation in the size of the apartments, combined with Naturally the forthcoming construction is considered early a distinctive rooftop garden and price. All the indications on in the process, so that the project is adapted to keep in the industry were clear: the market had changed and we construction costs down without compromising on quality and concluded that there were no buyers for this type of tenant- sustainability. owned apartment now or over the coming few years via sale by drawing. This makes our customer group broad: from private individuals buying a home in a tenant-owner association or as a property We did not want to be exposed to the risk of paying for the right, to real estate management companies interested development right and having to put the project on hold for in expanding their portfolio of investment apartments or several years pending another shift in the market. We literally premises. One of our biggest customers today is the Group’s went back to the drawing board, discussed the issue with the Real Estate Management business area, which is in the process municipality and produced a new concept for the entire interior of building up and expanding its investment property portfolio. of the building. From 106 apartments with an average area of around 70 square metres, we created 276 apartments with an TRANSITION GENERATES FUTURE PROSPECTS average area of 28 square metres. We almost tripled the number Over the past two years we have worked intensively on merging, of apartments without compromising on quality. The exterior developing and optimising both businesses and portfolios from of the building has not changed from our original plan. Initially the merger between Småa AB and ALM, so that we are ready to the idea was to use the tenant-owner association to reach the respond to the future market and needs. We have adjusted and private market. Now that we have begun construction, we streamlined several parts of the organisation, and this work have a product that will also appeal to the rental market. This will continue going forward. We have established structures reconceptualisation work has helped us to generate improved and new system support for planning, follow-up and customer earnings quicker than was actually possible from the start. care. If we had not adapted, earnings would have been lower and would definitely have taken longer to materialise. Sweden, and perhaps primarily Stockholm, faces many challenges and opportunities in relation to urban development, RIGHT CONDITIONS IN THE PORTFOLIO residential environments, trading patterns, lifestyle, Our development rights portfolio includes 13,502 units transportation, digital services and social, environmental primarily in locations with good communications in the and economic sustainable development. We are equipped to Stockholm area. The majority are suitable for both the private monitor trends in the housing and real estate market, and we and real estate management market, which is why over time, aim to be at the forefront of developments in various ways. irrespective of economic and market conditions, demand remains relatively even and healthy.

26 alm equity ab | 2019 PROJECT INVENTORY FUTURE PROSPECTS WITH HIGH AMBITIONS In 2019, an inventory was conducted of the development rights We want to grow in a controlled way with low risk, to become a portfolio as we have sold off small family home projects that were not stable, major operator on the market while retaining high margins, suitable, and renegotiated land allocations to implement projects earnings and satisfied customers. Our objective is to maintain an adapted to the market, i.e. space-efficient, high-quality homes that even and high volume of units in production on an annual basis. suit the payment capability of a majority of the population. We have challenged ourselves every day in 2019 to develop We have added new land allocations in Barkarby, Årsta and the sector and our business, and to build on the business area’s Karlsviks Strand in Farsta. We have reached the construction achievements to constantly improve. We look forward to reaping phase for 467 units and handed over 852 units to end customers. the benefits of these efforts in 2020, while continuing to maintain At year-end we had 881 units in production and after year-end, our stable foundations for many years to come, despite global construction began on a further 467 units, which is the result of uncertainty. much effort. Stockholm, April 2020 STEP TOWARDS BECOMING AN URBAN DEVELOPER Louise Eklund As we develop more and larger projects including preschools, Business Area Manager, Project Development commercial elements, infrastructure and mobility solutions, we feel more qualified to call ourselves an urban planner and developer. However, this role demands new forms of collaboration and confidence in relationships with projects’ co-owners, with municipalities, capital providers and contractors. We have proved to the communities in which we operate that we are able to adapt to challenging conditions while continuing to grow and develop. One significant step in this development that shows we have what it takes is getting Klövern on board as a business partner in our major Kista Square Garden project, where we are working together to develop approximately 1,000 units and commercial space right in the heart of Kista.

In addition to this we have the ongoing urban development project The Brick at Telefonplan, including a total of 1,400 units, where Ericsson’s old offices are being transformed into a completely new city block. The area has good communication links, close to both the metro and buses. Infrastructure and public spaces will be developed on this site to create a cohesive, compact and thriving urban environment throughout the district.

In Södra Häggvik, a completely new district is being developed as an extension of central Sollentuna out towards Häggvik, including 1,800 units. Tenant-owned apartments and investment apartments will be combined here with hotels, restaurants and LOUISE EKLUND premises with a focus on creating a good environment for everyday Business Area Manager, Project Development activities. MSc in Economics and Business from Stockholm University, specialising in financing and property. Has been working in the real estate sector Construction started on the first subprojects after year-end, and since 2002, and for the ALM Equity Group sine 2007. the first stage is expected to be completed by 2022. After the end Holding in ALM Equity privately/via family: 6,841 ordinary shares and of the year, the detailed zoning plan for Archimedes in Bromma 1,161 preference shares, as well as 15,000 warrants. including 1,000 units gained legal force and we are now planning to begin construction in stages. These projects are showcasing our ambition to be the best urban developer in the industry.

alm equity ab | 2019 27 BUSINESS AREA CONSTRUCTION MANAGEMENT

The Construction Management business area includes the company and brand 2xA Entreprenad AB.

The business area stems from the construction management business that was managed by Småå since 1927, and from the business operating within construction project management, procurement and quantity surveying that ALM Equity established along with partners in the construction industry. One key principle is the possibility of optimising projects in the early stages in order to determine the product and costing with realistic conditions and high quality in a cost-effective manner.

Construction management involves planning, procuring, managing and following up construction contracts. In the job of a turnkey contractor, the project is divided up into sub-contracts. This maximises competition within each part and reduces the total cost. Meanwhile, it allows a limited number of subcontractors more flexible coordination and better control. Turnkey contracts are packaged to include project planning, production and delivery, with a focus on efficiency and precision aided by digital systems.

BUSINESS CONCEPT THE CUSTOMER To design, plan and coordinate the construction of residential Customers include tenant-owner associations and property and property projects as a turnkey contractor from start to developers, primarily within ALM Equity. finish with a price and schedule guarantee. To assist in the early stages during conceptualisation to ensure the product FINANCIING is viable and facilitate planning permission processes. Each construction contract must be financed via capital- efficient agreements with conditions to ensure a balanced OBJECTIVE liquidity flow in operations. The contracts must be managed To optimise and quality assure procurements and processes to in a cost-effective manner with healthy margins based on achieve the best result and a safe work environment with healthy the specific business. margins. INVESTMENT STRATEGY VISION To procure risk-adjusted and optimised subcontractors To be the best business partner in the Stockholm area in with good references. To continually develop relationships the production of homes and commercial premises. and partnerships to streamline and improve both delivery and the product. EXPERTISE The business area has skills within all stages of construction: project management, BIM planning, quantity surveying, purchasing, aftermarket and construction management. PROCESS

TURNKEY COSTING & CONTRACTS & PROJECT PLANNING AFTERMARKET PURCHASING CONSTRUCTION MANAGEMENT

PROJECT PLANNING TURNKEY CONTRACTS AND CONSTRUCTION MANAGEMENT Initiatives are adapted in response to financial, functional and A successful turnkey contract requires an effective construction time requirements in the project. BIM planning (3D simulation management organisation on site. It saves time, and ensures the of the project) confirms both costing and the product at an early work is coordinated and carried out according to the contract. stage. AFTERMARKET COSTING AND PURCHASING Aftermarket takes care of all guarantee undertakings such as Key elements of a turnkey contract involve costing, planning, guarantee inspections, complaints and other matters. risk analysis, documentation and procurement of consultants and contractors.

28 alm equity ab | 2019 KEY FINANCIAL INDICATORS AT 31/12/2019 2019 2018

Units where production has started during the period 467 62

Number of units in ongoing production 533 360

- of which business area’s construction model 533 62

- of which previously combined construction model - 298

Completed units delivered during the period 320 249

- of which business area’s construction model - -

- of which previously combined construction model 320 249

alm equity ab | 2019 29 CONSTRUCTION MANAGEMENT BUSINESS AREA LOCATION OF CONSTRUCTION MANAGEMENT PORTFOLIO

Roughly 80 percent of the units in the construction management portfolio are right next to Stockholm’s rail communications.

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30 alm equity ab | 2019 CONSTRUCTION MANAGEMENT BUSINESS AREA CONSTRUCTION PORTFOLIO

The construction management portfolio contains all ongoing or future productions for which Construction Management’s company 2xA Entreprenad has entered into turnkey contracts. The portfolio totals 17,104 sqm (2,378) in ongoing production and 15,421 sqm (2,941) in future production; all relate to new-builds, and all are based on turnkey contracts with the Project Development business area. The total order value for ongoing and contracted future construction amounts to SEK 1.1 billion.

To follow is a presentation of the construction management portfolio at 31/12/2019; since year-end two contracts of 467 units have started, while 45 units have been completed and further construction contracts for 441 units have been entered into.

ONGOING CONTRACTS MUNICIPALITY NUMBER OF UNITS** TYPE OF BUILDING

1 Torghuset Rönninge Salem 66 Apartment block 2 Esplanaden Stockholm 52 Apartment block 3 Ängshuset Stockholm 78 Apartment block 4 Kronan Järfälla 280 Apartment block

Slottsholmen On Water Västervik 33 Commercial

Torparen Sollentuna 24 Single family home

TOTAL UNITS IN ONGOING CONTRACTS 533

AGREED CONTRACTS MUNICIPALITY NUMBER OF UNITS** TYPE OF BUILDING

5 Häggvik 7 Sollentuna 325 Apartment block 5 Häggvik 8 Sollentuna 126 Apartment block 6 Vällingby Parkstad Stockholm 15 Single family home

Skogshusen Nacka 181 Apartment block

TOTAL UNITS IN AGREED CONTRACTS 647

*Units include residential units, premises and hotel rooms.

CONTRACTS UNDER GUARANTEE Completed contracts carry guarantee undertakings of up to 10 years, including contracts from Småa AB’s previous production. At year- end this totalled 45 contracts within the range of the guarantee period. There is a total of SEK 20 million in guarantee provisions, and the size of the provision is reviewed on a continual basis.

alm equity ab | 2019 31 THOMAS CARLSSON Business Area Manager, Construction Management. Studied civil engineering at Nacka Academy. Experience within construction and consulting from various companies and roles in the construction industry, including construction manager at Andersson Company, commercial project manager at Strabag Projektutveckling and CEO and co-founder of 2xA Entreprenad. Holding in ALM Equity, private: 5,000 warrants.

32 alm equity ab | 2019 MESSAGE FROM THE BUSINESS AREA MANAGER TRADITION MEETS INNOVATION

We ensure that projects are completed to schedule, at the PLANNING IS EVERYTHING quality and cost agreed. As a turnkey contractor we procure Time is also a constant factor. For example, if someone fails to and coordinate subcontractors and are responsible for site complete in time, or if a delivery is delayed, then production management out in the projects. slows down which can have a knock-on effect. It is about getting the entire chain to keep to schedule. We plan, plan and What sets us apart from many other turnkey contractors is our then plan some more. Planning is everything. firm belief in combining innovation with tradition. This is at heart a highly traditional industry, but at the same time there IMPROVING EFFICIENCY are a lot of changes happening, particularly when it comes to These days we try to steer as many projects as possible digital aids. towards prefabrication. In this way we shift many of the risks and stages from the workplace to the factory. There has been a huge influx of applications and a younger generation is on the scene that relies heavily on them. This One example is a project in Rönninge, Torghuset, which is is a positive trend, but at the same time there needs to be essentially finished. We build apartment modules in wood a recipient at the other end who can evaluate and analyse where entire apartments complete with bathroom and kitchen the content. It is important to retain authentic know-how, come ready made, wrapped in plastic and protected from experience and tradition. We use all the new digital tools the elements from the factory to the workplace, where they when we can see that there is a benefit in doing so. are stacked and assembled. The more we can prefabricate, Computers do not do the building; that still involves the better the outcome in more ways than one. It is a safer craftsmanship that has to be performed out at the building process, and each stage is more efficient when we are able to site. We cannot lose that. Finding a balance between tradition build in an industrial environment. When we apply efficient and innovation is key. And when we do, the result is excellent. design right from the outset and then reproduce it, production costs come down. We are not as exposed to factors that can MINIMISING RISKS arise in traditional construction, in which materials come There are many challenges and risks in our business, both from a variety of sources. financial and physical. One risk that is ever-present is the financial risk. We work with small margins when it comes to We also achieve better quality when we build the majority of construction contracts, and it is important to keep to the budget. the apartment indoors in dry factory environments, instead of at a chaotic building site in all kinds of weather, and ultimately Health and safety is also a major priority. It is an issue that we achieve a better finish. we manage every day. We aim to have zero accidents at our workplaces. We are constantly faced with external conditions Another example of efficient construction, and an alternative such as weather, wind and damp. to complete apartment modules, is prefabricated bathrooms. We build the concrete frame traditionally and slot in complete We are on board at an early stage in each project, contributing bathroom pods, floor by floor, as the concrete frame is erected. our expertise and making sure we work efficiently throughout This also takes several stages away from the building site. the entire process. Our own architects and engineers work Whether it is bathroom pods or apartment modules, the time alongside the project developers from the start, drawing and element is of course also important. It is much faster to build designing. The fact that we have all the skills in-house and all using this method. And time, as we know, is money. the key personnel with us from the outset means we get rapid feedback and communication, making the entire project run Stockholm, April 2020 efficiently. Right from the early stages we can identify critical Thomas Carlsson aspects and eliminate the risk at the drawing stage. Business Area Manager, Construction Management

We are also careful about the contractors we choose. There are many factors to consider, and we cannot just go by price. We are firm believers in long-term relationships, so within each discipline we have contractors with whom we have strong partnerships. We bring them in at the start of our projects, where their input helps optimise the process and eliminate risks.

alm equity ab | 2019 33 BUSINESS AREA FINANCING

The Financing business area includes the brand Nordisk Fastighetskredit.

The Financing business area works internally within the Group and connects the Real Estate Management and Project Development business areas with investors and lenders outside the traditional banking system.

Since 2006, ALM Equity has delivered a strong and positive return to investors. Having active investors in projects leads to knowledge transfer and new business opportunities.

BUSINESS CONCEPT VISION The business area’s business concept is to create financing To create the most competitive financing solutions. solutions for various properties and real estate projects. The focus is on relationships, minimising risk and efficient EXPERTISE processes with few intermediaries. The business area has skills in raising capital, and financial structuring. OBJECTIVE The objective is to create affordable and effective financing OUR CUSTOMER solutions that benefit both the recipient and the investor. Our primary customers are the Real Estate Management and Project Development business areas.

KEY FINANCIAL INDICATORS AT 31/12/2019 2019 2018

Financing solutions provided for Real Estate Management (SEK million) 1,858 n/a

Financing solutions provided for Project Development (SEK million) 548 n/a

Kista Square Garden, Stockholm

34 alm equity ab | 2019 MESSAGE FROM THE BUSINESS AREA MANAGER INVESTORS HAVE SHOWN CONFIDENCE IN ALM EQUITY’S UNIQUE ABILITY TO ADAPT

ALM Equity has worked closely with investors right from the us to package and adapt the product to the investor’s own yield start. The company was in fact established back in 2006 by requirements. The central work of the business area is to create merging projects that founder Joakim Alm co-owned with an understanding of both the investor and the investment various investors. They exchanged their project shares for object; to be able to speak both languages and home in on the shares in ALM Equity AB and thus became co-owners in a key information in our projects that is of interest to the investor. project company, and ALM Equity was founded. Back then it Perhaps even more important is close, honest and transparent was a matter of investments of a few million krona per project dialogue and personal contact. They are placing great confidence with a total of around 200 homes across ten different areas. in us, and naturally that must be treated with the utmost respect. Since then growth has soared and today both the projects and Personally I genuinely appreciate the fantastically open and the investments are much bigger, but the fundamental idea lives talented investors who choose to invest their capital with us. on as part of our DNA. HIGHLIGHTS OF THE YEAR Both the initial investors, who have to say the least enjoyed a We have had a positive 2019 with several successful capital wonderful journey as shareholders in ALM Equity, and investors injections, and we have arranged both our own capital and debt in subsequent projects are our priority, and highly valued capital for projects launched by our business areas. We have good within the organisation. Maintaining an open dialogue with our investor relationships to thank for this, along with hard work investors and capital providers, and managing their capital well, on projects with an approach that works on more challenging has been and will continue to be one of our key success factors. markets as well, efforts to build up the Group’s management Successfully managing capital is dependent on several factors: company, and not least, the new investors who have believed in, the right financial and legal structures that can withstand and grasped what we do. both stable and more challenging markets, with flexibility and foresight being the key words. Considerable risk awareness, Stockholm, April 2020 effective processes, experience and transfer of skills, along with Frida Holmberg good follow-up work are also fundamental factors. Having Financing business area these things in place allows for that little bit extra in the form of boldness and creativity to produce really good projects for all parties, including our investors. I believe that this combination is the reason why many of our investors have chosen to grow alongside ALM Equity, and move their capital from completed to new projects. Since 2018, we have gathered the core aspects of our work with investors and financing solutions outside the banking system in a new business area – Financing. The business area continues with the tradition, while we try to improve, develop, scale up and think along new lines.

TRANSACTION-BASED APPROACH ALM Equity has several constellations within the Project Development and Real Estate Management business areas with investors, who at year-end allocated approximately SEK 1.9 billion and SEK 1.4 billion respectively to the business areas. The business area’s focus is on getting investors involved in new projects and transactions, but there is also an ongoing dialogue regarding existing projects, for business with Project Development FRIDA HOLMBERG and Real Estate Management. We also maintain a dialogue with Business Area Manager, Financing. capital providers for solutions on the debt side that are outside MSc in Engineering in Industrial Finance from Royal Institute of Technology, the traditional bank loans, such as direct loans with institutions. focusing on financial mathematics, and certified financial analyst from This substantial portfolio of opportunities that the Group has in the Stockholm School of Economics, Executive Education. Background in investment banking with a focus on leveraged finance and debt capital markets. the form of development rights and investment objects enables Holding in ALM Equity, private: 1,250 ordinary shares and 24 preference shares, as well as 5,000 warrants.

alm equity ab | 2019 35 BUSINESS AREA DIGITAL SERVICES

The Digital Services business area includes the company and brand Your Block.

Digital Services is directed at stakeholders for digital development within the real estate sector. The company Your Block develops software and services for digital communities within the sharing economy and control of digital locks.

BUSINESS CONCEPT VISION To develop cost-effective and user-friendly digital services To own and develop the leading platform for digital services within to control digital locks and establish digital communities property development. With user-friendly interfaces and control and a sharing economy in tenant-owner associations, of digital access, the service will simplify property management, rental properties and urban blocks. increase properties’ net operating income and contribute to a more pleasant and more sustainable residential area. OBJECTIVE Identifying user needs and developing a cost-effective EXPERTISE digital platform for the residential and property segment, The business area has skills within systems development, with a focus on the sharing economy, access control and digital service development and sharing economy. user-friendliness. THE CUSTOMER Our primary customers are property developers, property managers and tenant-owner associations, but also companies and other associations.

KEY FINANCIAL INDICATORS AT 31/12/2019 2019 2018

Number of users 8,900 7,500

Number of properties and associations 225 300

36 alm equity ab | 2019 MESSAGE FROM THE BUSINESS AREA MANAGER DIGITALISATION OF REAL ESTATE MARKET OFFERS HUGE POTENTIAL

In order to be a relevant operator and harness the potential of SMART ACCESS GOES INTO OPERATION the real estate market, we need to be at the forefront in taking The physical key represents a major cost. Keys that go astray advantage of digital business opportunities and developing lead to break-ins; they have to be handed out and collected, platforms for the sharing economy and digital access that and when they are replaced, the property manager has to boosts the property owner’s net operating income. engage a locksmith and replace the entire bolt.

Our cloud-based platform Your Block enables cost-effective We provide a comprehensive entry solution that costs the digitalised access and communication between property purchase and installation price of the lock and then just a managers, residents and service providers. When residents are few krona a month per door. The goal for 2020 is to launch connected in a digital community with digital locks, it creates digital locks for 1,000 homes. In the long term we want to win opportunities for new value-adding services and sources of significant market share for entry systems to apartment blocks. income for property owners. ONLINE RETAIL SALES CREATE NEW BUSINESS CLOUD SERVICES CREATE NEW BUSINESS MODELS OPPORTUNITIES Easily administered and user-friendly digital services gradually The dramatic growth in online retail sales is increasing the reduce the cost of communication, case management, property amount of home deliveries, which is inefficient and costly both documentation, entry systems and sharing of properties’ joint for online retailers and logistics companies. resources. We make it easier and cheaper for the market to deliver both to The Your Block platform is being developed into a central tool in the property and inside the door. Streamlining home deliveries, to a growing digital ecosystem for property management, online parcel rooms or PO boxes in the stairwell, has great potential value retail and home support services. Through close cooperation for the property owner. In 2020 we will be gradually establishing with other leading cloud services, we are establishing a broader seamless home deliveries to over 800 homes to identify the platform with higher customer value at a lower price, which is commercial value for both service providers and property owners. well-positioned to become a central part of a more efficient, modern property management operation. Stockholm, April 2020 Erik Lindblom We are not just linking up all residents in the block, we are Business Area Manager, Digital Services also creating practical digital access to the property for online purchases and service providers.

MOBILE PHONE BECOMES A DIGITAL KEY We are gradually developing Your Block into a comprehensive mobile entry system. Our goal is to offer an easily administered, seamless access platform that takes away the need for a physical key in property management. Instead residents’ mobile phones become the digital key.

When the property manager arranges entry to a home, residents are automatically assigned digital access rights to the home, mailbox, PO boxes, laundry room and front door. When residents book shared resources such as overnight apartments and laundry rooms, they are automatically given temporary digital access. ERIK LINDBLOM Residents can also assign digital keys for parcel deliveries, Business Area Manager, Digital Services. MSc in Economics and Business from Gothenburg School of Economics. tradespeople or a cleaning firm. It will also be easier for Previously founder and Director of Sales for Mind, founder and CEO of ESN property managers to manage service work being carried out Social Software (Uprise) and Esportal. Has worked in the real estate sector in the property by assigning temporary access to each service since 2015, mainly within digitalisation and software development. engineer. Holding in ALM Equity, private: 2,500 warrants.

alm equity ab | 2019 37 38 alm equity ab | 2019 Dragonen, Upplands Väsby alm equity ab | 2019 39 THE MARKET THE SHORTAGE OF HOUSING IN STOCKHOLM MAINLY RELATES TO SMALL HOMES

ALM Equity develops, builds, manages and owns residential or authorities that need to arrange accommodation for property in Stockholm County; around 95 percent of our employees with essential skills. operations are in Greater Stockholm. We direct our activities at around half of the households in the region. It is a section of The list of people we help find a home or temporary the population that has been neglected by the region’s property accommodation can be a long one. But they all have in developers, construction firms, local government and decision- common the fact that not much has been built for them over makers for decades. It is made up of small households: single the past sixty years. We have decided to change that. people, couples and single parents. Households that rarely have the highest salaries, but that still need somewhere to live. The Stockholm area is one of the fastest growing regions in Europe. There is significant growth in both the number of pensioners and It includes people who come to Stockholm for their first job, young people. The region has a total of around a million homes. for temporary employment or to study for a fixed period of The general housing shortage is well-known, but statistics show time. It also applies to municipalities that need temporary that the biggest shortage is in the number of small homes. It is housing for people with various assistance needs, companies this very segment where demand is expected to increase the most.

40 alm equity ab | 2019 There are reasons why so few small homes have been built. For us here at ALM Equity, Sundbyberg Municipality is an The simplest explanation is that it is difficult. Building a large example of how Greater Stockholm can be transformed over home is easy, because there is plenty of room for everything: a the coming decades. The municipality has roughly the same spacious bathroom, kitchen, large windows to let in light and number of homes and workplaces. So theoretically, no-one a few bedrooms. living in Sundbyberg should have to travel to work. Developing more similar communities in the vicinity of Stockholm would But finding room for everything that needs to go into be one way of easing the pressure on Stockholm city, and a modern home of just 25–30 square metres requires public transport connections to the centre. meticulous planning right from the zoning plan stage. ALM Equity’s development rights portfolio is largely already Häggvik, where ALM Equity is building homes and has focused on production of small, space-efficient homes, which additional housing projects in the pipeline, has the potential is a segment that will doubtless be attracting more interest for becoming just such a ‘live-and-work’ area. Nacka and among developers and property managers going forward. Skärholmen, where ALM also has forthcoming projects, could But this focus places considerable demands on each stage of be developed in a similar way. Kista has been a working area, the process, in order to achieve a successful end result. Most but is now being supplemented with homes by ALM Equity as people who take a look inside our space-efficient homes often the substantial office property, Kista Square Garden, is largely think they are bigger than they actually are in terms of square redeveloped into efficient homes. meterage. This could be regarded as proof that ALM Equity Group has hit upon the right formula for building a good ALM Equity’s projects often start with urban planning questions. studio apartment of 20–25 square metres. What will this area look like in ten years’ time? Who will live here? Workplaces? Communications? All these questions are of The traditional market for investment apartments is individual course linked, but it is important to get answers to them before rentals for private individuals. When construction starts on a making an investment decision. The communications question project, or sometimes before that point, work also begins on is perhaps the most important, because good connections in matching it with the perfect tenant or tenants. Letting all the turn attract both companies and people. The overwhelming apartments in a building to one party allows an opportunity to majority of ALM Equity’s projects and investment properties adapt both the building and the apartments to the customer’s are located close to good communications. One current example preferences, which may lead to higher rent levels and simplified is the Archimedes project in Bromma, Stockholm, which was administration. Rental contracts for 10, 20 or 30 apartments recently given the go-ahead for a detailed zoning plan that will function in the same way. Over the years that we have been allow the construction of 1,000 homes. producing investment apartments, we have established procedures and channels to a large number of customers within Within a few minutes’ journey of the airport, light railway, metro, these segments of the rental market. The transactions we have long-distance trains and commuter trains. Or a bike ride away carried out have also put ALM Equity on the map as a company from work, which could be close by. ALM Equity has been working that has a lot going on, and that delivers on its promises. on the Archimedes project for seven years and we are hoping to begin construction on this forward-thinking project soon.

alm equity ab | 2019 41 SUSTAINABILITY REPORT LONG-TERM SUSTAINABILITY AT ALL STAGES

This Sustainability Report covers ALM Equity and its companies. Results and information pertain to the 2019 financial year, unless otherwise stated.

ALM Equity’s sustainability work is a continual process and With a proactive approach to current challenges and is integrated into all aspects of the business. Sustainability accountability that stakeholders and the sector as a whole work encompasses economic, social and environmental perceive as credible. Collaboration can enable us to create responsibility, and the goal is to constantly strive to achieve a sustainable solutions in partnership with other operators and good balance between these aspects in a sustainable way, with together contribute to more sustainable societal development. satisfied customers and a safe, positive work environment for our employees. This is an essential foundation for ALM In 2019, work continued on restructuring the Group, leading Equity’s future and continued success. to a clearer division of operations into five business areas. For sustainability work and reporting, this has meant it will Taking responsibility for people and the environment be clearer which issues the various parts of the organisation throughout the entire value chain is a prerequisite for living up are able to influence, since each business area faces different to the expectations of the Group’s stakeholders, and successfully challenges and opportunities in their respective niches pursuing operations with the goal of long-term profitability. of the real estate sector. Particularly within the area of the environment, a need has been identified to further develop Through our sustainability work, we aim to be a role model internal processes and adapt our efforts and external in sustainable urban planning based on an approach that is reporting to an audience that is increasingly aware. proactive, collaborative and reliable.

FOCUS AREAS

ALM Equity’s seven focus areas are inspired by the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). The areas covered by the SDGs include Goal 5: Gender Equality, Goal 7: Affordable and Clean Energy, Goal 8: Decent Work and Economic Growth, Goal 11: Sustainable Cities and Communities, Goal 12: Responsible Consumption and Production and Goal 13: Climate Action.

The topics have been grouped into three main areas in order to better reflect how work is pursued and our approach going forward:

FOCUS AREAS

PERSONNEL ENVIRONMENT BUSINESS ETHICS AND WORK AND CARBON AND SUSTAINABLE ENVIRONMENT FOOTPRINT SUPPLIERS

Includes health and safety Includes anti-corruption work, Includes energy efficiency at work, along with diversity, respect for human rights and efforts to reduce the anti-discrimination and and a responsible approach Group’s carbon footprint. gender equality. in the supply chain.

42 alm equity ab | 2019 SUSTAINABILITY REPORT STAKEHOLDER ENGAGEMENT

STAKEHOLDER ENGAGEMENT ALM Equity maintains an open and continual dialogue with its stakeholders within each business area to ensure we understand the needs, expectations and challenges that are important to them and for the Group as a whole. As part of the development of our sustainability work, a survey was conducted in autumn 2019 with a large number of stakeholders in order to direct ALM Equity’s sustainability focus over the next few years. A mix of shareholders, financial analysts, lenders and banks, to customers, employees, authorities and municipalities participated in the survey, which concentrated primarily on around 12 sustainability topics and included everything from matters relating to business ethics such as bribery and corruption, to environmental issues such as energy efficiency and greenhouse gas emissions. The sustainability topics that were included in the survey had all been internally classified as relevant to the Group as a whole and for our stakeholders. These topics were inspired by the GRI Standards, the UN Global Compact and the 2030 Agenda for Sustainable Development.

MATERIALITY ANALYSIS A materiality analysis has been carried out based on the results of stakeholder engagement and an assessment of ALM Equity’s opportunity to impact the sustainability topics. This produced a total of seven areas that are deemed to be particularly important for ALM Equity to work on.

1

3 1. Bribery & corruption 2 2. Heath and safety 4 3. Energy efficiency 8 4. Carbon footprint 5. Sustainable suppliers 6 10 6. Discrimination 9 7. Diversity and gender equality 7 5 8. Choice of materials STAKEHOLDERS 9. Waste management SIGNIFICANCE FOR FOR SIGNIFICANCE 10. Surface water management 11 11. Impact on local communities 12 12. Staff development

Significant areas

Less significant areas

ALM EQUITY’S IMPACT

alm equity ab | 2019 43 SUSTAINABILITY REPORT PERSONNEL AND WORK ENVIRONMENT

A good and safe work environment is an important Management reviews and establishes these policies annually, strategic issue for the ALM Equity Group. We aim to be and they are updated as required. In addition to the policies an employer that attracts, motivates, develops and retains there are also group-wide work environment targets that are qualified personnel in a professional and stimulating work established annually by the Group’s management team. Each environment. Our health & safety and equal opportunities business area adopts the Group’s targets and its activities in policies guide the Group’s work environment efforts. These their entirety, and can supplement them with targets based policies set out our ambitions for our work environment on the needs of their own specific operations. and aim to promote health and prevent accidents in all the Group’s workplaces. Each business area manager is responsible for following up the targets and reporting back on achievement of targets The health and safety policy details the aims of the Group’s to the HR manager, who in turn compiles and reports the overall health and safety work and states the direction we Group’s combined results to management continually and in want to take regarding what we want the Group’s work connection with the annual follow-up of work environment environment to be like. Our equal opportunities policy aims efforts. See below for further information about our targets to promote a balanced personnel policy and a workplace that at Group level in 2019 and the outcomes. reflects a diverse society.

TARGET FOLLOW-UP AND ACTIVITIES OUTCOME 2019 Our employees are offered benefits including a fitness allowance, the Attendance over 95% opportunity to exercise during working hours and regular health checks to 97.7% promote a healthy lifestyle and prevent ill health. With a consistent focus on safety and clear requirements imposed on suppliers Zero tolerance of and contractors, we take responsibility for safety in our projects and minimise No reported occupational injuries the risk of accidents occurring. Any incidents or accidents are followed up occupational injuries continually and at the annual review of our work environment efforts.

44 alm equity ab | 2019 Based on the activities that the Group’s business areas In 2019, the Group had an average of 128 employees with a conduct, they take on the role of property owner, developer gender balance of 48 percent women and 52 percent men. and service provider. This means that safety at work is At the end of 2019, management was made up of three taken extremely seriously, with regular group-wide and individuals, one of whom was a woman (33 percent). The specific measures to ensure safety and prevent accidents company’s Board of Directors consists of a total of five in the workplace. individuals, one of whom is a woman (20 percent). We have ALM Equity’s group-wide safety policy, which applies to all made a total of nine new appointments during the year, three employees whatever their role, states that everyone within of whom are women, and 25 people have left the organisation, the Group has a responsibility to ensure stipulated safety corresponding to a staff turnover rate of 9 percent. procedures are complied with at our building sites, and that these regulations are also adhered to by external contractors and their subcontractors. Compliance is followed up by PERSONNEL 2019 2018 always having a representative present during the regular Average no. of employees 128 119 safety inspections conducted at our building sites. - Women 48% 44%

DIVERSITY AND GENDER EQUALITY - Men 52% 56% ALM Equity operates in a traditionally male-dominated New appointments 9 16 sector. This is why it is particularly important to work with issues linked to gender equality and diversity, and to - Women 3 5 boost our appeal as an employer for a broader target group. - Men 6 11 As a guide we have our equal opportunities policy and an Terminated employment 25 28 equal opportunities plan, with activities that are carried out systematically and followed up to ensure gender equality and Employee turnover 9% 11% diversity in the business. The work focuses on four key areas: GENDER BALANCE • Combating all forms of discrimination – Conditions of employment must be independent of sex, gender identity or expression, ethnicity, religion or other beliefs, sexual orientation, disability or age. • Efforts to achieve an even gender balance – When candidates are equally qualified, to appoint MANAGEMENT GROUP the applicants from the under-represented gender and to design advertisements in order to encourage applications from both men and women. • Equal pay for equal work – Conducting annual ●WOMEN, 33% ●MEN, 67% ●WOMEN, 48% ●MEN, 52% salary analyses and using the results as an instrument to adjust any differences. • Action in the event of potential tendencies towards harassment – Established procedures to manage potential harassment cases and encourage employees to submit a report if they notice tendencies towards harassment. BOARD OF DIRECTORS

●WOMEN, 20% ●MEN, 80%

alm equity ab | 2019 45 SUSTAINABILITY REPORT ENVIRONMENT AND CARBON FOOTPRINT

The Project Development business area develops cleverly From 2020 onwards the plan is for investment properties designed properties that take account of the environment, under the Real Estate Management business area to report both in the short and the long term. We aim for the key performance indicators relating to energy efficiency properties to be mindful of the environment and long-term and greenhouse gas emissions. use through the choice of materials, construction and management. SOIL CONTAMINATION AND HAZARDOUS WASTE Acquisitions and the start-up of new projects carry the risk There is a strong emphasis on energy and resource of the soil being contaminated or of the development of the efficiency, with individual metering of electricity, water property having a negative impact on the local ecology and and heating a key tool to ensure residents are aware of their environment. Environmental and construction engineering consumption and use, which leads to change and reduced experts are hired to conduct surveys and evaluate the consumption. In addition to individual electricity meters, potential impact in order to reduce the impact and examine individual water metering has also started being introduced the conditions of properties in question. A plan of action is in parts of the existing portfolio and in some forthcoming then established to address any deficiencies, or we do not properties. go ahead with the property development and acquisition where the environmental impact is deemed too great. It is hoped 2020 will see the first property with individual metering and control of heating, which should further boost Development of new-builds, redevelopments, energy efficiency and reduce energy use in the property refurbishments and demolition work also carry a risk holdings. During the project stage low-flow taps, nozzles of materials that are harmful to the environment or to and fittings are chosen, along with energy class A+ domestic human health, or of hazardous materials and waste not appliances. being handled correctly. Comprehensive environmental inventories are always conducted to ensure that any ‘Sharing economy’ initiatives are also being introduced hazardous waste such as asbestos, PCB, mercury and black through Digital Services’ Your Block sharing and asbestos mastic is disposed of in the optimum way. communication platform, which is being implemented in all properties. Your Block makes it easy for a property’s ALM Equity always applies the precautionary principle for residents to communicate, ensuring they can share tools, new materials whose impact has not yet been established, swap items and services, and make use of sharing services or for products or solutions that are not yet proven. such as cycle and car pools. This reduces the need to buy new products and ensures more efficient use of existing vehicles, tools and premises.

46 alm equity ab | 2019 Grönskan, Tyresö alm equity ab | 2019 47 SUSTAINABILITY REPORT BUSINESS ETHICS AND SUSTAINABLE SUPPLIERS

BUSINESS ETHICS AND ANTI-CORRUPTION SUSTAINABLE SUPPLIERS ALM Equity’s business and success depend on good The Group’s operations depend on external parties carrying relationships with a raft of different organisations, ranging out a range of work on behalf of each business. This means from government authorities and municipalities to there is an indirect impact through the contractors and suppliers, banks, contractors and customers. ALM Equity other parties that are commissioned to carry out work for and its representatives must therefore behave correctly and the Group’s businesses. in a way that inspires confidence. As part of our work in maintaining good ethics in everything we do, we also have a ALM Equity takes responsibility for these companies number of underpinning, guiding policies that all employees operating in a sustainable way. This is done primarily are trained in when they join us. The key policies are: by imposing requirements on suppliers when procuring services and purchasing products and materials. This • Code of Conduct – The overall policy that summarises may involve general requirements regarding financial how the business should be run in an ethically, socially management, the environment and safety, as well as more and environmentally correct way. specific stipulations based on each unique property and • Hospitality Policy – A guiding document for all type of service or product. employees about applying caution and moderation in situations that involve the receiving or giving of gifts. Since 2018 the group-wide Code of Conduct for suppliers Complies with the business code of the Swedish Anti- has been included in all agreements. It is based on the corruption Institute. Swedish Construction Federation’s code of conduct and • Inside Information Policy – The Inside the UN Declaration of Human Rights and other significant Information Policy provides guidelines on how inside international conventions and agreements. Given the information should be handled to avoid breaches of significant mobility of labour in the construction industry, law, the Market Abuse Regulation, stock exchange additional importance has been given to the respect of human rules or equity market good practice. rights, the condemnation of all types of child and forced labour • Information Policy – A policy aimed at clarifying and respect of working hours and freedom of association. requirements regarding the disclosure of information Each business area manager is responsible for monitoring as part of being a listed company on the First North compliance with the sustainability requirements that are set. Growth Market. No negative observations were made during the year.

As well as these policies there is also an employee handbook, which provides guidance on how employees are expected to act in various situations that may arise at work. This also acts as an overall document enabling employees to find information for further guidance on specific policies. Mandatory information briefings are held at least three times a year with the entire Group in order to inform and update personnel on what good ethics means at ALM Equity.

No incidents regarding deficient business ethics or corruption were reported in 2019.

48 alm equity ab | 2019 Slottsholmen, Västervik alm equity ab | 2019 49 SUSTAINABILITY REPORT THE BRICK – A SUSTAINABLE URBAN DEVELOPMENT PROJECT

The starting point is that ALM Equity’s operations should be conducted with the minimum environmental impact in order to contribute to sustainable development, taking account of the environment in both the short and the long term.

As society develops and becomes more digitalised, and as businesses close and new ones emerge, the need for both accessibility and space is changing.

The asset portfolio contains a number of examples of urban Homes in The Brick property are optimised and space development projects whose vision is to develop sustainable efficient to reduce the carbon footprint of both use of living environments based on the idea that what we do today will materials and energy consumption. All aspects of the project also impact on people’s lives tomorrow and the day after. The provide a basis for optimising use and minimising the carbon aim is to create the conditions for sustainable lifestyle choices, footprint. A smart eco-friendly strategy for people, the encouragement of a sharing economy and a physical environment environment and a sustainable business success. that promotes social interaction and a sense of security. Space-efficient and low-carbon housing close to public The quantities of construction materials used to build new transport and well-designed social integration and structure housing impact the climate in numerous ways. In particular, of the residential area also create a sense of togetherness large quantities of carbon dioxide are released into the and belonging on the residents’ own terms. The concept is atmosphere in the manufacture of cement for the production that ‘home’ also includes places outside one’s own residence, of a new building frame. One example in our portfolio is such as cafés, gyms, restaurants and rehearsal spaces. This the former industrial and office area by Telefonplan in ensures maximum use of resources and sustainable urban Stockholm, now one of the city’s trendiest places to live. development. The transformation of this area has been quicker than the technical life of the buildings that were located there when We are also putting in place the conditions to enable the it was just an area where people worked. When Ericsson no sharing of resources and ease of communication in the longer needed its old office and production complex, there residential area. We are creating spaces for activities and was relatively little interest in the large brick building being procuring services that may be sought by residents. And reused and converted into homes and continuing to stand for digital access to housing enables convenient services for several more decades. homeowners. Mobility solutions make life easier, with access to both a bike and car pool. These kinds of sharing ALM Equity, however, saw an opportunity to reuse and retain services provide social sustainability, with the management both the frame and facade of the old building and provide of resources promoting a sense of togetherness and day-to- something much needed in the city, i.e. space-efficient day contact. housing. Much of the key infrastructure is already in place in the form of roads, the metro and bus stops, meaning no Taking account of all aspects of societal development in additional resources are needed to create new infrastructure. order to optimise the use of existing resources, both within the building and in the surrounding area, provides a strong Calculating the impact of housing over the course of its life basis for a sustainable strategy. cycle in addition to its construction must also factor in its use, so it is important to minimise the impact its use has. The We believe society grows when people create something redevelopment has resulted in the old office and industrial together, and that people grow when they have the ability property being better insulated, and it is now much more and opportunity to contribute. energy efficient than it was in its former guise. Correct comparison requires a breakdown of use of materials and THE BRICK URBAN DEVELOPMENT PROJECT energy consumption per home. Number of units: 1,400 Contents: Tenant-owned apartments, residential investment You can be careful in selecting the right materials and properties, premises, mobility measures, infrastructure building energy-efficient homes, but this has little benefit Area: Telefonplan, Stockholm when you are constructing on a large scale. This creates an Production period: 2017–2028 unnecessarily large carbon footprint.

50 alm equity ab | 2019 7 1

2 8 10 6 4 3 9 5

AN OVERVIEW OF WHAT THE AREA MAY OFFER IN TERMS OF SERVICES AND SHARING POSSIBILITIES:

1 GYM 6 SHARED SPACE

2 GROCERY SHOP 7 SPACE-EFFICIENT HOUSING

3 BIKE CAFÉ 8 CAFÉ

4 RESTAURANT 9 CAR POOL

5 BIKE POOL 10 SERVICE, E.G. PARCEL DELIVERY SERVICE

The Brick, Stockholm

alm equity ab | 2019 51 Kanotbryggan, Stockholm

52 alm equity ab | 2019 THE AUDITOR’S OPINION REGARDING THE STATUTORY SUSTAINABILITY REPORT To the Annual General Meeting of ALM Equity AB, Corporate ID Number 556549-1650

ASSIGNMENT AND ALLOCATION OF RESPONSIBILITY The Board of Directors is responsible for ensuring that the sustainability report for 2019 on pages 42–53 has been prepared in accordance with the Annual Accounts Act.

SCOPE AND FOCUS OF THE REVIEW Our examination has been conducted in accordance with FAR’s auditing standard RevR 12 ‘The auditor’s opinion regarding the statutory sustainability report’. This means that our examination of the statutory sustainability report is different and substantially smaller in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.

OPINION A sustainability report has been prepared.

Stockholm, 29 April 2020, Ernst & Young ab

Jonas Svensson Authorised Public Accountant

alm equity ab | 2019 53 RISKS & RISK MANAGEMENT RISK MANAGEMENT, ALM EQUITY 2019

Both external factors and internal processes affect the Group’s profitability and opportunity to carry out real estate transactions that generate a healthy risk-adjusted return. In a constantly evolving operating environment, the successful companies are those that can adapt and manage the risks and opportunities that arise. ALM Equity believes the organisation is highly capable of adapting to global changes, and that the entire business is characterised by risk awareness that is factored into decision-making at all levels of the Group and at all times. Procedures for monitoring risks are designed to identify and minimise the operating risks to which the business is exposed, while keeping track of changes in our operating environment. The most significant risks identified by the Group are outlined below. If the risks below materialise, this will have a negative impact on the Group’s operations and its profitability and financial position. Risk management is carried out in the Group’s business areas, and is supported and monitored by group-wide functions.

1. Geographic concentration risk 2. Regulatory and political risk

Macro Financial Operational 3. Changes to demand/macroecononmic instability 4. Financing, liquidity and refinancing risk 5. Interest rate risk 6. Credit and counterparty risk 7. Valuation of assets 8. Transaction-related risk 9. Detailed zoning plan and planning permission 10. Project-related risk – counterparty risk & planning HIGH 11. Concept

9 12. Underwriting unsold tenant-owned 12 apartments 13. Deficient procedures 14. Provision for new-build housing 15. Competition 16. Risks relating to tenancy agreements and vacancies 17. Increased management costs 5 15 2 18. Key personnel MEDIUM 10 13 19. Disputes 3 20. Insurance risks 18 19 LIKELIHOOD 27 21. IT-related risks 22. GDPR 23. Tax risk 20 24. Environment and climate 23 16 22 25. Ethical breaches, reputational risk, human 24 14 11 4 rights violations 26. Systemic risk 17 8 25 1 7 26 27. Warranty risk LOW 6 28 21 28. Health and safety

LOW MEDIUM HIGH

IMPACT

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Real Estate ALM Equity assesses that the Stockholm 1. GEOGRAPHIC CONCENTRATION RISK Management, region has good conditions for growth, both The vast majority of operations are concentrated in the Project Medium/ because of its historical growth but also Low Stockholm region, which means that an adverse effect on the Development, High owing to high levels of education, average region has a negative impact on ALM Equity. Construction income, etc. Management

2. REGULATORY AND POLITICAL RISK Changes, for example, to the Swedish Planning and Building Act In order to manage these risks, ALM Equity Real Estate (PBL), accessibility standards, tenancy legislation, design, time engages continually with municipalities, Management, taken for handling detailed zoning plans and building permission government authorities and consultants, Project processes, and tax legislation can affect projects’ profitability. Medium Medium and monitors political influence of opinion Development, In addition, other rules or political decisions can have a major on issues that could impact the company’s Construction impact, such as amortisation requirements or debt ratio caps for business. Management private individuals, which affects provision for the company’s housing properties. 3. CHANGES TO DEMAND/MACROECONONMIC Macroeconomic and geographic risk is INSTABILITY managed through the analysis of the The property market is highly sensitive to macroeconomic factors Real Estate operating environment, trends and drivers such as general economic performance, performance of financial Management, that affect the company, as well as those markets, growth, employment, the rate of construction of new Project micro-markets on which the company owns Medium Medium housing and premises, changes to infrastructure, population Development, or is considering acquiring properties. The growth, inflation and interest rate levels. If individual customers, Construction findings of this analysis in turn influence real estate management companies and investors’ willingness Management strategic decisions and the assessments that and ability to acquire housing properties is affected, this has a the Group makes. direct impact on ALM Equity’s business.

HAS AN DESCRIPTION MITIGATING FACTORS PROBABILITY IMPACT IMPACT Financing in the different parts of the Group takes place separately and financing 4. FINANCING, LIQUIDITY AND REFINANCING RISK is matched with the asset being financed. The Group’s ability to meet its financial commitments is Equity and debt are combined in different dependent on a number of factors, such as the Group’s financial forms in order to achieve a good balance and operating performance. There is a risk of being unable of financing in each part. In projects under to obtain financing on favourable terms in order to refinance development the company strives to attain existing debt or to transact new business. a high proportion of short-term interest- bearing financing, and to ensure projects In some cases debt is linked to a change-of-control clause and are fully financed before construction a commitment regarding, for instance, the maintenance of loan work is contracted. Investment properties Real Estate to value and the equity ratio. This means that creditors may be are financed using long-term interest- Management, Low High entitled to call for immediate early repayment of loans granted, bearing financing, while the Construction Project or to demand changes in terms and conditions, in the event that Management business generally only has Development these specific commitments are not met by the borrower. seasonal working capital needs. Additional cash and cash equivalents is available in the In the event of insufficient financing the Group would have Parent Company, which limits the Group’s to take measures such as scaling back its business, delaying liquidity risk and thereby reduces financing the implementation of projects, acquisitions and investments, risk. The Group uses several different divesting assets, restructuring or refinancing its liabilities or sources of finance, and works with a number obtaining additional capital. of counterparties and different types of instruments, thereby reducing the effects should a counterparty or source of financing become temporarily unavailable.

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ALM Equity is able to use different types Real Estate 5. INTEREST RATE RISK of interest rate derivatives to limit interest Management, Interest rate risk relates to changes in the capital market, which rate risk in projects and to increase the Medium Medium Project in turn affects the Group’s borrowing cost. predictability of the Group’s housing Development projects. In connection with transactions and Real Estate 6. CREDIT AND COUNTERPARTY RISK ongoing agreements or cooperation, the Management, ALM Equity’s credit and counterparty risks comprise the counterparty risk is evaluated and contracts Project inability of suppliers, partners or customers to fulfil their Low High are complemented with security in the form Development, obligations or payments as agreed. Material counterparties of guarantees, insurance, sureties, pledged Construction comprise contractors, financiers, customers and tenants. assets or similar. Management Investment properties are valued 7. VALUATION OF ASSETS continually and changes in value have a The risk of actual asset values falling, requiring assets values to direct impact on the income statement. be impaired. Material assets in the consolidated balance sheet To minimise the risk of the value of the mainly relate to properties, such as Investment Properties, property portfolio decreasing, we manage Properties Under Construction, Development Properties, the value-driving parameters of properties Ongoing Housing Projects and Inventory Shares in Housing that can be influenced, such as occupancy and Property Rights. rate, rent levels, counterparty risk, length of contract, etc. The value of the Group’s property assets is affected by a number of parameters, including property-specific and market-specific Development Properties, Investment factors. There is a risk that changes could lead to negative Properties Under Construction, Ongoing realised and unrealised changes in value. Housing Projects and Inventory Shares in Real Estate Housing and Property Rights have a carrying Management, Property-specific parameters: amount corresponding to cost plus expenses Project incurred. This means that activities affecting Development, Low High Investment properties market value do not have an impact until (Construction - Vacancy rate, rent level and running costs all value-creating parameters have been Management to a fulfilled. small extent) Investment Properties Under Construction and Ongoing Housing Projects This results in there often being positive - Besides factors that affect the final value, the value of unrealised changes in value that reduce the unforeseen project-related costs is also impacted risk.

Development Properties Cost estimates for acquisitions of - Affected by the property’s construction conditions and how development rights contain both a project this impacts production costs. and construction margin, which reduces the risk of development rights declining in Market-specific parameters: yield requirements, discount rates value. Account is also taken of demographic and other market parameters that affect the value of property development in those areas in which assets. development rights are acquired.

56 alm equity ab | 2019 HAS AN LIKELI- DESCRIPTION MITIGATING FACTORS IMPACT IMPACT HOOD ALM Equity believes that the Group has adequate skills and experience to carry out acquisitions 8. TRANSACTION-RELATED RISK Real Estate and integrate them into the business. In order to Acquisitions and sales are part of the Group’s operating activities Manage- minimise risk in acquisitions, where necessary and are by their nature associated with some uncertainty with ment, Low High ALM Equity uses external expertise and a regard to both buyers and sellers. Project De- methodical analysis of acquisition properties is velopment always conducted, focusing on risks that have a material impact. 9. DETAILED ZONING PLAN AND PLANNING Having a large number of projects at the detailed PERMISSION zoning plan stage means that the Group’s As part of the Group’s business is the development and dependence on one particular detailed zoning redevelopment of properties, the company depends on the plan is limited. In order to minimise the risk ability to utilise properties. The Group also depends on obtaining relating to the detailed zoning planning process, development rights required for its business and detailed zoning the Group conducts continual dialogue with plans needed for the Group’s projects being adopted within the municipalities and other interested parties to Project De- prescribed period of time. High Low understand and best manage the challenges velopment and opportunities of each project. The Group’s There is a risk of detailed zoning plans being delayed or not being overall development rights portfolio is also approved by municipalities or other authorities. There is also a risk continually analysed in order to ensure the right of the Group having too many or too few development rights that mix of development rights in terms of timing are at the detailed zoning plan stage, or of development rights not of possible construction start, location and being located in sufficiently attractive locations. intended target group.

10 PROJECT-RELATED RISK – COUNTERPARTY RISK & PLANNING The Group’s development and construction management activities are associated with a number of risks, such as risk of defective construction, delays, of projects not being completed on schedule, operating risks, risks relating to use, permits, etc. Different parts of the business carry a risk of unforeseen costs arising that can neither by allocated to suppliers nor customers and instead directly affect earnings.

ALM Equity has a small core organisation and therefore purchases many services externally. Operating risks in managing projects Credit risk is managed in part to minimise Project De- relate, for instance, to the choice of subcontractors, agents, counterparty risk, as mentioned in point 6. In velopment, consultants and architects. The wrong choice of supplier can also addition, there is a rigorous process for project Construc- Medium Medium lead to deficiencies in quality, delivery delays or failure to deliver in planning, procurement and signing of contracts tion Man- the event of bankruptcy. Both breaches and deficiencies and delays in order to reduce counterparty risks in projects. agement caused by suppliers could have a negative impact on ALM Equity’s profitability and brand.

Flawed planning and procurement could lead to increased costs for work to make changes and/or additional work. Rising prices of material can make projects more expensive to varying degrees, depending on the form of contracting used. The Group tries to keep a large percentage of total costs in these construction contracts at a fixed price and the risk of cost increases in construction is typically borne by the contractor, which in turn means such contract structures have a higher counterparty risk.

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Risks at the conceptualisation stage are minimised through market analyses and surveys 11. CONCEPT by agents. In order to reduce risk in those Project De- The Group creates a concept for each property. There is a risk of concepts created in development or investment, velopment, the concepts that are developed being based on incorrect prices or ALM Equity endeavours where possible to keep Real Estate Low High rent assumptions, or of the concepts not being well received on the as many circumstances and the legal structure Manage- market. open to future changes. E.g projects that are ment intended for the tenant-owned market can instead be switched to the rental market. 12. UNDERWRITING UNSOLD TENANT-OWNED Projects for the tenant-owned market account for APARTMENTS only a small portion of total production and have ALM Equity underwrites unsold housing units in projects aimed decreased sharply in recent years. The risk in the at the tenant-owned market, i.e. it takes them on as investment investment is usually minimised in practice when Project De- High Low properties and guarantees payment of fees, etc. At year-end ALM a set level of sales is achieved. Since the Group velopment Equity was underwriting the purchase of SEK 412 million worth of usually has a number of projects underway housing. This underwriting relates to any unsold housing units at the at the same time, the Board makes an overall date of transfer. assessment of ongoing projects. Real Estate 13. DEFICIENT PROCEDURES Manage- ALM Equity may, within its operating activities, suffer losses ment, ALM Equity endeavours continually to develop because of defective procedures, deficient controls or irregularities. Project De- the company’s safety and controls to minimise Medium Medium Appropriate administrative systems, good internal control, skills velopment, operating risks. development and access to reliable valuation and risk models are an Construc- effective basis for reducing operating risks. tion Man- agement

14. PROVISION FOR NEW-BUILD HOUSING To manage these risks, the company monitors The project development business within the Group is concerned issues such as demographic change, along with with managing and participating in property development projects, changes in demand and offering in the rental, primarily in order to create housing in the Stockholm region, which succession and new-build markets. Customer Project De- Low High means both the willingness and the ability to pay for housing is pivotal willingness and ability to pay is a key factor, velopment to the Group’s business operations. The ability to sell housing is also regardless of market, when conceptualising affected by general competition and demand in the region in which existing development rights or when acquiring the Group operates, and the micro-market for each project. new development rights.

15. COMPETITION To address the competition from other operators, Real Estate The Group operates on a competitive market, with competition ALM Equity aims to be responsive to customer Manage- depending on the ability to predict changes in market conditions and and market demands and willingness to pay and ment, rapidly adapt to new circumstances. This could result in increased to be adaptable in order to cope with changes Project De- costs, lower selling prices or other changes in the Group’s business Medium Medium in circumstances. Increased competition from velopment, model. The Group operates on a market in which a number of existing or new market operators and a decline Construc- competitors have significant financial resources available. ALM in its competitive capabilities could result in a tion Man- Equity also competes with some market operators that have a larger negative impact on the Group. agement balance sheet and greater financial resources.

58 alm equity ab | 2019 HAS AN LIKELI- DESCRIPTION MITIGATING FACTORS IMPACT IMPACT HOOD

The rental risk is reduced by monitoring the 16. RISKS RELATING TO TENANCY AGREEMENTS AND development of significant counterparties, as VACANCIES growth in the portfolio of completed investment Both rental levels and vacancies are highly sensitive to Swedish properties reduces the significance of individual economic growth, but particularly the performance of the Stockholm counterparties. The lengths of tenancy agreements region. There are risks of rental losses and vacancies in relation to Real Estate are also staggered to ensure a good expiry tenants and contract structures. Concentration on a few tenants can Manage- Low High structure. result in increased exposure. ment,

There is essentially a very significant shortage of There are a number of tenants that represent a relatively large space-efficient housing in Stockholm locations percentage of the Group’s total rental income, or that rent all or large with good communications, which reduces the risk parts of a particular property. of vacancies arising. 17. INCREASED MANAGEMENT COSTS As the investment property portfolio consists Group properties are rented to private individuals, as well as of new-build properties, both energy costs Real Estate commercial and public-sector organisations. The tenancy agreements and maintenance are significantly lower than Manage- Low Medium regulate responsibility for operating and maintenance costs. Some of in an older property. The risk of unforeseen ment, these costs are outside the company’s control; for instance, the cost of maintenance costs is also lower. heating is affected by weather and energy prices at any given time. 18. KEY PERSONNEL The company has a relatively small organisation, resulting in dependence on individual employees. ALM Equity’s future Real Estate performance depends strongly on the know-how, experience and Manage- ALM Equity has entered into employment commitment of a number of key personnel. These people have ment, contracts on terms that are deemed to be market significant knowledge about both the Group and the sector. It is Project De- Medium Medium based. An increased number of employees in important for both the Group’s future business operations and velopment, recent years has also helped lower this risk. performance to both retain and recruit capable employees. The Construction company could be adversely affected if one or more of these key Management employees were to leave or if the company were to fail to recruit such employees. Real Estate 19. DISPUTES Manage- ALM Equity may, in the future, be involved in disputes or have claims ment, Reputable legal advisors are used when signing brought against it. Such disputes may be time consuming and result in Project De- Medium Medium significant agreements. costs that cannot always be predicted. Disputes may therefore have an velopment, adverse effect on ALM Equity. Construction Management Real Estate 20. INSURANCE RISK Manage- If ALM Equity were incapable of maintaining insurance cover on terms ment, acceptable to ALM Equity or if future business needs exceed or are not ALM Equity cooperates closely with insurance bro- Project De- Low High covered by ALM Equity’s insurance cover, or if ALM Equity’s provi- kers to ensure it obtains sufficient insurance cover. velopment, sions for uninsured costs were to be insufficient to cover final loss, this Construction could have a negative impact on ALM Equity. Management 21. IT-RELATED RISK Insufficient or unreliable systems could pose a risk for the Group. The Group has a cloud-based platform, which Real Estate There is a risk of investments in digital development failing to achieve in the long term will be entirely independent of Manage- expected results, or of the incorrect amount of resources being set hardware, to ensure that it does not depend on ment, aside to develop relevant solutions. Digitalisation these days is driving hardware and related risks. The Group’s Digital Project De- Low Medium both development and behaviour in society, making it a vital element Services business area develops digital solutions velopment, for all companies in all sectors to monitor and understand in terms of that promote the sharing economy to ensure it is at Construction what this means and how digitalisation will impact customer demand the forefront in this field. Management in the future.

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22. GDPR A new data protection regulation, GDPR, came into effect in the Real Estate EU, directly applicable in Sweden, from 25 May 2018. The Group The Group has procedures and system support Manage- processes the personal data of tenants, customers and employees. in place to help ensure personal data is ment, Low High There is a risk of the company’s processing of personal data being processed in line with GDPR. Project De- incorrect or of the measures taken to comply with GDPR being velopment insufficient, which could result in disputes, civil and/or criminal measures. 23. TAX RISK ALM Equity has accumulated tax losses. Changes in ownership, Real Estate resulting in a change in controlling influence over the company, Manage- could result in restrictions (fully or in part) on the ability to utilise ment, ALM Equity continually monitors changes to tax these losses. The ability to utilise these losses could also be affected Project De- legislation. Expertise in both tax and VAT issues Low High by changes to legislation. The Group is also affected by new or velopment, is used to minimise the impact of tax legislation. amended legislation, legal practice and requirements in a number Construc- of other areas, such as regarding competition, construction or tion Man- the environment. New or amended legislation, legal practice or agement requirements could have adverse consequences for ALM Equity. When redeveloping and demolishing properties, comprehensive environmental inventories are conducted to ensure that any hazardous waste such as asbestos, PCB, mercury and black 24. ENVIRONMENT AND CLIMATE asbestos mastic are handled in the optimum Property operations have an environmental impact and are Real Estate way. For acquisitions, the costs of this kind regulated by extensive environmental legislation. On this basis, Manage- of work are based on previous experience of requirements may arise regarding decontamination of soil, disposal ment, similar buildings and projects. of construction materials or ecological protection. Climate change Project De- Low High could affect properties’ suitability for different areas of use. velopment, Requirements within the company are at Construc- statutory level as a minimum, and aims are Despite inspections being conducted and assessments carried out tion Man- significantly higher with regard to the Group’s of the cost of managing environment risks before acquisitions, agement environmental impact and carbon footprint, unforeseen cost increases may arise. with the goal of reusing existing buildings where possible and minimising material usage and energy consumption both in construction and management. 25. ETHICAL BREACHES, REPUTATIONAL RISK, HUMAN RIGHTS VIOLATIONS Real Estate The Group’s reputation is of vital importance as the Group is In order to create a robust, consistent corporate Manage- dependent on suppliers, customers and other stakeholders on culture, the Group continually endeavours ment, the property market associating the Group with positive values to create and maintain a robust corporate Project De- Low High and good quality. If, for example, the Group’s Board members, culture, and it has established code of conduct velopment, executive management or employees were to act in a way that goes guidelines that all employees have read and Construc- against the values represented by the Group, or, indirectly, if the must comply with. tion Man- Group’s property projects do not meet market expectations, there is agement a risk of reputational damage to the Group.

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Real Estate Manage- 26. SYSTEMIC RISK ment, In order to minimise systemic risk, the business As the Group’s business areas cooperate and conduct business Project De- areas are managed as independent businesses Low Medium together, there is a risk of systemic risk being created, particularly if velopment, that conduct business on market terms. business and transactions are only conducted with internal parties. Construc- tion Man- agement We monitor existing guarantees for work carried out carefully to ensure that estimated 27. WARRANTY RISK damages are correctly provisioned for. Checks For construction contracts there is a warranty undertaking for work on quality and financial strength are carried out Construc- carried out for up to 10 years after it is completed. There is a risk when signing contracts with subcontractors to tion Man- Medium Medium of construction defects arising or other measures needing to be ensure both a willingness and ability to rectify agement taken that cannot be passed on to a subcontractor, irrespective of any defects that may occur. There is also a whether there is a warranty undertaking or goodwill rectification. significant emphasis on ensuring contracts are structured so that the supplier bears the warranty liability. Construc- 28. HEALTH AND SAFETY There is a strong emphasis on health and safety, tion Man- There is a risk of employees suffering workplace accidents, or in addition to compliance with applicable laws agement, Low High physical or mental harm in connection with work. In the worst and rules, particularly at construction sites, Project case, a workplace accident could lead to death. where accidents can have serious consequences. Develop- ment

alm equity ab | 2019 61 RISKS & RISK MANAGEMENT PANDEMIC RELATED TO COVID-19

Given current circumstances, ALM Equity would like to in turn lead to cost increases. It is likely that there will be a provide information about the impact from and its handling shortage of components purchased from countries that have of the Covid-19 situation. Below are the areas deemed most shut down industrial production, unless alternative supplies significant, along with the status and restrictions in place at can be sourced. Subcontractors may be affected by sickness the time of writing. absence, resulting in reduced productivity. Thus far there are no cases where ALM Equity has been affected by a shortage PERSONNEL AND PRODUCTIVITY of components or resources at a subcontractor. Delays may The ALM Equity Group is following an action plan for result in compensation having to be paid to buyers or tenants, personnel that complies with the Swedish Public Health and in delays to project earnings, rent flows and the inflow of Agency and Ministry of Foreign Affairs’ guidelines to help liquidity that occurs when projects are completed. Much of reduce the spread of infection in society and to safeguard the the housing being constructed uses Swedish-produced timber health of its employees. The Group already has a cloud-based modules, which reduces the risk. There is some flexibility in IT platform and aims to be independent of hardware, making terms of time to absorb some delays so that end customers are it easier to work remotely, which is a major advantage in the not affected. And in most cases contracts allow for the date current circumstances. However, there is significant risk of of transfer to be postponed without ALM Equity’s businesses reduced productivity, as new assessments are finding that incurring penalties. At present, the assessment is that those both absence due to sickness and child care is increasing projects where construction is further advanced can be within the company and among suppliers, government completed on schedule. The risk of being affected by delays authorities and cooperation partners on which we depend. and the impact that this could lead to is deemed to be medium.

PRODUCTION BY SUBCONTRACTORS CUSTOMERS ALM Equity is carefully following developments among There are currently no signs that private customers are subcontractors and how they are being affected by Covid-19. having problems completing transactions or meeting their If subcontractors have a shortage of components or personnel commitments. New agreements are being signed with this could impact the timetable of projects, which could private customers but market activity is lower.

62 alm equity ab | 2019 There is a significant risk of market activity staying low for FINANCIERS – ACCESS TO CAPITAL as long as some kind of restrictions remain in place, and of ALM Equity appears to have gained significant trust on the banks being more restrictive with financing. It is difficult market after managing to adapt to new market conditions to assess what effects could remain on the private market and obtaining financing commitments for both project when the direct impact of Covid-19 is over. If there is a finance and end-financing, despite some operators in the material increase in unemployment on the market, there is a banking sector having limited capital to allocate to property. significant risk that this will have a considerable impact on the There is a risk of the impact from Covid-19 resulting in private market’s ability to pay. There is a risk of willingness banks, institutions and investors being less willing to engage and ability to pay for residential investment properties on in new deals and having to free up liquidity. In the short the investment market being affected by reduced asset prices term, access to certain types of capital will decrease, but in or a change in climate on the capital market owing to the the long term we believe investors may wish to re-weight impact of Covid-19. As residential investment properties their investments to the types of investments offered by ALM should be fairly resilient to an external impact and since Equity. Many private investors want low-risk investments transactions are still taking place on the market, the impact with a high risk-adjusted return over the long term. There is expected to be lower than for other types of property. is a high risk of one or other operator or certain sources of capital not being available for a period of time. For instance, TENANTS there has been limited activity among new issuers on the There is a risk that the impact from Covid-19 will affect our bond market since the start of the pandemic. ALM Equity tenants’ ability to pay. Tenants in the form of companies, has historically worked with lots of different operators authorities and organisations that are renting in order to representing different sources of capital, which means other provide their own personnel with company properties are sources of capital could be used instead. However, there is a being affected differently depending on the sector in which risk of delays, more expensive financing or of a lower paces they operate. Operators that manage and rent out properties of transactions. for personnel are being affected directly by reduced travel and resulting low inflow of new rental agreements. ECONOMY – MARKET Operators with a range of properties for personnel without The direct impact of the coronavirus on the economy is community solutions appear to be more affected. ALM expected to be low, but the measures taken to reduce the Equity is continually monitoring developments among spread of the virus will be greater. In the best case, a range tenants. Where tenants are operators we have the ability to of stimulus measures will mitigate the economic impact. In take over and conduct business with end customers if the the worst case, Covid-19 could be the factor that ends the operator defaults on payments. ALM Equity would have economic boom and results in a recession involving a sharp lower front-end costs and would therefore be able to achieve reduction in growth and significantly lower employment. It breakeven at a lower occupancy rate. is currently extremely difficult to assess how great an impact Covid-19 will have on the economy. There will be an adverse A further mitigating factor is that, for us, the risk is distributed impact, but its extent is hard to judge at present. One risk across a greater number of tenants and the fact that the relating to the market is that this will also affect the market’s housing units can also be rented to private individuals. general required return on money, as well as the required As the properties are in the Stockholm region with good return that investors have in the property market. This could communications and low rent, the risk of long-term vacancy affect property values and result in a need for impairments. is deemed to be low, even in the event of serious disruptions Significant changes in value involving impairment losses to employment and growth. If tenants are unable to meet could result in loan agreements with covenants linked to their commitments and other tenants cannot be found at loan to value having to be renegotiated or otherwise facing the same rental level, or if vacancies occur, there is a risk the possibility of defaulting. of property values being affected. This could lead to values having to be impaired, which in turn could also result in loan agreements with covenants linked to the lending ratio having to be renegotiated or, in the worst case, be defaulted on.

alm equity ab | 2019 63 z

BOARD OF DIRECTORS OF ALM EQUITY AB Standing, from left: Johan Unger, Johan Wachtmeister, Gerard Versteegh Sitting, from left: Joakim Alm (CEO), Maria Wideroth (Chair).

BOARD OF DIRECTORS & AUDITOR ABILITY TO IDENTIFY AND DEVELOP OPPORTUNITIES IN THE REAL ESTATE SECTOR

The composition of the Board reflects expertise and experience from areas such as business development, the real estate sector, financing and capital markets. Maria Wideroth, Joakim Alm, Johan Unger, Johan Wachtmeister and Gerard Versteegh were re-elected at the 2019 AGM. Maria Wideroth was re-elected Chair of the Board of Directors. Ernst & Young were re-appointed as auditor, with Jonas Svensson as principal auditor.

64 alm equity ab | 2019 z

BOARD OF DIRECTORS & AUDITORS

JOAKIM ALM Born 1961. Studied economics at Uppsala University. Founder and CEO of free newspapers: Bargain Pages Ltd in England, 1989–1995, Admag Holding in India, and Admag Holding in Australia, 1997–1999. Business developer at Interline Phone, 1999–2002. CEO of Skarnvest AB, 2004–2006. Founder of ALM Equity AB, 2006. Holding in ALM Equity privately/via family and companies: 5,837,623 ordinary shares and 775,461 preference shares, along with 15,000 warrants. Not independent in relation to the company, company management or the company’s major shareholders.

MARIA WIDEROTH  JOHAN UNGER Born 1967. Bachelor of Law, Stockholm University. Born 1961. Business and Economics degree, Lawyer and partner, Landahl Advokatbyrå. Has Uppsala University. Accountant at Arthur worked for law firms since 1998, specialising in Andersen & Co, 1985–1989. Worked for real estate law and transactions. Maria Wideroth Hagströmer & Qviberg Fondkommission AB is also chair of the boards of EFIB, Enskilda 1990–2005, partner 1992–2005. Head of Fastighetsägare i Bromma AB and real estate and Corporate Finance, 1996–2005. Since 2006 construction company Frentab. Holding in ALM he has been running his own business in Equity privately/via family: 7,200 ordinary shares investment, financial advice and board work. and 1,332 preference shares. Holding in ALM Equity privately/via family: Not independent in relation to the company, 151,360 ordinary shares and 12,523 preference company management or the company’s major shares. Independent in relation to the company, shareholders. company management and the company’s major shareholders.

 JOHAN WACHTMEISTER Born 1959. Master’s in Engineering, KTH Royal Institute of Technology, and MBA IMD. SEB/ Enskilda 1989–1999: Executive Vice President, SEB, Head of Corporate Banking in Merchant Banking. President of Ledstiernan, 1999–2006. Co-founder of GHP Speciality AB, Executive Vice President 2006–2012. Today owns investments via MJW Invest AB. Holding in ALM Equity privately/via family and companies: 757,492 ordinary shares and 23,515 preference shares. Independent in relation to the company, company management and the company’s major shareholders.

JONAS SVENSSON GERARD VERSTEEGH The company’s principal auditor since 2014, Born 1960. Business and Economics degree. when Ernst & Young were re-elected as the Executive chairman, principal owner and company’s auditing firm. Authorised public founder in 1989 of Commercial Estates accountant and partner of EY. Previously Group Limited, London, and chairman/board chairman of FAR and CEO of Ernst & Young member of a number of related companies. AB. Assignments carried out for Besqab AB, Indirect beneficiary of Dooba Investments Byggpartner i Dalarna AB, Citycon AB, John Limited, which has a holding in ALM Equity Matsson Fastighetsföretagen AB, Kungsleden of 990,494 ordinary shares and 125,984 AB, Lyko Group AB and Skanska AB. preference shares. Holding in ALM Equity: None. Independent in relation to the company, company management and the company’s major shareholders.

Holdings at 18/04/2020 alm equity ab | 2019 65

GROUP MANAGEMENT OF ALM EQUITY AB From left: Carolina Karlström, Joakim Alm (CEO), John Sjölund.

66 alm equity ab | 2019

GROUP MANAGEMENT AN ORGANISATION WITH A BROAD SKILLS BASE

ALM Equity consists of Group management and Group MANAGEMENT staff and finance, which provides overall functions for ALM Equity’s management comprises a small, close-knit Finance, HR, Marketing and IT to the whole Group. Each team with wide-ranging expertise and experience. business area has a broad range of skills attributable Management takes overall decisions within the Group. to each area, which are supplemented by a network of partners who are well-versed in our way of thinking and THE BUSINESS AREAS working, as well as our quality requirements. This means The ALM Equity Group is made up of five business areas we are able to adapt each business area, each company whose operations focus on different parts of the real estate and each project’s partner organisation to current needs sector. to achieve the best results. Each business area consists of several companies for which the respective business area manager is When recruiting, ALM Equity endeavours to find responsible employees with different specialisms. This enables us to The five business areas are: build up a broad skills base, which is highly valuable for • Real Estate Management the Group, allowing us to take a professional, organised • Project Development approach to our work. • Construction Management • Financing • Digital Services

Find out more about each business area on pages 14–37. EXECUTIVE MANAGEMENT TEAM

 JOAKIM ALM CAROLINA KARLSTRÖM  JOHN SJÖLUND Chief Executive Officer. Business Controller. Financial accountant, CFO. Business and Economics degree, Luleå See under Board of Directors. IHM Business School. Employed by ALM University of Technology. Broad financial Equity since 2012, previously accounting background with 15 years in corporate manager. banking in various positions at Swedbank, Holding in ALM Equity privately/via family: including project finance for real estate 200 ordinary shares and 85 preference projects. Also has experience from the shares, as well as 4,000 warrants. housing development industry as CFO at Serafim Fastigheter. Holding in ALM Equity privately/via family: 5,000 warrants.

Holdings at 18/04/2020 alm equity ab | 2019 67 CORPORATE GOVERNANCE THIS IS HOW WE WORK

This Corporate Governance Report has not been prepared in accordance with the Swedish Corporate Governance Code (the Code). All Swedish companies whose shares are listed on a regulated market in Sweden are subject to the Code. Nasdaq First North Growth Market is not a regulated market, which is why the company has chosen not to apply the Code.

Ingenting, Solna

ARTICLES OF ASSOCIATION INTERNAL CONTROL The company’s name according to the Articles of Association is According to the Swedish Companies Act, the Board is responsible for ALM Equity AB (publ), and it is a public company. The registered internal control. The foundation for internal control consists of the office of the Board of Directors is in Stockholm. The company control environment, which comprises various elements that together shall pursue project operations related to property and associated constitute the culture and the values that govern ALM Equity. activities via wholly-owned and co-owned companies. Internal control is guided by the decision processes, powers and responsibilities recorded and communicated in governing documents such as the Board’s rules of procedure, the CEO instruction, finance policy, authorisation and reporting instructions and other internal policies, guidelines and manuals that direct internal work.

68 alm equity ab | 2019 RISK ASSESSMENT GOVERNANCE AND FOLLOW-UP Risk management within the ALM Equity Group and its business The company’s earnings are continually monitored at several levels areas and companies is integrated into the processes and various in the Group, at Group level and at business area, company, property methods used to evaluate and limit risks, and to ensure that the management and project level. risks to which ALM Equity is exposed are managed in accordance with established policies and guidelines. In accordance with the Outcomes are measured against budgets and forecasts. Financial rules of procedure, the Board conducts a review of internal control earnings are analysed by both the respective business area and Group at least once a year together with the company’s auditors, and staff. Reports are submitted to the CEO and Board of Directors. The such review is addressed by the Board at the next Board meeting. company’s auditors are tasked by the AGM with reporting direct to Risks are identified and measures established to reduce them. the Board at least once a year. The auditors must also report their observations from their audit See separate section on risks and risk management, pages 54–63. and their assessment of internal control. These observations are then reported back to the Board. The Board takes minutes of these reports and then follows up the minutes at a subsequent meeting.

CONTROL ACTIVITIES The risks identified regarding financial reporting are managed via the company’s control structures, which results in a number of control activities. These control activities aim to prevent, detect and correct PERFORMANCE MANAGEMENT errors and deviations. The activities include analytical follow-up at According to its investment strategy, ALM Equity intends to several levels in the organisation and comparison of income statement continue growing by decentralising operations and allocating items, account reconciliations, follow-up and checking of Board them between five business areas operating within the real estate decisions and policies established by the Board, approval and reporting sector. The company invests in businesses that satisfy the Group’s of business transactions, authorisation structures, individuals requirement for a healthy return and balanced risk. authorised to sign for the company, group-wide definitions, templates, Each investment is reviewed separately when each individual reporting tools and accounting and valuation policies. decision is made. Furthermore, the Board shall ensure that the company has good internal control in place, keep abreast of systems for internal control and continually evaluate their effectiveness. The Board shall also maintain an ongoing dialogue with the company’s auditors and management to provide further assurance that internal control systems function effectively.

INFORMATION AND COMMUNICATION ALM Equity’s information policy aims to provide effective and accurate information regarding the financial statements. The company’s inside information policy and finance policy also deal with information and communication regarding the financial NEED FOR INTERNAL AUDIT statements. Policies and guidelines relating to the financial ALM Equity’s Group staff is a relatively small organisation in which statements, as well as updates and changes to these documents finance and rental administration are managed from the company’s are made available and disclosed to the relevant employees. The Stockholm office. The company’s earnings and balance sheets are Board receives additional information regarding risk management, followed up quarterly by the various functions within the company and internal control and financial reporting from the auditors via by company management. A special internal audit function is therefore information at Board meetings at which the auditors are present. not deemed to be necessary.

alm equity ab | 2019 69 ANNUAL GENERAL MEETING AGM 13 JUNE 2019 The AGM is the company’s highest decision-making body. At the ALM Equity’s AGM was held on 13 June 2019 in Stockholm. The AGM, all shareholders are granted the opportunity to exercise AGM resolved on the following matters: influence over the company relative to the number of shares held. • Dividend of SEK 8.40 per preference share, payable quarterly. • Bonus issue through which the company will issue one preference share per 100 ordinary shares, which involves a bonus issue of 101,546 preference shares. • Re-election of Board members Maria Wideroth, Johan Unger, Gerard Versteegh, Johan Wachtmeister and Joakim Alm. • Re-election of Maria Wideroth Chair of the Board of Directors. • Appointment of Ernst & Young AB as auditor, with Jonas Svensson as principal auditor. • Adoption of fees to the Board of SEK 180,000, to be allocated as follows: Chair SEK 60,000 and other members SEK 40,000 each, apart from Joakim Alm who receives a salary from the company. • Principles regarding the composition of the Nomination Committee and instructions. • Authorisation for the Board to resolve on the issue of a maximum of 3,000,000 preference shares with deviation from shareholders’ preferential rights. • Minutes from the 2019 AGM are available on ALM Equity’s website.

70 alm equity ab | 2019 BOARD OF DIRECTORS THE SPECIFIC DUTIES OF THE CEO ARE TO: According to the company’s Articles of Association, ALM Equity’s • Prepare the requisite information and decision-making Board of Directors shall consist of at least three and no more documentation ahead of Board meetings and in other respects than five members, with a maximum of three deputies. ALM fulfil their obligations as stipulated in relevant decisions and Equity’s Board of Directors has five members elected by the instructions from the Board. 2019 AGM. The company’s CEO Joakim Alm is a member of the • Fulfil the function of rapporteur and submit supported proposals Board. The Board members are Maria Wideroth, Joakim Alm, for decisions. Where appropriate, the CEO is entitled to delegate Gerard Versteegh, Johan Wachtmeister and Johan Unger. Maria the role of rapporteur for individual matters to another person Wideroth was appointed Chair of the Board by the 2019 AGM. All subordinate to the CEO. Board members continue in their role until the end of the next • Ensure that Board members are continually provided with AGM. For further information about the Board members, see the information required to monitor the company’s position, the sections entitled Board of Directors and auditor, Company liquidity and performance, and in other respects to fulfil their management and Personnel. reporting obligation regarding financial position in accordance with details stipulated in the CEO instruction regarding financial BOARD OF DIRECTORS’ PROCEDURES: reporting to the Board. The work of the Board of Directors is regulated by the Swedish • Be responsible for ensuring that obligations, contracts or other Companies Act and the company’s Articles of Association. In legal transactions that the company enters into or undertakes addition, the work of the Board is governed by the rules of procedure are documented in an appropriate manner, and that they are not adopted by the Board each year in connection with the first Board in breach of Swedish or foreign mandatory statutes, including meeting following the AGM. The rules of procedure set out the competition law rules within the EU and similar regulatory Board’s duties and division of responsibility between the Board and systems. the Chief Executive Officer. The CEO instruction and instructions • Monitor compliance with the objectives, policies and strategic relating to financial reporting are established at the same time. plans for the company established by the Board, and ensure that such objectives, policies and plans are referred to the Board for THE SPECIFIC DUTIES OF THE CHAIR OF THE updating or review as required. BOARD ARE TO: • Monitor the company’s performance via contact with the Chief Executive Officer. Ensure that Board members, by the agency of the CEO, are continually provided with the information they need in order to monitor the company’s position, financial planning and performance. • Consult with the CEO on matters of strategic importance. • Chair Board meetings and prepare agendas for, and convene such meetings, assisted by the CEO. • Ensure matters are dealt with in accordance with the provisions of the Articles of Association and Swedish Companies Act.

alm equity ab | 2019 71 NOMINATION COMMITTEE DUTIES OF THE NOMINATION COMMITTEE: At the 2019 AGM is was decided that the following principles The Nomination Committee shall prepare and submit proposals to and instructions shall apply as regards how members of the the AGM regarding: Nomination Committee are elected, and committee procedures. a) election of chair to lead the AGM; b) election of Board members and, where applicable, any other ELECTION OF MEMBERS, ETC.: special committee that the Annual General Meeting resolves to The Chair of the Board shall, no later than by the end of the appoint; third quarter each year, ensure that the company’s three largest c) election of auditor and, where applicable, deputy auditors; shareholders or groups of owners in terms of votes are each d) Board member fees, auditor fees and, where applicable, fees to offered the opportunity to appoint their own representative members of any other special committee that the Annual General to sit on the Nomination Committee. Such shareholders are Meeting resolves to appoint, and identified based on Euroclear SwedenAB ’s shareholder register e) any changes to procedures for appointing the Nomination (owner-grouped) on the last business day in August. Should one Committee. or more shareholders waive their right to appoint a member of the Nomination Committee, shareholders are contacted in proportion The Chair of the Board shall, in an appropriate manner, inform the to the size of their holding to appoint a member of the Nomination Nomination Committee of the skills profile and working methods Committee. of the Board of Directors. At the request of the Nomination Committee, the company shall make available personnel resources The Chair of the Board is a member of the Nomination Committee such as secretarial support to facilitate the work of the Nomination and convenes the committee’s first meeting. The composition of the Committee. Where necessary, the company shall also bear Nomination Committee shall be published as soon as its members reasonable costs for external consultants deemed necessary by the have been appointed. Unless the members agree otherwise, the Nomination Committee in order for the Nomination Committee Nomination Committee shall be chaired by the member who represents to complete its task. Joakim Alm (chairman), Edward Camilleri, the largest shareholder in terms of votes. The Nomination Committee Johan Wachtmeister and Maria Wideroth were appointed shall retain its mandate until a new Nomination Committee has been members of the Nomination Committee for the period extending appointed. No fee will be paid to the members of the Nomination up until the 2020 AGM. Committee. The Nomination Committee can from among its members, and by co-opting additional members as required, appoint MEETINGS: a special nomination committee to elect an auditor. If such committee The Nomination Committee shall convene when required to is appointed, this must also be published according to what is stated enable it to fulfil its duties, but at least once annually. The above in this point. All shareholders will hereby be informed about convening notice shall be issued by the chair of the Nomination which individuals can be contacted regarding nomination issues. A Committee (except in the case of the first meeting, which shall be member should step down from the Nomination Committee if the convened by the Chair of the Board of Directors). The committee shareholder who appointed such member is no longer one of the three may be convened at the request of a member. The Nomination largest shareholders, after which the new shareholder in order of Committee has a quorum if at least three members participate. size shall be offered the opportunity to appoint a member. However, However, decisions on matters may not be taken unless, as far unless there is a specific reason, no changes should be made to the as possible, all members have had the opportunity to participate composition of the Nomination Committee if only minor changes in in discussions on the matter. A decision by the Nomination the number of votes have occurred, or if the change occurs less than Committee refers to the opinion voted for by more than half of the two months prior to the AGM. Shareholders who have appointed members present, or if the number of votes is equal, the opinion representatives as members of the Nomination Committee are voted for by the chair of the Nomination Committee. An account entitled to dismiss such member and appoint a new representative as of the work of the Nomination Committee shall be published on a member of the Nomination Committee. the company’s website in advance of the ordinary AGM.

CHANGES TO THESE INSTRUCTIONS: The Nomination Committee shall continually evaluate these instructions and the work of the committee, and submit proposals to the AGM regarding such changes to these instructions as the Nomination Committee has deemed appropriate.

72 alm equity ab | 2019 COMMITTEES AUDIT COMMITTEE There are no designated committees within the Board of Directors, The company has no special audit committee; such matters are but there is a delegated division of responsibilities within certain instead handled by the Board as a whole. The Board shall together areas, where Board members are responsible for issues in which function as an audit committee, with the task of maintaining they have expertise and are tasked with preparing matters. and streamlining contact with the Group’s auditors, monitoring procedures for accounting and financial reporting, evaluating the work of the auditors and following the development of accounting policies and accounting requirements. The Board held two minuted meetings with the auditors in 2019. These meetings have included reports on the auditors’ examination of the company’s AUDIT ISSUES financial statements and the company’s internal control. Johan Unger and Joakim Alm have specific responsibility for issues relating to the audit of the company’s operations and other closely related matters.

AUDIT The auditors are required to examine the company’s Annual REMUNERATION ISSUES Report and accounts as well as the Board and the Chief Executive Maria Wideroth and Joakim Alm have specific responsibility for Officer’s management of the company. The auditors must attend issues relating to remuneration and other closely related matters. and submit a report at the Board meeting at which a decision is made on the adoption of the year-end accounts for the previous financial year. After the end of each financial year, the auditors are required to submit an audit report to the AGM. The 2019 AGM elected authorised auditing firm Ernst & Young AB, with authorised public accountant Jonas Svensson as principal auditor, for the period extending up to the 2020 AGM. Ernst & Young have been the company’s auditing firm since 2011, and Jonas Svensson has been principal auditor since 2014. The company’s auditors attended ALM Equity Board meetings on two occasions in 2019.

alm equity ab | 2019 73 STOCK MARKET INFORMATION IMPORTANT INFORMATION ABOUT FIRST The company shall supply prompt, accurate, relevant and reliable NORTH GROWTH MARKET information to existing and potential shareholders and other First North Growth Market is an alternative stock exchange that is investors. The company publishes interim reports on operations run by the various stock markets that make up NASDAQ. It does each quarter, as well as a year-end report and annual report for not share the same legal status as a regulated market. Companies the entire financial year. ALM Equity uses NASDAQ First North on First North Growth Market are subject to First North Growth Growth Market and its own website in order to release timely Market’s rules and not the legal requirements imposed for trading information to the stock market. Significant events are made on a regulated market. Investing in a company traded on First public via separate press releases. North Growth Market is more high-risk than an investment in a listed company. All companies whose shares are registered to trade on First North Growth Market have a Certified Adviser who monitors compliance with the rules.

TRADING ALM Equity AB (publ) began trading on the NASDAQ First North Growth Market as of 8 June 2012. CERTIFIED ADVISER Ticker symbol – ordinary shares: ALM ALM Equity AB’s Certified Adviser is: Ticker symbol – preference shares: ALM PREF Erik Penser Bank AB Apelbergsgatan 27 ALM Equity’s corporate bonds were listed on NASDAQ Box 7405 Stockholm as of 23 February 2017 and 7 June 2017 respectively. 103 91 Stockholm Ticker symbol – bond: ALME 102 www.penser.se Ticker symbol – bond: ALME 103 Telefon: +46-8-463 80 00

74 alm equity ab | 2019 POLICY DOCUMENTS INSIDE INFORMATION POLICY The company’s Board has adopted the following policies on ALM Equity’s inside information policy is intended to provide corporate governance: finance policy, information policy, inside guidelines on how the company should manage inside information so information policy, dividend policy and gender equality. In that the company and its employees do not breach any laws, regulations, addition, the Board annually considers any revisions to the CEO rules for issuers or good equity market practice. Compliance with instruction and regarding financial reporting, and the Board’s rules these guidelines is vital in maintaining the confidence of both the of procedure. Policies should be revised in a way that ensures all capital market and the general public. The inside information policy policies are current and support the business’s purpose and goals. covers all persons with managerial responsibilities, those closely associated with them and other persons notified that they are covered by the policy. All employees and consultants are obliged to report inside information to ALM Equity’s CEO.

FINANCE POLICY DIVIDEND POLICY The finance policy specifies guidelines and rules on how ALM ALM Equity is a growth company and its intention for the Equity’s finance activities should be conducted. It is established foreseeable future is to focus on investing excess liquidity back by the Board and specifies how the various risks within finance into the business. Dividend proposals are based on the company’s activities should be limited and what risks ALM Equity may liquidity and anticipated future financial position, taking account assume. The finance policy establishes division of responsibility of current economic conditions. The ambition is to at least propose and administrative rules and should also provide guidance on the a dividend for preference shares every year. day-to-day work of finance department personnel. ALM Equity’s Group companies are subject to the finance policy.

EQUAL OPPORTUNITIES POLICY INFORMATION POLICY Our equal opportunities policy aims to promote a balanced ALM Equity’s information policy has been drawn up to personnel policy and a workplace that reflects a diverse society. meet the requirements to which companies listed on NASDAQ First ALM Equity aims for all employees to have the same rights, North Growth Market, Stockholm, are subject. The purpose of ALM opportunities and obligations in all areas of working life. Working Equity’s information policy is to provide equity market operators conditions, training and professional development opportunities with quick, up-to-date, accurate, relevant and reliable information should be independent of gender, and pay at ALM Equity should about the company. The information policy should be followed by be equal between genders. all employees, Board members and externally hired consultants. Information issued by the company should be primarily provided in the form of press releases and financial reports.

alm equity ab | 2019 75 OTHER DISCLOSURES REGARDING BOARD & REMUNERATION OF MEMBERS OF SENIOR MANAGEMENT MANAGEMENT There are no conflicts of interest between the Board of Directors or At the AGM on 13 June 2019, it was decided that fees totalling management and the company. Board members Gerard Versteegh, SEK 180,000 will be paid, including SEK 60,000 to the Chair of the Johan Unger and Johan Wachtmeister are independent (according Board and SEK 40,000 to each of the other Board members elected to the definition in the Swedish Corporate Governance Code) in by the AGM who are not employed by ALM Equity. Executive relation to ALM Equity as a company and major shareholders. Board members are entitled to invoice for their Board fees. No However, the Chair of the Board, Maria Wideroth, is deemed not other remuneration is paid to the Board other than the Board fee. to be independent, as the company of which she is a co-owner The auditor’s fee is paid according to an approved invoice. has provided consulting services to ALM Equity’s subsidiaries and associates during the year, for which remuneration in the amount The AGM of 13 June 2019 resolved that remuneration for the CEO of SEK 1 million including expenses was paid. and other members of company management should consist of a fixed salary, variable remuneration and other benefits, as well as a pension. Total remuneration should be market based and competitive, and also relate to level of responsibility and authority. Variable remuneration should never exceed six months of salary. In the event of termination of employment by the company, notice-period pay and severance pay combined should not exceed 12 months of salary. Pension benefits should be on a defined-contribution basis, unless deemed otherwise for specific reasons. The Board may deviate from the guidelines established by the AGM only if there are specific grounds in a particular case.

76 alm equity ab | 2019 alm equity ab | 2019 77 78 alm equity ab | 2019

The ALM Equity share 80 Comparative overview 82 Directors’ report 83 Financial statements 86 Notes 94 Auditor’s report 141 Calendar 144 Contact information 144

alm equity ab | 2019 79 THE ALM EQUITY SHARE

The share capital in ALM Equity AB amounts to SEK 199,728,750 at 31 December 2019, allocated among 10,154,600 ordinary shares and 9,818,275 preference shares. Each ordinary share entitles its holder ten votes and each preference share entitles its holder to one vote at general meetings of shareholders. Each shareholder may vote for the full number of shares owned or represented at general shareholder meetings without limitation of the voting power. The company’s ordinary and preference shares have been listed on NASDAQ First North Growth Market since 8 June 2012.

The closing prices on 31 December 2019 were SEK 310 per ordinary share and SEK 107 per preference share, which represents an increase for the ordinary share of 77 percent in 2019. Based on the closing prices, ALM Equity had a market capitalisation at 31 December of SEK 4,198.5 million. ALM Equity shares were traded on First North for a total of approximately SEK 540.5 million in 2019. The yield of ordinary shares in 2019 consisted of a bonus issue of one preference share for every 100 ordinary shares held. The dividend for the preference share amounts to SEK 8.40/year, payable quarterly.

Ordinary share trend between 8 June 2012 and 20 April 2020* Preference share trend between 8 June 2012 and 20 April 2020**

400 40 000 160 180 000

350 35 000 140 160 000 140 000 300 30 000 120 120 000 250 25 000 100 100 000 200 20 000 80 80 000 150 15 000 60 60 000 100 10 000 40 40 000 50 5 000 20 20 000

0 0 0 0 jun- 2012okt - 2012apr - 2013okt - 2013apr - 2014okt - 2014apr - 2015okt - 2015apr - 2016okt - 2016apr - 2017okt - 2017apr - 2018okt - 2018apr - 2019okt - 2019apr - 2020 jun- 2012okt - 2012apr - 2013okt - 2013apr - 2014okt - 2014apr - 2015okt - 2015apr - 2016okt - 2016apr - 2017okt - 2017apr - 2018okt - 2018apr - 2019okt - 2019apr - 2020

Total number of shares traded OMX Stockholm Small Cap PI Number of shares traded per week

ALM Stam ALM Pref

*On 16/12/2013 a lot of 600,000 shares was traded, which is not included in the above data. **The graph has been adjusted to take account of a restructuring of the preference share capital in 2013. Sales of a large number of shares on specific days in March, April and May 2017 are excluded from the diagram above.

SHAREHOLDERS AT 31 DECEMBER 2019

Number of Number of Percentage Percentage of votes ordinary shares preference shares of share capital Joakim Alm, incl. companies, family and insurance 5,837,623 775,461 33.11% 53.12% Kopparnäset AB 1,304,279 65,210 6.86% 11.77% Dooba Investments Limited 990,494 125,984 5.59% 9.01% Johan Wachtmeister, incl. companies 760,783 41,082 4.01% 6.87% John Rosén 523,433 132,815 3.29% 4.82% Johan Unger and family 151,360 12,523 0.82% 1.37% Other shareholders 586,628 8,665,200 46.32% 13.05% Total 10,154,600 9,818,275 100.00% 100.00%

80 alm equity ab | 2019 DIVIDEND POLICY ALM Equity is a growth company and its intention for the foreseeable future is to focus on investing excess liquidity back into the business. Dividend proposals are based on the company’s liquidity and anticipated future financial position, taking account of current economic conditions. The ambition is to at least propose a dividend for preference shares every year. For 2019, the Board of Directors proposes a dividend of one (1) preference share per 100 ordinary shares in the form of a bonus issue, which translates to a redemption value of approximately SEK 1.20 (1.20) in cash per ordinary share. Furthermore, the Board of Directors proposes a dividend of SEK 8.40 (8.40) as a cash dividend per preference share payable quarterly in the amount of SEK 2.10 (2.10).

SHARE CAPITAL TREND OVER 10 YEARS Change Change in Total Change in Total in the ordinary ordinary Number of preference preference Number of number share share ordinary share share preference Year Event of shares capital, SEK capital, SEK shares capital, SEK capital, SEK shares 2011 Bonus issue, preference 1,015,453 - 10,154,530 10,154,530 101,545,300 101,545,300 1,015,453 shares 2013 New issue, equalisation, 3 - - - 30 101,545,330 1,015,456 preference shares 2013 New issue, equalisation, 70 700 10,155,230 10,154,600 ordinary shares 2013 Cancellation of preference -253,864 - - - -2,538,640 99,006,690 761,592 shares 2013 Bonus issue, preference 50,773 - - - 507,730 99,514,420 812,365 shares 2013 New issue, preference shares 1,364,000 - - - 13,640,000 113,154,420 2,176,365 2014 Bonus issue, preference 50,773 - - - 507,730 113,662,150 2,227,138 shares 2014 New issue, preference shares 273,000 - - - 2,730,000 116,392,150 2,500,138 2014 New issue, preference shares 545,455 - - - 5,454,550 121,846,700 3,045,593 2015 Bonus issue, preference 101,546 - - - 1,015,460 122,862,160 3,147,139 shares 2015 New issue, preference shares 280,000 - - - 2,800,000 125,662,160 3,427,139 2016 Bonus issue, preference 101,546 - - - 1,015,460 126,677,620 3,528,685 shares 2017 New issue, preference shares 2,341,144 - - - 23,411,440 150,089,060 5,869,829 2017 New issue, preference shares 150,660 - - - 1,506,600 151,595,660 6,020,489 2017 Bonus issue, preference 101,546 - - - 1,015,460 152,611,120 6,122,035 shares 2017 New issue, preference shares 182,874 - - - 1,828,740 154,439,860 6,304,909 2017 New issue, preference shares 18,365 - - - 183,650 154,623,510 6,323,274 2017 New issue, preference shares 1,798,761 - - - 17,987,610 172,611,120 8,122,035 2018 Bonus issue, preference 101,546 - - - 1,015,460 173,626,580 8,223,581 shares 2019 Bonus issue, preference 101,546 - - - 1,015,460 176,714,260 8,532,349 shares 2019 New issue, preference shares 1,285,926 - - 12,859,260 189,573,520 9,818,275

alm equity ab | 2019 81 COMPARATIVE OVERVIEW

2019 2018 2017 2016 2015 Group Jan–Dec Jan–Dec Jan–Dec Jan–Dec Jan–Dec KEY FINANCIAL INDICATORS Revenue (SEK million) 1,681 2,314 2,080 694 1,701 Operating profit/loss (SEK million) 139 106 248 63 210 Profit for the year (SEK million) 434 5 179 33 236 Operating margin (%) 8% 5% 12% 9% 12% Basic earnings per ordinary share (SEK) 19.79 -5.24 3.70 1.96 7.59 Earnings per ordinary share after dilution (SEK) 19.79 -5.24 3.70 1.96 7.59 Cash and cash equivalents (SEK million) 699 390 609 539 220 Equity (SEK million) 3,310 2,138 2,208 863 766 Total assets 8,502 6,972 6,807 3,712 2,247 Equity/assets ratio (%) 39% 31% 32% 23% 34% Return on equity (%) 10% -4% 3% 3% 14% Equity per ordinary share (SEK) 97.91 34.46 44.74 20.10 18.27 Equity per preference share (SEK) 120.00 120.00 120.00 120.00 120.00

OPERATIONS* Number of units in asset portfolio 13,502 11,837 10,510 8,295 6,964 Number of units where production has started 467 100 546 786 503 Number of units in production 881 1,318 1,707 1,204 718 Number of units sold to market 69 47 545 263 951 Number of units sold to property management 908 244 - - - Selling rate in production (%) 82% 84% 82% 89% 82% Number of units supplied to market 295 419 510 156 307 Number of units supplied to property management 557 - - 140 221 Number of units in property management 945 387 361 361 221

*All units are stated including co-ownership

DEFINITIONS AND KEY FINANCIAL INDICATORS Earnings per ordinary share DEFINITIONS Profit for the period attributable to Parent Company’s shareholders, Return on equity relative to the average number of ordinary shares, after taking Profit for the period after taxes attributable to the Parent account of the share of profit for the period of the preference shares Company’s shareholders, less the dividend on preference shares, as and minority interest. a percentage of the average equity attributable to Parent Company shareholders, less the preference share capital. Operating margin Operating profit/loss as a percentage of revenue. Equity per ordinary share Equity at the end of the period relative to the number of ordinary Equity/assets ratio shares at the end of the period, after taking account of the preference Total equity as a percentage of the balance sheet total. share capital and the minority interest. Units Equity per preference share ‘Units’ includes tenant-owned apartments, investment apartments, Preference share’s preferential right on liquidation of the company premises and hotel rooms. (SEK 120 per preference share) and the share’s remaining right to adopted dividend. ALM Equity’s interest ALM Equity’s ownership interest, calculated on the basis of its holding relative to the total proportion of shares.

82 alm equity ab | 2019 DIRECTORS’ REPORT

The Board of Directors and the Chief Executive Officer of ALM Equity AB (publ), corporate ID number 556549-1650, hereby submit the annual and consolidated accounts for the 2019 financial year.

OPERATIONS Changes in the investment property portfolio during the year: Occupied and in operation: total 557 (0) units, all supplied by the DESCRIPTION OF ALM EQUITY AB’S OPERATIONS Project Development business area. ALM Equity AB (publ) is the parent company of a property group divided into five business areas operating in the following areas of Agreement reached between the Project Development and Real the real estate sector: Real Estate Management, Project Development, Estate Management business areas to produce an additional 2,215 Construction Management, Financing and Digital Services. Each (766) units for management. business area functions independently of the others and pursues operations in a cost-effective manner within its own corporate structure DEVELOPMENT RIGHTS PORTFOLIO and with its own financing. Each business area is established based on This portfolio is attributable to operations under the Project its own business needs in terms of expertise and resources, supported Development business area, and comprises three parts: production in by shared Group functions such as finance, HR and IT. progress, completed development rights and scheduled development rights. In total, the portfolio comprises 13,502 (11,298) units allocated SEGMENT REPORTING = BUSINESS AREAS over 541,246 sqm (543,445), 186,558 sqm (234,490) of which relates During the 2019 financial year, the business areas have been reported to land allocations or acquisitions for which ownership has not yet separately and constitute ALM Equity’s segment reporting. No been transferred. Projects under production for the private market are comparative figures have been reported per business area in 2019, shown in the balance sheet under ‘work in progress’, while projects since in 2018 ALM Equity based accounting and follow-up on the sold to the Real Estate Management business area are included then core Residential Development segment. Retrospective allocation under the item ‘investment properties under construction’, along with is not deemed to provide an accurate comparison and is thus not a contracted projects in the Real Estate Management business area significant element of follow-up and reporting. where production has not started. At year-end, the development rights portfolio was assigned a market value, which revealed an estimated ASSET PORTFOLIO surplus value of approximately SEK 2.5 billion.

ALM Equity’s portfolio is divided into three main categories: Changes in the development rights portfolio during the year: investment property portfolio, development rights portfolio and Three land allocations that were won increased the portfolio by 1,136 construction portfolio. The information below provides details of units. performance during the year within each category. Construction began on five projects including 467 (100) units, INVESTMENT PROPERTY PORTFOLIO corresponding to 14,728 sqm (3,857). The investment property portfolio is attributable to the Real Estate Management business area and is split into three parts. Investment CONSTRUCTION PORTFOLIO objects that include completed and occupied properties, total 557 (0) The construction portfolio is attributable to the Construction units, which are listed in the balance sheet as investment properties Management business area and includes all agreed construction valued at SEK 1.5 billion and have an estimated annual net operating contracts that the business area’s company, 2xA Entreprenad, has income of SEK 73 million. entered into. At year-end, the six contracts in progress included 533 units and four agreed contracts covering 647 units, with terms The second part includes contracted investment properties that are under and conditions regarding legally approved planning permission and production, totalling 635 (66) units, while the third part is contracted financing. The portfolio includes a total of 17,104 sqm (2,378). investment properties where production has not started, totalling 2,453 units. Both parts are listed in the balance sheet as ‘investment properties In addition to the current construction portfolio, the business area is under construction’. These are deemed to contribute a value of SEK 6.2 responsible for guarantee undertakings for up to 10 years, including billion and estimated annual net operating income of SEK 278 million. previously completed contracts from Småa AB’s production. At year- end this totalled 45 contracts within the range of the guarantee period. Further information about the investment properties can be found There is a total of SEK 20 million in guarantee provisions, and the size under Notes 19 and 20. of the provision is reviewed on a continual basis.

alm equity ab | 2019 83 Changes in the production portfolio during the year: is based on acquisition, management and project calculations that Construction began on 467 (66) units, and no units were completed are produced. The flow of liquidity within ALM Equity includes a and handed over to the external market. number of transactions, some of which are intermittent, which can have a significant impact on individual quarters. During periods of FINANCES excess liquidity, the liquidity is invested in projects or replaces bank loans; funds that can be converted into cash should other potential ALM Equity has decided to adapt its accounting policies regarding investments arise that could generate a better return. consolidation of tenant-owner associations, which means that the timing will be adjusted for when project revenue and project Further information about financing, interest rates, financial risks expenditure are settled. This change means that the management and a more detailed description of interest rate derivatives and bond groups that were previously recognised as other unlisted shareholdings loans can be found under Notes 27 and 28. are also consolidated. The amended application has been adjusted retrospectively in accordance with IAS 8; see Note 36 for details of the PARENT COMPANY restatement effects. Parent Company ALM Equity AB’s earnings for the year amounted to SEK -118 million (258) and the company had at its disposal SEK 453 PROFIT FOR THE JANUARY–DECEMBER 2019 PERIOD million (131) in cash and cash equivalents at the end of the period. Net revenue for the year amounted to SEK 1,681 million (2,314) with an Guarantees for bank loans and advance payments amounted to SEK operating profit of SEK 139 million (106), corresponding to an operating 1,272 million (503) at year-end. Equity totalled SEK 1,175 million (1,221). margin of 8 percent (5). Earnings for the period totalled SEK 434 The equity/assets ratio at the balance sheet date was 51 (52) percent. million (5) and include an unrealised change in the value of investment properties under construction of SEK 271 million (0) attributable to the DIVIDEND Project Development business area and SEK 120 million (0) attributable The Board of Directors proposes a dividend of one (1) preference to the Real Estate Management business area; see Notes 1, 19 and 20 for share per 100 ordinary shares via a bonus issue. The value of this further details. dividend based on the redemption value of one preference share corresponds to SEK 1.20 (1.20) per ordinary share. Furthermore, the BALANCE SHEET ACCORDING TO IFRS AT Board proposes a cash dividend of SEK 8.40 (8.40) per preference 31 DECEMBER 2019 share, payable quarterly in the amount of SEK 2.10 (2.10) per quarter. Total assets amounted to SEK 8,502 million (6,972), the most significant items on the assets side being investment properties, SEK SUSTAINABILITY REPORT 1,508 million (0), investment properties under construction, SEK 1,602 million (1,212), properties held for development, SEK 2,807 ALM Equity’s sustainability strategy is a continual process and million (3,564) and residential projects in progress, SEK 726 million covers all aspects of the business. Sustainability work encompasses (1,009) . With regard to liabilities, interest-bearing financing totalled economic, social and environmental responsibility, where the goal is SEK 4,226 million (3,979), including the bond loan of SEK 1,076 to constantly strive to achieve a good balance between these aspects. million (1,076). In the first quarter of 2019, net SEK 476 million of In accordance with Chapter 6, § 11 of the Swedish Annual Accounts the first bond loan was classified as short term. This bond loan was Act, ALM Equity AB (publ) has chosen to prepare the statutory repaid in March 2020. sustainability report as a report separate from the Annual Report. The Sustainability Report can be found on pages 42–53. At year-end, equity stood at SEK 3,310 million (2,138), corresponding to an equity/assets ratio of 39 (31) percent. At the end of the period, THE WORK OF THE BOARD OF DIRECTORS external capital contributions within the Project Development business area amounted to a total of SEK 1,872 million; these are repaid once ALM Equity AB annually adopts rules of procedure for the Board of projects are completed and if a project reports a deficit, the repayment Directors and a CEO instruction. The rules of procedure set out the is reduced by such deficit. External capital contributions within the Real obligations of the Board of Directors, division of responsibility, a meeting Estate Management business area totalled SEK 413 million at the end plan and the type of matters to be brought before the Board of Directors. of the period; these are repaid in the event of positive capital flows from During the year the company held 11 Board meetings, at which the the investment properties. Repayment of these is reduced in the event primary issues dealt with included reports to the market, the status of of a deficit resulting from the potential sale of the investment property. the projects and major capital expenditure decisions. In addition, Board members maintain regular contact with the company’s CEO. LIQUIDITY, CASH FLOW AND FINANCING The Group’s cash and cash equivalents amounted to SEK 699 million RISKS AND UNCERTAINTIES (390) at the end of the period. Cash flow for the year was SEK 309 million (-219). Operations are financed primarily via loans from ALM Equity AB’s business is to a great extent affected by external banks and financial institutions, construction loans, bonds, external factors over which the company has no control. The company shareholder contributions and preference share capital. Financing continually monitors behaviour, trends, laws and rules and so on

84 alm equity ab | 2019 in order to respond to new circumstances. In a constantly evolving PROPOSED DISTRIBUTION OF PROFITS operating environment, the successful companies are those that can adapt and manage the risks and opportunities that arise. ALM PARENT COMPANY Equity is of the opinion that the organisation has good capacity to adapt to changes in the world around us. At the disposal of the Annual General Meeting: Retained earnings 1,091,874,888 The business model and internal processes for doing business are Profit/loss for the year -117,024,100 of great importance for long-term success. The entire business is 974,850,788 risk aware, and this approach is factored into decision-making To be allocated as follows:* at all levels in the Group. Business models for following up the Dividend to holders of ordinary shares - various activities of the business areas are designed to identify Dividend to current holders of preference 82,473,510 and minimise operating risks in the business, while changes in shares the company’s operating environment are monitored. The most Dividend to holders of preference shares issued 852,986 significant risks identified by the Group are described in the section as bonus issue* ‘Risks and risk management’ on pages 54–63. To be carried forward 891,524,292 974,850,788 In 2016 and 2017, the Parent Company issued SEK 600 million + *According to the proposal of the Board of Directors to the Annual General Meeting. SEK 600 million in bond loans (SEK 124 million of which has been repurchased) at a variable rate of STIBOR 3m (interest rate floor of 0 percent if STIBOR is negative) + 6.75 percent and STIBOR 3m + 7.5 percent respectively, which increases the level of refinancing/ liquidity risk in the company. The bond loan raised in 2016 of SEK 476 million net was fully amortised in March 2020 using internally generated funds.

It is hard to predict how the continuing Covid-19 pandemic will ultimately impact the global economy, our operating environment and our business. But it will affect everyone in some way. The impact on ALM Equity in the short term is considered to be limited. In the longer term, it is difficult to predict the impact on society and the economy, and the knock-on effects this will in turn have on ALM Equity. Based on a risk assessment, the following areas may potentially be affected:

• Personnel and productivity • Subcontractor productivity, access to resources and the effect this could have on deliveries and opportunities to fulfil their obligations within contractually agreed timeframes. • Customers and tenants’ opportunities to fulfil their obligations. • Access to pricing of external capital • Market conditions and how these impact property values.

Further information about how Covid-19 may affect ALM Equity can be found on pages 62–63.

DISPUTES ALM Equity has no pending disputes of material or financial significance.

alm equity ab | 2019 85 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (SEKM)

01/01/2019 01/01/2018 Notes – 31/12/2019 – 31/12/2018

Net revenue 3, 4, 6, 8 1,681 2,314 Production and operating costs 3, 6 -1,394 -2,062 Gross profit 287 252

Selling and administrative costs 3, 5 ,6, 7, 9 -143 -145 Profit/loss from interests according to the equity method -5 -1 Operating profit/loss 139 106

Profit/loss from financial items Finance income 3, 11 5 10 Finance costs 3, 12 -130 -103 Profit/loss after financial items 14 13

Unrealised changes in value Unrealised changes in value, derivative instruments 3, 13 7 3 Unrealised changes in the value of interests in tenant-owned premises 3, 18 20 - Unrealised changes in value, investment properties 3, 19 120 - Unrealised changes in value, investment properties under 3, 20 271 - construction

Profit/loss before tax 432 16

Tax 3, 15 2 -11 PROFIT/LOSS FOR THE YEAR 434 5

Other comprehensive income Other comprehensive income - - Other comprehensive income for the year after tax - -

COMPREHENSIVE INCOME FOR THE YEAR 3 434 5

Profit/loss for the year attributable to: Parent Company shareholders 278 16 Non-controlling interests 156 -11

Comprehensive income for the year attributable to: Parent Company shareholders 278 16 Non-controlling interests 156 -11

Basic earnings per ordinary share, SEK 16 19.79 -5.24 Earnings per ordinary share after dilution, SEK 16 19.79 -5.24

86 alm equity ab | 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (SEKM)

ASSETS Notes 31/12/2019 31/12/2018 01/01/2018 Non-current assets Machinery and equipment 17 16 6 14 Investment properties 19 1,508 - - Investment properties under construction 20 1,602 1,212 771 Interests in tenant-owned premises 18, 27, 28 42 - - Right-of-use assets 9 177 - - Interests according to the equity method 21 10 19 34 Deferred tax assets 16 4 4 5 Total non-current assets 3,359 1,241 824

Current assets Development properties 23 2,807 3,564 3,272 Residential projects in progress 24 726 1,009 1,394 Interests in tenant-owner apartments and property rights 337 366 87 Trade receivables 27, 28 49 112 97 Receivables, interests according to the equity method 26, 27, 28 - - 7 Current tax receivables - - 27 Other current receivables 21, 27, 28 461 228 321 Prepaid expenses and accrued income 26, 27, 28 64 61 139 Other short-term investments 27, 8 - 1 30 Cash and cash equivalents 27, 29 699 390 609 Total current assets 5,143 5,731 5,983

TOTAL ASSETS 8,502 6,972 6,807

EQUITY AND LIABILITIES Notes 31/12/2019 31/12/2018 01/01/2018 Equity 31 Share capital 200 184 183 Other contributed capital 1,608 986 1,006 Retained earnings including profit/loss for the year 385 184 258 Equity attributable to Parent Company shareholders 2,193 1,354 1,447

Non-controlling interests 1,117 784 762 Total equity 3,310 2,138 2,209

Non-current liabilities 27, 28, 35 Non-current interest-bearing liabilities 1,864 1,076 1,087 Derivatives 15 22 26 Lease liability 176 - - Deferred tax liabilities 15 178 181 172 Other provisions 20 11 26 Total non-current liabilities 2,253 1,290 1,311

Current liabilities 27, 28, 35 Interest-bearing bond loans 476 - - Liabilities to credit institutions 1,596 2,409 2,387 Interest-bearing project financing 290 494 126 Trade payables 72 129 185 Current tax liability 16 79 70 Other current liabilities 245 283 407 Accrued expenses and deferred income 32 244 150 112 Total current liabilities 2,939 3,544 3,287

TOTAL EQUITY AND LIABILITIES 8,502 6,972 6,807

alm equity ab | 2019 87 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (SEKM)

Equity attributable to Parent Company shareholders Retained earnings Other incl. profit/ Non- Share contributed loss for the controlling Total capital capital Reserves year Total interests equity Opening equity 01/01/2018 183 1,006 - 258 1,447 762 2,209 Profit/loss for the year - - - 16 16 -11 5 Other comprehensive income for the year ------Comprehensive income for the year - - - 16 16 -11 5

Transactions with shareholders: Dividends paid - - - -69 -69 - -69 Bonus issue/redemption of preference shares 1 - - -1 - - - Unconditional shareholder contribution - 188 - - 188 115 303 Transactions with non-controlling interests* - -208 - -20 -228 -82 -310 Total transactions with shareholders 1 -20 - -90 -109 33 -76

Closing equity 31/12/2018 184 986 - 184 1,354 784 2,138

Opening equity 01/01/2019 184 986 - 184 1,354 784 2,138 Profit/loss for the year - - - 278 278 156 434 Other comprehensive income for the year ------Comprehensive income for the year - - - 278 278 156 434

Transactions with shareholders: Dividends paid - - - -77 -77 - -77 Bonus issue/redemption of preference shares 1 - - -1 - - - New share issue 15 133 - - 148 - 148 Unconditional shareholder contribution - 473 - - 473 481 954 Transactions with non-controlling interests* - 16 - 1 17 -304 -287 Total transactions with shareholders 16 622 - -77 561 177 738

Closing equity 31/12/2019 200 1,608 - 385 2,193 1,117 3,310

*Transactions with non-controlling interests mainly comprise dividends in connection with project completions.

88 alm equity ab | 2019 CONSOLIDATED CASH FLOW STATEMENT (SEKM)

Notes 31/12/2019 31/12/2018 OPERATING ACTIVITIES Operating profit/loss 139 106 Adjustment for non-cash items 33 39 18 Interest received 5 10 Interest paid -130 -102 Tax paid -68 -2 Cash flow from operating activities before changes in -15 30 working capital

Cash flow from changes in working capital Increase/decrease development properties 757 -178 Increase/decrease residential projects in progress 280 224 Increase/decrease interests in tenant-owner apartments and property 29 -279 rights Increase/decrease in operating receivables -172 286 Increase/decrease in operating liabilities -167 -163 Cash flow from operating activities 712 -80

INVESTING ACTIVITIES Acquisition of investment properties -1,778 -451 Acquisition of property, plant and equipment -10 - Divestment of property, plant and equipment 84 8 Divestment of non-current financial assets 213 57 Cash flow from investing activities -1,491 -386

FINANCING ACTIVITIES New issues/Warrants incl. costs 148 - Raised borrowings 1,917 1,354 Amortisation of loans -1,670 -975 External shareholder contributions 888 -24 Dividends from equity joint venture 6 9 Dividend paid to holders of ordinary shares - - Dividend paid to holders of preference shares -74 -67 Transactions, non-controlling interests -127 -50 Cash flow from financing activities 1,088 247

Cash flow for the year 309 -219

Cash and cash equivalents at beginning of year 390 609 Cash and cash equivalents at year-end 699 390

alm equity ab | 2019 89 PARENT COMPANY INCOME STATEMENT (SEKM)

Notes 01/01/2019 01/01/2018 – 31/12/2019 – 31/12/2018

Net revenue - - Production and operating costs - - Gross profit - -

Selling and administrative costs 5,6,7 -20 -31 Other operating income - - Other operating costs - - Operating profit/loss -20 -31

Profit/loss from financial items Profit/loss from investments in Group companies 10 -35 348 Other interest income and similar items 11 1 14 Interest expenses and similar profit/loss items 12 -78 -76 Total financial items -112 286 Profit/loss after financial items -132 255

Appropriations 14 14 3 Tax on profit for the year 15 - -

PROFIT/LOSS FOR THE YEAR -118 258

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME (SEKM)

01/01/2019 01/01/2018 – 31/12/2019 – 31/12/2018 Profit/loss for the year -118 258 Other comprehensive income - - COMPREHENSIVE INCOME FOR THE YEAR -118 258

90 alm equity ab | 2019 PARENT COMPANY BALANCE SHEET (SEKM)

ASSETS Notes 31/12/2019 31/12/2018

Non-current assets Non-current financial assets Participations in associates - - Investments in Group companies 22 50 5 50 5 Total non-current assets 50 5

Current assets Current receivables Receivables from Group companies 34 1,792 2,170 Other current receivables 26 5 28 Prepaid expenses and accrued income 29 7 12 1,804 2,210

Cash and bank balances 30 453 131 Total current assets 2,257 2,341

TOTAL ASSETS 2,307 2,346

EQUITY AND LIABILITIES Notes 31/12/2019 31/12/2018

Equity 31, 37 Restricted equity Share capital (10,154,600 shares) 10 10 Preference share capital (9,818,275 shares) 190 174 200 184 Unrestricted equity Retained earnings 1,092 779 Profit/loss for the year -117 258 975 1,037 Total Parent Company equity 1,175 1,221

Non-current liabilities Bond loans 27,28,35 600 1,076 600 1,076 Current liabilities 27,28,35 Bond loans 476 - Trade payables 1 - Due to Group companies 34 27 9 Other liabilities 20 19 Accrued expenses and deferred income 32 8 21 532 49 Total liabilities 1,132 1,125

TOTAL EQUITY AND LIABILITIES 2,307 2,346

alm equity ab | 2019 91 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY (SEKM)

Share Preference Retained Profit/loss capital capital earnings for the year Total Opening equity 01/01/2018 10 173 732 117 1,032 Reversal of prior-year earnings - - 117 -117 - Profit/loss for the year - - - 258 258 Other comprehensive income for the year - - - - - Comprehensive income for the year - - 117 141 258

Transactions with shareholders: Bonus issue/redemption of preference shares - 1 -1 - - Dividends paid - - -69 - -69 Total transactions with shareholders - 1 -70 - -69

Closing equity 31/12/2018 10 174 779 258 1,221

Opening equity 01/01/2019 10 174 779 258 1,221 Reversal of prior-year earnings - - 258 -258 - Profit/loss for the year - - - -117 -117 Other comprehensive income for the year - - - - - Comprehensive income for the year - - 258 -375 -117

Transactions with shareholders: Bonus issue/redemption of preference shares - 1 -1 - - New share issue - 15 133 - 148 Dividends paid - - -77 - -77 Total transactions with shareholders - 16 55 - 71

Closing equity 31/12/2019 10 190 1,092 -117 1,175

92 alm equity ab | 2019 PARENT COMPANY STATEMENT OF CASH FLOW (SEKM)

Notes 2019 2018 OPERATING ACTIVITIES Operating profit/loss before financial items -20 -31 Adjustment for non-cash items 33 -2 -2 Subsidiary profits - 375 Interest received 1 12 Interest paid -70 -69 Tax paid - - Cash flow from operating activities before changes in -91 285 working capital

Increase/decrease in operating receivables 406 -1,487 Increase/decrease in operating liabilities 7 -9 Cash flow from operating activities 322 -1,211

INVESTING ACTIVITIES Acquisition of Group companies and associates -23 -1 Divestment of Group companies and associates 248 1,244 Group contributions and shareholder contributions received 59 19 Group contributions and shareholder contributions paid -358 -152 Cash flow from investing activities -74 1,110

FINANCING ACTIVITIES New issue/Warrants incl. costs 148 - Dividends paid -74 -67 Cash flow from financing activities 74 -67

Cash flow for the year 322 -168

Cash and cash equivalents at beginning of year 131 299 Cash and cash equivalents at year-end 453 131

alm equity ab | 2019 93 NOTES (SEKM)

NOTE 1 ACCOUNTING POLICIES

The annual and consolidated accounts include the Swedish Parent Company ALM Equity AB, corporate ID number 556549-1650, and its subsidiaries. The Parent Company is a limited liability company registered and domiciled in Stockholm, Sweden. The head office address is Regeringsgatan 59, SE-111 56 Stockholm, Sweden.

On 30 April 2020, the Board of Directors approved the annual and consolidated accounts, which will be presented for adoption by the Annual General Meeting on 28 May 2020.

REGULATIONS APPLIED The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union (EU). In addition, the Group applies the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial Reporting Board’s recommendation RFR 1: Supplementary accounting rules for groups of companies. The Parent Company applies the same accounting policies as the Group, except in the cases stated below under the section entitled ‘Parent Company’s accounting policies’.

Unless otherwise stated, the accounting policies below have been consistently applied to all periods presented in the consolidated financial statements. The Group’s accounting policies have been consistently applied by all Group companies.

VALUATION PRINCIPLES Assets and liabilities are recognised at historical cost except in the case of investment properties and certain financial assets and liabilities measured at fair value. Financial assets and liabilities measured at fair value consist of derivatives and securities. The consolidated accounts have been prepared on a going concern basis.

CURRENCY The functional currency is the currency in the primary economic environments in which the companies conduct their business. The Parent Company’s functional currency is the Swedish krona (SEK), which is also the reporting currency for the Parent Company and the Group. This means that the financial statements are presented in SEK. Unless otherwise stated, all amounts are rounded to the nearest million krona (SEK million).

ADJUSTMENT OF PREVIOUSLY APPLIED ACCOUNTING POLICIES In accordance with the press release dated 24 February 2020, ALM Equity decided to adapt its accounting policies regarding consolidation of tenant-owner associations, which means that the timing will be adjusted for when project revenue and project expenditure are recognised. This change means that the management groups that were previously recognised as other unlisted shareholdings are also consolidated. The amended application was implemented in connection with the 2019 year-end report, and the accounts have been adjusted retrospectively in accordance with IAS 8; see Note 3 for details of the restatement effects.

REVISED ACCOUNTING POLICIES PROMPTED BY NEW OR REVISED IFRS STANDARDS To follow is a description of amended accounting policies applied as of 1 January 2019. Other IFRS amendments to be applied as of 1 January 2019 have not had any material impact on the consolidated accounts.

IFRS 16 Leases IFRS 16 Leases replaced the previous standard IAS 17 Leases and related interpretations as of 1 January 2019. For the transition to IFRS 16, the Group has applied the simplified transition method, which means that comparative information on prior periods has not been recalculated. The leasing debt consists of the discounted remaining lease payments at 1 January 2019. The right-of-use asset for all contracts totalled an amount corresponding to the lease liability adjusted for prepaid or accrued lease payments recognised in the statement of financial position on the first day of application. The transition to IFRS 16 has had no effect on equity.

IFRS 16 was applied on transition only for those agreements that were deemed to contain a lease under IAS 17 and IFRIC 4. The present value of all remaining lease payments attributable to operating leases has been calculated applying the Group’s marginal borrowing rate.

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On transition to IFRS 16, leases with a remaining term of less than 12 months were classified as short-term leases in accordance with the relief rule at the time of transition. Lease payments linked to such leases were expensed.

The Group’s lease portfolio consists of leaseholds, premises and vehicles, which are the classes of underlying assets within which the Group presents existing leases.

On transition to IFRS 16, the Group’s balance sheet total increased by SEK 195 million through the inclusion of right-of-use assets and lease liabilities; see transition table below. The lease payment is allocated between amortisation of the lease liability and payment of interest, apart from for leasehold agreements where the entire lease payment comprises interest payments. The lease payment which under IAS 17 was recognised in operating profit or loss in the income statement is replaced by depreciation of the right-of-use assets and interest on the lease liability.

The Group applies the relief rules in the standard and expenses current leases of less than 12 months (short-term leases) and leases where the underlying asset is of low value.

RECONCILIATION OF OPERATING LEASE COMMITMENTS (SEK MILLION) Commitments for operating leases, 31 December 2018 32

Less leases for which the following relief rules have been applied Short-term leases -2 Low-value leases -4 Commitments after discounting using the Group’s marginal borrowing rate, 4% 23 Additional leasehold agreements at 31/12/2018 172

Reported lease liability at 1 January 2019 195 Of which: Short-term lease liabilities 12 Long-term lease liabilities 183

Since the simplified transition method was used, the right-of-use assets were recognised in an amount corresponding to the lease liability adjusted for prepaid lease payments on transition as follows.

Right-of-use assets by underlying class at 1 January 2019 Leaseholds 172 Premises 18 Vehicles 5 Total right-of-use assets 195

For further information about the Group’s leases, please refer to Notes 8 and 9.

NEW OR REVISED IFRS STANDARDS NOT YET APPLIED IFRS 3 Business combinations The definition of a business in IFRS 3 Business combinations has been updated. The new definition means that an acquisition must be classified as a business combination if the acquisition includes an input and a substantive process that together significantly contribute to the ability to create outputs. A business does not need to include all resources and all processes required to generate a return, but it must have the ability to make a significant contribution towards generating a return. This can be compared with the previous requirement of having the ability to generate a return.

The update to IFRS 3 means that an entity can choose to apply a ‘concentration test’ that, if it confirms the acquisition is an asset acquisition, eliminates the need for further assessment. The company may opt to apply the concentration test or not for each transaction. However, the test never answers the question as to whether an acquisition is a business combination. It can

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only show whether it is an asset acquisition. If the simplified assessment conducted using the test indicates that substantially all of the fair value of gross assets acquired is concentrated in a single asset or group of similar assets, the acquisition is an asset acquisition. If the test is carried out and it is not possible to determine that it is an asset acquisition, then a detailed assessment must be conducted in accordance with IFRS 3 requirements. To follow is ALM Equity’s assessment of how the change will affect the Group when it is adopted.

Once the IFRS 3 update has been adopted by the EU, ALM Equity intends to apply the concentration test for each acquisition, which means that ALM Equity will conduct a simplified assessment of whether the fair value of gross assets acquired can be attributed to a single asset (property/properties) or to a group of similar assets. If the test indicates that substantially all of the fair value is concentrated in a single asset (property/properties) or group of similar assets, ALM Equity deems that the acquisition shall be classified as an asset acquisition. What is meant by ‘substantially all of the fair value’ will be determined on a case by case basis.

None of the other IFRS or IFRIC interpretations that have entered into force during the year have had any material impact on the Group. No new or amended IFRS standards have been applied in advance.

CLASSIFICATION Non-current assets and non-current liabilities essentially consist of amounts expected to be recovered or paid more than twelve months after the balance sheet date. Current assets and current liabilities essentially comprise amounts expected to be recovered or paid within twelve months of the balance sheet date.

However, the company has classified all liabilities attributable to the Project Development business area as current, as they relate to project financing for a fixed period of time. These liabilities are classified based on the expectation that they will be settled within the Group’s normal business cycle. Further information is available in Note 28 Financial risks.

CONSOLIDATION Subsidiaries Subsidiaries are companies that are under ALM Equity AB’s controlling influence. An investor has a controlling influence over a company when the investor is exposed to or entitled to a variable return on their engagement in the company, and can affect that return with their influence.

Subsidiaries are accounted for according to the purchase method. This method means that acquisition of a subsidiary is regarded as a transaction whereby the Group indirectly acquires the subsidiary’s assets and assumes its liabilities. The fair value of acquired identifiable assets and assumed liabilities, along with any non-controlling interests on the acquisition date, are identified in the acquisition analysis. Transaction expenses, except for transaction fees attributable to the issuance of own capital instruments or liability instruments, are recognised immediately in profit or loss for the year.

When acquiring a business where the transferred consideration exceeds the fair value of the acquired assets and assumed liabilities reported separately, the difference is recognised as goodwill. When the difference is negative, a so-called low-price acquisition, it is recognised immediately in profit or loss for the year.

The financial reports of subsidiaries are included in the consolidated financial statements from the date of acquisition until the date the controlling influence ceases.

Since acquisitions of subsidiaries do not relate to business combinations, but rather acquisitions of assets in the form of investment properties, the acquisition cost is instead allocated among the acquired assets in the acquisition analysis. Acquisitions of investment properties are classified as acquisitions of assets if the acquisition relates to property, with or without rental contracts, but do not include the personnel and the processes required to run the real estate management operation. One key difference in recognition of asset acquisitions compared with business combinations is that no deferred tax is recognised on initial recognition of the asset in the balance sheet. One further difference is that with an asset acquisition, transaction expenses are recognised as part of the acquisition cost.

Transactions eliminated on consolidation Intra-group receivables and liabilities, revenue or costs, and unrealised profits or losses arising from intra-group transactions between Group companies are eliminated in their entirety when the consolidated financial statements are prepared.

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Unrealised profits that arise in transactions with associates are eliminated to the extent they correspond to the Group’s ownership interest in the company. Unrealised losses are eliminated in the same manner, but only to the extent that there is no need for impairment.

Associates Participations in companies over which the Group has a significant influence are classified as associates and recognised in accordance with the equity method. According to this method, a holding is initially recognised at cost and the carrying amount subsequently increased or reduced to take account of the owner company’s interest in the investment object’s earnings following the date of acquisition.

Acquisition/sale from/to non-controlling interests Acquisitions from and sales to non-controlling interests are recognised as transactions within equity, i.e. between the Parent Company’s owner (within retained earnings) and non-controlling interests. Therefore, goodwill does not arise in these transactions. The change in the non-controlling interest is based on its proportional share of net assets.

CURRENCY TRANSLATION Transactions in foreign currency Transactions in foreign currency are converted into the functional currency using the exchange rate prevailing on the transaction date. Monetary assets and liabilities in foreign currency are converted to the functional currency using the exchange rate prevailing on the balance sheet date. Exchange rate differences arising on conversion are recognised in profit or loss for the year. Exchange rate gains and losses on operating receivables and operating liabilities are recognised in operating profit or loss, while exchange rate gains and losses on financial receivables and liabilities are recognised as financial items.

INCOME The Group’s income is generated from rental income attributable to the Group’s investment properties and project revenue attributable to the sale of residential units, primarily in the form of tenant-owned apartments via tenant-owner associations.

Rental income ALM Equity is lessor for leases where the Group rents out properties mainly to corporate customers. These leases are classified in their entirety as operating leases, as ALM Equity deems that the Group retains the financial benefits and economic risks associated with ownership of the properties. Rental income is notified in advance and accrued on a straight-line basis over the rental period. Where applicable, recognised rental income has been reduced by the value of rental discounts provided. In cases where rental contracts result in a reduced rent for a specific period, this is accrued on a straight-line basis over the term of the lease.

Project revenue Revenue from contracts with customers relates to the sale of goods and services from the company’s regular operations. Revenue is recognised when control is transferred to the customer for the goods or services the company considers to be distinct in a contract and reflects the compensation that the company expects to be entitled to in exchange for such goods and services. In order for the Group to be able to recognise revenue from contracts with customers, each customer contract is analysed according to the five-step method in the standard:

• Step 1: Identify a contract between at least two parties in which there is a right and an obligation. • Step 2: Identify the various obligations. A contract includes pledges to transfer goods or services to the customer (performance obligation). All obligations that can be distinguished in terms of their nature and that are distinguishable within the framework of the contract must be recognised separately. • Step 3: Determine the transaction price. The transaction price is the amount the company expects to receive in exchange for the promised goods or services. The transaction price should be adjusted for variable elements, for example potential discounts. • Step 4: Allocate the transaction price to the various performance obligations. The company is usually able to allocate the transaction price for each individual item or service based on an independent selling price. • Step 5: Fulfilment of the performance obligation and recognition of revenue, either over time or on a particular date depending on the nature of the performance obligation. The amount recognised as income is the amount the company previously allocated to the performance obligation in question.

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The Group’s project revenue is derived from the development and sale of new residential units and the customers are mainly private individuals. The sale of residential units occurs via tenant-owner associations, which ALM Equity has deemed to be subject to consolidation as the Group has a controlling influence over the tenant-owner associations (see Note 2). Contracts with customers usually include only one performance obligation: to provide an apartment that is ready to move into. The transaction price is essentially a fixed price. Control of the apartment is considered to be transferred to the customer on the date that ownership of the tenant-owned apartment was transferred to the buyer.

LEASES On entering into a contract, ALM Equity establishes whether the contract is, or contains, a lease based on the substance of the contract. A contract is, or contains, a lease if the contract, for a specific period of time, transfers the right to direct the use of an identified asset in exchange for consideration.

ALM Equity applies relief rules for short-term leases and leases where the underlying asset is of low value. Expenses arising in connection with these leases are recognised in the income statement on a straight-line basis over the term of the lease.

Leaseholds ALM Equity has leasehold contracts that satisfy the definition of a lease. Since the lessee is unable to terminate these leases, they are recognised as perpetual leases. Both right-of-use assets and lease liabilities attributable to leasehold contracts are initially measured in accordance with IFRS 16, which means that the remaining lease payments (rent) are discounted over the term of the perpetual lease.

The lease liability is not amortised for subsequent measurements, but lease payments are instead recognised in their entirety as interest expenses. When rents are renegotiated, the lease liability is revalued based on the change in ground rent, as the renegotiation is deemed to reflect a change in rent levels on the market.

Other lease liabilities On the start date for other leases, a lease liability is recognised corresponding to the net present value of the lease payments that have not been paid by this date. These lease liabilities are recognised separately from other liabilities in the statement of financial position.

The lease period is determined as the non-cancellable period together with periods to extend or terminate the lease if ALM Equity is reasonably certain of exercising the options. Lease payments include fixed payments (less any benefits in connection with signing the lease), variable lease payments linked to an index or a price, and amounts expected to be paid according to residual value guarantees. Lease payments also include the exercise price of an option to buy the underlying asset, or penalties payable on termination, if ALM Equity is reasonably certain of exercising these options. Variable lease payments that are not linked to an index or price are recognised as a cost in the period to which they are attributable.

When calculating the present value of lease payments, the implicit rate in the lease is applied if it can be easily established. Otherwise, the marginal borrowing rate for the lease is used. After the start date of a lease, the lease liability increases to reflect the interest on the lease liability and decreases as lease payments are paid. In addition, the lease liability is revalued as a result of contract modifications, changes to the lease period, changes to lease payments or changes in an assessment to buy the underlying asset.

Other right-of-use assets ALM Equity recognises right-of-use assets in the statement of financial position on the start date of the lease. Right-of-use assets are recognised separately from other assets in the statement of financial position.

Right-of-use assets for other leases are measured at cost less accumulated depreciation and any impairment, and adjusted for revaluations of the lease liability. The acquisition cost includes the initial value recognised for the attributable lease liability, initial direct expenses, any advance payments made on or before the start date of the lease less any incentives received, as well as an estimation of any restoration costs. Provided ALM Equity is not reasonably certain that it will assume the right of ownership to the underlying asset on expiry of the lease, the right-of-use asset is depreciated on a straight-line basis for the lease period or useful life, whichever is shorter.

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Accounting policies for comparison year Up until the 2018 financial year, ALM Equity applied IAS 17 Leases. Under the previous standard, where a material portion of the risks and benefits associated with ownership are retained by the lessor, leases were classified as operating leases. Payments made during the lease period (less any incentives from the lessor) are expensed in the income statement on a straight-line basis over the lease period. The Group did not have any significant financial lease commitments.

EMPLOYEE BENEFITS Short-term benefits Short-term employee benefits, such as salary, social security contributions, holiday pay and bonuses, are expensed in the period in which the employees perform the services.

Pensions The Group offers primarily defined contribution pension plans classified as plans where fixed fees are paid and there are no obligations to pay anything additional to these fees. Expenses for defined contribution plans are recognised as an expense during the period in which the employees perform the services on which the obligation is based. One of the subsidiaries is covered by collective bargaining agreements with ITP plans including both defined contribution parts in ITP 1 and defined benefit plans in ITP 2.

Severance payments A cost for compensation in connection with termination of employees’ contracts is recognised only if the company is demonstrably obligated, without realistic possibility of withdrawal, by a formal detailed plan, to terminate employment before the normal point in time. When compensation is offered to encourage voluntary redundancy, a cost is recognised if it is probable that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.

FINANCE INCOME AND COSTS Finance income consists of interest income and gains from changes in the value of financial assets/liabilities measured at fair value through profit or loss that are recognised in separate entries in net financial items. Interest income is recognised according to the effective rate method. The effective rate of interest is the rate that discounts the estimated future payments and disbursements during a financial instrument’s expected term to the financial asset or liability’s recognised net value. The calculation includes all charges paid or received by the parties to the contract that are part of the effective rate of interest, transaction costs and all other premiums and discounts.

Finance costs consist mainly of interest expenses on loans and losses due to a change in the value of financial assets/liabilities measured at fair value through profit or loss recognised separately in net finance items. Interest expenses on loans are recognised according to the effective rate method.

Exchange rate gains and losses are recognised on a net basis in finance costs.

TAX Income taxes consist of current taxes and deferred taxes. Income taxes are recognised in profit or loss for the year, except when the underlying transaction is recognised in other comprehensive income or in equity, in which case the associated tax effect is recognised in other comprehensive income or in equity.

Current taxes are taxes to be paid or received for the current year, with the application of the tax rates that are decided, or in practice decided, on the balance sheet date. Adjustment of current taxes attributable to previous periods is also categorised as current taxes.

Deferred taxes are recognised in their entirety in accordance with the balance sheet method for all temporary differences that arise between the tax value of assets and liabilities and their reported values. Temporary differences are not taken into account in consolidated goodwill or if they arise as a result of a transaction that constitutes initial recognition of an asset or liability that is not a business combination, and that on the date of the transaction affects neither the carrying amount nor taxable earnings. Nor do temporary differences attributable to investments in subsidiaries not expected to be reversed within the foreseeable future. The valuation of deferred taxes is based on how the underlying assets or liabilities are expected to be realised or settled.

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Deferred taxes are calculated by applying the tax rates and tax rules that are decided or announced as of the balance sheet date and which are expected to apply when the relevant deferred tax asset is realised, or the deferred tax liability is settled.

Deferred tax assets relating to deductible temporary differences and tax loss carryforwards are recognised only to the extent it is probable that it will be possible to utilise them. The value of deferred tax assets is reduced when it is no longer believed that it will be possible to utilise them.

EARNINGS PER ORDINARY SHARE Basic earnings per share are calculated by dividing net earnings attributable to the Parent Company’s shareholders, less the preference capital’s share of earnings, with the weighted average number of ordinary shares outstanding during the year.

Earnings per share after dilution are calculated by dividing net earnings attributable to the Parent Company’s shareholders, less the preference capital’s share of earnings, adjusted where applicable, with the sum total of the weighted average number

of ordinary shares outstanding and potential ordinary shares that may give rise to a dilutive effect. The dilutive effect of potential ordinary shares is recognised only if a recalculation of ordinary shares would lead to a reduction in earnings per share after dilution.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recognised in the Group at cost less accumulated depreciation and any impairment losses. Cost includes the purchase price and expenses directly attributable to bringing the asset to the location and condition required for it to be utilised in accordance with the purpose of the acquisition.

The carrying value of an asset is removed from the balance sheet upon disposal, or when no future economic benefits are expected from its use, or upon disposal/sale of the asset. Profit or loss resulting from a sale or disposal is the difference between the selling price and the carrying amount of the asset, less a deduction for direct selling costs. Profit and loss are recognised as other operating revenue/costs.

ADDITIONAL EXPENSES Additional expenses are added to the cost only if it is probable that the future economic benefits associated with the asset will accrue to the Group and the expense can be calculated in a reliable manner. All other additional expenses are recognised as costs in the period in which they arise. Repairs are expensed on an ongoing basis.

Depreciation principles Depreciation is carried out on a straight-line basis over the estimated useful life of the asset. The Group applies component depreciation, which means that the estimated useful life of the components is the basis for depreciation. The estimated useful life periods are: • Machinery and equipment 5 years • Tenant customisations based on term of underlying lease

Depreciation methods used, residual values and useful life periods are reviewed at each year-end.

IMPAIRMENT OF NON-FINANCIAL NON-CURRENT ASSETS Assets subject to impairment are assessed for loss of value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment charge is made in the amount at which the asset’s carrying value exceeds its recoverable value. The recoverable value is the higher of the asset’s fair value, less selling costs, and its value in use. When assessing impairment requirements, assets are grouped at the lowest levels where there are separate identifiable cash flows (cash-generating units).

A previously recognised impairment loss is reversed if the recoverable amount is estimated to exceed the carrying value. However, a reversal is not effected in an amount exceeding what the carrying amount would have been if no impairment charges had been recognised in prior periods.

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FINANCIAL INSTRUMENTS Financial instruments are every form of agreement that gives rise to a financial asset in a company and a financial liability or equity instrument in another company. Financial instruments recognised in the balance sheet include,

on the assets side, trade receivables, interests in tenant-owned premises held for investment, other current receivables and investments, cash and cash equivalents and derivatives with a positive fair value. On the liability side they include trade payables, loan liabilities and other liabilities and derivatives with a negative fair value. Recognition depends on how the financial instruments are classified. Hedge accounting is not applied.

Recognition and derecognition A financial asset or a financial liability is recognised in the balance sheet when the Group becomes a party to the contractual terms of the instrument. Trade receivables are recognised in the balance sheet when an invoice has been sent and the company has an unconditional right to receive payment. Liabilities are recognised when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not yet been received. Trade payables are recognised when an invoice has been received.

A financial asset and financial liability are offset and reported with a net amount in the balance sheet only when there is a legally enforceable right to offset the amounts and there is an intention to settle the items with a net amount, or simultaneously realise the asset and settle the debt. A financial asset is removed from the balance sheet once the rights in the agreement are realised, fall due or when the company loses control over them. The same applies for part of a financial asset. A financial liability is removed from the balance sheet once the obligation arising from the agreement has been fulfilled or is extinguished in another way. The same applies for part of a financial liability. At each reporting date, the company assesses whether there is objective evidence that a financial asset or group of financial assets are in need of impairment. Gains and losses incurred by removal from the balance sheet and modification are reported in the income statement.

Classification and measurement Financial assets Debt instruments: classification of financial assets that are debt instruments is based on the Group’s business model for managing the asset and the character of the asset’s contractual cash flows.

The instruments are classified at: • amortised cost, • fair value via other comprehensive income, or • fair value through profit or loss

The Group’s debt instruments are classified at amortised cost.

Financial assets classified at amortised cost are initially measured at fair value plus transaction costs. Trade receivables are initially recognised at invoiced value. Following initial recognition, the assets are valued according to the effective interest method. Assets classified at amortised cost are held according to the business model to collect contractual cash flows which are only payments of principal amounts and interest on the outstanding principal amount. The assets are covered by a loss provision for expected credit losses.

Fair value through profit or loss includes those debt instruments that are not measured at amortised cost or fair value via other comprehensive income. Financial instruments in this category are initially recognised at fair value. Changes in fair value are recognised in profit or loss.

Equity instruments: classified at fair value through profit or loss, unless they are not held for trade, when an irrevocable choice can be made to classify them at fair value via other comprehensive income without subsequent reclassification to profit or loss. The Group has shares and interests that are recognised at fair value through profit or loss.

Financial liabilities Financial liabilities are classified at amortised cost except for derivatives. Financial liabilities carried at amortised cost are initially valued at fair value including transaction costs. Following initial recognition, they are measured at amortised cost according to the effective interest method.

Derivatives: classified at fair value through profit or loss. The Group does not apply hedge accounting. Fair value is determined in accordance with the description in Note 27.

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IMPAIRMENT OF FINANCIAL ASSETS The Group’s financial assets, except those classified at fair value via profit or loss or equity instruments measured at fair value via other comprehensive income, are subject to impairment for expected credit losses. Impairment for credit losses according to IFRS 9 is forward-looking and a loss provision is made when there is an exposure to credit risk, usually on initial recognition. Expected credit losses reflect the present value of all cash flow deficits attributable to default, either for the next 12 months, or for the expected remaining term of the financial instrument, depending on type of asset and on credit deterioration since initial recognition. Expected credit losses reflect an objective, probability-weighted outcome that takes most scenarios into account based on reasonable and verifiable forecasts. The simplified model is applied for trade receivables, contract assets and lease receivables. A loss provision is recognised, in the simplified method, for the expected remaining term of the receivable or the asset.

An impairment model with three stages is applied to other items subject to expected credit losses.

Initially, and at each balance sheet date, a loss provision is recognised for the next 12 months, alternatively for a shorter period depending on the remaining term (stage 1). The Group’s assets have been deemed to be in stage 1, meaning that there has been no significant increase in credit risk. This method is applied to financial assets not measured at fair value through profit or loss and to expected credit losses related to financial guarantee agreements. These consist of guarantees that the company has for the benefit of loans raised by tenant-owner associations in connection with financing of construction.

If a significant increase in the credit risk has occurred since initial recognition, resulting in a rating that is below investment grade, a loss provision is recognised for the remaining term of the asset (stage 2). For assets deemed to be credit impaired, a provision is continually made for expected credit losses for the remaining term (stage 3). For assets and receivables deemed to be impaired, the calculation of interest income is based on the asset’s carrying amount, net of loss provision, as opposed to the gross amount as in the previous stages.

Valuation of expected credit losses is based on various methods. The method for trade receivables and contract assets is based on historic bad debts combined with forward-looking factors. Other receivables and assets are impaired according to a rating-based method by way of external credit rating. Expected credit losses are valued at the product of likelihood of default, loss in the case of default and exposure in the event of default. Credit impaired assets and receivables are assessed individually, taking account of historic, current and forward-looking information. The valuation of expected credit losses takes account of any collateral and other credit enhancements in the form of guarantees. The financial assets are carried in the balance sheet at amortised cost, that is, net of gross value and loss provision. Changes in the loss provision are recognised in the income statement.

INVESTMENT PROPERTIES Investment properties Investment properties are properties that have been taken over and are owned and managed entirely or partly by the Group’s Real Estate Management business area. These properties are held for the purposes of generating rental income, value appreciation or a combination of both. Investment properties include buildings, land, land improvements and property fixtures.

An investment property is recognised as an asset when it is likely that the economic benefits associated with the investment property will accrue to the accounting unit, and its value can be reliably calculated in accordance with IAS 40. It is initially valued at cost plus any transaction expenses. Investment properties are subsequently valued in accordance with the fair value method.

Additional expenses are added to the carrying value of the investment property only if it is probable that the future economic benefits associated with the expenses will accrue to the Group and the cost can be reliably calculated. All other additional expenses are recognised as costs in the period in which they arise. Expenses relating to the exchange of identified components and addition of new components are added to the carrying amount when they satisfy the criteria above. Repairs and maintenance are expensed as the expense arises.

Valuation is carried out via a cash flow analysis based on a present value calculation of estimated future cash flows, combined with a local price analysis. The local price analysis is carried out on the basis of the selling prices of comparable properties. Market value refers to the price that will likely be obtained if the investment property is sold on an open market.

Valuations are carried out annually by an authorised valuer and followed up internally each quarter, or in the event of incidents that significantly impact the value. The value is adjusted through profit or loss and realised on divestment. Valuations at 31/12/2019 have been conducted by JLL.

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Investment properties under construction Investment properties under construction are properties within the Project Development business area that are in the process of being developed for the Group’s Real Estate Management business area.

A property is categorised as an investment property under construction from the date on which the Project Development and Real Estate Management business areas decide to implement the project intended for internal management.

It is not deemed to be possible initially to reliably calculate the value; instead properties are valued at accumulated cost during the development phase, including production costs incurred. Once the necessary criteria and conditions have been satisfied for it to be possible to use the properties for their purpose, and the value of the properties can be reliably calculated, the properties are recognised at fair value in accordance with IAS 40.

CURRENT ASSETS Development properties Development properties are properties over which the company has control and that are at pre-construction phases. They are valued according to the lowest value principle, which means that a property is carried at the lower of acquisition cost and net realisable value. The net realisable value is the estimated selling price in ongoing operations, less estimated costs for completing the property and achieving a sale.

The Group’s property holdings are carried as current assets, since the holdings are included in the Group’s normal business cycle and are regarded as part of a residential project and/or have customer access within 2–5 years.

Acquisition of properties is only fully entered in the accounts when legal ownership has been transferred, which normally occurs when all conditions of the relevant contract have been fulfilled. Before impairment charges, development properties are measured at cost, direct costs incurred and a reasonable proportion of indirect costs.

Residential projects in progress Residential projects in progress include all projects where production has started that are intended for the external market. These projects are valued according to the lowest value principle, which means that a project is carried at the lower of cost and the net realisable value. The net realisable value is the estimated selling price in ongoing operations, less estimated costs for completing the property and achieving a sale.

The Group’s property holdings are carried as current assets, since the holdings are included in the Group’s normal business cycle and are deemed to be accessed by customers within 2–5 years. Before impairment charges, residential projects in progress are measured at cost, direct costs incurred and a reasonable proportion of indirect costs.

CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and immediately available deposits with banks and similar institutions, as well as short-term liquid investments maturing within less than three months of the date of acquisition. Cash and cash equivalents are subject to loss provision requirements for expected credit losses.

EQUITY Share capital is made up of ordinary and preference shares, with the share capital recognised at quotient value and the excess portion as other contributed capital. Transaction expenses associated with new share issues are booked through equity against other contributed capital.

DIVIDENDS Dividends to the Parent Company’s shareholders are recognised as a liability in the consolidated financial statements in the period in which the dividend is approved. In subsidiaries where holders of preference shares in projects have made unconditional shareholder contributions, these have preference to dividends upon final settlement in profitable projects equivalent to the amount contributed and the return thereon. However, if a project reports a loss, this preference should be reduced by an equivalent amount.

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BORROWING COSTS Borrowing costs consist of interest and other expenses incurred when a company borrows money. Borrowing costs attributable to financing of an asset that will take a considerable amount of time to complete for its intended use or sale, are capitalised as a part of the asset’s acquisition cost.

PROVISIONS A provision differs from other liabilities in that there is uncertainty as to the date of payment or the size of the amount to settle the commitment. A provision is recognised in the balance sheet when there is an existing legal or informal obligation as a consequence of an event that has occurred, and it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are set aside in the amount that is the best estimate of what is required to settle the existing obligation on the balance sheet date. When the effect of the timing of the payment is significant, a provision is made based on discounting the expected future cash flow.

CONTINGENT LIABILITIES A contingent liability is recognised when there is a possible commitment, the occurrence of which is confirmed only by one or more uncertain future events, or when there is a commitment not recognised as a liability or provision because it is unlikely that an outflow of resources will be required.

CASH FLOW STATEMENT The cash flow statement is prepared according to the indirect method and details the Group’s payments and disbursements during the period. The statement is divided up into operating activities, investing activities and financing activities.

PARENT COMPANY The Parent Company has prepared its financial statements in accordance with the Swedish Annual Accounts Act and RFR 2 Accounting for Legal Entities issued by the Swedish Financial Reporting Board.

The differences between the Group’s and the Parent Company’s accounting policies are shown below. Unless otherwise stated, the accounting policies for the Parent Company described below have been applied consistently in all periods presented in the Parent Company’s financial statements.

CLASSIFICATION AND PRESENTATION The Parent Company’s income statement and balance sheet are presented in accordance with the Swedish Annual Accounts Act.

PARTICIPATIONS IN ASSOCIATES Participations in associates are recognised in accordance with the equity method.

INVESTMENTS IN GROUP COMPANIES Investments in Group companies are carried at cost, less deductions for any impairment. This means that transaction expenses are included in the carrying value for holdings in subsidiaries.

EARNINGS FROM GROUP COMPANIES Dividends are reported as revenue, even if the dividend represents profits accumulated before the acquisition date. Dividends are normally recognised once the Annual General Meeting has resolved on the dividend, since it is at this point that the right to receive payment is secure, and it can be reliably calculated.

FINANCIAL INSTRUMENTS The rules for financial instruments in IFRS 9 are not applied in the Parent Company as a legal entity because of the relationship between accounting and taxes. The Parent Company instead applies the acquisition method in accordance with the Swedish Annual Accounts Act. In the Parent Company, financial non-current assets are therefore measured at cost and financial current assets according to the lowest value principle, with application of impairment for expected credit losses according to IFRS 9 for assets that are debt instruments. For other financial assets impairment is based on market value. Derivative instruments with negative fair values are carried as a liability in the amount of the negative value with the change in value via profit or loss. The Parent Company’s financial guarantees consist of guarantees on behalf of Group companies.

104 alm equity ab | 2019 NOTE 1 CONT.

The Parent Company applies the exception not to value financial guarantees on behalf of subsidiaries, associates and joint ventures in accordance with the rules in IFRS 9, and instead recognises financial guarantees as a provision in the balance sheet when the company’s valuation principles according to IAS 37 Provisions, Contingent Liabilities and Contingent Assets can be applied. In other cases the undertaking is reported as a contingent liability.

LEASES In the Parent Company the exception in RFR 2 regarding leases is applied. This means that lease payments are recognised as a cost on a straight-line basis over the lease period, and that right-of-use assets and lease liabilities are not included in the Parent Company’s balance sheet. However, leases are identified in accordance with IFRS 16, i.e. a contract is, or contains, a lease if the contract, for a specific period of time, transfers the right to direct the use of an identified asset in exchange for consideration.

GROUP CONTRIBUTIONS AND SHAREHOLDER CONTRIBUTIONS Group contributions paid and received are recognised as year-end appropriations in accordance with the alternative method. Shareholder contributions paid are carried directly to equity with the recipient and are capitalised in shares interests with the donor, to the extent that impairment is not required.

TAX Untaxed reserves including deferred tax liabilities are recognised in the Parent Company.

alm equity ab | 2019 105 NOTE 2 ESTIMATES AND JUDGEMENTS

Preparing financial reports in accordance with IFRS requires management to make estimates and judgements, and to make assumptions that affect the application of the accounting policies and the carrying amounts of assets, liabilities, revenue and costs. Actual outcomes may differ from these estimates.

Estimates and assumptions are regularly reviewed. Changes in estimates are recognised in the period in which the change is made if the change has had an effect on this period only, or in the period in which the change is made and future periods if the change affects the current period as well as future periods.

Management has made a number of significant accounting assessments when applying the Group’s accounting policies.

Control over tenant-owner associations According to previous principles for classifying tenant-owner associations, ALM Equity has decided that each tenant-owner association is an independent legal entity. Based on this conclusion, tenant-owner associations have not been consolidated in the consolidated accounts. IFRS regulations require a considerable number of judgements, which allows scope for interpretation and in many cases differing conclusions. From its inspection and assessment of residential projects with other operators in the industry, the Swedish Financial Supervisory Authority has concluded that tenant-owner associations should be consolidated. ALM Equity has monitored the course of the dialogue, further analysed the various stages of its own business and decided to reclassify tenant-owner associations and consolidate them, which means that the timing will be adjusted for when project revenue and project expenditure are recognised.

Classification of the Group’s holdings in Group companies Another important assessment is the classification of the Group’s holdings in Group companies. The Group is deemed to have a controlling influence over the majority of the holdings and regards them as subsidiaries. This assessment is based on the fact that ALM Equity has at least 50 percent of the votes in the companies and a governing project plan as the basis for shareholder agreements, the design of the project and governance.

As a result of the decision regarding tenant-owner associations, ALM Equity has also decided to consolidate the management groups with investor arrangements that in the interim reports for the first, second and third quarters of 2019 were recognised as unlisted shareholdings.

IMPORTANT SOURCES OF UNCERTAINTY IN ESTIMATES The sources of uncertainty in estimates that pose a substantial risk of the value of assets and liabilities having to be significantly adjusted during the financial year to come are deferred tax assets.

Valuation of investment properties The value of investment properties is based on independent valuations by certified valuers. These valuations are based on a combination of actual data and assumptions. Although the assumptions are based on qualified assessments supported by property transactions with similar conditions, there is an element of uncertainty in the assumptions made. Should the assessments prove to be inaccurate, it could have a material impact on the balance sheet.

Estimated deferred tax Deferred tax assets are recognised for temporary differences and for unutilised loss carryforwards. Measurement of tax loss carryforwards and the Group’s ability to take advantage of the tax loss carryforwards is based on management’s estimates of future profits. The tax loss carryforwards relate to Sweden, where they can be utilised to offset future profits without time limitation. For further information on deferred tax assets, please refer to Note 13.

106 alm equity ab | 2019 NOTE 3 SEGMENT REPORTING

ALM Equity previously only followed up operations in one segment, Residential Development, which has been the company’s main core activity. In 2018, the Group presented a new structure in which operations are divided into five business areas, including three primary business areas and two smaller business areas in the development phase. As of 2019, management follows up operations based on the three primary activities.

Follow-up is carried out based on the Group’s financial reporting, with an adjustment to reflect value creation over time in projects in the Project Development business area. The adjustment involves a reversal of the completion method’s settlements and a gradual increase in value is calculated based on completion and contracts with end customers.

No comparative figures have been reported per business area in 2019, since in 2018 ALM Equity based accounting and follow-up on the then core Residential Development segment. Retrospective allocation is not deemed to provide an accurate comparison and is thus not a significant element of follow-up and reporting. Information about the Group’s operations and business areas can be found on pages 14–37.

SEGMENT REPORTING 2019 To follow is a breakdown of the income statement and balance sheet for each of our business areas, and pages 14–37 contain specific financial performance indicators and information about significant events for each business area.

Business area acronyms: PD = Project Development, CM = Construction Management, REM = Real Estate Management, OBA = Other business areas

EARNINGS PD* CM REM OBA Aftermar- Central Group Total in JANUARY–DECEMBER 2019 ket** costs elim. Group

Net revenue 1,721 215 62 11 340 80 -1,848 581 Operating expenses -1,521 -206 -53 -3 -353 -160 1,603 -693 Operating profit/loss 200 9 9 8 -13 -80 -245 -112

Net financial items -27 - -19 1 -2 -78 - -125 Change in value of derivative instruments 7 ------7 Changes in value, investment properties ------271 271 Changes in value, investment properties - - 120 - - - - 120 under construction Changes in value, financial instruments 20 ------20 Appropriations and tax 47 -8 -2 -8 -46 19 - 2

Profit/loss for the period 247 1 108 1 -61 -139 26 183 Minority share of profit/loss -158 - -70 - - - - -228

*Earnings for Project Development business area according to IFRS are produced using the completion method, which gives rise to significant fluctuations in earnings. ALM Equity follows up the business area based on a gradual increase in value. This is calculated by restoring revenue recognition according to the completion method within IFRS accounting policies, and by applying a value increase using the percentage-of-completion method, taking account of completion and sale.

**Includes aftermarket in completed contracts according to previously combined construction and project models within Småa AB; the last ongoing projects were completed in 2019 and guarantee undertakings for the contracts extend for up to 10 years into the future

alm equity ab | 2019 107 NOTE 3 CONT.

PD* CM REM* OBA After Central Group Total in BALANCE AT 31/12/2019 market** costs elim. Group

Non-current assets Machinery and equipment - - 3 12 - 1 - 16 Investment properties - - 1,508 - - - - 1,508 Investment properties under construction 1,808 ------4 1,804 Interests in tenant-owned premises 42 ------42 Right-of-use assets 171 --- -- 10 181 Interests according to the equity method 10 ------10 Deferred tax assets ---- - 2 2 4 Non-current assets 2,046 - 1,496 12 - 3 8 3,565

Current assets Development properties 2,720 - - - - 5 -5 2,720 Residential projects in progress 772 ------13 759 Inventory shares in tenant-owner 313 --- 24 -- 337 apartments and property rights Other receivables -86 125 379 11 1,069 2,064 -2,919 643 Cash and cash equivalents 157 28 12 1 44 457 - 699 Current assets 3,861 153 406 12 1,137 2,526 -2,937 5,158

TOTAL ASSETS 5,907 153 1,902 24 1,137 2,529 -2,929 8,723

Equity including minority’s share 2,058 6 548 5 -74 1,063 -79 3,527

Non-current liabilities Non-current interest-bearing loans 299 - 965 - - 600 - 1,864 Derivatives 15 ------15 Lease liability 165 --- -- 11 176 Deferred tax liabilities 176 - 2 - --- 178 Other provisions ---- 20 -- 20 Non-current liabilities 655 - 967 - 20 600 11 2,253

Short-term interest-bearing bond loans ---- - 476 - 476

Short-term interest-bearing loans from 1,440 - - - 156 - - 1,596 credit institutions Subordinated interest-bearing promissory 277 - - 3 --- 280 note loans Other current liabilities, non-interest-bearing 1,477 147 387 16 1,035 390 -2,861 591

Current liabilities 3,194 147 387 19 1,191 866 -2,861 2,943

TOTAL LIABILITIES AND EQUITY 5,907 153 1,902 24 1,137 2,529 -2,929 8,723

108 alm equity ab | 2019 NOTE 3 CONT.

Reconcili- ation with Reconciliation with IFRS 2019 Segment IFRS IFRS Net revenue 581 1,100 1,681 Profit/loss after tax 181 251 432 Equity 3,527 -217 3,310 Total assets 8,723 -221 8,502 Equity/assets ratio 40% -2% 39%

SEGMENT REPORTING 2018 The company previously followed up operations based on one segment and based on adjusted accounting policies, where the most significant difference compared with IFRS was the method of revenue recognition; the company internally applied the percentage-of-completion method in two stages for all projects, unlike with IFRS where only the percentage-of-completion method according to IFRS is used in cases where tenant-owner associations are not controlled by ALM Equity and calculated from production start. Otherwise the entire profit is taken into account to coincide with transfer to the customer. Further information about previous segments can be found in ALM Equity’s 2018 Annual Report, Note 3, on pages 104–105.

Differences between previous segment reporting and IFRS are shown below in the column ‘Reconciliation with IFRS’.

Residential Devel- Reconcili- Residential opment ation with Develop- Income statement, January–December 2018 segment IFRS ment IFRS Net revenue 1,883 431 2,314 Operating expenses -1,758 -450 -2,208 Operating profit/loss 125 -19 106 Net financial items -84 -9 -93 Change in value of derivative instruments 0 3 3 Profit/loss before tax 41 -25 16 Tax 5 -16 -11 Profit/loss for the period 46 -41 5

BALANCE SHEET EXCERPTS 31/12/2018

Investment properties under construction - 1,212 1,212 Development properties 3,339 -532 2,807 Residential projects in progress - 1,009 1,009 Equity 2,070 68 2,138 Total assets 4,448 2,524 6,972

Equity/assets ratio 47% 31%

NOTE 4 SPECIFICATION NET REVENUE Group 2019 2018 Project revenue 1,192 2,085 Rental income 117 39 Inventory sales 250 59 Divested projects 76 45 Other revenue 46 86 Total 1,681 2,314

alm equity ab | 2019 109 NOTE 5 EMPLOYEE BENEFITS (SEK THOUSAND)

Group Parent Company 2019 2018 2019 2018 Average no. of employees Women 62 52 - - Men 66 67 1 1 128 119 1 1

Employee expenses Board of Directors and CEO Salaries and other remuneration 659 883 659 883 Social security contributions 623 525 623 525 Pension expenses 300 2,126 300 2,126 1,582 3,534 1,582 3,534

Other employees Salaries and other remuneration 72,375 62,866 - - Social security contributions 25,143 23,425 - - Pension expenses 5,272 7,115 - - 102,790 93,406 - -

Pensions The Group mainly has defined contribution pension plans. The subsidiary Småa AB is covered by collective bargaining agreements, which means there are also ITP plans including both defined contribution parts of ITP 1 and defined benefit plans in ITP 2. The Group’s aggregate cost for pensions amounted to SEK 5,572,000 (9,241,000).

Group Parent Company 2019 2018 2019 2018 Gender distribution, members of senior management Women on the Board of Directors 15% 18% 20% 20% Men on the Board of Directors 85% 82% 80% 80% Women among other members of senior management 33% 33% - - Men among other members of senior management 67% 67% - -

Disclosures regarding remuneration of the Board of Directors and members of senior management

Basic Variable Share- Other salary, Pension remunera- based remunera- 31/12/2019 Board fee cost tion payments tion Total Chair Maria Wideroth 60 - - - - 60 Board members Johan Wachtmeister 40 - - - - 40 Johan Unger 40 - - - - 40 Gerard Versteegh 40 - - - - 40 Joakim Alm ------

Other members of senior management CEO 1,200 300 - - 119 1,619 Other members of senior management (2) 1,800 90 50 - - 1,940 Total 3,180 390 50 - 119 3,739

110 alm equity ab | 2019 NOTE 5 CONT.

Disclosures regarding remuneration of Board members and members of senior management (cont.)

Basic Variable Share- Other salary, Pension remuner- based remuner- 31/12/2018 Board fee cost ation payments ation Total Chair Maria Wideroth 60 - - - - 60 Board members Johan Wachtmeister 40 - - - - 40 Johan Unger 40 - - - - 40 Gerard Versteegh 40 - - - - 40 Joakim Alm ------

Other members of senior management CEO 1,200 300 - - 113 1,613 Other members of senior management 4,201 210 329 - - 4,740 (3) Total 5,581 510 329 - 113 6,533

REMUNERATION AND TERMS OF EMPLOYMENT FOR MEMBERS OF SENIOR MANAGEMENT The CEO is employed by the Parent Company. Remuneration of the CEO consists of basic salary without a variable component, defined contribution pension cost (excluding special payroll tax) equivalent to 25 percent of the salary and the benefit of a company car. Salary exchange between salary and pension cost occurred during the year.

Remuneration of other members of senior management consists of basic salary, defined contribution pension plans and potential bonuses. ‘Other senior executives’ includes those individuals who together with the CEO constitute Group management.

The Group CEO has a mutual period of notice of 12 months whether termination of employment is at the initiative of the Group or the CEO. Other members of senior management have a notice period in accordance with the Employment Protection Act if termination of employment is at the initiative of the Group. There are no agreements on severance pay.

Warrants An issue of 72,000 warrants for an employee incentive programme was floated in 2015. Each warrant entitles the subscriber to one ordinary share in the company at an offer price of SEK 222.08. According to the terms and conditions, shares could originally be subscribed for on three occasions, of which one remains: 1 June 2020–15 June 2020. In connection with previous subscription periods, no-one has opted to exercise their warrants to subscribe for shares. The warrants have been subscribed for at market value.

Another issue of 154,700 warrants for an employee incentive programme was floated in 2017. Each warrant entitles the subscriber to one ordinary share in the company at an offer price of SEK 368.00. According to the terms and conditions for the issue, shares can be subscribed for during the following periods: 1 October 2020–15 October 2020, 1 October 2021–15 October 2021 and 1 October 2022–15 October 2022. The warrants have been subscribed for at market value.

Upon full utilisation of the warrants, the company’s share capital increases by a maximum of SEK 3.5 million divided into 350,000 shares, equivalent to a dilution effect of approximately 2.0 percent of all shares outstanding and approximately 3.5 percent of ordinary shares.

alm equity ab | 2019 111 NOTE 6 REMUNERATION OF AUDITORS

Group Parent Company Audit firm 2019 2018 2019 2018 Ernst & Young Auditing assignments 7 7 1 1 Tax advisory services - - - - Other fees - - - - Total fees and remuneration to 7 7 1 1 auditors

‘Audit assignment’ refers to auditing of the company’s accounting records, annual accounts, management by the Board of Directors and the CEO and other duties incumbent upon the company’s auditor to perform.

Other fees include other auditing work in addition to the regular audit assignment, which is all other advisory services or assistance prompted by observations in the course of such review or the performance of such duties.

NOTE 7 SPECIFICATION OF SELLING AND ADMINISTRATIVE EXPENSES

Group Parent Company 2019 2018 2019 2018 Other external expenses -43 -41 -19 -28 Employee expenses -65 -87 -1 -3 Depreciation, amortisation -34 -17 - - and impairment Total -143 -145 -20 -31

NOTE 8 LEASES – LESSOR

Leasing revenue for the year regarding leases comprises the Group’s rental agreements with no set expiration where the customer as a rule has the right to terminate such agreements within 3–9 months. During the year, the Real Estate Management business area implemented its first leases in which the majority have terms of at least 5 years. Leasing revenue for the year amounts to SEK 80 million (39).

Future leasing revenue at 31 December for leases is distributed as follows:

31/12/2019 31/12/2018 Within 1 year 137 80 Between 1 and 2 years 109 130 Between 2 and 3 years 99 108 Between 3 and 4 years 94 99 Between 4 and 5 years 77 93 Later than 5 years 297 383 813 893

The Parent Company has no leases in which it is the lessor.

112 alm equity ab | 2019 NOTE 9 LEASES – LESSEE

Right-of-use assets Group 2019 2018 Opening carrying amount 195 - Depreciation, right-of-use assets -10 - Completed right-of-use assets -8 - Revaluation of right-of-use agreements - 195 Closing carrying amount 177 195

Right-of-use assets by underlying classification 2019 2018 Leaseholds 166 172 Premises 11 18 Vehicles - 5 Total right-of-use assets 177 195

Right-of-use assets are calculated at present value using the Group’s marginal borrowing rate and recognised at an amount corresponding to the lease liability, adjusted for prepaid lease payments. All are recognised in the balance sheet under ‘Right-of-use assets’.

Lease liabilities amount to a total of SEK 177 million, of which SEK 176 million are long-term and SEK 1 million short-term.

2019 2018* Depreciation of right-of-use assets -10 - Interest expenses on lease liabilities -2 - Costs relating to short-term leases -11 -14 -23 -14

The Group’s short-term lease agreements mainly comprise rental agreements for premises, cars and parking spaces with a remaining term of less than 12 months. In addition there are a few smaller leases that run until further notice, with a notice period of 3–9 months. A maturity analysis for the lease liability can be found under Note 28.

*In 2018, the Group followed the former accounting policies according to IAS 17.

To follow is a maturity analysis for future undiscounted payments for short-term leases:

Future minimum lease payments (SEK million) 31/12/2019 31/12/2018 Within 1 year 11 15 1–5 years 15 17 Later than 5 years - - 26 32

The Parent Company is lessee for one car and its parking space for the benefit of the CEO.

alm equity ab | 2019 113 NOTE 10 PROFIT/LOSS FROM INVESTMENTS IN GROUP COMPANIES Parent Company 2019 2018 Dividends received 7 375 Impairment -42 -27 -35 348

Impairments have been implemented in investments in Group companies in connection with the reporting periods when assessments have been made of the value of the respective shares relative to the subsidiary’s equity and project status.

NOTE 11 FINANCE INCOME Group Parent Company 2019 2018 2019 2018 External interest income 5 10 1 14 5 10 1 14

All interest income relates to financial items that are measured at amortised cost.

NOTE 12 FINANCE COSTS Group Parent Company

2019 2018 2019 2018 External interest expenses -130 -103 -78 -76 -130 -103 -78 -76

All interest expenses relate to financial items that are measured at amortised cost.

NOTE 13 UNREALISED CHANGES IN VALUE, DERIVATIVE INSTRUMENTS Group 2019 2018 Unrealised changes in value, interest 7 3 rate swaps 7 3

Net earnings from derivatives in the sub-category held for trade constitute the total change in value.

NOTE 14 APPROPRIATIONS Parent Company 2019 2018 Group contributions received 59 19 Group contributions paid -45 -16 14 3

114 alm equity ab | 2019 NOTE 15 TAX ON PROFIT FOR THE YEAR Group Parent Company 2019 2018 2019 2018 Current tax -1 -2 - - Adjustment relating to prior years -1 - - - Deferred tax 4 -9 - - Reported taxes 2 -11 - -

Reconciliation of effective tax rate Profit/loss before tax 431 16 -117 258 Tax according to current tax rate (21.4%) -92 -4 25 -57 Non-taxable income 574 560 2 82 Non-deductible expenses -421 -476 -10 -6 Non-deductible interest income and interest expenses -41 -17 - Change in tax loss carryforwards 86 -81 - -19 Change in deferred tax relating to temporary differences -104 -10 - - Reported taxes 2 -11 - -

Effective tax rate -0.4% 65.7% 0.0% 0.0%

The Group does not recognise any tax items in other comprehensive income. Non-taxable revenue and non-deductible expenses are mainly derived from the Project Development business area’s revenue recognition, as well as from divestments of properties and interests in tenant-owned apartments and from the Real Estate Management business area’s unrealised changes in fair value.

Disclosures regarding deferred tax asset and deferred tax liability The table below specifies the tax effect of the temporary differences:

Deferred tax assets 31/12/2019 31/12/2018 Tax loss carryforwards 113 4 Carrying amount 113 4

Deferred tax liabilities 31/12/2019 31/12/2018 Deferred taxes, acquisition of Småa AB 124 132 Deferred tax relating to temporary differences 163 49 Carrying amount 287 181

At the end of 2019, accumulated tax loss carryforwards within the Group totalled SEK 825 million (716). The tax loss carryforwards deemed to be possible to use to reduce tax on future profits within the Group have been capitalised as tax assets at a level corresponding to deferred tax on unrealised changes in fair value. Renewed evaluations as to whether or not deferred tax assets for loss carryforwards should be recognised are performed on a regular basis.

At year-end, deferred tax attributable to unrealised changes in fair value were recognised net against loss carryforwards that are not group contribution blocked within the Group. Total deferred tax for these amounts to SEK 109 million.

alm equity ab | 2019 115 NOTE 16 EARNINGS PER SHARE Group 2019 2018 Basic earnings per ordinary share Profit for the year attributable to Parent Company shareholders 278 16 Less earnings attributable to preference shareholders 77 69

Average number of ordinary shares outstanding 10 10 Basic earnings per ordinary share, SEK 19.79 -5.24

Group 2019 2018 Earnings per ordinary share after dilution Profit for the year attributable to Parent Company shareholders 278 16 Less earnings attributable to preference shareholders 77 69

Average number of ordinary shares outstanding 10 10 Effect of potential ordinary shares on warrants - - Earnings per ordinary share after dilution, SEK 19.79 -5.24

When calculating earnings per ordinary share after dilution, the weighted average number of ordinary shares outstanding is adjusted to take account of the dilutive effect of all potential ordinary shares. These potential ordinary shares are attributable to warrants issued to employees in 2015, 2016 and 2017. There was no dilutive effect during the financial year since the average price of the ordinary share for the year was lower than the subscription price for the warrants.

For disclosures about the change in the number of shares outstanding, please refer to Note 31 Equity.

NOTE 17 MACHINERY AND EQUIPMENT Group Parent Company 2019 2018 2019 2018 Opening costs 10 20 - - Acquisitions during the year 12 4 - - Divestments during the year - -14 - - Closing accumulated costs 22 10 - -

Opening depreciation -4 -7 - - Acquisitions during the year - - - - Divestments during the year - 4 - - Depreciation for the year -2 -1 - - Closing accumulated depreciation -6 -4 - -

Closing carrying amount 16 6 - -

Depreciation of property, plant and equipment is included in the income statement under the sub-item ‘selling and administrative costs’.

NOTE 18 INTERESTS IN TENANT-OWNED PREMISES Group 2019 2018 Opening cost - - Reclassified from current asset 22 - Unrealised changes in value 20 - Closing property values 42 -

Closing carrying amount 42 -

Tenant-owned premises held for long-term management that have been measured at fair value based on external market values based on future cash flows. The effects have been recognised via profit or loss as unrealised changes in fair value.

116 alm equity ab | 2019 NOTE 19 INVESTMENT PROPERTIES Group 2019 2018 Opening property values - - Completed properties* 1,388 - Unrealised changes in value 120 - Closing property values 1,508 -

Closing recognised fair value 1,508 -

*Including reclassification from investment properties under construction as completed and taken over.

Ratable value 2019 2018 Ratable value, buildings 90 - Ratable value, land 266 - Total ratable value 356 -

Investment properties include properties that have been taken over and are operated by the Real Estate Management business area; these are measured at fair value through profit or loss. Over the year a total of 557 units have been transferred from the Project Development business area and the tenants have taken up occupation. All are let with leases with terms of between three and eight years, generating annual net operating income of SEK 73 million. All the Group’s investment properties are residential units and are located in the Stockholm area.

Further information about the Group and the Real Estate Management business area can be found on pages 14–19.

Investment property portfolio Contractually agreed investment properties are divided up into investment properties being managed and contractually agreed properties under production and due to be produced. Those classified as under production and due to be produced are entered in the balance sheet as investment properties under construction up until the date of completion and transfer. Munici- Construc- Nu mber of E st i mated net Under management pality tion year units operating income Brygghusen i Väsjön Sollentuna 2019 45 SEK 10 million Mälarterrassen Stockholm 2019 164 SEK 16 million Poeten Solna 2019 236 SEK 32 million Skalden* Solna 2019 112 SEK 15 million Total number of units in property management 557 SEK 73 million

Contracted, under production Munici- Construc- Nu mber of E st i mated net pality tion year units operating income Ängshuset Stockholm 2020 78 SEK 6 million Esplanaden Stockholm 2020 52 SEK 4 million Kronan Stockholm 2021 280 SEK 20 million Torghuset Rönninge Salem 2020 66 SEK 7 million Skalden* Stockholm 2020 159 SEK 20 million Contracted, under production 635 SEK 57 million

Contracted, future production Munici- Construc- Nu mber of E st i mated net pality tion year units operating income Häggvik 7 Sollentuna 2022 325 SEK 22 million Häggvik 8 Sollentuna 2022 126 SEK 9 million Häggvik 9 Sollentuna 2023 272 SEK 23 million Häggvik 10 Sollentuna 2023 153 SEK 11 million Kista Square Garden Stockholm 2022–2025 1,047 SEK 110 million Lignum Stockholm 2023 207 SEK 21 million Hesselby Slott Stockholm 2022 142 SEK 13 million Skogshusen Nacka 2022 181 SEK 12 million Total contracted units, future production 2,453 SEK 221 million

*One of three stages had been completed and taken over at year-end; the remainder were completed and taken over in the first quarter of 2020.

alm equity ab | 2019 117 NOTE 19 CONT.

VALUATION MODEL An investment property is recognised as an asset when it is likely that the economic benefits associated with the investment property will accrue to the accounting unit, and the value can be reliably calculated in accordance with IAS 40. It is initially valued at cost plus any transaction expenses. Investment properties are subsequently valued in accordance with the fair value method. Fair value is the purchase consideration received on the valuation date from the sale of the asset via an orderly transaction between market operators.

Valuation is carried out according to Level 3 in the valuation hierarchy via a cash flow analysis based on a present value calculation of estimated future cash flows, combined with a local price analysis. The local price analysis is carried out on the basis of the selling prices of comparable properties. Market value refers to the price that will likely be obtained if the investment property is sold on an open market. Valuations are carried out annually by an authorised valuer and followed up internally each quarter, or in the event of incidents that significantly impact the value. The value is adjusted through profit or loss and realised on divestment.

All investment properties have been independently valued at some point during the year, either by JLL or by FORUM Fastighetsekonomi. On the valuation dates these companies have had access to information about current and newly signed leases, estimated operating and maintenance costs and estimated investments based on maintenance plans and anticipated future vacancies. A calculation period typically extends over five or ten years.

At year-end, the carrying amount of the Group’s property portfolio amounted to SEK 1,508 million, with an unrealised change in value of SEK 120 million during the year. At the end of the year the Parent Company only owned properties via subsidiaries.

VALUATION ASSUMPTIONS When assessing a property’s future earning capacity, the following assumptions have been used in valuations. Where assumptions change during the calculation period or differ between investment properties, they are stated as a range.

ASSUMPTIONS DURING VALUATION AT YEAR-END 2019 2018 Calculation period (years) 5–20 - Yield requirement (%) 4.0–5.3 - Inflation forecast (%) 2 - Discount rate (%) 6.2–7.4 - Long-term vacancies (%) 0.1–5.0 - Rent assumption Existing rent and market rent Operating and maintenance costs Individually per property based on outcomes and valuation institute’s experience of similar objects.

At year-end the average yield requirement was 4.4 percent in the valuations.

SENSITIVITY ANALYSIS

Impact on value, SEK million 2019 2018 Change in net operating income+/-3% +3/-3 - Yield requirement +/-1% +346/-526 -

118 alm equity ab | 2019 NOTE 20 INVESTMENT PROPERTIES UNDER CONSTRUCTION Group 2019 2018 Opening property values 1,212 771 Additional contracts with Real Estate Management* 820 123 Production costs incurred 625 317 Unrealised changes in value in production 271 - Properties completed during the year -1,326 - Closing property values 1,602 1,211

Closing carrying amount 1,602 1,211

*In connection with agreements entered into between the Project Development and Real Estate Management business areas, the property was reclassified from a development property to an investment property under construction. Once the project has been completed and taken over, it is reclassified as an investment property.

Investment properties under construction are properties within the Project Development business area that are in the process of being developed and produced for the Group’s Real Estate Management business area. Properties are classified to coincide with the signing of agreements between the business areas. During the year, the first 557 units were completed and transferred from the Project Development business area to the Real Estate Management business area. All the Group’s investment properties are primarily residential units and are located in the Stockholm area.

VALUATION MODEL It is not deemed to be possible initially to reliably calculate the value of investment properties; instead properties are valued at accumulated cost during the development phase, including production costs incurred. Once the necessary criteria and conditions have been satisfied for it to be possible to use the properties for their purpose, and the value of the properties can be reliably calculated, the properties are recognised at fair value in accordance with IAS 40.

Quarterly checks are carried out of estimated market values in relation to accumulated cost, including production costs incurred, to ensure there is no need for impairment.

alm equity ab | 2019 119 NOTE 21 INTERESTS CARRIED IN ACCORDANCE WITH THE EQUITY METHOD

Group 31/12/2019 31/12/2018 Opening carrying amount 19 34 Share of profit/loss -6 -1 Shareholder contributions to joint ventures and associates 4 - Dividends -7 -9 Sales/disposals during the year -1 - Value adjustment* - -5 Closing carrying value, share of equity 10 19

*A value adjustment was made of the remaining share of equity in connection with the divestment of the project.

DISCLOSURES REGARDING SIGNIFICANT HOLDINGS In 2018, the underlying project previously reported as a significant holding was sold, which means that the holding is no longer considered to be of a significant character for the Group and is therefore carried together with other individually insignificant holdings below.

Disclosures regarding individually insignificant holdings:

Total carrying amount for individually insignificant associates: 10 19

Total amount of the Group’s share of: Profit/loss from continuing operations -6 1 Profit/loss after tax from discontinued operations - -2 Total comprehensive income -6 -1

120 alm equity ab | 2019 NOTE 22 SHARES AND PARTICIPATIONS WHOLLY OWNED BY THE PARENT COMPANY

Parent Company 2019 2018 Opening cost 5 1,139 Acquisitions 23 1 Shareholder contributions 313 136 Sales -248 -1,244 Impairment losses -43 -27 50 5

The specification below includes shares and interests directly or indirectly owned by the Parent Company.

The company has controlling influence in all of the companies below since ALM Equity owns at least half of the votes and/or has a governing project plan as a basis for the agreements with other shareholders.

In 2018, ALM Equity AB implemented a new organisational structure that harnesses the Group’s synergies and strengths following the acquisition of the housing developer Småa AB. Operations have been divided up into five business areas via legal sale. As a result of this, the Parent Company’s book value decreased during the 2018 financial year, but the Group’s value remains unchanged.

SHARES AND PARTICIPATIONS WHOLLY OWNED BY THE PARENT COMPANY

Corporate Registered Partici- Equity Company identity number office pations stake Proportion of votes Carrying amount* 31/12/2019 31/12/2018 31/12/2019 31/12/2018 Skarnvest AB 556255-2330 Stockholm 10,101 100% 100% 100% 11 - B.X. Utvecklings AB 556681-5337 Stockholm 1,000 100% 100% 100% - - ALM Commercial AB 559158-4403 Stockholm 500 100% 100% 100% - - ALM Construction Management AB 559158-4395 Stockholm 500 100% 100% 100% - - ALM Equity Admin AB 556691-4056 Stockholm 100 100% 100% 100% - - A Equity Förvaltning AB 559152-1504 Stockholm 500 100% 100% 100% - - ALM Småa Bostad AB 559158-4361 Stockholm 500 100% 100% 100% - - ALM Digital 559158-4387 Stockholm 500 100% 100% 100% - - BX 3 Holding AB 556712-3053 Stockholm 1,000 100% 100% 100% - - Elutera Fastighet AB 556719-6968 Stockholm 1,000 100% 100% 100% - - Stadsterrassen Holding AB 556828-8251 Stockholm 1,000 100% 0% 100% - - ALM Equity Management AB 556895-0140 Stockholm 500 100% 100% 100% - - Archimedes Holding AB 556922-7217 Stockholm 500 100% 100% 100% 1 1 Prispallen Holding AB 556869-5380 Stockholm 1,000 100% 100% 100% - - ALM Equity Urban Parking AB 559000-6820 Stockholm 1,000 100% 100% 100% - - ALM Equity Bostadsgaranti AB 559026-3207 Stockholm 500 100% 100% 100% 15 - Nenises Holding AB 559039-3020 Stockholm 1,000 100% 0% 100% - 1 Stadsterrassen AB 559003-8203 Stockholm 500 100% 100% 100% - - Eldfyren Holding AB 556921-3191 Stockholm 1,000 100% 0% 100% - - Tvålflingan Holding AB 556720-6775 Stockholm 1,000 100% 0% 100% - 3 Småa Holding AB 559091-2548 Stockholm 500 100% 100% 100% - - Såpsjudaren Holding AB 556810-4268 Stockholm 1,000 100% 0% 100% - - A Equity Finans Holding AB 559136-6744 Stockholm 500 100% 100% 100% - - Total wholly owned interests 27 5

alm equity ab | 2019 121 NOTE 22 CONT.

SHARES AND PARTICIPATIONS WITH CONTROLLING INFLUENCE BY PARENT COMPANY

Corporate Regis- identity tered Partici- Equity Financial info Company number office pations stake Proportion of votes Carrying amount 31/12/2019 Profit/ 31/12/2019 31/12/2018 31/12/2019 31/12/2018 Equity loss for the year Häggvik Invest 559176-0391 Stockholm 1,000 35% 35% 100% - - 205 -1 Projektutveckling AB Häggvik Invest Förvaltning AB 559181-9502 Stockholm 1,000 35% 35% 0% - --- Slipskäraren Holding AB** 556976-6206 Stockholm 1,000 1% 3% 0% 23 - 380 -2 Total participations with controlling influence 23 - 585 -3

Grand total of Group participations 50 5

Subsidiaries’ operations primarily involve owning and managing shares and properties and associated activities. ALM Equity Management AB, 2xA Entreprenad AB, A Equity Finans AB, ALM Småa Bostad Management AB, A Equity Förvaltning Management AB and Småa AB are the Group’s construction och management companies in which all staff except for the company’s CEO are employed.

Most of the subsidiaries represent top companies in corporate structures established for the business’s projects. The basic structure comprises a tenant- owner association and a property company, and the properties are based and projects operated within this structure. The corporate structures consist of a number of companies, depending on the size and scope of each project.

During the financial year, SEK 127 million (50) was paid in dividends from the company’s subsidiaries to holders without controlling influence.

*In some cases carrying amounts and financial information total SEK 0 million, as these amounts fall below SEK 500,000 and are therefore rounded down. **The Group owns a total of 86 percent of the votes via the Parent Company and its subsidiaries. ALM is therefore deemed to have a controlling influence over the company. ***The Group is considered to have control and a controlling influence over the companies through agreements and business structures in the company.

NOTE 23 DEVELOPMENT PROPERTIES

Group 2019 2018 Opening carrying amount 3,564 3,271 Acquisitions - 300 Capitalised project costs 137 145 Additional contracts with Real Estate Management* -820 -123 Initiated residential projects -54 -18 Divested properties -66 -11 Depreciation and impairment for the year -16 -16 Reclassification of projects 62 16 Closing carrying amount 2,807 3,564

*In connection with agreements entered into between the Project Development and Real Estate Management business areas, properties were reclassified from a development property to an investment property under construction.

Development properties are properties in projects at an early stage, before production start, and over which the company is deemed to exercise control. A development property is reclassified as a ‘Residential project in progress’ once production has started, and reclassified as an ‘Investment property under construction’ when the Real Estate Management business area and Project Development business area agree that the property is to be developed for the benefit of Real Estate Management.

Development properties under development totalled 47 (50) projects at the end of 2019. There were no additional projects during the year, two projects were divested and construction began on one project. Furthermore, ALM Equity has sold interests in two of the projects to external investors and two subprojects have been reclassified as ‘Investment properties under construction’.

122 alm equity ab | 2019 NOTE 24 RESIDENTIAL PROJECTS IN PROGRESS

Group 2019 2018 Opening carrying amount 1,009 1,394 Residential projects acquired - 8 Residential projects where construction has started 54 18 Work in progress during the year 734 1,134 Residential projects delivered -1,071 -1,485 Reclassification of projects - -60 Closing carrying amount 726 1,009

Residential projects in progress include all projects intended for the external housing market where production has started, measured at cost and capitalised project costs.

During the year, production began on two projects/subprojects and they were transferred to Residential projects in progress; the previous year the corresponding figure was one project/subproject.

Meanwhile five projects/subprojects have been completed and customers have taken them over during the year; the corresponding figure for the previous year was 15 projects/subprojects.

NOTE 25 INTERESTS IN TENANT-OWNER APARTMENTS AND PROPERTY RIGHTS Group 2019 2018 Opening carrying amount 366 87 Reclassification from projects in progress 447 439 Reclassifications to Real Estate Management -156 - Impairment for the year -9 -2 Sales for the year -311 -158 Closing carrying amount 337 366

Interests in tenant-owner apartments and property rights comprise those units that are unsold once projects in the Project Development business area have been completed and thus remain in the Group.

NOTE 26 OTHER CURRENT RECEIVABLES

Group Parent Company 2019 2018 2019 2018 Down payments for property acquisitions 12 11 - - Receivables sold but not taken over 289 79 - - Project costs, properties not taken over 39 32 - - Other external receivables 121 106 5 28 461 228 5 28

Down payments in connection with acquisition of new projects, paid according to agreements for acquisitions where not all contract stipulations have been fulfilled or transfer taken place.

Receivables on objects sold but not yet taken over include receivables from buyers who have acquired but not yet taken possession of completed tenant-owned apartments, properties or entire projects. At the end of 2019, projects were completed, two properties divested and several apartments sold where not all customers fully took over financial possession until after year-end.

Project costs for projects where transfer has not yet taken place are costs that accrue at early stages for projects that have not yet been taken over.

Other external receivables consist mainly of lending to external parties and outstanding claims against tenant-owner’s associations no longer controlled.

alm equity ab | 2019 123 NOTE 27 FINANCIAL ASSETS AND LIABILITIES

The table below presents the Group’s financial assets and liabilities classified in categories according to IFRS 9.

Financial assets and liabilities at 31 December 2019 Group

Financial assets/liabilities measured at fair Financial assets/liabilities measured at Total carrying amount* Financial assets value through profit or loss amortised cost Interests in tenant-owned premises - 42 42 Trade receivables - 49 49 Other current receivables - 461 461 Prepaid expenses and accrued - 64 64 income Cash and cash equivalents - 699 699 - 1,316 1,316 Financial liabilities Derivatives 15 - 15 Bond loans - 1,076 1,076 Non-current interest-bearing - 1,264 1,264 liabilities Liabilities to credit institutions - 1,596 1,596 Interest-bearing project financing - 290 290 Trade payables - 72 72 Other current liabilities - 245 245 Accrued expenses and deferred - 243 243 income 15 4,786 4,801

Financial assets and liabilities at 31 December 2018 Group

Financial assets/liabilities measured at fair Financial assets/liabilities measured at Total carrying amount* Financial assets value through profit or loss amortised cost Trade receivables - 112 112 Other current receivables - 228 228 Prepaid expenses and accrued - 60 60 income Other short-term investments - 1 1 Cash and cash equivalents - 390 390 - 791 791 Financial liabilities Derivatives 22 - 22 Bond loans - 1,076 1,076 Liabilities to credit institutions - 2,409 2,409 Interest-bearing project financing - 494 494 Trade payables - 129 129 Other current liabilities - 282 282 Accrued expenses and deferred - 150 150 income 22 4,540 4,562 *Carrying value is deemed to be equivalent to fair value.

124 alm equity ab | 2019 NOTE 27 CONTINUED

Financial assets and liabilities at 31 December 2019 Parent Company

Financial assets/liabilities measured at fair Financial assets/liabilities measured at Total carrying amount* Financial assets value through profit or loss amortised cost Receivables from Group companies - 1,792 - Other current receivables - 5 5 Prepaid expenses and accrued - 7 7 income Cash and cash equivalents - 453 453 - 2,257 465 Financial liabilities Bond loans - 1,076 1,076 Liabilities with Group companies - 27 27 Trade payables - 1 1 Other current liabilities - 20 20 Accrued expenses and deferred - 8 8 income - 1,132 1,132

Financial assets and liabilities at 31 December 2018 Parent Company

Financial assets/liabilities measured at fair Financial assets/liabilities measured at Total carrying amount* Financial assets value through profit or loss amortised cost Receivables from Group companies - 2,170 2,170 Other current receivables - 28 28 Accrued income - 12 12 Cash and cash equivalents - 131 131 - 2,341 2,341 Financial liabilities Bond loans - 1,076 1,076 Liabilities with Group companies - 9 9 Other current liabilities - 19 19 Accrued expenses and deferred - 21 21 income - 1,125 1,125 *Carrying value is deemed to be equivalent to fair value.

alm equity ab | 2019 125 NOTE 27 CONT.

FAIR VALUE MEASUREMENT

IFRS 13 Fair value measurement contains a valuation hierarchy for input data used to measure fair value. This fair value hierarchy establishes three levels as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 – Other observable input data for the asset or liability than quoted prices included in Level 1, either directly (i.e. as price quotations) or indirectly (i.e. derived from price quotations). Level 3 – Input data for the asset or liability not based on observable market data (i.e. unobservable inputs).

ALM Equity’s interest rate derivatives are measured at fair value in accordance with Level 2 of the above-mentioned valuation hierarchy.

INTERESTS IN TENANT-OWNED PREMISES Fair value of the financial assets consisting of tenant-owned premises for management purposes is based on market value based on future cash flows produced by the external market valuer, New Property.

INTEREST-BEARING PROJECT FINANCING Interest-bearing project financing consists of the loans raised to finance the projects in full from co-owners of the projects and other external parties in addition to credit institutions. The carrying value is considered to reflect fair value.

CURRENT RECEIVABLES AND LIABILITIES In the case of current receivables and liabilities, such as trade receivables and trade payables with a lifespan of less than six months, the carrying value is considered to reflect fair value.

INTEREST RATE DERIVATIVES The fair value of interest rate swaps is based on market valuation of future cash flows as established by Swedbank.

BOND LOANS In the case of the bond loans, the assessment has been made that the credit margin is the same as when the bond loans were issued, which means that the fair value is deemed to be equivalent to the carrying value.

LEASE LIABILITY The lease liability is measured at the present value of all remaining lease payments attributable to operating leases with a term extending beyond 12 months, applying the Group’s marginal borrowing rate.

126 alm equity ab | 2019 NOTE 28 FINANCIAL RISKS

In its business the Group is subject to different types of financial risks: credit risk, market risk (currency risk, interest rate risk and other price risks) and liquidity risk. The Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial earnings. For further information about ALM Equity’s risks and risk management, see pages 54–63.

The Group’s financial transactions and risks are controlled centrally by the Parent Company through the Group’s Chief Financial Officer and its Chief Executive Officer. The overall objective for financial risks is to provide cost-effective financing and cash management, and to ensure that all payment obligations are handled in a timely manner.

The Board of Directors formulates written principles for overall risk management, as well as for specific areas such as credit risks, currency risks, interest rate risks, refinancing risks, liquidity risks, and the use of derivative instruments and investment of excess liquidity.

LIQUIDITY AND FINANCING RISK ALM Equity’s financing primarily consists of equity, interest-bearing and non-interest-bearing liabilities such as bank and construction loans. In 2016 and 2017, the Parent Company raised two bond loans in a total amount of SEK 1,200 million. Other interest-bearing and non-interest-bearing liabilities are recorded immediately by the Group’s property-owning subsidiaries and associates. Counterparties include Swedish commercial banks, private investors, suppliers and private customers. In some cases loan agreements contain covenants with commitments to maintain certain levels of Loan to Value and Equity Ratio. This means that creditors may be entitled to call for early repayment of loans granted, or to demand changes in terms and conditions, in the event that these special commitments are not met by the borrower. ALM Equity has to a large extent contracted out requirements for covenants when entering into financing agreements and the company meets all financial obligations to which it has agreed.

Liquidity risk is the risk that the Group may have difficulty meeting its obligations associated with financial liabilities. The Board of Directors manages liquidity risks by continually following up cash flow and liquidity forecasts in order to reduce the liquidity risk and to ensure solvency. In projects under development the company strives to attain a high proportion of short-term interest-bearing financing, and to ensure projects are fully financed before construction work is contracted. Investment objects are financed using long-term interest-bearing financing. As a further safeguard, additional liquid funds are available in the Parent Company in the event of a need for supplemental liquidity in projects.

Financing risk refers to the risk of liquid funds being unavailable, and that financing is only partially available, or not at all, or at a higher cost. The company manages this risk by carefully monitoring its liquidity and financial position by developing short-term as well as long-term models. The Group uses several different sources of finance, and works with a number of counterparties and different types of instruments, thereby reducing the effects should a counterparty or source of financing become temporarily unavailable.

The Group’s contractual and undiscounted interest payments and repayments of financial liabilities are shown in the table below. Financial instruments with variable interest are calculated using the interest rate prevailing on the balance sheet date. Liabilities are included in the period when earliest repayment may be required.

alm equity ab | 2019 127 NOTE 28 CONT.

31/12/2019 Maturity analysis, Group <6 months 6–12 months 1–3 years 3–5 years >5 years Total Derivative liabilities - - 15 - - 15 Lease liabilities* - - 20 15 75 110 Bond loans 507 23 619 - - 1,149 Liabilities to credit institutions 1,596 - - 1,265 - 2,861 Interest-bearing project financing - 67 248 - - 315 Trade payables 72 - - - - 72 Other current liabilities 362 90 27 - - 479

31/12/2018 Maturity analysis, Group <6 months 6–12 months 1–3 years 3–5 years >5 years Total Derivative liabilities - - 22 - - 22 Lease liabilities* - - 20 19 78 117 Bond loans 38 38 1,147 - - 1,223 Liabilities to credit institutions 2,409 - - - - 2,409 Interest-bearing project financing - 60 462 - - 522 Trade payables 129 - - - - 129 Other current liabilities 197 214 72 - - 483

*Lease liabilities include lease liabilities for leaseholds for which the lease liability is considered to be perpetual. Annual ground rents amounting to SEK 6 million have been included up to and including 31/12/2040.

31/12/2019 Maturity analysis, Parent <6 months 6–12 months 1–3 years 3–5 years >5 years Total Company Bond loans 507 23 619 - - 1,149 Liabilities with Group companies 24 3 - - - 27 Other current liabilities 29 - - - - 29

31/12/2018 Maturity analysis, Parent <6 months 6–12 months 1–3 years 3–5 years >5 years Total Company Bond loans 38 38 1,147 - - 1,223 Liabilities with Group companies 8 1 - - - 9 Other current liabilities 40 - - - - 40

Derivatives, bond loans, lease liabilities and loans to credit institutions are classified as long-term loans. The assets in the Project Development business area that implement projects are classified as short term; in accordance with this, other project-related liabilities are also considered to be short term.

CREDIT RISK Credit risk is the risk that a customer or a counterparty in a financial instrument is unable to fulfil its obligations, thereby subjecting the Group to a financial loss. ALM Equity’s credit and counterparty risks comprise the inability of suppliers, partners or customers to fulfil their obligations or payments as agreed. In connection with the signing of contracts, these are complemented as required with security in the form of guarantees, insurance, sureties, pledged assets, Parent Company guarantees or similar. ALM Equity is constantly working to monitor and evaluate counterparties’ financial position.

Credit risk exposure in the Group as a whole is limited. In the Group, credit risk is distributed across a large number of counterparties. The rental business has a small number of tenants who account for a large portion of rental income. However, rent is paid in advance. Credit risk exposure can arise with individual parties in connection with transactions. In the event of this, a risk assessment is conducted and if it is deemed necessary, additional collateral is requested to minimise the credit risk.

The Group has established guidelines to ensure that contracts are entered into with customers that have a suitable credit background. Payment terms are typically 30 days. Credit losses are minimal relative to the Group’s revenue. The credit quality of receivables not yet due or impaired is considered to be good and no significant credit losses have been identified.

128 alm equity ab | 2019 NOTE 28 CONT.

The Group applies the simplified method for recognition of expected credit losses. This means that a provision is made for expected credit losses for the remaining term, which is expected to be less than one year for all trade and rent receivables. A provision is made for expected credit losses based on historical credit losses and forward-looking information. In many ways the customers in each of the Group’s business areas share similar risk profiles, which is why the credit risk is initially assessed collectively for all customers within each business area. For larger individual receivables, an assessment is conducted per counterparty. A receivable is written off when there is no longer any expectation that payment will be received and when all active measures for obtaining payment have been completed.

The financial assets covered by provisions for expected credit losses according to the general method essentially consist of cash and cash equivalents, loan agreements and contract agreements. ALM Equity applies a method that combines historical experience with other known information and forward-looking factors for assessment of expected credit losses. The Group has defined default as when payment is 90 days or more overdue, or if other factors indicate default. No substantial increase in credit risk has been deemed to exist at the balance sheet date for any receivable or asset. This assessment is based on whether payment is 30 days or more overdue, or if there is a significant deterioration in the credit rating to below investment grade. In cases where amounts are deemed to be significant, a reserve is set aside for expected credit losses for financial instruments.

The Parent Company applies the same impairment method as the Group for expected credit losses on current and non-current receivables from Group companies. No significant increase in credit risk has been deemed to exist for any claim on Group companies. The assessment has been made that expected credit losses are not significant and no provision has therefore been recognised.

FINANCIAL CREDIT RISK Counterparties in cash transactions and derivative contracts are exclusively financial institutions with high credit ratings.

MARKET RISKS Market risk is the risk of the fair value of, or future cash flows from a financial instrument fluctuating due to changes in market prices. According to IFRS market risks are divided into three types: currency risk, interest risk and other price risks. The market risk affecting the Group consists of interest rate risk. At present the Group has no loans or holdings exposing the Group to currency risk or other price risks.

INTEREST RATE RISK Interest rate risk is the risk of the fair value of, or future cash flows from a financial instrument fluctuating due to changes in market rates. Interest expenses constitute a significant portion of the Group’s expenses. Interest rate risk is attributable to the trend in current interest rate levels and changes that affect ALM Equity’s financing costs.

Interest rate risk is defined as the risk of impact on earnings and cash flow from a change in market rates. To increase predictability in the Group’s finance costs, ALM Equity has the opportunity to use interest rate derivatives.

Liabilities to credit institutions are either on a fully floating basis or linked to STIBOR 7 days, 30 days or 90 days.

A rise or decline in interest rates of 1 percent at the balance sheet date would impact net financial items before taxes by SEK +/-23 million (+/-5) and the effect on equity after taxes would be SEK +/-23 million (+/-4). The interest rate swaps have not been taken into account in this analysis as they are linked to future tenant-owner association loans.

In 2016 and 2017, ALM Equity issued bond loans in a total amount of SEK 1,200 million intended for project financing. ALM Equity invested SEK 124 million of the issues on its own books. The 2016 bond loan carried a variable interest rate of STIBOR 3m + 6.75 percent (quarterly payment) with a floor of 0 percent, and it was repaid in full on 18 March 2020. The 2017 bond loan carries a variable interest rate of STIBOR 3m + 7.5 percent (quarterly payment) and has a maturity date of 19 May 2021. The bonds are listed on Nasdaq Stockholm.

CAPITAL MANAGEMENT The Group’s goal with respect to the capital structure is to maintain an optimal asset and liability structure over time, well adapted to the Group’s business. Capital is defined as equity, which amounts to SEK 3,310 million (2,138). The Group has no explicit financial targets.

There were no changes during the year in the Group’s capital management. None of the Group companies are subject to external capital requirements.

alm equity ab | 2019 129 NOTE 29 PREPAID EXPENSES AND ACCRUED INCOME

Group Parent Company 2019 2018 2019 2018 Accrued interest income 2 2 1 1 Other prepaid expenses 62 59 6 11 64 61 7 12

NOTE 30 CASH AND CASH EQUIVALENTS

Group Parent Company 2019 2018 2019 2018 Bank deposits* 699 390 453 131 699 390 453 131

*Cash and cash equivalents in both the Group and the Parent Company solely comprise bank balances.

NOTE 31 EQUITY

Share capital and other contributed capital Other Number of Number of Share capital contributed ordinary shares preference shares (SEKm)* capital (SEKm) At 1 January 2018 10,154,600 8,122,035 183 1,006 Bonus issue 31/05/2018 101,546 1 Shareholder contributions -20 At 31 December 2018 10,154,600 8,223,581 184 986 Non-cash issue 27/02/2019 - 207,222 2 21 Bonus issue 13/06/2019 - 101,546 1 - Set-off issue 13/08/2019 - 1,285,926 13 112 Dividends - - - - Shareholder contributions - - - 489 At 31 December 2019 10,154,600 9,818,275 200 1,608

SHARE CAPITAL At 31 December 2019, the registered share capital consisted of 19,972,875 shares divided into classes as shown above. Preference shares entitle their holder to one vote per share, while ordinary shares entitle their holder to ten votes per share at the Annual General Meeting of shareholders. Preference shares have a pre-emptive right over ordinary shares to an annual dividend of SEK 8.40. The accumulated right to dividend for preference shares amounts to SEK 20,618,000 at 31 December 2019 (SEK 17,270,000 at 31 December 2018).

OTHER CONTRIBUTED CAPITAL Other contributed capital consists of capital contributed by the company’s owners, such as for example premiums in connection with oversubscription, and capital contributions in co-owned subsidiaries. The return on capital is credited to equity on an ongoing basis. The capital, including return, enjoys preference in the event of repayment of unrestricted equity in the subsidiaries before any distribution of profit. Contributed capital, and the return thereon, is repaid in connection with final accounting of profitable projects. In the event of a project reporting a loss, repayment is reduced by such loss.

WARRANTS An issue of 72,000 warrants for an employee incentive programme was floated in 2015. Each warrant entitles the subscriber to one ordinary share in the company at an offer price of SEK 222.08. According to the terms and conditions, shares could originally be subscribed for on three occasions, of which one remains: 1 June 2020–15 June 2020. In connection with previous subscription periods, no-one has opted to exercise their warrants to subscribe for shares. The warrants have been subscribed for at market value.

Another issue of 154,700 warrants for an employee incentive programme was floated in 2017. Each warrant entitles the subscriber to one ordinary share in the company at an offer price of SEK 368.00.

130 alm equity ab | 2019 NOTE 31 CONT.

According to the terms and conditions for the issue, shares can be subscribed for during the following periods: 1 October 2020–15 October 2020, 1 October 2021–15 October 2021 and 1 October 2022–15 October 2022.

The warrants have been subscribed for at market value.

Upon full utilisation of the warrants, the company’s share capital increases by a maximum of SEK 3.5 million divided into 350,000 shares, equivalent to a dilution effect of approximately 2.0 percent of all shares outstanding and approximately 3.5 percent of ordinary shares.

NOTE 32 ACCRUED EXPENSES AND DEFERRED INCOME

Group Parent Company 2019 2018 2019 2018 Accrued interest expenses 26 28 7 7 Personnel-related expenses 14 14 1 1 Other items 204 108 - 13 244 150 8 21

NOTE 33 ADJUSTMENT FOR ITEMS NOT INCLUDED IN CASH FLOW

Group Parent Company 2019 2018 2019 2018 Non-cash items 36 19 - - Depreciation/amortisation 5 1 - - Provisions -2 -2 -2 -2 Other items 39 18 -2 -2

Group – Reconciliation of liabilities attributable to financing activities

Liabilities Changes affecting Changes not 31/12/2018 31/12/2019 acquired cash flow affecting cash flow Other interest-bearing non-current assets - - 1,274 -10 1,264 Short-term bond loans - - - 476 476 Liabilities to credit institutions 2,409 - -796 -17 1,596 Interest-bearing project financing 494 - -133 -71 290 3,979 - 345 -98 4,226

Parent Company – Reconciliation of liabilities attributable to financing activities

Liabilities Changes affecting Changes not 31/12/2018 31/12/2019 acquired cash flow affecting cash flow Long-term bond loan 1,076 - - -476 600 Short-term bond loan - - - 476 476 1,076 - - - 1,076

NOTE 34 RELATED-PARTY TRANSACTIONS

At year-end, the Parent Company had outstanding receivables from the subsidiaries in the amount of SEK 1,792 million (2,170) and liabilities of SEK 27 million (9).

For information regarding remuneration of members of senior management, see Note 5 Employees and personnel costs.

At the end of 2019, the company’s CEO and family owned tenant-owned apartments in projects for a total of approximately SEK 16 million (50) acquired at market prices. A total of approximately SEK 1 million (3) was paid to a company in which the Chair of the Board of Directors is a co-owner for contracted legal assignments, primarily in the residential projects. All transactions were made at market prices. alm equity ab | 2019 131 NOTE 35 PLEDGED ASSETS AND CONTINGENT LIABILITIES

Pledged assets Group Parent Company 2019 2018 2019 2018 Property mortgages 2,236 2,008 - - Interests in tenant-owner associations 202 91 - - 2,438 2,099 - -

Contingent liabilities Group Parent Company 2019 2018 2019 2018 Guarantees for Group companies - 178 1,272 503 Additional considerations in projects** 184 330 - - 184 508 1,272 503

**Refers to additional considerations in projects to be paid upon each respective approved detailed zoning plan. Financing is entirely secured from external investors. In April 2020, 121 were paid.

At 31 December 2019, the Group had total liabilities of SEK 3.5 billion for which assets had been pledged in the form of property mortgages in the Project Development and Real Estate Management business areas. For these liabilities, security has also been pledged in the form of guarantees within the business areas and in the Parent Company. In addition to this, at year-end ALM Equity had undertaken to acquire 127 unsold units with a value of SEK 0.4 billion in projects intended for the external market where production has started.

From time to time the Group is involved in various suits and legal proceedings resulting from its normal business operations. These claims may relate to, but are not limited to, the Group’s business practices, personnel and taxation matters. Based on information currently available, the Group is of the opinion that no current issues require provisions to be set aside since none will have a significant negative impact on the Group’s financial earnings.

In its capacity as a property owner and business operator, ALM Equity is responsible for contamination and other environmental damage according to Swedish environmental protection legislation. There are currently no significant environmental requirements levelled against any of the Group companies, neither has ALM Equity identified any significant environmental risks. Information about ALM Equity’s environmental work and efforts to promote a more sustainable society can be found on pages 42–53.

132 alm equity ab | 2019 NOTE 36 EFFECTS OF TRANSITION TO NEW ACCOUNTING POLICIES

In connection with the 2019 year-end report, ALM Equity decided to adjust its previously applied accounting policies regarding residential projects and investment properties. The revised application has been adjusted retrospectively, in accordance with IAS 8; see Note 1 on page 94 for further information about the new accounting policies. The restatement effects are detailed below.

EFFECTS ON EARNINGS AND FINANCIAL POSITION

Reclassifications on consolidation According to previous principles for classifying tenant-owner associations, ALM Equity has decided that each tenant-owner association is an independent legal entity. Based on this conclusion, tenant-owner associations have not been consolidated in the consolidated accounts.

IFRS regulations require judgements, which allows scope for interpretation and in many cases differing conclusions. From its inspection and assessment of residential projects with other operators in the industry, the Swedish Financial Supervisory Authority has concluded that tenant-owner associations should be consolidated. ALM Equity has been following the dialogue and has decided to adapt its accounting policies regarding consolidation of tenant-owner associations, which means that the timing will be adjusted for when project revenue and project expenditure are settled.

As a result, ALM Equity has also decided to consolidate the managements groups with investor arrangements that were previously recognised as unlisted shareholdings.

RECLASSIFICATION OF PROPERTIES UNDER PRODUCTION INTENDED FOR MANAGEMENT As a result of the reclassification of tenant-owner associations and ordinary shareholdings in management groups, ALM Equity has reclassified residential projects intended for the Real Estate Management business area as ‘Investment properties under construction’. It is not deemed to be possible initially to reliably calculate the value of these; instead properties are valued at accumulated cost during the development phase, including production costs incurred. Once the necessary criteria and conditions have been satisfied for it to be possible to use the properties for their purpose, and the value of the properties can be reliably calculated, the properties are recognised at fair value in accordance with IAS 40. Recalculation has been done on the basis of the appreciation in value occurring only once there is final proof and the Real Estate Management business area has taken over possession, which will result in more significant non-recurring effects on completion. Initial appreciation in value is established based on the Project Development business area’s income; valuation subsequently occurs based on the fair value principle within the Real Estate Management business area.

REVENUE RECOGNITION According to previous accounting policies in which the tenant-owner association is regarded as an independent legal entity, the percentage-of-completion method was applied from the date that production started. Now that ALM Equity is consolidating the tenant-owner associations, the percentage-of-completion method can no longer be applied and revenue recognition will instead occur on the basis of the completion method, in connection with the respective buyer taking possession.

LOANS TO CREDIT INSTITUTIONS The consolidation of tenant-owner associations and management groups means that loans to credit institutions increase by SEK 2.2 billion in 2019 and by SEK 1.9 billion for 2018. Note 35 on page 132 provides details of security and contingent liabilities pledged in favour of these. Project-related interest and other loan expenses such as arrangement fees are capitalised continually against the project with an accrued tax effect consistent with previously communicated accounting policies for this.

The summary below illustrates the effects of the revised accounting policies on the consolidated financial statements for 2019 and the comparative year 2018. Certain adjustments to the classification of balance sheet items have been made in relation to the transition.

alm equity ab | 2019 133 NOTE 36 CONT.

Consolidated statement of comprehensive income, 1 January – 31 December 2019 SEK million According According to previous Transition to new policies effects policies Net revenue 1,786 -105 1,681 Production and operating costs -1,579 185 -1,394 Gross profit 207 80 287

Selling and administrative costs -119 -24 -143 Profit/loss from interests recognised according to the equity method -5 - -5 Operating profit/loss 83 56 139

Finance income 13 -8 5 Finance costs -109 -21 -130 Profit/loss after financial items -13 27 14

Unrealised changes in value Unrealised changes in value, derivative instruments 7 - 7 Unrealised changes in the value of interests in tenant-owned premises - 20 20 Unrealised changes in value, investment properties - 120 120 Unrealised changes in value, investment properties under construction 1 270 271 Unrealised changes in the value of unlisted shares 71 -71 0 Profit/loss before tax 66 366 432

Tax on profit for the year -2 4 2 Profit/loss for the period 64 370 434

Other comprehensive income for the period Other comprehensive income - - - Other comprehensive income for the year after tax - - -

Comprehensive income for the year 64 370 434

Profit/loss for the year attributable to: Parent Company shareholders 60 218 278 Non-controlling interests 3 153 156

Comprehensive income for the year attributable to: Parent Company shareholders 60 218 278 Non-controlling interests 3 153 156

134 alm equity ab | 2019 NOTE 36 CONT.

Consolidated balance sheet at 31 December 2019 SEK million According According to previous Transition to new policies effects policies ASSETS Non-current assets Machinery and equipment 12 4 16 Investment properties 198 1,310 1,508 Investment properties under construction - 1,602 1,602 Interests in tenant-owned premises - 42 42 Right-of-use assets 96 81 177 Interests in other unlisted shares 72 -72 - Interests according to the equity method 10 - 10 Deferred tax assets 4 - 4 Total non-current assets 392 2,967 3,359

Current assets Development properties 1,121 1,686 2,807 Residential projects in progress 2,854 -2,128 726 Interests in tenant-owner apartments and property rights 209 128 337 Trade receivables 141 -92 49 Other current receivables 317 144 461 Prepaid expenses and accrued income 60 4 64 Cash and cash equivalents 679 20 699 Total current assets 5,381 -238 5,143 TOTAL ASSETS 5,773 2,729 8,502

EQUITY AND LIABILITIES

Equity 3,098 212 3,310

Non-current liabilities Non-current interest-bearing liabilities 858 1,006 1,864 Derivatives -4 19 15 Lease liability 54 122 176 Deferred tax liabilities 166 12 178 Other provisions 20 - 20 Total non-current liabilities 1,094 1,159 2,253

Current liabilities Interest-bearing bond loans 476 - 476 Liabilities to credit institutions 359 1,237 1,596 Interest-bearing project financing 280 10 290 Trade payables 35 37 72 Current tax liability 5 11 16 Other current liabilities 205 40 245 Accrued expenses and deferred income 221 23 244 Total current liabilities 1,581 1,358 2,939

Total liabilities 2,675 2,517 5,192 TOTAL LIABILITIES AND EQUITY 5,773 2,729 8,502

alm equity ab | 2019 135 NOTE 36 CONT.

Consolidated statement of comprehensive income, 1 January – 31 December 2018 SEK million According According to previous Transition to new policies effects policies Net revenue 2,598 -284 2,314 Production and operating costs -2,283 221 -2,062 Gross profit 315 -63 252

Selling and administrative costs -125 -20 -145 Profit/loss from interests recognised according to the equity -1 - -1 method Operating profit/loss 189 -83 106

Finance income 10 - 10 Finance costs -83 -20 -103 Profit/loss after financial items 116 -103 13

Unrealised changes in value Change in value of derivative instruments 3 - 3 Changes in the value of unlisted shares - - - Profit/loss before tax 119 -103 16

Tax on profit for the year -3 -8 -11 Profit/loss for the period 116 -111 5

Other comprehensive income for the period Other comprehensive income - - - Other comprehensive income for the year after tax - - -

Comprehensive income for the year 116 -111 5

Profit/loss for the year attributable to: Parent Company shareholders 86 -70 16 Non-controlling interests 30 -41 -11

Comprehensive income for the year attributable to: Parent Company shareholders 86 -70 16 Non-controlling interests 30 -41 -11

136 alm equity ab | 2019 NOTE 36 CONT.

Consolidated balance sheet at 31 December 2018 SEK million According According to previous Transition to new policies effects policies ASSETS Non-current assets Machinery and equipment 6 - 6 Investment properties - - - Investment properties under construction - 1,212 1,212 Right-of-use assets - - - Interests in other unlisted shares - - - Interests according to the equity method 19 - 19 Deferred tax assets 4 - 4 Total non-current assets 29 1,212 1,241

Current assets Development properties 1,238 2,326 3,564 Residential projects in progress 3,017 -2,008 1,009 Interests in tenant-owner apartments and property rights 366 - 366 Trade receivables 98 14 112 Other current receivables 195 33 228 Prepaid expenses and accrued income 55 6 61 Other short-term investments 1 - 1 Cash and cash equivalents 336 54 390 Total current assets 5,306 425 5,731 TOTAL ASSETS 5,335 1,637 6,972

Equity 2,709 -571 2,138

Non-current liabilities Non-current interest-bearing liabilities 1,076 - 1,076 Derivatives 3 19 22 Lease liability - - - Deferred tax liabilities 165 16 181 Other provisions 11 - 11 Total non-current liabilities 1,255 35 1,290

Current liabilities Interest-bearing bond loans - - - Liabilities to credit institutions 508 1,901 2,409 Interest-bearing project financing 493 1 494 Trade payables 13 116 129 Current tax liability 73 6 79 Other current liabilities 148 135 283 Accrued expenses and deferred income 136 14 150 Total current liabilities 1,371 2,173 3,544

Total liabilities 2,626 2,208 4,834 TOTAL LIABILITIES AND EQUITY 5,335 1,637 6,972

alm equity ab | 2019 137 NOTE 36 CONT.

Consolidated balance sheet at 1 January 2018 SEK million According According to previous Transition to new policies effects policies ASSETS Non-current assets Machinery and equipment 14 - 14 Investment properties - - - Investment properties under construction - 771 771 Right-of-use assets - - - Interests in other unlisted shares - - - Interests according to the equity method 34 - 34 Deferred tax assets 5 - 5 Total non-current assets 53 771 824

Current assets Development properties 718 2,554 3,272 Residential projects in progress 3,345 -1,951 1,394 Interests in tenant-owner apartments and property rights 87 - 87 Trade receivables 104 -7 97 Receivables in the form of interests, share of equity 7 - 7 Other current receivables 318 30 348 Prepaid expenses and accrued income 130 9 139 Other short-term investments 30 - 30 Cash and cash equivalents 569 40 609 Total current assets 5,308 675 5,983 TOTAL ASSETS 5,361 1,446 6,807

Equity 2,667 -458 2,209

Non-current liabilities Non-current interest-bearing liabilities 1,087 - 1,087 Derivatives 7 19 26 Lease liability - - - Deferred tax liabilities 165 7 172 Other provisions 26 - 26 Total non-current liabilities 1,285 26 1,311

Current liabilities Interest-bearing bond loans - - - Liabilities to credit institutions 865 1,522 2,387 Interest-bearing project financing 147 -21 126 Trade payables 124 61 185 Current tax liability 70 - 70 Other current liabilities 110 297 407 Accrued expenses and deferred income 95 17 112 Total current liabilities 1,411 1,876 3,287

Total liabilities 2,696 1,902 4,598 TOTAL LIABILITIES AND EQUITY 5,363 1,444 6,807

138 alm equity ab | 2019 NOTE 37 APPROPRIATION OF PROFITS

Proposed distribution of profits (SEK)

PARENT COMPANY At the disposal of the Annual General Meeting: Retained earnings 1,091,874,888 Profit/loss for the year -117,024,100 974,850,788 To be allocated as follows:* Dividend to holders of ordinary shares - Dividend to current holders of preference shares 82,473,510 Issued to holders of preference shares Dividend to holders of preference shares issued as bonus issue* 852,986 To be carried forward 891,524,292 974,850,788 *According to the proposal of the Board of Directors to the Annual General Meeting:

The Board of Directors proposes a dividend of one (1) preference share per 100 ordinary shares via a bonus issue. The value of this dividend based on the redemption value of one preference share corresponds to SEK 1.20 (1.20) per ordinary share. Furthermore, the Board proposes a cash dividend of SEK 8.40 (8.40) per preference share, payable quarterly in the amount of SEK 2.10 (2.10) per quarter.

NOTE 38 EVENTS AFTER BALANCE SHEET DATE

• The Project Development business area is starting construction of 467 units together with the Construction Management business area, 451 of which are intended for the Real Estate Management business area.

• The Board of Directors proposes a dividend of one (1) preference share per 100 ordinary shares through a bonus issue rather than a cash dividend, equivalent to a redemption value of SEK 1.20 (1.20) per ordinary share. Furthermore, the Board of Directors proposes a dividend of SEK 8.40 (8.40) in cash per preference share, payable quarterly in an amount of SEK 2.10 (2.10). • 2020 began with concern and uncertainty surrounding the spread of the new coronavirus and illness Covid-19, and its impact on society and the economy. In the short term, up until the drafting of this annual report, the impact on the Group’s revenue, earnings and cash flow has been minimal. In the current situation it is difficult to judge what the long-term impact will be on society and the economy, and the knock-on effects for ALM Equity.

alm equity ab | 2019 139 Stockholm, 29 April 2020 ALM Equity AB

Maria Wideroth Johan Unger CHAIR

Gerard Versteegh Johan Wachtmeister

Joakim Alm CEO

Our audit report was submitted on 29 April 2020. Ernst & Young AB

Jonas Svensson AUTHORISED PUBLIC ACCOUNTANT

140 alm equity ab | 2019 AUDITOR’S REPORT To the Annual General Meeting of ALM Equity AB, Corporate ID Number 556549-1650

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS Opinions We have performed an audit of the annual accounts and the consolidated In connection with our audit of the annual accounts and consolidated financial statements of ALM Equity AB for the financial year1 January 2019–31 accounts, our responsibility is to read the information identified above December 2019. The annual accounts and consolidated accounts of the and consider whether the information is materially inconsistent with company are included on pages 83–140 of this document. the annual accounts and consolidated accounts.

In our opinion, the annual accounts have been prepared in accordance In this procedure we also take into account our knowledge otherwise with the Annual Accounts Act and present fairly, in all material respects, obtained in the audit and assess whether the information otherwise the financial position of the Parent Company at 31 December 2019 appears to be materially misstated. and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated If we, based on the work performed concerning this information, accounts have been prepared in accordance with the Annual Accounts conclude that there is a material misstatement of this other information, Act and present fairly, in all material respects, the financial position of we are required to report that fact. We have nothing to report in this the Group at 31 December 2019 and of its financial performance and regard. cash flow for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Responsibilities of the Board of Directors and the Chief Executive Accounts Act. The Directors’ Report is consistent with the other parts of Officer the annual accounts and consolidated accounts. The Board of Directors and the Chief Executive Officer are responsible for the preparation of the annual accounts and consolidated accounts We therefore recommend that the general meeting of shareholders and for ensuring that they provide a fair presentation in accordance adopts the income statement and balance sheet for the Parent with the Annual Accounts Act and, concerning the consolidated Company and the statement of comprehensive income and statement accounts, in accordance with IFRS as adopted by the EU. The Board of financial position for the Group. of Directors and the Chief Executive Officer are also responsible for such internal control as they determine is necessary to enable the Basis for opinions preparation of annual accounts and consolidated accounts that are We conducted our audit in accordance with International Standards on free from material misstatement, whether due to fraud or error. Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in In preparing the annual accounts and consolidated accounts, the the section entitled ‘Auditor’s responsibilities’. We are independent Board of Directors and the CEO are responsible for the assessment of in relation to the Parent Company and Group, in accordance with the company’s and the Group’s ability to continue as a going concern. generally accepted auditing standards in Sweden, and have in They disclose, as applicable, conditions that may affect the ability to other respects fulfilled our ethical responsibility according to these continue operating and using the going concern basis of accounting. requirements. However, the going concern basis of accounting is not applied if the Board of Directors and the CEO intend to liquidate the company, to We believe that the audit evidence we have obtained is sufficient and cease operations, or have no realistic alternative but to do so. appropriate to provide a basis for our audit opinions. Auditor’s responsibilities Other information besides the annual accounts and consolidated Our objectives are to obtain reasonable assurance that the annual accounts accounts and consolidated accounts as a whole are free from material The Board of Directors and the CEO are responsible for the other misstatement, whether due to fraud or error, and to issue an auditor’s information contained in this annual report. The other information report that includes our opinions. Reasonable assurance is a high comprises pages 1–82. level of assurance, but is not a guarantee that an audit conducted in accordance with ISA and generally accepted auditing standards Our opinion on the annual accounts and consolidated accounts does in Sweden will always detect a material misstatement when it exists. not cover this other information and we do not express any form of Misstatements can arise from fraud or error and are considered assurance conclusion regarding this other information. material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

alm equity ab | 2019 141 As part of an audit in accordance with ISA, we exercise professional REPORT ON OTHER LEGAL AND REGULATORY judgement and maintain professional scepticism throughout the audit. REQUIREMENTS We also: Opinions In addition to our audit of the annual accounts and consolidated • identify and assess the risks of material misstatement in the accounts, we have also audited the administration of the Board of annual accounts and consolidated accounts, whether due to fraud Directors and the Chief Executive Officer of ALM Equity AB for the or error, design and perform audit procedures responsive to those financial year 01/01/2019–31/12/2019 and the proposed appropriations risks, and obtain audit evidence that is sufficient and appropriate to of the company’s profit or loss. provide a basis for our opinions. The risk of failing to detect a material We recommend to the general meeting of shareholders that the profit misstatement resulting from fraud is higher than for one resulting from be appropriated in accordance with the proposal in the directors’ error, as fraud may involve collusion, forgery, intentional omissions, report and that the members of the Board of Directors and the Chief misrepresentations, or internal control breaches. Executive Officer be discharged from liability for the financial year. • obtain an understanding of the company’s internal control relevant to our audit in order to design audit procedures that are appropriate Basis for opinions in the circumstances, but not for the purpose of expressing an opinion We conducted the audit in accordance with generally accepted on the effectiveness of the company’s internal control. auditing standards in Sweden. Our responsibilities under those • evaluate the appropriateness of accounting policies used and the standards are further described in the ‘Auditor’s responsibilities’ section. reasonableness of accounting estimates and related disclosures made We are independent in relation to the Parent Company and Group, in by the Board of Directors and the CEO. accordance with generally accepted auditing standards in Sweden, • conclude on the appropriateness of the Board of Directors’ and and have in other respects fulfilled our ethical responsibility according the CEO’s use of the going concern basis of accounting in preparing to these requirements. the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any We believe that the audit evidence we have obtained is sufficient and material uncertainty exists related to events or conditions that may appropriate to provide a basis for our audit opinions. cast significant doubt on the company’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty Responsibilities of the Board of Directors and Chief exists, we are required to draw attention in our auditor’s report to the Executive Officer related disclosures in the annual accounts and consolidated accounts The Board of Directors is responsible for the proposal for appropriations or, if such disclosures are inadequate, to modify our opinion about of the company’s profit or loss. At the proposal of a dividend, this includes the annual accounts and consolidated accounts. Our conclusions are an assessment of whether the dividend is justifiable considering the based on the audit evidence obtained up to the date of our auditor’s requirements which the company and Group’s type of operations, size report. However, future events or conditions may cause a company and and risks place on the size of the Parent Company and Group’s equity, a group to cease to continue as a going concern. consolidation requirements, liquidity and position in general. • evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, The Board of Directors is responsible for the company’s organisation and whether the annual accounts and consolidated accounts represent and the administration of the company’s affairs. This includes the underlying transactions and events in a manner that achieves fair among other things continuous assessment of the company’s and presentation. the Group’s financial situation and ensuring that the company’s • obtain sufficient and appropriate audit evidence regarding the organisation is designed so that the accounting, management of financial information of the entities or business activities within the Group assets and the company’s financial affairs otherwise are controlled to express an opinion on the consolidated accounts. We are responsible for in a satisfactory manner. The Chief Executive Officer shall manage the direction, supervision and performance of the Group audit. We remain ongoing administration according to the Board of Directors’ guidelines solely responsible for our opinions. and instructions and among other matters take measures that are necessary to fulfil the company’s accounting in accordance with law We must inform the Board of Directors of, among other matters, the and handle the management of assets in a satisfactory manner. planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in Auditor’s responsibilities internal control that we have identified. Our objective concerning the audit of the administration, and thereby our opinion regarding discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Chief Executive Officer in any material respect:

142 alm equity ab | 2019 • has undertaken any action or been guilty of any omission which of our professional judgement, based on risk and materiality. This means can give rise to liability to the company, or that we focus the examination on such actions, areas and relationships • in any other way has acted in contravention of the Companies Act, that are material for operations and where deviations and violations the Annual Accounts Act or the Articles of Association. would be particularly significant to the company’s situation. We examine Our objective concerning the audit of the proposed appropriations of and test decisions undertaken, support for decisions, actions taken the company’s profit or loss, and thereby our opinion about this, is to and other circumstances that are relevant to our opinion concerning assess with a reasonable degree of assurance whether the proposal is discharge from liability. As a basis for our opinion on the Board of in accordance with the Companies Act. Directors’ proposed appropriations of the company’s profit or loss, we examined the Board of Directors’ reasoned statement and a selection Reasonable assurance is a high level of assurance, but is not a of supporting evidence in order to be able to assess whether the guarantee that an audit conducted in accordance with generally proposal is in accordance with the Companies Act. accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are not in Stockholm, 29 April 2020 accordance with the Companies Act. Ernst & Young AB As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgement and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations Jonas Svensson of the company’s profit or loss is based primarily on the audit of the Authorised Public Accountant accounts. Any additional audit procedures are performed on the basis

alm equity ab | 2019 143 CALENDAR

2020 27 May Interim Report January–March 28 May Annual General Meeting 30 June Record date for dividend to holders of preference shares 25 August Half-year Report January–June 30 September Record date for dividend to holders of preference shares 25 November Interim Report January–September 30 December Record date for dividend to holders of preference shares

2021 25 February Year-end Report 31 March Record date for dividend to holders of preference shares

CONTACT INFORMATION

ALM Equity AB (publ) Telephone: +46-8-562 303 00 Regeringsgatan 59 Email [email protected] 111 56 Stockholm www.almequity.se

© ALM Equity AB 2020 • Print: EO Grafiska AB, 2020 • Photos & illustrations: Photographer Thomas Henriksson [2, 6, 11, 13, 19, 27, 32, 35, 37, 44, 52, 64, 65, 66, 67, 69, 73, 74], 2xA Arkitektur & Teknik [18], Notar [24], Pia Andersson Fastighersbyrå [77], PSD.zone [36], Walk the Room [25], David Vall (Zap PR), VARG Arkitekter [38], 3D House [1, 34], White Arkitekter [51], Carl Nenzen Loven (Unsplash.com) [62], Oskars Sylwan (Unsplash.com) 47], Haut Risque (Unsplash.com) [40], ALM Equity [14, 29, 68]

144 alm equity ab | 2019