Fastighetsbeståndet Och Intjäningskapaciteten Annual Report 2004 Kungsleden

Fastighetsbeståndet och intjäningskapaciteten Annual Report 2004 Kungsleden

57 Kungsleden is a Swedish property company that prioritises yield above property type or geographical location. At the end of 2004, Kungsleden’s holdings comprised 371 properties with a book value of approximately SEK 12.5 bn. The holding is distributed over a total of 91 municipalities nationwide, although focused on the southern and central provinces of Götaland and Svealand. At year-end 2004, the property yield was 7.9 per cent. Kungsleden has been quoted on the Stockholm Stock Exchange O-list since 14 April 1999.

Vision Kungsleden’s vision is that by means of skilled entrepreneurship and a high level of expertise, Kungsleden will become Sweden’s most proﬁtable and successful property company.

Business concept Kungsleden owns and manages properties, generating high and stable long-term returns.

Strategy We intend to achieve our objectives by: • Enhancing our skilled and businesslike organisation; • Pursuing customer satisfaction through the active management and enhancement of our property holding; • Proceeding from our existing holding, and through acquisitions and disposals, assuring high long-term returns.

Financial targets Our objectives are to achieve: • A minimum return on equity of 15 per cent; • A minimum property yield net of property administration in our portfolio of 8.5 per cent.

Risk limits We limit risk by: • Sourcing a maximum of 30 per cent of rental revenue from industrial and warehouse properties; • Sourcing a maximum of 30 per cent of rental revenue from properties located in municipalities with populations of less than 25,000; • Maintaining a minimum long-term equity ratio of 25 per cent, with a minimum short-term level of 20 per cent.

2 Contents

2004 in summary 5 32 Financial reporting Report of the Directors 1999—2004 6 Income Statement Balance Sheet Chief Executive’s statement 8 Change in shareholders’ equity Eager for new challenges Cash Flow Statement Supplementary disclosures Questions about Kungsleden 10 Proposed appropriation of proﬁts

Organisational and human resources 14 Organisational resources 43 Audit Report Human resources Senior executives 45 Staff Board of Directors and Auditors 46 Assets: Properties The share and shareholders 18 50 Acquired properties 2004 Environmental audit 20 52 Divested properties 2004 The property holding and 21 earnings capacity 54 Deﬁnitions The property holding

Earnings capacity 55 Invitation to Kungsleden’s Annual General Meeting Financial overview 25

The past year 55 Addresses Property values Funding Forecast 2005 Five-year overview

3 Ingrid Ljungqvist, 59, Management Assistant, West region.

Why do you work at Kungsleden? What was the most enjoyable part Kungsleden is a very nice place to work and I’ve been of your work in 2004? here since the company started in 1991. That’s a hard one because day-to-day property management is always enjoyable, and because we work in What’s the most important part of your job? teams, we have a greater sense of participation in the Customer contact is the most important, and the most fun. properties themselves. It also means my job’s varied—no two days are alike. What changed most in your job in 2004? What do you think distinguishes Kungsleden’s The manager I’ve worked with over the last ﬁve years is working methods? moving on at the beginning of 2005, which will be a big We know our properties so well, both ﬁnancially and change because we’ve worked together so closely and technically, which I think is unusual. We work as if they know each other so well. were our own little property company. We make sure we get all the right information, adding to our know-how What’s your favourite property? and overview of properties. Our town square properties in Gothenburg; there’s always something going on there.

4 2004 in summary

• Profit before tax amounted to SEK 571 (485) m; profit after tax was SEK 928 (745) m, or SEK 49.00 (39.30) per share. • Proposed dividends are SEK 15.00 (13.00) per share. The Board of Directors will be proposing a 2:1 share split at the AGM. • Rental revenues and operating surplus grew by 10 (7) and 10 (4) per cent respectively to SEK 1,508 (1,376) m and SEK 934 (850) m respectively. • Forecast for the financial year 2005 of profits for calculating dividends of SEK 600 (595) m.

Kungsleden has a dual focus: property trading and management. At year-end, its property yield calculated from earnings capacity was 7.9 (8.3) per cent, net of property administration. Property disposals in the year contributed to increasing the property portfolio’s yield by 0.1 percentage points, while acquisitions exerted a negative 0.1 percentage point contribution. Property administration exerted a negative contribution of 0.4 percentage points.

Acquisitions Disposals Property trading

64 properties 116 properties Disposals SEK 2,490 m SEK 2,723 m proﬁtable 83 properties SEK 254 m loss-making 7.7% property 6.8% property 33 properties SEK –51 m yield yield Sales administration SEK –33 m Proﬁt SEK 170 m

Earnings capacity 2003 2004 Operating net SEK 1,092 m SEK 1,054 m Property yield 8.3% 7.9% –Acquisitions and disposals 0.0% –Management of properties owned for the full year –0.4% Fewer municipalities 110 91 Higher value per property SEK 29 m SEK 34 m

5 Kungsleden 1999–2004

At its initial public offering (IPO) in 1999, Kungsleden owned SEK 5 bn-worth of property and generated an operating surplus of SEK 403 m. Five years later, the property portfolio value had more than doubled to SEK 12.5 bn and the operating surplus was up to SEK 934 m. Gross proﬁt increased by 16 per cent annually since 1999, and was SEK 1,104 m in 2004. This progress occurred in an era when the Swedish property market was transforming. But Kungsleden maintained a consistent focus throughout— generating sustainable high and stable returns by continually enhancing its property portfolio. Kungsleden has maintained a high transaction rate, acquiring a total of 366 properties for SEK 13.9 bn and disposing of 610 for SEK 7.4 bn since the beginning of 1999.

SHARE PRICE PERFORMANCE Share price and total return Share price and total return SEK % 300SEK %50 Kungsleden’s market capitalization was SEK 4.8 bn at year- 300 50 250 45 end 2004, against SEK 1.1 bn at its IPO in April 1999. Accord- 250 45 200 40 ingly, market capitalization increased by an annual average of 200 40 150 35 27 per cent in this period. Including dividends, returns in the 150 35 100 30 period averaged 34 per cent per annum. 100 30 50 25 Total dividends for 1999–2004 (the Board’s proposed divi- 50 25 0 20 dend is assumed for 2004) amount to a total of SEK 67.50 per 0 1999 2000 2001 2002 2003 2004 20 share, which is higher than the share price at the IPO of SEK 1999 2000 2001 2002 2003 2004 Closing price Total return 66.00. Closing price Total return

PROFIT PERFORMANCE

Gross profit Property yield Gross profit Property yield SEK m % 1,100SEK m 9.0% 1,1001,000 9.0 1,000900 90800 8.5 80700 8.5 70600 8.0 60500 8.0 50400 40300 7.5 30200 7.5 20100 100 7.0 0 1999 2000 2001 2002 2003 2004 7.0 1999 2000 2001 2002 2003 2004 1999Operating2000 surplus 2001Profit from2002 property2003 trading 2004 1999 2000 2001 2002 2003 2004 Operating surplus Profit from property trading

Kungsleden’s gross profit, partly comprising its operating The yield from the property portfolio, i.e. operating surplus in surplus from property management and the profit from prop- relation to average property book values, was an average of erty trading, nearly doubled in 1999–2004, with the average 7.9 per cent in 1999–2004. Through its property trading and annual growth rate being 16 per cent. Kungsleden’s operat- active management, Kungsleden’s ambition is to continuously ing surplus grew by nearly 20 per cent annually in the period, enhance the relationship between risk and return. while the profit from property trading increased less. Total property values and value per property Total floor-space SEKTotal bnproperty values and value per property SEK m T000otal sq. floor m.-space SEK13 bn SEK 35m 2,000000 sq. m. 13 3035 2,000 11 1,800 2530 11 1,800 9 2025 1,600 9 1520 1,600 7 1,400 1015 76 1,400 5 510 1,200 5 1999 2000 2001 2002 2003 2004 5 1,200 1999 2000 2001 2002 2003 2004 1999Property valu2000e 2001 2002 Value2003 per property2004 1999 2000 2001 2002 2003 2004 Property value Value per property

Number of municipalities and major cities NoNumber. of municipalities and major cities % No200. 75% 180200 75 65 160180 65 140160 55 120140 55 45 100120 45 10080 35 80 1999 2000 2001 2002 2003 2004 35 1999 2000 2001 2002 2003 2004 Municipalities Share in Stockholm, Gothenburg, Öresund Municipalities Share in Stockholm, Gothenburg, Öresund

Number of acquisitions and disposals Property disposals, profitable and loss making No.Number of acquisitions and disposals SEKProperty m disposals, profitable and loss making 150No. 270SEK m 150 270240

120 240210 83

120 210180 83

90 60 180150 60

90 operties

150120 50 60 59 96 90 operties 120 50 60 59 30 9060 96 No. of pr 30 6030 55 No. of pr 0 300 55 1999 2000 2001 2002 2003 2004 –30 0 0 39 57 44 17 17 33 1999 2000 2001 2002 2003 2004 –6–300 Acquisitions Disposals 199939 200057 200144 200217 200317 200433 –60 Acquisitions Disposals 1999 2000 2001 2002 2003 2004

Property categories 1999 Other 11% PrTotaloperty book value categories SEK 5,229 1999 m Offices RetailOther 12%11% Total book value SEK 5,229 m Of58%fices Retail 12% 58% Industrial/ Industrial/warehouse war19%ehouse 19%

Property categories 2004 Other 2% PrTotaloperty book value categories SEK 12,463 2004 m OtherRetail 7%2% Offices Total book value SEK 12,463 m Industrial/Retail 7% Of45%fices Industrial/warehouse 45% war16%ehouse 16%Retirement Retirhomesement 30% homes 30% Share price and total return

SEK % 300 50

250 45

200 40

150 35

100 30

50 25

0 20 1999 2000 2001 2002 2003 2004 Closing price Total return

Gross profit Property yield

SEK m % 1,100 9.0 1,000 900 800 8.5 700 600 8.0 500 400 300 7.5 200 100 0 7.0 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 Operating surplus Profit from property trading

Share price and total return

SEK % 300 50

250 45

200 40 Total property values and value per property Total floor-space Share price and total return SEK bn SEK m 000 sq. m. 150 35 13 35 2,000 SEK % 100 30 30 300 50 11 1,800 25 25050 4525 9 20 1,600 0 20 200 40 15 1999 2000 2001 2002 2003 2004 7 1,400 10 150 Closing price Total return 35 5 5 1,200 Shar100 e price and total return 30 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004

SEK50 %25 Property value Value per property 3000 2050 1999 2000 2001 2002 2003 2004 250 45 Closing price Total return 200 40 Gross profit Property yield 150 35 SEK m % 1,100100 30 9.0 1,000 50 25 900 8000 20 8.5 Gr70oss0 pr1999ofit 2000 2001 2002 2003 2004 Property yield 600 Closing price Total return 8.0 SEK500 m % 1,100400 9.0 1,000 300 7.5 20900 Number of municipalities and major cities 800 8.5 100 No. % 700 0 7.0200 75 600 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 8.0 500 180 Gross profitOperating surplus Profit from property trading Property yield 65 400 160 300 SEK m 7.5140% 55 1,100200 9.0 100 120 1,000 45 900 7.0100 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 800 8.5 Operating surplus Profit from property trading 80 35 700 1999 2000 2001 2002 2003 2004 600 8.0 500 Municipalities Share in Stockholm, Gothenburg, Öresund 400 300 7.5 Kungsleden 1999–2004 Total200 property values and value per property Total floor-space SEK100 bn SEK m 000 sq. m. 13 0 35 2,0007.0 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 30 11 Operating surplus Profit from property trading Number1,800 of acquisitions and disposals Property disposals, profitable and loss making ENHANCING THE HOLDING 25 SEK m 9 20 No.1,600 Total property values and value per property T150otal floor-space 270 15 240 SEK7 bn SEK m 1,400 10 000 sq. m. 120 210 83 13 35 2,000 5 5 1,200 180 30 90 60 11 1999 2000 2001 2002 2003 2004 1,800 1999 2000 2001 2002 2003 2004 150

25 operties

120 50 Property value Value per property 60 59 9 20 1,600 90 96 15 30 60

7 1,400 No. of pr 10 30 55 0 0 Total5 property values and value per property 5 T1,200otal floor-space 1999 2000 2001 2002 2003 2004 –30 SEK bn1999 2000 2001 2002 2003 2004SEK m 000 sq. m.1999 2000 2001 2002 2003 2004 39 57 44 17 17 33 13 35 –60 Property value Value per property 2,000 Acquisitions Disposals 1999 2000 2001 2002 2003 2004 30 11 1,800 Between 1999 and 2004, Kungsleden’s property portfolio 25 Since 2001, the total floor-space of Kungsleden’s holding has values9 grew from SEK 5.2 bn to SEK 12.5 bn, equivalent to 20 been1,600 fairly stable at about 2,000,000 sq. m. The acquisition annual growth of 20 per cent. The value per property was more15 of properties from JM and Ericsson was the main reason for 7 1,400 consistent, with annual gains of 23 per cent, due partly to the10 the expansion in the period 1999–2001. 5 5 1,200 number1999 of properties2000 reducing2001 from2002 615 to 2003371 in the200 period.4 1999 2000 2001 2002 2003 2004 Property value Value per property Number of municipalities and major cities Property categories 1999 Other 11% Total book value SEK 5,229 m Offices No. % Retail 12% 200 75 58% 180 65 Industrial/ 160 warehouse Number140 of municipalities and major cities 55 19% No120. % 45 100200 75 Property categories 2004 Other 2% 18080 35 Retail 7% 65 Total book value SEK 12,463 m Offices 160 1999 2000 2001 2002 2003 2004 Industrial/ 45% 140 Municipalities Share in Stockholm, Gothenburg, Öresund 55 warehouse 16% 120 45 Retirement CoincidentNumber100 of municipalities with its IPO and in 1999,major cities Kungsleden owned prop- homes 30% ertyNo80. in 176 of Sweden’s 290 municipalities, a result of the 35% 200 1999 2000 2001 2002 2003 2004 75 holding comprising the assets accumulated within Bank- A growing share of retirement homes, an initiative which be- 180 Municipalities Share in Stockholm, Gothenburg, Öresund stödsnämnden,Number of acquisitions the government and disposals bank support commission 65 ganProperty in 2001, disposals, is the pr biggestofitable and change loss makin to Kungsleden’sg property 160 formedNo. during the financial crisis of the 1990s. By year-end holding.SEK m At year-end 2004, retirement home properties ac- 150140 55 counted270 for nearly a third of total portfolio value. In terms of 2004, the holding had been concentrated on 91 municipali- 240 120 book value, offices remain the largest type, while industrial ties,120 mainly because opportunities for doing lucrative proper45- 210 83 100 ty deals had focused on certain regions. The concentration of and180 warehouse properties are the third largest category.

90 60 Number80 of acquisitions and disposals 35 150Property disposals, profitable and loss making

Kungsleden’s1999 holding2000 on the2001 major2002 city regions2003 of Stockholm,2004 operties 120 50 60 59

No. SEK m 96 90 Gothenburg150 Municipalitie and Malmös Shar increasede in Stockholm, from Gothenburg, 36 per cent Öresund in 1999 270 60 to30 66 per cent in 2004. 240 No. of pr 30 55

120 210 83 0 0 180 1999 2000 2001 2002 2003 2004 –30 39 57 44 17 17 33 90 150 60 PROPERTY TRADING –60 operties

120 50 60 Acquisitions Disposals 1999 2000 200159 2002 2003 2004 90 96 Number of acquisitions and disposals Property disposals, profitable and loss making 30 60 No. of pr No. SEK30 m 55 1500 2700 1999 2000 2001 2002 2003 2004 –30 240 39 57 44 17 17 33

120 210–60 83 Acquisitions Disposals 180 1999 2000 2001 2002 2003 2004

90 150 60 operties

120 50 60 59 Property categories 1999 Other 11% 90 96 Total book value SEK 5,229 m Offices 30 Retail 12% 60 No. of pr 58% 30 55 0 0 1999 2000 2001 2002 2003 2004 –30 Industrial/ 39 57 44 17 17 33 warehouse –60 Acquisitions Disposals19% 1999 2000 2001 2002 2003 2004 Property categories 1999 Other 11% Total book value SEK 5,229 m Offices Retail 12% In the period 1999–2004, Kungsleden acquired 366 proper58%- The figure illustrates profitable and loss-making property dis- Other 2% tiesProperty and categoriesdisposed 2004 of 610, with the number of disposals ex- posals in each year. The highest profit from property trading Retail 7% Offices Total book value SEK 12,463 m Industrial/ ceeding the number of acquisitionswarIndustrial/ehouse every year. The biggest45% was achieved in 2004, a net profit of SEK 170 m. In the period, acquisitions in this period were19%warehouse from JM and Ericsson, in the an average of 34 per cent of disposals generated a loss. 16% period 1999-2001. In 2001, the most transaction-intensive Retirement Property categories 1999 homes 30% yearProperty until categories the present, 2004 KungsledenOther 2%11% did over 200 deals. Total book value SEK 5,229 m Offices Total book value SEK 12,463 m Retail 12%7% Offices Industrial/ 45%58% 7 warehouse 16%Industrial/ warehouse Retirement 19% homes 30%

Property categories 2004 Other 2% Total book value SEK 12,463 m Retail 7% Offices Industrial/ 45% warehouse 16% Retirement homes 30% Chief Executive’s Statement

EAGER FOR NEW CHALLENGES

For the seventh consecutive year, Kungsleden is posting record proﬁts—up 18 per cent to SEK 571 m. This performance shows that our business concept works even in a market featuring intense competition and rising property prices. It also shows that we have an organization that in every sense is suited to its task—successfully conducting multiple, rapid transactions, while simulta- neously managing the properties in our holding efﬁciently.

Kungsleden has published profit forecasts for every year since As competition on the property market increases, taking a our initial public offering (IPO) in 1999, and each year, we’ve closer look at alternatives to traditional property types becomes been able to meet our own forecast and market estimates, more attractive. Just over three years ago, Kungsleden started and the same applies to 2004. In fact, we upgraded our fore- to accumulate a holding of retirement homes, which now, com- cast profit before tax of SEK 530 m to SEK 550 m. The out- prises 30 per cent of our total portfolio. Of the SEK 2.5 bn of come was even higher, SEK 571 m. We’ve worked hard for property acquisitions we consummated in 2004, retirement these results in a harsh market for both Kungsleden’s busi- homes represented SEK 1.2 bn. Retirement homes have long ness areas—property management and property trading. rental contracts, stable tenants and good scope for mortgag- On our management side, despite an economic upturn, ing, which suits Kungsleden’s business concept of owning vacancies were generally high in the year, resulting in pres- and managing properties with sustainable high and stable sure on rents. Nevertheless, Kungsleden was able to main- returns well. The property yields of the retirement home prop- tain unchanged vacancies in our portfolio of 6.3 per cent, erties we acquired in the year average just over 7 per cent, a very satisfactory level. Meanwhile, we lifted our operating somewhat lower than the previous year. But on the other surplus by 10 per cent to SEK 934 m. Since our IPO, the gross hand, we are now being offered better funding terms, which profit contribution of property management has increased, to is obviously significant to our returns. 85 per cent in 2004, while conversely, the contribution from Our orientation on retirement homes is a consequence of property trading has reduced. The consequence is more us still seeing opportunities in this segment to find the right stable earnings generation. relationship between risk and returns, which generally, we In property trading, our market has increasingly featured have difficulty doing in residential and commercial premises. larger and faster transactions. Market commentators estimate Accordingly, we will keep buying retirement home properties that transaction volumes on the Swedish property market in while this relationship sustains, and while attractive properties 2004 were SEK 80–100 bn. The buy-side expanded, and new come up for sale. players moved into the market, such as various types of real But we’re also curious about other niche property types estate funds and foreign investors from Germany, Norway, that can satisfy our standards in terms of risk and return; Denmark and elsewhere. Meanwhile, the supply of property health-authority owned hospital properties and schools are was reduced, resulting in larger holdings selling very fast at two segments where we see promise. Major restructuring is cranked-up prices, particularly residential and commercial underway in the healthcare and education sectors at present, premises—and if nothing unforeseen occurs, we expect this which we think, will result in more authorities that are now also development to continue. landlords, seeking to relinquish the latter role. Such proper- Kungsleden also maintained a high transaction tempo in ties set challenging standards in terms of management and 2004, with disposals amounting to SEK 2.7 bn, generating development. But with Kungsleden’s experience of retirement profits of SEK 170 m. The abundance of players on the market homes and other segments, coupled with our broad-based generates liquidity, offering us opportunities to dispose of prop- organization, we have good prospects of coping with acquisi- erties at good prices. Since our IPO in 1999, the annual profit tions of such holdings and managing them effectively. from Kungsleden’s property trading has increased significantly.

8 Chief Executive’s Statement

Kungsleden’s organization doesn’t merely have the capacity to manage holdings subject to special requirements like retirement home properties, or diverse holdings in terms of geography or type, but we can also run an acquisition process from evaluation and negotiation to decision at a speed that, I suspect, few other property companies can match. This ability commands an increasing premium the more pressurized the acquisition process becomes in the current hot market. Major input and intense efforts within property trading and management are necessary for us to achieve the profit objective we have set ourselves. While we are proud of our efforts in 2004, now we’re setting ourselves new goals. The overall outlook for Kungsleden in 2005 is upbeat—interest rates remain low, we perceive healthy economic growth and there are plenty of players looking to do property deals. This creates opportunities for us to keep growing Kungsleden’s profits. Our forecast for 2005 is profits for calculating dividends of SEK 600 m, which given our dividend policy, would mean minimum dividends of SEK 16 per share. Profit for calculating dividends means profit after tax excluding unrealized value changes (that do not influence cash flow) and deferred tax. Realised value changes are included in the profit for calculating dividends.

Jens Engwall Chief Executive

9 Questions about Kungsleden

How does Kungsleden differ from other Aren’t all property companies pursuing property companies? higher returns and lower risk? We regard the returns on property as the prime factor. The The property market’s relatively poor transparency means objective of our business is to constantly improve the risk/re- that no player has completely comprehensive information on turn relationship, what we term risk-adjusted returns. Accord- returns and risk. This is where Kungsleden has a competitive ingly, we don’t set any limits on the location, structure or pur- edge through our extensive experience of property trading pose of properties. and our business control model, which constantly determines the risk-adjusted return on each single property. Moreover, What does risk-adjusted return mean? each property’s risk-adjusted return is always more important For us, it means that the returns on each property and our than its location or type. portfolio cannot be considered independent of risk levels. By comparing the returns on each property with its specific re- How do you evaluate risk? quired rate of return, we gain a view of its financial prospects. Our business control model reflects the investment risk on We generate our required rate of return by calculating the each property through the required rate of return that is spe- weighted cost of capital, primarily determined by the split cific to that property. The required rate of return reflects the between borrowings and shareholders’ equity. risk level in funding and management. Retirement homes are a good example. Their combination of healthy returns—com- How do you go about improving risk-adjusted returns? parable with office property—and lower risk, means that the Our proprietary business control model generates supporting Retirement Homes business area has high risk-adjusted data illustrating risk-adjusted returns on each property and returns. our portfolio. The properties have differing comparative performance. Worse properties can be re-financed, which may How much can you improve risk-adjusted return? improve their financial prospects, or divested. Freed-up capi- The risk-adjusted return of our current portfolio varies quite tal can be used to acquire better properties. If we do this on considerably. Although poorer properties can be improved or a continuous basis, we can really enhance our portfolio. divested, with better replacements acquired, discrepancies within the portfolio will remain. The conclusion is that it is always According to the theory, don’t higher returns possible to rationalize our portfolio through methodical efforts also mean more risk? targeted on its composition, and each property’s returns and Yes, portfolio theory says you can only swap risk for return, risk. or vice versa. But Kungsleden’s view is that this is not entirely correct for the property market because it is not comparable Isn’t your business model similar to real estate funds? with the financial markets in at least two respects. Firstly, the No. The array of real estate funds that have been created in property market is less transparent, and often, different play- Sweden in recent years generally operate less actively as ers take widely differing views. Secondly, properties are not landlords than Kungsleden and several other property com- entirely comparable. The ability to achieve reasonable panies. At Kungsleden, we work consistently towards maxi- financing levels on properties is another important factor. mizing the returns on our property portfolio, without being limited to property type, geographical location or any specific time-frame, and accordingly, we can exploit far more business opportunities, thereby creating value-added for our shareholders. Moreover, as a listed company, it’s important that we provide continuous updates on our progress, offering our shareholders the opportunity to evaluate risk and opportunities.

10 Questions about Kungsleden

Why is Kungsleden investing increasingly in retirement homes? Retirement home properties—with their long rental contracts, stable tenants and healthy scope for mortgaging, are very well suited to our strategy of creating sustainable high and stable returns. Moreover, the demand for retirement homes is rising as the population ages. Through Hemsö, our retirement homes initiative, Kungsleden is the biggest commercial retirement homes landlord in Sweden. At year-end, we were landlords or partners in 82 retirement home properties with a book value of SEK 3.7 bn.

How does Kungsleden view its retirement home holdings? Why do you work for Kungsleden? We’ve said that we won’t sell individual retirement home You might say it’s tradition—I’ve been here since 1991 because I like the atmosphere properties, although we might consider divesting the entire and there’s plenty of scope for your work to vary. This is because the management is holding if the price was good enough. However, pricing is responsive to people wanting to move on and progress—you don’t get stuck. low at present, so, we’re acquiring as many retirement home What’s the most important part of your job? properties as we can. Making sure our IT support works in-house and that our subcontractors do what they should.

What, do you think, distinguishes Kungsleden’s working methods? Kungsleden’s working methods are very flexible, both in its dealings and in-house— no one’s scared of change. We all feel part of the business process, which functions smoothly and efficiently. Largely, the background to our efficiency is that our management shows a good example, and has a positive attitude. This makes everyone feel secure, and give of their best.

What was the most enjoyable part of your work in 2004? Technological progress—particularly mobility.

What changed most in your job in 2004? Mobility, and possibly increased security consciousness. The convergence between IT and telephony was another big change.

What’s your favourite building? The Empire State.

Soﬁa Hedberg, 38, Kungsleden’s IT Manager.

11 Questions about Kungsleden

Kungsleden acquired properties in the Stockholm How will the adoption of IFRS change region in 2004 despite you saying you didn’t like the how Kungsleden conducts business? Stockholm property market. Why? These new accounting standards won’t mean any change Actually, we’ve never said we don’t like the Stockholm prop- to how we conduct business. None of the changes relate to erty market. What we have said is that we are very sceptical calculated factors like transaction costs, fees, taxes or simi- of investing in the Stockholm office market at present, which lar—accounting is the only thing affected. Obviously, just be- now has vacancies of some 20 per cent. This means that cause we amend our accounting standards, the market value being active on this market involves considerable risk. of properties won’t change, nor will the cash flows they gen- It’s definitely a tenant’s market, and having high tenant turn- erate. But if these new accounting standards do change the over would be very costly. Rectifying high vacancies would conduct of banks, investors and other people active in the take several years of growth, and the creation of lots of jobs, sector, this may result in some alteration in our behaviour, but which we don’t expect at present. it’s too early to say yet. But other markets in Stockholm, like retail properties, warehousing and logistics properties, are working very well and have done for some time. Our acquisitions in 2004 were mainly in these latter sectors, while we sold approximately SEK 700 m of office properties in Greater Stockholm in 2004.

How will you be able to earn money and pay high dividends when interest rates start rising? A lot of people have been saying that interest rates will be heading up for several years now, but they’ve kept going down nevertheless. This shows that it’s basically impossible to predict where interest rates are heading. Without doubt, interest costs are Kungsleden’s biggest cost item, so it’s vital that we can control them. Obviously, we benefit from low interest rates on a short-term basis, but ultimately, we cannot live with low interest rates and low growth. If yields rise because of increasing growth, this would only favour Kungsleden, because we have indexed rents, which rise with inflation, but also, growth means our tenants perform better so that demand for premises firms, and rents can rise. It’s a common misconception that property companies are profitable in cyclical downturns with low interest rates but have problems generating earnings in upturns with high interest rates.

12 Questions about Kungsleden

Why do you work for Kungsleden? Working for a successful company with a good corporate culture and positive colleagues is fun and interesting. I joined on 1 November 2004 after I’d heard about this job from a contact in the property sector. I’d come into contact with Kungsleden earlier through business dealings and its Website.

What’s the most important part of your job? The most important thing is directing management so our operating net improves through lettings, rent negotiations, conversions and operational measures.

What, do you think, distinguishes Kungsleden’s working methods? Kungsleden generates high returns through active management, buying and selling. Kungsleden was one of the pioneers in prioritizing high property yields above geographical location.

What was the most enjoyable part of your work in 2004? Joining a skilled, happy organization—while I also got a new geographical region to work on.

What changed most in your job in 2004? Changing employer after eighteen years.

What’s your favourite building? Kungsleden has many properties with the potential to keep progressing positively including Göta Ark, in south-central Stockholm, an ofﬁce development in an attractive location.

Kjell Bergman, 42, Manager, Property Management, East region.

13 Organisational and human resources

Kungsleden’s organizational skills are important, and its capacity to realize its business concept, vision and strategy ultimately rests on the professionals that compose its organisational resources. A transaction-intensive business needs ﬂexible staff that are adaptable and guided by professionalism and skill.

ORGANISATIONAL RESOURCES tends to be assigned subordinate significance in budget con- Kungsleden’s organisational resources are divided into two texts. Accordingly, Kungsleden has instead opted to pursue segments, Management and Service Centre. The Manage- a more dynamic control model based on rolling forecasts and ment segment, headed up by the Chief Operating Officer, moving objectives. Thus, Kungsleden’s professionals gain comprises an analysis function and four regions. The regions updated financial information on an ongoing basis, which are responsible for each regional property holding and deal also considers exogenous factors. The intention of the con- with property management letting and sales. The Service trol model is to create better prospects for reaching business Centre is headed up by the Deputy Chief Executive/Chief decisions. Our ambition is for staff at all levels to perform Financial Officer and deals with accounting, finance, legal, their individual tasks more efficiently, thereby being able to HR and IT issues. enhance profitability. Kungsleden’s South and West regions are managed from regional offices in Malmö and Gothenburg respectively. HUMAN RESOURCES West region also includes four local branches in the cities of Kungsleden’s staff work on property management or admin- Jönköping, Trollhättan, Växjö and Angered. East region and istration. Those in property management work on local mar- the Retirement Homes region are located at Kungsleden’s kets. On management, Kungsleden works in teams com- head office in Stockholm. East region also has local branches prising managers, management assistants and property in Karlstad, Västerås and Finspång. technicians. These teams have considerable know-how on The Service Centre is located at the head office, although property management and of the players on their local prop- some staff are located at the Gothenburg regional office. erty and rental markets. They are also highly familiar with the Accordingly, the Service Centre is independent of the geo- development potential of such players and markets. A busi- graphical location of properties, and has good prospects of nesslike approach and flexibility are key concepts in the func- attracting specialist staff. tion of our property management activities, in enhancing Kungsleden’s property holding and working methods. Business control model Primarily, administration staff operate centrally within our Development of the business control model continued in organisational structure, and possess know-how with a spe- 2004. The model incorporates a goal-orientation process cific orientation on various over-arching group issues. Service that replaces traditional budgeting. In various contexts, the and specialist skills are the central concepts of the adminis- process of determining budgets has a tendency to become tration function’s work in supporting property management, inefficient, partly because it is resource intensive and partly collaborating with this function to continuously improve because when updated, predetermined goals are often ren- Kungsleden’s working methods and to bear responsibility dered irrelevant by altered conditions. Moreover, profitability for the observance of legal requirements. Kungsleden regards skilled staff as an important success

CEO factor, and accordingly, assigns high signiﬁcance to developing its staff and skills enhancement. Appraisal interviews are conducted at least once a year to verify the need for, and stimulate, progress. These appraisal interviews are intended Analysis COO CFO to monitor and evaluate efforts in the previous period, and the results achieved, to determine the objectives and activities for the forthcoming period, and to review each staff member’s West Region South Region East Region Region Service Retirement Centre developmental needs and direction for the immediate future, Homes Accounting and the slightly longer term. Jönköping Finance Legal Kungsleden conducted an in-house survey in 2004 to de- Trollhättan Västerås HR termine how staff experienced their work situation, with par- Växjö Karlstad IT ticularly positive results. The survey showed that a large ma- Angered Finspång

14 Organisational and human resources

jority of staff were very satisfied with relationships with their The adjacent figure shows the division between salaried em- managers and colleagues. Staff also perceived the com- ployees in property management and administration, and pany’s service standards as very high, and the survey also between men and women. There were 55 (51) people in showed that most of the members of Kungsleden’s organ- property management, and 28 (28) in administration. The ization felt good or very good, which naturally, goes hand in share of women in administration is somewhat higher than hand with delivering positive results. Areas for improvement men, and the reverse applies within property management. were wanting to feel less stress and time pressure, and to Overall at year-end, 45 (45) per cent of staff were women. increase daily physical exercise. The consequence was a The average age of salaried employees was 42 (41) and is series of seminars on stress being offered in the spring for lower among women than men. Women are a clear majority those staff members that wished to participate. In a com- of salaried employees under 40, while men are the majority of posed manner, the seminar offered an opportunity to in- employees aged over 40. 61 (56) per cent of salaried employ- crease understanding of the parameters that cause stress, ees are 40 or older. and also dealt with simple methods to manage one’s own Overall, the statistics demonstrate that the company has a and other people’s stress. favourable mix of younger and older employees of varying age Physical activity is encouraged by subsidised keep-fit and experience. The figure below shows the length of service activities for all staff and through activities that emphasize of clerical staff. Of our salaried employees, 48 (39) have worked daily exercise. For example, in 2004, Kungsleden’s staff par- for Kungsleden for four years or more, 32 (28) between one and ticipated in a step competition, competing individually and in three years and the remaining 14 (12) for less than one year. region-based teams. The competition was very popular, and resulted in increased physical activity. Appointments – salaried staff Length of service – salaried staff To further enhance the drive and commitment of its staff, No. No. Kungsleden has run a bonus scheme in recent years, linked 90 50 80 to the company’s profits; all staff apart from the management 70 40 60 received one additional month’s salary at the end of 2004. 30 50 Kungsleden pursues an equality plan to attain a favour- 40 20 able division between the sexes and age groups. Kungsleden 30 is trying to change the division between the sexes in its cor- 20 10 10 porate management, which at present, comprises men ex- 0 0 Total Property Admi- up to 1 year 1–3 year 4 years clusively. The company takes a positive view of parental leave Management nistration Women Men or more and observes favourable agreements. In July 2004, eight Women Men members of Kungsleden’s staff were on parental leave, or some 10 per cent of staff headcount at that time, which to- Age distribution – salaried staff Average age – salaried staff talled 81. Although this is an unusually high share, by tem- No. Year porarily re-assigning internal staff, and outsourcing staff, 30 50 25 Kungsleden was able to keep its organization functioning 40 20 smoothly. 30 15 At year-end 2004, Kungsleden had 83 (90) full-time staff of 20 10 which 75 (79) were salaried employees. In addition to salaried 5 10 employees, there was 1 (11) janitor employed at year-end, be- 0 0 up to 30 30–39 40–49 50 or Total Women Men cause Kungsleden wound down its property care organization older Women Men 2004 2003 through outsourcing in the year. The result is that Kungsleden can outsource property care services, conferring flexibility, thereby enabling Kungsleden to select the supplier offering the best service for each property.

15 Organisational and human resources

Jens Engwall Johan Risberg

Lars Thagesson Benny Ivarsson

Eskil Lindnér Göran Linder

MANAGEMENT TEAM

Jens Engwall. Born in 1956. Chief Executive. With Kungsleden since 1993. Qualiﬁcations: B.Sc. (Eng.) Holding in Kungsleden: 140,000 shares.

Åke Kaur Johan Risberg. Born in 1961. Deputy Chief Executive, Chief Financial Officer. With Kungsleden since 1996. Qualifications: B.Sc. (Econ.), School of Economics. Holding in Kungsleden: 69,400 shares. Eskil Lindnér. Born in 1959. Regional Director South. With Kungsleden since 1999. Lars Thagesson. Born in 1959. Qualifications: B.Sc. (Eng.) Chief Operating Officer. With Kungsleden since 1993. Holding in Kungsleden: 5,400 shares. Qualifications: Compulsory schooling. Holding in Kungsleden: 0 shares. Göran Linder. Born in 1968. Regional Director Retirement Homes. With Kungsleden since 1998. Benny Ivarsson. Born in 1955. Qualifications: B.Sc. (Econ.) Regional Director West. With Kungsleden since 1999. Holding in Kungsleden: 0 shares. Qualifications: B.Sc. (Econ.) Holding in Kungsleden: 5,400 shares. Åke Kaur. Born in 1955. Regional Director East. With Kungsleden since 1998. Qualifications: Construction and management qualifications. Holding in Kungsleden: 0 shares.

16 Organisational and human resources

Bengt Kjell Mats Israelsson

Jonas Nyrén Per-Anders Ovin

Anna Weiner Jiffer Jens Engwall

BOARD

Bengt Kjell. Born in 1954. Per-Anders Ovin. Born in 1956. Qualiﬁcations: B.Sc. (Econ.), Stockholm School of Economics. Qualiﬁcations: B.Sc. (Econ.), School of Economics. Chairman. Senior Vice President of AB Industrivärden. Board member since Board member since 2003. Other Board assignments: 1996. Other Board assignments: Pandox AB, Helsingborgs Dagblad, Capona AB, Catella Property AB, Catella Capital AB, ABG Sundal Collier A/S Munters AB and Össur HF. and EDX Ltd. Holding in Kungsleden: 10,000 shares. Holding in Kungsleden: 0 shares.

Mats Israelsson. Born in 1940. Anna Weiner Jiffer. Born in 1971. Qualifications: B.Sc. (Eng.) Qualifications: B.Sc. (Eng.) Active through his own consulting practice. Board member since 1993. Chief Executive of biotech enterprise Ellen AB. Board member since 2003. Other Board assignments: Castellum AB, Akademiska Hus i Stockholm AB, Other Board assignments: Connect Väst AB. Atrium Fastigheter AB, Veidekke Bostad AB and Forsen Projekt AB. Holding in Kungsleden: 0 shares. Holding in Kungsleden: 4,000 shares. Jens Engwall. Born in 1956. Jonas Nyrén. Born in 1951. Qualifications: B.Sc. (Eng.) Qualifications: B.Sc. (Econ.), School of Economics. Chief Executive, with Kungsleden since 1993. Other Board assignments: Deputy Chief Executive and Chief Financial Officer of Bonnier AB. FastPartner AB and Vasallen AB. Board member since 2001. Other Board assignments: TV4 AB, Holding in Kungsleden: 140,000 shares. SkandiaBanken AB, Bonnier Holding AB and others. Holding in Kungsleden: 3,000 shares. Auditors Auditor Deputy Auditor Tomas Thiel. Born in 1947 Björn Flink. Born in 1959. Authorised Public Accountant, KPMG Authorised Public Accountant, KPMG

17 The share and shareholders

The share price rose by 30 per cent in 2004; total yield on the share was 37 per cent. In the same period, the SIX Return Index yielded 21 per cent.

Market capitalisation and turnover Dividend policy Kungsleden’s share has been quoted on the Stockholm The Board of Directors’ ambition is to maintain stable divi- Stock Exchange since 14 April 1999. The closing price on 30 dends, with a high pay-out ratio. This policy stipulates divi- December 2004 was SEK 251, equivalent to market capi- dends of at least 50 per cent of profits for calculating divi- talization of SEK 4,759 m. A total of 7.8 million shares were dends. Profits for calculating dividends means profits after tax turned over, equal to 41 per cent of the total number of out- excluding unrealized value changes (that do not affect cash standing shares. The year low and high were SEK 177 and flow) and deferred tax. Realised value changes are included SEK 266 respectively. Against the closing price at year-end in profits for calculating dividends. This profit measure corre- 2003 of SEK 193, the share price rose by 30.0 per cent. Divi- sponds to the cash flow statement item cash flow from dends paid were SEK 13, implying a total yield of 36.8 per cent. operations before change in working capital. Average total yields over the last five years have been 35.6 per For the financial year 2004, the Board is proposing divi- cent. In 2004, the CREX (Carnegie Real Estate Index) gained dends of SEK 15 per share, equivalent to a dividend yield of 32.8 per cent, while the SAX (Stockholm All-share Index) 6.0 per cent in terms of the closing price at year-end 2004. gained 17.6 per cent. The Board intends to propose a 2:1 share split to the Annual General Meeting, scheduled for implementation on Share capital 17 May 2005. At year-end, Kungsleden’s share capital was 47,396,550 divided between 18,958,620 shares, each with a nominal Analyst monitoring amount of SEK 2.50. Each share has one vote and confers The following financial analysts monitor Kungsleden on an equal rights to participation in the company’s assets and ongoing basis: profits. Bernd Stahli Fredrik Skoglund Merrill Lynch London Carnegie Shareholders +44 (0)207 996 1205 +46 (0)8 676 8800 Kungsleden had some 13,500 shareholders as of 31 Decem- Lars Åke Bokenberger Tobias Kaj ber 2004, unchanged since the previous year. At the time of Alfred Berg Swedbank Markets its IPO, it had approximately 1,700 shareholders. At year-end, +46 (0)8 723 5800 +46 (0)8 585 90000 the ten largest shareholders controlled 20.3 per cent of the capital and votes. Private investors constituted 54.7 per cent Jonas Andersson Olof Nyström of the total, and foreign owners, 21.2 per cent. ABG Sundal Collier Hagströmer & Qviberg +46 (0)8 566 28600 +46 (0)8 696 1700 Shareholders as of 31 December 2004 David Forsman Shareholder No. of shares % of vote and capital Kaupthing Bank SHB/SPP Mutual Funds 795,067 4.2 Mellom AAM Omnibus 677,888 3.6 +46 (0)8 791 4800 Olle Florén with companies 448,000 2.4 Crafoord Foundation 381,750 2.0 Robur Mutual Funds 341,350 1.8 JP Morgan Chase Bank, W9 307,509 1.6 Swedish Red Cross 276,700 1.6 Board and management 237,200 1.2 Fortis Bank 198,216 1.0 Société Générale 180,000 0.9 Total, 10 largest shareholders 3,843,680 20.3 Foreign shareholders, other 2,647,551 14.0 Other shareholders 12,467,389 65.7 Total 18,958,620 100.0

18 FastighetsbeståndetThe och share intjäningskapaciteten and shareholders

Why do you work for Kungsleden? Two reasons: I ended up here because I worked at a recruitment ﬁrm, and was then hired in 2001, and partly because of my interesting colleagues, good pay and bonus if we hit our targets.

What’s the most important part of your job? The most important is that things run smoothly—that you enjoy yourself, obviously. It’s got to feel good. And it does.

What, do you think, distinguishes Kungsleden’s working methods? I don’t really see anything that makes Kungsleden different from other companies—apart from us being better.

What was the most enjoyable part of your work in 2004? Being involved in hiring new staff. It was fun to be involved in hiring a new colleague.

What was the biggest change in your job in 2004? Hiring my new colleague, because I was constantly getting more work to do.

What’s your favourite building? Högalid Church is my favourite, I live in south-central Petra-Soﬁ Dahlgren, 33, Stockholm, and often see the Church when I’m in town. Accounts Assistant, Baltzar system.

The share

Kungsleden SX All-Share Index Share turnover, 000s, SEK Carnegie Real Estate Index (including after-hours trading) 270 240 210 180 150 120 2,500

90 2,000

1,500 60 1,000

500

30 1999 2000 2001 2002 2003 2004 © SIX

Total yield

The share (including dividends) SEK SIX Return Index 450 400 350 300 250 200

150

100

50 40 1999 2000 2001 2002 2003 2004 © SIX

19 Environmental audit

Kungsleden’s environmental efforts will: • Proceed on the basis of prevailing environmental legislation and its staff’s high levels of expertise to create a proﬁtable and environmental property holding on market terms; • To focus on the continual minimisation of the environmental burden coincident with the management and reﬁnement of its property holding; • Be an integrated and goal-oriented part of business.

Kungsleden’s environmental objectives are revised and made Environmental efforts in 2004 progressively more stringent, keeping pace with the realiza- In the financial year 2004, Kungsleden has entered energy tion of previous objectives, and new issues coming into fo- consumption data from its entire property holding into energy cus. In general terms, Kungsleden’s objectives imply that statistics software. Routines for measuring heat, electricity consistently, the environmental consequences of its actions and water consumption have been introduced, affecting will be considered in day-to-day efforts and in the develop- Kungsleden’s staff and its contractors. Thus Kungsleden has ment of its property holding. created a platform for a systematic approach to reducing en- The objective of environmental efforts is for committed ergy consumption. The next step is to formulate objectives for staff to view environmental issues as an integrated part of how much energy consumption should reduce. Kungsleden their day-to-day efforts. also launched new routines for purchasing properties in the Kungsleden’s business concept is to own and manage year, including the discussion of environmental considera- properties with high and stable long-term returns. Returns are tions at an early stage, which are then studied at the first in- more important than property type or geographical location, spection. Kungsleden’s environmentally aware staff then de- and Kungsleden creates high and stable returns by owning cide whether additional environmental audits are necessary properties that generate a high yield in relation to their risk. when making the property acquisition. Thus environmental initiatives are a self-evident part of its business concept. Overall central objectives for 2005–2006 By constantly improving its environmental know-how, Kungs- As part of its consistent environmental efforts, Kungsleden leden can refine its property portfolio, and thereby offer its has formulated a number of overall objectives for its opera- tenants environmental and profitable solutions. As a trans- tions until year-end 2006. action-intensive business, managing environmental risks to 1 Cut energy consumption (heating and electricity) in

avoid ecological damage in its property portfolio as far as its properties so that airborne CO2 emissions reduce. possible is particularly important. Kungsleden either has, or is introducing, routines to read, Kungsleden constantly pursues improvements to alleviate report and measure energy consumption, and to prioritise the adverse environmental impact it generates by offering the a range of energy-saving measures with retained or im- best possible technology and sustainable properties from an proved comfort for its tenants. environmental perspective, and the optimal technology and 2 To encourage functional waste sorting solutions in proper- most sustainable properties at the rate and extent its tenants ties to increase recycling and reduce the wastage of demand. resources. The success factors for its environmental initiatives are the 3 To direct goods and services procurement towards the knowledge and commitment of its staff, plus the ambition to further alleviation of the environmental burden. actively gather and disseminate environmental knowledge. Simultaneous with minimising the hazardous environmental impact of business, Kungsleden will also satisfy its quality, working environment and competitive standards. Through Kungsleden’s environmental policy, the company strives to reduce the environmental impact when properties are acquired and managed. Further, through this policy, Kungsleden aims to realise the company’s vision: by means of skilled entrepreneurship and a high level of expertise, Kungsleden will become Sweden’s most proﬁtable and successful property company.

20 The property holding and earnings capacity

As of 31 December 2004, the holding comprised 371 (423) properties with a book value of SEK 12,463 (12,336) m with aggregate rental value of SEK 1,628 (1,681) m. Total lettable ﬂoor-space was 1,966,000 (1,962,000) sq. m.

THE PROPERTY HOLDING Two retirement home properties and one school were ac- The past year featured continued portfolio reallocations to quired from PEAB for SEK 220 m. The retirement home enhance risk-adjusted returns. Investments increased in properties, designated Järven 6 and Pjäsen 12, are located Retirement Homes—a business area with sustainable high and in Norrköping, south of Stockholm and Visby on the island stable cash flow. Overall, the combination of good property of Gotland. Järven 6 will undergo a complete renovation, market liquidity and property price increases raised intensity scheduled for completion on 1 April 2005, subsequently let- on the sales side. These transactions enhanced the quality of ting to Municipality of Norrköping on a contract running until the property holding and made property yields more stable. 31 March 2020. Completion is included in the purchase price. Pjäsen 12 is let to the Municipality of Gotland with a rental Acquisitions contract running until 31 May 2029. Järven 5, a 3,000 sq. m. Kungsleden acquired 64 (70) properties with floor-space of property, is let to an independent school with a rental con- 417,000 (324,000) sq. m. in the year, for SEK 2,490 (2,913) m. tract expiring 30 June 2018. Total rental revenues including The success of the Retirement Homes business area con- rent subsidies were SEK 22 m. The estimated property yield tinued in its efforts to acquire properties from municipalities was 8.2 per cent. around Sweden. Eight properties with a total value of SEK Late in the year, the retirement home properties designated 390 m were acquired from the Municipality of Gävle. These Norrköping Konstantinopel 6 and Göteborg Näset 130:1 were properties included 491 retirement homes, with the Munici- acquired from Skandrenting AB and the property designated pality of Gävle the tenant in many of them. The lettable floor- Arlöv 11:294 was acquired from Erik Thun AB for a total pur- space of these properties is 49,000 sq. m., generating rental chase price of SEK 228 m including overheads. The lettable revenues of SEK 36 m including rent subsidies. Of rental rev- floor-space of these properties amounts to 15,000 sq. m. The enues, 89 per cent are sourced from the Municipality, and the acquisition was implemented at an expected property yield of average contract term was fourteen years. The acquisition 7.9 per cent. Total rental venues including rent subsidies are was implemented at a property yield of 7.1 per cent before SEK 23 m. The average rental contract term was ten years, administration costs. The pricing underscores the increasing with 64 per cent of rental revenues sourced from a municipal competition in this business area. More players have noted the counterparty. low risk levels of this business, and accordingly, re-evaluated Additionally, Hemsö Äldreboende AB acquired Saltsjö- their required rates of return on retirement home properties. baden Hospital in the Municipality of Nacka for SEK 124 m, Three retirement homes were also acquired from the a property comprising some 10,000 sq. m. of lettable floor- Municipality of Sundsvall for SEK 142 m, with an expected space mainly intended as retirement homes. This acquisition property yield of 7.8 per cent. They have lettable floor-space was conducted at an estimated property yield of 7 per cent. of 18,000 sq. m. with a rental value of SEK 16 m. The property is let to Carema, with a contract expiring on 30 Four retirement home properties and one residential prop- September 2011. erty were acquired from the Municipality of Finspång in the Commercial acquisitions included an 18-property portfolio year, for an acquisition price of SEK 191 m including acquisi- from Ahlten, Perez & Co, totalling SEK 530 m. The majority of tion costs. The retirement home properties are rented by the these properties are in conurbations in central Sweden. The municipality of Finspång, on a new twenty-year contract. The properties have total lettable floor-space of 80,000 sq. m., properties have floor-space of 17,000 sq. m., generating an- mainly office and industrial/warehouse properties, and retire- nual rental revenue of SEK 16 m. The residential property is ment homes. The portfolio included two properties intended 19,000 sq. m., with rental revenue of SEK 12 m. as retirement homes. This acquisition was effected at an estimated property yield of 8.2 per cent.

21 The property holding and earnings capacity

At about the same time, 10 properties were acquired from the Property type Bröderna Edstrand group for SEK 204 m. The acquisition in- Generally, Kungsleden increased its holdings in retirement cludes properties with lettable floor-space of 100,000 sq. m. homes, reducing its exposure to office premises. Of total and rental values of SEK 23 m. Property yield based on ac- book values, office properties represented 45 (54) per cent of quisition price was estimated at 11 per cent. The group signed total book values, or SEK 5,582 (6,609) m as of 31 December a rental contract for the properties involved with a term of up 2004. Within retirement homes, the book value share of the to fifteen years coincident with the transaction, and an option to total holding amounted to 30 per cent, and in absolute terms, extend one property within four years at an estimated invest- book value increased to SEK 3,731 (2,769) m. The share of ment cost of SEK 30 m and a yield of 10 per cent. industrial and warehousing properties was an unchanged Additionally, Kungsleden acquired seven properties in 16 (16) per cent of book values, and represented 20 (20) per Greater Stockholm for SEK 200 m, comprising over 36,000 cent of rental revenues. The acquisition of a number of spe- sq. m. of lettable floor-space, mainly retail stores and warehous- cific retail premises and retail centres meant the proportion of ing properties with a rental value of SEK 26 m. The property retail properties growing to 7 (6) per cent of total book value. yield in terms of purchase price was estimated at 8.5 per cent. In Gothenburg, Kungsleden acquired the properties des- Geographical location ignated Angered 94:1 (Municipal Centre) and Backa 171:1 (in Changes to the geographical diversification of the property a trading estate) for a price of SEK 280 m and property yield holdings are not due to the company realigning its focus, but of 9 per cent. The vendor was Diligentia. Total lettable floor- rather, that pricing and the market are changing, offering op- space is 47,000 sq. m., divided between retail units and offices. portunities for good deals. Vacant floor-space was 2,000 sq. m. At year-end, 66 (74) per cent of property book values were An outdoor retail park was acquired in Skellefteå, northern located in the three major city regions of Greater Stockholm, Sweden, with scheduled opening in November 2005 and an Greater Gothenburg and the Öresund region. The share of estimated total investment of SEK 187 m. The vendor is IBI property book values reduced in Greater Stockholm and the Sverige AB, a subsidiary of IBI of Denmark, a company fo- Öresund region, while Greater Gothenburg increased some- cused on developing retail premises in the Nordic region. At what. completion, lettable floor-space will be some 16,700 sq. m., Extensive disposals in the year resulted in a concentration with tenants including major retailers like ICA Maxi, Willys, the of the property holding on fewer municipalities. At year-end Swedish National Pharmacy Corporation and Systembolaget, 2004, the property holding was located in 91 (110 ) municipal- the government wines and spirits retailer. The majority of con- ities. Property values in the largest 10 and 50 municipalities tract terms are ten years. Construction was planned to start respectively were 65 (65) and 97 (95) per cent of total book in September, 2004; scheduled completion is in November value; 84 (83) per cent of the property holding was located in 2005. The estimated property yield was 8.5 per cent. municipalities with populations of over 50,000, and 6 (4) per Finally, one notable individual acquisition was the property cent in municipalities with populations of less than 25,000; designated Roten 6, an independent school in Sundsvall, less than 7 (6) per cent of total rental revenues were sourced northern Sweden. Total floor-space was 3,000 sq. m., with from these properties. an estimated property yield of 9.2 per cent. EARNINGS CAPACITY Disposals As of 31 December 2004, property yield was 7.9 (8.3) per Disposals of properties prioritised for sale contributed to en- cent including property administration. Explanations of the hancing the property holding’s composition, and either re- progress of earnings capacity can be divided between two lated to smaller, non-prioritised properties with low property activities: property trading and property management. The yields, or properties whose market values had increased to former exerts a positive impact on earnings capacity if prop- the extent that their implicit property yields were less than erties disposed of have yields that are lower than, and ac- Kungsleden’s portfolio risk and return criteria. Moreover, the quired properties have yields higher than, average portfolio property market’s healthy liquidity enabled some problem yields. Property management exerts a positive influence on properties to be divested. A total of 116 (77) properties were earnings capacity if the same properties generate a higher disposed of for SEK 2,723 (1,334) m. The disposals gener- property yield in the current year than the previous year. ated profits of SEK 170 (151) m. Of all properties disposed of, 23 (15) were located in municipalities with populations of less than 25,000.

22 The property holding and earnings capacity

Property trading Municipalities in descending order of size In terms of sales prices and book value, the property yield 1–10 Malmö of divested properties was 6.8 (5.8) per cent and 7.5 (6.7) Stockholm per cent respectively, and accordingly, disposals in the year Gothenburg Mölndal made a positive contribution to the progress of earnings Gävle capacity. During the year, the estimated property yield of Helsingborg Västerås acquired properties was 7.7 (7.8) per cent, which was lower Norrköping than the portfolio average return. Divested properties’ risk- Huddinge Södertälje SEK 8,129 m, 167 properties, 65% adjusted returns were lower than, and acquired properties’ 11–25 SEK 2,586 m, 77 properties, 21% higher than, the portfolio average. Overall, property trading 26–50 SEK 1,316 m, 62 properties, 11% had a positive effect on the progress of earnings capacity 51–91 SEK 432 m, 65 properties, 3% and the portfolio’s risk-adjusted returns. 0 10 20 30 40 50 60 70 % Last year featured more intense competition and increas- % of book value ing property prices. The combination of low interest rates and new funding opportunities helped change the market’s required rates of return. In these circumstances—increased Geographical distribution Municipal populations competition and lower market required rates of return—evaluating return against the risk with the intention of buying and Book value >100,000 SEK 6,762 m, 54% 50,000– selling the right properties becomes even more important. Öresund SEK 3,670 m, 29% Other 31% 99,999 Accordingly, a review of the underlying logic of Kungsleden’s region 27% 25,000– SEK 1,292 m, 11% property trading may be appropriate. The intention is to buy 49,999 <25,000 SEK 738 m, 6% and sell properties to maximise risk-adjusted return. Day in, Greater Greater day out, Kungsleden considers returns against risk to opti- Gothenburg 17% Stockholm 25% 0 10 20 30 40 50 60 % mize risk-adjusted returns, i.e. combining higher returns and % of book value Total book value SEK 12,463 m lower risk, and this is a key explanation for the company’s success. This principle has been refined and defined in the Kungsleden’s geographical Kungsleden’s business control model Kungsleden uses in-house. presence in Sweden property categories The Retirement Homes business area is a good example in this context; its good yield levels, comparable with those Book value Book value obtained from office properties, combined with low risk, North 2% Other 2% mean that this business area has a high risk-adjusted return. Central 5% Retail 7% East 40% Offices 45% Properties of the industrial/warehouse type, with property West 21% Industrial/ warehouse yields of 10.4 per cent, also enjoy high risk-adjusted returns. 16% South 32% Retirement Homes 30% Property management Total book value SEK 12,463 m Total book value SEK 12,463 m Property management made a negative contribution to earnings capacity, due partly to timing effects coincident with the Financial Statement. Moreover, vacancies in some properties Rental value Rental value increased, with lower rents resulting. This progress, corrobo- North 1% Other 2% Central 7% Retail 9% rates Kungsleden’s perception that vacancies persist despite East 37% Offices 45% West 23% Industrial/ healthy economic progress, resulting in downward pressure warehouse on rents. 20% To illustrate the property holding’s earnings capacity bet- South 32% Retirement Homes 24% ter than the Income Statement, a table of the holding’s earn- Total rental value SEK 1,628 m Total rental value SEK 1,628 m ings capacity by type and regional market follows on the next page. Floor-space Floor-space

North 2% Other 2% Central 9% East 34% Retail 8% Ofﬁces 36%

West 25% Industrial/ warehouse 36% South 30% Retirement Homes 18% Total ﬂoor-space 1,966,000 m2 Total ﬂoor-space 1,966,000 m2

23 The property holding and earnings capacity

Offices East South West Central North Total Number 29 73 24 13 3 142 Lettable floor-space, 000 sq. m. 210.4 258.9 198.5 42.3 3.7 713.8 Book value, SEK m 1,519.5 2,536.2 1,312.4 200.6 13.6 5,582.2 Rental value, SEK m 206.5 314.1 179.8 31.4 2.7 734.5 Rental revenues, SEK m 174.4 280.8 172.1 28.5 2.3 658.0 Operating surplus, SEK m 100.3 176.0 120.7 14.8 0.9 412.6 Economic occupancy, % 84.6 90.8 95.8 92.2 81.4 90.3 Property yield, % 6.6 6.9 9.2 7.4 6.4 7.4 Profit margin, % 57.5 62.7 70.1 51.9 37.8 62.7 Retirement Homes East South West Central North Total Number 44 23 10 2 3 82 Lettable floor-space, 000 sq. m. 227.7 44.8 46.7 9.9 18.4 347.6 Book value, SEK m 2,474.8 527.6 477.2 106.9 144.5 3,730.9 Rental value, SEK m 255.0 55.1 51.0 12.2 16.3 389.6 Rental revenues, SEK m 255.4 55.0 51.0 12.4 16.3 390.1 Operating surplus, SEK m 180.2 38.5 32.4 9.1 10.6 270.9 Economic occupancy, % 99.8 99.5 99.5 100.0 100.0 99.8 Property yield, % 7.3 7.3 6.8 8.5 7.4 7.3 Profit margin, % 70.6 70.0 63.6 73.2 65.2 69.4 Industrial/warehouse East South West Central North Total Number 23 41 19 10 1 94 Lettable floor-space, 000 sq. m. 166.2 254.7 152.8 109.2 14.1 696.9 Book value, SEK m 622.7 760.7 406.6 259.9 12.8 2,062.8 Rental value, SEK m 86.3 115.7 64.0 60.7 2.1 328.8 Rental revenues, SEK m 82.6 105.3 59.0 56.4 2.1 305.4 Operating surplus, SEK m 55.6 73.2 48.7 34.7 2.0 214.1 Economic occupancy, % 98.1 91.3 93.0 95.1 100.0 94.2 Property yield, % 8.9 9.6 12.0 13.3 15.4 10.4 Profit margin, % 67.3 69.5 82.4 61.4 96.3 70.1 Retail East South West Central North Total Number 6 8 10 5 2 31 Lettable floor-space, 000 sq. m. 35.6 25.5 74.0 17.5 9.1 161.6 Book value, SEK m 236.5 108.5 402.1 104.5 26.7 878.3 Rental value, SEK m 32.6 20.2 70.8 13.3 2.4 139.3 Rental revenues, SEK m 31.0 18.6 67.1 12.5 2.4 131.6 Operating surplus, SEK m 18.5 9.3 35.2 6.9 2.1 72.1 Economic occupancy, % 98.2 94.5 94.9 99.1 100.0 96.1 Property yield, % 7.8 8.6 8.8 6.6 7.8 8.2 Profit margin, % 59.7 50.0 52.5 55.6 86.1 54.8 Other East South West Central North Total Number 3 8 7 4 – 22 Lettable floor-space, 000 sq. m. 22.1 10.2 12.6 1.7 – 46.6 Book value, SEK m 81.4 65.2 52.9 9.3 – 208.8 Rental value, SEK m 16.7 8.6 9.1 1.1 – 35.5 Rental revenues, SEK m 12.4 6.6 14.5 0.8 – 34.2 Operating surplus, SEK m 2.0 2.4 4.9 0.3 – 9.6 Economic occupancy, % 77.6 77.6 93.1 74.1 – 81.4 Property yield, % 2.4 3.7 9.3 2.9 – 4.6 Profit margin, % 15.8 36.7 34.0 32.6 – 27.9 Totalt East South West Central North Total Number 105 153 70 34 9 371 Lettable floor-space, 000 sq. m. 661.9 594.1 484.6 180.6 45.2 1,966.4 Book value, SEK m 4,934.8 3,998.3 2,651.2 681.1 197.6 12,463.0 Rental value, SEK m 597.2 513.8 374.7 118.7 23.5 1,627.8 Rental revenues, SEK m 555.7 466.3 363.6 110.6 23.1 1,519.3 Operating surplus, SEK m 356.6 299.4 241.9 65.7 15.6 979.1 Economic occupancy, % 93.6 91.8 95.6 95.1 97.9 93.7 Property yield, % 7.2 7.5 9.1 9.6 7.9 7.9 Profit margin, % 64.2 64.2 66.5 59.4 67.4 64.4

Greater Greater Geographical division Öresund region Stockholm Gothenburg Other Total Number 101 61 34 175 371 Lettable ﬂoor-space, 000 sq. m. 466.0 381.6 356.6 762.3 1,966.4 Book value, SEK m 3,381.9 3,087.7 2,168.1 3,825.3 12,463.0 Rental value, SEK m 416.9 366.2 298.8 545.9 1,627.8 Rental revenues, SEK m 379.2 338.3 294.8 507.0 1,519.3 Operating surplus, SEK m 251.6 216.2 196.2 315.1 979.1 Economic occupancy, % 92.0 92.6 96.5 94.1 93.7 Property yield, % 7.4 7.0 9.0 8.2 7.9 Proﬁt margin, % 66.3 63.9 66.5 62.2 64.4

24 Financial overview

The property market featured sustained high activity and liquidity in 2004. The combination of increased demand for properties and a reduced supply resulted in price increases. The rental market remained weak with high vacancies, pressurizing rents. Funding terms were attractive, with declining yields and narrower margins.

THE PAST YEAR Results Earnings capacity The actual figures for the year were better than the previous The property holding is in continuous change so that at any year, and exceeded the most recent forecast of SEK 550 m given time, Kungsleden’s earnings capacity is not reflected before tax by SEK 21 m. Return on equity was 18 (19) per optimally by its Income Statement. Instead, earnings capac- cent before tax and 29 (29) per cent after tax, which com- ity indicates the appearance of the Income Statement if the pares favourably to Kungsleden’s 15 per cent RoE target. property holding as of 31 December 2004 had been owned However, the actual property yield of 7.5 (7.6) per cent, and for the full year. The purpose of the illustration is to demon- 7.9 (8.3) per cent in terms of earnings capacity, did not satisfy strate the effect of changes to the property holding, and to the 8.5 per cent objective. Both actual property yields, and in provide the optimal information on the current situation and terms of earnings capacity, were pressurized during the year, earnings capacity. through a general price increase on properties. Low yields and new funding opportunities have shifted the required rate 31 Dec SEK/ 31 Dec SEK/ of return on property. Earnings capacity, SEK m 2004 sq. m. 2003 sq. m. The operating surplus increased by SEK 84 (32) m, a re- Rental revenue 1,519 773 1,565 798 Operating and maintenance costs –403 –205 –409 –209 sult of Kungsleden’s profit margin increasing to 61.9 (61.8) Property tax –43 –22 –51 –26 per cent, and a larger holding. Profit from property trading im- Ground rent –19 –10 –13 –6 proved by SEK 19 (15) m. Administration costs increased by Operating surplus 1,054 536 1,092 557 SEK 27 (21) m. The net financial position deteriorated by SEK

Book value 12,463 12,336 23 (10) m. The tax cost became a SEK 357 (260) m revenue. Property yield, % 7.9 8.3 Economic occupancy, % 93.7 93.9 Rental revenues Proﬁt margin, % 64.4 65.5 Rental revenues amounted to SEK 773 (798) per sq. m. Rent- Floor-space, 000 sq. m. 1,966 1,962 al values were SEK 828 (857) per sq. m., and as a share of

Property trading in the year was a slight positive influence on rental values, vacancies, discounting and rental losses were earnings capacity; in terms of sales prices, those properties 6.3 (6.1), 0.9 (1.2) and 0.4 (0.1) per cent respectively, indicat- disposed of had a property yield of 6.8 (5.8) per cent, and the ing both stable progress and the robust state of the property estimated property yield of acquired properties was 7.7 (7.8) holding at year-end. per cent. This relatively low property yield has reduced the The following figure illustrates contract values divided portfolio’s average property yield. Nevertheless, the acquisi- between commercial property, retirement home, residential tions, mainly retirement home properties, are considered to and other contracts at year-end. The revenues from these enjoy below-average risk, and accordingly, portfolio risk-ad- contracts are not consistent with earnings capacity, because justed returns have increased. Portfolio realignment helped this latter variable has been adjusted for supplementary billing maintain good stability of the key figures relating to earnings and other revenues. capacity, as evident in high occupancy and a high profit margin. Kungsleden has good risk diversification in its contract If terms of a like-for-like holding, property costs were sta- portfolio, and has reduced its exposure to commercial ble in the year adjusted for timing effects of operating costs premises in favour of retirement homes, underscoring the coincident with the annual financial statement. Moreover, quality enhancement the property holding has undergone in maintenance costs decreased in like-for-like terms, a conse- recent years. quence of the good condition of properties and the holding’s Contract values Contract size, SEK 000s quality being higher than a few years ago. Nevertheless, the Other 1% % property management contribution to earnings capacity was 1,116 contracts 60 Residential 3% negative, because generally, market vacancies were high in 651 contracts 45 the year, pressurizing rents. This progress could be restricted Retirement homes 24% 30 to specific properties, mainly offices in major city regions and 234 contracts Commercial 72% 15 the largest municipalities (populations of over 100,000). How- 1,868 contracts ever, properties in the rest of the country and in slightly small- 0 er municipalities continued to perform well. Moreover, no ad- Total contract value SEK 1,477 m 0–499 500–999 1,000– 5,000– >10,000 distributed on 3,869 contracts 4,999 9,999 verse tendencies in discounting were apparent, while rental Commercial Retirement homes losses remained low.

25 Financial overview

The following figure illustrates the division of contract maturi- on reducing property costs, achieved mainly through central- ties between commercial premises and retirement homes. ized contract tendering, and the enhanced control of prop- The table illustrates the difference in the nature of these con- erty care. tracts and the lower risk implicit in retirement homes with Kungsleden’s properties are generally well maintained. their long-term contracts. A high proportion of commercial The demand for premises is mainly positive, and the propor- contract values mature within five years, while almost half of tion of unoccupied floor-space in the property holding is low, retirement home contract values mature in 2014 or later. suggesting that Kungsleden expects the relative cost of tenant adaptations to remain fairly constant. Contract maturities Overall, this means that property costs are not expected % 50 to outgrow inflation. Operating and maintenance costs stood at SEK 423 40 (405) m, with operating costs comprising SEK 333 (304) m of 30 this total, and maintenance costs, SEK 90 (101) m. A further 20 SEK 114 (119) m was capitalised as investments in remaining 10 properties, while the new production of properties amounted to SEK 78 (97) m. 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014+ Typically, ground rent has a 10–20 year term, and accord-

Commercial Retirement homes ingly, renegotiations are assessed to exert a limited impact on costs from year to year. The distribution of contracts across social segments also Revenues received from onward billing of property tax are confirms this low risk. Over 35 per cent of contract values are accounted under rental revenues and amounted to SEK 36 attributable to public sector tenants, meaning central and lo- (32) m. cal government, and public authorities—but including central Property administration cost SEK 83 (67) m, equivalent to government and municipal corporations, the public sector 0.67 (0.54) per cent of book values. Property administration share is even higher. Moreover, the figure also classifies pri- comprises costs for ongoing property management including vate operators with publicly financed operations as private the costs of rental billing, rent negotiations, rent demands and sector. The ten largest tenants represent 25 per cent of con- accounting. The depreciation of equipment has been divided tract values, or SEK 370 m, spread over 342 contracts. Risk between three usage-related administrative classes. exposure is limited by the majority of the largest tenants being public sector. Property trading During the year, 64 (70) properties with a floor-space of 417,000 Contract values divided by type of tenant (324,000) sq. m. were acquired for SEK 2,490 (2,913) m. These Other 1% acquisitions were made at estimated property yields of 7.7 Residential 3% (7.8) per cent. Meanwhile, 116 (77) properties were disposed Public sector 35% of for a total of SEK 2,723 (1,334) m, and profits of SEK 170 (151) m. The disposals were effected at a property yield of 6.8 Private sector 61% (5.8) per cent calculated in terms of sales values. The prices received were SEK 86 (88) m and SEK 93 (46) m above inter-

Share of nal and external valuations respectively. For 51 (46) of these Contract contract No. of Share of properties, sales values per property were less than SEK 10 m. Largest tenants value, SEK m value, % contracts contract, % Ericsson 83 5.6 59 1.5 Municipality of Norrköping 41 2.8 21 0.5 Proﬁt effect of divested properties Sales, SEK m Proﬁt, SEK m No. Stockholms Stad 40 2.7 19 0.5 Positive 1,750.6 254.3 78 FöreningsSparbanken 40 2.7 130 3.3 Zero 329.8 0 5 Capio 39 2.6 40 1.0 Negative 642.6 –51.2 33 Municipality of Gävle 32 2.2 17 0.4 Sales administration –32.9 Municipality of Malmö 30 2.0 33 0.9 Total 2,723.0 170.2 116 Bröderna Edstrand AB 24 1.6 10 0.3 Municipality of Uppsala 21 1.4 6 0.2 Rikspolisstyrelsen 20 1.4 7 0.2 Sales administration also includes sales overheads, mainly Total 370 25.0 342 8.8 transaction related, and principally comprising brokerage fees.

Property costs Central administration Kungsleden’s property holding is extensive and property Central administration includes costs of the company’s man- management issues have gradually gained importance. The agement and central functions such as accounting, ﬁnance, organisational resources sustained their focus on increasing legal services, analysis and IT, as well as costs associated management efﬁciency, efforts that include continuous work with stock market quotation.

26 Financial overview

Value adjustments Sensitivity analysis Value adjustments in the year were SEK 35 (45) m net. Write- The sensitivity analysis in the following table illustrates how ups, i.e. reversals of write-downs in previous years, were SEK operations are influenced by the primary variables, and is 20 (32) m, and write-downs were SEK 55 (76) m. The write- based on the situation as of 31 December 2004. downs primarily concerned those properties where the tenant situation or other conditions on local markets implied a Profit impact, Sensitivity analysis Change SEK m deteriorated outlook for the properties. Rental revenue +/–1 % 15 Economic vacancy +/–1 percentage point 16 Net financial position Property costs +/–1 % 5 Funding costs, upon changed +/–1 percentage point 25 The progress of net financial position is due to a larger aver- interest level age property holding, and the following circumstances. Average funding costs +/–1 percentage point 94

Adjusted net financial position, SEK m 2004 2003 PROPERTY VALUES Accounted net financial position –456.0 –432.7 Freedom from interest received coincident with As of 31 December, the property holding had an internally as- –8.8 0.0 property acquisitions sessed actual value of SEK 13,452 (13,291) m and an exter- Total –464.8 –432.7 nally assessed actual value of SEK 13,060 (12,989) m. The internal valuation exceeded book value by SEK 989 (955) m, The snap-shot interest level has declined from 4.97 to 4.93 per and the external valuation exceeded book value by SEK 597 cent. The interest fixing period declined from 2.58 to 2.41 years. (653) m. Internal valuations are the most significant to Kungsleden Tax and are an integrated element of its business process. Every Tax for the year was influenced by the changes in temporary property has a business plan, updated at least annually, and differences on shares in subsidiaries. The following table illus- includes internal valuations, the most recent external valu- trates Kungsleden’s tax position at year-end 2004. ation, a statement of standpoint and an action-plan for the measures considered to optimise the property’s operating Temporary differences, SEK m Properties –2,428 net and value. Principally, the statement of standpoint and Shares in subsidiaries 257 internal valuation calculation are based on a present value Income tax (loss carry-forwards) 4,010 calculation with a five-year forecast period and the external Interest-bearing liabilities 16 valuation as a comparison. Total 1,855 Deferred tax receivables 520 Kungsleden considers that out of ethical business considerations, external parties would expect internal valuations After such entities are liquidated, temporary differences in to be verified externally. Accordingly, a comprehensive ex- shares in subsidiaries are accounted as deductible losses in ternal valuation including property inspections is performed 2005, and subsequently transfer to temporary differences on a representative sample of properties in terms of type and in income tax. Proceeding from these values, loss carry-for- location amounting to some 70 per cent of property values, wards at year-end 2005 can be expected to amount to SEK every third year. For the intervening years, previous valuations 4,267 m, reduced by taxable profits for 2005. are updated, through what is termed a desktop valuation, on New legislation was introduced in Sweden on 1 July 2003, all properties. However, comprehensive valuations are also allowing the divestiture of certain subsidiaries that are limited performed on all new properties and properties with special companies free of tax. By incorporating properties, this has circumstances. In 2004, and as of December, Forum Fas- also affected tax for the year. This type of divestiture, which tighetsekonomi AB performed desktop valuations of those implies that temporary differences on properties can be properties owned for the full year. A comprehensive external divested without any tax burden, represented 40 per cent of valuation on 60 per cent of constituent properties was also disposals in the year and can be expected to remain a signifi- conducted coincident with the re-financing of a syndicated cant proportion. loan. Comprehensive valuations were performed on properties acquired in the year. Cash flow Inherently, Kungsleden’s business is such that it is always Cash flow from ongoing operations was SEK 500 (673) m. important to maintain an accurate perception of what each Operating cash flow amounted to SEK 865 (985) m. Invest- property is worth to Kungsleden, and how much its saleable ment activity generated a cash flow of SEK –182 (–2,267) m, value would be. Accordingly, business plans and internal from financing activity, a cash flow of SEK –255 (1,471) m. valuations are highly significant. More information is in Kungsleden’s Cash Flow Statement on As an element of the quality process, the relationship be- page 36, and under Note 18. tween internal and external valuations and realised sales prices is made on an ongoing basis. Prices achieved in the

27 Financial overview

year exceeded the previous year’s internal and external valu- Risk management objectives ations by 3.3 (7) and 3.5 (4) per cent respectively. Experience The Financial Policy stipulates that the overall objectives of indicates that prices received are above internal and external Kungsleden’s Finance function are: valuations. Generally, internal valuations are closer to prices • To ensure the long and short-term access to capital; achieved than external valuations. The fact that in most cases, • To adapt Kungsleden’s funding strategy according to the internal valuations have at least as high quality as external company’s operations in order for a stable long-term capital valuations is due to the fact that Kungsleden is kept informed structure to be achieved and maintained; on other players’ pricing assessments on an ongoing basis • To achieve the optimal net financial position within the by its active participation in the property market. established risk limits. As in previous years, Kungsleden is accounting its property holding as current assets at the lower of cost or assessed Short and long-term access to capital is achieved through market value. Actual value is an accounting term, which for the active re-negotiation and supply of new lines of credit. properties, is synonymous with market value. The Financial Policy stipulates permitted counterparties for transactions, and the terms of unilateral commitments. Property values in summary, 2004 The Financial Policy also regulates the investment of sur- Retirement Industrial/ plus liquidity in terms of counterparty, instruments and time- Category, SEK m Offices homes warehouse Retail Other Total frame. The Financial Policy stipulates the framework for liquid- Book value 5,582 3,731 2,063 878 209 12,463 Internal valuation 5,885 4,093 2,304 943 227 13,452 ity reserves for fulfilling payment commitments. External valuation 5,716 3,940 2,212 970 222 13,060 The financial strategy is modified to the business to achieve and retain a stable long-term capital structure. The Market Area, SEK m East West South Central North Total introduction of this Annual Report stated Kungsleden’s finan- Book value 4,935 2,651 3,998 681 198 12,463 cial objectives and risk limits, including a long-term minimum Internal valuation 5,293 2,883 4,311 749 216 13,452 External valuation 5,095 2,816 4,204 739 206 13,060 equity ratio of 25 per cent.

FUNDING Financial risks The bond market in 2004 Interest risk is defined as the risk of a profit and cash-flow For borrowers, 2004 was a very favourable year—from low impact of a change in market yields. opening levels of 4.5 per cent on five-year swap yields and Funding risk is defined as the risk of funding not being 2.9 per cent on three-month STIBOR, the year ended with forthcoming, or only available on unfavourable terms. five-year swap yields of 3.6 per cent and a three-month Credit risk is defined as the risk that a counterparty does STIBOR of below 2.2 per cent—levels seldom, if ever, seen not fulfil all or parts of its commitment. Counterparty risk is before in Sweden. These low yields correlate to very low infla- in swap agreements and investments of surplus liquidity. tion in the country. Long yields fluctuated in the year, track- Liquidity risk is defined as the risk of not having access to ing expectations of an international cyclical rally. US labour liquid funds or un-utilized credits to satisfy payment commit- market data was in focus, pushing international yields up and ments. down depending on trends. The US labour market, a driver of the global economy, was weak throughout 2004, as reflected Financing in yield levels. The Riksbank, the Swedish central bank, eased Kungsleden’s loan portfolio contracted from SEK 9,480 m its benchmark rate rapidly from 2.75 per cent to 2.0 per cent to SEK 9,460 m in 2004. A syndicated loan agreement was between January and April, and has remained at this level reached, with a volume of SEK 6,000 m, replacing the previ- since. The majority of market forecasts late in the year also ous agreement and another SEK 687 m facility. At year-end, suggested short yields staying low, with pricing at year-end SEK 4,725 m of this facility had been drawn down. This syn- indicating unchanged short yields throughout the first half- dicated loan runs until December, 2010, and encompasses year 2005. eight loan agreements of a total of SEK 7,195 m. A volume of SEK 300 (500) m of the bond issue quoted on the Stockholm Financial Policy Exchange remains, which has been fully drawn down. This Kungsleden’s Financial Policy stipulates the guidelines and issue matures in July 2005 and has a 9.75 per cent coupon. rules governing funding. The Finance function is a group- wide activity responsible for group funding, liquidity planning Liquidity and managing interest risk. The Board formulates the Finan- As of 31 December 2004, available liquidity including an un- cial Policy and stipulates how the various risks in the funding utilised committed credit facility and the unutilised portion of operation are to be limited. Moreover, the Board determines the syndicated facility, stood at SEK 581 m. the division of responsibility and administrative regulations, which mean that the Financial Policy offers guidance to the efforts of Kungsleden’s Finance function.

28 Financial overview

Interest fixing strategy and risk management Loan maturity structure as of 31 December 2004 Kungsleden’s interest fixing strategy is based on the view Maturity Total, SEK m Proportion, % 2005 642 5.9 that even with a relatively high share of short interest fixings in 2007 198 1.8 its funding portfolio, it can maintain a low risk level by a high 2008 1,240 11.3 share of the loan portfolio’s interest fixings being extended 2009 7,875 71.8 with realizable long-maturity interest swaps. This strategy has 2010 1,013 9.2 been complemented with long interest fixings for a portion Total 10,968 100.0 of the funding of retirement homes. FORECAST 2005 The strategy is embodied as a benchmark portfolio for on- The Board of Directors expects profits for calculating divi- going management. The interest fixing strategy is subject to dends of SEK 600 m. Profits for calculating dividends means ongoing evaluation and is also dependent on capital structure. profit after tax excluding unrealized value changes (changes The benchmark portfolio also has a limited risk mandate as- that do not influence cash flows) and deferred tax. Realized sociated, stipulating maximum permitted divergence within value changes are included in profits for calculating dividends. each maturity interval. The mandate has been determined to This profit measure corresponds to the Cash Flow Statement enable the active management of the funding portfolio, with item cash flow from operations before change in working divergence from the benchmark reported and evaluated on capital. an ongoing basis. Kungsleden continues to monitor the financial markets, and is very prepared to further limit its interest risk. Increased loan ratios may result in an adjustment of the floating interest portion of the funding portfolio. At year-end 2004, the average interest fixing period was 2.41 (2.58) years. Why do you work for Kungsleden? I was hired in 1993 when we were part of Gota, so I’m one of the people that’s been here longest. I stay here because it’s enjoyable to work in a Funding structure changing corporation with a very good HR policy, with benefits and training, As of 31 December 2004, Kungsleden’s total assets amount- keep-fit and the management’s positive attitude. Nice colleagues, which mean we have fun at work, are another plus. ed to SEK 13,697 m, of which properties were SEK 12,463 m. The following table illustrates funding at year-end. What’s the most important part of your job? Keeping things in order and organizing stuff—mainly Jens’ time and appointments. I’m his right hand, so I need to be able to make my own Interest fixing periods as of 31 December 2004 decisions when he’s not here. I’ve got extensive contacts with people out Interest maturity Loan, SEK m Proportion, % Average interest, % in our organization, and most of them know they can ring me to get help. 2005 4,742 50.1 3.85 2006 650 6.9 5.42 What, do you think, distinguishes Kungsleden’s working methods? 2007 475 5.0 6.56 The fact that we all have high individual responsibility—no one’s checking what 2008 688 7.3 6.16 you’re doing. We’ve got freedom with responsibility. We’re also encouraged to train and we get good support from technology. 2009 630 6.7 5.07 2010 1,375 14.5 6.55 What was the most enjoyable part of your work in 2004? 2011 400 4.2 6.47 The biggest change last year over the last year was that I went on parental 2012 200 2.1 5.65 leave, returning in November, 2004. Otherwise, Kungsleden is very generous 2013 200 2.1 5.31 and understanding of parents of small children. 2014 100 1.1 5.32 What changed most in your job in 2004? Total 9,460 100.0 4.93 I’m trying to catch up and get updated after being on parental leave.

What’s your favourite building? Göta Ark, Kungsleden’s new head ofﬁce in south-central Stockholm—we’re moving there in summer 2005.

Sinikka Mukka, 39, Chief Executive’s Personal Assistant.

29 Financial overview

FIVE-YEAR OVERVIEW

Summary Income Statement, SEK m Property management 2000 2001 2002 2003 2004 Rental revenue 785 1,039 1,291 1,376 1,508 Operating and maintenance costs –236 –294 –349 –404 –423 Property tax –31 –45 –49 –42 –50 Ground rent –8 –10 –13 –12 –18 Property administration –49 –52 –62 –67 –83 Operating surplus 461 638 818 850 934

Property trading Sales revenues properties 390 1,057 880 1,334 2,723 Sales administration incl. overheads –7 –16 –16 –24 –33 Book value –321 –941 –727 –1,158 –2,520 Profit property trading 62 100 137 152 170

Gross proﬁt 523 738 955 1,002 1,104

Central administrative costs –21 –30 –32 –39 –42 Value adjustments on properties –47 –51 –48 –45 –35 Operating profit 455 657 875 918 1,027 Interest subsidies 2 1 0 2 0 Financial income 83 19 4 2 8 Financial costs –223 –297 –427 –437 –464 Profit after financial items 316 380 452 485 571 Tax costs –88 –114 –130 260 357 Net profit 228 266 322 745 928

Summary Balance Sheet, SEK m Assets 2000 2001 2002 2003 2004 Fixed assets 176 56 15 196 566 Current property assets 6,487 9,477 10,130 12,336 12,463 Other current assets 154 260 140 372 601 Liquid funds 140 154 127 4 67 Total assets 6,957 9,947 10,412 12,908 13,697

Liabilities and shareholders’ equity Shareholders’ equity 2,092 2,188 2,310 2,828 3,510 Interest-bearing liabilities 4,115 5,966 7,461 9,480 9,460 Non-interest bearing liabilities 750 1,793 641 600 727 Total liabilities and shareholders’ equity 6,957 9,947 10,412 12,908 13,697

30 Financial overview

Key figures Property-related Earnings capacity 2000 2001 2002 2003 2004 Property yield, % 8.3 8.6 8.6 8.3 7.9 Economic occupancy, % 91.0 93.4 93.6 93.9 93.7 Profit margin, % – 63.5 65.0 65.5 64.4 Actuals Property yield, % 7.8 8.0 8.3 7.6 7.5 Economic occupancy, % 90.6 92.2 92.9 93.6 93.0 Profit margin, % 58.6 61.5 63.4 61.8 61.9

Financial Return on total capital, % 7.2 8.0 8.6 7.9 7.8 Return on equity, % 11.2 12.4 14.3 29.0 29.1 Interest cover, multiple 3.3 2.4 2.1 2.1 2.3 Equity ratio, % 30.1 22.0 22.2 21.9 25.6 Gearing, multiple 2.0 2.7 3.2 3.4 2.7 Mortgage ratio, % 63.4 63.0 73.4 76.8 75.9

Data per share Share price, SEK 92.00 117.00 145.00 193.00 251.00 Beta value 0.05 0.04 0.43 0.05 0.31 Dividend, SEK1 9.00 10.50 12.00 13.00 15.00 Total yield, % 29.9 37.0 32.9 41.4 37.8 Dividend yield, % 10.4 9.8 9.0 8.3 7.8 P/E ratio, multiple 6.6 6.9 8.5 4.9 3.9 P/CE ratio, multiple 2.9 3.4 4.9 4.1 7.3 Operating surplus, SEK 24.8 33.70 43.20 44.90 49.30 Proﬁt, SEK 12.30 14.00 17.00 39.30 49.00 Cash ﬂow from operations, SEK 26.80 26.70 24.00 35.50 26.40 Shareholders’ equity, SEK 102.30 115.40 121.90 149.20 185.10 Property book value, SEK 342.20 499.90 534.30 650.70 657.40

Number of shares, closing balance 18,958,620 18,958,620 18,958,620 18,958,620 18,958,620 Average number of shares in the year 18,596,000 18,958,620 18,958,620 18,958,620 18,958,620

1 2004: The Board’s proposed appropriation of proﬁts.

31 Financial reporting

REPORT OF THE DIRECTORS As of 31 December 2004, Kungsleden’s equity ratio was 25.6 Summarised comments (21.9) per cent, and its un-utilised credit facilities stood at Despite the economy achieving very robust growth of 4 per SEK 1,509 (1,141) m. cent, the past financial year featured relatively weak progress For more information, please refer to the financial overview on rental markets, with the major cities—and particularly on pages 25 to 31. Stockholm—weakest. Property trading generated a strong trading net, helping Board actions further enhance the portfolio’s risk-adjusted returns. In value The Board of Kungsleden AB (publ) comprises six Directors terms, the year’s divestments were concentrated on the Öre- and has been composed to support the management in its sund and Stockholm regions, and on office properties. The corporate development process actively and effectively. More- majority of acquisitions in the year were retirement homes. over, the Board monitors and directs activities. In a listed Overall, this resulted in distinctly lower risk levels, but only a corporation like Kungsleden, skills and experience in activi- marginal decrease in yields. ties including the following are significant: Through an SEK 84 m increase to its operating surplus, • The property sector; the second component of Kungsleden’s business model, • Funding; property management, also contributed to better profits due • Business development; to a larger average property holding, but also thanks to a • Capital markets issues. somewhat higher profit margin. Board actions follow the approved agenda and instructions Significant events in the financial year stipulating the division of responsibility between the Board Kungsleden continued to consolidate its status as the leading of Directors and Chief Executive, and the forms for financial retirement homes player in Sweden by acquiring more prop- reporting to the Board. The Board considered issues such as erties. Retirement homes are expected to undergo very pro- Kungsleden’s strategies, objectives, business plan, markets, nounced growth over the next 30 years, particularly consid- external reporting, property acquisitions and disposals, ering the demand arising from an ageing population. investments in existing properties, raising loans and other funding issues, preparing sales mandates and incentives Overview agreements. Profit, SEK m Kungsleden’s Board held seven scheduled meetings in Property management 2004 2003 the financial year 2004; additional Board meetings were con- Rental revenue 1,508 1,376 Operation & maintenance costs –424 –405 vened to consider property acquisitions and funding issues. Property tax –50 –42 The Board met on a total of 24 occasions. Ground rent –17 –12 Property administration –83 –67 Operating surplus 934 850 Property trading Sales revenues from properties 2,723 1,334 Sales administration incl. overheads –33 –24 Book value –2,520 –1,158 Profit from property trading 170 152 Gross profit 1,104 1,002 Central administration costs –42 –39 Value adjustments on properties –35 –45 Operating profit 1,027 918 Interest subsidies 0 2 Financial income 8 2 Financial costs –464 –437 Profit after financial items 571 485 Tax 357 260 Net profit 928 745

Cash flow, SEK m 2004 2003 Operations 500 673 Investment activity –182 –2,267 Financing activity –255 1,470 Cash flow for the year 63 –124 Cash flow, opening balance 4 128 Cash flow, closing balance 67 4

32 Financial reporting

The Deputy Chief Executive and company lawyer, who is also Expected future progress the Board Secretary, are present at Board meetings. Please refer to our forecast for 2005 on page 29. The company’s Auditors submit a personal report on their audit observations and their assessment of internal controls Parent company on an annual basis. Parent company profits after tax was SEK 498 (764) m. Sales The Board has appointed an internal Accounting and were SEK 0 (0) m. Parent company assets primarily comprise Audit Committee, which is active from the financial year 2005 funding of subsidiaries’ property holdings, divided between onwards. shares in subsidiaries of SEK 1,235 (1,705) m and interest- The members of the Nomination Committee are bearing internal funding of SEK 1,631 (2,150) m. Funding was Kungsleden’s Chairman, Bengt Kjell, Henrik Sandberg of mainly through shareholders’ equity of SEK 2,691 (2,307) m Handelsbanken SPP/Liv and Olle Florén. The Nomination and external liabilities of SEK 300 (1,479) m. Committee met on three occasions. Significant events after the end of the period Proposed appropriation of profits By 16 February, three properties had been divested, for a The Board of Directors’ proposed appropriation of profits is profit of SEK 14 m. stated on page 43.

Why do you work for Kungsleden? What was the most enjoyable part of your job in 2004? Actually I got a job here by chance. I started at Kungsleden in mid-September The most enjoyable thing was a group kick-off seminar in central Sweden— 2003, after the company had advertised for an accounting manager. I’d worked it was the ﬁrst time I met all my colleagues. In professional terms, getting in the sector previously, but my last job was in the IT sector. to know all the new stuff this year was most fun—I learned a lot.

What’s the most important part of your job? What was the biggest change in your job in 2004? The most important thing is to work for a company that’s been successful for All the acquisitions we made in the year. We bought as many as 23 properties a long time. This sets a stamp on the whole organization, and provides strong in 2004, for a total of SEK 1 billion-plus. It was a really transaction-intensive developmental impetus. Moreover, I need to have varying tasks. Actually, the year and we’ll soon be Kungsleden’s biggest region in terms of book value. most enjoyable things are those that aren’t everyday—quite a lot happens ad What’s your favourite building? hoc in this organization. My favourite is Saltsjöbaden Hospital, east of Stockholm—it looks beautiful What do you think, distinguishes Kungsleden’s working methods? and has a great location. Kungsleden took it over on 1 September 2003. Speed and informal contacts within the organization. Moreover, Kungsleden generally has highly professional staff.

Roger Johansson, 43, Head of Accounting, the Retirement Homes Region.

33 Financial reporting

INCOME STATEMENT

SEK m Group Parent company Property management Note 2004 2003 2004 2003 Rental revenue 1,507.8 1,376.2 – – Operating and maintenance costs –423.4 –404.5 – – Property tax –49.8 –42.0 – – Ground rent –17.5 –12.4 – – Property administration 1–3 –83.3 –67.0 – – Operating surplus, property management 933.8 850.3 – –

Property trading Sales revenues properties 2,723.0 1,334.3 – – Sales administration incl. overheads 1–3 –32.9 –24.3 – – Book value of divested properties –2,519.9 –1,158.6 – – Profit, property trading 170.2 151.4 – –

Gross proﬁt 1,104.0 1,001.7 – –

Central administration costs 1–3 –41.7 –39.3 –8.5 –5.7 Value adjustments 4 –35.3 –44.9 – – Operating profit 1,027.0 917.5 –8.5 –5.7

Profit from financial items Profit from shares in group companies 5 – – 579.1 756.4 Interest income, etc. 7.9 2.3 182.0 98.9 Interest subsidies 0.2 1.7 – – Interest costs, etc. –464.1 –436.6 –234.7 –124.0 Profit before tax 571.0 484.9 517.7 725.6

Tax 6 Current tax –10.9 –22.8 – – Deffered tax 368.2 283.1 17.2 38.0 Net proﬁt 928.3 745.2 534.9 763.6

Average number of shares 18,958,620 18,958,620 Proﬁt before tax per share 30.10 25.60 Proﬁt after tax per share 49.00 39.30 Proposed dividend per share 15.00 13.00

34 Financial reporting

BALANCE SHEET

SEK m Group Parent company Assets Note 31 Dec 2004 31 Dec 2003 31 Dec 2004 31 Dec 2003 Fixed assets Tangible fixed assets Equipment, fixtures and fittings 7 6.0 6.4 – – 6.0 6.4 – – Financial fixed assets Shares in group companies 8 – – 1,234.5 1,704.7 Deferred tax receivables 6 519.5 167.9 108.2 128.4 Other long-term receivables 40.1 21.8 18.0 – 559.6 189.7 1,360.7 1,833.1 Total fixed assets 565.6 196.1 1,360.7 1,833.1

Current assets Current property assets 9, 10 12,463.0 12,336.3 – –

Current receivables Accounts receivable 13.5 13.3 – – Receivables, group companies – – 1,630.7 2,150.1 Other receivables 11 549.1 344.8 – 6.3 Pre-paid costs and accrued income 39.0 13.9 – – 601.6 372.0 1,630.7 2,156.4 Cash Cash and bank balances 67.3 3.8 20.8 – Total current assets 13,131.9 12,712.1 1,651.5 2,156.4 Total assets 13,697.5 12,908.2 3,012.2 3,989.5

Liabilities and shareholders’ equity Shareholders’ equity 12 Restricted equity Share capital 47.4 47.4 47.4 47.4 Restricted/statutory reserves 1,087.3 1,087.2 1,086.1 1,086.1 1,134.7 1,134.6 1,133.5 1,133.5 Non-restricted equity Non-restricted reserves/retained proﬁt/loss 1,446.7 948.1 1,022.6 409.5 Net proﬁt 928.3 745.2 534.9 763.6 2,375.0 1,693.3 1,557.5 1,173.1 Total shareholders’ equity 3,509.7 2,827.9 2,691.0 2,306.6

Provisions Other provisions 13 1.1 – – – Total provisions 1.1 – – –

Long-term liabilities 15 Loans 14 9,160.0 9,384.3, – 1,479.2 Total long-term liabilities 9,160.0 9,384.3 – 1,479.2

Current liabilities 15 Loans 300.0 – 300.0 – Committed credit facility (limit: SEK 250 m) – 95.3 – 95.3 Accounts payable 102.1 100.6 0.4 0.2 Tax liabilities 11.0 23.1 – – Other liabilities 410.6 331.4 2.0 90.9 Accrued costs and deferred income 203.0 145.6 18.8 17.3 Total current liabilities 1,026.7 696.0 321.2 203.7 Total liabilities and shareholders’ equity 13,697.5 12,908.2 3,012.2 3,989.5

Assets pledged and contingent liabilities Assets pledged 16 9,059.2 5,274.2 None None Contingent liabilities 17 None None 6,017.3 4,362.2

35 Financial reporting

CHANGE IN SHAREHOLDERS’ EQUITY Group Parent company SEK m 2004 2003 2004 2003 Opening balance 2,827.9 2,310.2 2,306.7 1,875.6 Dividends –246.5 –227.5 –246.5 –227.5 Group contribution – – 95.9 –105.1 Net proﬁt 928,3 745.2 534.9 763.6 Closing balance 3,509.7 2,827.9 2,691.0 2,306.6

CASH FLOW STATEMENT Group Parent company SEK m Note 2004 2003 2004 2003 18 Ongoing operations Operating profit 1,027.0 917.5 –8.5 –5.7 Net financial position –455.9 –432.7 526.2 731.3 Value adjustments 35.3 44.9 – – Adjustments for items not included in cash flow. etc. 3.3 2.6 – – 609.7 532.3 517.7 725.6 Tax paid –23.0 1.4 – – Cash flow before change in working capital 586.7 533.7 517.7 725.6

Cash flow from change in working capital Increase (–)/decrease (+) in operating recievables –109.7 67.0 6.2 –0.1 Increase (+)/decrease (–) in operating liabilities 23.1 72.2 –87.0 76.2 Cash flow from operations 500.1 672.9 437.0 801.7

Investment activity Aquisitions of current property assets –2,681.9 –3,409.8 – – Disposals of current property assets 2,519.9 1,158.6 – – Net investments in tangible fixed assets –1.8 –1.3 – 0.2 Net investments in financial fixed assets –18.2 –14.8 1,102.7 –449.2 Cash flow from investment activity –182.0 –2,267.3 1,102.7 –449.0

Financing activity Loans drawn down/amortised –8.1 1,698.1 –1,272.4 –125.2 Dividend paid –246.5 –227.5 –246.5 –227.5 Cash flow from financing activity –254.6 1,470.6 –1,518.9 –352.7

Cash flow for the period 63.5 –123.8 20.8 0.0 Liquid assets, opening balance 3.8 127.6 0.0 0.0 Liquid assets, closing balance 67.3 3.8 20.8 0.0

SUPPLEMENTARY DISCLOSURES value at the time of acquisition, consistent with the acquisition All amounts in SEK 000 unless otherwise stated analysis prepared. Acquired companies’ revenues and costs are consolidated from the acquisition date onwards, which General accounting principles means that these companies do not start contributing to The Annual Report for 2004 has been prepared in accord- consolidated capital until after their acquisition. The income ance with the Swedish Annual Accounts Act, Redovisnings- statements of divested companies are considered until the rådet’s (RR, the Swedish Financial Accounting Standards time possession is relinquished. Council) recommendations and Emerging Issues Task Force statements and the Industry and Commerce Stock Exchange Joint ventures Committee’s recommendations. Holdings in joint ventures are accounted using proportional Unless stated otherwise, the accounting principles applied consolidation (the proportional method). In the consolidated are unchanged compared to previous years. accounts, Kungsleden’s participation in joint ventures’ assets, liabilities, revenues and costs are accounted line by line along- Consolidated accounts side the corresponding items in the consolidated accounts. The consolidated accounts encompass the parent company, subsidiaries and joint ventures. Subsidiaries are those Revenues companies in which the parent company exerts a controlling Rental contracts are classified as operational leasing con- influence. Joint ventures are those companies in which the tracts. Rental revenues are divided over time pursuant to the parent company exerts a controlling influence alongside an- content of contracts, with consequences including rental other party. The consolidated accounts have been prepared discounts accounted in the period to which they apply. pursuant to acquisition accounting, which means that ac- For property trading, as for property and corporate divest- quired assets and liabilities have been valued at their actual ments, divestments imply the transaction being accounted,

36 Financial reporting

and the revenue recognized, when it is likely that the group Accordingly, property has been valued at the lower of cost will receive the related financial benefits, which most often, is or market value. In cases where discrepancies between the on the contract date. book value and estimated actual value of the property appear, the requisite write-downs and write-ups of previous Financial revenue and costs write-downs have been effected. This means that the book The revenue from rental revenues and rent subsidies is rec- value of property has a maximum corresponding to acquisi- ognized in the period to which it relates. tion value. Estimated actual values are based on internal and Interest and other financial expenditure coincident with external valuations conducted in accordance with generally property construction is capitalised, while that associated accepted valuation principles. with extension and conversion is written off on an ongoing basis. Derivative instruments are utilised to achieve the de- Equipment, fixtures and fittings sired interest fixings. Revenues and costs associated with Equipment, fixtures and fittings have been accounted at ac- such instruments are accounted on an ongoing basis, with quisition value less accumulated depreciation according to the revenues and costs for redemption and re-negotiation of plan and any potential write-downs. Equipment is depreciated derivatives, as well as prepayment penalty interest, account- linearly according to plan over five years. ed as they arise. Costs associated with funding facilities are allocated during the term of the facility. Financial instruments Long-term receivables, exclusively comprising promissory Income tax notes issued by the seller to the buyer have been valued at Deferred tax is accounted pursuant to the balance sheet acquisition value unless a valuation indicates a need for write- method, implying that deferred tax is calculated on the tem- downs. porary differences between taxable and book values of assets After valuation on a case-by-case basis, short-term receiv- or liabilities identified on the balance sheet date. Temporary ables are accounted at the amount at which they are expected differences arise in properties, shares in subsidiaries, income to be received. tax (loss carry-forwards) and interest-bearing liabilities. All Liquid funds comprise cash and immediately available bal- temporary differences are valued entirely at nominal tax rates, ances with the postal giro system and banks. and the change from the previous year’s balance sheet date Provisions are accounted when a commitment arises en- is accounted as deferred tax in the Income Statement. suing from an event that has occurred, and it is likely that resources will be necessary to satisfy the commitment, and a Employee benefits sufficiently accurate estimate of the amount is possible. Employee benefits such as salary and social security costs, Interest-bearing loans are accounted initially at acquisition holidays and paid sickness absence etc. are accounted as value, and subsequently, at accrued acquisition value. This staff conduct employment. Kungsleden has adopted RR 29 means that values are adjusted by potential discounting or Employee Benefits since 1 January 2004 regarding pensions premiums coincident with raising or redeeming such loans, and other remuneration after conclusion of employment. and costs coincident with funding are distributed over the Commitments relating to senior executives are underwritten term of such loan. through defined-contribution pension schemes. Commit- Other liabilities are accounted at nominal value. ments for other executives are underwritten by insurance through Alecta. A statement from RR’s (the Swedish Finan- Segments cial Accounting Standards Council) Emerging Issues Task Kungsleden applies RR 25 Segment Reporting—business Force, URA 42, stipulates that this is a defined-benefit plan lines and geographical segments from 1 January 2003. covering multiple employers. Alecta has not provided suffi- Kungsleden’s business comprises the portfolio manage- cient information to enable this plan to be accounted for as a ment of a single asset class on a single market—proper- defined-benefit plan in 2004. On 10 December 2004, FAR’s ties in Sweden, and accordingly dividing the results-based (the Swedish Institute of Authorised Public Accountants) ac- accounting information in income statements and balance counting and audit committees made a statement implying sheets is not considered beneficial, or helpful to the recipi- that Alecta’s ITP (supplementary pensions for salaried em- ents of Kungsleden’s financial reports. For these parties to ployees) scheme should be accounted as a defined-contri- be able to evaluate the risks and opportunities applicable to bution plan pursuant to RR 29, point 30. Accordingly, the ITP Kungsleden, earnings capacity is disclosed in each financial pension scheme underwritten by insurance through Alecta is report instead, which is based on more relevant information. accounted as a defined-contribution plan. Please refer to pages 22–25 and 54. The justification for accounting a single segment is provided below. Leasing Kungsleden is party to a number of smaller-scale leasing Business—risks and opportunities contracts on office machines. The aggregate total of these Kungsleden’s business model centres on enhancing the contracts is not significant, and accordingly, they are ac- composition of its portfolio subject to the trends observed counted as operational leasing contracts. on the Swedish property market. The objective is to raise the portfolio’s risk-adjusted return. The core of business revolves Property around the risk and opportunities presented by value changes Since the intention of ownership is to pursue trading, the group’s property holding is accounted as current assets.

37 Financial reporting

on properties, both those owned, and other properties. As of 1 January 2004, the fair value of the property holding Balancing and optimizing total risk levels by diversifying the exceeded book value by SEK 954.5 m. The recalculated proﬁt portfolio into the dimensions of type, tenant and geographical effect for 2004 is SEK 34.8 m net before tax, comprising SEK region are important considerations. Another is to achieve 152.0 m of unrealized value changes on properties as of 31 portfolio property management that is efﬁcient and economical December 2004, less SEK 117.2 m for adjustments to fair so that property yields and values can be maximized. value of divested properties.

Organizational resources—controlling and reporting Financial instruments Kungsleden’s organisation has been designed to implement Although IFRS 1 allows the adoption of IAS 39 to be deferred its business model with the greatest possible efficiency. Its until 2005, Kungsleden has decided to adopt IAS 39 simul- structure basically conforms to geography, because moni- taneous with the compulsory adoption of the remaining IFRS. toring the property market and conducting management in Kungsleden’s funding portfolio constitutes a major part of any other way in a large country like Sweden is difficult in the passive side of its Balance Sheet, and assuming the se- purely practical terms. However, a portion of organizational lected interest fixing strategy, interest-bearing liabilities can resources are apportioned to the retirement homes property be assumed to correlate with value changes in the property type, because these properties are subject to specific opera- portfolio. Accordingly, it is natural for Kungsleden to introduce tional and tenant circumstances. Reports are primarily de- the valuation of financial instruments at fair value, simultan- signed to provide decision-makers with information on how eous with this being introduced for properties. the risk-adjusted returns of the portfolio and its components Hedge accounting will not be applied, and accordingly, are progressing. Secondly, the reports offer an impression derivatives will be valued and accounted at fair value in the of progress of parts of the organization. Decision-making is Balance Sheet, with unrealized value changes posted to the heavily concentrated on the Chief Executive and group man- Income Statement. agement, which has proved a key prerequisite for enabling The fair value of derivatives as of 1 January 2004 exceeded the full implementation of Kungsleden’s business model. book value by SEK 126.6 m. The recalculated profit effect for 2004 amounts to SEK –98.8 m before tax on unrealized value Adaptation to accounting pursuant to IFRS 2005 changes on derivatives. From 1 January 2005, listed companies in the EU must pre- The transitional rules of IFRS 1 stipulate that value changes pare their consolidated accounts pursuant to IFRS (Interna- on derivatives accounted as hedging in previous accounting tional Financial Reporting Standards). Kungsleden is adopt- periods should be accounted to a hedging reserve under ing the transitional rules of IFRS 1, “First-time Adoption of shareholders’ equity. This provision is eliminated against the International Financial Reporting Standards”, and has pro- Income Statement coincident with the hedged items arriving gressively made modifications by adopting RR’s recommen- on the Income Statement, which would affect 2004 earnings dations. pursuant to IFRS but not total shareholders’ equity as of 31 All comparative figures (including financial instruments) December 2004. should be recalculated from 1 January 2004. The Interim Report for the first quarter 2005 will be the first financial report Summary of financial effects Kungsleden publishes pursuant to IFRS. Overall, Kungsleden considers that cash flow from management will not be affected by the new Standards, while ac- For Kungsleden’s part, the most important changes counted profits including value changes will fluctuate. associated with the transition to IFRS are: Preliminary estimates of the effect on profits and share- • The reclassification of properties to investment properties holders’ equity for 2004 are as follows: Share- pursuant to IAS 40 and accounting them at fair value; Income holders’ • Accounting derivatives at fair value pursuant to IAS 39 and SEK m Statement equity IAS 32; Opening balance, pursuant to current accounting, 1 Jan 2004 2,827.9 Investment properties, accounting at fair value 954.5 • Accounting the effects of deferred tax on the basis of the Financial instruments, accounting of derivatives at fair value –126.6 above changes. Deferred tax, accounting at nominal value –231.8 Opening balance, pursuant to IFRS accounting, 1 Jan 2004 3,424.0 Investment properties IAS 40 offers a choice between two valuation methods: cost Profit after tax 2004 928.3 or fair value. A management property means buildings and Adjustments pursuant to IFRS land owned or leased through financial leasing agreements Investment properties, fair value of divested properties –117.2 intended to generate rental revenue and/or value apprecia- Investment properties, unrealized value changes 152.0 Financial instruments, unrealized value changes –98.8 tion. Fair value has been selected because Kungsleden con- Deferred tax 17.9 siders it to be more compatible with its business model. Con- sequently, properties are valued and accounted at fair value Adjusted profits pursuant to IFRS accounting excl. 882.2 882.2 in the Balance Sheet, with unrealized value changes posted transfer of hedging provision, 31 Dec 2004 Dividends –246.5 to the Income Statement. Closing balance, pursuant to IFRS accounting, 31 Dec 2004 4,059.7 Closing balance, pursuant to current accounting, 31 Dec 2004 3,509.7

38 Financial reporting

Note 1 Employees and personnel costs Comments on the table: • Performance-related pay is bonuses for 2004, of which 6,694 has been Proportion Proportion posted to 2004; Average number of employees 2004 women % 2003 women % • Other benefits comprise company car and subsistence allowance; Group 75 45 76 39 • Senior executives’ pension schemes are defined contribution. Pension Parent company – – – – costs are the costs burdening 2004. For more information on pensions, see below. Gender distribution, Proportion Proportion Corporate management 2004 women % 2003 women % Parent company and group Performance-related pay The Board 17 13 For the Chief Executive and Deputy Chief Executive, the bonus in 2004 Other senior executives 0 0 reflects the total yield on the share and profit before tax. The bonus for 2004 was equivalent to 100 per cent of basic salary. The Board of Directors has six members of which one woman. For the five other senior executives, the bonus in 2004 was based on the outcome of each individual business area’s property trading, property yield Salary, other remuneration 2004 2003 calculated on earnings capacity, profit before tax and the total returns on the and social security costs Social Social share. The bonus for these executives in 2004 varied between 60 and 100 Salary and security Salary and security per cent, and on average 83 per cent, of basic salary. Group remuneration costs remuneration costs The Board, Chief Executive Pensions and Deputy Chief Executive 8,838 4,292 9,358 4,699 The Chief Executive’s and Deputy Chief Executive’s pensionable age is 65, (of which pension costs) (1,402) (1,267) with a defined-contribution pension with no other commitments for the Other employees 35,567 16,304 31,289 14,968 company apart from annual premiums, which were 984 and 418 respecti- (of which pension costs) (4,674) (3,964) vely in 2004. Total 44,405 20,596 40,647 19,667 The pensionable age of other senior executives is 65. The maximum (6,076) (5,231) premium is the premium pursuant to the ITP plan (supplementary pensions Parent company for salaried employees). The Board 870 284 820 269 (of which pension costs) (–) (–) Redundancy payments The company and Chief Executive are subject to a mutual notice period of Sickness absence, % 2004 2003 six months. The Chief Executive receives redundancy pay of 18 months’ Total sickness absence as a percentage of ordinary working-hours 2 2 salary coincident with termination initiated by the company, an amount that Proportion of total sickness absence due to contiguous sickness absence of 60 days or more 10 50 is not deducted from other income, and is included in pension entitlements. Sickness absence as a percentage of each No redundancy pay is due for termination initiated by the Chief Executive. group’s regular working-hours: For four of the other senior executives, notice periods vary between three Sickness absence by gender and six months, although for termination initiated by the company, six Men 1 1 months’ notice applies to these senior executives, and redundancy pay Women 5 5 of 12 months’ salary is due upon termination initiated by the company. Sickness absence by age Redundancy pay is not offset against other income. No redundancy pay Up to 291 1 – is due upon termination initiated by these senior executives. The terms 30–49 3 3 applying to the other two senior executives are regulated by collective 50 or older 1 1 agreement.

1 Not accounted in 2003 due to the stipulation of Swedish legislation stating that information should not be submitted if the number of employees in the group is up to 10, or if information Preparatory and decision processes could be attributed to a particular individual. The term ‘group’ applies to both gender and age. In the absence of a Remuneration Committee, the Chairman has submitted

a proposal to the Board of Directors regarding the Chief Executive’s remunera- All Kungsleden’s salaried staff are employed by the subsidiary Kungsleden tion, and upon a proposal from the Chief Executive, the remuneration of Fastighets AB. other senior executives, The Board of Directors has discussed the Chairman’s Remuneration to Kungsleden’s auditors KPMG was paid, 2000 for auditing proposal and reached a decision thereupon. assignments and 600 for other assignments. Of this total, remuneration for auditing the parent company was 500, and for other assignments, 0. Note 3 Depreciation

Note 2 Remuneration to senior executives Group 2004 2003 Equipment, fixtures and fittings –2,193 –2,575 Principles Total –2,193 –2,575 Remuneration is payable to the Board, pursuant to AGM decision. The Board Depreciation according to plan by function resolves on how fees are divided between the Chairman and Board members. Property management –1,316 –1,445 No fees are payable to Board members employed by the company. Sales administration –219 –286 Remuneration to the Chief Executive and other senior executives comprises Central administration costs –658 –844 basic salary, performance-related pay, other benefits and pension. The term Total –2,193 –2,575 ‘other senior executives’ means the six people that were active in the corporate management in 2004 in addition to the Chief Executive. Performance-related Note 4 Value adjustments pay is intended to comprise a significant portion of possible remuneration, subject to a maximum of 12 months’ salary. The performance-related Group 2004 2003 portion is based on actual performance in relation to individual targets. Current property assets –35,303 –44,883

Remuneration and other benefits for 2004 Note 5 Profit from shares in group companies Basic salary/ Performance Other Pension Director’s fees related pay benefits costs Total Parent company 2004 2003 Chairman 300 – – – 300 Dividend 1,020,000 756,400 Chief Executive 2,405 2,432 169 984 5,990 Write-downs –440,935 – Other senior executives 4,842 4,262 266 1,365 10,735 Total 579,065 756,400 Total 7,547 6,694 435 2,349 17,025

39 Financial reporting

Note 6 Tax Specification of parent company’s holdings of shares in group companies First-tier subsidiary/ No. of Holding, Book value, Book value, Tax cost 2004 2003 corp id. no./reg office-country shares %1 2004 2003 Group Kungsleden Fastighets AB, Profit before tax 571,044 484,854 556459-8612, Sthlm 200 100 856,000 856,000 Standard rate tax, parent company –159,892 –135,759 Hemsö Fastighets AB, Tax effect of non-taxable revenue and costs, net 988 1,379 556481-1429, Sthlm 1 000 100 107,872 107,872 Revaluation of tax positions1 516,190 394,687 Kungsleden Syd AB, 556480-0109, Sthlm 10 000 100 144,274 144,274 Accounted tax 357,286 260,307 Kungsleden Öst B AB, Current tax –10,872 –22,833 556610-9103, Sthlm 1 000 100 35,785 254,100 Deferred tax 368,158 283,140 Kungsleden Öst C AB, Accounted tax 357,286 260,307 556610-9095, Sthlm 1 000 100 2,100 2,100 Kungsleden Öst G AB, Parent company 556598-3177, Sthlm 1 000 100 100 100 Profit before tax 517,740 725,574 Bovård i Sverige AB, Standard rate tax, parent company –144,967 –203,161 556429-6126, Sthlm 3 750 100 20,274 20,274 Tax effect of non-taxable revenue and costs, net 162,135 241,223 Kungsleden Äldre B AB, 556635-1366, Sthlm 1 000 100 17,761 100 Accounted tax 17,168 38,062 Kungsleden Bäcken AB, Current tax – – 556651-8394, Sthlm 1 000 100 50,100 – Deferred tax 17,168 38,062 Kungsleden Real Estate BV, Accounted tax 17,168 38,062 34209547, Nederländerna 900 100 165 –

1 Re-valued tax positions are attributable to the effects of intra-group restructuring, the divestment Solba Fastighets AB, of properties through companies, acquired tax loss companies and the acquisition of properties 556647-0711, Sthlm 1 000 100 100 – through companies. Divested companies during 2004 – 319,900 1,234,531 1,704,720 Deferred tax 2004 2003 1 Refers to the equity holding, which also corresponds to the votes held for the total Temporary differences number of shares. Income tax (loss carry-forwards) 4,010,244 1,063,951 Shares in subsidiaries 257,668 1,503,918 Note 9 Current property assets Interest-bearing liabilities 15,860 19,592 Properties –2,428,391 –1,987,954 Group 31 Dec 2004 31 Dec 2003 Total 1,855,381 599,507 Accumulated acquisition value Deferred tax receivable 519,507 167,862 Opening balance 12,496,857 10,279,497 Acquisitions and investments 2,681,887 3,409,824 Kungsleden’s tax position allows the full off-set of deferred tax liabilities Divestments –2,561,485 –1,192,464 against deferred tax receivables. Total 12,617,259 12,496,857 Accumulated write-downs Note 7 Equipment, ﬁxtures and ﬁttings Opening balance –160,555 –149,571 Divestments 41,606 33,900 Group 31 Dec 2004 31 Dec 2003 Accumulated acquisition value Reversed write-downs in the year 19,647 31,566 Opening balance 17,576 16,432 Write-downs in the year –54,957 –76,450 Acquisitions 2,818 1,401 Total –154,259 –160,555 Divestment and disposals –3,324 –257 Book value, year-end 12,463,000 12,336,302

Total 17,070 17,576 Taxable residual value 10,034,609 10,348,351 Accumulated depreciation according to plan Opening balance –11,172 –8,754 Note 10 Joint Ventures Divestment and disposals 2,298 157 Depreciation according to plan for the year –2,193 –2,575 Via a subsidiary, Kungsleden owns 50 per cent of a company, Hemsö Total –11,067 –11,172 Äldreboende AB, corporate identity number 556623-1337 with registered Residual value according to plan, closing balance 6,003 6,404 office in Stockholm, managed as a joint venture. Together, Hemsö Äldreboende AB and wholly owned subsidiary Hemsö Baggen Fastighets AB, corporate identity number 556579-1752, with registered office in Note 8 Shares in group companies Stockholm, own the following properties: Parent company 31 Dec 2004 31 Dec 2003 Accumulated acquisition value Property Municipality Property Municipality Opening balance 1,704,720 1,230,494 Norra sjukhuset 1 Lund Luthagen 81:1 Uppsala Acquisitions 365 75,863 Nicktisteln 2 Malmö Bardisanen 14 Malmö Divestments –319,900 –173,337 Storskarven 9 Malmö Storskarven 12 Malmö Shareholders’ contribution 180,000 571,700 Storskarven 13 Malmö Tväråkern 16 Malmö Sånekulla 16 Malmö Sädesärlan 6 Malmö Total 1,565,185 1,704,720 Write-downs, opening balance – – Nattskäran 7 Malmö Rosenbuketten 8 Malmö Write-downs –330,654 – Stengodset 1 Malmö Slätvaren 1 Malmö Koljan 10 Malmö Idrotten 12 Malmö Total –330,654 – Cykeln 12 Malmö Vannagården 2 Malmö Book value, closing balance 1,234,531 1,704,720 Limhamn 152:371 Malmö Jakobsberg 34:6 Järfälla First-tier subsidiaries are stated below. Other companies that are part of the Rösunda 36:41 Nacka group are not stated in the parent company’s annual report because subject to requirements for accuracy, the information is insignificant. However, other Kungsleden owns 500 shares in Hemsö Äldreboende AB, which had a book companies are stated in each subsidiary’s annual report. value of 40,699. The proportional method is applied, and accordingly, Kungsleden’s share of these properties’ profits, assets, liabilities and assets pledged, as detailed below, have been consolidated into the group. 40 Financial reporting

Income statement 2004 2003 Note 11 Other receivables Rental revenues 38,373 – Operating surplus 30,330 – Group 31 Dec 2004 31 Dec 2003 Receivable payments on sold properties 420,000 300,000 Net proﬁt 3,636 – Other current receivables 129,104 44,810 Balance Sheet Total 549,104 344,810 Properties 348,598 – Parent company Other current assets 37,089 – Other current receivables – 6,258 Total assets 385,687 – Total – 6,258 Shareholders’ equity 46,033 – Liabilities 339,654 – Total 385,687 –

Assets pledged 348,105 – Average number of employees 0 –

Note 12 Shareholders’ equity

Group Share capital Restricted reserves Non-restricted equity Opening balance 47,397 1,087,188 1,693,276 Dividend –246,462 Transfer between restricted and non-restricted equity 109 –109 Net proﬁt 928,330 Closing balance 47,397 1,087,297 2,375,035

Parent company Share capital Statutory reserve Proﬁt carried forward Opening balance 47,397 1,086,079 1,173,126 Dividend –246,462 Group contribution received, incl. deferred tax 95,900 Net proﬁt 534,907 Closing balance 47,397 1,086,079 1,557,471

Share capital history Change in Total Nominal value per Increase in Cumulative share Year Action no. of shares no. of shares share, SEK share capital, SEK capital, SEK 1997 Incorporation 1,000 1,000 100 100,000 100,000 1997 Split 20:1 19,000 20,000 5 – 100,000 1997 New issue 230,000 250,000 5 1,150,000 1,250,000 1997 Promissory note with stock options – 250,000 5 – 1,250,000 1997 New issue 3,750,000 4,000,000 5 18,750,000 20,000,000 1998 New issue 2,400,000 6,400,000 5 12,000,000 32,000,000 1998 Convertible subordinated debenture – 6,400,000 5 – 32,000,000 1999 Split 2:1 6,400,000 12,800,000 2.50 – 32,000,000 1999 Conversion of subordinated debenture 2,758,620 15,558,620 2.50 6,896,550 38,896,550 1999 New issue 3,000,000 18,558,620 2.50 7,500,000 46,396,550 2000 New issue 400,000 18,958,620 2.50 1,000,000 47,396,550

The Board of Directors intends to propose a 2:1 split to the AGM, whereupon the number of shares would increase to 37,917,240, with a nominal value of SEK 1.25 per share.

Note 13 Provisions measures that will reduce the volatility of its net financial position optimally. The following table illustrates the difference between the nominal value and Group 31 Dec 2004 31 Dec 2003 market value of liabilities. The table also shows the division of liabilities Redundancy pay 1,095 – between fixed and floating rates, the instruments used for risk management Total 1,095 – and these instruments’ nominal amounts.

Note 14 Borrowings Debt/instrument Nominal amount Actual value Floating-rate loans 7,862,073 7,877,054 Group 31 Dec 2003 31 Dec 2003 Fixed-rate loans 1,597,910 1,744,093 Maturing less than one year from the balance sheet date 642,300 1,428,587 Interest swap—receivable –6,069,900 –6,090,257 Maturing 1–5 years from the balance sheet date 7,804,484 6,091,039 Interest swap—liability 6,069,900 6,309,487 Maturing more than 5 years after the Options, caps and floors—liabilities 400,000 406,117 balance sheet date 1,013,200 1,960,000 Total 9,859,983 10,246,494 Total 9,459,984 9,479,626 For calculating market value, the discounting of future cash flows with zero- In a financial context, Kungsleden is primarily exposed to interest risk, which coupon yields based on official quoted prices is applied. All values represent means the risk of changes in interest levels affecting net financial position. a calculated value and will not necessarily be realised. By simulating future yields, Kungsleden can select those instruments and

41 Financial reporting

Note 15 Liabilities Note 18 Additional information, Cash Flow Statement

Group 31 Dec 2004 31 Dec 2003 Adjustment for items not included Non-interest bearing 726,645 600,669 in cash flow, etc. 31 Dec 2004 31 Dec 2003 Interest-bearing 9,459,984 9,479,626 Depreciation and write-downs of assets 37,496 47,458 Total 10,186,629 10,080,295 Other provisions 1,095 – Total 38,591 47,458 Parent company Non-interest bearing 20,677 106,980 Components included in liquid funds 31 Dec 2004 31 Dec 2003 Interest-bearing 300,000 1,479,185 Cash and bank balances 67,306 3,780 Total 320,677 1,586,165 Approved credit facilities amounted to 10,969,000 divided between credit limits for property acquisitions of 6,000,000, a secured loan of 4,419,000, Note 16 Assets pledged a 300,000 bond facility and a committed credit facility of 250,000. The un- Group 31 Dec 2004 31 Dec 2003 utilised portion of credit facilities amounted to 1,509,000. For Kungsleden’s own liabilities and provisions Investments in the extension and renovation of existing property Property mortgages 9,059,244 5,274,207 amounted to 113,872 (119,381). Acquisitions and new construction of property amounted to 2,568,215 (3,244,322). Kungsleden Fastighets AB and subsidiaries have provided an undertaking to the banks providing its syndicated loan to refrain from raising further loans or Operating cash flow 2004 2003 creating or depositing security from its asset mass without approval of the Operating profit 1,026,960 917,528 banks. However, existing mortgages have been pledged as collateral for the Adjustment for items not included in cash flow 38,591 47,458 syndicated credit facility. Change in working capitall –86,521 139,205 Investments –113,872 –119,381 Note 17 Contingent liabilities Total 865,158 984,810 Parent company 31 Dec 2004 31 Dec 2003 Surety in favour of group companies 6,017,275 4,362,200

Why do you work for Kungsleden? What was the most enjoyable part of your work in 2004? I started as an accounting consultant here three years ago, and got a job I always enjoy my work—while there’s a lot of routine, we’re all trusted to offer that I accepted. do every aspect of our work.

What’s the most important part of your job? What changed most in your job in 2004? I act as the hub for contacts with banks and on borrowing issues—the We’ve implemented a new funding management system, a loans ledger, most important thing for me is to coordinate our administrative companies. which I manage, and it’s working well.

What, do you think, distinguishes Kungsleden’s working methods? What’s your favourite building? Good order, which means things work despite Kungsleden being spread The former Sandbyhov Hospital in Norrköping, south of Stockholm, which nationwide. Despite the speed of our transactions things work because of is now retirement homes. Kungsleden bought this building fairly recently. our routines. Kungsleden is at the leading edge in terms of routines, and it’s the management that’s behind this. From top to bottom, the whole organization is interwoven with a desire for progress and change. Kungsleden also has great staff—you can get on with everyone and the management have a serious but up-beat attitude.

Anja Sydner, 51, Accounting Manager, Service Centre (& administrative companies).

42 Audit Report

PROPOSED APPROPRIATION OF PROFITS To Kungsleden AB’s (publ) Annual General Meeting Consolidated shareholders’ equity, as stated in the Consoli- Corporate identity number 556545-1217 dated Balance Sheet, is SEK 2,375 m. No provisions to re- I have examined Kungsleden AB’s (publ) Annual Report, stricted reserves are proposed. consolidated accounts, accounts and the Board’s and Chief Executive’s administration for the year 2004. The Board and The following amounts in the parent company are at the disposal Chief Executive assume responsibility for the accounts, man- of the Annual General Meeting, SEK Profit brought forward 1,059,856,936 agement and for the Swedish Annual Accounts Act being Net profit 497,611,603 observed when preparing the Annual Report and consolidated Total 1,557,468,539 accounts. My responsibility is to comment on the Annual Report, the consolidated accounts and the management on The Board of Directors and Chief Executive propose that profits are appropriated as follows, SEK: the basis of my audit. Dividends of SEK 15.00 per share to shareholders, in total: 284,379,300 The audit has been completed in accordance with gen- Carried forward 1,273,089,239 erally accepted accounting practice in Sweden. This means Total 1,557,468,539 that I have planned and completed the audit in order to ensure reasonably that the Annual Report and consolidated accounts do not contain any material mis-statement. An audit comprises the examination of a selection of the documenta- Stockholm, Sweden, 7 March 2005 tion relating to amounts and other information contained in the accounts. An audit also includes examining the accounting principles and the Board’s and Chief Executive’s application thereof, as well as evaluating the significant estimates the Board of Directors and Chief Executive have made when preparing the Annual Report and the consolidated accounts Bengt Kjell Mats Israelsson as well as evaluating the overall presentation of information in Chairman the Annual Report and consolidated financial statements. As the basis for my statement regarding discharge from liability, I have examined significant decisions, measures and circumstances in the company in order to assess whether any Board member or the Chief Executive is liable for compensation to Jonas Nyrén Per-Anders Ovin the company. I have also examined whether any Board member or the Chief Executive has otherwise contravened the Companies Act, the Annual Accounts Act or the Articles of Association. I consider that my audit provides me with a reasonable foundation for the following statements. Anna W Jiffer Jens Engwall The Annual Report and consolidated accounts have been Chief Executive prepared in accordance with the Annual Accounts Act and thereby provide an accurate impression of the company’s and the group’s profit and financial position in accordance with generally accepted accounting practice in Sweden. The Report of the Directors is consistent with the other parts of the Annual Report and consolidated accounts. I recommend that the Annual General Meeting approve the Income Statement and Balance Sheet for the parent company and the group, allocate profit in the parent company in accordance with the proposal in the Report of the Directors and discharge the Board members and Chief Executive from liability for the financial year.

Tomas Thiel Authorised Public Accountant KPMG Stockholm, Sweden, 7 March 2005

43 MedarbetareFastighetsbeståndet förteckning och intjäningskapaciteten

Åke Persson, 61, Property Management Technician, South region.

Why do you work for Kungsleden? I work here because part of JM, who I worked for before, was acquired just before the IPO in 1999. But obviously, I also work for Kungsleden because I like it very much, and have stayed here.

What’s the most important part of your job? The most important thing is to make sure everything works. A lot of this is about hiring and co-ordinating subcontractors–small enterprises and craftsmen. I buy the jobs, project manage them and make sure the results are right.

What, do you think, distinguishes Kungsleden’s working methods? You’re pretty free here, but you have responsibility. The details aren’t under such control, and decision-paths are short–everything happens quickly, and our organization is ﬂexible.

What was the most enjoyable part of your work in 2004? The most fun was to get the properties we have into shape–there’s never been so many properties and so much to do as in 2004. Despite our headcount doubling with the acquisition from Drott early in the year, it was also very enjoyable.

What was the biggest change in your work in 2004? The new workmates that came to our ofﬁce in the year.

What’s your favourite building? It’s called Turning Torso.

44 Staff

Surname First name Hired Location Position Age Surname First name Hired Location Position Age

Head office Regional office East Engwall Jens 1993 Stockholm Chief Executive 48 Allard Andrea 2003 Stockholm Transactions/Back Office 27 Mukka Sinikka 1993 Stockholm Chief Executive’s Personal Assistant 39 Bergman Kjell 2004 Stockholm Manager, Property Management 42 Risberg Johan 1996 Stockholm Deputy Chief Executive 43 Broman Maléne 2001 Stockholm Property Manager 33 Thagesson Lars 1993 Stockholm COO/Chief Operating Officer 45 Broman Stig 1998 Västerås Manager, Property Management 52 Eckerbom Nils 2001 Stockholm Property Management Technician 54 Analysis Elfving Ann-Sofie 2001 Stockholm Receptionist 30 Nyman Anna-Carin 2000 Stockholm Analyst 32 Hall Lotta 1994 Karlstad Management Assistant 61 Ryhle Helena 2002 Stockholm Analysis Assistant 26 Hedman Per 2002 Stockholm Technical Manager 43 Jagetoft Ulf 1995 Stockholm Back Office 60 Service Centre Johansson Henrik 2002 Stockholm Property Management Technician 31 Alenskog Åsa 2001 Stockholm Accounts Assistant 34 Johansson Lena 1999 Västerås Management Assistant 38 Andersson Mattias 2002 Stockholm Business Controller 31 Karlsson Reine 1994 Karlstad Property Manager 59 Binette Pia 1999 Stockholm Rent Accounting 48 Kaur Åke 1998 Stockholm Regional Manager 49 Blomgren Catarina 1998 Stockholm IT Co-ordinator 37 Larsson Gunnar 1999 Stockholm Property Manager 47 Dahlgren Petra-Sofi 2001 Stockholm Accounts Assistant 32 Lind Anita 1994 Karlstad Property Manager 44 Dahlström Åke 2003 Stockholm Rent Accounting 58 Lönnborg Göran 1998 Stockholm Property Manager 59 Ekstedt Hanna 2004 Stockholm Accounts Assistant 25 Müller Susanne 2004 Finspång Block Manager 45 Hamrén-Johansson Therése 2001 Stockholm Payroll Assistant 32 Olin Sven 1998 Växjö Property Manager 55 Hedberg Sofia 1991 Stockholm IT Manager 38 Pettersson Göran 1998 Falun Janitor 53 Jönehall Jonas 2001 Gothenburg Audit Manager 28 Sosa Johan 1998 Stockholm Property Manager 30 Kruse Mikael 2000 Gothenburg Audit Manager 42 Sundström Mikael 2003 Västerås Property Management Technician 37 Lisén Carine 2001 Stockholm Accounts Assistant 59 Säfström Dick 1998 Västerås Property Manager 49 Nordin Gunilla 1999 Stockholm Accounts Assistant 34 Tolvers Marianne 1999 Stockholm Management Assistant 40 Sterner Mats 1999 Stockholm Head of Accounting 43 Vallin Johan 1999 Stockholm Management Assistant 32 Sydner Anja 2002 Stockholm Accounting Manager 51 Öiangen Lisa 2001 Stockholm Receptionist 29 Telby Susanne 1996 Stockholm Head of Auditing 44 Theblin Åke 2001 Stockholm Company Lawyer 43 Regional office Retirement Homes Virdeborn Gunilla 2002 Stockholm Audit Manager 44 Andersson Kerstin 2001 Stockholm Management Assistant 41 Frantz Michael 2004 Stockholm Manager, Property Management 49 Regional office South Jenrik Bernt 2004 Stockholm Property Manager 62 Berg Kim 2001 Malmö Management Assistant 35 Johansson Roger 2003 Stockholm Head of Accounting 43 Falkenström Adam 2001 Malmö Property Manager 29 Linder Göran 1998 Stockholm Regional Manager 36 Johansson Lars 1988 Malmö Property Manager 60 Swedin Ronny 2004 Stockholm Property Manager 60 Lindnér Eskil 1997 Malmö Regional Manager 45 Öhrn Anders 2003 Norrköping Property Manager 58 Mosebach Jenny 2001 Malmö Property Manager 32 Österlund Annika 2002 Stockholm Management Assistant 40 Olsson Bo 1985 Malmö Property Management Technician 55 Persson Per-Åke 1991 Malmö Property Management Technician 61 Sjöstedt Håkan 1998 Malmö Management Assistant 54 Sjöstedt Johan 2003 Malmö Property Manager 32 Stenberg Kurth 1975 Malmö Property Management Technician 57 Sörling Fredrik 2004 Malmö Property Manager 32 Ternström Gert 1990 Malmö Manager, Property Management 42 Tomasson Hanna 2004 Malmö Management Assistant/Receptionist 26 Åkesson Fredrik 2000 Malmö Property Manager 33

Regional ofﬁce West Andersson Bertil 2000 Gothenburg Property Manager 50 Andersson Kjell-Åke 1994 Gothenburg Back Ofﬁce 56 Askengren Pia 2002 Trollhättan Management Assistant 41 Broström Sten 1998 Trollhättan Property Manager 50 Eliasson Eva 2000 Gothenburg Management Assistant/Receptionist 33 Florén Aili 1998 Gothenburg Management Assistant 50 Göthberg Jonny 2001 Jönköping Property Manager 42 Hellqvist Kerstin 2004 Gothenburg Property Manager 47 Herngren Lena 2004 Jönköping Management Assistant 33 Ivarsson Benny 1999 Gothenburg Regional Manager 49 Lindström Lars 1994 Gothenburg Property Developer 50 Ljungqvist Ingrid 1991 Gothenburg Management Assistant 59 Selin Kerstin 1998 Växjö Management Assistant 49 Sjöberg Anna 2000 Jönköping Management Assistant 31

45 Assets: Properties

Lettable floor-space, m2 Year of construction/ Industrial/ Retirement Total Rental Rental Vacancy, Name Municipality Locality Address conversion Office warehouse homes Retail Residential Hotel Other floor-space revenue value %

Market Area East Ofﬁce properties Hållsta 6:13, 15, 18, 19 Eskilstuna Eskilstuna Hållsta 1972/1981 24,280 – – – – – – 24,280 6,080 6,045 0 Norr 12:5 Gävle Gävle Nygatan 13 1978 10,327 1,330 – 4,190 – – – 15,847 11,299 13,009 13 Södertull 33:1 Gävle Gävle Södra Kungsgatan 59 1940/1960 6,564 852 – 3,675 – – – 12,578 7,982 9,208 13 Diametern 1 Huddinge Huddinge Dialoggatan 1 1978 43,410 232 – – – – – 43,642 36,836 42,344 13 Rektangeln 1 Huddinge Huddinge Månskärsvägen 9 1988 8,200 – – – – – – 8,200 4,736 10,187 51 Mekanikern 23 Linköping Linköping Gamla Tanneforsv 17 1926/1986 12,020 1,966 – – – – – 13,986 6,510 8,910 29 Sigtuna 2:171 Sigtuna Sigtuna Väringavägen 11 1965/1994 1,265 – – – 90 – – 1,355 1,340 1,349 1 Sigtuna 2:227 Sigtuna Sigtuna Skolbacken 61 2001 1,629 – – – – – – 1,629 3,107 3,075 0 Kansliet 1 Solna Solna Signalistgatan 9 1940/1994 2,000 – – – – – – 2,000 3,317 3,317 0 Gunnebo 15 Stockholm Stockholm Salagatan 12, 42 1992 4,135 – – – – – – 4,135 3,522 3,522 0 Göta Ark 18 Stockholm Stockholm Medborgarplatsen 21–25 1984 17,991 668 – – – – – 18,659 38,778 46,735 17 Rosteriet 5 Stockholm Stockholm Lövholmsvägen 9 1956 3,270 – – – – – – 3,270 4,088 4,108 1 Stenskärven 8 Stockholm Vinsta Siktgatan 2 1980/1987 7,946 1,746 – – – – – 9,692 3,207 6,721 52 Sävjan 56:1 Uppsala Sävja Västgötaresan 60 1990 3,017 – – 159 – – – 3,176 4,924 4,925 0 Årsta 78:1 Uppsala Uppsala Fyrislundsgatan 73 1982 2,922 – – – – – – 2,922 2,149 2,530 15 Husby 4:25 Österåker Åkersberga Företagsallén 4 1988 1,379 – – – – – – 1,379 8 1,100 100 Husby 4:27 Österåker Åkersberga Företagsallén 10 1988 926 4 – – – – – 930 726 1,196 37 Husby 4:28 Österåker Åkersberga Företagsallén 8 1988 1,385 10 – – – – – 1,395 278 1,280 78 Husby 4:32 Österåker Åkersberga Företagsallén 14 1992 2,699 – – – – – – 2,699 2,484 2,281 –18 Runö 7:84 Österåker Åkersberga Sågvägen 2 1980 3,432 395 – 417 – – 102 4,346 3,953 4,362 9

Retirement homes Jakobsberg 2:2719 Järfälla Jakobsberg Vibblabyvägen 97–99 2000 – – 4,341 – – – – 4,341 6,376 6,374 0 Jakobsberg 34:6 Järfälla Jakobsberg Snapphanevägen 22 1973/2002 – – 3,528 – – – – 3,528 5,909 5,887 0 Elefanten 6 Linköping Linköping Barnhemsgatan 4 1998 – – 743 – 477 – – 1,221 1,388 1,385 0 Lillgårdsskolan 11 Linköping Linköping Ridhusgatan 2a 1996 – 49 1,461 – 157 – – 1,667 2,157 2,203 1 Valbyrån 5 Linköping Linköping Kärnavägen 3–11 1996 – – 2,656 – 94 – – 2,750 2,860 2,886 0 Mensättra 26:1 Nacka Nacka Orenövägen 5 1995 – – 2,047 – – – – 2,047 3,722 3,764 0 Diademet 3 Norrköping Norrköping Gamla Övägen 27 1993 – – 3,625 – – – – 3,625 3,692 3,691 0 Sandbyhov 5 & 30 Norrköping Norrköping Sandbyhovsgatan 21 1920–70/2000 9,629 30 15,354 2 736 – – – 27,749 28,651 28,422 0 Linet 1 Norrtälje Norrtälje Torpvägen 5a 1992 – – 4,314 – – – – 4,314 4,321 4,311 0 Sigtuna 2:164 Sigtuna Sigtuna Rektor Cullbergs väg 9 1943/1992 – – 1,493 – – – – 1,493 1,346 1,340 0 Hallen 4 Solna Solna Lövgatan 39 1990 320 – 5,511 – – – – 5,831 7,806 7,979 0 Plommonträdet 5 Stockholm Hägersten Valborgsmässov 16 1964 78 20 6,675 – 724 – – 7,497 8,442 8,398 0 Flyghöjden 2 Stockholm Skarpnäck Skarpnäcks Torg 1 2003 – – 2,880 – – – – 2,880 4,708 4,638 0 Tempelriddarorden 5 Stockholm Skärholmen Vita Liljans väg 53 1999 – – 5,000 – – – – 5,000 6,051 6,018 0 Glaven 10 Stockholm Stockholm Stadshagsvägen 5 1996 141 – 3,442 – – – – 3,583 6,133 6,133 0 Kopparn 11 Stockholm Stockholm Erstagatan 32–34 1929/1995 57 – 3,085 144 – – – 3,286 4,832 4,841 0 Kulltorp 3 Stockholm Stockholm Tantogatan 19–25 1966/1997 – – 5,098 – – – – 5,098 8,498 8,482 0 Sjöstöveln 3 Stockholm Stockholm Folkparksvägen 156 1977/1997 325 – 7,445 – – – – 7,770 9,708 9,815 0 Träbron 1 Stockholm Stockholm Vantörsvägen 216 1967/2000 13,667 – 3,208 – – – 5 16,880 20,082 20,048 0 Blåvalen 1 Södertälje Södertälje Tallhöjdsvägen 1–3 1927/1986 – – 7,178 – – – – 7,178 8,893 8,885 0 Sågverket 2 Södertälje Södertälje Korpuddsvägen 1–11 1985/1989 8,113 – – – – – – 8,113 8,239 8,134 0 Bylegård 37 Täby Täby Jarlabankes väg 48 1903/1993 – – 1,957 – – – – 1,957 3,276 3,180 0 Dragarbrunn 9:4 Uppsala Uppsala S:t Olofsgatan 44b 2000 – – 4,020 – – – – 4,020 5,856 5,856 0 Kvarngärdet 14:5 Uppsala Uppsala Torkelsgatan 42 2000 – – 3,585 – – – – 3,585 5,352 5,351 0 Luthagen 81:1 Uppsala Uppsala Norrlandsgatan 2 2001 – – 1,370 – – – – 1,370 2,372 2,366 0 Rickomberga 9:14 Uppsala Uppsala Geijersgatan 61 2001 – – 3,200 – – – – 3,200 5,521 5,522 0 Rickeby 1:97 Vallentuna Vallentuna Stendösvägen 5 2003 – – 2,950 – – – – 2,950 4,510 4,541 0 Vallentuna-Ekeby 2:275 Vallentuna Vallentuna Ekebyvägen 40 1992 – – 2,936 – – – – 2,936 3,142 3,121 0 Tuna 3:30, 3:182 Österåker Åkersberga Österskärsvägen 3 1994 – – 1,394 – 5,028 – – 6,422 7,339 7,461 1

Industrial/warehouse properties Hantverkaren 1 Botkyrka Botkyrka Segersbyvägen 4–6 1974 2,915 6,758 – – – – – 9,727 4,975 5,348 3 Segersby 1 Botkyrka Botkyrka Kumla Gårdsväg 10 1976 – 12,019 – – – – – 12,019 6,893 6,893 0 Hemsta 9:6 Gävle Gävle Rynningsgatan 2 1984/1997 – 3,500 – – – – – 3,500 2,880 2,880 0 Sörby Urfjäll 36:3 Gävle Gävle Utmarksvägen 13 1979/1995 – 11,833 – – – – – 11,833 3,219 5,166 7 Jakobsberg 22:14 Järfälla Järfälla Brantvägen 2 1962/1997 – 2,650 – – – – – 2,650 1,986 1,987 0 Veddesta 2:39 Järfälla Järfälla Bruttovägen 4 1972 1,851 1,698 – – – – – 3,549 2,043 2,039 0 Generalen 7 Linköping Linköping Generalsgatan 4 1959/1976 2,087 2,964 – – – – – 5,051 2,416 2,669 9 Rosersberg 11:37 Sigtuna Rosersberg Tallbacksgatan 13 1989/1999 – 11,394 – – – – – 11,394 8,617 8,753 0 Magasinet 1 Södertälje Järna Tuna Industriväg 35 1970 – 21,375 – – – – – 21,375 6,885 6,830 0 Isbrytaren 1 Södertälje Södertälje Hansavägen 6, 8, 10 1970 – 17,222 – – – – – 17,222 6,596 6,596 0 Kryssaren 8 Södertälje Södertälje Hansavägen 5–7, 11 1942 1,605 27,569 – – – – – 29,174 8,684 8,825 2 Viby 19:13 Upplands-Bro Kungsängen Energivägen 3 1981 – 2,080 – – – – – 2,080 727 1,011 0

Retail properties Norr 30:4 Gävle Gävle N:a Slottsgatan 5 1965 2,448 60 – 1,367 – – – 3,875 4,732 4,968 5 Midas 5 Brf Stockholm Stockholm Mälartorget 15 1929/1979 – 420 – 766 – – – 1,186 2,644 2,549 0 Fjärdingen 35:1 Uppsala Uppsala S:t Eriks Torg 8 1929/1983 – – – 1,887 – – – 1,887 3,204 4,323 0

Other Husby 4:23 Österåker Åkersberga Svinningevägen 15, 17 – – – – – – – – – – – 0

Market Area South Ofﬁce properties Släggan 9 & 10 Bromölla Bromölla Segervägen 2–4 1960 2,217 658 – – – – – 2,875 80 888 91 Apoteket 2 Eksjö Eksjö Nybrogatan 4 1929/1963 797 – – 206 749 – – 1,752 1,189 1,355 12 Läkaren 1 Eksjö Mariannelund Torget 1960 616 – – 114 – – – 730 440 491 10 Klövern 1 Emmaboda Emmaboda Nygatan 16 1990 419 – – – 354 – – 773 575 627 6 Ölmestad 19:2 Gislaved Reftele Storgatan 52 1980 354 – – – 163 – – 517 397 399 0 Hillerstorp 4:18 Gnosjö Hillerstorp Storgatan 5 1976 266 – – – – – – 266 390 390 0 Kavalleristen 11 Helsingborg Berga Bergavägen 1a 1989 2,154 30 – – – – – 2,184 1,875 1,902 1 Danmark 29 Helsingborg Helsingborg Södergatan 39 1972 8,210 242 – 742 1,912 – – 11,106 11,446 11,633 2 Springposten 3 Helsingborg Helsingborg Springpostgränden 3 1910/1990 2,127 – – – – – – 2,127 1,329 2,000 33 Terminalen 1 Helsingborg Helsingborg Järnvägsgatan 10–12 1991 16,524 140 – 2,892 – – 116 19,672 42,051 44,641 6 Arkitekten 3 Hultsfred Hultsfred Bryggerigatan 7 1982 290 – – 87 – – – 377 338 338 0

46 Assets: Properties

Hägelåkra 3:48 Hultsfred Målilla Vetlandavägen 2a 1967 190 – – – – – – 190 – 130 100 Mörlunda 1:103 Hultsfred Mörlunda Stationsvägen 1 1967 230 – – 97 268 – – 595 333 361 0 Mården 7 Hässleholm Hässleholm Första Avenyn 14a–d 1972/2001 4,534 140 – 1,356 – – – 6,030 6,274 7,564 15 Åldermannen 24 Kalmar Kalmar Storgatan 25 1970 4,300 – – 227 – – – 4,527 5,211 5,211 0 Vega 21 Lessebo Hovmanstorp Centralplan 1960 233 – – 135 – – – 368 296 296 0 Företaget 8 Lund Lund Företagsvägen 28 1984 2,193 – – – – – – 2,193 1,800 2,385 24 Verkstaden 5 Lund Lund Annedalsvägen 7 1973/1989 5,268 1,725 – – – – – 6,993 6,582 7,034 4 Armringen 2 Malmö Fosie Agnesfridsvägen 190 1975 987 1,314 – 2,566 – – – 4,867 2,939 3,069 0 Gullriset 4 Malmö Hindby Monicavägen 18–22 1945 648 – – – – – – 648 630 630 0 Brudbuketten 10 Malmö Malmö Russgatan 6 1988/1997 750 – – – – – – 750 638 638 0 Brudbuketten 11 Malmö Malmö Russgatan 8 1988 1,291 53 – – – – – 1,344 669 919 18 Brudbuketten 13 Malmö Malmö Derbyvägen 20 1988 1,056 – – – – – – 1,056 1,139 1,139 0 Brännaren 8 Malmö Malmö Agneslundsvägen 14 1947 5,375 20 – – – – – 5,395 5,208 5,783 9 Cementen 4 Malmö Malmö Barlastgatan 2 1982 1,673 1,414 – 650 – – – 3,737 1,728 2,032 16 Claus Mortensen 29 Malmö Malmö Baltzarsgatan 41a 1950 4,580 240 – 1,683 – – – 6,503 6,478 9,682 24 Davida 15 Malmö Malmö Amiralsgatan 13a 1990 11,101 114 – 340 – – 1 11,556 17,215 18,835 9 Druvan 1 Malmö Malmö Engelbrektsgatan 7 1900 2,311 26 – 445 – – – 2,782 3,420 3,754 9 Flygledaren 1 Malmö Malmö Höjdrodergatan 14 1988 916 – – – – – – 916 1,079 1,155 7 Fältsippan 8 Malmö Malmö Rimfrostgatan 1 1986/2000 3,625 – – – – – – 3,625 5,346 5,346 0 Grönsakshandlaren 5 Malmö Malmö Jägersrovägen 80 1989–1991 3,003 – – – – – – 3,003 3,124 3,125 0 Kamelen 14 Malmö Malmö Storgatan 43 1934 13,500 – – – – – – 13,500 16,314 16,314 0 Kullen 5 Malmö Malmö Sturkögatan 5 1962/1981 4,870 – – – – – – 4,870 6,533 6,533 0 Laxen 23 Malmö Malmö Brogatan 5–7 1971 6,762 61 – 625 – – – 7,448 6,684 9,516 23 Nejlikebuketten 6 Malmö Malmö Derbyvägen 4 1987 1,765 – – – – – – 1,765 1,738 1,751 0 Oscar 16 Malmö Malmö Södergatan 3 1907 1,538 217 – 564 – – – 2,319 3,337 4,141 16 Piledal 27 Malmö Malmö Klågerupsvägen 259 1963/1978 362 – – – – – – 362 644 644 0 Revolversvarvaren 12 Malmö Malmö Jägershillgatan 18 1987 9,698 – – – – – – 9,698 10,039 11,295 6 Rosenbuketten 4 Malmö Malmö Höjagatan 1 1987/1990 4,322 – – – – – – 5,420 3,378 6,109 45 Stjärnan 10 Malmö Malmö Engelbrektsgatan 6 1990 901 – – – – – – 901 1,455 1,483 0 Svavlet 4 Malmö Malmö Emilstorpsgatan 24 1975 1,205 – – – – – – 1,205 1,392 1,446 4 Söderhavet 5 Malmö Malmö Elbegatan 5 1992 1,472 120 – – – – – 1,592 1,970 1,970 0 Söderhavet 6 Malmö Malmö Elbegatan 7 1938/1998 1,406 – – – – – – 1,406 1,985 1,985 0 Söderport 7 Malmö Malmö Gustav Adolfs Torg 43 1885 927 – – 558 556 – – 2,041 2,263 3,330 24 Söderport 8 Malmö Malmö Per Weijersgatan 4 1700 1,455 – – 325 – – – 1,780 1,843 2,437 24 Söderport 9 Malmö Malmö Gustav Adolfs Torg 47 1910 1,697 6 – 397 – – – 2,100 2,829 2,962 17 Torshammaren 11 Malmö Malmö Hornyxegatan 6 1984 647 – – – – – – 647 784 784 0 Vildanden 8 Malmö Malmö Geijersgatan 4–8 1967/1990/1993 8,529 32 – – – – – 8,561 7,796 8,200 4 Vildanden 9 Malmö Malmö Geijersgatan 2a–b 1990 5,439 – – 325 – – – 5,764 5,423 6,565 16 von Conow 51 Malmö Malmö Kalendegatan 4 1884 1,518 – – 411 – – – 1,929 2,492 2,745 4 von Conow 54 Malmö Malmö Baltzarsgatan 31 1965 13,301 965 – 3,936 2,582 – 25 20,809 28,511 32,424 9 Dadeln 23 Malmö Sorgenfri Bertrandsgatan 3 1920 2,299 1,181 – – – – – 3,480 2,078 2,433 15 Venus 16 Nybro Nybro Nya Stationsgatan 2–16 1929/1955 2,473 – – 861 493 – – 3,827 2,811 3,005 6 Banken 3 Nässjö Nässjö Nygatan 3 1970 3,370 – – 515 415 – – 4,300 3,449 3,590 4 Holje 6:191 Olofström Olofström Bredgatan 20 1958 1,103 – – 250 420 – – 1,773 1,379 1,451 5 Malghult 2:305 Oskarshamn Kristdala Vallgatan 2 1967 415 – – – – – – 415 275 275 0 Lejonet 15 Oskarshamn Oskarshamn Flanaden 8 1967 4,055 83 – – – – 1 4,139 3,345 3,615 4 Lejonet 16 Oskarshamn Oskarshamn Flanaden 12 1969 1,409 – – 1,002 – – – 2,411 2,441 2,602 6 Älvehult 1:195 Oskarshamn Påskallavik Kustvägen 53–55 1963 190 – – – – – – 190 169 169 0 Sturup 1:160 Svedala Svedala Västerg, Sturupsﬂygplats 1972 1,991 – – – – – – 1,991 892 1,311 24 Kräftan 7 Sävsjö Sävsjö Storgatan 1 1939/1972 1,483 – – 98 743 – – 2,324 1,556 1,740 6 Vrigstad 3:12 Sävsjö Vrigstad Jönköpingsvägen 2, 4 1929/1960 832 – – – 385 – – 1,217 746 743 1 Örjan 19 Tingsryd Tingsryd Dackegatan 18 1971/1989 1,829 – – 439 986 – – 3,254 2,676 2,694 1 Oden 11 Tranås Tranås Nygatan 14 1979 2,795 – – – 318 – – 3,113 1,952 2,338 16 Herkules 34 Trelleborg Trelleborg C B Friisgatan 4 1970 4,041 30 – – 341 – – 4,412 3,734 4,211 11 Lenhovda 5:27 Uppvidinge Lenhovda Storgatan 30 1973 240 – – – – – – 240 230 230 0 Rådhuset 7 Uppvidinge Åseda Olofsgatan 6 1966 298 – – – – – – 298 285 285 0 Gästgivaren 2 Vaggeryd Skillingaryd Storgatan 6 1953 811 – – – 251 – – 1,062 915 916 0 Kärnan 4 Vaggeryd Vaggeryd Järnvägsgatan 1 1974 833 – – – – – – 833 691 691 0 Broby 52:2 Vetlanda Landsbro Sävsjöv 3, 5 1950/1966 396 – – 105 372 – – 873 499 543 3 Bredaryd 10:4 Värnamo Bredaryd Storgatan 14 1964 155 – – 245 189 – – 589 302 338 11 Elefanten 1 Växjö Växjö Rådjursvägen 2 1975 1,439 904 – 638 – – – 2,981 1,685 1,842 9 Nunnan 7 Växjö Växjö Bäckgatan 17 1979 7,049 223 – 4,167 150 – – 11,589 11,082 12,730 13

Retirement homes Norra Sjukhuset 1 Lund Lund Norra Gränsvägen 1 1975/1991 656 – 6,427 – – – – 7,083 6,512 6,621 0 Koljan 10 Malmö Limhamn Tegnérgatan 68 1995 – – 178 – – – – 178 348 348 0 Nattskärran 7 Malmö Limhamn Järnvägsgatan 29 1993 – – 959 – – – – 959 992 1,241 20 Slätvaren 40 & 51 Malmö Limhamn Sarvgränd 2c 1910/1998 – – 225 – – – – 225 362 362 0 Sädesärlan 6 Malmö Limhamn Linnégatan 18 1929/60/2000 236 – – 153 – – – 389 359 359 0 Anten 3 Malmö Malmö Eddagatan 1 1989 – – 3,040 – – – – 3,040 3,448 3,420 0 Bardisanen 14 Malmö Malmö Norra Bulltoftav 61–63 1993 – – 411 – – – – 411 752 752 0 Cykeln 12 Malmö Malmö Palmgatan 17 2000 – – 1,490 – – – – 1,490 1,732 1,732 0 Idrotten 12 Malmö Malmö Hasselgatan 24 1993 – – 270 – – – – 270 204 204 0 Limhamn 152:371 Malmö Malmö – – – – – – – – – – – – 0 Nicktisteln 2 Malmö Malmö Ernst Jakobssons g 7 1993 – – 1,125 – – – – 1,125 1,377 1,377 0 Rosenbuketten 8 Malmö Malmö Höjagatan 21 1989/1997 – – 733 – – – – 733 1,185 1,185 0 Storskarven 9 Malmö Malmö Brunandavägen 32 1993 – – 221 – – – – 221 278 278 0 Storskarven 12 Malmö Malmö Norra vägen 7 1998 – – 950 – – – – 950 1,315 1,310 0 Storskarven 13 Malmö Malmö Norra vägen 1–5 1996 – – 1,157 – – – – 1,157 1,465 1,400 0 Sånekulla 16 Malmö Malmö Limhamnsvägen 74 1990/1995 – – 1,120 – – – – 1,120 1,786 1,786 0 Torsten 12 Malmö Malmö Major Nilssonsgatan 13 1942 – – 2,400 – – – – 2,400 2,754 2,733 0 Tväråkern 16 Malmö Malmö Marieholmsvägen 3 1996 – – 336 – – – – 336 454 454 0 Vannagården 2 Malmö Malmö Husie Kyrkoväg 1 1992 371 – – – – – – 371 498 498 0 Solskiftet 1 Malmö Oxie Oshögavägen 2 1976 – – 6,285 – – – – 6,285 5,984 5,938 0 Stengodset 1 Malmö Oxie Stengodsvägen 4 1999 – – 925 – – – – 925 1,258 1,258 0

47 Assets: Properties

Industrial/warehouse properties Tågarp 20:81 Burlöv Arlöv Lommavägen 39 1929/1984 – 26,515 – – – – – 26,515 8,679 8,793 1 Dolken 3 Helsingborg Berga Mörsaregatan 12 1985/1990 – 3,845 – – – – – 3,845 2,815 2,807 0 Asien 20 Helsingborg Gåsebäck Kvarnstensgatan 11 1989 1,778 770 – – – – – 2,548 1,118 1,965 43 Jupiter 12 Helsingborg Ringstorp Grenadjärgatan 8 1978 432 1,027 – – – – – 1,459 665 967 31 Ädelmetallen 14 Jönköping Jönköping Grossistgatan 5 1987 654 861 – – – – – 1,515 634 758 16 Övergången 8 Jönköping Jönköping Syrgasvägen 4 1950/1960 1,051 2,554 – – – – 704 4,309 1,275 1,471 12 Överstycket 25 Jönköping Jönköping Maskingatan 2 1981 474 7,367 – – – – – 7,841 1,749 2,337 25 Strömma 1:1 Karlshamn Karlshamn Strömmavägen 1929/1950 5,082 12,070 – – – – 312 17,464 6,553 8,319 18 Cementen 4 Kristianstad Kristianstad Industrigatan 11 1989/1991 – 1,194 – – – – – 1,194 470 470 0 Plattan 4 Kristianstad Kristianstad Isolatorvägen 5 1991 – 1,328 – – – – – 1,328 522 522 0 Ventilen 10 Kristianstad Kristianstad Mossvägen 6 1980 – 900 – – – – – 900 469 469 0 Kvartsen 6 Lund Lund Skiffervägen 25 1988 – 4,217 – – – – – 4,217 3,712 3,712 0 Oket 1 Lund Lund Odlarevägen 1 1991 126 3,365 – – – – – 3,491 1,547 2,388 32 Flygbasen 4 Malmö Bulltofta Höjdrodergatan 17 1989 1,431 250 – – – – – 1,681 1,223 1,223 0 Flintkärnan 2 Malmö Fosie Agnesfridsvägen 194 1972 437 4,104 – 184 – – – 4,725 2,300 2,702 12 Krukskärvan 11 Malmö Fosie Flintyxegatan 8a 1986 2,610 – – – – – – 2,610 1,388 1,714 19 Hammaren 5 Malmö Kirserberg Södra Bulltorftav 17 1966 3,188 1,111 – – – – – 4,299 3,835 3,840 0 Böttö 5 Malmö Malmö Kosterögatan 5 1964/1993 3,830 7,613 – – – – – 11,443 6,290 6,989 7 Eggegrund 6 Malmö Malmö Hemsögatan 10 1983 241 7,673 – – – – – 7,914 4,092 4,237 3 Haken 6 Malmö Malmö Vinkelgatan 15 1970 – 8,620 – – – – – 8,620 2,874 3,278 0 Holmögadd 3 Malmö Malmö Bjurögatan 26 1969 – 11,482 – – – – – 11,482 4,692 4,692 0 Holmögadd 4 Malmö Malmö Bjurögatan 28 1969 – 14,165 – – – – – 14,165 6,481 6,481 0 Krukskärvan 3 Malmö Malmö Flintyxegatan 10 1979 – 7,585 – – – – – 7,585 3,374 4,085 17 Lerkärlet 3 Malmö Malmö Flintyxegatan 2 1984/1987 – 1,070 – – – – – 1,070 671 671 0 Sidorodret 3 Malmö Malmö Höjdrodergatan 2 1976/1987 – 1,057 – – – – – 1,057 515 515 0 Skjutstallslyckan 23 Malmö Malmö Lundavägen 56 1946 1,044 7,489 – 509 – – – 9,042 3,704 4,232 9 Smörbollen 12 Malmö Malmö Cypressvägen 12 1970 – 3,905 – – – – – 3,905 2,977 1,872 20 Smörbollen 52 Malmö Malmö Pinjevägen 5 1977 – 2,629 – – – – – 2,629 926 1,181 22 Speditionen 1 Malmö Malmö Lodgatan 19–23 1992 728 4,282 – – – – – 5,010 2,482 2,749 4 Storbådan 2 Malmö Malmö Hemsögatan 22 1973 186 2,962 – – – – 100 3,248 1,263 1,309 4 Storbådan 4 Malmö Malmö Hemsögatan 18 1973 – 2,590 – – – – – 2,590 1,254 1,254 0 Storbådan 5 Malmö Malmö Hemsögatan 14–16 1973 580 12,211 – – – – – 12,791 6,327 6,455 2 Svinbådan 4 Malmö Malmö Brännögatan 9 1961 50 1,501 – – – – – 1,551 388 812 52 Svinbådan 5 Malmö Malmö Tärnögatan 3 1963 – 2,639 – – – – – 2,639 952 1,042 9 Masugnen 22 Malmö Soﬁelund Annelundsgatan 59 1948 1,064 681 – – – – 625 2,370 1,008 1,356 23 Sämjan 2 Malmö Soﬁelund Bokgatan 16–18 1929 6,927 2,492 – – – – – 9,419 3,326 4,687 24 Brännaren 3 Malmö Sorgenfri Industrigatan 13 1947 2,478 1,902 – – – – – 4,380 2,261 2,876 18

Retail properties Bokhandeln 2 Eksjö Eksjö Södra Storgatan 11 1929 – – – 809 683 – – 1,492 975 1,072 6 Bjärred 14:11 Lomma Bjärred Vikingavägen 1 1971/1991 1,722 – – 3,002 – – 407 5,131 5,973 6,238 3 Köpmannen 2 Nybro Nybro Jutarnas Väg 1 1964 300 786 – 1,858 – – – 2,944 1,938 1,952 1 Köpmannen 3 Nybro Nybro Storgatan 2 1992 1,075 74 – 2,049 – – – 3,198 1,836 2,498 27 Lönnen 12 Nybro Nybro Salutorget 9 1975 690 72 – 5,429 – – – 6,191 3,548 3,915 2 Nederled 2:63 Värnamo Kloster Lindvägen 2 1934/1976 – – – 775 – – – 775 600 544 0 Ljungadal 5 Växjö Växjö Mörners Väg 112 1966/1971 – – – 3,082 – – – 3,082 1,397 1,516 0 Ljungdahl 2 Växjö Växjö Ljungadalsgatan 6 1966/1978 528 – – 2,126 – – – 2,654 2,327 2,458 5

Other Gårö 1:541 Gnosjö Gnosjö Gårö – – – – – – – – – – – 0 Flahult 2:348 Jönköping Jönköping Örnabergsvägen 13 – – – – – – – – – – – 0 Hamnen 22:2 Malmö Malmö Jörgen Kocksgatan 3 1952/1964 3,033 643 – – – 4,361 – 8,037 5,069 7,003 27 Krukskärvan 6 Malmö Malmö Flintyxegatan 6 – – – – – – – – – – – 0 Apollo 6 Nybro Nybro Storg 5 1955 474 – – 251 731 – – 1,456 1,037 1,064 0 Malmbäck 2:118, 115 Nässjö Nässjö Ågatan 7 – – – – – – – – – – – 0 Sjöafall 1:85, 1:80 Nässjö Nässjö Cirkelvägen 30 – – – – – – – – – – – 0 Ljungsåsa 16:7 Växjö Lammhult Köpmannagatan 5 1969 337 – – – 419 – – 756 481 531 6

Market Area West Ofﬁce properties Prästgård 1:349 Färgelanda Färgelanda Centrumvägen 6 1977 286 – – – – – – 286 268 268 0 Angered 100:1 Gothenburg Gothenburg Rävebergsvägen 1982/1989 26,126 – – – – – – 26,126 20,494 20,493 0 Bagaregården 16:9 Gothenburg Gothenburg Byfogdegatan 6 1949/1977 3,996 – – – – – – 3,996 3,736 3,768 1 Gamlestaden 2:5 Gothenburg Gothenburg Artillerigatan 17 1910-talet 23,498 699 – 90 – – 108 24,395 18,186 20,516 11 Gamlestaden 2:8 Gothenburg Gothenburg Rullaregatan 7 1929/1966 20,882 – – – – – – 20,882 16,682 16,682 0 Landvetter 4:36 Härryda Härryda Brattåsvägen 5–8 1978/1988 2,020 386 – 1,098 – – – 3,504 3,976 3,834 0 Landvetter 4:37 Härryda Härryda Brattåsvägen 14 1977/1999 430 – – 268 563 – – 1,261 1,433 1,520 2 Kindbogården 1:111 Härryda Mölnlycke Metallvägen 5 1985 2,983 196 – – – – – 3,179 1,755 1,755 0 Södra Hamnen 13:3 Lysekil Lysekil Rosviksgatan 5 1959/1983 1,201 – – – 658 – – 1,859 1,754 1,857 6 Köpmannen 15, 16 Mark Kinna Boråsvägen 32 1943/1968 732 – – 324 206 – – 1,262 1,043 1,049 0 Mekanikern 1 Mark Kinna Boråsvägen 50 1957/1975 2,150 – – 164 – – – 2,314 1,811 1,811 0 Krokstad Sandåker 1:46 Munkedal Hedekas Centrum 1973 309 – – 118 288 – – 715 339 401 11 Vässje 1:108 Munkedal Hällevadsho N Bohusvägen 2a 1975 230 – – 128 – – – 358 173 237 27 Annestorp 24:4 Mölndal Mölndal Almåsgången 5 1974/1991 2,506 – – 325 – – – 2,831 2,523 3,040 0 Lindome 2:43 Mölndal Mölndal Almåsgången 1 1974 814 – – 653 – – – 1,467 1,505 1,619 6 Snödroppen 2 Mölndal Mölndal Flöjelbergsgatan 1 1962/1967 28,749 48 – – – – – 28,797 29,928 30,380 1 Tulpanen 3 Mölndal Mölndal Bergfotsgatan 7, 9 1960 52,529 1,716 – – – – – 54,245 50,896 53,029 6 Munkeröd 1:61 Stenungsund Stenungsund Munkerödsvägen 4 1990 2,047 422 – – – – – 2,469 1,459 1,466 0 Ekoxen 2 Trollhättan Trollhättan Sylte Center 1973 456 – – 257 – – – 713 85 393 73 Barken 6 Uddevalla Uddevalla Junogatan 9 1990 3,558 – – – – – – 3,558 2,342 2,627 10 Bastionen 28 Uddevalla Uddevalla Bastionesgatan 40 1960/1989 7,006 – – – – – – 7,006 5,820 6,220 2 Solbacken 10 Uddevalla Uddevalla Silentzvägen 6 1990 1,790 – – – – – – 1,790 1,617 1,975 16 Misteln 24 Vänersborg Vänersborg Drottninggatan 10 1929 3,081 – – – – – – 3,081 2,477 2,877 14 Resedan 16 Vänersborg Vänersborg Kungsgatan 7 1965 1,136 90 – 1,189 – – – 2,415 1,772 1,992 11

Retirement homes Backa 866:836 Gothenburg Gothenburg S:t Jörgens väg 22 1956–62/1992–93 – – 5,155 – – – – 5,155 4,962 5,133 3 Heden 28:2 Gothenburg Gothenburg Berzeliigatan 11 1993 – – 1,840 – – – – 1,840 3,538 3,399 0 Krokslätt 147:2 Gothenburg Gothenburg Fridkullagatan 18g 1996 150 – 3,124 – – – – 3,274 5,073 5,070 0

48 Assets: Properties

Fiskebäck 8:7 Gothenburg Västra Frölunda Hälleﬂundregatan 20 1999 – – 6,444 – 1,341 – – 7,785 8,223 8,298 1 Fiskebäck 8:8 Gothenburg Västra Frölunda Hälleﬂundregatan 18 1976 1,719 – – – – – – 1,719 1,210 1,237 0 Halmstad 10:35 Halmstad Halmstad – 2004 – – 1,580 – – – – 1,580 2,348 2,348 0 Fallström 14 Mölndal Mölndal Fallströmsgatan 1–5 1997 – – 1,389 – – – – 1,389 2,246 2,160 0

Industrial/warehouse properties Strandbygget 1 Falkenberg Falkenberg Kvekatorpsvägen 26 1970 – 4,720 – – – – – 4,720 1,428 1,428 0 Gamlestaden 740:130 Gothenburg Gothenburg Gamlestadsvägen 8 1947/1985 – 3,151 – – – – – 3,151 2,385 2,385 0 Kärra 11:110 Gothenburg Gothenburg Ellesbovägen 101 1968 – 7,822 – – – – – 7,822 2,655 2,643 0 Sävenäs 170:9 Gothenburg Gothenburg Von Utfallsgatan 12 1929/1955 650 7,846 – – – – – 8,496 2,375 2,640 9 Försäljaren 9 Kungälv Kungälv Filaregatan 17–19 1974 288 7,900 – 337 – – – 8,525 4,058 4,237 3 Ulseröd 1:212 Lysekil Lysekil Lysekils Industrihotell 1975 – 9,456 – – – – – 9,456 1,994 2,464 19 Anisen 2 Mölndal Mölndal Johannefredsgatan 9 1991/1999 – 5,500 – – – – – 5,500 4,549 4,549 0 Gasmätaren 2 Mölndal Mölndal Argongatan 11 1982/1987 2,589 11,133 – 314 – – 30 14,066 11,468 11,428 0 Lexby 11:14 Partille Partille Laxﬁskevägen 4 1956/1981 4,312 15,189 – – – – – 19,501 5,252 7,243 28 TanumRyland 3:6 Tanum Tanum Storemyrsvägen 1972/1987 – 19,016 – – – – – 19,016 8,474 8,474 0 Drivhjulet 3 Trollhättan Trollhättan Kardanvägen 65 1989 – 1,680 – – – – – 1,680 778 778 0 Hjulet 6 Trollhättan Trollhättan Kardanvägen 12b 1980/1984 – – – 1,710 – – – 1,710 913 934 0 Hörnstenen 5 Trollhättan Trollhättan Installatörsvägen 1–3 1978/1989 – 1,664 – – – – – 1,664 501 763 34 Kugghjulet 2 Trollhättan Trollhättan Kardanvägen 66 1991 – 1,500 – – – – – 1,500 420 636 0 Kuröd 4:86 Uddevalla Uddevalla Brunnemyrsvägen 4 1976/1990 – 5,290 – – – – – 5,290 767 2,392 57 Fregatten 21 Vänersborg Vänersborg Industrigatan 2 1945/1967 – 6,677 – – – – – 6,677 2,143 2,143 0

Retail properties Hindås 1:450 Härryda Härryda Hindås Stationsv 41–47 1978/1996 783 – – 840 – – – 1,623 1,703 1,634 0 Floda 3:833 Lerum Lerum Rurik Holms väg 1 1960/1991 3,464 – – 3,821 3,847 – – 11,132 9,781 10,506 7 Annestorp 24:2 Mölndal Mölndal Almåsgången 2 1974/1987 – 19 – 3,443 – – – 3,462 2,800 2,831 0 Köpmannen 30 Tibro Tibro Centrumgatan 6 1973 580 24 – 1,491 – – – 2,095 480 1,197 60 Ekoxen 1 Trollhättan Trollhättan Sylte Center 1970 1,119 160 – 2,278 – – – 3,557 2,254 2,709 17 Kuröds Tegar 2 Uddevalla Uddevalla Kurödsvägen 27 1978 – – – 1,878 – – – 1,878 698 700 0 Källeberg 7:18 Vänersborg Brålanda Storgatan 21 1965 386 – – 660 – – – 1,046 370 473 20 Timjan 4 Vänersborg Vänersborg Edsgatan 18 1965 135 – – 1,421 – – – 1,556 712 1,060 33

Other Baggatomten 6:1 Härryda Hindås Hotellvägen 1937 – – – – – 4,079 – 4,079 9,910 3,895 0 Torreby 3:54 Munkedal Munkedal Torreby – – – – – – – – – – – 0 Köpmannen 26 Tibro Tibro Stora Torget 8 1986 1,034 147 – 742 1,346 – – 3,268 2,537 2,649 4 Tranemo 1:29 Tranemo Tranemo Kvarngatan – – – – – – – – – – – 0 Ekoxen 3 Trollhättan Trollhättan Sylte Center – – – – – – – – – – – 0 Ekoxen 4 Trollhättan Trollhättan Sylte Center – – – – – – – – – – – 0

Market Area Central Ofﬁce properties Verdandi 9 Borlänge Borlänge Borganäsvägen 42–44 1929/1987 1,374 182 – 1,282 195 – – 3,032 1,179 1,916 39 Smedjan 5 Forshaga Forshaga Tryckerigatan 7 1990 788 350 – – – – – 1,138 465 510 9 Sköllersta-Kärr 1:34 Hallsberg Pålsboda Köpmangatan 3 1978 635 230 – – – – – 865 333 374 6 Blåsten 4 Karlstad Karlstad Stormgatan 8 1975/1979 2,407 – – – – – – 2,407 1,720 1,665 0 Brisen 4 Karlstad Karlstad Sunnanvindsgatan 8 1973 800 – – – – – – 800 294 623 53 Fjädern 16 Karlstad Karlstad Bromsgatan 4 1991 2,920 334 – 1,202 – – – 4,456 2,966 2,974 0 Sågen 7 Karlstad Karlstad Lantvärnsgatan 12 1940/1975 1,834 1,910 – – – – – 3,744 1,120 1,601 30 Tången 15 Karlstad Karlstad Gjuterigatan 28 1991/1995 984 – – 990 – – – 1,974 927 1,145 9 Svanen 17 Ludvika Ludvika Carlavägen 21 1988 2,653 363 – – – – – 3,015 2,301 2,427 3 Stranden 20:4 Mora Mora Hantverkaregatan 14 1989 2,479 – – – – – – 2,479 1,844 1,880 2 Klas 11 Västerås Västerås Hantverkargatan 5 1955/1987 5,407 834 – 2,962 – – – 9,203 9,146 9,768 4 Klio 10 Västerås Västerås Norra Källgatan 17 1984/1998 2,540 77 – 178 – – – 2,795 2,726 2,785 2 Kryssen 3 Västerås Västerås Regattagatan 33–53 1929–1962 4,920 1,513 – – – – – 6,433 3,442 3,718 6

Retirement homes Hanen 4 Västerås Västerås Hagalidsvägen 2 1964/1996 – – 2,740 – – – – 2,740 3,886 3,672 0 Vedbo 61 Västerås Västerås Erikslundsg/H.torpsv 20 1977/1999 – – 7,200 – – – – 7,200 8,493 8,556 0

Industrial/warehouse properties Smedjan 1 Forshaga Forshaga Framgårdsvägen 2 1973 303 508 – – – – – 811 597 597 0 Fjädern 14 Karlstad Karlstad Kolvgatan 1 1971 982 2,716 – 347 – – – 4,045 2,206 2,633 6 Kulingen 4 Karlstad Karlstad Östanvindsgatan 17 1976 – 8,425 – 450 – – – 8,875 1,514 2,165 30 Sågen 9 Karlstad Karlstad Lantvärnsgatan 8 1950/1973 1,093 1,462 – – – – – 2,555 811 858 5 Oxen 17 Kumla Kumla Västra Drottningg 38 – – 6,645 – – – – – 6,645 1,321 1,321 0 Finnslätten 5 Västerås Västerås Terminalv Finnslätten 1959/1976–77 209 49,975 – – – – – 50,184 37,274 39,161 5 Kryssen 4 Västerås Västerås Regattagatan 7–31 1929–1963 1,442 11,566 – 215 – – – 13,223 5,331 6,317 2 Regattan 46 Västerås Västerås Regattagatan 8–28 1929–1964 751 11,795 – 115 – – – 12,661 5,897 6,153 1

Retail properties Bromsen 1, 13 Karlstad Karlstad Blockgatan 6 1967/1991 1,218 710 – 1,972 – – – 3,900 1,185 1,331 2 Gräsroten 1 Karlstad Karlstad Gräsdalsgatan 1 1987 – – – 4,961 – – – 4,961 2,165 2,152 0 Härden 3 Karlstad Karlstad Sågverksgatan 5 1952 – 519 – 501 – – – 1,020 543 553 0 Mercurius 15 Karlstad Karlstad Östra Torggatan 9 1992 1,469 – – 4,438 1,111 – – 7,018 7,983 8,633 1 Stolpen 6 Karlstad Karlstad Ventilgatan 1 1991 – 50 – 510 – – – 560 613 639 0

Other Harneskmakaren 3 & 10 Arboga Arboga Järntorgsgatan 4 1953/1972 458 36 – 462 702 – – 1,658 823 1,125 26 Mejeriet 17 Filipstad Filipstad Tingshusg 10b – – – – – – – – – – – 0 Mejeriet 18 Filipstad Filipstad Tingshusg 10a – – – – – – – – – – – 0 Energin 6 Västerås Västerås Omformargatan 22 – – – – – – – – – – – 0

Market Area North Ofﬁce properties Gnistan 7 Bollnäs Bollnäs Långgatan 7 1972 1,160 – – 888 – – – 2,048 1,477 1,490 10 Knuten 4 Härjedalen Sveg Fjällvägen 4 1991 350 – – 285 298 – – 933 556 762 27 Knuten 6 Härjedalen Sveg Kyrkogatan 20 1920 576 – – – 103 – – 679 284 414 34

49 Acquired properties 2004

Market Area East Ofﬁce properties Valpen 1 Eskilstuna Eskilstuna Kungsgatan 68 1929 4,475 – – – – – – 4,475 2,624 2,624 0 Viljan 2 Eskilstuna Eskilstuna Careliigatan 8 1976/1995 9,162 – – – – – – 9,162 7,726 8,092 5 Växlaren 4 Eskilstuna Eskilstuna Fristadstorget 10 1930 3,110 – – – – – – 3,110 3,216 3,271 2 Järven 5 Norrköping Norrköping Bergslagsgatan 11 /2003 3,011 1,500 – – – – – 4,511 4,967 4,967 0 Valsverket 8–9 Stockholm Bromma Gjuterivägen 15 1947 1,485 525 – 520 – – – 2,530 1,175 1,702 31 Säteritaket 1 Stockholm Hässelby Maltesholmsv 88–90 1991 2,374 92 – – – – – 2,466 1,920 2,245 14 Roten 6 Sundsvall Sundsvall Tallrotsgatan 2 – 3,000 – – – – – – 3,000 3,540 3,540 0 Kopparen 9 Tyresö Tyresö Vintervägen 2 1960 1,110 983 – 241 – – – 2,334 1,518 1,518 0 Ösby 1:79 Värmdö Gustavsberg Skogsbovägen 21 1986/1990 2,691 – – – – – – 2,691 2,349 2,382 1

Retirement homes Betaren 4 Finspång Finspång Proﬁlvägen 8 1964/1993 – – 1,991 – – – – 1,991 1,384 1,384 0 Hårstorp 3:366 Finspång Finspång Hårstorpsvägen 13 1972/1990 – – 2,880 – – – – 2,880 3,499 2,979 0 Tegelbruket 3 Finspång Finspång Östermalmsvägen 55 2002 – – 3,275 – – – – 3,275 4,563 4,563 0 Östermalm 1:12 Finspång Finspång Södra Storängsv 50 1950 – – 8,510 – – – – 8,510 6,984 6,980 0 Brynäs 55:4 Gävle Gävle Tredje Tvärgatan 31 1970 – – 6,490 – – – – 6,490 4,118 4,118 0 Kristinelund 49:1 Gävle Gävle Solgårdsgatan 2 – – – 6,239 3,251 – – – 9,490 7,607 7,607 0 Kristinelund 49:2 Gävle Gävle Järvstavägen 20 1980 – – 6,485 – – – – 6,485 3,664 3,664 0 Strömsbro 4:2 Gävle Gävle Sanatorievägen 17 1910/2002 – – 5,841 – – – – 5,841 5,062 5,062 0 Södertull 13:13 Gävle Gävle Fleminggatan 11–17 /1999–2001 – – 9,358 – – – – 9,358 7,950 7,950 0 Södertull 13:14 Gävle Gävle Valongatan 3 1970/1996 – – 659 – – – – 659 578 621 7 Vallbacken 24:3 Gävle Gävle Vallbacksgatan 8 1970/1995 – – 4,937 – – – – 4,937 3,248 3,248 0 Varva 2:20 Gävle Gävle Norra Prästv 12a–b 1970/1992 – – 5,563 – – – – 5,563 3,777 3,777 0 Rösunda 36:41 Nacka Nacka Rösundavägen 2 – – – 5,078 – – – – 5,078 4,404 4,404 0 Järven 6 Norrköping Norrköping Enebygatan 22 /2004 – – 1,622 – – – – 1,622 2,186 2,420 10 Konstantinopel 6 Norrköping Norrköping Skomakaregatan 11 2000 – – 3,183 – – – – 3,183 5,178 5,178 0

Industrial/warehouse properties Nedre Gruvriset 33:156 Falun Falun Krontallsvägen 1, 3, 16 2004 – 5,153 – – – – – 5,153 4,665 4,665 0 Glasberget 5 Linköping Linköping Roxtorpsgatan 13 1974, 1985, 1984 – 8,400 – – – – – 8,400 3,831 3,831 0 Elektronen 1 Sollentuna Sollentuna Hovslagarevägen 5 1957/1987 – 2,313 – – – – – 2,313 1,882 1,882 0 Elektronen 4 Sollentuna Sollentuna Hovslagarevägen 3a 1958/1992 – 3,793 – – – – – 3,793 3,056 3,398 10 Elementet 3 Sollentuna Sollentuna Bäckvägen 20 1963/1989 – 2,786 – – – – – 2,786 1,615 1,940 17 Domnarvet 40 Stockholm Spånga Gunnebogatan 34 1989 – 2,577 – – – – – 2,577 1,797 1,797 0 Bagaren 9 Tyresö Tyresö Radiovägen 7a 1984 – 2,220 – – – – – 2,220 1,433 1,433 0 Kopparen 8 Tyresö Tyresö Vintervägen 4 /2001 – 3,847 – – – – – 3,847 4,383 4,383 0 Viby 19:53 Upplands-Bro Kungsängen Kraftvägen 30, 32 1992/1994 – 2,600 – – – – – 2,600 1,348 1,348 0 Viby 19:54 Upplands-Bro Kungsängen Kraftvägen 26, 28 1992 – 2,056 – – – – – 2,056 1,538 1,538 0 Ösby 1:32 Värmdö Gustavsberg Värmdögatan 3 1950 – 884 – – – – – 884 1,095 1,095 0

Retail properties Nollplanet 12 Eskilstuna Eskilstuna Mått Johanssons V 30 1990/1994 – – – 2,038 – – – 2,038 1,385 1,385 0 Valsverket 10 Stockholm Bromma Karlsbodavägen 2 1962/98, 1979/97 6,600 – – 11,550 – – – 18,150 11,815 11,815 0 Vagnhallen 15 Stockholm Vällingby Jämtlandsgatan 153 1953 550 1,025 – 6,850 – – – 8,425 7,224 7,557 4

Other Centrum 13:1 Enköping Enköping Kungsg 26/Källg 11 1977/1995 – 337 – 804 – 1,910 122 3,173 1,551 2,223 29 Hårstorp 3:110 Finspång Finspång Dunderbacksvägen 41 1974/1994–95 416 110 – – 18,432 – – 18,958 10,825 14,509 21

Market Area South Retirement homes Arlöv 11:294 Burlöv Arlöv Arwidius Väg 50–66 1900/2000 – – 8,578 – – – – 8,578 12,671 12,671 0 Visby Pjäsen 12 Gotland Visby Pjäsgatan 12 2004 – – 6,600 – – – – 6,600 9,269 9,156 0

Industrial/warehouse properties Bränslet 7 Malmö Malmö Koksgatan 6–12 1972, 1976 – 19,897 – – – – – 19,897 6,140 6,140 0 Järnet 1 Malmö Malmö Spadegatan 1 1942, 1962 – 1,196 – – – – – 1,196 88 88 0 Stålet 2 Malmö Malmö Lodg 5, Spadeg 2 1937, 39, 43, 56, 63 – 14,600 – – – – – 14,600 2,167 2,167 0 Värmet 3 Malmö Malmö Koksgatan 14 1966, 1967 – 6,124 – – – – – 6,124 2,118 2,118 0

Market Area West Retirement homes Näset 130:1 Gothenburg Västra Frölunda Bjölavägen 1 2000 – – 3,700 – – – – 3,700 5,215 5,215 0 Fjällräven 15 Uddevalla Uddevalla Myråsvägen 6a–f 1972 – – 4,148 – – – – 4,148 3,496 3,496 0 Rosenhäll 1 Uddevalla Uddevalla Österled 2 1972 – – 16,138 – – – – 16,138 14,670 14,670 0

Industrial/warehouse properties Backa 21:8 Gothenburg Hisings Backa Exportgatan 19–21 1960/1997, 1972 – 16,908 – – – – – 16,908 4,914 4,914 0 Backa 96:2 Gothenburg Hisings Backa Exportgatan 23 1983, 1986, 1990 – 6,634 – – – – – 6,634 1,659 1,659 0 Öret 6 Jönköping Jönköping Soldattorpsgatan 15 1963, 1969 – 10,447 – – – – – 10,447 2,309 2,309 0

Retail properties Angered 94:2 Gothenburg Angered Angered Centrum 1978 20,815 1,447 – 17,547 – – 12 39,821 40,865 41,390 1 Backa 171:2 & 866:279 Gothenburg Gothenburg Backavägen 3 1990 2,969 180 – 4,655 – – – 7,817 7,390 8,250 9

Other Epidemisjukhuset 1 Uddevalla Uddevalla Hovslagaregatan 1 – – – – – 5,246 – – 5,246 2,017 2,541 21

50 Acquired properties 2004

Market Area Central Industrial/warehouse properties Hammaren 8 Borlänge Borlänge Lustbergsvägen 6 1974/1995 – 4,165 – – – – – 4,165 948 948 0 Smedjan 3 Borlänge Borlänge Gesällgatan 1, 3 1960, 1963/1988 – 6,004 – – – – – 6,004 546 546 0

Other Kontrollanten 15 Örebro Örebro – – – – – – – – – – – – 0

Market Area North Retirement homes Roten 5 Sundsvall Sundsvall Tomtegränd 5a–c 1993 – – 4,369 – – – – 4,369 4,568 4,568 0 Sköle 1:117 Sundsvall Sundsvall Skölevägen 15 1983 – – 6,006 – – – – 6,006 5,702 5,702 0 Skörden 2 Sundsvall Sundsvall Axvägen 7–9 1975 – – 8,026 – – – – 8,026 6,041 6,041 0

Industrial/warehouse property Rävsund 1:338 Sundsvall Kvissleby Pionvägen 5 1974/95, 87, 90, 95/99 – 14,053 – – – – – 14,053 2,053 2,053 0

Retail properties Firman 2 Skellefteå Skellefteå – 2005 – – – 6,529 – – – 6,529 1,667 1,667 0 Varulagret 1 Skellefteå Skellefteå – 2005 – – – 2,595 – – – 2,595 763 763 0

Why do you work for Kungsleden? What was the most enjoyable part of your work in 2004? Kungsleden’s an active property company with fast decision-paths and The fact that we’ve done a series of good property deals–lettings have great colleagues. We have a lot of fun together. also gone well.

What’s the most important part of your job? What was the biggest change in your work in 2004? Meeting businesspeople and presenting Kungsleden, then negotiating a My last job was with Drott and coming here is a big change. Buying and deal that’s good for everyone involved. My objective is a satisﬁed customer selling properties goes faster here. Another difference is that instead of and the maximum returns for the company. budgeting, our work proceeds from business plans.

What, do you think, distinguishes Kungsleden’s working methods? What’s your favourite building? Our speed and simple decision-paths, but also, our positive atmosphere. It’s called von Conow 54, a very ﬂexible property to work with–you can Our speed is due to our business plan, in turn, meaning our decisions are create state-of-the-art solutions for your tenants. well founded.

Adam Falkenström, 30, Property Manager, South region.

51 Divested properties 2004

Lettable floor-space, m2 Year of construction/ Industrial/ Retirement Total Name Municipality Locality Address conversion Offices warehouse homes Retail Residential Hotel Other floor-space

Market Area East Ofﬁce properties Bulten 7 Danderyd Danderyd Rinkebyvägen 11 1992 1,169 454 – 216 – – – 1,839 Köpmannen 2 Finspång Finspång Bergslagsvägen 4 1929 950 – – 470 531 – – 1,951 Galjonen 1 Linköping Linköping Gillbergagatan 30 1975/1991 590 – – – – – – 590 Domaren 1 Mjölby Mjölby Kungsvägen 54 1961 1,690 – – 254 1,672 – – 3,616 Bagaren 4 Motala Motala Bispmotalagatan 9 1972 3,195 – – 182 – – – 3,377 Sicklaön 37:13 Nacka Nacka Finnbodavägen 13 1967 2,669 – – – – – – 2,669 Sicklaön 37:45 Nacka Nacka Kvarnholmsvägen 52 1987 1,845 807 – – – – – 2,652 Märsta 24:18 Sigtuna Sigtuna Turbingatan 2 1990 1,895 – – – – – – 1,895 Ritmallen 1 Sollentuna Rotebro Kung Hans väg 4, 12 1990 3,034 263 – 1,358 – – – 4,655 Centrum 13 Sollentuna Sollentuna Allfarvägen 1, 3 1986 3,610 291 – 755 – – – 4,656 Ekplantan 2 Sollentuna Sollentuna Djupdalsvägen 13–15 1988 4,388 8 – – – – – 4,396 Nattvakten 3 Sollentuna Sollentuna Sjöängsvägen 15–21 1990 4,440 174 – 430 – – – 5,044 Nattvakten 5 Sollentuna Sollentuna Sjöängsvägen 9 1988 1,352 – – – – – – 1,352 Nattvakten 6 Sollentuna Sollentuna Sjöängsvägen 5, 7 1987 2,517 – – – – – – 2,517 Nattvakten 7 Sollentuna Sollentuna Sjöängsvägen 1, 3 1985 1,157 – – – – – – 1,157 Nattvakten 8 Sollentuna Sollentuna Sjöängsvägen 2, 4 1986 489 468 – – – – – 957 Nattvakten 9 Sollentuna Sollentuna Sjöängsvägen 6, 8 1986 1,244 – – – – – – 1,244 Nattvakten 10 Sollentuna Sollentuna Sjöängsvägen 10, 12 1998 825 801 – – – – – 1,626 Träkolet 16 Sollentuna Sollentuna Tellusvägen 13 1982/1988 11,637 607 – – – – – 12,244 Albano 18 Stockholm Stockholm Björnnäsvägen 12 1964 2,000 – – – – – – 2,000 Degeln 2 Täby Täby Nytorpsvägen 2a–34 1983 11,969 601 – – – – – 12,570 Stansen 1 Täby Täby Maskinvägen 1, 3 1979/1994 5,100 – – – – – – 5,100

Industrial/warehouse properties Ekhagen 4 Botkyrka Botkyrka Kumla Gårdsväg 9 1989 – 3,428 – – – – – 3,428 Kumla Hage 7 Botkyrka Botkyrka Segersbyvägen 5 – – 1,950 – – – – – 1,950 Kumla Äng 2 Botkyrka Botkyrka Kumla Gårdsväg 31 1988 – 1,420 – – – – – 1,420 Plinten 4 Norrköping Norrköping Malmgatan 35 1974/1991 5,450 – – – – – – 5,450 Märsta 17:2 Sigtuna Märsta Maskingatan 8a 1974/1986 – 3,791 – – – – – 3,791 Reglaget 1 Sollentuna Sollentuna Bergkällavägen 24 1987/1990 573 2,549 – 180 – – – 3,302 Korsräven 1 Stockholm Spånga Arrendevägen 50 1969/1998 – 6,120 – – – – – 6,120 Albano 19 Stockholm Stockholm Björnnäsvägen 10 1944/1981 402 662 – – – – – 1,064 Albano 64 Stockholm Stockholm Roslagsvägen 54–56 1959 356 5,125 – 207 – – – 5,688 Mästaren 6 Södertälje Södertälje Hantverksvägen 14 1986 – 1,104 – – – – – 1,104

Retail properties Forbonden 4 Botkyrka Botkyrka Fittja Centrum, Fittjavägen 3 1972 5,059 1,253 – 4,445 – – – 10,757 S:t Ilian 9:1 Enköping Enköping Vårfrugatan 2 1961 1,556 – – 1,811 – – – 3,367 Fogden 6 Täby Täby Fogdevägen 4 1987 4,037 1,541 – 4,299 – – 149 10,026

Market Area South Ofﬁce properties Löttorp 1:16 Borgholm Löttorp Löttorpsvägen 57 1957 485 – – 275 85 – – 845 Delﬁnen 17 Helsingborg Helsingborg Kullagatan 31 1900/1984 6,743 – – – – – – 6,743 Fiskaren 40 Helsingborg Helsingborg Kullagatan 41 1900/1984 – – – 886 841 – – 1,727 Fiskaren 41 Helsingborg Helsingborg Drottninggatan 42–44 1900/1984 1,274 – – 29 – – – 1,303 Kopparslagaren 6 Hässleholm Hässleholm Frykholmsgatan 4 1980 2,670 – – 465 – – – 3,135 Vakteln 3, 23 Malmö Limhamn Tegnérgatan 39 1991 1,871 – – – – – – 1,871 Gustav Adolf 12 Malmö Malmö Gustav Adolf Torg 6 1958 3,157 – – – – – – 3,157 Lejonet 2 Malmö Malmö Lilla torg 1 1911 4,374 82 – 997 314 – – 5,767 Vakteln 17 Malmö Malmö Järnvägsgatan 42–46 1930 2,560 – – – – – – 2,560 Banken 14 Vetlanda Vetlanda Storgatan 2, 4 1929 2,107 – – 486 1,484 – – 4,076

Industrial/warehouse properties Ädelmetallen 15 Jönköping Jönköping Grossistgatan 14 1988/1997 – 5,000 – – – – – 5,000 Pumpen 5 Kalmar Kalmar Grindängsvägen 2 1969 – 665 – – – – – 665 Gråsejen 1 Malmö Limhamn Prångaregatan 5 1960 1,932 433 – – – – – 2,365 Kupolen 2 Malmö Limhamn Krossverksgatan 7–17 1992 – 9,922 – – – – – 9,922 Bjurö 11 Malmö Malmö Bjurögatan 35 1970 – 5,836 – – – – – 5,836 Eggegrund 7 Malmö Malmö Hemsögatan 12 1968/1970 – 14,679 – – – – – 14,679 Holkyxan 8 Malmö Malmö Bronsyxegatan 13 1972/2002 – 4,625 – – – – – 4,625 Gravören 5 Växjö Växjö Verkstadsgatan 8 1969/1983 – 2,568 – – – – – 2,568

Retail properties Ryttaren 13 Hässleholm Hässleholm Första Avenyen 5 1972/1995 230 – – 3,206 1,227 – 30 4,693 Vakten 1 Jönköping Jönköping Bataljonsgatan 4 1996 – – – 4,964 – – – 4,964 Forsheda 3:31 Värnamo Värnamo Brogatan 4 1984 205 – – 449 – – – 654

Other Bläsinge 5:232 Borgholm Borgholm Högby – – – – – – – – – Ryttaren 8 Hässleholm Hässleholm Godtemplaregatan 1 1972/1995 – 102 – 3,243 4,570 – – 7,915 Påskbuketten 7 Malmö Malmö Hästvägen 4b – – – – – – – – – Gyllebo 1:288 Simrishamn Simrishamn Liavångsvägen 8 – – – – – – – – –

Market Area West Ofﬁce properties Pomona 9 Borås Borås Allégatan 46 1962 2,486 – – – 799 – – 3,285 Klockaren 11 Falköping Falköping Storgatan 7–9 1929 2,081 – – 247 627 – – 2,954 Staren 8 Mariestad Mariestad Nygatan 14 1957/1972 2,006 – – – 86 – – 2,092 Fältskären 2 Skövde Skövde Södra Trängallen 1 1990 466 – – – – – – 466 Vidar 1 Skövde Skövde Kungsgatan 18–22 1980 8,507 110 – 939 – – – 9,556 Advokaten 1 Töreboda Töreboda Norra Torggatan 7 1985 1,026 – – 260 839 – – 2,125

52 Divested properties 2004

Lettable floor-space, m2 Year of construction/ Industrial/ Retirement Total Name Municipality Locality Address conversion Offices warehouse homes Retail Residential Hotel Other floor-space

Industrial/warehouse properties Rud 51:14 Gothenburg Västra Frölunda Klangärgsgatan 6a 1970/1990 – 4,463 – – – – – 4,463 Hylsan 3 Mariestad Mariestad Förrådsgatan 32 1980 – 4,210 – – – – – 4,210 Skövde 4:160 Skövde Skövde Mariestadsvägen 98–100 1976/1989 599 2,090 – 1,276 – – – 3,965 Stenung 16:6 Stenungsund Stenungsund Ängsvägen 7 1976/1983 1,695 1,720 – – – – – 3,415 Stolen 1 Tibro Tibro Fabriksgatan 4 1987 – 7,247 – – – – – 7,247 Kuröd 4:43 Uddevalla Uddevalla Brunnemyrsv 1/Klevåsv 4 1974/1999 – 1,600 – – – – – 1,600 Svanebergslyckan 4 Uddevalla Uddevalla Svensebergsvägen 4 1988 – 1,989 – – – – – 1,989 Tofta 10:18 Varberg Varberg Tångaberg 31 1968 625 2,283 – – – – – 2,908

Retail properties Rådmannen 1, 2, 3 Falköping Falköping Landbogatan 1–5 1973/1986 2,276 236 – 2,622 973 – 745 6,852 Hulebäck 1:520 Härryda Härryda Råda Torg 1–2 1970/1987 1,367 172 – 2,231 1,894 – – 5,664 Hunden 3 Mariestad Mariestad Nya Torget 3 1988 333 65 – 3,139 – – – 3,537 Gullriset 2 och 3 Trollhättan Trollhättan Göteborgsvägen 31 1955 – – – 1,051 – – – 1,051

Other Kroken 6 Alingsås Alingsås Sävelunds Industriområde – – – – – – – – – Tummarp 1:66 Borås Dalsjöfors Storgatan 25 1952 210 – – 259 568 – – 1,037 Gästgivaren 8 Falköping Falköping Sankt Olofsgatan 5 1929 399 – – 504 623 – 30 1,556 Gästgivaren 3 Lidköping Lidköping Gamla Stadens Torg 1 1929 155 – – – – 4,120 – 4,275 Fritsla 7:7 Mark Fritsla Klevliden 12 – – – – – – – – – Nösund 1:176 Orust Orust Jakträttsavtal – – – – – – – – – Lerdala 2:23 Skövde Lerdala Sjövägen 3a–b, 5a–b, 9a–b, 11 1992 – – – – 1,880 – – 1,880 Alfhem 11 Tidaholm Tidaholm Telefongatan 4 1960 268 – – 192 594 – – 1,054 Idun 5 Tidaholm Tidaholm Norra Kungsvägen 5 1984 784 – – 267 1,402 – – 2,453 Byggmästaren 5 Töreboda Töreboda Norra Torggatan 10, 12 1990 44 – – 270 1,097 – – 1,410 Plåtslagaren 9 Töreboda Töreboda Friggagatan 5, 7 1947/1992 – – – – 1,849 – – 1,849 Rönnen 11 Töreboda Töreboda St Bergsgatan 20a–b 1957 177 40 – – 821 – – 1,038 Sotaren 12 Töreboda Töreboda Vadsbogatan 10a–b, 12a–b 1990 – – – – 972 – – 972

Market Area Central Ofﬁce properties Frigga 7 Borlänge Borlänge Målaregatan 1 1983 2,197 9 – 1,276 – – – 3,482 Rolf 2 Borlänge Borlänge Borganäs 43/Sveagatan 14 1970 5,626 112 – 964 – – – 6,702 Sigrid 11 Borlänge Borlänge Wallingatan 25 1971 2,519 – – – – – – 2,519 Hagfors 2:174 Hagfors Hagfors Uddeholmsvägen, Stationshus 1929/1950 826 58 – 67 – – – 950 Väktaren 7 Karlstad Karlstad Västra Kyrkogatan 1 1929/1971 5,811 – – – 212 – 10 6,033 Östsura 2:76 Surahammar Surahammar Köpmangatan 16 1933/1990 388 – – – 182 – – 570 Talby 2:75 Örebro Odensbacken Örebrovägen 11 1984 360 – – – – – – 360

Industrial/warehouse properties Långtradaren 4 Borlänge Borlänge Godsvägen 11 1970/1990 – 1,599 – – – – – 1,599 Hällabrottet 2:4, 9 Kumla Kumla Yxhultsvägen 16 1939 – 5,169 – – – – – 5,169 Kontrollanten 11 Örebro Örebro Skomaskinsgatan 2 1965 – 9,283 – – – – – 9,283

Retail properties Kyrkåkern 8 Borlänge Borlänge Häradsvägen 20 1920/1977 – 820 – 1,172 239 – – 2,231 Östra Via 1:62 Örebro Vintrosa Skolgatan 4 1950/1985 170 70 – 1,403 130 – – 1,773

Other Drillsnäppan 2 Kristinehamn Kristinehamn Södra Ringvägen 11 1990 901 65 – 143 1,312 – – 2,421 Gasten 1 Västerås Västerås Regattagatan 1929–1960 – – – – – – – – Gasten 2 Västerås Västerås Björnövägen 20 1929–1961 – – – – 40 – – 40 Kontrollanten 15 Örebro Örebro – – – – – – – – – –

Market Area North Ofﬁce properties Rösta 13:1 Nordanstig Harmånger Strömbruksvägen 2 1962 306 – – 59 – – – 365 Nordanbro 2:83 Nordanstig Hassela Nordanbrovägen 2 1991 558 – – – – – – 558 Rostbrännaren 4 Sandviken Sandviken Hyttgatan 21 1963/1988 1,551 – – – – – – 1,551

Industrial/warehouse properties Likriktaren 2 Kiruna Kiruna Ställverksvägen 7 1990 – 1,053 – – – – – 1,053 Skorpionen 8 Luleå Luleå Midgårdsvägen 10 1964 – 2,644 – – – – – 2,644 Sköns Prästbord 1:65 Sundsvall Sundsvall Förmansvägen 20 1978 – 6,555 – – – – – 6,555 Spänningen 5 Umeå Umeå Förrådsvägen 23 1975 – 1,686 – – – – – 1,686 Trucken Östersund Östersund Chaufförvägen 17 1965/1977 – 1,860 – – – – – 1,860

Retail property Rostbrännaren 6 Sandviken Sandviken Hyttgatan 19 1966/1988 272 – – 1,129 1,010 – – 2,411

53 Deﬁnitions

Earnings capacity: properties disposed of as of the balance sheet date are excluded, and properties acquired by no later than the same date are included as if they had been owned for 12 months. Otherwise, the calculation is based on the following assumptions: • For those properties where 12 months have passed since Kungsleden took possession, actuals for the last 12 months are included; • For those properties where more than six months but less than 12 months have passed since Kungsleden took possession, actuals are recalculated to 12-month equivalents; • For properties where less than six months have passed since Kungsleden took possession, data from acquisition calculations is used.

Property terminology Financial terminology

Property yield: the operating surplus for the year Return on equity: profit in relation to average Gearing: interest-bearing liabilities at year-end in in relation to the average book value of properties. shareholders’ equity. Stated for profit before and relation to shareholders’ equity. However, the property yield for the earnings after tax. Average shareholders’ equity is Equity ratio: shareholders’ equity including capacity is calculated as earnings capacity in calculated as the total of opening and closing minority shares at year-end in relation to total relation to the book value of properties at year-end. balances divided by two. assets. Operating net: rental revenue less operation and Return on total capital: profit after financial items Total yield: the total of the share’s price gains and maintenance costs, ground rent and property tax. plus interest costs less interest subsidies in dividends paid in the year in relation to the closing relation to average assets. Average assets are Operating surplus: rental revenue less operation share price at the beginning of the year. calculated as the total of opening and closing and maintenance costs, ground rent, property balances divided by two. Profit margin: operating surplus in relation to tax and property administration. total rental revenue. Beta value: the share’s correlation with the Operation costs: costs for electricity, heating, market’s average performance. A beta value of water, property care, cleaning, insurance and less than one implies that a share price has ongoing maintenance. fluctuated less than the SAX (Stockholm All-share Economic occupancy: rental revenue, rental dis- Index). Beta value is a key component of the counts and rental losses in relation to rental value. CAPM (Capital Asset Pricing Model) used to calculate the market’s required rate of return on Economic vacancy: assessed market rent for un- the share. The CAPM indicates that a low beta occupied floor-space in relation to rental value. value implies a low required rate of return. Beta values relate to a period of 12 months. Property type: the properties’ primary usage (see “Distribution of floor-space”). Mortgage ratio: interest-bearing liabilities in relation to property book value at year-end. Rental revenues: rent invoiced, plus supplementary items such as remuneration for heating, Dividend yield: dividends paid in the year in property tax, insurance claims and other revenues, relation to the share price at the beginning of less rental losses and rental discounts. the year.

Rental value: rental revenues plus assessed Shareholders’ equity per share: shareholders’ market rent for un-let ﬂoor-space, rental equity in relation to the number of shares at year- discounts and rental losses, less other revenue. end.

Accommodation type: floor-space distributed Book value of property per share: book value of by usage. property in relation to the number of shares at year-end. Maintenance: measures intended to maintain a property and its technical systems. Relates to Cash flow from operations: operating profit less planned measures entailing the replacement or net financial items adjusted for value adjustments renovation of parts of a building or technical and items not included in cash flow from systems. Also includes tenant adaptations. operations, and for changes in working capital and tax paid. Distribution of floor-space: distribution by accommodation type implies that the floor-space P/E ratio: share price at the end of the period in in a property is distributed by usage. There is a relation to earnings per share, in accordance with division between office, housing, retail, hotel, prevailing forecasts. Year-end share prices in development, industrial and warehousing. relation to the following year’s EPS are used for Distribution by property type means the property is historical values. defined by that type of floor-space that represents the greatest proportion of total. Accordingly, a P/CE ratio: share prices at the beginning of the property with 51 per cent of its floor-space used year in relation to cash flow from operations. as offices is considered an office property. Earnings per share: profit after tax at year-end Area-based occupancy: let floor-space in relation divided by the number of shares at year-end. to total lettable floor-space at the end of the period. Interest cover: profit before net financial items Area-based vacancy: vacant floor-space in in relation to net financial position. relation to total lettable floor-space at the end of the period.

54 Annual General Meeting and addresses

Kungsleden AB (publ) Corp.id.no. 556545-1217 Reg. office Stockholm Head office Guldgränd 5 Dividend Annual General Meeting Box 70414 The Annual General Meeting will be held on 7 April 2005 The Board and Chief Executive propose that dividends of SE-107 25 Stockholm Sweden at 2:00 p.m. at the Skandia Cinema, Drottninggatan 82, SEK 15.00 per share are paid to shareholders. The record Tel +46 8 503 052 00 Stockholm, Sweden. day for dividends has been proposed as 12 April 2005. If Fax +46 8 503 052 01 the Annual General Meeting approves the proposal, VPC Regional office West Application is expected to distribute the dividends on 15 April 2005. Spannmålsgatan 14 Box 11284 Shareholders wishing to participate in the Annual General SE-404 26 Gothenburg Meeting must be registered in their own name (i.e. not Share split Tel +46 31 755 56 00 nominee-registered) in the share register maintained by The Board of Directors proposes that the Annual General Fax +46 31 755 56 01 VPC AB (the Swedish Central Securities Depository & Meeting resolves to implement a share split by amending Regional office East Guldgränd 5 Clearing Organisation) AB by no later than 24 March §5 of the Articles of Association, whereupon the nominal Box 70414 2005 and must notify their intention to attend by no later amount of shares would change from SEK 2.50 to SE-107 25 Stockholm than 31 March 2005, by writing to the company at the SEK 1.25, if implying that one (1) existing share becomes Tel +46 8-503 052 00 Fax +46 8-503 052 01 following address: two (2) new shares. The share split is scheduled for im- Kungsleden AB plementation on 17 May 2005, and accordingly, the final Regional office South Elbegatan 5 FAO: Sinikka Mukka trading day before the share split is 12 May 2005, and SE-211 20 Malmö P.O. Box 70414, the first trading day after the split is 13 May 2005. Tel +46 40 17 44 00 Fax +46 40 17 44 19 107 25 Stockholm, Sweden Forthcoming reports and Annual General Meeting Regional office E-mail: [email protected] Retirement Homes Telephone: +46 (0)8 503 05200 • The Interim Report for the period January—March Guldgränd 5 Box 70414 Fax: +46 (0)8 503 05202 will be presented on 19 April 2005 SE-107 25 Stockholm Or via our Website: www.kungsleden.se • The Interim Report for the period January—June Tel +46 8 503 052 00 Fax +46 8 503 052 01 will be presented on 16 August 2005 Shareholders whose holdings are nominee-registered Local offices West • The Interim Report for the period January—September Angered with a bank custodian account service or other fund will be presented on 20 October 2005 Kultivatorgatan 6 manager must temporarily have the shares registered in Box 84 their own name in their share register maintained by VPC SE-424 22 Angered Tel +46 31 330 21 61 in order to be entitled to participate in the Annual General Jönköping Meeting. Shareholders must notify their fund managers Huskvarnavägen 40 of this in good time before 24 March 2005. SE-554 54 Jönköping Tel +46 36 16 70 07 Fax +46 36 16 70 03

Växjö Norrgatan 29 SE-352 31 Växjö Tel +46 470 405 90 Fax +46 470 74 09 20

Trollhättan Polhemsgatan 2 SE-461 30 Trollhättan Tel +46 520 47 63 50 Fax +46 520 47 63 51

Local ofﬁces East Finspång Dunderbacksvägen 21b SE-612 46 Finspång Tel +46 122 252 20 Fax +46 122 252 23

Karlstad Lantvärnsgatan 8 Box 1037 SE-651 15 Karlstad Tel +46 54 17 50 00 Fax +46 54 17 50 01

Västerås Smedjegatan 13 SE-722 13 Västerås Tel +46 21 12 52 70 Fax +46 21 12 52 90

55 Fastighetsbeståndet och intjäningskapaciteten translation: Turner & Turner, www.turner.se Citigategramma.com, print:Strokirk Landströms, photo: Joachim Lundgren & Mattias Bardå, Kungsleden Annual Report 2004