UK_annual_report_0809

Entré, Malmö, Sweden

TK Development A/S, CVR 24256782

Annual Report 2008/09

2/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Table of contents

Summary 3

Company information 5

Consolidated fi nancial highlights and key ratios 6

TK Development in outline 7

Financial review for 2008/09 7

Handed-over projects 9

Share of two investment properties in the Czech Republic sold 9

Progress in the Group’s projects 9

Ownership interest in Euro Mall Holding A/S increased to 100 % 10

Th e Group’s project portfolio 10

Outlook for 2009/10 11

Post-balance sheet events 12

Markets and business units 12

TK Development, the Parent Company 15

TKD Nordeuropa 18


Project portfolio 18

Project outline 18

Euro Mall Holding 24


Project portfolio 24

Project outline 24

Investment properties 28

Other matters 29

Business concept 30

Value creation in TK Development 32

Shareholders 35

Corporate Governance 40

Financial Targets 45

Risk Issues 46

Posts held by Supervisory and Executive Board members 52

Statement by the Supervisory and Executive Boards on the Annual Report 56

Independent Auditors’ Report 57

Accounting policies 58

Consolidated Financial Statements 67

Parent Company Financial Statements 97

TABLE OF CONTENTS

Summary | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 3/115

SUMMARY

On 24 April 2009, the Supervisory Board of TK Develop-ment A/S considered and adopted the 2008/09 Annual Re-port. Th e key points are given below:

• TK Development recorded a profi t of DKK 155.2 mil-lion after tax, which is in line with recent expectations.

• In light of the prevailing market situation, Management considers the profi t for the year satisfactory.

• Consolidated equity totalled DKK 1,506.0 million at 31 January 2009, corresponding to a solvency ratio of 39.5 %.

• Th e return on equity was 10.5 % for the 2008/09 fi nan-cial year.

• Th e Group handed over projects of about 104,000 m², including its fi rst housing project in Poland, a shopping centre in the Czech Republic and retail parks in Den-mark, Sweden and Finland.

• In June 2008, TK Development sold its share of the investment properties Futurum Ostrava in Ostrava and Haná Shopping Centre in Olomouc, the Czech Repub-lic.

• As of December 2008, TK Development took over the development of a retail park in Uppsala, Sweden. Th e project has been sold to German IVG Funds on the basis of forward funding.

• Th e project portfolio comprised 960,000 m² at 31 Janu-ary 2009, against 1,212,000 m² at 31 January 2008.

• In June 2008, TK Development exercised its option to buy the remaining stake in Euro Mall Holding A/S from the Investment Fund for Central and Eastern Europe. Th us, TK Development is now the sole owner of the Central European activities.

• For the 2009/10 fi nancial year, the Group still expects to generate a profi t after tax of about DKK 150 million.

Market conditions

Th e international credit crisis has caused considerable dete-rioration in the Group’s market situation during the past year.

Th e fi nancial markets have undergone a period of extreme un-certainty. In general, the banks have tightened the equity re-quirements for individual projects and also shown reluctance to provide loans for fi nancing real property.

Th e situation in the fi nancial markets has reduced the number

of investors, and the remaining investors have stepped up their return requirements. Overall, only a few property deals have been fi nalized recently in the Group’s markets, result-ing in uncertainty about real property pricing and a general wait-and-see attitude among investors, which is expected to continue for some time.

Despite more sluggish demand, the retail letting market re-mains stable. In 2008, private consumption declined over-all, and the revenue generated by individual retail stores also dropped. Th is trend continued into the new year, and is ex-pected to place greater pressure on rent levels in the period ahead. Th e market conditions have resulted in a downward adjust-ment of property prices. Due to dampened growth, Manage-ment expects land prices and construction costs to continue falling.

A large share of the Group’s project portfolio was acquired at a time when market conditions were more favourable, and Management therefore considers it likely that the Group’s profi t margin on these projects will be under pressure in the current market conditions. Falling construction costs for projects not yet initiated may partly compensate for this ef-fect. As far as new projects are concerned, Management be-lieves that the Group can continue to record a close-to-normal profi t margin, as falling land prices and construction costs will be able to off set the lower property prices.

In light of the market conditions, TK Development has placed heavy focus on consolidating its position and executing exist-ing projects in the portfolio. At the same time, Management has tightened its requirements for pre-construction letting, which has resulted in the postponement of several projects. In future, TK Development also intends to secure a sound fi nan-cial foundation in the form of satisfactory pre-letting before initiating new projects.

Th e diffi cult market has opened up new project opportuni-ties, by either taking over competing development projects or providing assistance to credit institutions that have taken over distressed projects. For some time, TK Development has been pursuing such opportunities, which for one thing resulted in the takeover of a project in the Swedish city of Uppsala.

TK Development recorded a profi t of DKK 155.2 million after tax, which is in line with recent expectations. In light of the prevailing market situation, Management considers the profi t satisfactory.

4/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Summary

Handed-over projects

In the 2008/09 fi nancial year, the Group handed over projects with a total fl oor space of about 104,000 m², including an 11,400 m² retail park and a 10,000 m² shopping centre in the Czech Republic, both handed over to GE Real Estate Central Europe. Th e Group also completed its fi rst housing project in Poland, of 18,800 m², handing over about 90 % of the units to the buyers. In the Northern European markets, the handed-over projects consist mainly of retail parks and plots of land. Th us, the Group handed over three retail parks with a total fl oor space of 14,100 m² in Sweden.

Progress in the Group’s projects

Spurred on by sustained interest from tenants, the majority of the Group’s projects are progressing according to plan. How-ever, some projects have been postponed to ensure improved letting or a sale before the startup of construction.

In Denmark, construction started on the Group’s shopping centre project in Frederikssund in the summer of 2008, and the current occupancy rate is 69 %. In Poland, the interest on the part of tenants prompted the Group to extend its shopping centre projects in Tarnów and Nowy Sącz by almost 3,000 m² each. Th e current occupancy rate of the Nowy Sącz shopping centre is 95 %, and construction started in mid-2008. Th e shopping centre project in Tarnów has reached an occupancy rate of 87 %, and construction commenced in autumn 2008.

With eff ect from 15 December 2008, TK Development took over the development of a 10,800 m² retail park in the Swed-ish city of Uppsala. Th e retail park has been sold to an insti-tutional fund of German IVG Funds on the basis of forward funding. Th e total selling price amounts to about SEK 200 million, the current occupancy rate is 92 %, and the retail park is expected to be completed and handed over in April 2010.

Th e Group’s multifunctional centre, Entré in Malmö, Swe-den, opened on 19 March 2009. Th e centre has a total fl oor space of 39,500 m², with a current occupancy rate of 87 %. Th e project has been sold to Commerz Real Investmentges-ellschaft mbH (previously CGI Commerz Grundbesitz In-vestmentgesellschaft mbH) and is expected to be handed over to the investor in June 2009. Th e profi t on this project will impact performance for the 2009/10 fi nancial year.

Th e Group has reduced its total project portfolio by 252,000 m² since 31 January 2008. Th is reduction is attributable to the handing-over of projects and to Management’s focus on consolidation and on executing the existing projects in the portfolio. Th us, the Group has decided not to implement some of its project opportunities.

To match the current activity level, Management has car-ried out staff cuts and decided in December 2008 to close the Group’s offi ce in Bulgaria. Th e project opportunities are not considered suffi ciently attractive. Overall, the Group is expected to cut its cost level for 2009/10 by about 10 % com-pared to 2008/09.

Th e Group’s project portfolio

Th e main elements of the Group’s project portfolio are set out below:

31 Jan 2007

31 Jan 2008

31 Jan 2009

Project portfolio (DKKm)Gross project portfolio 2,039 2,777 3,484Of which, forward funding 590 832 943Carrying amount of project portfolio

1,449 1,945 2,541

Development potential in ’000 m²:Sold projects 351 264 183Remaining projects 810 948 777Total project portfolio 1,161 1,212 960Number of projects 94 86 63

Outlook for 2009/10

TK Development expects the challenging market conditions to continue in the 2009/10 fi nancial year. Based on the sales already completed and the potential of the existing project portfolio, Management still expects to generate a profi t of about DKK 150 million after tax for the 2009/10 fi nancial year. Th is profi t forecast corresponds to a rate of return on equity of about 10 %.

Th e expectations for future developments presented in this Annual Report, including earnings expectations, are naturally subject to risks and uncertainties and may be aff ected by various factors, such as global economic conditions and other signifi cant issues, including credit-market, interest-rate and foreign-exchange de-velopments. Reference is also made to the section on risk issues in this Annual Report.

Th e Annual Report is available on TK Development’s website www.tk-development.dk.

Summary | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 5/115

ISIN code: 0010258995 • Municipality of registered offi ce: Aalborg • Homepage: www.tk-development.dk • e-mail: [email protected] Development A/S: CVR 24256782 • TKD Nordeuropa A/S: CVR 26681006 • Euro Mall Holding A/S: CVR 20114800

COMPANY INFORMATION

Aalborg CopenhagenVestre Havnepromenade 7 Arne Jacobsens Allé 16, 3. t.v.DK-9000 Aalborg DK-2300 Copenhagen ST: (+45) 8896 1010 T: (+45) 3336 0170

Helsinki StockholmKorkeavuorenkatu 34 Gamla Brogatan 36-38FIN-00 130 Helsinki S-101 27 StockholmT: (+358) 9 2284 81 T: (+46) 8 751 37 30

Vilnius RigaGynėjų str. 16 Duntes str. 6LT-01109 Vilnius LV-1013 RigaT: (+370) 5231 2222 T: (+371) 7 821 811

Warsaw Pragueul. Mszczonowska 2 Karolinská 650/1PL-02-337 Warsaw CZ-186 00 Prague 8T: (+48) 22 572 2910 T: (+420) 2 8401 1010

BerlinAhornstraße 16D-14163 BerlinT: (+49) 30 802 10 21

Executive board: Frede Clausen and Robert Andersen Supervisory board: Poul Lauritsen, Torsten Erik Rasmussen, Per Søndergaard Pedersen, Kurt Daell, Jesper Jarlbæk and Niels Roth

6/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Consolidated fi nancial highlights and key ratios

CONSOLIDATED FINANCIAL HIGHLIGHTS AND KEY RATIOS

(DKK mio.) 2004/05 2005/06 2006/07 2007/08 2008/09

Financial highlights:Net revenue 2,131.8 1,623.3 2,719.1 2,586.8 1,052.4Value adjustment, investment properties 8.4 157.1 111.0 44.5 57.7Gross profi t/loss 413.0 379.0 623.9 553.8 375.0Profi t/loss from ordinary activities before fi nancing 253.0 224.9 462.5 386.8 201.7Financing, etc. -158.0 -177.7 -126.3 -41.7 -33.4Profi t/loss before tax 94.4 44.6 335.7 345.4 168.0Consolidated profi t/loss 81.6 72.6 298.5 271.9 155.2Shareholders’ share of profi t/loss for the year 33.1 28.3 249.4 249.5 155.2

Balance sheet total 5,291.2 4,739.1 3,685.8 4,070.9 3,816.1Property, plant and equipment 628.0 787.2 551.7 598.8 380.8

of which investment properties 598.7 761.6 533.7 584.6 366.5Carrying amount of project portfolio 2,715.0 2,224.8 1,449.4 1,945.5 2,541.3

of which total project portfolio 2,715.0 2,260.4 1,491.1 1,998.3 2,541.3of which prepayments received from customers 0.0 -35.5 -41.7 -52.8 0.0

Contracted work in progress 0.0 0.0 0.0 0.0 3.7Equity excl. minority interests 310.8 899.1 1,153.7 1,439.9 1,506.0Equity 343.7 986.7 1,290.9 1,533.8 1,506.0Total capital resources* 1,122.5 1,493.5 1,290.9 1,533.8 1,506.0

Cash fl ows from operating activities 1,507.5 506.1 1,219.9 142.6 -637.6Net interest-bearing debt, end of year 3,603.7 2,577.9 1,125.1 1,094.9 1,509.5

Key ratios:Return on equity (ROE) 11.2% 8.5% 24.3% 19.2% 10.5%Earnings before interest and tax (EBIT margin) 11.9% 13.9% 17.0% 15.0% 19.2%Solvency ratio (based on equity) 6.5% 20.8% 35.0% 37.7% 39.5%Solvency ratio (based on capital resources) 21.2% 31.5% 35.0% 37.7% 39.5%Equity value (nom. DKK 20) 22.2 32.1 41.1 51.3 53.7Earnings per share (EPS-D) of nom. DKK 20 2.3 2.0 8.9 8.9 5.5Dividend (in DKK per share) 0.0 0.0 0.0 0.0 0.0Listed price of shares (nom. DKK 20) 34 57 82 63 22

Key ratios adjusted for the issue of convertible bonds and warrants:Return on equity (ROE) 11.2% 8.5% 24.3% 19.2% 10.5%Solvency ratio (based on equity) 6.5% 20.8% 35.0% 37.7% 39.5%

Solvency ratio (based on capital resources) 21.2% 31.5% 35.0% 37.7% 39.5%Equity value (nom. DKK 20) 22.2 32.1 41.1 51.3 53.7Diluted earnings per share (EPS-D) of nom. DKK 20 2.3 2.0 8.9 8.8 5.5

Th e calculation of key ratios was based on the guidelines issued by the Danish Society of Financial Analysts. Basis for calculating solvency ratio: equity at year-end/liabilities at year-end.

From fi scal year-end 2005/06 and forward the accounting principles are in accordance with International Financial Reporting Standards (IFRS)Th e key ratios for 2004/05 has been changed accordingly.

*) According to IFRS, total capital resources includes minority interests.

Management's review | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 7/115

Financial review for 2008/09

Th e profi t for the 2008/09 fi nancial year amounts to DKK 155.2 million after tax, compared to DKK 249.5 million after tax and minority interests the year before. Th e balance sheet total amounted to DKK 3,816.1 million at 31 January 2009 against DKK 4,070.9 million at 31 January 2008. Consoli-dated equity totalled DKK 1,506.0 million, and the solven-cy ratio stood at 39.5 %. Th e return on equity for 2008/09 reached 10.5 % compared to 19.2 % in 2007/08.

Th e profi t for the year meets recent expectations, and in light of the market conditions, Management considers this per-formance satisfactory.

Th e Annual Report is presented in compliance with the Inter-national Financial Reporting Standards (IFRS), as approved by the EU, and in accordance with Danish disclosure require-ments for listed companies.

Income statement

Revenue

Th e revenue for the 2008/09 fi nancial year totalled DKK 1,052.4 million versus DKK 2,586.8 million for the 2007/08 fi nancial year.

Th e revenue breaks down on the following geographic seg-ments: 47.1 % on Northern Europe and 52.9 % on Central Europe. Th e revenue breaks down on the following business seg-ments: 58.0 % on the retail segment, 8.8 % on mixed-segment projects, 6.2 % on the offi ce segment and 27.0 % on the residential segment.

Gross margin

Th e gross margin for the 2008/09 fi nancial year amounted to DKK 375.0 million, against DKK 553.8 million the year before. Excluding the value adjustment of investment proper-ties, the gross margin amounts to 30.2 %, which Manage-ment considers highly satisfactory.

Th e projects handed over are described in more detail below.

Th e gross margin includes the profi t on account on a single project, an amount of DKK 5.3 million recognized accord-ing to the percentage of completion method in the 2008/09 fi nancial year.

Th e profi t for the year includes a net amount of DKK 57.7 million under value adjustments. Th e amount consists of the realized excess value from the sale of two of the Group’s invest-ment properties, DKK 42.3 million, the negative value ad-justment of the Group’s German investment properties due to a changed required rate of return, DKK 15.3 million, and the positive value adjustment of the Group’s Czech investment property due to a higher rent level and an unchanged required rate of return, DKK 30.7 million.

Th e gross profi t includes impairment losses of DKK 11.2 mil-lion recognized on projects and the reversal of impairment losses, amounting to DKK 22.8 million, previously recog-nized on two projects. Th e reversal is due to the satisfactory progress of the two projects in question.

Staff costs and other external expenses

Staff costs and other external expenses amounted to DKK 167.3 million for 2008/09, an increase of 5.6 % compared to the year before.

Staff costs totalled DKK 120.6 million in the 2008/09 fi nan-cial year, thus up 9.0 % on the previous year. In the last part of the year under review, the organization was adapted to match the current activity level. Th e full impact of this adaptation will be realized in the course of 2009. Th e number of employ-ees in the Group totalled 164 at 31 January 2009.

Other external expenses amounted to DKK 46.7 million against DKK 47.8 million the year before.

Financing

In the 2008/09 fi nancial year, the Group recorded net fi nanc-ing expenses of DKK 33.4 million, a reduction of 20 % com-pared to the year before. Th is reduction results largely from the sale of the Group’s two Czech investment properties. Th e sale freed up substantial cash resources, which have been in-vested in ongoing projects and used to reduce debt.

Tax on profi t/loss for the year

Th e tax on the profi t for the year amounts to DKK 12.8 mil-lion, corresponding to a tax rate of 7.6 %. Th is amount is composed of calculated tax on profi t for the year, with part of the earnings realized as tax-free capital gains, and is based on a revaluation of the total tax asset, with the accumulated impairment being increased by a net amount of DKK 8.9 mil-lion during the year.

TK DEVELOPMENT IN OUTLINE

In the 2008/09 fi nancial year, the Group handed over projects with a total fl oor space of about 104,000 m². In the period to come, the Group will continue to focus on consolidation and on executing existing projects in the portfolio.

8/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Management's review

Profi t after tax

Th e Group’s profi t after tax amounted to DKK 155.2 million.

Balance sheet total

Th e Group’s balance sheet total amounted to DKK 3,816.1 million at 31 January 2009, a decline of DKK 254.8 million, or 6.3 %, compared to 31 January 2008.

Goodwill

Goodwill amounted to DKK 33.3 million at 31 January 2009, increasing by DKK 2.0 million in the year under re-view due to the Group’s acquisition of the remaining stake in Euro Mall Holding A/S held by the Investment Fund for Central and Eastern Europe. Th e carrying amount of goodwill has been subjected to an impairment test, which has not given rise to the recognition of any goodwill impairment.

Investment properties

Th e valuation of the Group’s investment properties is made on the basis of a discounted cash-fl ow model, where future cash fl ows are discounted to net present value on the basis of a given return requirement.

Th e Group’s German investment properties at 31 January 2009 have been valued on the basis of a changed required rate of return, increased from 6 % to 6.5 %. Th e value adjustment for the 2008/09 fi nancial year amounts to DKK -15.3 mil-lion. Th e valuation of the Group’s remaining Central Euro-pean investment property continues to be based on a required rate of return of 7 %, and the value adjustment for the year amounts to DKK 30.7 million.

At 31 January 2009, the total value of the Group’s investment properties constituted DKK 366.5 million, of which DKK 153.4 million relates to the Group’s Central European invest-ment property in Euro Mall Holding, and DKK 213.1 mil-lion relates to the German investment properties.

Deferred tax asset

Th e deferred tax asset in the balance sheet amounted to DKK 265.7 million at 31 January 2009. Based on existing budgets and profi t forecasts for a fi ve-year period, Management spe-cifi cally assessed the valuation of the deferred tax asset. Th e assessment resulted in accumulated impairment of the tax asset of DKK 56.4 million against DKK 47.5 million at 31 January 2008.

Project portfolio

Th e total project portfolio grew by DKK 543.0 million com-pared to 31 January 2008, amounting to DKK 2,541.3 mil-lion at 31 January 2009. Th is growth is the combined result

of several factors, the chief being:

• land has been bought for the purpose of carrying out planned projects; and

• the Group has initiated construction of the Sillebroen shopping centre in Frederikssund in Denmark and the Tarnów and Nowy Sącz shopping centres in Poland fol-lowing the satisfactory pre-completion letting of premis-es in the centres.

Total prepayments based on forward-funding agreements were DKK 942.7 million at 31 January 2009, compared to DKK 832.0 million at 31 January 2008. Th is increase is attributable to the accumulated forward funding of projects in progress. At 31 January 2009, forward funding represented about 95 % of the gross carrying amount of sold projects.

Receivables

Total receivables amounted to DKK 337.4 million, a reduc-tion of DKK 157.9 million from 31 January 2008. Th is re-duction is attributable to both trade receivables and other receivables.

Cash and cash equivalents

Cash and cash equivalents amounted to DKK 227.2 million at 31 January 2009, down from DKK 417.2 million at 31 January 2008. Th e decline is attributable to the use of cash re-sources to reduce debt, invest in new projects and acquire the remaining stake in Euro Mall Holding A/S previously held by the Investment Fund for Central and Eastern Europe.

Equity

Consolidated equity totalled DKK 1,506.0 million at 31 Jan-uary 2009. At 31 January 2008, consolidated equity amount-ed to DKK 1,533.8 million, of which DKK 93.9 million was attributable to minority interests.

Th e change in minority interests occurred because in the 2008/09 fi nancial year, the Investment Fund for Central and Eastern Europe sold its remaining stake in the TK subgroup, Euro Mall Holding, to TK Development.

Th e remaining increase in equity since 31 January 2008 results from the profi t generated for the year, negative market-value adjustments after tax of DKK 62.0 million and an unrealized loss on a forward-exchange transaction of DKK 31.4 million.

Th e solvency ratio amounts to 39.5 %.

Long-term liabilities

Th e Group’s long-term liabilities represented DKK 163.9 mil-lion at 31 January 2009, a DKK 318.6 million reduction from the year before. Th is reduction is attributable to repayments


made and the recognition under short-term liabilities of some long-term liabilities that are to be renegotiated within the next year.

Short-term liabilities

Short-term liabilities totalled DKK 2,146.2 million at 31 January 2009, a minor increase on the year before.

Financial liabilities have been off set against trade receivables and tied-up cash and cash equivalents, to the extent that the Company has a right of setoff and also intends or is contractu-ally obliged to realize assets and liabilities at the same time. At 31 January 2009, an amount of DKK 40.3 million was off set against tied-up cash.

Th e Group’s short-term debt to credit institutions consists of operating and project credits. TK Development has entered into a general agreement with the Group’s main banker about both operating and project credits. Th e agreement and the as-sociated conditions are renegotiated once a year, and Manage-ment expects the agreement to continue.

In addition, the Group has entered into project-fi nancing agreements with various banks in Denmark and abroad. Project credits are usually granted with diff erent terms to ma-turity, depending on the specifi c project.

Out of the total project fi nancing, an amount of DKK 426.9 million will mature in 2009/10, and Management believes that the project credits will be extended.

Cash fl ow statement

Th e cash fl ow statement shows negative cash fl ows from op-erating activities of DKK 637.6 million, positive cash fl ows from investing activities of DKK 179.1 million and positive cash fl ows from fi nancing activities of DKK 57.7 million.

(DKKm) 2006/07 2007/08 2008/09Cash fl ows from operations 1,219.9 142.6 -637.6Net interest-bearing debt, end of year 1,125.1 1,094.9 1,509.5

Handed-over projects

In the 2008/09 fi nancial year, the Group handed over projects with a total fl oor space of about 104,000 m².

In Central Europe, the projects handed over included an 11,400 m² retail park and a 10,000 m² shopping centre in the Czech Republic, both handed over to GE Real Estate Central Europe. Th e Group also completed its fi rst housing project in Poland, the 18,800 m² Tivoli Residential Park, handing over about 90 % of the units to the buyers.

In the Northern European markets, the handed-over projects consist mainly of retail parks and plots of land. Th us, the Group handed over three retail parks with a total fl oor space of 14,100 m² in Sweden.

Th e outline below shows the projects handed over in 2008/09.

ProjectFloor space

(m²)Th e Spinderiet shopping and district centre, Valby, Denmark 3,000

Sale of land, Vandtårnsvej, Copenhagen, Denmark 21,000Hadsundvej, Aalborg, Denmark 4,700Retail park in Odense, Denmark 6,800Retail parks in Örebro and Nyköping, Sweden 8,500Retail park in Barkarby, Stockholm, Sweden 5,600Retail park in Seinäjoki, Finland 6,750Tivoli Residential Park, Warsaw, Poland 16,000Liberec Retail Park, phase 1, Czech Republic 11,400Kolin Shopping Centre, Czech Republic 10,000Other projects/land 10,000

Th ese projects are discussed in more detail under the indi-vidual business units.

Share of two investment properties in the Czech Republic soldTh e joint venture Euro Mall Ventures S.à.r.l., Luxembourg, of which Euro Mall Holding owns 20 %, sold the Futurum Shopping Centre in Ostrava and the Haná Shopping Centre in Olomouc, the Czech Republic, in the 2008/09 fi nancial year. Th e selling price for the two shopping centres amounted to EUR 104 million, and the shopping centres were handed over to the buyer in June 2008. Th e buyer is the UK-based fund manager Pradera – AM PLC.

As a result of the sale, TK Development has realized the posi-tive value adjustments recognized in previous years, as well as an excess value of DKK 42.3 million over the carrying amount at the beginning of the fi nancial year, thus freeing up substantial liquidity. Th e excess value is included in “Value ad-justments” under gross profi t. Reference is also made to stock exchange announcement no. 7/2008.

Progress in the Group’s projectsTK Development has placed heavy focus on consolidating its position and executing existing projects in its portfolio, and at the same time, Management has tightened its requirements for pre-construction letting.

Spurred on by sustained interest from tenants, the majority of the Group’s projects are progressing according to plan. How-


ever, some projects have been postponed to ensure improved letting or a sale before the startup of construction.

In Denmark, construction started on the Group’s shopping centre project in Frederikssund in the summer of 2008, and the current occupancy rate is 69 %. In Poland, the interest on the part of tenants prompted the Group to extend its shopping centre projects in Tarnów and Nowy Sącz by almost 3,000 m² each. Th e current occupancy rate of the Nowy Sącz shopping centre is 95 %, and construction started in mid-2008. Th e shopping centre project in Tarnów has reached an occupancy rate of 87 %, and construction commenced in autumn 2008.

In Brønderslev, the Group is developing a retail project of about 5,800 m². Th e Group has entered into an agreement with Dansk Supermarked regarding the establishment of a 3,700 m² Føtex supermarket, based on forward funding, and with OK Benzin regarding the establishment of a petrol sta-tion. Th e remaining premises have been let to Punkt 1 and an amusement arcade operator. Construction has started, and the whole retail park is expected to be completed by mid-2009.

In the Group’s Premier Outlets Centre in Ringsted, Hugo Boss signed a lease and subsequently opened its fi rst factory outlet store in Scandinavia in March 2009.

Th e Group’s multifunctional centre, Entré in Malmö, Swe-den, opened on 19 March 2009. Th e centre has a total fl oor space of 39,500 m², with a current occupancy rate of 87 %. Th e project has been sold to Commerz Real Investmentges-ellschaft mbH (previously CGI Commerz Grundbesitz In-vestmentgesellschaft mbH) and is expected to be handed over to the investor in June 2009. Th e profi t on this project will impact performance for the 2009/10 fi nancial year.

With eff ect from 15 December 2008, TK Development took over the development of a 10,800 m² retail park in the Swed-ish city of Uppsala. Th e retail park has been sold to an insti-tutional fund of German IVG Funds on the basis of forward funding. Th e total selling price amounts to about SEK 200 million. Construction has started, and the current occupancy rate is 92 %. Th e completed retail park is scheduled to be handed over in April 2010.

In December 2008, the Group decided to close its offi ce in Bulgaria after a period of investigating the potential for de-veloping shopping centres and retail parks in the country. Th e background to the decision is Management’s assessment that the project opportunities are not suffi ciently attractive.

To match the current activity level, Management has cut staff by about 10 %. Overall, the Group expects to cut staff costs and other external expenses in 2009/10 by about 10 % com-pared to 2008/09.

Ownership interest in Euro Mall Holding A/S increased to 100 %

In June 2008, TK Development exercised its option to buy the remaining stake in Euro Mall Holding A/S from the In-vestment Fund for Central and Eastern Europe. Th us, TK Development is now the sole owner of the Central European activities. Reference is also made to stock exchange announce-ment no. 9/2008.

Th e Group’s project portfolio

Project portfolio status

Th e Group’s project portfolio dropped from 1,212,000 m² at 31 January 2008 to 960,000 m² at 31 January 2009. Th e project portfolio consists of sold projects of 183,000 m² and of remaining projects of 777,000 m². Th is reduction is attri-butable to the handing-over of projects and to Management’s focus on consolidation and on executing the existing projects in the portfolio. Th us, the Group has decided not to imple-ment some of its project opportunities.

Development in the Group’s project portfolio (amount)

(DKKm) 31 Jan 2007 31 Jan 2008 31 Jan 2009

SoldCompleted 0 0 0In progress 523 29 4Not initiated 78 52 41Total 601 81 45

RemainingCompleted 180 465 565In progress 113 186 813Not initiated 555 1,213 1,118Total 848 1,864 2,496

Net project portfolio 1,449 1,945 2,541Forward funding 590 832 943Gross project portfolio 2,039 2,777 3,484Forward funding in % of gross carrying amount of sold projects 49.5 % 91.1 % 95.4 %

Table 1.


Development in the Group’s project portfolio (m2)

m² (‘000) 31 Jan 2007 31 Jan 2008 31 Jan 2009

SoldCompleted 0 0 0In progress 207 109 56Not initiated 144 155 127Total 351 264 183

RemainingCompleted 14 34 35In progress 42 54 103Not initiated 754 860 639Total 810 948 777

Total project portfolio 1,161 1,212 960Number of projects 94 86 63

Table 2.

By means of forward funding, the Group continuously re-duces the funds tied up in the portfolio of sold projects. At 31 January 2009, forward funding represented 95 % of the gross carrying amount of sold projects. However, in light of the current market conditions, the Group considers that it will be more diffi cult to conclude agreements for the sale of future projects on the basis of forward funding.

As appears from the table above, the carrying amount of re-maining projects in progress increased substantially during the year. Th is increase is attributable to the startup of the Group’s building projects in Frederikssund, Denmark, and in Tarnów and Nowy Sącz, Poland. Th e table below shows the distribution of the carrying amounts of the projects in the portfolio at 31 January 2009 for the two business units.

Projects at 31 January 2009(DKKm)

TKDNordeuropa

Euro Mall Holding Group, total *)

Sold Percent of total

Completed 0 0 0 0.0 %In progress 4 0 4 0.1 %Not initiated 7 34 41 1.7 %Total 11 34 45 1.8 %UnsoldCompleted 158 372 530 21.5 %In progress 541 272 813 32.9 %Not initiated 476 607 1,083 43.8 %Total 1,175 1,251 2,426 98.2 %

Project portfolio 1,186 1,285 2,471 100.0 %

*) excl. TK Development, Parent Company, a total of DKK 70 million.

Table 3.

Th e table below shows the square metres of the project port-folio broken down in the same manner as in the table above.

Projects at 31 January 2009(m² (‘000))

TKD Nordeuropa

Euro Mall Holding Group, total *)

Sold Percent of total

Completed 0 0 0 0.0 %In progress 56 0 56 5.8 %Not initiated 6 121 127 13.2 %Total 62 121 183 19.0 %

Unsold Completed 16 19 35 3.6 %In progress 66 37 103 10.7 %Not initiated 397 242 639 66.7 %Total 479 298 777 81.0 %

Project portfolio 541 419 960 100.0 %

*) excl. TK Development, Parent Company.

Table 4.

A more detailed description of all major projects appears from the section concerning the project portfolio under the indi-vidual business units.

Outlook for 2009/10TK Development expects the challenging market conditions to continue in the 2009/10 fi nancial year. Based on the sales already completed and the potential of the existing project portfolio, Management still expects to generate an activity level close to that in 2008/09 and a profi t of about DKK 150 million after tax for the 2009/10 fi nancial year. Th is profi t forecast corresponds to a rate of return on equity of about 10 %.

Th e profi t on the sale of the multifunctional centre Entré in Malmö, Sweden, is included in the above-mentioned forecast.

Th e profi t forecast does not include any value adjustments of the Group’s investment properties resulting from changes in predetermined return requirements.

Th e forecast for 2009/10 is based on the market conditions described in more detail for each individual market; see below under ”Markets and business units”.

Th e expectations for future developments presented in this Annual Report, including earnings expectations, are naturally subject to risks and uncertainties and may be aff ected by various factors, such as global economic conditions and other signifi cant issues, including credit-market, interest-rate and foreign-exchange de-velopments. Reference is also made to the section on risk issues in this Annual Report.


Post-balance sheet events

No other events aff ecting the Company other than those mentioned in the Management’s review have occurred after the reporting date.

Markets and business unitsTh e international credit crisis has caused considerable dete-rioration in the Group’s market situation during the past year.

Th e fi nancial markets have undergone a period of great uncer-tainty. In general, the banks have tightened the equity require-ments for individual projects, and they have been reluctant to provide loans for fi nancing real property.

Th e situation in the fi nancial markets has caused the number of investors in the market to drop, while the remaining in-vestors have stepped up their return requirements. Overall, only a few property deals have been fi nalized recently in the Group’s markets, resulting in uncertainty about real property pricing and a general wait-and-see attitude among investors, which is expected to continue for some time.

Despite more sluggish demand, the retail letting market re-mains stable. In 2008, private consumption declined over-all, and the revenue generated by individual retail stores also dropped. Th is trend continued into the new year, and is ex-pected to place greater pressure on rent levels in the period ahead. Th e market conditions have resulted in a downward adjust-ment of property prices. Against the backdrop of restrained growth and general reluctance to initiate new projects, Man-agement expects land prices and construction costs to con-tinue falling.

A large share of the Group’s project portfolio was acquired at a time when market conditions were more favourable, and Management therefore considers it likely that the Group’s profi t margin on these projects will be under pressure in the current market conditions. However, falling construction costs for projects not yet initiated may partly compensate for this eff ect. As far as new projects are concerned, Management believes that the Group can continue to record a close-to-nor-mal profi t margin, as falling land prices and construction costs will be able to off set the lower property prices.

In light of the market conditions, TK Development has placed heavy focus on consolidating its position and executing existing projects in the portfolio. At the same time, Manage-ment has tightened its quality standards for pre-construction letting, which has resulted in the postponement of several

projects. In future, TK Development also intends to secure a sound fi nancial foundation, in the form of satisfactory pre-letting, before initiating new projects.

Th e diffi cult market has opened up new project opportuni-ties, by either taking over competing development projects or providing assistance to credit institutions that have taken over distressed projects. For some time, TK Development has been pursuing such opportunities, which for one thing resulted in the takeover of a project in the Swedish city of Uppsala.

Th e macroeconomic indicators in the form of GDP, private consumption and unemployment in the Group’s markets are showing lower growth expectations than before, but with con-siderable variation from country to country. Th us, the indica-tors forecast negative growth in the Northern European mar-kets, particularly in the Baltic States, and higher but subdued growth in the Central European markets.

Th e Group has a strong platform in each of its markets and focuses on exploiting the unrealized potential on all markets through existing retailer and investor networks. Th e Group consistently strives to strengthen the project portfolio in each of its markets, with special emphasis on the retail segment.

TK Development has business activities in two geographical areas, Northern and Central Europe.

Northern European markets

Geographically, TKD Nordeuropa’s activities are broken down on four core markets: Denmark, Sweden, Finland and the Baltic States. TKD Nordeuropa has activities in the in-dividual markets within various segments, as shown by the table below.

Denmark Sweden Finland Baltic States

Shopping centres • • • •Stores/superstores • • • •High-street properties •Offi ces •Segment mix • • •Residential •

Denmark

Supermarket and retail chains in Denmark are generally fo-cusing on new and central locations in their eff orts to secure market shares and generate growth. Th e prevailing market conditions are expected to slow down growth. Th e Group’s primary market focus is to establish district and shopping cen-


tres in small and medium-sized towns.Denmark – startup in 1989 2007 2008e 2009e 2010e

GDP (% yr./yr.) 1.6 -0.7 -1.0 0.2

Private consumption (% yr./yr.) 2.4 0.8 0.2 1.2

Unemployment (%) 2.7 1.8 2.8 4.3

(Source: Nordea, January 2009*)

Appealing offi ce property locations, such as the Group’s wa-terfront areas, can attract tenants and investors alike, and the Group expects to create attractive offi ce projects in the years to come. Examples of such projects include the Group’s loca-tions at Amerika Plads in Copenhagen and Stuhrs Brygge in Aalborg.

Sweden

As in previous years, the business activity in Sweden is antici-pated to focus on the retail segment. Th e ongoing expansion in the retail sector continues to make the country an interest-ing market in this segment, and the Group intends to focus on developing individual, major shopping centre projects.

Sweden – startup in 1997 2007 2008e 2009e 2010e

GDP (% yr./yr.) 2.5 0.7 -1.5 1.3

Private consumption (% yr./yr.) 3.0 0.9 -0.6 1.5

Unemployment (%) 6.2 6.1 7.7 8.7


Finland

Since establishing a branch offi ce in Finland, the Group has developed retail parks primarily. Th e focus is expected to re-main on the retail segment, in particular retail parks and indi-vidual, major shopping centre projects.

Finland – startup in 1999 2007 2008e 2009e 2010e

GDP (% yr./yr.) 4.5 1.5 -1.3 1.5


Unemployment (%) 6.9 6.4 7.2 8.0


Baltic States

Th e markets in the Baltic States have changed signifi cantly in recent years. Th eir economies have come to a standstill, resulting in falling rent levels and increasing return require-ments. Th e Group has postponed the startup of construction on planned projects in the two countries until the property can be sold or satisfactory pre-completion achieved, relative to the market situation in the relevant country.

Baltic States – startup in 2001 2007 2008e 2009e 2010e

Latvia:

GDP (% yr./yr.) 10.3 -1.8 -6.0 -2.0

Private consumption (% yr./yr.) 14.2 -6.1 -10.0 -2.5

Unemployment (%) 5.7 5.3 9.5 11.0

Lithuania:

GDP (% yr./yr.) 8.9 3.3 -3.0 -0.5

Private consumption (% yr./yr.) 12.4 6.8 -3.5 -1.0

Unemployment (%) 4.3 5.6 8.0 9.0


Central European markets

In Central Europe, the Group has activities in Poland, the Czech Republic and Slovakia. Euro Mall Holding has activi-ties within the following segments of the individual markets:

Poland Czech Republic Slovakia

Shopping centres • • •Stores/superstores • • •Offi ces •Segment mix • •Residential •

Moreover, Euro Mall Holding owns a share of an investment property in the Czech Republic and one-third of the manage-ment company Euro Mall Centre Management (EMCM).

Th e Group has a well-developed network of contacts with many local and international retail chains looking to ex-pand into Central Europe. In addition, Euro Mall Holding works closely with investors, including international invest-ment funds, looking to invest in Central European property projects.

Poland

Th e outlook for the Polish market remains positive. Both lo-cal and international retailers continue to show keen inter-est in renting premises in prime-location retail centres and minor shopping centres in Poland. Th is is refl ected, among other things, by highly satisfactory pre-completion letting of the Group’s projects in progress. Future projects are expected to be located in smaller towns, and projects in towns with fewer than 100,000 inhabitants are now considered feasible. Such projects will typically have a fl oor space of 10-15,000 m², with a supermarket as anchor tenant.


Poland – startup in 1995 2007 2008e 2009e 2010e

GDP (% yr./yr.) 6.7 5.0 0.9 2.6


Unemployment (%) 12.7 9.8 10.5 11.9


Th e Group’s business platform also includes the housing mar-ket in Poland.

Attractive housing remains scarce, and much of the existing housing no longer fulfi ls the Poles’ housing standard require-ments. Warsaw continues to develop rapidly and to boost its position as Poland’s commercial hub. A large number of new residential buildings have been constructed recently, and the supply of housing for sale is high. A key contributory factor is the increasing diffi culty individual buyers have experienced in obtaining home purchase loans, which has resulted in a slower rate of housing turnover. Th e slight decline in the housing price level refl ects these market conditions.

Th e development of the Group’s fi rst housing project in Central Europe was initiated in Warsaw, Poland, in autumn 2006 and comprises close to 300 residential units. Th e Tivoli Residential Park project has been completed, and about 90 % of the units have been sold. Th is project proceeded very satisfactorily. Th e Group’s next housing project, Residential Park, Bielany, comprising 900-1,000 units, can be completed in four phases. Construction of the fi rst phase will start once pre-completion sales have reached a satisfactory level, estimat-edly in spring 2010.

Czech Republic

Th e Czech market continues to experience good demand for tenancies in attractive retail projects. Th e market for retail parks and shopping centres in minor towns is considered at-tractive, and the Group has several retail park and shopping centre projects in its portfolio. Th e trend is towards building retail parks in the vicinity of existing shopping centres.

Czech Rep. – startup in 1997 2007 2008e 2009e 2010e

GDP (% yr./yr.) 6.4 3.8 4.1 5.0


Unemployment (%) 6.6 5.4 5.5 5.4


Slovakia

Management estimates that demand for shopping centres in Slovakia will be moderate over the next few years, as the demand has already been met in most of the major towns and cities. Management believes that there will be a future de-mand for retail parks in Slovakia, and the Group is currently working on several project opportunities.

Slovakia. – startup in 1999 2007 2008e 2009e 2010e

GDP (% yr./yr.) 10.4 6.8 2.0 2.8


Unemployment (%) 8.4 7.7 9.0 8.6

(Source: Th e Economist, January 2009*)

*Th e above economic indicators are from January 2009. Man-agement believes that the recent marginal deterioration in the growth estimates for the countries in question will not aff ect the overall picture; see above.


TK Development, the Parent Company, is a holding com-pany for TKD Nordeuropa and Euro Mall Holding. Moreo-ver, this part of the Group owns the projects in Germany and Russia and a few other assets.

Th e year’s results for this part of the Group constitute a loss of DKK 16.9 million before tax.

Sale of land, Germany

In the fi rst quarter of 2008/09, the Group sold and handed over one of its German plots of land to a supermarket chain.

Value adjustment of the Group’s German invest-ment properties

Th e Group’s investment properties in Germany consist of commercial and residential rental properties, all situated on the outskirts of Berlin, apart from a property in Lüdenscheid. Th e total value of these properties amounted to DKK 213.1 million at 31 January 2009. Th e value adjustment amounted to DKK -15.3 million in the 2008/09 fi nancial year, prima-rily as a consequence of the above-mentioned increase of the required rate of return from 6 % to 6.5 %. Th e value adjust-ment has been calculated on the basis of a discounted cash-fl ow model over a ten-year period.

Investment properties are described in the section ”Invest-ment properties” on page 28.

Current assets

Th e project portfolio includes three plots of land in Germany, rental properties in Russia and a few other assets.

TK DEVELOPMENT, THE PARENT COMPANY

Many years of hard work culminated in a spec-tacular opening event when the Entré shop-ping centre opened its doors to the public on 19 March this year. Entré is TK Development’s fi rst shopping centre in Sweden and centrally located in Malmö. The total fl oor space includ-

ing the underground car park is about 90,000 m2, of which the rentable area is 39,500 m2.

During the fi rst 12 days aft er the opening, more than 500,000 visitors fl ocked to the

centre.

Bustling acti vity from early morn-ing ti ll late night

It is not only size that sets En-tré apart from other shop-

ping centres. Excepti onal leisure opportuniti es

compliment the shop-ping experience, mak-

ing Entré a hive of acti vity from early

morning ti ll late at night.

In additi on to a wide range of exciti ng retail stores, Entré off ers an array of leisure acti vi-ti es, from fi tness and bowling to a cinema and a large children’s acti vity centre. What is more, Entré off ers a choice of high-quality culinary ex-periences far surpassing the standard fare found in an average shopping centre. In other words, Entré is a state-of-the-art shopping and enter-tainment facility.

Glass facades from top to bott om

Entré is located at the northern approach roads to Malmö, with more than 45,000 cars passing by every day. To integrate Entré into the city-scape, glass facades have been used to produce a fantasti c lighti ng eff ect. The glass exterior al-lows shoppers to follow life in the pulsati ng city outside, while giving bypassers a glimpse of the atmosphere inside Malmö’s new shopping and leisure centre.

Another eye-catching detail is Entré’s sophisti -cated external lighti ng design, which illuminates the centre in diff erent colours at night, extend-ing a bright welcome to travellers from the north.

Entré – much more than a shopping centre


Opened: 19 March 2009 Total fl oor space: 90,000 m2 Rentable area: 39,500 m2 Occupancy rate at opening: 87 %

Sold to Commerz Real Investmentgesellschaft mbH A footf all of 500,000 during the fi rst 12 days



Retail park, Seinäjoki, FinlandIn the Finnish town of Seinäjoki, TKD Nordeuropa has de-veloped a 6,750 m² retail park. Th e project has been sold to a private investor, based on forward funding. Construction was initiated in August 2007, and the project was handed over to the investor in July 2008.

Retail park, Barkarby, Stockholm, SwedenTh is 23,000 m² retail park has now been fully developed. Th e fi rst three phases, a total of 17,450 m², were completed and handed over to the investor in a previous fi nancial year. Th e fourth and last phase of 5,600 m², let to the electronics chain Media Markt, was completed and handed over to the investor in December 2008. Th e total project has been sold to the Ger-man investment fund Commerz Grundbesitz Spezialfonds-gesellschaft mbH on the basis of forward funding.

Retail park, Marieberg, Örebro, SwedenTh e 6,350 m² retail park project in Örebro, Sweden, was de-veloped in two phases. Th e fi rst phase of about 2,350 m² was handed over to IVG Funds in October 2007. Th e second fully let phase of 4,000 m² was handed over to the same investor in January 2009 upon completion.

Retail park, Nyköping, SwedenTh is project comprises a 4,500 m² retail park. Construction has been completed, and the retail park handed over to the two investors, about 3,500 m² to a private investor and about 1,000 m² to a supermarket unit in the retail park.

Project portfolioTh e development potential of the project portfolio represent-ed 541,000 m² at 31 January 2009, of which sold projects accounted for 62,000 m² and remaining projects for 479,000 m². Th e project portfolio had a total development potential of 656,000 m² at 31 January 2008.

Project outlineTh e outline below lists the key projects of TKD Nordeuropa’s project portfolio. Th e carrying amounts of the projects listed below accounted for more than 95 % of the total carrying amount of the project portfolio at 31 January 2009. In terms of carrying amount, TKD Nordeuropa’s fi ve largest projects represented a total of DKK 754.6 million at 31 January 2009.

Th e Group’s activities in Northern Europe are placed in the wholly-owned subgroup TKD Nordeuropa. TKD Nordeuropa primarily operates in the retail property segment (shopping centres and retail parks), the offi ce seg-ment and the mixed segment (including multifunctional projects).

In the 2008/09 fi nancial year, TKD Nordeuropa realized a profi t before tax of DKK 18.5 million against DKK 76.8 mil-lion the year before.

Handed-over projectsProjects totalling a fl oor space of 66,000 m² have been handed over. Major projects contributing to the profi t for the year include the following:

Spinderiet, Valby, DenmarkTh e remaining residential premises of about 3,000 m² were handed over to the investor at the beginning of the 2008/09 fi nancial year. Th is combined multifunctional shopping and district centre, which consists of retail, restaurant, offi ce, leisure and residential facilities totalling about 40,000 m², opened on 15 November 2007. Th e project, excl. residential facilities, was handed over to Dades, a property investment company, in the 2007/08 fi nancial year. Th e residential sec-tions, which consist of 2,500 m² of rental units and 6,500 m² of owner-occupied units, were also handed over during the 2007/08 fi nancial year after being sold to Boligselskabet DVB and a private investor.

Vandtårnsvej, Copenhagen, DenmarkIn the fi rst quarter of 2008/09, TK Development sold its 50 % share of options to build about 21,000 m² of property at Vandtårnsvej in Copenhagen.

Hadsundvej, Aalborg, DenmarkAs at 1 April 2008, the Group sold and handed over about 5,000 m² of the property at Hadsundvej, Aalborg, to the ad-ministrative region of Northern Jutland.

Tagtækkervej, Odense, DenmarkIn May 2008, the Group handed over a retail park at Tagtækkervej in Odense, Denmark, to a private investor. Th e project, comprising premises of 6,800 m² let to IDEmøbler, was executed in cooperation with Marselisberg A/S.

TKD NORDEUROPA

TK Development has handed over projects totalling about 66,000 m2 in the Group’s Northern European markets.


Project name City/town Segment Floor space (m²)

TKD’s owner-ship interest

Construction start/Expected construction start

Opening/Expected opening

Denmark

Premier Outlets Center Ringsted Retail 13,200 50 % Autumn 2006 March 2008

Østre Teglgade Copenhagen Offi ce/Residential 24,000 1)100 % As units are completed As units are

completed

Amerika Plads, lot C Copenhagen Mixed 13,800 50 % 2009/10 2011/12

Amerika Plads, lot A Copenhagen Offi ce 11,000 50 % 2009/10 2011/12

Amerika Plads, underground car park Copenhagen Under-ground car park 32,000 50 % 2004 As units are

completed

Sillebroen, shopping centre Frederikssund Retail/Residential 28,000 100 % Mid-2008 Early 2010

Århus South, phase II Århus Retail 2,800 100 % Early 2010 End-2010

Ejby Industrivej Copenhagen Offi ce 12,900 100 % 2009 2010

Hadsundvej Aalborg Mixed 8,600 100 % As units are completed As units are completed

Østre Havn/Stuhrs Brygge Aalborg Mixed 80,000 1)50 % As units are completed As units are completed

Neptunvej Randers Mixed 7,800 100 % Autumn 2009 Autumn 2010

Retail park, Anelystparken, phase IV Århus Retail 2,800 100 % Early 2008 Mid-/autumn 2008

Retail park, Aabenraa Aabenraa Retail 4,200 100 % Autumn 2008 Mid-2009/early 2010

Retail park, Brønderslev Brønderslev Retail 5,800 100 % Autumn 2008 Mid-2009

Vasevej Birkerød Mixed 4,400 100 % 2009 2010

Sweden Entré, multifunctional centre Malmö Mixed 39,500 100 % Mid-2006 March 2009

Bazaar, Gothenburg Gothenburg Mixed 45,000 100 % Early 2011 2013

Retail park, Karlstad Karlstad Retail 15,000 100 % End-2010 End-2011

Retail park, Söderhamn Söderhamn Retail 10,000 100 % End-2009 End-2010

Retail park, Kofoten, Kristianstad Kristianstad Retail 6,200 100 % Mid-2008 Mid-2010

Retail park, Enebyängen, Danderyd Danderyd Retail 14,400 100 % 2009 Autumn 2010

Retail park, Uppsala Uppsala Retail 10,800 100 % Early 2009 Spring 2010

Finland Pirkkala Retail Park, phase II Tammerfors Retail 5,500 100 % End-2009 End-2010

Shopping centre, Hyvinkää Hyvinkää Mixed 26,300 100 % 2009 2011

Kaarina Retail Park Turku Retail 7.500 100 % 2009 2010

Baltic StatesDomusPro Retail Park Vilnius Retail 18,500 100 % - -

Milgravja Street Riga Residential 9,200 50 % - -

Ulmana Retail Park Riga Retail 12,400 100 % - -

TKD Nordeuropa, total fl oor space approx. 472,000 1) TKD Nordeuropa’s share of profi t on development amounts to 70 %.


Projects

Premier Outlets Center, Ringsted, DenmarkTh e project has been developed in a 50/50 joint venture with Miller Developments, an experienced Scottish factory outlet developer. Th is project consists of a factory outlet centre and restaurant facilities, with a total fl oor space of 13,200 m² and about 1,000 parking spaces. Th is is Denmark’s fi rst major fac-tory outlet centre. Th e centre opened on 6 March 2008, and the current occupancy rate is 58 %. Following the conclusion of a lease agreement, Hugo Boss opened its fi rst factory outlet store in Scandinavia in March 2009. Negotiations with several potential Danish and international tenants are ongoing. Th e centre is expected to be sold after startup and maturing.

Østre Teglgade, Copenhagen, DenmarkTh is attractively located project covers an area of 24,000 m² at Teglholmen. Th e area is well-suited for a housing or offi ce project. Th e project may be built in phases in step with let-ting and/or sale. Th e local plan being prepared for the area is expected to be available in mid-2009.

Amerika Plads, Copenhagen, DenmarkKommanditaktieselskabet Danlink Udvikling (DLU), which is owned 50/50 by Udviklingsselskabet By og Havn I/S and TKD Nordeuropa, owns three projects at Amerika Plads: lot A, lot C and an underground car park. A building complex with about 11,000 m² of offi ce space is to be built on lot A, and a building complex with about 13,800 m² of commercial and residential space on lot C. Construction will take place as the space is let, and negotiations with several potential tenants are ongoing. Part of the underground car park in the Amerika Plads area has been built, and is operated by Europark. Upon completion, the underground car park is expected to be sold as a unit.

Sillebroen, shopping centre, Frederikssund, DenmarkIn Frederikssund, TKD Nordeuropa is constructing a project with a total fl oor space of about 28,000 m². Th e project com-prises a shopping centre of about 25,000 m², of which 5,000 m² has been let to supermarket operators, while the remaining 20,000 m² will be let to speciality stores and restaurants. In addition, the project comprises about 3,000 m² of residential space. Th e occupancy rate has reached 69 %, and the anchor tenants include Kvickly, Fakta, Hennes & Mauritz, Synoptik and Skoringen. Construction was initiated in mid-2008, and the opening of the centre is scheduled for the beginning of 2010. A multi-storey car park with about 800 parking spaces will be established at the centre. An agreement has been made regarding the sale to a private investor of options to build resi-dential property.

Århus South, phase II, DenmarkIn Århus, the Group is developing a retail project of about 5,300 m². Th e project consists of two phases, of which the fi rst completed phase of about 2,500 m² was handed over in November 2007 to the investors: a property company and a user. Construction on the second phase will start once the let-ting status and relevant authority approvals are in place.

Østre Havn/Stuhrs Brygge, Aalborg, DenmarkIn the area previously occupied by Aalborg Shipyard at Stuhrs Brygge, TKD Nordeuropa is developing a business and resi-dential park of about 80,000 m², for which TKD Nordeuropa regularly buys land for new project development. Attempts are currently being made to amend the local plan for the pur-pose of changing the zoning status of about 6,600 m² from offi ce to residential use. Th e local plan is expected to be com-pleted in spring 2009. Negotiations with a potential investor for this residential space are ongoing.

Retail park, Anelystparken, phase IV, Århus, DenmarkTh is project consists of a 2,800 m² retail park, of which about 2,400 m² has been let to date. Th e retail park has been com-pleted and handed over to the tenants.

Retail park, Brønderslev, DenmarkIn Brønderslev, the Group is developing a retail project of about 5,800 m². Th e Group has entered into an agreement with Dansk Supermarked regarding the establishment of a 3,700 m² Føtex supermarket and with OK Benzin regarding the establishment of a petrol station. Th e remaining premises have been let to Punkt 1 and an amusement arcade operator. Construction has started, and the whole retail park is expected to be completed by mid-2009. Th e Føtex premises have been sold to Dansk Supermarked on the basis of forward funding. Th e Group will take over the existing 2,400 m² Føtex prop-erty in Brønderslev when the project is handed over.

Vasevej, Birkerød, DenmarkTKD Nordeuropa has acquired an existing property of about 3,000 m² at Vasevej in Birkerød, rented by SuperBest. Plans are in progress to build new premises of about 1,400 m² on the property, bringing the total project area up to about 4,400 m². A lease agreement for premises of about 1,100 m² has been signed by Lidl. Th e total project will consist of a combi-nation of retail stores, offi ces and residential units. Construc-tion is expected to start in 2009, and the centre is scheduled to open in 2010.

Th e Entré Multifunctional Centre, Malmö, SwedenTh e Group’s multifunctional centre, Entré, opened on 19 March 2009. Th is project was sold to Commerz Real Invest-mentgesellschaft mbH (previously CGI Commerz Grundbe-sitz Investmentgesellschaft mbH) in a previous fi nancial year.


Th e selling price was fi xed on the basis of a return require-ment of 6 %, with the sales agreement being based on forward funding. Th e project is to be handed over to the investor in June 2009. Th e occupancy rate has reached 87 %. Th e an-chor tenants include Hennes & Mauritz, Lindex, Hemköp, Intersport, SF Bio (Svensk Film) and the fi tness chain Sats. Th e multifunctional centre has total premises of 39,500 m², comprising retail stores of 25,800 m², restaurants, cinema, fi t-ness and bowling facilities of 10,700 m², offi ces of 300 m² and residential accommodation of 2,700 m². In addition, the centre will have common areas and underground parking fa-cilities with 900 spaces.

Bazaar, shopping centre and service/commercial space, Gothen-burg, SwedenTKD Nordeuropa and the Swedish housing developer JM AB have entered into a cooperation agreement with SKF Sver-ige AB to develop SKF’s former factory area in the old part of Gothenburg. Th e contemplated project comprises a total fl oor space of about 75,000 m²: 30,000 m² for a shopping centre, 15,000 m² for services/commercial use and 30,000 m² for housing. TK Development will be in charge of developing the 45,000 m² for a shopping centre, services and commercial facilities, while JM AB will have responsibility for the 30,000 m² of housing. Th e acquisition of land for the project will be completed following the adoption of a local plan, expected in the course of 2010.

Kofoten, Kristianstad, SwedenTKD Nordeuropa owns a property in Kristianstad. Following conversion and extension, the project will comprise a retail park of about 6,200 m². Th e existing building of about 4,000 m² is almost fully let, and renovation has started. Th e overall project is expected to be completed by mid-2010.

Retail park, Enebyängen, Danderyd, SwedenTh rough a qualifi cation procedure, TKD Nordeuropa has won a contract to build a new commercial centre in the mu-nicipality of Danderyd near Stockholm. Th e total project is expected to comprise a 14,400 m² retail park, and lease agree-ments have been signed for some of the premises, including 4,300 m² let to supermarket operator Coop Extra. To date, lease agreements for 63 % of the premises have been signed. Construction is expected to start in the course of 2009, and the retail park is scheduled to open in autumn 2010.

Retail park, Uppsala, SwedenWith eff ect from 15 December 2008, TKD Nordeuropa has taken over the development of a 10,800 m² retail park in the Swedish city of Uppsala. Th e retail park has been sold to an institutional fund of German IVG Funds on the basis of forward funding, with the investor making payments as TKD Nordeuropa builds the premises. Th e total selling price

amounts to about SEK 200 million. Th e current occupancy rate is 92 %. Construction of the retail park started in Febru-ary 2009. TKD Nordeuropa expects to hand over the com-pleted retail park to IVG Funds in April 2010.

Kaarina Retail Park, Turku, FinlandIn the Finnish town of Turku, TKD Nordeuropa owns a plot of land allowing for the construction of a 7,500 m² retail park. Work is proceeding on an extension of the project to a total of 14,500 m2, and negotiations with potential tenants are ongo-ing. Construction is expected to start in the course of 2009, with the opening scheduled for 2010.

DomusPro Retail Park, Vilnius, LithuaniaTKD Nordeuropa owns a plot of land in Vilnius reserved for building an 18,500 m² retail park. A building permit has been granted for the project. Th e Group has postponed the startup of construction until a sale of the project has been completed or satisfactory pre-completion letting achieved, relative to the market situation in the country. Tenants have signed leases for almost 55 % of the fl oor space.

Milgravja Street, Riga, LatviaIn Riga, Latvia, the Group’s Milgravja Street project now comprises options to build residential property of about 9,200 m². Negotiations with potential investors for the project are ongoing.

Ulmana Retail Park, Riga, LatviaIn Riga, TKD Nordeuropa owns a plot of land on which the construction of a 12,400 m² retail park is planned. A building permit for the project has been obtained. Th e Group has post-poned the startup of construction until it can sell the project or has achieved satisfactory pre-completion letting, relative to the market situation in the country. Letting is ongoing, and binding lease agreements for almost half the fl oor space have been signed.

Almost eight months have passed since the fi rst turf was cut for the Sillebroen shopping centre in Frederikssund. Constructi on of the centre is progressing as planned. Its name derives from the Sillebroen stream that fl ows past the cen-tre and has inspired the building’s disti ncti ve curved features.

A new meeti ng place in Frederikssund

Sillebroen’s locati on between the sta-ti on and the pedestrian street makes

it a natural meeti ng place in Frede-rikssund.

As well as having a prime loca-ti on, a shopping centre must of-

fer an att racti ve concept in in-spiring surroundings. A spa-

cious green outdoor square in front of the Sillebroen

shopping centre will al-low outdoor serving.

Together with the recreati onal areas

bordering on the

Sillebro stream, the square will provide shop-pers and bypassers with an inviti ng and pleasant place to relax.

A centre with no dead corners

Potenti al tenants have shown keen interest in the Sillebroen shopping centre, and the occu-pancy rate has now reached 69 %. The numer-ous retail stores waiti ng to welcome customers when the centre opens in spring 2010 include Kvickly, Fakta, SPORT-MASTER, Hennes & Mau-ritz, Matas, Skoringen and Synopti k – to name but a few.

In additi on to its locati on and design, the cen-tre layout has contributed to att racti ng tenants. The curved lines inspired by the Sillebro stream mean the shopping centre will not have the dead corners frequently seen in other shopping centres. The layout of Sillebroen will ensure a steady fl ow of customers past all stores in the shopping centre.

SILLEBROEN

Sillebroen – a shopping centre set in an inspiring locati on


Occupancy rate at 24 April 2009: 69 % Rentable area: 28,000 m2

Number of stores: 75-80 Number of parking spaces: 800 Expected opening: Spring 2010

Expected annual revenue*: DKK 650-825 million Primary catchment area*: 100,000 customers

* (Report prepared by ICP)



TK Development carries on its activities in Central Europe primarily through Euro Mall Holding, whose activity focus is the retail property segment (shopping centres and retail parks) and the mixed segment (including multifunctional projects) and in Poland, also the residential segment.

After TK Development exercised its option in June 2008 to buy the remaining stake in Euro Mall Holding A/S from the Investment Fund for Central and Eastern Europe, TK De-velopment is now the sole owner of the Central European activities.

Euro Mall Holding continues to account for a substantial share of the Group’s total earnings, recording a profi t before tax of DKK 166.4 million in the 2008/09 fi nancial year versus DKK 251.3 million the year before.

Share of two investment properties in the Czech Republic soldAs mentioned above, the joint venture Euro Mall Ventures S.à.r.l., Luxembourg, of which Euro Mall Holding owns 20 %, sold and handed over the Futurum Shopping Centre in Ostrava and the Haná Shopping Centre in Olomouc, the Czech Republic, in June 2008. TK Development’s share of the shopping centres now sold was previously classifi ed as invest-ment properties in the Group’s portfolio. Th e sale generated an excess value over the carrying amount of about DKK 42.3 million, which is included in the item “Value adjustments” under gross profi t.

Handed-over projectsProjects totalling a fl oor space of 37,000 m² have been handed over. Major projects contributing to the profi t for the year include the following:

Tivoli Residential Park, Warsaw, PolandIn Poland, the Group’s fi rst housing project, the Tivoli Resi-dential Park of about 18,800 m², was completed, with about 90 % of the 280 apartments being sold and handed over to the new owners in 2008/09.

Kolin Shopping Centre, Czech RepublicTh is project consists of a 10,000 m² shopping centre, which has been fully let. Th e centre opened in October 2008. Th e project has been sold to GE Real Estate Central Europe on the basis of forward funding.

Liberec Retail Park, phase 1, Czech RepublicTh is 11,400 m² retail park, which opened on 17 September 2008, has been sold to GE Real Estate Central Europe.

Value adjustment of the Group’s Central Euro-pean investment property

Th e Group’s investment property in Central Europe (a 20 % stake in the Futurum Hradec Králové shopping centre in the Czech Republic) was valued at DKK 153.4 million at 31 Jan-uary 2009, based on an unchanged required rate of return of 7 %, calculated on the basis of a discounted cash-fl ow model over a fi ve-year period.

Th e letting situation was satisfactory during the year under re-view. Th e property was fully let, the rent payable under exist-ing lease agreements could be escalated on the usual basis, and new lease agreements were generally concluded at higher rent levels when existing tenants renegotiated their lease terms or new tenants took over leases. Overall, this resulted in a posi-tive value adjustment of DKK 30.7 million in 2008/09.

Project portfolioTh e development potential of the project portfolio represent-ed 419,000 m² at 31 January 2009, of which sold projects ac-counted for 121,000 m² and remaining projects for 298,000 m². Th e project portfolio had a total development potential of 542,000 m² at 31 January 2008.

Project outline Th e outline below lists the key projects of Euro Mall Hold-ing’s project portfolio. Th e carrying amounts of the projects listed below accounted for more than 90 % of the total car-rying amount of the project portfolio of Euro Mall Holding at 31 January 2009. In terms of carrying amount, Euro Mall Holding’s fi ve largest projects represented a total of DKK 977.7 million at 31 January 2009.

EURO MALL HOLDING

TK Development has handed over projects totalling about 37,000 m2 in the Group’s Central and Eastern European markets.


Project name City/town Segment Floor space (m²)

TKD’s ownership interest

Construction start/ Expected construction start

Opening/Expected opening

Poland

Stocznia Multifunctional Centre, Young City Gdansk Mixed 72,000 45 % 2009 2012

Residential park, Bielany Warsaw Residential/Services 60,000 100 % Spring 2010 As units are completed

Tivoli Residential Park, Targówek Warsaw Residential 2,750 100 % Spring 2007 Autumn 2008

Tivoli Residential Park, Targówek Warsaw Services 5,700 100 % Mid-2009 Mid-2010

Poznan Warta Poznan Retail/Residential 50,000 100 % - 2010

Shopping centre, Tarnów Tarnów Retail 16,500 100 % Autumn 2008 Autumn 2009

Shopping centre, Nowy Sącz Nowy Sącz Retail 17,300 100 % Mid-2008 Autumn 2009

Shopping centre, Jastrzębie Jastrzębie Retail 43,300 1) - - -

Bytom Retail Park Bytom Retail 25,800 100 % 2009 As units are completed

Czech Republic

Prague Airport Ruzyne II Prague Mixed 7,000 100 % 2010 2011

Fashion Arena Outlet Centre Prague Retail 25,000 75 % Spring 2007 Phase 1: November 2007. Phase 2: 2010.

Sterboholy Retail Park Prague Retail 6,000 100 % 2010 2011

Liberec Retail Park, II Liberec Retail 6,200 100 % Early 2010 End-2010

Most Retail Park Most Retail 8,400 100 % Autumn 2008 Phase 1: Spring 2009. Phase 2: Autumn 2010.

Futurum Hradec Králové, extension Hradec Králové Retail 9,800 2) 20 % Autumn 2009 Autumn 2010

Retail park, Teplice Teplice Retail 7,600 100 % Spring 2010 Autumn 2010

Slovakia

Retail park, Prešov Prešov Retail 9,300 100 % Autumn 2009 Spring 2010

Euro Mall Holding, total fl oor space approx. 373,0001) Based on fee income. 1) Euro Mall Holding’s share of profi t amounts to 50 %.

Projects

Stocznia Multifunctional Centre, Young City, Gdansk, PolandBased on current plans, this multifunctional centre in Gdansk, Poland, will have total premises of about 72,000 m², to be de-veloped in a joint venture with Atrium European Real Estate (previously Meinl European Land Ltd.). Th e centre will com-prise retail, restaurant and leisure facilities of about 61,000 m² and an offi ce tower of about 11,000 m². Two previously planned residential towers totalling about 22,000 m² have been put on hold. Th e land for the project has been acquired from the Baltic Property Trust Group, which will also hold a long-term investment in the offi ce section. Atrium European Real Estate has undertaken the overall project fi nancing and will retain a long-term investment in the retail, restaurant and leisure premises. Negotiations are being held with several ten-ants, all indicating keen interest in renting premises in the centre. During the development period, TK Development

will generate earnings through fee income and a profi t share based on the rental income obtained when the centre opens. Th e building permit is expected to be issued in mid-2009. Once the work on the town’s infrastructure has begun, it will be decided when to start project construction. Th is project represents the fi rst phase of a major development plan for the whole area.

Residential park, Bielany, Warsaw, PolandEuro Mall Holding owns a tract of land in Warsaw allowing for the construction of 900-1,000 residential units. Th e plan is to build the project in four phases. Construction of the fi rst phase is anticipated to start in spring 2010, once the relevant authority approvals are in place and the pre-completion sale has reached a satisfactory level, with handing-over scheduled for end-2011. Th e remaining phases will then be handed over


successively. Th e residential units are expected to be sold as owner-occupied units to private users.

Tivoli Residential Park, Targówek, Warsaw, PolandTh e Group has completed its fi rst housing project in Poland on the land owned by Euro Mall Holding in the Targówek area in Warsaw. Th e project consists of 280 residential units, of which 254 had been sold as of 31 January 2009. In ad-dition, the Group has the choice of building approximately 5,700 m² for service trades. A conditional agreement for the sale of about 3,100 m² has been concluded, and the buildings for this part of the project are scheduled for completion in mid-2010.

Shopping centre, Tarnów, PolandIn the Polish town of Tarnów, Euro Mall Holding began con-struction on a 16,500 m² shopping centre in September 2008, comprising a supermarket of about 2,700 m² and specialty stores of about 13,800 m². Th e current occupancy rate is 87 %. Th e centre is scheduled to open in autumn 2009.

Shopping centre, Nowy Sącz, PolandIn the Polish town of Nowy Sącz, Euro Mall Holding has de-veloped a 17,300 m² shopping centre, consisting of a 5,000 m² hypermarket and specialty stores of about 12,300 m². Th e current occupancy rate is 95 %. Construction started in August 2008, and the centre is expected to open in autumn 2009.

Shopping centre, Jastrzêbie, PolandTh is project, consisting of a 43,300 m² shopping centre, will be executed by Atrium European Real Estate (previously Meinl European Land Ltd.), with Euro Mall Holding as the project developer. Euro Mall Holding has entered into an agreement with Atrium European Real Estate regarding Euro Mall Holding’s assistance for development, letting and con-struction management of the project on a fee basis. As part of the procedure to obtain a building permit for the project, negotiations are being held with the public authorities about the project infrastructure. Th e timing of construction startup has not yet been determined.

Bytom Retail Park, Bytom, PolandEuro Mall Holding intends to develop a retail park with total leasable space of about 25,800 m² on its site at the Plejada Shopping Centre in Bytom, which is centrally located in the Katowice region. Construction of the project will be phased in step with letting. Letting eff orts are ongoing, and construc-tion will be started as space is let. A conditional sales agree-ment has been concluded for part of the retail premises.

Fashion Arena Outlet Centre, Prague, Czech RepublicIn Prague, the Group is developing a 25,000 m² factory outlet

centre. Th e project is being developed in a joint venture with an international collaboration partner with factory outlet ex-perience. Th e fi rst phase of about 18,000 m² opened on 15 November 2007. Th e current occupancy rate for the phase is almost 90 %. At present, negotiations with several potential Czech and international tenants for the remaining premises are ongoing. Following the keen interest shown by tenants in smaller tenancies in the factory outlet centre, the letting of premises comprised by the second 7,000 m² phase has begun. Construction is scheduled to start in 2009 once satisfactory pre-completion letting has been achieved. Th e second phase is projected to open in 2010. Th e centre is expected to be sold after startup and maturing.

Liberec Retail Park, phase II, Czech RepublicTh is project comprises a 17,600 m² retail park to be built in phases. Th e fi rst 11,400 m² phase, which opened on 17 Sep-tember 2008, has been sold and handed over to the inves-tor. Th e second 6,200 phase is scheduled to open in autumn 2010. Th e project has been sold to GE Real Estate Central Europe on the basis of forward funding.

Most Retail Park, Czech RepublicEuro Mall Holding has acquired a plot of land in the Czech town of Most for the purpose of establishing an 8,400 m² retail park. Th e retail park will be built in two phases. Th e current occupancy rate for the fi rst phase of the project is 83 %. Th e fi rst 6,400 m2 phase is under construction and is ex-pected to be completed in spring 2009, with the second phase being scheduled for completion in autumn 2010.

Futurum Hradec Králové, extension, the Czech RepublicTh e Futurum Hradec Králové Shopping Centre, owned by a joint venture between GE Capital, Heitman and TK Devel-opment in which TK Development has a 20 % ownership interest, is to be extended by almost 10,000 m². Tenants have signed Heads of Terms for 77 % of the fl oor space. Construc-tion is expected to start in autumn 2009, with the opening scheduled for autumn 2010.

Retail park, Teplice, Czech RepublicEuro Mall Holding has acquired plots of land in Teplice with a view to constructing a retail park of about 7,600 m². A building permit for the project has been obtained. Letting is ongoing, and construction is expected to start in spring 2010, with the opening scheduled for autumn 2010.

Retail park, Prešov, SlovakiaEuro Mall Holding has acquired plots of land in Prešov with a view to constructing a retail park of about 9,300 m². A build-ing permit has now been obtained for the project. Letting is ongoing, and construction is expected to start in autumn 2009, with the opening scheduled for spring 2010.


Bazaar, Gothenburg, Sweden

Most Retail Park, Most,Czech Republic

Entré, Malmø, Sweden

Retailpark, Enebyängen, Danderyd, Sweden

Sillebroen, Frederikssund, Denmark

Liberec Retail Park, Liberec, Czech Republic

Residential Park, Bielany, Warsaw,Poland

Retail park, Prešov, Slovakia

Tivoli Residential Park, Targówek, Warzaw Poland

Shopping centre, Tarnóv, Poland

Retail park, Teplice, Czech Republic

Fashion Arena Outlet Center, Prague, Czech Republic

Retail park, Brønderslev, Denmark

Retail park, Uppsala,Sweden

Shopping centre, Nowy Sącz, Poland

Østre Havn/Stuhrs Brygge, Aalborg,Denmark

Premier Outlets Center, Ringsted, Denmark

Selected projects in the project portfolio


Th e Group’s investment properties

Project name City/town Segment Floor space* (m²)

Ownership interest Opening

Futurum Hradec Králové, the Czech Republic Hradec Králové Retail 18,300 20 % Nov. 2000Germany Lüdenscheid/Berlin Residential/ Mixed 26,000 100 % 1994-1998

Total investment properties 44,300

* incl. common areas

ally concluded at higher rent levels when existing tenants re-negotiate their lease terms or new tenants take over leases. Th e value adjustment for the year amounts to DKK 30.7 million.

Th ere are plans to extend the Futurum Hradec Králové Shop-ping Centre by almost 10,000 m². Construction is expected to start in autumn 2009, with the opening scheduled for au-tumn 2010.

Germany

Th e Group has fi ve investment properties in Germany, of which a combined commercial and residential property is located in Lüdenscheid in the western part of the country, whereas the four remaining properties are residential rental properties on the outskirts of Berlin.

At 31 January 2009, the properties were recognized at DKK 213.1 million based on a required rate of return of 6.5 % p.a. calculated on the basis of a discounted cash-fl ow model over a ten-year period. Th e assumptions of the cash-fl ow model imply an initial yield of about 5.5 %, based on 100 % oc-cupancy. Th e value adjustment for the year amounts to DKK -15.3 million, based on Management’s estimate that the re-turn requirement for the Group’s German investment proper-ties has increased from 6 % to 6.5 %; see more details above.

Th e Group’s investment properties are included in the bal-ance sheet under property, plant and equipment. Investment properties are measured at fair value and represented a value of DKK 366.5 million at 31 January 2009 against DKK 584.6 million the year before.

Central Europe

Euro Mall Holding’s investment property had a carrying amount of DKK 153.4 million at 31 January 2009, based on a required rate of return of 7.0 % p.a., calculated on the basis of a discounted cash-fl ow model over a fi ve-year period.

Th rough Euro Mall Holding, TK Development previously owned 20 % of the joint venture Euro Mall Ventures S.à.r.l., Luxembourg. Th is joint venture entered into an agreement to sell the Futurum Shopping Centre in Ostrava and the Haná Shopping Centre in Olomouc, the Czech Republic. Th e shop-ping centres were handed over to the buyer in June 2008. Please see the outline above. Th e Group’s remaining investment property, Futurum Hradec Králové in the Czech Republic, is owned in a joint venture with GE Capital, Heitman, according to which TK Devel-opment has access to a performance-based share of the value adjustments on part of the property, which has been included in the carrying amount. Th e letting situation was satisfactory during the year under review. New lease agreements are gener-

INVESTMENT PROPERTIES

Th e value of the Group’s investment properties totalled DKK 366.5 million at 31 January 2009. Letting proceeded satisfactorily in 2008/09.


Annual General Meeting

Th e Annual General Meeting of TK Development A/S will be held on 25 May 2009. Th e Supervisory Board intends to recommend to the Annual General Meeting that: 1. no dividends be distributed for the 2008/09 fi nancial

year;2. the Supervisory Board be authorized to acquire treasury

shares having a nominal value of not more than 10 % of the share capital;a. that any such acquisition of treasury shares may

take place at the offi cially listed price at the date of acquisition +/-10 %; and

b. that any such authorization be granted for a period of 18 months as from the date of the appropri-ate resolution being passed at the Annual General Meeting.

Th e complete wording of the resolutions proposed will appear from the agenda of the Annual General Meeting.

Th e full Annual Report is downloadable from TK Develop-ment’s website, www.tk-development.dk, as from 13 May 2009.

Litigation/other legal issues

Th e Group is not a party to any lawsuits that, either indi-vidually or collectively, are expected to materially aff ect the Group’s earnings.

For more details about the charges brought by the public prosecutor for serious economic crime and the case against the Group’s Senior Vice President in Poland, reference is made to the section on risk issues on page 46.

Financial targets

To provide for suffi cient future fi nancial resources, Manage-ment has adopted a liquidity target for the whole Group. In addition, Management has adopted a solvency target for the whole Group corresponding to a solvency ratio of mini-mum 30 %, calculated as the ratio of equity to total assets. Th e Group has undertaken a commitment towards its main banker to meet a liquidity target and a solvency target. Both targets were met during the year under review.

Dividends

Th e Supervisory Board recommends to the Annual General Meeting that no dividends be distributed for the 2008/09 fi -nancial year.

OTHER MATTERS

30/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Business concept

ties, but to use its capital for development projects instead.

Project development

Th e Group has strong networks forged on the basis of long-standing, close business relationships with tenants and inves-tors, and regularly enters into contracts with these business partners. Th e Group is predominantly a service provider and has specialized in being the productive and creative liaison be-tween tenants, investors, architects, construction companies and other business partners.

A project typically goes through the following stages:

• Th e Group’s project developers seek out prime locations based on the specifi c requirements of tenants and inves-tors.

• A rough budget is drawn up.• As a main rule, the Group secures an option to acquire

the selected plot of land.• Independent architects prepare a project outline.• Th e Group’s project engineers review construction costs

indicated in the project proposal.• A fi nal budget is prepared and submitted for approval by

Management.• Lease agreements are concluded with future project ten-

ants. Frequently, agreements concerning a sale to one or more investors are signed at this point.

• Agreements are concluded with contractors and subcon-tractors to perform the actual construction work.

• Th e Group’s project engineers are in charge of construc-tion management while the project is being carried out.

• Th e sales department makes continuous eff orts to sell and let any projects that have not been pre-sold or pre-let to investors and tenants.

Mission and strategy

Th e overall mission of TK Development is to create added value by developing real property.

Th e Group operates in the property development and services environments, and specializes in being the creative and result-oriented link between tenants and investors.

Business concept

In collaboration with tenants and investors, TK Development plans and arranges the construction of new buildings, and the expansion and conversion of real property based on tenant needs and investor requirements. Th e Group develops the projects, which involves concluding contracts with construc-tion companies and subcontractors for the execution of the building works, managing construction and letting the com-pleted premises.

In terms of segments, the Group focuses on the establishment of shopping centres, superstores and corporate headquarters and related mixed and multifunctional projects as well as housing in Poland.

Th e retail segment will continue to be the Group’s most im-portant segment in the years ahead based on continued expan-sion of its already extensive network of contacts.

Th e Group owns several investment properties for letting pur-poses. Th e Group monitors the market situation on an ongo-ing basis with a view to selling its investment properties. Th e Group does not intend to acquire further investment proper-

BUSINESS CONCEPT

Th e Group operates in the property development and services environments, and specializes in being the creative and result-oriented link between tenants and investors.

Finished project

Subcontractors

Investors

Option/purchase of site

Tenant requirements

Investor requirements

Contractors

Tenants

EngineersArchitects

Public authorities

Project managementLetting

Sales

Business concept | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 31/115

Project and risk management

New projects are initiated on the basis of an overall assessment of their earnings potential, balance sheet impact and impact on cash resources relative to the specifi c risks attaching to the individual project.

A number of management tools contribute to ensuring a satis-factory project process. Construction is typically not initiated until at least 60 % of a project is let or sold. If the project is sold, construction will not be initiated until the Group anticipates being able to meet such investor requirements as would allow fi nal completion of the project sale. Meeting these requirements typically falls within the Group’s spheres of competency. Careful project management and follow-up are essential to any project, and project fi nances and cash fl ows are also monitored closely.

Th e Group emphasizes that project location, regulatory mat-ters, pre-letting, construction matters and market conditions should combine to limit the complexity of and thus the risk attaching to the projects.

In general, the Group aims to secure the sale of projects at an early stage and believes it is important to expand investor commitment by having the investors fund the project during

the construction process (forward funding) where possible. Forward-funding agreements with investors are usually made before construction startup, which means that the investor’s payments on account during the construction period coincide with the payments to be made to TK Development’s contrac-tors.

Th e criteria for using forward funding are based on several im-portant principles, including to keep the funds tied up in the Group’s projects at an absolute minimum, which also reduces the balance sheet total and minimizes the risk. Before con-struction starts, the investor and TK Development come to an agreement on a well-defi ned project. Th e investor remains involved throughout the construction period and is consulted on major decisions. Th ese principles ensure that, apart from the risk of not completing the project, TK Development’s risk from construction startup is typically limited to the letting risk attaching to any remaining unlet premises and the risk of construction budget overruns.

Under the current market conditions, it may be diffi cult for the Group to continue concluding sales agreements based on forward funding. Th us, the Group foresees having to execute more projects based on forward purchase - with payment be-ing made upon completion of the project and handing-over to the investor - than has been the case in recent years.

Th e diagram below illustrates the Group’s funds tied up in projects, both in a normal project scenario and a forward-funding scenario.

Construction periodDevelopment phase

Project implementation based on forward funding

Project implementation without forward funding

Site

pu

rch

ase

Fun

ds

tied

up

(DK

K)

Co

nst

ruct

ion

sta

rt

Han

din

g-o

ver

Project progress

32/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Value creation in TK Development

TK Development’s value creation is based primarily on its good relations with tenants and investors (networks). Com-bined with the employees’ know-how and competencies, these relations form the basis for the Group’s ability to create added value for its shareholders.

TK Development develops real property projects that meet high standards. Together with the employees’ knowledge and qualifi cations, the Group’s close relations with tenants and investors play an essential role in minimizing the risks of individual projects. Th is combination is the prerequisite for developing projects that generate satisfaction for tenants and investors alike, as well as satisfactory earnings for the Group on individual projects.

Employees

Th e employees’ know-how and competencies are key to TK Development’s value creation. Th e Group’s employees work within individual, specialized areas: project developers, let-ting managers, legal and fi nancial project controllers, and engineers. Project developers create the Group’s portfolio of projects. Th ey have great expertise within letting and selling retail and offi ce space. Th eir tasks consist of selecting loca-tions, which are subsequently analyzed to identify their busi-ness potential. Th eir next task is preparing conceptual designs for the fi nal projects in close cooperation with independent architects, consulting engineers, future tenants, authorities and investors. Th e Group’s engineers and project controllers manage the individual projects from startup to handing-over, and their work is thus crucial for ensuring that budgets are complied with and anticipated values generated.

Management believes that the combination of long-standing experience, in-depth knowledge of tenants and investors, know-how and professional competencies enables the Group to complete projects from idea to fi nalized project at reduced risk and improved profi tability.

Training programme launched

To continue reinforcing value creation, TK Development has launched a training programme to raise employees’ level of expertise to an even higher level. Th e aim is to strengthen the Group in the development phases that are critical to maximiz-ing the value of each individual project.

Th e training programme targets the Group’s project develop-ers, letting managers and engineers. Th e programme takes its cue from the individual employee’s qualifi cations, which are identifi ed in order to assess his or her need for training. A training programme is then set up to strengthen the employ-ee’s ability to manage and complete projects.

Th e training programme has been initiated and covers a three-year period. In addition to improving the Group’s knowledge resources, the programme helps cement TK Development’s position as an attractive workplace for both existing and fu-ture employees.

Apart from off ering a training programme, TK Development holds annual personal development interviews with all em-ployees. Th ese interviews form the basis for providing any supplementary development and training as well as career ini-tiatives for the individual employees.

Incentive schemes

With staff being an essential factor for ensuring the Group’s sustained development and growth, TK Development has launched warrant schemes for a number of employees as part of its eff orts to retain and attract staff . TK Development in-tends to use incentive schemes in the future as well.

Project organization

TK Development believes it is important to give employees an inspiring workplace where individual projects aff ord them the opportunity to accumulate knowledge and experience that can be passed on throughout the organization and thus con-tinuously improve the Group’s collective know-how and skills.

In order to ensure a high degree of quality in all services pro-vided by the Group to tenants and investors - as well as ef-fi cient progress and quick decisions in the development of individual projects - the Group’s staff is anchored in a matrix organization as follows:

2

Project managem./Construction managem.

Inte

rdis

cipl

inar

y c

ompe

tenc

ies

Project groups

Finance and accounting

Controlling

Sale and rental

41 3

VALUE CREATION IN TK DEVELOPMENT

Th e Group has launched a three-year training programme to strengthen the development phases critical to maximi-zing the value of each individual project.

Value creation in TK Development | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 33/115

Th e matrix organization means that all the Group’s peak com-petencies, covering the progress of a project from blueprint to completion, exist in the project group that carries through the individual project from A to Z.

Organization, management and employees

Like the group structure, TK Development’s organization and management structure is divided into Northern Europe and Central Europe.

In Northern and Central Europe, the Group operates branch offi ces managed by divisional managers (senior vice presi-dents).

Th e Group’s international management team consists of the above-mentioned group of persons, as well as functional man-agers in the individual countries.

Breakdown of the Group’s employees

At 31 January 2009, the Group employed a total of 164 per-sons, broken down as follows:

TK Development A/S (22)Group/services: 15Germany: 5Bulgaria: 2

TKD Nordeuropa A/S (80)Denmark: 35Sweden: 24Finland: 10 Latvia: 5Lithuania 6

Euro Mall Holding A/S (62) Czech Republic: 23Poland: 39

Group functions and related services include management, accounting, fi nance and other staff functions.

In the 2008/09 fi nancial year, the Group adapted the organi-zation to a lower activity level. In this connection, Manage-ment also decided to close the Group’s offi ce in Bulgaria. Th e number of employees in the Group increased during the fi rst half of the year and decreased in the second, thus totalling 164 at 31 January 2009. Th e Group intends to cut staff to about 150 as the adaptation to the lower activity level takes eff ect.

Th e Group’s management structure is shown below:

Frede ClausenPresident and Chief Executive Officer (CEO)

Robert AndersenExecutive Vice Precident

Helle Yde JensenHuman Resources

Morten TousgaardControlling

Martin Nørgaard BachInformation & Communication

Vivi SørensenGroup Accounting

Niels Christian OlsenGroup Finances

Erik GodtfredsenSenior Vice President

Denmark Erik GodtfredsenSweden Dan FæsterFinland Riku NisulaLatvia Juris DreimanisLithuania ina auk t

Czech Rep. SlovakiaPoland Zygmunt ChylaGermany Mogens Pedersen

Thomas Villadsen

Customer relations

Th e Group’s customers consist of tenants and investors. TK Development continuously strives to create new, improved services to make the Group an even more attractive business partner for tenants and investors.

Tenants

Over the years, TK Development has built close partnership relations with a large number of companies, including in par-ticular retail chains looking to set up new stores.

Th e Group has gained in-depth knowledge of tenant needs and requirements. From this platform, TK Development can develop retail solutions that meet tenants’ requirements for design and location. In addition, the numerous close relations with a wide range of retail chains mean that the Group is al-ways able to put together an attractive retail mix that boosts individual tenants’ revenue.

With development activities in eight Northern and Central European markets, TK Development can also accommodate tenants who wish to set up business in new markets.

Investors

TK Development has also built close relations with a number of Danish and international foreign property investors.

Th e Group has in-depth knowledge of investor needs and requirements. Among other things, TK Development of-fers standardized, international contracts and a problem-free process from initiation to delivery. Moreover, the Group off ers

34/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Value creation in TK Development

shopping centre management through its partial ownership of Euro Mall Centre Management.

Over the years, the Group has sold projects to a range of Dan-ish and foreign banks, investment funds, pension funds and private companies.

Corporate Social Responsibility (CSR)

In addition to carrying on profi table business activities, TK Development intends to adhere to and expand the Group’s ethical, social and environmental responsibilities as a business corporation.

TK Development exercises corporate social responsibil-ity, fi rst and foremost towards the Group’s employees. Th is means showing respect for and taking an interest in the indi-vidual employee. Within the scope of its available options, the Group endeavours to show fl exibility, for example by accom-modating employees who need to reduce their working hours for a period of time.

Th e qualifi cations of the Group’s employees are a crucial competitive parameter. Th erefore, the Group’s consistent and transparent staff policy allows room for diversity and develop-ment. Moreover, the Group off ers its staff a variety of em-ployee benefi ts to promote their physical, psychological and social well-being.

EnvironmentTK Development is involved in environmental issues mainly when buying plots of land for the Group’s projects. If a plot is contaminated, the Group will either remove the contami-nated soil before starting construction or refrain from buying the relevant plot. It is attempted to execute projects without unnecessarily impacting the surrounding environment, in-cluding in connection with the choice of materials and the actual construction process.

Local community sponsorshipsTK Development sponsors and cooperates with local commu-nity members in aid of sports and cultural events.

Shareholders | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 35/115

Share capital

TK Development A/S’ shares are listed on NASDAQ OMX Copenhagen A/S (www.nasdaqomxnordic.com). Th e share capital amounts to DKK 560,876,200 (nominal value), dis-tributed on 28,043,810 shares, each with a nominal value of DKK 20. Th e shares are not divided into several share classes, and no shares are subject to special rights or restrictions with regard to the payment of dividends or repayment of capital. Each share confers one vote on the holder. Th e Articles of Association contain no restrictions on the transferability of the shares.

Share price development

On 31 January 2009, TK Development A/S’ shares were listed at a price of DKK 21.80 per share with a nominal value of DKK 20, equal to a market value of DKK 611 million versus DKK 1,767 million at 31 January 2008.

Th e TK Development A/S share fell by 65 % during the pe-riod from 1 February 2008 to 31 January 2009, from a price of DKK 63.00 to DKK 21.80 per share of DKK 20. By com-parison, OMX Copenhagen_PI and OMXCopenhagen_20 dropped by 41 % and 37 %, respectively, during the same period.

On 23 April 2009, the TK Development A/S share was listed at a price of DKK 21.10 per share with a nominal value of DKK 20, equal to a market value of about DKK 600 million.

20

40

60

80

100

120

Apr

09

Feb

08

TK Development A/S OMC C20 OMC C20 PI

Volume of trading

During the year under review, the share was traded on 249 days, with a total trading volume of DKK 5.7 billion. 26,321 trades were completed, covering a total of 17,246,169 shares.

Th e total number of trades dropped by 71 % on the previous year. Th e trading volume decreased by 12 % compared to last year.

Shareholders and their holdings

Th e number of shareholders was on a par with 2007/08, total-ling 8,333 at the reporting date against 8,387 the year before. Th e shareholders are composed as follows:

Bank and insurance companies 14 %

Foreign investors 20 %

Supervisory Board etc. 9 %

Unregistered shares 8 %

Other 49 %

Th e table below shows the ownership structure of TK De-velopment A/S as of today, as reported to NASDAQ OMX Copenhagen A/S pursuant to section 29 of the Danish Securi-ties Trading Act. Direct and indirect ownership(shareholders)

Ownership and voting interest in %

Baugur hf., Tungata 6, 101 Reykjavik, Iceland *) 5.61

Dava 1 ApS, c/o Kurt Daell, Lysagervej 25, 2920 Charlottenlund, Denmark 6.44

Holberg Fenger Holding A/S, Frode Jakobsens Plads 4, 5, 2720 Vanløse, Denmark

6.49

*) Th is ownership interest has not been confi rmed by the shareholder.

SHAREHOLDERS

TK Development had 8,333 shareholders at the reporting date. Total trading in the Company’s shares amounted to DKK 5.7 billion, down 12 % on the year before.

36/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Shareholders

Th e table below shows a breakdown of shares held by the Su-pervisory Board and Executive Board. Direct and indirect ownership

Number of shares *)

Ownership and voting

interest in %Supervisory Board:Poul Lauritsen 42,130 0.15Torsten Erik Rasmussen 32,760 0.12Kurt Daell 1,806,300 6.44Per Søndergaard Pedersen 170,872 0.61Jesper Jarlbæk 24,600 0.09Niels Roth 110,000 0.39Executive Board:Frede Clausen 146,272 0.52Robert Andersen 50,000 0.18Total 2,382,934 8.50*) Th e holdings include all shares held by all members of the entire household as well as companies controlled by the above-named persons.

Shareholders’ agreements

Management is not aware of any shareholders’ agreements that have been concluded between TK Development A/S’ shareholders.

Rules regarding alterations to the Company’s Articles of As-sociation

Th e Articles of Association of TK Development A/S can only be altered following a resolution adopted at a General Meet-ing in compliance with the provisions of the Danish Public Limited Companies Act. In order to be considered at an An-nual General Meeting at which the Annual Report for the relevant fi nancial year is considered, any proposals from share-holders must be submitted in writing to the Company’s offi ce no later than two months after the end of a fi nancial year.

At a General Meeting, resolutions can only be adopted in re-spect of business included in the agenda and any proposed amendments. If proposals to alter the Articles of Association are to be considered at a General Meeting, the essentials of such proposals must be stated in the convening notice. A resolution to alter the Company’s Articles of Association is subject to the proposal being adopted by at least two-thirds of the votes cast as well as of the voting stock represented at the General Meeting.

Share-based incentive schemes

On 30 December 2005, the Supervisory Board issued war-rants to the Executive Board and 23 executive staff members for the subscription of 826,000 shares, each with a nomi-nal value of DKK 20. Subsequently, 136,000 warrants have lapsed, leaving a total of 690,000 active warrants at the re-porting date. Th is is a four-and-a-half-year warrant scheme with the fi rst exercise opportunity after three and a half years

and with a further three-year (max.) lock-up period in respect of any shares subscribed for. Th is means that shares at up to a market value equal to the subscription amount may be di-vested without restrictions, while shares exceeding a market value equal to the subscription amount can be disposed of no earlier than during a three-year period after subscription, such that up to one-sixth of these shares can be disposed of in each of the six windows during the three-year period. Th e above-mentioned 690,000 warrants correspond to 2.5 % of the share capital. Warrants comprised by the incentive scheme may be exercised during three six-week windows. Th ese six-week windows are placed thus:

• following publication of the preliminary announcement of fi nancial statements for the 2008/2009 fi nancial year (from around 30 April 2009);

• following publication of the interim report for the six months ending 31 July 2009 (from around 30 Septem-ber 2009); and

• following publication of the preliminary announcement of fi nancial statements for the 2009/2010 fi nancial year (from around 30 April 2010).

Th e subscription price per share of nominally DKK 20, before any deduction for dividends, has been fi xed at DKK 74.54 in the fi rst exercise window, DKK 77.05 in the second window and DKK 80.63 in the third window. Th e costs to the Group of the above-mentioned four-and-a-half-year incentive scheme total around DKK 6.6 million, which are expensed over the period from January 2006 to May 2009.

Moreover, on 5 June 2008, the Supervisory Board issued war-rants to the Executive Board and 30 executive staff members for the subscription of 698,000 shares, each with a nominal value of DKK 20. Subsequently, 12,000 warrants have lapsed, leaving a total of 686,000 active warrants at the reporting date. Th is is a four-year warrant scheme with the fi rst exer-cise opportunity after three years and with a further three-year (max.) lock-up period in respect of any shares subscribed for. Th is means that shares at up to a market value equal to the subscription amount plus tax liability may be divested with-out restrictions, while shares exceeding a market value equal to the subscription amount plus tax liability can be disposed of no earlier than during a three-year period after subscrip-tion, such that up to one-sixth of these shares can be disposed of in each of the six windows during the three-year period. Th e above-mentioned 686,000 warrants correspond to ap-prox. 2.5 % of the share capital. Warrants comprised by the incentive scheme may be exercised during three six-week win-dows. Th ese six-week windows are placed thus:


• following publication of the preliminary announcement of fi nancial statements for the 2010/2011 fi nancial year (from around 30 April 2011);

• following publication of the interim report for the six months ending 31 July 2011 (from around 30 Septem-ber 2011); and

• following publication of the preliminary announcement of fi nancial statements for the 2011/2012 fi nancial year (from around 30 April 2012).

Th e subscription price per share of nominally DKK 20, before any deduction for dividends, has been fi xed at DKK 83.40 in the fi rst exercise window, DKK 86.20 in the second window and DKK 90.20 in the third window.

Th e costs to the Group of the above-mentioned four-year in-centive scheme total around DKK 11 million, which will be expensed over the period from June 2008 to October 2011.

Number of warrants2005 scheme

Number of warrants2008 scheme

Supervisory Board 0 0Executive Board:Frede Clausen 120,000 85,000Robert Andersen 120,000 85,000Other executive staff 450,000 516,000

Total 690,000 686,000

Dividends and dividend policyTh e payment of any dividends will be considered from year to year. Th e Supervisory Board’s current policy is not to distrib-ute dividends. Th e Supervisory Board intends to maintain the Group’s cash fl ow, particularly in light of the present market situation. Moreover, the Supervisory Board wishes to chan-nel any earnings into the continued expansion of the Group’s activities.

Th e statement of consolidated fi nancial highlights and key ratios on page 6 shows the development in the listed price of shares, equity value, earnings per share and payment of divi-dends.

Voting rights

Th e shareholders of TK Development A/S have one vote for each share amount of DKK 1 at General Meetings. Share-holders who have acquired shares by transfer may not exercise the voting rights in respect of the relevant shares unless such shares have been registered in TK Development A/S’ register of shareholders or the shareholder has reported, and submit-ted proof of, his acquisition to TK Development A/S not later than eight days prior to the relevant General Meeting.

Annual General MeetingTh e General Meeting of shareholders is the supreme author-

ity in all corporate matters of TK Development A/S, subject to the limitations provided by Danish law and TK Develop-ment A/S’ Articles of Association. Th e Annual General Meet-ing must be held in the municipality where TK Development A/S’ registered offi ce is located, suffi ciently early to permit compliance with the Company’s applicable time limits for the holding of General Meetings and the fi ling of Annual Reports. General Meetings are convened by the Supervisory Board. Th e Annual General Meeting will be held at 4 p.m. on 25 May 2009 at Hotel Hvide Hus in Aalborg.

Extraordinary General Meetings are held following a resolu-tion by the shareholders in General Meeting or the Supervi-sory Board or at the request of the auditors of TK Develop-ment A/S or shareholders collectively holding not less than one-tenth of the total share capital.

All business transacted at General Meetings, with the excep-tion of alterations to the Articles of Association (see above), is decided by a simple majority of votes unless otherwise pro-vided by current legislation; see Article 6 of the Company’s Articles of Association.

Registered shares

All shares are registered in book-entry form in accounts main-tained in the computer system of VP Securities A/S, Wei-dekampsgade 14, PO Box 4040, DK-2300 Copenhagen S, and must be held and managed through a Danish bank or other institution authorized to be registered as the custodian of the shares. Th e shares must be issued to named holders and may not be transferred to bearer.

Notifi cation of investment

Th e Articles of Association or other corporate regulations of TK Development A/S contain no special provisions regarding the reportable level of investment. Reference is made to sec-tion 29 of the Danish Securities Trading Act.

Negotiability and transferability of the shares

Th e shares of TK Development A/S are freely transferable and negotiable instruments pursuant to Danish law and no restric-tions apply to the transferability of the shares. No shareholder is under an obligation to have his shares redeemed in full or in part by the Company or any other party.

Other rights/ownership restrictions

No shares of TK Development A/S carry any special rights. No ownership restrictions apply to the shares.

Th e Supervisory Board’s powers

Powers to issue new sharesTh e Supervisory Board is currently authorized to increase the Company’s share capital during the period ending on 13 Oc-

38/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Shareholders

tober 2010, by one or more issues, by up to a total of nomi-nally DKK 18,200,000 through a cash contribution, without any pre-emptive rights for the Company’s existing sharehold-ers. In addition, the Supervisory Board is currently author-ized to increase the Company’s share capital during the period ending on 30 June 2012, by one or more issues, by up to a total of nominally DKK 14,000,000. Th is authorization is to be used for implementing the capital increases resulting from the exercise of warrants under the existing incentive schemes.

Accordingly, the overall authorization for the Supervisory Board to subscribe for capital will amount to 5.7 % of the Company’s share capital.

Treasury sharesAt the Annual General Meeting in 2008, the Supervisory Board was authorized, on behalf of the Company, to acquire treasury shares having a nominal value of not more than 10 % of the share capital in order to optimize the Group’s capital structure. Th is authorization was granted for a period of 18 months. Th e Supervisory Board proposes a resolution for an 18-month extension of this authorization, starting from the adoption of the resolution at the Annual General Meeting.

Rules on insider trading

TK Development’s Management and employees are only al-lowed to trade in the Company’s shares during the six-week period after the announcement of annual and half-year fi nan-cial results and other comprehensive announcements of fi nan-cial results. Th e Company keeps a register of the shares held by insiders, including any changes in their portfolios, and dis-closes this information in accordance with existing legislation.

Investor relationsTK Development aims to keep its shareholders and investors up-to-date on all relevant matters.

Th e Company’s website, www.tk-development.dk, includes all stock exchange announcements issued for the past four years, updated share prices and information about projects in progress. When investor presentations are published in con-nection with the announcement of annual and half-year fi -nancial results, they are also made available at the Company’s website.

Moreover, there is a direct link from TK Development A/S’ website to the NASDAQ OMX Copenhagen A/S website (www.nasdaqomxnordic.com), which contains further infor-mation about the TK Development A/S share. Reference is also made to the section on corporate governance.

Financial calendar

Annual Report 2008/09 13 May 2009Interim announcement Q1 2009/10 30 June 2009Interim report for the six-month period ending 31 July 2009 29 September 2009

Interim announcement Q3 2009/10 18 December 2009Preliminary announcement of fi nancial statements 2009/10 22 April 2010

Annual Report 2009/10 12 May 2010


Stock exchange announcements

No. Date

2 4 Feb 2008 Financial calendar3 24 Apr 2008 Preliminary announcement of fi nancial statements 2008/09

4 24 Apr 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities

5 15 May 2008 Notice convening the Annual General Meeting6 27 May 2008 Minutes of the Annual General Meeting of TK Development A/S7 6 Jun 2008 TK Development sells its share of two investment properties in the Czech Republic8 6 Jun 2008 Supervisory Board exercises authorization to launch incentive scheme9 24 Jun 2008 TK Development becomes the sole owner of the Group’s Central European activities10 25 Jun 2008 TK Development implements planned incentive scheme11 26 Jun 2008 Interim announcement Q1 2008/0912 30 Sep 2008 Interim report for the six-month period ending 31 July 2008 13 30 Sep 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities14 1 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities15 03 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities16 08 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities17 09 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities18 10 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities19 14 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities20 16 Oct 2008 Information about the executive staff ’s and their related parties’ transactions in TK Development A/S shares and related securities

21 16 Dec 2008 TK Development takes over development of retail park in Uppsala, Sweden22 23 Dec 2008 Interim announcement Q3 2008/091 5 Jan 2009 Notifi cation of majority shareholding2 8 Jan 2009 Notifi cation of majority shareholding - Holberg Fenger Holding A/S (clarifi cation)3 13 Jan 2009 Financial calendar4 2 Feb 2009 Downward revision of profi t forecast for the 2008/09 fi nancial yearTh e complete wording of stock exchange announcements is available at the Company’s website.

40/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Corporate Governance

TK Development is committed to complying with the cor-porate governance rules as far as possible to ensure that the Group is managed in accordance with shareholder interests and with due regard for its other stakeholders.

I. Th e role of the shareholders and their interac-tion with corporate management

Th e supreme authority of TK Development A/S is vested in the General Meeting of shareholders.

Th e Supervisory Board is committed to ensuring that the General Meeting of shareholders is a forum for open commu-nication and exchange of opinions between shareholders and the Supervisory Board. All registered shareholders are entitled to vote at the General Meeting, and shareholders who are un-able to attend may vote by proxy. To the extent possible, the instruments of proxy are drawn up to allow the individual shareholder to indicate his vote on each individual item on the agenda.

Th e holding of General Meetings of shareholders is announced by inserting ads in newspapers, giving not less than eight days’ nor more than four weeks’ notice. Th e convening notice is also sent to registered shareholders by letter. In addition to the date and time of the General Meeting of shareholders, the convening notice also contains information about the items on the agenda and an indication of the proposals submitted for consideration.

TK Development A/S has no limitations in respect of owner-ship of shares or the number of votes that a shareholder may hold. Shareholders holding in the aggregate not less than one-tenth of the share capital may convene an Extraordinary Gen-eral Meeting.

During the year, TK Development holds a number of meet-ings specifi cally arranged for shareholders, both at its own initiative and at the request of investors. Information is com-municated to shareholders via announcements of fi nancial results and stock exchange announcements, and moreover by circulating dedicated shareholder information immediately after the publication of the Annual Report and the interim report for the fi rst six months.

Th e Supervisory Board reviews the Company’s capital and

share structure on a regular basis, and an update is provided of most recent developments in the Annual Report.

Th e Supervisory Board regularly considers whether informa-tion technology can be used to increase communications with the Company’s shareholders.

II. Th e role and importance of stakeholders for the Company

TK Development is committed to an open dialogue with its stakeholders, who include investors, tenants, employees, pub-lic authorities and local interest groups.

Representatives of the Group also take part in investor meet-ings, conferences and lectures and related activities.

Th e Supervisory Board assesses corporate policies on an ongo-ing basis to ensure that they parallel the needs of stakeholders.

Th e Supervisory Board is kept currently informed about the Company’s dialogue with its stakeholders and can thus over-see that their interests are safeguarded, if necessary by making changes to the Company’s policies in this regard.

In light of this open dialogue, in future the Group also intends to review environmental and social issues for the benefi t of its stakeholders.

III. Openness and transparency

Signifi cant information of importance to shareholders and fi -nancial markets is published immediately in stock exchange announcements via NASDAQ OMX Copenhagen A/S in ac-cordance with the stock exchange rules. Th e announcements are prepared in both a Danish and an English version. Im-mediately after being published, the announcement is trans-mitted as an email to shareholders and stakeholders who have signed up for this service with TK Development. At the same time, the announcement can be accessed on the Company’s website.

Th e Group has project guidelines stipulating at which stages stock exchange announcements are to be issued, and has rules specifying which projects are of a magnitude warranting the publication of separate announcements. For instance, stock

CORPORATE GOVERNANCE

Corporate Governance | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 41/115

exchange announcements are issued on the sale of projects representing a sales value of DKK 100 million or more.

Th e Company’s website is developed on an ongoing basis. Th e website contains data regarding the Group’s project portfolio. Such data are constantly updated. TK Development’s website includes a separate Investor Relations section, which is linked to the NASDAQ OMX Copenhagen A/S’ prices and com-pany info page, which gives the updated TK share price and order depth data. TK Development arranges a number of investor meetings during the year. Immediately after these meetings, which are held following the announcement of annual and half-year an-nual results, the investor presentation material can be accessed from the Company’s website. Corporate Governance policies are described on the website. Th is description is developed on an ongoing basis.

Th e Group presents Annual Reports under IFRS, and the use of these standards is considered to provide the requisite infor-mation for shareholders and other stakeholders, as well as to enable comparability with other annual reports.

Th e disclosure of non-fi nancial information will be upgraded on an ongoing basis, both at the Company’s website and in Annual Reports.

Th e Company publishes an Annual Report, an interim report for the fi rst six months as well as interim announcements of quarterly results. Quarterly reports are not prepared, as the Supervisory Board has found that the informative value would not be commensurable with the resource usage, given the spe-cial nature of the activities carried on by TK Development.

IV. Th e tasks and responsibilities of the Supervi-sory Board

In the interim between General Meetings, the supreme au-thority of the Company is vested in the Supervisory Board. Th e work of the Supervisory Board is regulated via rules of procedure. Th ese rules of procedure are updated once a year. Th e Supervisory Board appoints the Chairman and Deputy Chairman.

Th e rules of procedure are adapted regularly and include rules about the responsibilities and duties of the Chairman of the Supervisory Board. Further, the rules of procedure specify how information is to be exchanged between the Executive Board and the Supervisory Board.

Th e Supervisory Board has decided not to set up special board committees, apart from the audit committee. Th is decision

was made in light of the size of the Supervisory Board and the commitment to ensuring a high level of information and knowledge for all board members.

At least four ordinary Supervisory Board meetings are held each year, one of which is a strategy meeting. Th e Chairman and Deputy Chairman (“Chairmanship”) arrange meetings in consultation with the Executive Board.

At its meetings, the Supervisory Board considers issues of gen-eral importance to the Group, such as:

• Goals and strategies• Division of responsibilities• Financial statements and fi nancial reporting• Authorization for major projects• Budgets• Valuation of the Group’s properties• Proposals for mergers or the acquisition or sale of com-

panies and properties• Appointment and remuneration of the Executive Board.

In the event that matters to be considered by the Supervisory Board require urgent attention, an extraordinary board meet-ing is convened. In special cases, such board meetings may be held as telephone conference meetings. In 2008/09, six board meetings were held, including a strategy meeting.

Th e Supervisory Board is provided with ongoing reporting updates, and reporting is provided prior to board meetings according to specifi c guidelines.

Th e Supervisory Board carries out one annual systematic eval-uation of the Supervisory Board’s and Executive Board’s work and competencies, including their collaboration. Th e evalu-ation includes a review of the results achieved compared to budgets, and addresses the need to change future work proc-esses.

V. Composition of the Supervisory Board and rules regarding appointments and replacements

According to the Articles of Association, the Supervisory Board must be composed of not less than four nor more than seven members. Th e Supervisory Board is composed of six members, and reference is made to the section entitled “Posts held by Supervisory and Executive Board members” for more information. In view of the Company’s size, there is no desire to appoint employee representatives to the Supervisory Board. No Supervisory Board members take part in the day-to-day management of the Company

Th e board’s competencies cover a wide spectrum, including


management, international relations, the property line and the retail line, as well as accounting and fi nancial expertise.

Candidates for election to the Supervisory Board are nomi-nated based on an overall assessment of their competencies and experience base. Th e nomination process must be based on a description of the qualifi cations required of candidates in order to ensure the best possible board composition. New members will receive a thorough introduction to the Compa-ny, and the individual board members’ further training needs will be currently assessed.

Regular assessments are made to determine whether the com-position of the Supervisory Board is optimal and ensures its ability to:

• Act independently of special interests• Preserve an equilibrium between continuity and renewal• Adapt its leadership to the Group’s situation• Have the requisite insight into the property develop-

ment business as well as the necessary business and fi -nancial qualifi cations.

TK Development publishes the number of shares and op-tions held by members of its Supervisory Board and Execu-tive Board in the section entitled “Shareholders”. Th is An-nual Report, page 52 et seq., contains information about the positions of the individual Supervisory Board members, their ages, supervisory board memberships, the dates when they joined TK Development A/S’ Supervisory Board and whether they are considered independent members.

Th e members of the Supervisory Board are elected at the Gen-eral Meeting of shareholders to serve for a term of one year at a time. Retiring members are eligible for re-election. Setting an age limit for the members of the Supervisory Board has not been considered appropriate, as competencies and experience are weighted higher than an age criterion.

VI. Remuneration of the Supervisory Board and Executive Board

Since 1995, TK Development A/S has been using incentive schemes for the Executive Board and a group of key execu-tives. Th e basic philosophy underlying these schemes was to tie executive staff members closer to the Company and to en-hance their commitment in pursuing fi nancial gains for TK Development. Th e Annual Report reviews the current incen-tive schemes.

Executive Board members receive a fi xed fee and a bonus scheme based on consolidated profi ts. Under the Executive Board’s service agreements, the individual Executive Board

member may give notice of termination no later than three months after the occurrence of an extraordinary event (change of control), such termination to take eff ect 12 months after notice has been given. Th e Executive Board member may de-mand to be released from his or her duties during the period of notice, with the usual remuneration being payable dur-ing such period. In other respects, the service agreements are based on ordinary terms and conditions.

Th e term of notice for Executive Board members is 12 months on the part of the Company and six months by the member. Pay and service terms for members of the Executive Board come up for review once a year. Th e Executive Board’s salaries, etc. appear from the Annual Report.

Supervisory Board members are paid a basic fee. Th e Chair-man is paid three times the basic fee, while the Deputy Chair-man is paid twice the basic fee. Th e basic fee in 2009 will re-main unchanged at DKK 250,000. Th e remuneration payable to the Supervisory Board will be adopted at the Annual Gen-eral Meeting at the same time as the Group’s Annual Report.

Th e Supervisory Board members are not remunerated via in-centive schemes.

VII. Risk management

One of the tasks of the Supervisory Board is to ensure effi cient risk management. A central building block of the Group’s risk management is the adopted solvency target for the Group and the liquidity targets for the subgroups with active projects, viz. TKD Nordeuropa and Euro Mall Holding. Reports to the Supervisory Board are submitted on an ongo-ing basis with respect to the Group’s risk issues, which also constitute an important element in the decision-making basis for all major projects.

Th e Supervisory Board regularly considers issues relating to the project portfolio, properties, fi nancing, IT and staffi ng as part of its broader assessment of potential risks and scarcity factors.

VIII. Audit

Auditors elected by TK Development A/S’ General Meeting of shareholders: Deloitte, Statsautoriseret Revisionsaktie-selskab, Weidekampsgade 6, DK-2300 Copenhagen S, and Nielsen & Christensen, Statsautoriseret Revisionspartner-selskab, Hasseris Bymidte 6, DK-9000 Aalborg.

Th e Supervisory Board has made the provisional choice of continuing with two auditing fi rms, even though it is possible

Corporate Governance | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 43/115

for listed companies to have only one auditing fi rm.

Th e Supervisory Board believes that auditing is an issue that concerns all board members. For this reason, and given the complexity of the accounting procedures, it has been consid-ered appropriate for all board members to sit on the audit committee.

IX. Corporate Governance Recommendations is-sued by NASDAQ OMX Copenhagen A/S

In their annual reports, listed companies must explain how they stand in relation to the “Corporate Governance Recom-mendations”, most recently updated in December 2008. One of the fundamental principles of the new recommendations is the “comply-or-explain” principle, which implies that compa-nies are required either to comply with the recommendations for corporate governance or explain why they do not comply with the recommendations in whole or in part.

Th e Supervisory Board is of the opinion that TK Develop-ment A/S lives up to the Corporate Governance Recommen-dations.


Remuneration policy

Th e Group’s remuneration policy was adopted at the Company’s An-nual General Meeting in 2008 and is set out below:

General guidelines for the Company’s remuneration of the Supervisory and Executive BoardsAccording to section 69b of the Danish Public Limited Companies Act, the supervisory board of a listed company must lay down general guidelines for the company’s incentive pay to members of the super-visory and executive boards before entering into any specifi c agree-ment on incentive pay to a member of either the supervisory or the executive board. TK Development’s Supervisory Board has chosen to describe all types of remuneration, not only incentive pay.

Th e Executive Board is taken to mean Executive Board members whose appointment has been notifi ed to the Danish Commerce and Companies Agency.

Supervisory BoardTh e members of the Supervisory Board are paid a fi xed, annual fee. Th e Chairman and Deputy Chairman of the Supervisory Board re-ceive a supplement to the fi xed fee. Th e amount of the fee and of the supplement is disclosed in the Annual Report. Th e fee is determined on the basis of comparisons with fees paid by other companies. Ad-ditional remuneration may be paid for particularly demanding tasks. Supervisory Board members are not eligible for incentive pay.

Executive BoardEvery year the Supervisory Board assesses and determines the re-muneration payable to the Executive Board members, based on the recommendation of the Chairman and Deputy Chairman (“Chair-manship”).

Th e Executive Board’s remuneration consists of a fi xed and a variable portion. Th e fi xed remuneration consists of a net salary and other benefi ts, and the value of each of these elements is disclosed in the Annual Report for each individual Executive Board member. Th e Group does not make payments to the Executive Board members’ pension schemes.

TK Development considers it expedient to continue establishing incentive schemes for the Company’s Executive Board. Th is helps ensure a balance between the incentive for the Executive Board and the short-term and long-term value creation for shareholders. Th e variable remuneration consists of a short-term and a long-term incen-tive scheme.

Th e short-term incentive scheme consists of an annual cash bonus. Th is bonus amounts to 0.5 % of the Group’s profi t after tax, which is payable to each Executive Board member. Th e bonus amount, for which no upper limit has been fi xed, is only payable when the Group’s profi t after tax results in a minimum return on

equity of 8 %. Th e bonus currently payable to each Executive Board member is disclosed in the Annual Report.

Th e long-term incentive scheme consists of an equity compensation plan in the form of warrants. Th is part of the variable remuneration is a revolving scheme, under which warrants are issued to the Execu-tive Board and other executive staff members every other year. Th e number of warrants issued to the Executive Board per allocation rep-resents a value of up to about 50 % of the fi xed annual salary payable to the Executive Board members. As the allocation takes places every other year only, this corresponds to an annual value of up to about 25 % of the fi xed annual salary paid to the Executive Board, calcu-lated according to the Black & Scholes Model. Th e warrants issued can be exercised after a three-four year period, and the redemption price, which increases successively to refl ect advance returns to the shareholders, is higher than the market price at the time of alloca-tion. Th ere is an additional lock-up period of up to two to three years for gains on any shares whose market value exceeds the subscription amount and tax. Th e tax rules applicable to the allocation of war-rants mean that capital gains are taxed as equity income, on condition that the Company’s costs associated with the allocation are not tax-deductible. Th e specifi c allocation is determined by the Supervisory Board within the established framework, and the overall scheme is submitted for adoption at the General Meeting. Th e number of war-rants issued and the accrued value of the scheme to be expensed in the Company’s books are disclosed for each Executive Board member in the Annual Report. Th e warrants issued are covered by the issue of new shares, adopted in advance at one of the Company’s General Meetings.

It is company policy to ensure that Executive Board members have an incentive to work dedicatedly in the interests of the Company and its shareholders in the event of a merger, takeover bid or similar. Against this background, the Supervisory Board may decide, on the basis of a specifi c assessment, to pay a retention bonus whereby Ex-ecutive Board members receive a special consideration, however, not exceeding 12 months’ fi xed salary, in the event that the Company merges with another company or if another company takes over all the Company’s activities, provided that the General Meeting has ap-proved such a transaction. Payment of such a bonus is contingent on the Executive Board member’s being employed by the Company at the time of the completion of such a transaction; however, the Execu-tive Board member will be entitled to the relevant bonus if his or her employment is terminated by the Company later than four months before the completion of the transaction, provided that the Executive Board member has given no reasonable cause for the termination.

Every year, the Supervisory Board will review the remuneration payable to the Executive Board by comparing it to that payable to executive boards of other comparable companies with international activities.

Financial targets | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 45/115

FINANCIAL TARGETS

Financial targets

To provide for suffi cient future fi nancial resources, TK Devel-opment has adopted a liquidity target for the whole Group; see below. In addition, Management has adopted a solvency target for the Group corresponding to a solvency ratio of minimum 30 %.

Covenants related to credit facilities in TK De-velopment

Th e Group has given its main banker an undertaking to com-ply with a solvency ratio covenant of minimum 30 % at group level, measured in connection with the presentation of An-nual Reports, half-year interim reports, and possibly quarterly interim reports. Th is ratio is measured as liable capital relative to total assets.

Liquidity covenant in TK Development

Th e Group introduced liquidity covenants in spring 2004 in connection with the division of the Group’s operating activi-ties into two subgroups. At that time, the Group wished to safeguard the interests of the new bond holders of TKD Nor-deuropa and the Investment Fund for Central and Eastern Europe, the shareholder of Euro Mall Holding, by setting up covenants to ensure good liquidity in both subgroups.

Since then, the Group has eff ected a capital increase generat-ing net proceeds of DKK 540 million, repaid the bond hold-ers of TKD Nordeuropa and bought out its co-shareholder in Euro Mall Holding, the Investment Fund for Central and Eastern Europe.

Consequently, the Group has an interest in optimizing cash fl ows throughout the Group, and has therefore decided not to uphold the liquidity covenants in the two subsidiary groups, but instead to set up a liquidity covenant at group level.

Th e covenant represents a liquidity target for the whole Group and a commitment to the Group’s main banker.

In short, the covenant expresses that the Group’s cash resourc-es must at any time correspond to the fi xed costs for the next six-month period, excluding funds received as proceeds from projects sold, but including project liabilities materializing

within the next six months.

Th e covenant must be calculated and met before projects re-quiring liquidity can be acquired and initiated.

Th e covenant is expressed as follows: L + K > E + O + R, where L = Th e TK Development Group’s free cash resources in the

form of deposits with banks and the value of listed Dan-ish government and mortgage bonds with a term to ma-turity of less than fi ve years.

K = Th e TK Development Group’s amounts available on committed operating credit facilities from time to time.

E = Th e planned impact on cash resources from the projects which the TK Development Group is obliged to com-plete within six months, including the new/expanded project, taking into account committed project credit facilities from fi nancial institutions and forward funding.

O = Th e TK Development Group’s cash non-project-related capacity costs for the following six months less manage-ment fees falling due within six months. In addition, pre-agreed project fees from fi nal and binding agreements with project investors falling due within six months are to be set off against the amount.

R = Interest accruing on the TK Development Group’s oper-ating credit facilities for the following six months.

Th e Group’s solvency and liquidity covenant were both met during the year under review.

46/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Risk issues

Financial risks

Property prices and rental income

Th e Group is aff ected by price fl uctuations on the various property markets on which it operates, as well as general eco-nomic trends. Th is applies to the Group’s portfolio of devel-opment sites, ongoing and completed projects and the intake of new projects. Declining prices of land and property and falling rent levels will impact negatively on the Group’s earn-ings from project sales not fi nalized.

Carrying amounts of assets

Management believes that the net carrying amount of the project portfolio at 31 January 2009, DKK 2,541.3 million, provides a true and fair view. As stated above, the current mar-ket conditions have resulted in plummeting property prices. Th e Group acquired a major part of its project portfolio while market conditions were more positive, and Management therefore assesses that its profi t margin on projects already ac-quired will be under pressure. However, falling construction costs for projects not yet initiated may partly compensate for this eff ect.

In addition to the project portfolio, which is categorized as current assets less prepayments received from customers, TK Development also holds property, plant and equipment in the form of investment properties. Th e value of investment properties is measured at fair value, of which the investment property portfolio in the Czech Republic was carried at DKK 153.4 million at 31 January 2009 based on a required rate of return of 7.0 % p.a. calculated using a discounted cash-fl ow model. Th e portfolio of investment properties in Germany was carried at DKK 213.1 million at 31 January 2009 based on a required rate of return of 6.5 % p.a. calculated using a discounted cash-fl ow model. Management believes that the required rates of return are consistent with current market levels. For example, the Group’s investment properties are ex-posed to the following risks:

1. General economic conditions in countries where the Group has investment property holdings.

2. Price fl uctuations on the property market, including or-dinary fl uctuations in supply and demand.

3. Interest-rate fl uctuations.4. Legislative amendments, including tax rules applying to

investors.

5. Tenants’ ability to pay.6. Foreign-exchange fl uctuations, although the Group has

contracted to have the rent paid in euro. However, the fi nancial standing of tenants may weaken due to negative exchange-rate movements between their local currencies and the euro.

7. Consumer confi dence and behaviour and, by extension, consumer purchasing power may have a signifi cant infl u-ence on the shopping centre tenants’ ability to pay.

A change in market return requirements or in factors relat-ing to the properties’ rental situation would trigger changes in the value of the investment properties. Such value adjustment would be charged against the Group’s income statement. As the Group has access to a performance-driven share of the value adjustments of some of these properties, changes in the value could have a relatively stronger impact than what is refl ected in the ownership interest and, by extension, in the value recognized in the consolidated fi nancial statements. Th e Group’s receivables consist of trade receivables and other receivables, totalling DKK 337.4 million at 31 January 2009. Any impairment losses are recognized on the basis of an as-sessment of each individual receivable. Th is assessment may be subject to uncertainty, involving a risk of insuffi cient im-pairment and, in turn, losses on receivables that will have to be charged to the income statement.

Liquidity risks

Th e international credit crunch has sharpened the Group’s at-tention to loan fi nancing, as the banks’ changed lending prac-tices have fuelled uncertainty about the availability of credit.

Having suffi cient cash resources is essential for TK Develop-ment. In order to complete the development of its planned projects and thereby achieve the expected results, the Group must have or must be able to procure suffi cient cash resources to cover the costs and deposits required for the projects, the capacity costs and other obligations. All elements of the risk factors described in the section on risk issues may have an adverse eff ect on the Group’s ability to generate such cash re-sources. TK Development depends on credits to fi nance day-to-day operations as well as existing and new projects.

RISK ISSUES

Risk issues | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 47/115

TK Development has committed itself to compliance with specifi c covenants (liquidity and solvency covenants) and has made a commitment to the Group’s main banker to the same eff ect. Th ese covenants may place limitations on the ability to initiate new activities, and in case the conditions are not complied with, the project credits or other credit facilities may be terminated.

TK Development has entered into a general agreement with the Group’s main banker about operating and project credits, in which the framework for the parties’ cooperation is laid down for a number of years. Th e agreement and the associated conditions are renegotiated once a year, and Management ex-pects the agreement to continue.

To determine the required liquidity buff er, the Group draws up both short- and long-term cash budgets. Th e Company seeks to use forward funding to limit its cash requirements. It is essential that the Group obtains third-party construction funding in cases where forward funding is not available.

Th e Group has concluded agreements with a number of banks regarding the fi nancing of land purchases and projects in Denmark and abroad. Where project credits have been raised for existing projects, the possibility of extending these cred-its is crucial to the Group. Project credits are usually granted with diff erent terms to maturity, depending on the specifi c project. Several of these project credits are due to expire in the 2009/10 fi nancial year and are thus up for renegotiation. Out of the total debt owing to credit institutions, an amount of DKK 426.9 million will mature in 2009/10. Management believes that the project credits will be extended. If funds are raised by project credits, there is a risk that the credits may ex-pire and will have to be renegotiated if construction is delayed or a project is completed without being sold, for instance.

Funds for new projects can be obtained through forward-funding agreements with investors, which means that it is up to the investor to fi nance the relevant project. Funds can also be raised under usual project credits furnished by banks.

Interest-rate risks

As a main rule, TK Development fi nances its projects in progress by short-term, fl oating-rate bank loans or by forward funding, generally based on a fi xed interest rate. Th e Group’s other interest-bearing debt is largely subject to variable inter-est (fl oating-rate debt). Th us, the main part of the Group’s total net interest-bearing debt consists of fl oating-rate loans. A one percentage point increase in short-term interest rates will, ceteris paribus, have a net negative impact on the Group’s profi t before tax of around DKK 15 million per year before tax. In addition, increasing interest rates will, ceteris paribus,

impact on investors’ return requirements, and thus on real property prices. A policy has been formulated for interest-rate risks.

Foreign-exchange risks

TK Development is an international group of companies with operations in Denmark, Sweden, Finland, Latvia, Lithuania, Germany, Russia, Poland, the Czech Republic and Slovakia. In Denmark, the Group invoices revenue from the project portfolio in Danish kroner, while outside Denmark, the for-eign subsidiaries generally invoice in their local currency or in euro. Th e Group’s reporting currency is Danish kroner. Ac-cordingly, movements in the exchange rates of local curren-cies and euro relative to Danish kroner infl uence the Group’s revenue, earnings, total assets and equity. In order to mini-mize the foreign-exchange risk on consolidated earnings, the Group generally raises funding for individual projects in the agreed invoicing currency. Similarly, construction contracts are generally concluded in the invoicing currency for the relevant project. In the few cases where the Group gains an advantage from concluding the construction contract in a dif-ferent currency than the relevant project’s invoicing currency, it will be assessed in each case whether the foreign-exchange risk is to be hedged through a forward agreement. Th e foreign subsidiaries pay their staff costs and other administrative ex-penses in local currencies.

Each Group subsidiary determines its functional currency as the offi cial currency of the primary fi nancial environment in which the entity operates. In determining its functional cur-rency, each entity takes account of which currency has the strongest impact on selling prices, the offi cial currency of the country whose market forces and legislation have the strongest impact on selling prices, and which currency has the strongest impact on costs. All transactions of each entity are measured in the functional currency in order to minimize the foreign-exchange risk of each subsidiary. In spite of the above-mentioned initiatives to minimize the foreign-exchange risk, changes in the local currencies of for-eign subsidiaries or in the euro against Danish kroner will in-fl uence the future fi nancial position and results of the Group. Th e policy formulated for foreign-exchange risks is adhered to.

Credit risks

In connection with the sale of the Group’s development projects, the title does not pass to the investor until payment has been eff ected. Th us, the Group’s sale of projects does not generate credit risks as such.


Cross-liability between the Group’s companies

TK Development A/S has provided guarantees on a continu-ing basis for the Group’s overall banking and guarantee com-mitments. Also, in a few cases, TK Development has provided guarantees for group companies’ agreements, including trans-actions, construction contracts and leases.

Risks relating to Group operations

Development activities

TK Development operates as a development company and seeks to enter into agreements with investors at a very early stage in the development process, the object being to limit the Group’s risk to the development activity as such. Th is risk limitation strategy means that projects are not always fully defi ned at the time contracts are concluded with investors. Th e Group aims to enter into an agreement with the inves-tor around the time of construction startup. Consequently, the most signifi cant risks attaching to projects for which sales agreements have been concluded are closely linked to individ-ual elements of the implementation process, such as obtaining relevant permits from the authorities, coordinating subcon-tractors, meeting time schedules, assessing the letting risk and complying with the construction budget. Th e risk attaching to existing projects may be signifi cant despite advance agree-ments made with an investor, and may thus also result in ma-jor uncertainty regarding cash fl ows, capital to be tied up and timeframes. If, contrary to expectations, the Group discovers that elements key to the completion of a project cannot be met, a sold project may have to be abandoned or completed at the Group’s own expense. Project costs defrayed that relate to unsold projects are expensed if the projects in question are abandoned.

A substantial number of the Group’s projects will be sold to investors based on a fi xed, agreed initial return calculated on the lease agreements concluded in the project development phase. In cases where a sales agreement is concluded before all lease agreements in the project have been fi nalized, the Group undertakes a calculated risk that the remaining unlet premises will be let on terms and conditions that ensure a satisfactory profi t or the agreed selling price, as the case may be, for the project.

For projects that have been sold, construction will not be ini-tiated until the Group anticipates being able to meet such in-vestor requirements as would fi nalize the project sale. Meeting these requirements typically falls within the Group’s sphere of competencies. Th e Group assumes a calculated risk that it may be unable to meet these requirements, contrary to its expectations.

Basically, the construction of unsold projects will only be giv-en the go-ahead if lease agreements have been concluded for at least 60 % of the leasable premises. Th us, the Group assumes the risk of the project being sold as well as project funding. In addition to the above-mentioned project development risks, such projects are also subject to the risk that they cannot be sold at a satisfactory profi t. Th is may force the Group to either keep the project and continue to tie up the working capital involved or sell the project at a lower profi t or at a loss. Th is risk will be partly off set by the minimum occupancy rate to be met prior to commencement of construction. When changes occur in the Group’s markets, projects not sold are subject to the risk of investor return requirements increas-ing sharply, and the Group’s consumption of resources may be lost and the value of acquired land or relevant associated rights may depreciate.

Dependency on staff

Th e knowledge, experience and networks of key employees constitute some of TK Development’s greatest assets, and are thus key prerequisites for the Group’s ability to carry on prof-itable business. Accordingly, ensuring these employees’ long-term commitment is a vital competitive parameter for the Group. Th ere can be no assurance that the Group can retain existing employees or attract new ones.

Environmental conditions

As a development company, TK Development does not carry on any actual production activities that in themselves may im-pact the environment negatively. If there are reasons to suspect contamination when development sites and existing buildings are acquired, the appropriate reservations are made in the pur-chase process, soil samples taken and thorough environmental analyses conducted. If a site has been contaminated by previ-ous activities, the land will be cleaned up for the particular purpose for which it is to be used, or the Group will decide not to acquire it. If developed sites have been insuffi ciently cleaned up, or if the assessment of the required cleaning-up proves incorrect with respect to undeveloped sites, cleaning-up or disposing of such areas may result in the Group in-curring signifi cant unforeseen expenses in the cases where the Group cannot pass on such expenses to its contractors.

Structural changes

For its future earnings, the Group relies on the infl ow of new projects and, by extension, on the future availability of new building sites and planning permission from local authorities. Changes in national legislation, local plans or other factors that make obtaining planning permission diffi cult or restrict the supply of building sites will have a negative impact on future earnings.


Tax matters

Th e deferred tax asset of DKK 265.7 million included in the balance sheet at 31 January 2009 relates mainly to tax loss carryforwards in the diff erent subsidiaries, and to negative de-ferred tax. Th e total impairment of the tax asset amounts to DKK 56.4 million.

Valuation is based on the existing rules for carrying forward losses and group pooling or group contributions and the as-sumption that each subsidiary is a going concern. A change in the terms and assumptions for carrying forward losses and group pooling/group contributions could result in the value of the tax assets being lower than the value computed at 31 January 2009. Management performed the valuation on the basis of the existing business plans. In the event the business plans do not materialize, the value of the tax assets could be lower than the value computed at 31 January 2009.

Up to and including the 2004/05 fi nancial year, TK Develop-ment A/S and the Danish subsidiaries subject to group pool-ing were taxed with the Group’s German subsidiaries on a pooled basis. Tax has not been provided on the retaxation bal-ance, because Management does not plan to invoke changes in the Group that would result in full or partial retaxation.

Risks relating to legal matters

Th ird-party agreements

A major portion of TK Development’s business consists of concluding agreements with development partners, investors, tenants and contractors for property development projects. A description is given below of the most signifi cant risks regard-ing these contractual issues.

Agreements with development partners

Agreements have been made with the following major de-velopment partners: Udviklingsselskabet By og Havn I/S, Nordkranen Ejendomsudviklingsselskab A/S, Frederikshavn Maritime Erhvervspark A/S, Atrium European Real Estate (previously Meinl European Land Ltd.), Miller Holdings International Limited, the Baltic Property Trust Group and LMS (DHL) Limited.

Th e risks primarily break down into potential problems due to disagreements regarding strategy and development focus and speed on the one hand and the risk of cooperation agreements being terminated on the other. TK Development has attempt-ed to counter these risks by concluding long-term cooperation agreements that can only be terminated on the grounds of breach. However, there can be no assurance that either the Group or a partner will not breach the agreement, and there can be no assurance that existing cooperation agreements will

not give rise to other disagreements between the parties.

Agreements with investors

TK Development’s customers on the investment side are private property companies and institutional investors. To the extent possible, the Group seeks to reduce its working capital and risks relating to ongoing projects by applying for-ward funding from investors, which means that one or more investors undertake to provide funding as project construc-tion progresses. Before construction starts, the investor and TK Development come to an agreement on a well-defi ned project. Th e investor remains fi nancially involved throughout the construction period and is consulted on major decisions. Th ese principles ensure that from construction startup, TK Development’s risk in the project is mostly limited to the let-ting risk attaching to any remaining unlet premises and the risk of construction budget overruns.

In agreements with institutional investors, the overriding risk relates to the Group’s ability to deliver on time and according to specifi cations, while the counterparty risk is less signifi cant. Even though a sales agreement regarding a project has been concluded, major risks may still attach to the project in a number of cases, which may lead to the cancellation of a sales agreement on account of breach by one of the parties.

However, under the current market conditions, obtaining forward-funding agreements with investors is expected to be more diffi cult. For some time to come, it must be expected that more agreements to sell projects will be based on forward purchase, with payment being eff ected on project completion and handing-over to the investor. Such agreements may con-tain reservations regarding funding procurement, etc. Th e risk attaches generally to counterparty risks, primarily the ability of investors to meet the conditions to which fi nal completion of a deal is subject. Accordingly, these factors are to some ex-tent outside the infl uence of the Group.

Agreements with tenants

Th e risk attaching to lease agreements primarily comprises the ability of tenants to live up to the terms and conditions of the lease agreement, including particularly the obligation to pay. If the tenants do not live up to the terms of the lease agreement in a project sold, the investor who has bought the property may in some cases set up a claim against the Group. In a worst-case scenario, the investor may not be obliged to uphold the acquisition. Attempts are made to reduce the risks by claiming suitable deposits and bank guarantees and gener-ally being alert to any changes in the creditworthiness of ten-ants. However, there is no guarantee that such measures will be suffi cient to curb any losses on account of breach of lease agreements.


Agreements with contractors

All construction contract assignments are bought externally and are typically based on fi xed-priced contracts containing guarantees as security for performance of the contractor’s obligations. Th is reduces the Group’s risk of unforeseen fl uc-tuations in the construction costs with respect to individual projects. However, there can be no assurance that a contractor can honour his obligations under a construction contract, or that the guarantees provided under it are suffi cient to ensure that a given project will generate earnings for the Group. If a contractor breaches a construction contract, the worst-case scenario would be that the Group cannot honour its own agreements regarding the sale and/or letting of the relevant property, implying that the Group would risk being in breach of concluded agreements.

Senior Vice President charged by the Polish police

In June 2006, the Senior Vice President in charge of the Group’s Polish branch offi ce was detained, taken into custody and charged by the Polish police with irregularities related to obtaining regulatory approval (zoning permission) for the Polish Galeria Biala shopping centre project in Bialystok. In November 2006, the Senior Vice President was released on bail. Th e Polish prosecution service has indicted the Senior Vice President.

During the entire process, Group Management has been un-able to fi nd any irregularities in connection with the project, and thus fails to comprehend that the Senior Vice President could be involved in the alleged practices. If, contrary to Management’s expectations, the Senior Vice President is convicted, this might damage the Group’s reputa-tion and thus adversely aff ect its activities and earnings.

Charges brought by the public prosecutor for serious eco-nomic crime

As stated in stock exchange announcements nos. 19/2005 and 20/2005, the prospectus published on 30 December 2005 and the Annual Report for 2005/06, TK Development A/S and six individuals have been charged by the public prosecutor for serious economic crime with fraudulent income recognition and share price manipulation concerning periods covering the 2000/01, 2001/02, 2002/03 and 2003/04 fi nancial years. Th e charge from the autumn of 2005 covers 16 projects. On 14 June 2006, the charge against TK Development and the six individuals was supplemented; see stock exchange an-nouncement no. 7/2006. Th e charge still concerns fraudulent income recognition and share price manipulation and also relates to periods covering the 2000/01 to 2003/04 fi nancial years. From June 2006, the charge has covered a total of 29 projects following the addition of 13 projects located in both

Denmark and Central Europe.

In spring 2007, charges were also brought against two of the Company’s auditors from Deloitte and Nielsen & Christensen, who no longer serve as auditors for the Group. Th e charges were brought because, according to the public prosecutor for serious economic crime, the conditions for the Group’s use of the percentage of completion method for the relevant fi nan-cial years had not been met, and the fi nancial statements of TK Development A/S for the 2000/01 to 2003/04 fi nancial years were therefore incorrect on some points. In addition, the public prosecutor for serious economic crime has submit-ted the matter to the committee charged with drafting legal opinions at the Institute of State-authorized Public Account-ants in Denmark.

Management still considers that the charges are based on mis-conceptions concerning the Group’s accounting policies. For a more detailed description of the charge, including the exact wording of the charge from October 2005, please see the pro-spectus published on 30 December 2005, the Group’s Annual Report for 2005/06 and stock exchange announcement no. 3/2006.

Th e matters covered by the charges have no impact on the Group’s current fi nancial position.

If the charges lead to the Company being indicted on the counts set out in the charge sheets or for violation of other accounting provisions and to subsequent conviction, the Company may be fi ned. Assessing the size of such fi ne is sub-ject to considerable uncertainty. Moreover, the risk exists that investors who have bought or sold shares and/or bonds in TK Development A/S during the relevant period will claim dam-ages from the Company. Whether such claims would lead to the Company becoming liable for damages will depend on, among other things, whether the investors in question can prove a loss and document that such loss has occurred as a result of unlawful actions taken by the Company or its em-ployees. It is not possible to assess the potential extent of any such claims for damages. If convicted of misrepresentation for the purpose of income recognition, the individuals charged may be punished by imprisonment for up to 18 months and, in aggravating circumstances, the punishment may be im-prisonment for up to four years. If the charges, a potential indictment and a potential trial continue for a lengthy pe-riod of time, such period will put a strain on the Company’s resources and the individuals charged, and this may have a material, negative indirect eff ect on the Group. In the event developments in the case result in one or more of the individ-uals charged having to resign, this could also have an adverse indirect eff ect on the Group. A conviction might damage the Group’s reputation and thus adversely aff ect its activities and earnings.


Lawsuits

TK Development is currently party to the following legal pro-ceedings/arbitration proceedings that are of relevance due to their scope:

In the summer of 2002, De Samvirkende Købmænd, a trade association of grocery retailers, fi led a complaint with the Na-ture Protection Board of Appeal (Naturklagenævnet) in re-spect of the City of Copenhagen’s approval of the layout of the Field’s department store. In particular, the claim asserted that the Field’s department store is not one department store, but that it consists of several individual stores. Th e Nature Protec-tion Board of Appeal made its decision in the matter on 19 December 2003, after which the department store layout was approved. De Samvirkende Købmænd subsequently took out a writ against the Nature Protection Board of Appeal before the Danish High Court. A ruling in the matter is expected at the earliest in 2009 or 2010. Neither the owner of the centre nor any company in the TK Development Group is a direct party to the case, but if the High Court were to uphold De Samvirkende Købmænd’s claim in full or in part, the Field’s department store may have to be redesigned following nego-tiations with the relevant local authorities. If the High Court rules in favour of De Samvirkende Købmænd, the owner of Field’s may have to incur the fi nancial burden of causing the necessary changes to the building layout, and in that connec-tion it cannot be ruled out that a claim may be made against the Group. In light of previous rulings made, Management believes the risk of this case to be negligible. In addition, the Group is involved in a few disputes, none of which is deemed to have a scope that, either individually or collectively, may aff ect the Group’s performance to any ap-preciable extent.

52/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Posts held by Supervisory and Executive Board members

Chairman Poul Lauritsen, Director

Born 16 February 1936Joined the Supervisory Board in 1993Term of offi ce ends May 2009

Education:Commercial education and MSc in Economics and Business Administration

Employment:1961-1974: Management consultant, director and partner in T. Bak-Jensen A/S.1976-1989: Director and partner in BakConsult Gruppen A/S (managing partner 1984-1989).1990-1992: Director in PA Consulting Group A/S.

Member of the supervisory boards of:Gangsø Møbler A/S (Chairman)Aalborg Stiftstidende A/S (Deputy Chairman)Nordjyske Holding A/S (Deputy Chairman)Aa. S.F. Holding A/S (Deputy Chairman)House of Businesspartners A/S

Poul Lauritsen is considered an independent member of the Supervisory Board. *)

Deputy Chairman Torsten Erik Rasmussen, MBA, Director

Born 29 June 1944Joined the Supervisory Board in 1998Term of offi ce ends May 2009

Education: 1961-1964: Commercial education, Dalhoff Larsen & Horneman A/S, Denmark.1964-1966: National service with the Royal Life Guards, dis-charged from military service as fi rst lieutenant 1967 (R).1972: MBA, IMEDE, Lausanne, Switzerland.1985: International Senior Managers’ Program, Harvard Business School.

Employment: 1967-1971: Head of department and later director of Northern Soft- & Hardwood Co. Ltd., Congo.1973: Executive secretary, LEGO System A/S, Denmark.1973-1975: Finance manager, LEGOLAND A/S, Denmark.1975-1977: Logistics manager, LEGO System A/S, Denmark.1977-1978: Assistant manager (logistics), LEGO System A/S, Denmark.1978-1980: President and CEO, LEGO Overseas A/S, Denmark.1981-1997: Manager and member of Group Management, LEGO A/S, Denmark.

Member of the supervisory boards of:EBP Holding A/S (Chairman)EVO Invest A/S (Chairman)Ball ApS (formand)Outdoor Holding A/S + one subsidiary (Chairman)A/S Det Østasiatiske Kompagni (Deputy Chairman)Vestas Wind Systems A/S (Deputy Chairman)Acadia Pharmaceuticals Inc., San Diego + one subsidiaryColoplast A/SECCO Sko A/S + fi ve subsidiariesMorgan Invest ApSSchur International Holding A/SVola Holding A/S + one subsidiary

Torsten Erik Rasmussen is considered an independent member of the Supervisory Board. *)

POSTS HELD BY SUPERVISORY AND EXECUTIVE BOARD MEMBERS

*) See section V.4 in the Corporate Governance Recommendations prepared by NASDAQ OMX Copenhagen A/S.

Posts held by Supervisory and Executive Board members | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 53/115

Jesper Jarlbæk

Born 9 March 1956Joined the Supervisory Board in 2006Term of offi ce ends May 2009

Education: 1981: Trained as a state-authorized public accountant. 2006: Licence placed in inactive status.

Employment: 1974-2002: Arthur Andersen (most recently as managing part-ner).2002-2006: Deloitte (executive vice president).

Member of the supervisory boards of:Advis A/S (Chairman) Altius Invest A/S + four subsidiaries (Chairman)Ascendi A/S (Chairman)Basico Consulting International A/S (Chairman)Groupcare Holding A/S + three subsidiaries (Chairman)JAWS A/S (Chairman)Prospect A/S (Chairman)Laigaard & Partners A/S (Deputy Chairman)Earlbrook Holdings Ltd. A/SIT2 TMS Ltd.TORM A/SInternational Rescue Journal A/S

Member of the executive board of:Earlbrook Holdings Ltd. A/S.

Jesper Jarlbæk is considered an independent member of the Su-pervisory Board. *)

Per Søndergaard Pedersen, Director


Education:Trained with Sparekassen Nordjylland (Spar Nord Bank).

Employment: 1983-1986: Head of the business department at Sparekassen Nordjylland headquarters, Østeraa branch. 1986-1989: Regional manager, Sparekassen Nordjylland, Hasseris branch. 1989-2002: CEO, TK Development A/S.

Member of the supervisory boards of:Business Institute A/S (Chairman)Celenia Software A/S + three subsidiaries (Chairman)EIPE Holding A/S (Chairman)Ib Andersen A/S Øst (Chairman)J. A. Plastindustri A/S (Chairman)JMI A/S + three subsidiaries (Chairman)Lindgaard A/S – Rådgivende Ingeniører (Chairman)Nowaco Group A/S + one subsidiaries (Chairman)PL-Holding Aalborg A/S + two subsidiaries (Chairman)TBP Invest Aalborg A/S (Chairman)Aalborg Boldspilklub A/S + six subsidiaries (Chairman) Ejendomsmægleraktieselskabet Th orkild Kristensen A/S + two subsidiariesMarius A/SOKF Holding A/S + two subsidiaries Skandia Kalk International Trading A/S + one subsidiarySmall Cap Danmark A/SSpar Nord Bank A/SToppenberg Maskinfabrik A/S + one subsidiaryRejser A/S + three subsidiariesFonden Musikkens Hus i NordjyllandKollegiefonden BikubenInvesteringsforeningen SmallCap Danmark

Per Søndergaard Pedersen is not considered an independent mem-ber of the Supervisory Board.*)


54/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Posts held by Supervisory and Executive Board members

Kurt Daell, Attorney


Education: 1976: MA (Law).1988: Practising certifi cate placed in inactive status on the roll of attorneys.

Employment:1983-86: Chairman of the supervisory board of A/S Daells Var-ehus (served as the CEO 1988-92). 1983-93: Chairman of the supervisory board of A/S Daells Dis-count. 1993-99: Chairman of the supervisory board of A/S Madeleine. 1985-87: Member of the supervisory board of Dagligvare Grup-pen K/S, Vejle. 1987-91: Member of the supervisory board of Dansk Fryse Økonomi, Osted. 1977-87: Secretary General for Denmark in AEVPC (Associa-tion Européenne de Vente par Correspondance – European Mail Order and Distance Selling Trade Association). 1981-87: Member of the International Advisory Board of DMA (Direct Marketing Association), USA.

Member of the supervisory boards of:A/S Harald Nyborg + 39 subsidiaries (Chairman) including A/S Jem & Fix A/S Daells BolighusStressmeter A/S

Kurt Daell is considered an independent member of the Supervi-sory Board. *)

Niels Roth, Director

Born on 24 July 1957Joined the Supervisory Board in 2007Term of offi ce ends May 2009

Education:1983: Msc (Economics)

Employment:1989-2004: CEO of Carnegie Bank, and Group Head of Invest-ment Banking in the Carnegie Group (2001-2002).1997-2004: Member of the Danish Securities Council.2001-2004: Chairman of the Danish Securities Dealers’ Associa-tion.

Member of the supervisory boards of:Friheden Invest A/S (Chairman) + two subsidiaries

Foreningen Fast Ejendom Dansk Ejendomsportefølje f.m.b.a. + one subsidiary (Chairman)

SmallCap Danmark A/S + one subsidiary (Deputy Chair-man)

Investeringsforeningen SmallCap Danmark (Deputy Chairman)

Brøndbyernes IF Fodbold A/SRealdaniaArvid Nilssons Fond

Member of the Executive Board of:Zira Invest II ApS + one subsidiaryZira Invest III ApS

Niels Roth is considered an independent member of the Supervi-sory Board. *)


Posts held by Supervisory and Executive Board members | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 55/115

Frede Clausen, President and CEO

Born 30 July 1959Member of the Executive Board of TK Development since 1992

Member of the supervisory boards of:Udviklingsselskabet Nordkranen A/S (Chairman) + two subsidiaries

Kommanditaktieselskabet DLU nr. 1 (Chairman)Kommanditaktieselskabet Danlink Udvikling Step RE CSP A/S + one subsidiaryPalma Ejendomme A/S

Robert Andersen, Executive Vice President

Born 3 April 1965Member of the Executive Board of TK Development since 2002

Member of the supervisory boards of:Udviklingsselskabet Nordkranen A/S + two subsidiariesKommanditaktieselskabet DLU nr. 1Kommanditaktieselskabet Danlink Udvikling Kommanditaktieselskabet Østre Havn

56/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Statement by the Supervisory and Executive Boards

Th e Supervisory and Executive Boards have today considered and adopted the 2008/09 Annual Report of TK Development A/S.

Th e audited Annual Report is presented in accordance with International Financial Reporting Standards (IFRS), as adopt-ed by the EU, and additional Danish disclosure requirements for annual reports prepared by listed companies.

We consider the accounting policies applied to be appropri-ate, and, in our opinion, the Annual Report gives a true and fair view of the Group’s and Parent Company’s fi nancial posi-tion at 31 January 2009 and of the results of the Group’s and Parent Company’s operations and cash fl ows for the period

from 1 February 2008 to 31 January 2009.

Moreover, in our opinion, the Management’s review gives a true and fair view of the development in the Group’s and Parent Company’s activities and fi nancial aff airs, the results for the year and the Group’s and Parent Company’s overall fi nancial position, and provides a true and fair description of the most signifi cant risks and elements of uncertainty faced by the Group.

We recommend that the 2008/09 Annual Report be adopted by the Annual General Meeting of shareholders.

STATEMENT BY THE SUPERVISORY AND EXECUTIVE BOARDS ON THE ANNUAL REPORT

Aalborg 24 April 2009

EXECUTIVE BOARD

SUPERVISORY BOARD

Frede ClausenPresident and Chief Executive Offi cer (CEO)

Robert AndersenExecutive Vice President

Poul LauritsenChairman

Torsten Erik RasmussenDeputy Chairman

Kurt Daell Per Søndergaard Pedersen

Jesper Jarlbæk Niels Roth

Independent Auditors’ Report | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 57/115

Aalborg, 24 April 2009

NIELSEN & CHRISTENSENStatsautoriseret Revisionspartnerselskab

Marian Fruergaard Per Laursen

State-authorized public accountant State-authorized public accountant

INDEPENDENT AUDITORS’ REPORT

To the shareholders of TK Development A/S

We have audited the Annual Report of TK Development A/S for the fi nancial year 1 February 2008 - 31 January 2009, which comprises the Statement by the Supervisory and Ex-ecutive Boards on the Annual Report, Management’s Review, income statement, balance sheet, statement of changes in equity, cash fl ow statement and notes, including accounting policies, for the Group as well as the Parent Company. Th e Annual Report is presented in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and additional Danish disclosure requirements for annual re-ports prepared by listed companies.

Th e Supervisory and Executive Boards’ responsibility for the Annual Report

Th e Supervisory and Executive Boards are responsible for the preparation and fair presentation of an annual report in ac-cordance with International Financial Reporting Standards, as adopted by the EU, and additional Danish disclosure re-quirements for annual reports prepared by listed companies. Th is responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from material misstatement, whether due to fraud or error; selecting and ap-plying appropriate accounting policies; and making account-ing estimates that are reasonable in the circumstances.

Auditors’ responsibility and basis of opinion

Our responsibility is to express an opinion on this Annual Re-port based on our audit. We conducted our audit in accord-ance with Danish and International Standards on Auditing. Th ose standards require that we comply with ethical require-ments and plan and perform the audit to obtain reasonable assurance whether the Annual Report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Report. Th e procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Annual Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Annual Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the entity’s internal control. An audit also includes evaluat-ing the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Super-visory and Executive Boards, as well as evaluating the overall presentation of the Annual Report.

We believe that the audit evidence we have obtained is suffi -cient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualifi cation.

Opinion

In our opinion, the Annual Report gives a true and fair view of the Group’s and Parent Company’s fi nancial position at 31 January 2009 and of the results of the Group’s and Parent Company’s operations and cash fl ows for the fi nancial year 1 February 2008 - 31 January 2009 in accordance with Interna-tional Financial Reporting Standards, as adopted by the EU, and additional Danish disclosure requirements for annual re-ports prepared by listed companies.

Copenhagen, 24 April 2009

DELOITTEStatsautoriseret Revisionsaktieselskab

Lars Andersen Jesper Jørgensen

State-authorized public accountant State-authorized public accountant

58/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Independent Auditors’ Report

TK Development A/S presents its Annual Report for 2008/09, including fi nancial statements for the Parent Company and for the Group, in compliance with the International Financial Reporting Standards (IFRS), as approved by the EU, and in accordance with Danish disclosure requirements for annual reports prepared by listed companies; see the requirements made by NASDAQ OMX Copenhagen A/S as to the fi nan-cial reporting by listed companies and the Executive Order on IFRS issued in pursuance of the Danish Financial Statements Act.

Th e Annual Report also complies with the International Fi-nancial Reporting Standards (IFRS) issued by IASB.

All fi gures in the Annual Report are presented in DKK mil-lion, unless otherwise stated. DKK is the presentation cur-rency for the Group’s activities and the functional currency of the Parent Company.

Th e Annual Report is presented on the basis of historical cost, with the exception of investment properties, derivative fi nan-cial instruments and fi nancial assets classifi ed as available for sale, which are measured at fair value.

Implementation of new and amended fi nancial reporting standards and interpretations issued by IFRIC

Th e 2008/09 Annual Report has been presented in accord-ance with the new and amended fi nancial reporting standards (IFRS/IAS) and new IFRIC interpretations applicable for fi -nancial years beginning at 1 February 2008 or later. Th ese standards and interpretations are: IAS 39 Financial instru-ments: Recognition and Measurement (amended October 2008) and IFRIC 11, IFRIC 12 and IFRIC 14.

Th e implementation of new and amended fi nancial report-ing standards and interpretations into the Annual Report for 2008/09 has not resulted in any changes to the accounting policies in the consolidated fi nancial statements. Th us, the new standards and interpretations have no eff ect on the earn-ings per share and the diluted earnings per share.

Th e accounting policies for the Parent Company’s fi nancial statements have been changed following the implementation of IFRIC 11. Th e eff ect of these changes appears from note

1 to the Parent Company’s fi nancial statements.Th e account-ing policies for the Parent Company’s fi nancial statements have been changed following the implementation of IFRIC 11. Th us, the value of incentive schemes allocated to subsidi-aries’ employees is now recognized in the Parent Company’s fi nancial statements under “investments in subsidiaries”, with a corresponding amount recorded directly in equity. Th is item was not previously recognized in the Parent Company’s fi nan-cial statements. Th e eff ect of these changes appears from note 1 to the Parent Company’s fi nancial statements.

Apart from the changes referred to above, the accounting poli-cies have been consistently applied compared to last year and are set out below.

Financial reporting standards and IFRIC interpretations not yet in force

At the date of publication of this Annual Report, a number of new or amended fi nancial reporting standards and IFRIC in-terpretations had not yet entered into force or been approved by the EU. Th us, they have not been incorporated into the Annual Report. Th e implementation of the above-mentioned standards and interpretations is not expected to materially af-fect the annual reports for the next fi nancial years, with the exception of additional disclosure requirements for operat-ing segments following from the implementation of IFRS 8 from the 2009/10 fi nancial year, the changed presentation of fi nancial statements following from the implementation of the amended IAS 1 from the 2009/10 fi nancial year, and the eff ect that the revised IFRS 3 will have from the 2010/11 fi -nancial year on the accounting treatment of any future acqui-sitions. Reference is also made to note 36 in the consolidated fi nancial statements.

Consolidated fi nancial statements

Th e consolidated fi nancial statements comprise the Parent Company, TK Development A/S, and the enterprises control-led by the Parent Company. Th e Parent Company is consid-ered to exercise control when it holds more than 50 % of the voting rights, whether directly or indirectly, or otherwise has a controlling interest.

Enterprises in which the Group holds between 20 % and 50 % of the voting rights, whether directly or indirectly, and thus has signifi cant infl uence, but not a controlling interest,

ACCOUNTING POLICIES


are considered associates. Enterprises managed together with other investors are considered joint ventures.

Consolidated fi nancial statements are prepared on the basis of the fi nancial statements of the Parent Company and its subsidiaries by adding together items of a uniform nature. Th e fi nancial statements on which the consolidated fi nan-cial statements are based are prepared in accordance with the accounting policies applied by the Group. Th e items in the subsidiaries’ fi nancial statements are fully recognized in the consolidated fi nancial statements. Th e minority interests’ proportionate share of the profi t or loss for the year is included as part of the consolidated profi t or loss for the year, and the proportionate share of equity is shown as a separate item under consolidated equity. On consolidation, intercompany income and expenses, share-holdings, balances and dividends as well as gains on transac-tions between consolidated enterprises are eliminated. Losses are eliminated to the extent that no impairment has occurred.

Th e consolidated fi nancial statements include subsidiaries and associates throughout the period of ownership.

Business combinations

Newly acquired or newly established enterprises are recog-nized in the consolidated fi nancial statements as from the date of acquisition or establishment. Sold or wound-up enterprises are recognized in the consolidated income statement until the date of sale or winding-up. Comparative fi gures are not ad-justed for newly acquired, sold or wound-up enterprises.

Upon the acquisition of new enterprises, the purchase method is used, which means that the diff erence between the cost of the enterprise and the fair value of identifi able assets, liabilities and contingent liabilities in the acquired enterprise is calcu-lated at the acquisition date. Restructuring provisions regard-ing the acquired enterprise are only recognized in the transfer balance sheet if they constitute a liability for the enterprise acquired. Th e tax eff ect of revaluations made is taken into ac-count.

Th e cost of an enterprise consists of the fair value of the consideration paid plus the costs directly attributable to the acquisition. If the fi nal determination of the consideration depends on one or more future events, adjustments are only made to the cost if the relevant event is probable and the eff ect on cost can be determined reliably.

Positive balances are recognized as goodwill in the balance sheet under intangible assets, and the goodwill amount is sub-jected to impairment tests on a continuing basis. If the carry-

ing amount of the asset exceeds the recoverable amount, it is written down to the recoverable amount.

For business combinations eff ected before 1 February 2004, the accounting classifi cation according to the previous ac-counting policies has been retained. Th us, goodwill deriving from such business combinations is recognized on the basis of the cost recognized according to the previous accounting policies (the Danish Financial Statements Act and Danish accounting standards), net of amortization and impairment until 31 January 2004. Goodwill recognized in the opening balance sheet was tested for impairment at 1 February 2004 and continues to be subjected to impairment tests on an on-going basis. As of 31 January 2009, the carrying amount of goodwill relating to business combinations eff ected before 1 February 2004 totalled DKK 29.1 million.

Gains or losses on the sale or winding-up of subsidiaries are determined as the diff erence between the selling price or the disposal sum and the carrying amount of the net assets at the date of sale or winding-up, including goodwill, accumulated foreign-exchange adjustments posted directly to equity and the expected costs of the sale or winding-up. Th e selling price is measured at the fair value of the consideration received.

Associates/joint ventures in the consolidated fi -nancial statements

In the consolidated fi nancial statements, investments in as-sociates are recognized and measured according to the equity method, which means that investments are measured at the proportionate share of the associates’ carrying amount, deter-mined according to the Group’s accounting policies, with the addition of goodwill and plus or less any proportionate inter-company profi ts or losses.

Th e proportionate share of the associate’s results after tax and the proportionate elimination of unrealized intercompany profi ts and losses are recognized in the income statement. Th e proportionate share of all transactions and events recognized directly in the associate’s equity is recognized in consolidated equity. Investments in associates with a negative equity value are measured at DKK 0. Receivables and other long-term fi -nancial assets considered to be part of the overall investment in the associate are written down by any remaining negative equity value. Trade receivables and other receivables are writ-ten down only to the extent that they are considered uncol-lectible. A provision for the remaining negative equity value is only recognized if the Group has a legal or constructive obli-gation to meet the relevant associate’s liabilities.

Associates whose activities comprise projects within the Group’s primary sphere of activity (development and contract


work), and which are managed together with other investors (joint ventures), are included in the consolidated fi nancial statements by pro rata consolidation of the associates’ ac-counting items, so that a proportionate share, equal to the participation in the associates, is included in the correspond-ing items in the consolidated fi nancial statements.

Translation of foreign-currency items

A functional currency is determined for each of the reporting enterprises in the Group. Th e functional currency is the cur-rency used in the primary economic environment in which the individual reporting enterprise operates. Transactions in currencies other than the functional currency are considered foreign-currency transactions. On initial recognition, transac-tions in foreign currencies are translated into the functional currency at the exchange rates ruling at the dates of the trans-actions. Exchange diff erences arising between the exchange rate on the transaction date and the exchange rate on the payment date are recognized in the income statement under fi nancial items.

Receivables, payables and other monetary items in foreign currencies that have not been settled by the reporting date are translated into the functional currency according to the exchange rates ruling at the reporting date. Realized and un-realized exchange gains and losses are recognized as fi nancial items in the income statement. Property, plant and equip-ment, intangible assets, projects in progress or completed and other non-monetary assets that have been bought in foreign currencies and are measured on the basis of historical cost are translated at the exchange rate ruling on the transaction date. Non-monetary items that are revalued at fair value are trans-lated at the exchange rate ruling on the date of revaluation.

When enterprises that present fi nancial statements in a func-tional currency other than Danish kroner (DKK) are recog-nized in the consolidated fi nancial statements, items in the income statement are translated on the basis of the average exchange rates for the period under review, and items in the balance sheet (including goodwill) are translated on the basis of the exchange rates ruling at the reporting date. If the aver-age exchange rates for the period under review deviate signifi -cantly from the actual exchange rates at the transaction dates, the actual exchange rates are used instead. Exchange diff erenc-es arising on translating foreign enterprises’ beginning-of-year equity at the exchange rate ruling at the reporting date and on translating the income statement items from the average exchange rate for the period under review to the exchange rate at the reporting date are recognized directly in equity under a special reserve for foreign-exchange adjustments. Exchange diff erences arising as a result of changes recognized directly in

the equity of the foreign reporting enterprise are also posted to equity. Foreign-exchange adjustments of intercompany ac-counts with foreign subsidiaries that are considered additions to/deductions from the net investment are posted directly to equity under a special reserve for foreign-exchange adjust-ments in the consolidated fi nancial statements, while they are recognized in the income statement of the Parent Company’s fi nancial statements.

When associates/joint ventures that present fi nancial state-ments in a functional currency other than DKK are recog-nized in the consolidated fi nancial statements, items in the income statement are translated on the basis of the average exchange rates for the period under review, and items in the balance sheet are translated on the basis of the exchange rates ruling at the reporting date. Exchange diff erences arising on translating foreign enterprises’ beginning-of-year equity at the exchange rate ruling at the reporting date and on translating the income statement items from the average exchange rate for the period under review to the exchange rate at the report-ing date are recognized directly in equity under a special re-serve for foreign-exchange adjustments. Exchange diff erences arising as a result of changes recognized directly in the equity of the foreign reporting enterprise are also posted to equity.

In connection with the Group’s transition to the presenta-tion of fi nancial statements according to IFRS, accumulated foreign-exchange diff erences on the translation of foreign sub-sidiaries posted to equity were reset to zero in the opening balance sheet at 1 February 2004, such that only exchange diff erences arising after 1 February 2004 appear from the item “Reserve for foreign-exchange adjustments” under equity.

Derivative fi nancial instruments

Th e Group regularly enters into derivatives contracts as a means of hedging business transactions in foreign currencies. On initial recognition, derivative fi nancial instruments are measured at fair value at the settlement date. Cost that are directly attributable to the purchase or issuance of the individ-ual fi nancial instrument (transaction costs) are added to the fair value on initial recognition, unless the fi nancial asset or liability is measured at fair value with fair-value adjustments recognized in the income statement.

After initial recognition, the derivative fi nancial instruments are measured at fair value at the reporting date. Positive and negative fair values of derivative fi nancial instruments are rec-ognized under other receivables and other debt.

Changes in the fair value of derivative fi nancial instruments that are classifi ed as and meet the conditions for the fair-value hedging of a recognized asset or liability are recognized in the


income statement together with changes in the value of the hedged asset or liability.

Changes in the fair value of derivative fi nancial instruments that are classifi ed as and meet the conditions for eff ective hedging of future transactions are recognized directly in eq-uity. Any ineff ective portion is recognized immediately in the income statement. When the hedged transactions are realized, the accumulated changes are recognized as part of the cost of the relevant transactions.

Changes in the fair value of derivative fi nancial instruments that are used to hedge net investments in foreign subsidiaries are recognized directly in equity to the extent that the hedging is eff ective. Any ineff ective portion is recognized immediately in the income statement. When the relevant foreign enterprise is sold, the accumulated changes in value are transferred to the income statement.

Derivative fi nancial instruments that do not meet the con-ditions for treatment as hedging instruments are considered trading portfolios and are measured at fair value, with fair-value adjustments being recognized under fi nancial items in the income statement on a continuing basis.

Share-based incentive schemes

Th e Group’s incentive schemes are equity based warrants schemes. Th e equity-based incentive schemes are measured at the fair value of the options at the time of allocation and are recognized in the income statement under staff costs over the vesting period. A corresponding amount is recorded directly in equity. In connection with initial recognition of the share options, an estimate is made of the number of options to which the em-ployees are expected to become entitled. Subsequently, adjust-ments are made to refl ect changes in the estimated number of vested options, such that the overall recognition is based on the actual number of vested options.

Th e fair value of the options allocated is estimated by using the Black-Scholes formula, based on the parameters indicated in note 7.

In the Parent Company’s fi nancial statements, the value of in-centive schemes allocated to subsidiaries’ employees is recog-nized under “investments in subsidiaries”, with a correspond-ing amount recorded directly in equity.

Income statement

Net revenue

Th e completed contract method is used to recognize income

on projects sold; see IAS 18, Revenue. Th us, profi ts are recog-nized once the project has been sold, construction completed and all essential elements of the sales agreement fulfi lled.

Th e percentage of completion method is used for projects meeting the defi nition of a construction contract; see IAS 11. Th us, the revenue for the year on these projects corresponds to the selling price of the work performed during the year. Th e recognized profi t is the estimated profi t on the project, calculated on the basis of its stage of completion.

Where the Group is in charge of development, letting and construction management, etc. on behalf of investors and re-ceives fee income for such services, the fee income is recog-nized as income on a continuous basis in step with the provi-sion of services.Where a sold project consists of several instalment deliveries that can be segregated and the fi nancial eff ect can be assessed separately and measured reliably for each delivery, the profi t on the individual instalment delivery is recognized when all essential elements of the agreement have been fulfi lled.

Rental income on completed projects and investment proper-ties is accrued and recognized in accordance with the lease agreements concluded.

For other income, the completed contract method is used.

Net revenue is measured at the fair value of the consideration received or receivable. If a sale is based on interest-free credit with a term extending beyond the usual credit period, the fair value of the consideration receivable is calculated by discount-ing future payments. Th e diff erence between the fair value and nominal value of the consideration is recognized as fi nancial income in the income statement over the extended credit pe-riod by using the eff ective interest method.

External direct project costs

Th is item consists of all costs relating to projects incurred to generate the year’s revenue and includes direct project costs, as well as interest during the construction period, plus a share of the relevant indirect project costs, determined as a percentage of staff costs, project materials, cost of premises and mainte-nance and depreciation resulting from the project develop-ment activity and proportionately attributable to the project development capacity utilized.

Moreover, this item includes any impairment losses on projects in progress or completed and the expensing of project development costs to the extent that the relevant projects are not expected to be realized.


Value adjustment of investment properties, etc.

Changes in the fair values of investment properties and as-sociated derivative fi nancial instruments are recognized in the income statement under the item “Value adjustment of in-vestment properties, net”.

Realized gains and losses on the sale of investment properties are determined as the diff erence between the carrying amount and the selling price and are also recognized in the income statement under the item ”Value adjustment of investment properties, net”.

Other external expenses

Th e item “Other external expenses” includes costs for admin-istration, cost of premises and operating expenses for cars.

Income from investments in associates in the consolidated fi nancial statements

Th e proportionate share of the associates’ results after tax and the proportionate elimination of unrealized intercompany profi ts and losses are recognized in the consolidated income statement.

Dividends on investments in subsidiaries and associates in the Parent Company’s fi nancial statements

Dividends on investments in subsidiaries and associates are recognized in the Parent Company’s income statement under fi nancial income in the fi nancial year in which the right to dividend vests. Usually, this will be date on which the General Meeting of shareholders adopts the distribution of dividend from the relevant company. To the extent that distributed dividend exceeds the accumulated earnings after the acquisi-tion date, the dividend is not recognized in the income state-ment, however, but recognized as impairment of the cost of the investment.

Financial income and expenses

Financial income and expenses include interest income and expenses, gains and losses on foreign-currency transactions, debt and securities as well as the amortization of fi nancial lia-bilities, except the fair-value adjustment of derivative fi nancial instruments relating to investment properties. In addition, any dividends on investments in subsidiaries and associates, see above, are included in the Parent Company’s income state-ment under fi nancial income.

Interest income and interest expenses are accrued, based on the principal and the eff ective interest rate. Th e eff ective inter-est rate is the discount rate used to discount the expected pay-ments associated with the fi nancial asset or fi nancial liability to ensure that the present value of such asset or liability is

equal to its carrying amount.

Borrowing costs that are directly associated with the acquisi-tion, construction or production of assets are capitalized as part of the cost of the relevant asset.

Tax on profi t/loss for the year

Th e tax for the year, which consists of the year’s current tax and changes in deferred tax, is recognized in the income state-ment as follows: the portion attributable to the profi t or loss for the year is recognized in the income statement, and the portion attributable to items under equity is posted directly to equity.

Current tax payable and receivable is recognized in the bal-ance sheet as tax computed on the taxable income for the year, adjusted for tax paid on account. Th e calculation of the year’s current tax is based on the tax rates and tax rules applicable at the reporting date.

Deferred tax is calculated on the basis of all timing diff er-ences between carrying amounts and tax values, based on the planned use of the individual assets and liabilities. Deferred tax assets, including the tax value of tax losses allowed for carryforward, are recognized in the balance sheet at the value at which the asset is expected to be realized, either by set-off against deferred tax liabilities or as net tax assets for setoff against future positive taxable income within the same legal tax entity. At each reporting date, it is reconsidered whether it is likely that suffi cient future taxable income will be gener-ated to utilize the deferred tax asset, based on an individual and specifi c assessment. If it is considered that an individual tax asset cannot be utilized, it is written down in the income statement.

Deferred tax is measured according to the tax rules and tax rates that will be applicable in the respective countries at the time when the deferred tax is expected to become payable, based on the legislation in force at the reporting date. Any changes in deferred tax resulting from changed tax rates and tax rules are recognized in the income statement, unless the deferred tax is attributable to items previously recognized di-rectly in equity. In such cases, the change in deferred tax is also recognized directly in equity.

Th e Parent Company is taxed on a pooled basis with all Dan-ish subsidiaries. Th e total income taxes payable by the com-panies subject to group pooling are distributed between the Danish companies taxed on a pooled basis on the basis of their taxable income.


Balance sheet

Goodwill

On initial recognition, goodwill is recognized and measured as the diff erence between the cost of the enterprise acquired and the fair value of the assets, liabilities and contingent li-abilities acquired; see the description under “Consolidated fi nancial statements”.

Th e carrying amount of goodwill is allocated to the Group’s cash-fl ow-generating units at the date of acquisition. Cash-fl ow-generating units are defi ned on the basis of the manage-ment structure and internal fi nancial control and reporting in the Group.

Goodwill is not amortized. Th e amount of goodwill is sub-jected to impairment tests on a continuous basis to ensure that the asset is written down to the extent that the carry-ing amount exceeds the recoverable amount. Th e recoverable amount is determined as the higher of the fair value less selling costs and the present value of estimated future net cash fl ows from the cash-fl ow-generating unit to which the goodwill re-lates. Impairment of goodwill is recognized in a separate line in the income statement. Impairment of goodwill is not re-versed.

Investment properties

Properties are classifi ed as investment properties when they are held to obtain rental income and/or capital gains. On initial recognition, investment properties are measured at cost, consisting of the acquisition cost of the property and directly associated costs. Subsequently, investment properties are measured at fair value. Th e valuation is made on the basis of a discounted cash-fl ow model, where future cash fl ows are discounted to net present value on the basis of a given rate of return. Th e rate of return is fi xed for each individual property.

Changes in the fair value are recognized in the income state-ment under “Value adjustment of investment properties, net” in the fi nancial year in which the change occurs.

Other fi xtures and fi ttings, tools and equipment

Other fi xtures and fi ttings, tools and equipment are measured at cost less accumulated depreciation and impairment. Th e cost consists of the acquisition cost and costs directly asso-ciated with the acquisition until the date when the asset is ready for use. Th e carrying amounts of other fi xtures and fi t-tings, tools and equipment are reviewed at the reporting date to identify any indications of impairment. If such indications are identifi ed, the recoverable amount of the asset is calculated to assess the need for any impairment and the extent of such impairment.

Th ese assets are depreciated according to the straight-line method over their expected useful lives, viz. a period of 5-10 years. Leasehold improvements are amortized according to the straight-line method over the term of the lease.

Investments in subsidiaries and associates in the Parent Company’s fi nancial statements

Th e Parent Company’s investments in subsidiaries and asso-ciates are measured at cost. Th e carrying amounts of invest-ments in subsidiaries and associates are reviewed at the report-ing date to identify any indications of impairment. If such indications are identifi ed, the recoverable amount of the asset is calculated to assess the need for any impairment and the extent of such impairment. If the cost exceeds the recoverable amount, it is written down to the lower amount. Moreover, the cost is written down to the extent that the dividend dis-tributed exceeds total earnings from the subsidiary or associate since its acquisition.

Impairment losses are recognized in the income statement. In case of any subsequent reversal of impairment losses result-ing from changed assumptions for calculating the recoverable amount, the carrying amount of the asset and of the cash-fl ow-generating unit is increased to a value not exceeding the value that the asset or cash-fl ow-generating unit would have had if no impairment losses had been recognized.

Other long-term assets

Other securities and investments consist of mortgage deeds and instruments of indebtedness created in connection with project sales and are measured at amortized cost.

Long-term securities and investments are classifi ed as “Finan-cial assets held to maturity”.

Projects in progress or completed

Project in progress or completed consist of real property projects.

Th e project portfolio is recognized on the basis of the direct costs attributable to the projects, including interest during the project period, plus a share of the relevant indirect project costs. Where considered necessary, the projects have been written down to a lower value, and the capitalized amounts are subjected to impairment tests on a continuous basis to ensure that the assets are written down to the extent that the carrying amount exceeds the recoverable amount.

Additions for indirect project costs are calculated as a percent-age of staff costs, project materials, the cost and maintenance of premises and depreciation resulting from project develop-ment and proportionately attributable to the project develop-ment capacity utilized.


Prepayments from customers on sold projects in progress (for-ward funding) are deducted from the carrying amount of the project portfolio, and any negative net amount, determined for each individual project, is included in the item “Prepay-ments received from customers”.

Receivables

Receivables consist of trade receivables, receivables from con-tract work in progress, receivables from associates and other receivables. Receivables are classifi ed as loans, advances and receivables, which are fi nancial assets with fi xed or determina-ble payments that are not quoted in an active market and are not derivative fi nancial instruments.

Receivables are measured at amortized cost, usually equal to the nominal value, or at the net realizable value where this is lower. Impairment losses on receivables are calculated on the basis of an assessment of the individual receivables. Financial assets and liabilities are charged against the balance sheet if the Company has a right of setoff and at the same time intends or is under a contractual obligation to realize assets and liabilities simultaneously.

Prepayments, recognized under assets, consist of paid expens-es relating to subsequent fi nancial years. Deferred income is measured at cost in the balance sheet.

Construction contracts

When the outcome of a construction contract can be esti-mated reliably, the construction contract is measured at the selling price of the work performed as of the reporting date (the percentage of completion method) less any amounts in-voiced on account and writedowns for impairment. Th e sell-ing price is measured on the basis of the stage of completion as of the reporting date and the total revenue expected from the individual construction contract.

Th e stage of completion of each individual project is normally calculated as the proportion between the resources used by the Group and the total budgeted use of resources.

When the outcome of the construction contract cannot be measured reliably, the construction contract is measured at the construction costs incurred if it is probable that they will be recoverable. If it is probable that the total construction costs will exceed total contract revenue, the estimated loss is recognized as a cost immediately.

Th e individual construction contract in progress is recognized in the balance sheet under receivables or liabilities, depending on whether its net value is a receivable or a liability.

Securities

Securities under short-term assets consist of listed and un-listed shares.

Securities are classifi ed as “Financial assets available for sale”, viz. fi nancial assets that are not derivative fi nancial instru-ments and that are either classifi ed as available for sale or that cannot be classifi ed as loans, advances, receivables, fi nancial assets measured at fair value via the income statement or held-to-maturity fi nancial assets.

Available-for-sale securities are measured at cost on initial recognition and subsequently at fair value. Fair-value adjust-ments are recognized directly in equity and are recognized in the income statement on the sale or settlement of the securi-ties.

Listed securities are measured at their offi cial listed price, and unlisted securities are measured at their fair value, based on the calculated value in use. Equity interests that are not traded in an active market, and where the fair value cannot be determined with a suffi cient degree of reliability, are measured at cost. Mortgage deeds are measured at amortized cost.

Equity

Dividend is recognized as a liability at the time of its adoption at the Annual General Meeting.

Acquired treasury shares are recognized at cost and included in retained earnings under equity. If treasury shares are sold, the pertinent consideration received is recognized directly in equity. A capital reduction eff ected by the cancellation of treasury shares will reduce the share capital and increase retained earnings. Dividend on treasury shares is recognized directly in equity under retained earnings.

Provisions

Provisions are recognized when a legal or constructive obliga-tion is incurred due to events before or at the reporting date, and meeting the obligation is likely to result in an outfl ow of economic benefi ts.

Th is item includes provisions for rent guarantees, with the provision being based on experience with rent guarantees and on an individual assessment of the individual leases, as well as provisions for the negative equity of associates, etc. to the extent that the Group has a legal or constructive obligation to meet the relevant associate’s liabilities. Provisions are meas-ured as the best estimate of the costs required to settle the rel-evant liabilities at the reporting date. Provisions for liabilities with an expected maturity of more than one year are classifi ed


as long-term liabilities.

Liabilities other than provisions

Long-term fi nancial liabilities are measured at cost at the time the relevant loans are raised, equivalent to the proceeds re-ceived after transaction costs. Subsequently, fi nancial liabili-ties are measured at amortized cost, such that the diff erence between the proceeds and nominal value is recognized as an interest expense in the income statement over the term of the loan. Other fi nancial liabilities are recognized at amortized cost, which usually corresponds to the nominal value.

Lease payments relating to operational leases are recognized in the income statement according to the straight-line method, over the term of the lease.

Financial liabilities, which comprise payables to credit institu-tions, trade payables and other debt, are classifi ed as “Finan-cial liabilities measured at amortized cost”.Deferred income, recognized under liabilities, consists of in-come received that relates to subsequent fi nancial years. De-ferred income is measured at cost in the balance sheet.


Th e cash fl ow statement for the Parent Company and for the Group is presented according to the indirect method, based on the profi t or loss from ordinary activities before fi nancing, and shows cash fl ows generated from operating, investing and fi nancing activities, as well as cash and cash equivalents at the beginning and end of the fi nancial year.

Cash fl ows from operating activities are calculated as the oper-ating profi t or loss, adjusted for non-cash operating items and changes in the working capital, less the corporate income tax paid during the fi nancial year.

Cash fl ows for investing activities comprise payments made in connection with the purchase and sale of enterprises, prop-erty, plant and equipment and other long-term assets. In ad-dition, cash fl ows relating to assets under fi nance leases are recognized in the form of lease payments made.

Cash fl ows from fi nancing activities consist of changes in the Parent Company’s share capital and associated costs, the rais-ing and repayment of loans, other repayments on interest-bearing debt as well as the payment of dividend.

Cash fl ows in currencies other than the functional currency are recognized in the cash fl ow statement by using average exchange rates for the period under review, unless they deviate

signifi cantly from the actual exchange rates at the transaction dates.

In preparing the consolidated cash fl ow statement, opening balance sheets and cash fl ows in foreign currencies are trans-lated on the basis of the foreign-exchange rates prevailing at the reporting date. Th is eliminates the eff ect of exchange dif-ferences on the period’s movements and cash fl ows. Interest paid is shown separately. Consequently, project interest for the period is not included in liquidity movements resulting from the project portfolio. Th us, the fi gures in the cash fl ow statement cannot be inferred directly from the fi nancial state-ments.

Cash and cash equivalents comprise free cash resources and amounts deposited in escrow accounts, but such amounts have been off set against payables to credit institutions to the extent that the Company intends or is contractually obliged to realize assets and liabilities at the same time.

Segment information

Segment information is shown by geographical market (pri-mary segment) and by business segment (secondary segment). Th e segment information complies with the Group’s account-ing policies and internal fi nancial control.

Segment income and expenses and segment assets and liabili-ties comprise the items directly allocable to the individual seg-ment, as well as the items that can be allocated to the individ-ual segments on a reliable basis. Th e unallocated items relate mainly to assets, liabilities, income and expenses, associated with the Group’s administrative functions, corporate income tax, and the like.

Long-term assets in the segments comprise the assets used di-rectly in the operation of the segments, including intangible assets, property, plant and equipment and investments in as-sociates.

Short-term assets in the segments comprise the assets directly allocable to the operating activities in the segment, including projects in progress or completed, trade receivables, other re-ceivables, prepayments, cash and cash equivalents.

Liabilities in the segments comprise the liabilities allocable to the operating activities in the segment, including trade paya-bles, payables to credit institutions, provisions, other debt and the like.


Ratio defi nitions

Return of equityTh e Parent Company’s share of profi t/loss for the year x 100

Th e Parent Company’s average share of consolidated equity

Ebita marginProfi t/loss from operating activities x 100

Net revenue

Solvency ratio (based on equity)Equity including minority interests x 100

Total equity and liabilities

Solvency ratio (based on total capital resources)Equity including minority interests and plus subordinated loans x 100

Total equity and liabilities

Equity valueEquity excluding minority interests x 100

Number of shares

Earnings per shareResults attributable to the Parent Company’s shareholders

Average number of shares in circulation

Diluted earnings per shareDiluted results attributable to the Parent Company’s shareholders

Diluted average number of shares in circulation, including the average dilutive eff ect of outstanding share options

Dividned per share Th e Parent Company’s dividend per share

Consolidated Financial Statements | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 67/115

CONSOLIDATED FINANCIAL STATEMENTS

Income statement

All amounts in DKKm Note 2008/09 2007/08

Net revenue 3 1,052.4 2,586.8External direct project costs 4 -735.1 -2,077.5Value adjustment of investment properties, net 57.7 44.5Gross profi t/loss 375.0 553.8

Other external expenses 5 -46.7 -47.8Staff costs 6 -120.6 -110.6Total -167.3 -158.4

Profi t/loss from ordinary activities before fi nancing, depreciation and amortization 207.7 395.4Depreciation, amortization and impairment of long-term assets -6.0 -8.6Profi t/loss from ordinary activities before fi nancing 201.7 386.8

Income from investments in associates 9 -0.3 0.3Financial income 11 61.5 60.4Financial expenses 12 -94.9 -102.1Total -33.7 -41.4

Profi t/loss before tax 168.0 345.4Tax on profi t/loss for the year 13 -12.8 -73.5Profi t/loss for the year 155.2 271.9

Allocated as followsShareholders of TK Development A/S 155.2 249.5Minority interests 0.0 22.4Profi t/loss for the year 155.2 271.9

Earnings per share in DKK

Earnings per share (EPS) of nom. DKK 20 14 5.5 8.9Diluted earnings per share (EPS-D) of nom. DKK 20 14 5.5 8.8

68/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Consolidated Financial Statements

Balance sheet

All amounts in DKKm Note 31.01.2009 31.01.2008

ASSETS

Long-term assets

Goodwill 15 33.3 31.3Intangible assets 33.3 31.3

Investment properties 16 366.5 584.6Other fi xtures and fi ttings, tools and equipment 17 14.3 14.2Property, plant and equipment 380.8 598.8

Investments in associates 9 24.1 23.9Other securities and investments 18 1.3 8.9Deferred tax assets 19 265.7 266.0Other long-term assets 291.1 298.8

Total long-term assets 705.2 928.9

Short-term assets

Projects in progress or completed 20 2,541.3 1,998.3

Trade receivables 21 154.2 220.1Receivables from associates 8.4 8.4Contracted work in progress 22 3.7 0.0Other receivables 160.3 256.5Prepayments 10.8 10.3Total receivables 337.4 495.3

Securities 23 5.0 4.0Cash and cash equivalents 24 227.2 644.4Total short-term assets 3,110.9 3,142.0

TOTAL ASSETS 3,816.1 4,070.9



LIABILITIES AND EQUITY

Equity

Share capital 25 560.9 560.9Other reserves 26 -36.3 57.1Retained earnings 981.4 821.9Shareholders' share of equity 1,506.0 1,439.9

Minority interests 0.0 93.9Total equity 1,506.0 1,533.8

Short- and long-term liabilities

Credit institutions 27 107.2 408.3Provisions 28 10.9 21.9Deferred tax liabilities 30 43.3 52.3Other debt 31 2.5 0.0Total long-term liabilities 163.9 482.5

Credit institutions 27 1,639.2 1,348.3Trade payables 224.0 381.7Prepayments received from customers 0.0 52.8Corporate income tax 26.8 67.0Provisions 28 7.6 11.1Other debt 31 234.7 187.9Deferred income 13.9 5.8Total short-term liabilities 2,146.2 2,054.6

Total short- and long-term liabilities 2,310.1 2,537.1

TOTAL LIABILITIES AND EQUITY 3,816.1 4,070.9

Balance sheet


Statement of changes in equity

(All amounts in DKKm) Share capital Other reserves

Retained earnings Total Minority

interests Total equity

Equity at 31 January 2007 560.9 157.1 435.7 1,153.7 137.2 1,290.9Foreign-exchange adjustment, foreign operations 0.0 34.0 0.0 34.0 2.9 36.9Tax on changes in equity for the year 0.0 0.8 0.0 0.8 0.0 0.8Net income recognized directly in equity 0.0 34.8 0.0 34.8 2.9 37.7Profi t/loss for the year 0.0 44.5 205.0 249.5 22.4 271.9Total income 0.0 79.3 205.0 284.3 25.3 309.6Transfer to distributable reserves *) 0.0 -179.3 179.3 0.0 0.0 0.0Dividend 0.0 0.0 0.0 0.0 0.0 0.0Share-based remuneration (warrants) 0.0 0.0 1.9 1.9 0.0 1.9Disposal in connection with increased share in minority 0.0 0.0 0.0 0.0 -68.6 -68.6Total other transactions 0.0 -179.3 181.2 1.9 -68.6 -66.7

Equity at 31 January 2008 560.9 57.1 821.9 1,439.9 93.9 1,533.8

Foreign-exchange adjustment, foreign operations 0.0 -62.6 0.0 -62.6 0.0 -62.6Value adjustment of hedging instruments 0.0 -31.4 0.0 -31.4 0.0 -31.4Value adjustment of available-for-sale fi nancial assets 0.0 -0.1 0.0 -0.1 0.0 -0.1Tax on changes in equity for the year 0.0 0.7 0.0 0.7 0.0 0.7Net income recognized directly in equity 0.0 -93.4 0.0 -93.4 0.0 -93.4Profi t/loss for the year 0.0 0.0 155.2 155.2 0.0 155.2Total income 0.0 -93.4 155.2 61.8 0.0 61.8Dividend 0.0 0.0 0.0 0.0 0.0 0.0Share-based remuneration (warrants) 0.0 0.0 4.3 4.3 0.0 4.3Disposal in connection with increased share in minority 0.0 0.0 0.0 0.0 -93.9 -93.9Total other transactions 0.0 0.0 4.3 4.3 -93.9 -89.6

Equity at 31 January 2009 560.9 -36.3 981.4 1,506.0 0.0 1,506.0

*) Th e reserve for fair-value adjustment of investment properties has been transferred to distributable reserves, as this reserve is not required to form part of non-distributable equity in the consolidated fi nancial statements.



All amounts in DKKm 2008/09 2007/08

Profi t/loss before fi nancing 201.7 386.8Adjustments for non-cash items Value adjustments, investment properties -57.7 -44.5 Depreciation and amortization 5.6 8.4 Provisions -14.5 -35.1 Market-value adjustments -9.4 6.0Increase/decrease in investments in projects, etc. -577.2 -385.4Increase/decrease in receivables 118.2 174.8Increase/decrease in payables and other debt -136.6 186.5Cash fl ows from operating activities before net fi nancials and tax -469.9 297.5

Interest paid, etc. -139.9 -168.5Interest received, etc. 23.4 37.7Corporate income tax paid -51.2 -24.1Cash fl ows from operating activities -637.6 142.6

Investments in equipment, fi xtures and fi ttings, net -8.3 -6.3Sale of equipment, fi xtures and fi ttings 1.1 2.3Investments in investment properties, net 0.0 -6.6Sale of investment properties 276.0 0.0Capital increase -96.8 -70.8Purchase of securities and investments -0.5 -0.4Sale of own subscription rights 7.6 25.3Cash fl ows from investing activities 179.1 -56.5

Increase/decrease in subordinated loan capital -56.9 -59.9Increase in long-term fi nancing 0.0 188.5Increase in project fi nancing 229.1 950.7Decrease in project fi nancing / repayment credit institutions -114.5 -1,122.8Cash fl ows from fi nancing activities 57.7 -43.5

Cash fl ows for the year -400.8 42.6

Cash and cash equivalents, beginning of year 644.4 601.1Market-value adjustment of cash and cash equivalents -16.4 0.7Cash and cash equivalents at year-end 227.2 644.4

Cash and cash equivalents include temporary deposits related to the sale of the Group's projects, as well as other cash and cash equivalentsto which the Group does not have a full right of disposal, a total of DKK 127.7 mio. (DKK 422.1 million in 2007/08).

Th e fi gures in the cash fl ow statement cannot be inferred from the Consolidated Financial Statements alone.


Table og content, notes consolidated fi nancial statements

Note 1. Accounting estimates and assessments 73Note 2. Segment information 74Note 3. Net revenue 74Note 4. External direct project costs 75Note 5. Other external expenses 75Note 6. Staff costs 75Note 7. Share-based remuneration 76Note 8. Fees payable to the auditors elected at the General Meeting 77Note 9. Investments in associates 77Note 10. Investments in joint ventures 78Note 11. Financial income 78Note 12. Financial expenses 79Note 13. Corporate income tax 79Note 14. Earnings per share 80Note 15. Goodwill 80Note 16. Investment properties 81Note 17. Other fi xtures and fi ttings, tools and equipment 82Note 18. Other securities and investments 82Note 19. Deferred tax asset 83Note 20. Projects in progress or completed 83Note 21. Trade receivables 84Note 22. Contracted work in progress 84Note 23. Securities 84Note 24. Cash and cash equivalents 84Note 25. Share capital 85Note 26. Other reserves 85Note 27. Payables to credit institutions 86Note 28. Provisions 87Note 29. Operating leases 87Note 30. Deferred tax liabilities 88Note 31. Other debt 88Note 32. Contingent assets and liabilities as well as security furnished 89Note 33. Financial risks and fi nancial instruments 90Note 34. Transactions with related parties 94Note 35. Post-balance sheet events 94Note 36. New IFRS and IFRIC interpretations 94


Note 1. Accounting estimates and assessments

Many account items cannot be measured with certainty, but only estimated. Such estimates consist of assessments based on the most recent information available at the time of presenting the fi nancial statements. It may be necessary to change previous estimates based on changes in the assumptions underlying the estimate or based on supplementary information, additional experience or subsequent events.

In connection with the practical application of the accounting policies described, Management has made a number of signifi cant accounting estimates and assessments that have materially aff ected this Annual Report:

Recognition of revenueAs stated in the accounting policies regarding sold projects that consist of several instalment deliveries that can be segregated and for which the fi nancial eff ect can be assessed separately, the profi t on the individual instalment delivery is recognized when all essential elements of the agreement have been fulfi lled. In this connection, Management assesses whether the individual instalment deliveries of a sold project can be segregated and assessed separately.

Investment propertiesTh e Group’s investment properties are measured at fair value in the balance sheet. Th e valuation is made on the basis of a discounted cash-fl ow model, where expected future cash fl ows are discounted to net present value on the basis of a given rate of return. If any changes occur in the assumptions used, the value may deviate from the value determined at 31 January 2009. In the fi scal year 2008/09 a negative value adjustment on the Group’s German investment properties was recognized based on changes in the required rate of return from 6 % to 6.5 %. Th e carrying amount of investment properties amounted to DKK 366.5 million at 31 January 2009.

Projects in progress or completedTh e need for impairment of projects in progress and completed projects is based on a specifi c assessment of each individual project, including existing project budgets and the expected future development potential. If the actual course of a project deviates from the expected development, this may necessitate adjustments to the impairment recognized. Th e changed estimate of the impairment of projects in progress and completed projects has had a positive impact on the profi t for the year of DKK 11.6 million. Th e carrying amount of projects in progress or completed totalled DKK 2,541.3 million at 31 January 2009.

ReceivablesAssessment of the need for impairment of receivables is based on a specifi c assessment of each individual receivable. If any changes occur in the assumptions used, the value may deviate from the value determined at 31 January 2009. Th e carring amount of receivables amounted to DKK 337.4 million at 31 January 2009.

Deferred tax assetsTh e valuation has been based on the existing possibilities for carrying forward losses and for group pooling or group contributions. A change in the conditions for carrying forward losses and group pooling/group contributions could result in the value of the tax assets being either higher or lower than the carrying amount computed at 31 January 2009. Moreover, the valuation has been based on existing budgets and profi t forecasts for a fi ve-year period. Th e carrying amount of deferred tax assets totalled DKK 265.7 million at 31 January 2009.

GoodwillTo assess the need for impairment of the goodwill amounts recognized, the values in use of the cash-fl ow-generating units to which the goodwill amount is attributable must be calculated. Calculating the value in use assumes that an estimate of future expected cash fl ows in the individual cash-fl ow-generating unit has been made and that a reasonable discount rate has been determined. Th e goodwill amount recognized in the balance sheet has not been written down. Th e carrying amount of goodwill totalled DKK 33.3 million at 31 January 2009. Reference is also made to the section “Risk issues” on page 46 in this present Annual Report.


Note 2. Segment information

Th e Group’s primary segment is geographical. Th e activities in the ”Northern Europe” geographical segment comprise activities in Denmark, Sweden, Finland, Latvia, Lithuania and Germany, and those in “Central Europe” comprise the Group’s activities in Poland, the Czech Republic, Slovakia and Bulgaria.

Th e Group’s secondary segment is its business segment. Th e Group’s activities in the “Retail” business segment comprise activities related to shopping centres, superstores, high-street stores, etc.; the “Offi ce” segment comprises activities related to offi ce properties; the “Residential” segment comprises activities related to housing; and the “Mixed” segment comprises activities related to projects consisting of several of the Group’s business segments, including multifunctional centres with stores, leisure activities, offi ces and housing.

Primary segment 2008/09 Northern Europe

Central Europe Unallocated Total

Net revenue 495.3 557.1 0.0 1,052.4Value adjustment of investment properties, net -15.3 73.0 0.0 57.7Profi t/loss, associates -0.8 0.5 0.0 -0.3Profi t/loss from ordinary activities before fi -nancing 11.3 190.4 0.0 201.7

Investments in associates 23.3 0.8 0.0 24.1Segment assets 1,858.1 1,689.5 268.5 3,816.1Segment liabilities 1,465.6 803.7 40.8 2,310.1Capital expenditure 6.2 2.1 0.0 8.3Depreciation and amortization 4.9 1.1 0.0 6.0Other major non-cash costs 7.6 -27.9 0.0 -20.3

Primary segment 2007/08 Northern Europe

Central Europe Unallocated Total

Net revenue 1,659.0 927.8 0.0 2,586.8Value adjustment of investment properties, net -1.1 45.6 0.0 44.5Profi t/loss, associates 0.2 0.1 0.0 0.3Profi t/loss from ordinary activities before fi nancing 121.0 265.8 0.0 386.8Investments in associates 23.5 0.4 0.0 23.9Segment assets 1,869.0 1,925.6 276.3 4,070.9Segment liabilities 1,528.8 986.5 21.7 2,537.0Capital expenditure 3.8 2.5 0.0 6.3Depreciation and amortization 7.2 1.4 0.0 8.6Other major non-cash costs -8.5 -105.6 0.0 -114.1

Secondary segment 2008/09 Retail Offi ce Residential Mixed Unallocated Total

Net revenue 610.2 64.8 283.7 93.7 0.0 1,052.4Segment assets 1,732.5 56.1 528.2 749.0 750.3 3,816.1Capital expenditure 0.0 0.0 0.0 0.0 8.3 8.3

Secondary segment 2007/08 Retail Offi ce Residential Mixed Unallocated Total

Net revenue 1,453.1 0.0 7.2 1,126.5 0.0 2,586.8Segment assets 1,525.8 173.7 535.4 824.5 1,011.5 4,070.9Capital expenditure 0.0 0.0 0.0 0.0 6.3 6.3

Note 3. Net revenue

2008/09 2007/08Sale of projects and properties 962.6 2,497.1Rental income 45.0 57.4Sale of services 44.8 32.3Total net revenue 1,052.4 2,586.8


Note 4. External direct project costs

2008/09 2007/08Project costs 746.7 2,178.5Impairment losses on projects in progress and completed projects 11.2 0.4Reversal of impairment losses on projects in progress and completed projects -22.8 -101.4External direct project costs, total 735.1 2,077.5

Impairment losses have been recognized on projects with DKK 11.2 million. Due to saticfactory progress, impairment losses on projects in progress and completed projects recorded in previous year have been reversed with DKK 22.8 million.

Note 5. Other external expenses

2008/09 2007/08Administrative expenses 28.8 31.2Cost of premises 12.5 11.7Cars, operating expenses 5.4 4.9Other external expenses, total 46.7 47.8

Note 6. Staff costs

2008/09 2007/08Fees for Supervisory Board 2.3 2.3Salaries, etc. for the Parent Company’s Executive Board; see below 10.2 11.4

Retention bonus, other employees 0.0 0.7Defi ned contribution plans 0.5 0.0Social security costs 11.2 9.2Costs of warrants, other employees 2.7 1.2Other salaries 88.9 81.3Other staff costs 4.8 4.5Total staff costs 120.6 110.6

Average number of employees 166 151Number of employees at year-end 164 161

Salaries, etc. for the Parent Company’s Executive Board:

SalaryDefi ned

contribution plans

Bonus Retention bonus Warrants Total

2008/09Frede Clausen 4.0 0.0 0.8 0.0 0.8 5.6Robert Andersen 3.0 0.0 0.8 0.0 0.8 4.6Salaries, etc., total 7.0 0.0 1.6 0.0 1.6 10.2

SalaryDefi ned

contribution plans

Bonus Retention bonus Warrants Total


Th e Supervisory Board is composed of the Chairman, Deputy Chairman and four other members. Supervisory Board members are paid a basic fee of DKK 250,000. Th e Chairman is paid three times the basic fee and the Deputy Chairman twice the basic fee, while the remaining members are paid the basic fee.

Defi ned contributi on plansTh e Group has entered into defi ned contributio n plans with the majority of the employees in the Danish companies. According to the defi ned contribution plans, the Group companies contribute a monthly amount equal to 2 % of the respective employees basic salary to independent pension funds. In the fi scial year 2008/09, an amount of DKK 0.5 million for the defi ned contribution plans has been charged to the profi t and loss account. (2007/08 DKK 0).


Th e Group has two incentive programmes

December 2005 programmeOn 30 December 2005, the Supervisory Board issued warrants to the Executive Board and other executive staff for the subscription of 826,000 shares, each with a nominal value of DKK 20. Subsequently, 136,000 warrants have lapsed, leaving a total of 690,000 active warrants at the balance sheet date. Th e allocation of warrants is subject to the relevant employees still being employed at the time of exercising the warrants.

Th is is a four-and-a-half-year warrant scheme with the fi rst exercise opportunity after three and a half years and with a further three-year (max.) lock-up period in respect of any gain on the acquired shares in excess of the subscription amount. Th is means that shares at up to a market value equal to the subscription amount may be divested without restrictions, while shares exceeding a market value equal to the subscription amount can be disposed of no earlier than during a three-year period after subscription, such that up to one-sixth of these shares can be disposed of in each of the six windows during the three-year period. Th e above-mentioned 690,000 warrants correspond to approx. 2.5 % of the share capital.

Th e above-mentioned warrants can be exercised in three six-week periods (windows) placed as follows:

• following publication of the preliminary announcement of 2008/09 annual fi nancial results (from around 30 April 2009)• following publication of the interim report for the six months ending 31 July 2009 (from around 30 September 2009)• following publication of the preliminary announcement of 2009/10 annual fi nancial results (from around 30 April 2010)

Th e subscription price per share of nominally DKK 20, before any deduction for dividend, has been fi xed at DKK 74.54 in the fi rst exercise window, DKK 77.05 in the second window and DKK 80.63 in the third window.

Based on a share price of DKK 57.81 and a dividend of DKK 0 per share per year, the value of the warrants has been calculated at DKK 6.6 million, using the Black-Scholes formula. Th e amount will be expensed currently over the period until May 2009. Th e calculation has been based on an expected future volatility of 30 % and an interest level of 3 %. In addition, it has been assumed that the warrants will be exercised in the intermediate exercise period.

Active warrants break down as follows: 240,000 to the Executive Board and 450,000 to other executive staff members.

May 2008 programmeAt the Annual General Meeting on 27 May 2008, the Supervisory Board of TK Development was authorized to issue warrants for a total of up to nominally DKK 14,000,000 (700,000 shares, each with a nominal value of DKK 20) to the Executive Board and other executive staff members in the Group. On 5 June 2008, the Supervisory Board decided to exercise this authorization and issued 170,000 warrants to the Executive Board and 528,000 warrants to other executive staff members, a total of 698,000 warrants. Subsequently, 12,000 warrants have lapsed, leaving a total of 686,000 active warrants at the balance sheet date.

Under the four-year warrant scheme, warrants can be exercised at the earliest three years after the grant date, and any shares subscribed for are subject to an additional lock-up period of up to three years. Th is means that shares up to a market value equal to the subscription amount, plus tax liability, can be disposed of without limitation, while shares in excess of such amount can be disposed of, at the earliest, during six trading windows in the three-year lock-up period, such that up to 1/6 of such shares can be disposed of during each window. Th e 686,000 warrants correspond to approx. 2.5 % of the share capital.


• following publication of the preliminary announcement of 2010/11 annual fi nancial results (from around 30 April 2011);• following publication of the interim report for the six months ending 31 July 2011 (from around 30 September 2011); and• following publication of the preliminary announcement of 2011/12 annual fi nancial results (from around 30 April 2012).

Th e subscription price per share has been fi xed on the basis of the average listed market price during the period 9–20 June 2008, with an annual 8 % adjustment to refl ect an advance return to existing shareholders. Th us, based on a price of DKK 66.9 per share of nominally DKK 20, the subscription price, before a deduction for any dividend, can be calculated at DKK 83.4, DKK 86.2 and DKK 90.2 for the exercise of warrants in the three respective six-week periods.

Based on a share price of DKK 66.9 and a dividend of DKK 0 per share per year, the value of the warrants has been calculated at DKK 11.9 million, using the Black-Scholes formula. Th e amount will be expensed periodically over the term of the incentive scheme. Th e calculation is based on a volatility

Note 7. Share-based remuneration


Th e development in outstanding warrants is shown below:

Number of warrants 31.1.2009 31.1.2008Outstanding warrants at 1 February 690,000 704,000Warrants issued during the year 698,000 0Lapsed due to termination of employment -12,000 -14,000Exercised during the year 0 0Outstanding warrants at 31 January 1,376,000 690,000

Number of warrants exercisable at the balance sheet date 0 0

Share-based remuneration recognized in the income statement 4.3 1.9

For the outstanding warrants at 31 January 2009, the average exercise prices ranged from DKK 78.96-85.40 per warrant.(2007/08: DKK 74.54-80.63 per warrant). Th e average term to expiry is calculated to 20 months. (2007/08: 21 months)

Note 8. Fees payable to the auditors elected at the General Meeting

2008/09 2007/08Total fees, Deloitte 2.2 2.0Total fees, Nielsen & Christensen 1.6 1.2Total fees 3.8 3.2

Fees break down as follows:Audit services, Deloitte 2.1 2.0Audit services, Nielsen & Christensen 1.0 1.0Other services, including tax and VAT, Deloitte 0.1 0.0Other services, including tax and VAT, Nielsen & Christensen 0.6 0.2

Note 9. Investments in associates

2008/09 2007/08Cost at 1 February 21.3 23.4Additions for the year 0.0 0.0Capital investments 0.5 0.4Disposals for the year 0.0 -2.5Cost at 31 January 21.8 21.3

Revaluations and impairment at 1 February -4.0 -3.7Profi t/loss for the year after tax -0.3 0.3Disposals for the year 0.0 -0.6Distribution 0.0 0.0Revaluations and impairment at 31 January -4.3 -4.0

Transferred for setoff against receivables/provisions 6.6 6.6

Carrying amount at 31 January 24.1 23.9

For an overview of associates measured in the consolidated balance sheet according to the equity method, please see the overview of group companies on page 95.

of 40 % and and interest rate level of 5 % p.a. Th e volatility has been determined on the basis of the historical volatility and the expected future volatility of the share price of the parent company’s share.


Note 7. Share-based remuneration, continued


Note 10. Investments in joint ventures

For an overview of the Group’s investments in joint ventures, please see the overview of group companies on page 95, which also shows the accounting treatment of each individual company in the Consolidated Financial Statements. Th e fi gures below show the Group’s share.

2008/09 2007/08

Income 203.5 127.2Expenses -112.2 -49.0Short-term assets 792.6 933.3Long-term assets 153.4 364.5Short-term liabilities 614.6 728.3Long-term liabilities 27.2 156.5

Note 9. Investments in associates, continued

Financial disclosures for associates:2008/09 2007/08

Income 30.6 20.9Profi t/loss for the year -0.7 0.8Assets 165.4 126.6Liabilities 115.9 63.0Th e Group’s share of profi ts/losses for the year -0.3 0.3Th e Group’s share of equity 17.5 19.1

Note 11. Financial income

2008/09 2007/08Interest, cash and cash equivalents, etc. 25.2 24.2Interest income from joint ventures 8.8 10.1Interest income from associates 15.5 0.4Financial income from loans, advances and receivables 49.5 34.7

Interest from securities (held-to-maturity) 0.7 3.1Foreign-exchange gains 3.1 11.9Capital gain on shares 0.0 0.0Other fi nancial income 8.2 10.7Total fi nancial income 61.5 60.4

which breaks down as follows:Interest income from fi nancial assets not measured at fair value through profi t and loss 58.4 48.5Other fi nancial income 3.1 11.9Total fi nancial income 61.5 60.4


Note 12. Financial expenses

2008/09 2007/08Interest expenses, credit institutions 150.3 102.6Interest expenses, joint ventures 8.1 5.4Foreign-exchange losses and capital losses on securities 0.8 8.0Other fi nancial expenses 28.4 25.1Of which capitalized fi nancial expenses -92.7 -39.0Total fi nancial expenses 94.9 102.1

which breaks down as follows:Interest expenses on fi nancial liabilities not measured at fair value through profi t and loss 94.1 94.1Other fi nancial expenses 0.8 8.0Total fi nancial expenses 94.9 102.1

An interest rate of 6-8 % is used to capitalize interest on projects in progress.

Note 13. Corporate income tax

2008/09 2007/08Accrued corporate income tax 13.1 50.0Adjustment regarding tax relating to prior years -1.7 -5.9Change in deferred tax 1.4 29.4Tax on net profi t or loss for the year 12.8 73.5

Th e tax on the net profi t/loss for the year results as follows:Danish tax rate 42.0 86.4Diff erence in tax rate, foreign subsidiaries -3.5 -14.5Adjustment relating to prior years -1.7 -5.9Tax eff ect of:Non-taxable income/expenses -27.4 -7.2Change in value adjustment 2.9 -10.7Change of tax rate 1.5 29.9Change in non-capitalized tax asset relating to:Losses in foreign subsidiaries 0.0 -2.2Other -1.0 -2.3Tax on net profi t or loss for the year 12.8 73.5

Deferred tax asset at 1 February 266.0 291.0Deferred tax liabilities at 1 February -52.3 -59.9Deferred tax asset/tax liability (net) at 1 February 213.7 231.1Market-value adjustment of balance, beginning of year 3.7 2.9Deferred tax for the year recognized in profi t or loss for the year 1.4 -29.4Adjustment relating to prior years recognized in the income statement -0.7 7.8Deferred tax for the year recognized in equity 0.7 0.8Other additions, net 3.6 0.5Deferred tax asset/tax liability (net) at 31 January 222.4 213.7

Deferred tax asset at 31 January; see note 19 265.7 266.0Deferred tax liabilities at 31 January; see note 30 -43.3 -52.3Deferred tax asset/tax liability (net) at 31 January 222.4 213.7


Note 15. Goodwill

31.1.2009 31.1.2008Cost at 1 February 45.8 43.6Additions 2.0 2.2Disposals 0.0 0.0Cost at 31 January 47.8 45.8

Amortization and impairment at 1 February 14.5 14.5Impairment for the year 0.0 0.0Amortization and impairment at 31 January 14.5 14.5


Of total goodwill, an amount of DKK 29.1 million relates to the purchase of a business partner’s activities in Central Europe. Th e balance of DKK 4.2 million of which DKK 2.0 million concerns 2008/09 relates to TK Development’s acquisition of the stake in Euro Mall Holding A/S held by the Investment Fund for Central and Eastern Europe, increasing TK Development’s shareholding to 100 %. At 31 January 2009, Management carried out an impairment test of the carrying amount of goodwill. Th e recoverable amount is based on the value in use, determined by means of expected cash fl ows on the basis of budgets for the comming 3 years, approved by Management, and further 2 years prognosis. In the calculation of the recoverable amount, a discount rate of 10 % before tax has been used. Th e impairment test did not give rise to any recognition of impairment.

Note 14. Earnings per share

2008/09 2007/08Earnings per share (EPS) of nom. DKK 20 5.5 8.9Diluted earnings per share (EPS-D) of nom. DKK 20 5.5 8.8

Profi t/loss for the year 155.2 271.9Share of consolidated profi t/loss attributable to minority interests 0.0 22.4Shareholders’ share of profi t/loss for the year 155.2 249.5

Average number of shares of nom. DKK 20 Number 28,043,810 28,043,810Dilutive eff ect of outstanding warrants of nom. DKK 20 Number 0 186,448Average number of treasury shares of nom. DKK 20 Number 0 0Average number of shares in circulation Number 28,043,810 28,230,258

Th e outstanding warrants do not have a dilutive eff ect, as the average market price of ordinary shares in the fi nancial year did not exceed the subscription price in the fi rst window. Th is means that the outstanding warrants are ”out-of-the-money” and therefore not included in the diluted average number of shares in circulation. Th e outstanding warrants may on longer terms have a dilluted eff ect on the earnings per share.


Note 16. Investment properties

31.1.2009 31.1.2008Cost at 1 February 406.6 400.2Foreign-exchange adjustments, beginning of year 0.1 -0.2Costs of improvements 0.0 -0.2Transfer from property, plant and equipment under construction 0.0 6.8Disposals -72.5 0.0Cost at 31 January 334.2 406.6

Revaluations at 1 February 244.5 198.9Revaluations for the year 30.7 45.6Revaluations reversed on disposals -161.1 0.0Revaluations at 31 January 114.1 244.5

Impairment at 1 February 66.5 65.4Impairment for the year 15.3 1.1Impairment reversed 0.0 0.0Impairment at 31 January 81.8 66.5

Revaluations and impairment at 31 January 32.3 178.0


which breaks down as follows:Central European investment properties 153.4 356.3German investment properties 213.1 228.3Total 366.5 584.6

Revaluations and impairment, investment properties 32.3 178.0Total value adjustments, investment properties, net 32.3 178.0

Rental income, investment properties 35.3 50.0Direct operating expenses, premises let -4.1 -5.1Direct operating expenses, unlet premises -0.7 -1.3Net income from investment properties 30.5 43.6

Investment properties: Location Ownership interest

Required return Year acquired sq.m.

Multifunctional Center Futurum, Hradec Králove Czech Rep. 20 % 7.0 % 2000 18,300Lüdenscheid/Berlin Germany 100 % 6.5 % 1994-1998 26,000

Th e Czech investment property is owned through a joint venture with GE Capital and Heitman, in which the Group has access to a performance-driven share of the value adjustments of the properties, which is recognized in the carrying amount at 31 January 2009. Th e carrying amount of the Czech investment property totalled DKK 153.4 million at 31 January 2009. Th e valuation is based on a rate of return of 7.0 % p.a. calculated on the basis of a discounted cash-fl ow model over a fi ve-year period. Th e value adjustment for the year amounts to DKK 30.7 million.

Th e valuation of the Group’s German investment properties is based on a rate of return of 6.5 % p.a. calculated on the basis of a discounted cash-fl ow model over a ten-year period. Th e carrying amount of the Group’s German investment properties totalled DKK 213.1 million at 31 January 2009. Th e rate of return has been changed from 6.0 % to 6.5 % due to the changed market situation. Th is change has caused a negative value adjustment of the Group’s German investment properties of DKK 15.3 million. Th e services of an external valuer have not been used to value the Group’s investment properties.


Note 18. Other securities and investments

31.1.2009 31.1.2008Cost at 1 February 23.9 46.1Additions for the year 0.0 0.0Disposals for the year -7.6 -22.2Cost at 31 January 16.3 23.9

Revaluations and impairment at 1 February -15.0 -15.0Revaluations and impairment for the year 0.0 0.0Revaluations and impairment at 31 January -15.0 -15.0


Other securities and investments consist mainly of instruments of indebtedness with mortgages on real property.

Th e carrying amount of other securities and investments is equal to their fair value. Th e fair value has been determined at the present value of future principal repayments and interest payments by using the eff ective interest method.

Note 17. Other fi xtures and fi ttings, tools and equipment

31.1.2009 31.1.2008Cost at 1 February 57.6 61.3Market-value adjustment of purchase price, beginning of year -2.5 0.5Additions 8.3 6.3Disposals -3.7 -10.5Cost at 31 January 59.7 57.6

Depreciation and impairment at 1 February 43.4 43.3Market-value adjustments of depreciation and impairment, beginning of year -0.8 0.2Depreciation for the year 5.6 8.1Impairment for the year 0.0 0.0Depreciation and impairment, assets disposed of -2.8 -8.2Depreciation and impairment at 31 January 45.4 43.4


Other fi xtures and fi ttings, tools and equipment are depreciated over a term of fi ve years. Leasehold improvements included in the above amounts are amortized according to the straight-line method over the term of the lease. Th e carrying amount of leasehold improvements is considered insignifi cant, for which reason other fi xtures and fi ttings, tools and equipment are not divided into diff erent classifi cations.


Note 20. Projects in progress or completed

31.1.2009 31.1.2008Projects in progress or completed excl. interest, etc. 3,406.0 2,855.6Capitalized interest, etc. 270.7 215.3Payments received on account -942.7 -832.0Impairment -192.7 -240.6Total projects in progress or completed 2,541.3 1,998.3

Th e carrying amount of the portion of the project portfolio on which impairment losses have been recognized is DKK 637.1 million (2007/08: DKK 668.6 million).

Note 19. Deferred tax asset

31.1.2009 31.1.2008Deferred tax asset at 1 February 313.5 349.1Change of tax rate 0.5 -30.9Additions for the year 55.7 59.4Disposals for the year -44.1 -68.4Tax on changes in equity 0.7 0.8Foreign-exchange adjustments -4.2 3.5Deferred tax asset at 31 January 322.1 313.5

Value adjustment at 1 February -47.5 -58.1Value adjustment for the year -8.9 10.6Value adjustments at 31 January -56.4 -47.5Carrying amount at 31 January 265.7 266.0

Th e deferred tax asset relates to:Investments 1.5 0.3Property, plant and equipment 0.4 0.4Other long-term assets 20.6 0.0Short-term assets -11.8 31.4Provisions 3.5 2.7Value of tax loss(es) 307.9 278.7Impairment of tax asset -56.4 -47.5Total deferred tax asset 265.7 266.0

Th e impairment of the tax asset is mainly attributable to Danish tax losses that have no expiry date and to Polish tax losses that expire within four to fi ve years.

Th e valuation of the tax asset is based on existing budgets and profi t forecasts for a fi ve-year period. On this basis, Management has assessed that impairment losses totalling DKK 56.4 million need to be recognized.

Th e Group has no deferred tax liabilities relating to investments in subsidiaries, associates or joint ventures that have not been recognized in the balance sheet. Th e contingent retaxation liability attaching to German subsidiaries, regarding which no provisions have been made, amounts to DKK 87.9 million. (2007/08: DKK 87.9 million). Th e Company will check whether such tax liability will be triggered, but this is believed to be highly unlikely.


Note 23. Securities

31.1.2009 31.1.2008Listed securities 0.1 0.1Unlisted securities 4.9 3.9Total securities 5.0 4.0

Securities consisting of listed shares and unlisted equity interests and securities are classifi ed as “fi nancial assets available for sale”. Listed securities consist of listed shares and are measured at fair value. Unlisted equity interests are not traded in an active market. As the fair value of these equity interests cannot be determined with a suffi cient degree of reliability, they are measured at cost. Unlisted securities, except unlisted equity interests, are measured at cost at the fi rst recognition and subsequently at fair value.

Note 21. Trade receivables

31.1.2009 31.1.2008Receivables relating to re-invoiced construction contracts 8.7 56.5Other trade receivables before setoff of fi nancial liabilities 145.5 242.7Setoff of fi nancial liabilities 0.0 -79.1Total trade receivables 154.2 220.1

Impairment for the year recognized in the income statement -0.2 2.2

Any impairment is made to the net realizable value, equal to the sum total of future net cash fl ows that the receivables are expected to generate. Impairment losses on bad debts are calculated on the basis of an assessment of the individual receivables.

Th e carrying amount of receivables written down to net realizable value based on an individual assessment is DKK 4.3 million. Th e corresponding amount at 31 January 2007 was DKK 6.1 million.

Th ere are no major overdue receivables that have not been written down. Th e carrying amount of the receivables corresponds to their fair value. Interest income has been recognized on written-down receivables with DKK 0.0 million (DKK 0.0 million).

Note 22. Contracted work in progress

31.1.2009 31.1.2008Sales value of contracted work in progress excluding profi t on account 30.0 0.0Profi t on account 5.3 0.0Payments recieved on account -31.6 0.0Total contracted work in progress 3.7 0.0

Note 24. Cash and cash equivalents

31.1.2009 31.1.2008Free cash and cash equivalents 99.5 222.3Escrow accounts and other accounts that the Group cannot fully dispose of 168.0 1,050.3Setoff of fi nancial liabilities -40.3 -628.2Total cash and cash equivalents 227.2 644.4

It is assessed that there is no credit risk.


Note 25. Share capital

Th e share capital consists of 28,043,810 shares of DKK 20 each (nom. DKK 560,876,200). Th e share capital has been paid up in full. Th e shares are not divided into several share classes, and no shares are subject to special rights or restrictions, including restrictions with regard to the payment of dividend and repayment of capital. No changes occurred in the 2008/09 fi nancial year.

Changes in the share capital over the past fi ve years:

Number in thousands Nominal valueChanges Year-end Changes Year-end

2004/05 0.0 14,021.9 0.0 280.42005/06 14,021.9 28,043.8 280.4 560.92006/07 0.0 28,043.8 0.0 560.92007/08 0.0 28,043.8 0.0 560.92008/09 0.0 28,043.8 0.0 560.9

Th e company holds no Treasury shares.

Note 26. Other reserves

Reserve for adjustment to fair value

Reserve for adjustment to available-for-sale fi nancial assets

Reserve for adjustment to hedging instruments

Reserve for for-eign-exchange

adjustmentsTotal

Other reserves at 1 February 2007 133.5 0.0 0.0 23.6 157.1Profi t/loss for the year 44.5 0.0 0.0 0.0 44.5Foreign-exchange adjustment, foreign operations 1.3 0.0 0.0 32.7 34.0Deferred tax on changes in equity for the year 0.0 0.0 0.0 0.8 0.8Transfer to distributable reserves *) -179.3 0.0 0.0 0.0 -179.3Other reserves at 31 January 2008 0.0 0.0 0.0 57.1 57.1

Profi t/loss for the year 0.0 0.0 0.0 0.0 0.0Foreign-exchange adjustment, foreign operations 0.0 0.0 0.0 -62.6 -62.6Value adjustment of hedging instruments 0.0 0.0 -31.4 0.0 -31.4Value adjustment of available-for-sale fi nansial assets 0.0 -0,1 0.0 0.0 -0.1Deferred tax on changes in equity for the year 0.0 0.0 0.0 0.7 0.7Other reserves at 31 January 2009 0.0 -0.1 -31.4 -4.8 -36.3

*) Th e reserve for fair-value adjustment of investment properties has been transferred to distributable reserves, as this reserve is not required to form part of non-distributable equity in the Consolidated Financial Statements.

Th e reserve for foreign-exchange adjustments comprises all foreign-exchange adjustments arising on the translation of fi nancial statements for enterprises with a functional currency other than Danish kroner; foreign-exchange adjustments relating to assets and liabilities that are part of the Group’s net investment in such enterprises; and foreign-exchange adjustments relating to any hedging transactions that hedge the Group’s net investment in such enterprises. On the sale or winding-up of subsidiaries, the accumulated foreign-exchange adjustments posted directly to equity in respect of the relevant subsidiary are transferred to the income statement.

Th e reserve for value adjustment of available-for-sale fi nancial assets comprises the accumulated net change in the fair value of fi nancial assets classifi ed as available for sale. Th e reserve is dissolved as the relevant fi nancial assets are sold or expire.

Th e reserve for value adjustment of hedging instruments comprises unrealized losses on forward-exchange transactions concluded to hedge future transactions.


Note 27. Payables to credit institutions

31.1.2009 31.1.2008Payables to credit institutions are recognized as follows in the balance sheet:Long-term liabilities 107.2 408.3Short-term liabilities before setoff s 1,679.5 2,055.6Total payables to credit institutions 1,786.7 2,463.9

Assets set off against short-term liabilitiesReceivables 0.0 -79.1Cash and cash equivalents -40.3 -628.2Payables to credit institutions after setoff against assets 1,746.4 1,756.6

Financial liabilities have been off set against trade receivables and tied-up cash and cash equivalents, to the extent that the Company has a right of setoff and also intends or is contractually obliged to realize assets and liabilities at the same time.

Fair value 1,746.4 1,756.6

Carrying amount 1,746.4 1,756.6

Th e fair value has been determined at the present value of future principal repayments and interest payments by using the eff ective interest method.

At 31 January, the Group had the following loans and credits:

Eff ective rate Carrying amount Fair value

Loans Maturity Fixed/ vari-able 2008/09 2007/08 2008/09 2007/08 2008/09 2007/08

Mortgage credit DKK 2027 fi xed 4.1% n/a 25.3 0.0 25.3 0.0Bank DKK 2009-2011 variable 6 - 8 % 4 - 8 % 789.9 756.8 789.9 756.8Bank SEK 2009-2023 variable 4 - 7 % 4 - 8 % 43.5 57.9 43.5 57.9Bank PLN 2009 variable 5 - 8 % 4 - 8 % 251.0 358.1 251.0 358.1Bank CZK 2009-2012 variable 4.7 - 5.2 % n/a 31.7 0.0 31.7 0.0Bank EUR 2009-2032 variable 3 - 5 % 4 - 8 % 605.0 583.8 605.0 583.8Total 1,746.4 1,756.6 1,746.4 1,756.6


Note 28. Provisions

31.1.2009 31.1.2008Rent guarantees for properties sold at 1 February 17.3 48.0Applied during the year -8.4 -11.3Reversed rent guarantees 0.2 -23.0Provisions for the year 2.8 3.6Rent guarantees for properties sold at 31 January 11.9 17.3

Other provisions at 1 February 15.7 20.7Applied during the year 0.0 0.0Reversed provisions -9.1 -5.0Provisions for the year 0.0 0.0Other provisions at 31 January 6.6 15.7

Provisions at 31 January 18.5 33.0

Expected maturity dates of the liabilities provided for:0-1 year 7.6 11.11-5 years 10.9 21.9> 5 years 0.0 0.0Provisions at 31 January 18.5 33.0

Rent guarantee liabilities for sold properties have been calculated based on experience with rent guarantees and on an individual assessment of the individual leases.

Other provisions consist of provisions for negative equity in associates.

Note 29. Operating leases

For the years 2009-2013, operating leases for the rental of offi ce premises, offi ce machines and operating equipment have been concluded. Th e leases have been concluded for a three-to fi ve-year period with fi xed lease payments that are index-adjusted annually. Th e leases are non-terminable for the period mentioned, after which they can be renewed for three- to fi ve-year periods.

Th e annual lease payments are expensed in the income statement.

Future, minimum lease payments according to non-terminable lease contracts break down as follows:

31.1.2009 31.1.2008Within 1 year 8.1 10.4Within 1-5 years 6.0 6.4After 5 years 0.0 0.0


Note 31. Other debt

31.1.2009 31.1.2008Debt related to employees 15.3 16.7Hedging instruments 31.4 0.0Other debt 190.5 171.2Other debt, total 237.2 187.9

Splitted in balance sheet as follows:Long-term liabilities 2.5 0.0Short-term liabilities 234.7 187.9Other debt, total 237.2 187.9

Th e carrying amount of payables consisting of salaries, A-tax, social security contributions, holiday pay, etc., project-related costs and other costs is equal to the fair value of these payables.

Holiday pay obligations represent the Group’s liability to pay salary during holiday periods to which the employees had earned entitlement by the balance sheet date and which are to be taken in the following fi nancial year(s).

Note 30. Deferred tax liabilities

31.1.2009 31.1.2008Deferred tax liability at 1 February 52.3 59.9Change in tax rate -1.0 -1.0Additions for the year 16.2 29.2Disposals for the year -16.3 -36.4Foreign-exchange adjustments -7.9 0.6Deferred tax liabilities at 31 January 43.3 52.3

Deferred tax liabilities relate to:Property, plant and equipment 0.0 -0.1Short-term assets 36.6 41.2Untaxed reserve relating to Sweden 8.9 15.3Provisions 0.0 1.6Value of tax losses -2.2 -5.7Total deferred tax liabilities 43.3 52.3


Note 32. Contingent assets and liabilities as well as security furnished

Contingent assets

Th e contingent asset in the form of a deferred tax asset not recognized appears from note 19.

Contingent liabilities and security furnished 31.1.2009 31.1.2008Surety and guarantee commitments on behalf of associates 5.1 5.1Surety and guarantee commitments on behalf of joint ventures 28.5 33.1Surety and guarantee commitments in joint ventures 8.5 11.0Other surety and guarantee commitments 23.4 38.1Carrying amount of project portfolio furnished as security to credit institutions 2,147.8 1,556.6Carrying amount of escrow account deposits, etc., investments, receivables and property, plant and equipment furnished as security to credit institutions 429.2 673.6

Th e amounts shown below in brackets are comparative fi gures for 2007/08.

Th e amounts stated for surety and guarantee commitments on behalf of associates and joint ventures are the upper limits.

Th e Group’s other surety and guarantee commitments consist primarily of the Group’s total rent guarantee commitments for which no provisions have been made in the fi nancial statements.

Th e provisions made in the fi nancial statements relate to the rent guarantees that are likely to be called up.

Th e Group’s project portfolio amounts to DKK 2,541.3 million (DKK 1,998.3 million), of which DKK 2,147.8 million (DKK 1,556.6 million) has been furnished as security to the credit institutions that have granted building credits or mortgage credit loans.

Th e carrying amount of escrow account deposits, etc., and non-current assets, totalling DKK 429.2 million (DKK 673.6 million), consists of security furnished in the form of escrow account deposits, securities, etc. amounting to DKK 62.7 million (DKK 89.0 million) and investment properties amounting to DKK 366.5 million (DKK 584.6 million).

At 31 January 2008, the Group had a commitment, through a joint venture, to take over an underground car park upon completion, amounting to DKK 14.4 million. From 31 January 2009, the Group does no longer have this commitment. Usual performance bonds have been furnished for construction works performed. Th e performance bonds have been issued via a credit insurance company. To a large extent, any work to be carried out under performance bonds will be attributable to subcontractors.

From time to time, the Group is involved in disputes and lawsuits. Any negative outcome of pending disputes and lawsuits is not expected to materially aff ect an assessment of the Group’s fi nancial position.

Th e contingent retaxation liability attaching to German subsidiaries, regarding which no provisions have been made, amounts to DKK 87.9 million. (2007/08: DKK 87.9 million). Th e Company will check whether such tax liability will be triggered, but this is believed to be highly unlikely.


Note 33. Financial risks and fi nancial instruments

Categories of fi nancial instruments 31.1.2009 31.1.2008Other securities and investments 1.3 8.9Financial assets held to maturity 1.3 8.9

Trade receivables 154.2 220.1Receivables from associates 8.4 8.4Contracted work in progress 3.7 0.0Other receivables 160.3 256.5Cash and cash equivalents 227.2 644.4Loans, advances and receivables 553.8 1,129.4

Securities 5.0 4.0Financial assets available for sale 5.0 4.0

Credit institutions 1,746.4 1,756.6Trade payables 224.0 381.7Other debt 237.2 187.9Financial liabilities measured at amortized cost 2,207.6 2,326.2

Th e Group’s risk management policyAs a consequence of its activities, TK Development is exposed to fl uctuations in foreign-exchange and interest rates. Th e overall objective of the Group’s risk policy is to manage risks and exposures and thus minimize the negative eff ects on earnings and cash fl ows. To the extent possible, the Parent Company manages the Group’s fi nancial risks centrally and coordinates the Group’s liquidity management, including the raising of funds and the investment of surplus funds.

Foreign-exchange risksTh e Group primarily hedges its foreign-exchange risks by matching the currency of payments received with the currency of payments made. As a main rule, the fi nancing of the individual projects, whether raised with credit institutions or by forward funding, is raised in the same currency as the currency agreed or expected to be used for the project sale. Likewise, the main rule is for construction contracts to be concluded in the project’s invoicing currency. In the few cases where the Group concludes the construction contract in a diff erent currency than the relevant project’s invoicing currency, it will be assessed in each case whether the foreign-exchange risk is to be hedged through a forward agreement or other fi nancial instruments. In the 2008/09 fi nancial year, a forward agreement was concluded for a project to hedge the contract currency, which diff ers from the project’s invoicing currency. No forward agreement was concluded in the previous fi nancial year.

Interest-rate risksAs a main rule, the TK Development Group fi nances its projects in progress by way of short-term, fl oating-rate bank loans or by forward funding, generally based on a fi xed interest rate. Other interest-bearing debt is largely subject to variable interest.

Based on the Group’s risk policy, Management regularly assesses whether a portion of its loans and advances should be hedged by fi nancial instruments. No fi nancial instruments were used in the 2008/09 fi nancial year or the previous year to hedge interest-rate risks.

Liquidity risksTh e Group manages its liquidity risks by using continuous short-term cash budgets and long-term cash budgets that cover several years. Th e Group aims to continuously secure an optimum liquidity buff er to make effi cient use of its cash resources in case of unforeseen fl uctuations in cash withdrawals. Th e Group aims to optimize its liquidity buff er by raising loans or forward funding for its projects in progress.

Credit risksIn connection with the sale of the Group’s projects, the title to a project does not pass to the investor until payment has been eff ected. Th us, the Group’s sale of projects does not generally generate credit risks as such. Each receivable is assessed individually, after which any necessary impairment losses are recognized.

Th e maximum credit risks associated with securities, equity investments, trade receivables, and other receivables correspond to their carrying amounts.Th e impairment losses for the year relating to trade receivables appear from note 21. No impairment losses on other fi nancial asset have been recognized.Reference is also made to the section “Risk issues” in this Annual Report, page 46.


CurrencyCash, cash equivalents

and securitiesReceivables Credit insti-

tutionsOther liabili-

tiesUnsecured

net position

EUR 7.1 102.6 -605.0 -65.2 -560.5SEK 65.7 10.4 -43.5 -63.6 -31.0PLN 23.6 36.6 -251.1 -27.4 -218.3CZK -15.7 14.8 -31.7 -31.7 -32.9Total at 31 January 2009 112.1 164.4 -931.3 -187.9 -842.7



tutionsOther liabili-

tiesUnsecured

net position

EUR 113.4 30.1 -583.9 -86.6 -527.0SEK 85.8 11.8 -57.9 -25.4 14.3PLN 73.9 171.0 -358.1 -83.9 -197.1CZK 49.2 28.3 0.0 -56.0 21.5Total at 31 January 2008 322.3 241.2 -999.9 -251.9 -688.3

Sensitivity of profi t/loss and equity to foreign-exchange fl uctua-tions 2008/09 2007/08

Eff ect if the EUR rate were 10 % lower than the actual rate 42.0 39.5Eff ect if the SEK rate were 10 % lower than the actual rate 2.3 -1.1Eff ect if the PLN rate were 10 % lower than the actual rate 16.4 14.8Eff ect if the CZK rate were 10 % lower than the actual rate 2.5 -1.6

Th e Group’s major foreign-exchange exposures relate to EUR, SEK, PLN and CZK. Th e above calculations show the eff ect of 10 % exchange-rate fl uctuations on equity and profi t or loss if the rate of the relevant currencies had been 10 % lower than the actual rate. A corresponding increase in foreign-exchange rates would have a corresponding positive impact on profi t or loss and equity.

As all foreign-exchange adjustments relating to the above-mentioned fi nancial instruments are recognized in the income statement, any exchange-rate fl uctuations will have the same eff ect on profi t or loss and equity.

As stated above, a forward agreement was concluded for a single project to hedge the project’s currency risk. No forward agreement or other fi nancial derivatives were concluded in the fi nancial year 2007/08.

Note 33. Financial risks and fi nancial instruments, continued

Foreign-exchange risks relating to recognized assets and liabilities.


Interest-rate risks and the dates of revaluation or maturity regarding fi nancial assets and liabilities:

Date of revaluation/maturity Eff ective rate

in %0-1 year 1-5 years > 5 years Total2008/09Other securities and investments 1.3 0.0 0.0 1.3 7.75 %Securities 5.0 0.0 0.0 5.0 0 - 7 %Trade receivables 154.2 0.0 0.0 154.2 0 %Other receivables 160.3 0.0 0.0 160.3 0 %Deposits with credit institutions (cash and cash equivalents) 227.2 0.0 0.0 227.2 2 - 5 %Receivables from associates 8.4 0.0 0.0 8.4 6 - 8 %Trade payables -224.0 0.0 0.0 -224.0 0 %Other debt -237.2 0.0 0.0 -237.2 0 %Payables to credit institutions -1,639.2 -84.7 -22.5 -1,746.4 3 - 8 %Total at 31 January 2009 1,544.0 -84.7 -22.5 1,651.2

Date of revaluation/maturity Eff ective rate in %0-1 year 1-5 years > 5 years Total

2007/08Other securities and investments 3.8 5.1 0.0 8.9 3 - 8 %Securities 4.0 0.0 0.0 4.0 0 - 7 %Trade receivables 220.1 0.0 0.0 220.1 0 %Other receivables 256.5 0.0 0.0 256.5 0 %Deposits with credit institutions (cash and cash equivalents) 644.4 0.0 0.0 644.4 2 - 5 %Receivables from associates 8.4 0.0 0.0 8.4 6 - 8 %Trade payables -381.7 0.0 0.0 -381.7 0 %Other debt -187.9 0.0 0.0 -187.9 0 %Payables to credit institutions -1,348.3 -216.9 -191.4 -1,756.6 5 - 9 %Total at 31 January 2008 -780.7 -211.8 -191.4 -1,183.9

With regard to interest-rate sensitivity, an increase in the interest level of 1 % p.a. compared to the interest level at the balance sheet date in respect of the Group’s variable-interest deposits with and payables to credit institutions would have a negative impact on the profi t or loss for the year, and thus on equity, of DKK 11.4 million for a full year. A fall in the interest level of 1 % p.a. would result in a corresponding positive impact on the profi t or loss for the year and on equity. For the 2007/08 fi nancial year, the interest-rate sensitivity in case of a change in the interest level of 1 % p.a. would have a DKK 8.2 million impact for a full year.

Liquidity risksTh e maturity dates of fi nancial liabilities are specifi ed for the individual categories of liabilities in the notes, with the exception of trade payables and other debt largely falling due for payment within one year. Th e Group’s liquidity reserve consists of cash and cash equivalents as well as unutilized credit facilities.

Th e liquidity reserve breaks down as follows: 2007/08 2007/08Free cash and cash equivalents 99.5 222.3Unutilized credit facilities 55.2 84.4Total 154.7 306.7Escrow accounts and other not fully disposable amount for later disposal 127.7 422.1Total liquidity reserve 282.4 728.8



Capital managementTh e Company’s Management reviews the Group’s capital structure on a regular basis, as well as the need for any adjustments. Management’s overall aim is to provide a capital structure that supports the Group’s long-term growth, while at the same time ensuring the best possible relation between equity and loan capital and thus maximizing the return for the Company’s shareholders.

Th e Group has adopted a solvency target corresponding to a solvency ratio of around 30 %, and compliance with this target also represents a covenant that commits the Group vis-à-vis its main bankers. Th e Group complied with this target throughout the fi nancial year. Th e solvency ratio was 39.5 % at 31 January 2009.

Th e Group realized a return on equity of 10.5 % for the 2008/09 fi nancial year and expects to generate a return on equity of almost 10.0 % for the 2009/10 fi nancial year. Th e realized return on equity and the expected future return on equity are naturally incorporated in the assessment of the Group’s capital structure.

Th e matter of whether or not to distribute dividends is considered year by year. Th e current policy of the Supervisory Board is not to distribute dividends. Th e Supervisory Board wishes to retain the liquidity in the Group, especially in consideration of the present market situation. Furthermore, the Supervisory Board wishes to apply the retained earnings to further developing the Group’s activities.

Breach of loan agreementsDuring the fi nancial year and the previous year, the TK Development Group was not in breach of any loan agreements.



Note 35. Post-balance sheet events

No other events aff ecting the Company other than those mentioned in the Management’s review have occurred after the balance sheet date.

Note 34. Transactions with related parties

Th e Company has no related parties with a controlling interest.

Related parties with signifi cant infl uence in the Company and the Group are specifi ed below:

• Supervisory Board and Executive Board (and their related parties)

• Joint ventures, associates and group enterprises; see the overview of group companies on page 95.

2008/09 2007/08Supervisory Board and Executive Board (and their related parties)Holding of shares, in terms of number 2,382,934 1,971,234Obligation towards Executive Board, retention bonus 0.0 5.7Obligation towards Executive Board, employee bonds 1.1 0.1

Remuneration, etc. to the Supervisory Board and Executive Board, see note 6.

Joint ventures, associates and group enterprisesFees from joint ventures 0.9 9.0Interest income from joint ventures 4.0 10.1Interest expenses, joint ventures -8.1 -5.4Interest income from associates 0.4 0.4Receivables from associates 8.4 8.4Receivables from joint ventures 102.3 122.7Payables to joint ventures 106.5 126.9

Apart from the above, there were no transactions with related parties in the year under review.

No security or guarantees for balances with related parties have been provided at the balance sheet date. Receivables and payables are settled by cash payment. No losses on receivables from related parties have been realised, nor have impairments of such as provision for probable losses been made.

Suretyships and guarantees have been issued on behalf of joint ventures and associates; see note 32.

Note 36. New IFRS and IFRIC interpretations

At the date of publication of this Annual Report, a number of new or amended fi nancial reporting standards and IFRIC interpretations had not yet entered into force. Th us, they have not been incorporated into the Annual Report. Management believes that the new and amended fi nancial reporting standards will not materially aff ect the annual reports for the next fi nancial years, with the exception of additional disclosure requirements for operating segments following from the implementation of IFRS 8, Operating segments, the impact that the revised IFRS 3, Business combinations, will have on the accounting treatment of any future business acquisitions, and the changed presentation following from the implementation of the amended IAS 1, Presentation of fi nancial statements.


Overview of group companies

No parent companies other than the listed compny TK Development A/S prepare consolidated fi nancial statements.

Th e TKD Group’s subsidiaries

Name Reg. offi ce Ownership interest Name Reg. offi ce Ownership

interest

TK Bygge-Holding A/S Aalborg 100 % TK Development Sweden Holding AB Stockholm 100 %

TKD Nordeuropa A/S Aalborg 100 % TK Projekt AB Stockholm 100 %

TK Bygge-Holding Russia A/S Aalborg 100 % EMÖ Projekt AB Stockholm 100 %

TK Development Danmark A/S Aalborg 100 % EMÖ Center AB Stockholm 100 %

TK Development Baltics Holding A/S Aalborg 100 % TK Utveckling AB Stockholm 100 %

TKD Projekt A/S Aalborg 100 % TK Sverige AB Stockholm 100 %

TK Valby Torvene A/S Aalborg 100 % Byggnetto i Blekinge AB Stockholm 100 %

TK Amerika Plads H A/S Aalborg 100 % TKD Suomi OY Helsinki 100 %

Kommanditaktieselskabet Frederikssund Shoppingcenter Aalborg 100 % OY TKD Construction Finland Helsinki 100 %

Komplementarselskabet Frederikssund Shoppingcenter ApS Aalborg 100 % D & V Properties Sp. z o.o. Warsaw 100 %

K/S Tampere IV, Finland Copenhagen 100 % TK Development Polska Sp. z o.o Warsaw 100 %

ApS Komplementarselskabet Tampere retail IV, Finland Copenhagen 100 % Euro Mall Bytom Sp. z o.o Warsaw 100 %

K/S Kaarina Retail Park 1, Finland Copenhagen 100 % Centrum Handlowe Reduta Sp. z o.o. Warsaw 100 %

Komplementarselskabet Kaarina Retail Park 1 ApS Copenhagen 100 % Centrum Handlowe Targowek Sp. z o.o Warsaw 100 %

TK Development Bau GmbH Berlin 100 % Euro Mall Polska XXI Sp. z o.o. Warsaw 100 %

TK Development GmbH Berlin 100 % Euro Mall Polska III Sp. z o.o Warsaw 100 %

TKH Datzeberg Grundstücksgesellschaft mbH Berlin 100 % UAB TK Development Lietuva Vilnius 100 %

TKH Projektbeteiligungsgesellschaft mbH Berlin 100 % UAB ”Profi sta” Vilnius 100 %

TKD Oranienburg Grundstücksgesellschaft mbH Berlin 100 % SIA TKD Retail Park Riga 100 %

TKH Mahlow Wohnungsbaugesellschaft mbH Berlin 100 % SIA TK Development Latvia Riga 100 %

TKH Bauprojekt Weissensee GmbH Berlin 100 % TK Czech Operations s.r.o. Prague 100 %

TKH Ferienwohnungsgesellschaft mbH Berlin 100 % Euro Mall Czech VI s.r.o. Prague 100 %

EKZ Datzeberg Scan-Car GmbH Berlin 100 % Euro Mall Brno South Retail Park s.r.o. Prague 100 %

EKZ Datzeberg Scan-Car GmbH & Co. KG Berlin 100 % TK Development Czech II s.r.o. Prague 100 %

TKH Bauprojekt Gäblerstrasse GmbH Berlin 100 % Euro Mall Ceske Budejovice s.r.o. Prague 100 %

Euro Mall Holding A/S Aalborg 100 % TK Sites s.r.o. Prague 100 %

Euro Mall Poland Holding A/S Aalborg 100 % TK Czech Development III s.r.o. Prague 100 %

Euro Mall Czech Holding A/S Aalborg 100 % Euro Mall Project s.r.o. Prague 100 %

Euro Mall Sweden AB Stockholm 100 % Euro Mall Bohemia s.r.o. Prague 100 %

TK Polska Operations S.A. Warsaw 100 % Euro Mall City s.r.o. Prague 100 %

Euro Mall Polska X Sp. z o.o. Warsaw 100 % Euro Mall Delta s.r.o. Prague 100 %

Euro Mall Targówek III Sp. z o.o. Warsaw 100 % Euro Mall Event s.r.o. Prague 100 %

Euro Mall Targówek Sp. z o.o. Warsaw 100 % Euro Mall Praha s.r.o. Prague 100 %

Jero II Sp. z o.o. Warsaw 100 % TK Development Slovakia s.r.o. Bratislava 100 %

Euro Mall Polska XIV Sp. z o.o. Warsaw 100 % Saprex s.r.o. Bratislava 100 %

Euro Mall Polska XV Sp. z o.o. Warsaw 100 % Targest s.r.o. Bratislava 100 %

Euro Mall Polska XVIII Sp. z o.o. Warsaw 100 % Euro Mall Poland Invest B.V. Amsterdam 100 %

Euro Mall Wroclaw Sp. z o.o. Warsaw 100 % Euro Mall Torun Holding B.V. Amsterdam 100 %

Euro Mall Sosnowiec Retail Sp. z o.o. in likvidation Warsaw 100 % Euro Mall Czech & Slovakia Invest B.V. Amsterdam 100 %

Euro Mall Chorzow Sp. z o.o. in likvidation Warsaw 100 % Euro Mall Czech Invest B.V. Amsterdam 100 %

Euro Mall Sosnowiec Dev. Sp z o.o. in likvidation Warsaw 100 % Euro Mall Karlovy Vary Holding B.V. in likvidation Amsterdam 100 %

Euro Mall Torun Sp. z o.o. in likvidation Warsaw 100 % Euro Mall Sterboholy Holding B.V. Amsterdam 100 %

TK Polska Development II Sp. z o.o. Warsaw 100 % Euro Mall Luxembourg S.A. Luxembourg 100 %

Euro Mall Polska XXII Sp. z o.o. Warsaw 100 % TK Development Sp. z o.o. Warsaw 100 %

Euro Mall Polska XXIII Sp. z o.o. Warsaw 100 % TKD Bulgaria EOOD Sofi a 100 %

Euro Mall Polska XXIV Sp. z o.o. Warsaw 100 %

Th e companies are included in the Consolidated Financial Statements by full consolidation.


Overview of group companies, continued

TKD Group’s Joint ventures

Euro Mall Hradec Kralove Real Estate s.r.o. Prague 20 % Euro Mall Polska XX Sp. z o.o. Warsaw 76 %

Euro Mall Polska XVI Sp. z o.o. Warsaw 76 % Euro Mall Ventures S.á.r.l. Luxembourg 20 %

Euro Mall Polska XIX Sp. z o.o. Warsaw 76 % Euro Mall Sterboholy SC a.s. Prague 75 %

Udviklingsselskabet Nordkranen A/S Copenhagen 50 % Ejendomsselskabet Klampenborgvej I/S Aalborg 50 %

Kommanditaktieselskabet Danlink - Udvikling Copenhagen 50 % Nordkranen Vandtårnsvej ApS Copenhagen 50 %

Komplementarselskabet DLU ApS Copenhagen 50 % Ejendomsanpartsselskabet matr. Nr. 1 ACN

Kommanditaktieselskabet Østre Havn P/S Aalborg 50 % Vestermarken, Odense Jorder Copenhagen 50 %

Østre Havn ApS Aalborg 50 % Ringsted Outlet Center P/S Aalborg 50 %

Kommanditaktieselskabet DLU nr. 1 Copenhagen 50 % SPV Ringsted ApS Aalborg 50 %

ApS Komplementarselskabet DLU nr. 1 Copenhagen 50 % TKD Milgravis ApS Aalborg 50 %

SIA ”KK” Riga 50 %

Th e companies are included in the Consolidated Financial Statements by pro-rata consolidation.

Associates

Pedersen Fritscheshof Neubrandenburg KG Hamburg 35 % I/S Fritscheshof Aalborg 35 %

Step RE CSP A/S Herning 33 % Euro Mall Center Management s.r.o. Prague 33 %

Step RE CSP Invest I A/S Herning 33 % Euro Mall Center Management s.r.o. Bratislava 33 %

Camacuri s.r.o. Prague 30 % Euro Mall Center Management Poland Sp. z o.o. Warsaw 33 %

Th e companies are included in the Consolidated Financial Statements according to the equity method.

Parent Company Financial Statements | TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results 97/115

All amounts in DKKm Note 2008/09 2007/08Net revenue 0.0 0.0External direct project costs 3 0.0 -1.2Gross profi t/loss 0.0 -1.2

Other external expenses 4 -5.0 -2.7Staff costs 5 -4.7 -3.8Total -9.7 -6.5

Profi t/loss before fi nancing, depreciation and amortization -9.7 -7.7Depreciation, amortization and impairment of long-term assets 0.0 0.0Profi t/loss before fi nancing -9.7 -7.7

Income from investments in group enterprises 8 -16.3 -9.2Financial income 9 49.9 99.7Financial expenses 10 -21.4 -58.2Total 12.2 32.3

Profi t/loss before tax 2.5 24.6Tax on profi t/loss for the year 11 25.0 1.0Profi t/loss for the year 27.5 25.6

Proposal for distribution of net profi tRetained earnings 27.5 25.6

PARENT COMPANY FINANCIAL STATEMENTS

Income Statements

98/115 TK Development A/S | Preliminary announcement of 2008/09 annual fi nancial results | Parent Company Financial Statements


ASSETS

Long-term assets

Goodwill 12 5.1 5.1Intangible assets 5.1 5.1

Investments in group enterprises 8 1,159.9 1,182.4Receivables from group enterprises 725.7 962.6Deferred tax assets 13 33.1 9.7Other long-term assets 1,918.7 2,154.7

Total long-term assets 1,923.8 2,159.8

Short-term assets

Other receivables 0.0 0.1Corporate incometax 1.7 0.0Prepayments 0.3 0.4Total receivables 2.0 0.5

Securities 14 4.0 4.0Cash and cash equivalents 15 8.4 13.9Total short-term assets 14.4 18.4

ASSETS 1,938.2 2,178.2

Balance sheet



EQUITY AND LIABILITIES

Equity

Share capital 16 560.9 560.9Retained earnings 1,162.1 1,130.3Total shareholders’ equity 1,723.0 1,691.2

Short- and long-term liabilities

Credit institutions 17 80.0 190.0Provisions 18 19.9 20.0Other debt 20 2.5 0.0Total long-term liabilities 102.4 210.0

Credit institutions 17 105.4 79.8Trade payables 0.9 0.6Payables to group enterprises 0.0 175.3Corporate income tax 0.0 8.4Provisions 18 1.6 1.8Other debt 20 4.9 11.1Total short-term liabilities 112.8 277.0

Total short- and long-term liabilities 215.2 487.0

EQUITY AND LIABILITIES 1,938.2 2,187.2

Balance sheet


All amounts in DKKm Share capital Retained earnings Total

Equity at 1 February 2007 560.9 1,102.8 1,663.7Profi t/loss for the year 0.0 25.6 25.6Total income and expenses recognized 0.0 25.6 25.6Share-based remuneration (warrants) 0.0 1.9 1.9Sale of treasury shares 0.0 0.0 0.0Other transactions 0.0 1.9 1.9

Equity at 31 January 2008 560.9 1,130.3 1,691.2

Profi t/loss for the year 0.0 27.5 27.5Total income and expenses recognized 0.0 27.5 27.5Share-based remuneration (warrants) 0.0 4.3 4.3Market-value adjustment, listed shares 0.0 0.0 0.0Other transactions 0.0 4.3 4.3

Equity at 31 January 2009 560.9 1,162.1 1,723,0

Statement of changes in equity


All amounts in DKKm 2008/09 2007/08

Profi t/loss before fi nancing -9.7 -7.7Adjustments for non-cash itemsShare-based remuneration (warrants) 0.2 0.1 Provisions -1.8 -1.8 Market-value adjustments -0.1 -0.1Increase/decrease in receivables 221.7 947.6Increase/decrease in payables and other debt -178.7 6.1Cash fl ows from operating activities before net fi nancials and tax 31.6 944.2

Interest paid, etc. -21.2 -79.4Interest received, etc. 49.9 121.0Corporate income tax paid -8.4 -10.4Cash fl ows from operating activities 51.9 975.4

Purchase of securities and investments 0.0 -452.6Sale of securities and investments 27.1 0.0Cash fl ows from investing activities 27.1 -452.6

Repayment of long-term fi nancing -110.0 -51.0Raising of long-term fi nancing 0.0 190.0Repayment of short-term fi nancing 0.0 -741.5Raising of short-term fi nancing 25.6 79.9Sale of treasury shares 0.0 0.0Cash fl ows from fi nancing activities -84.4 -522.6

Cash fl ows for the year -5.4 0.2

Cash and cash equivalents, beginning of year 13.9 13.7Market-value adjustment of cash and cash equivalents -0.1 0.0

Cash and cash equivalents at year-end 8.4 13.9

Cash and cash equivalents include temporary deposits related to the sale of projects, as well as other cash and cash equivalents to which the Group does not have a full right of disposal, a total of DKK 8.3 million. (2007/08 DKK 13.4 million)

Th e fi gures in the cash fl ow statement cannot be inferred from the Parent Company’s fi nancial statements alone.



Table of contents, Notes Parent Company

Note 1. . Eff ect of changes to accounting policies 102Note 2. Accounting estimates and assessments 102Note 3. External direct project costs 102Note 4. Other external expenses 102Note 5. Staff costs 103Note 6. Share-based remuneration - se koncern 103Note 7. Fees payable to the auditors elected at the General Meeting 105Note 8. Investments in group enterprises 105Note 9. Financial income 106Note 10. Financial expenses 106Note 11. Corporate income tax 106Note 12. Goodwill 107Note 13. Deferred tax asset 107Note 14. Securities 108Note 15. Cash and cash equivalents 108Note 16. Share capital 108Note 17. Payables to credit institutions 109Note 18. Provisions 109Note 19. Operating leases 110Note 20. Other debt 110Note 21. Contingent assets and liabilities as well as security furnished 110Note 22. Financial risks and fi nancial instruments 111Note 23. Transactions with related parties 113Note 24. Post-balance sheet events 114Note 25. Accounting policies 114Note 26. New IFRS and IFRIC interpretations 114


Note 3. External direct project costs

2008/09 2007/08Project costs 0.0 1.2External direct project costs, total 0.0 1.2

Note 4. Other external expenses

2008/09 2007/08Administrative expenses 4.6 2.3Cars, operating expenses 0.4 0.4Other external expenses, total 5.0 2.7

Note 2. Accounting estimates and assessments

Many account items cannot be measured with certainty, but only estimated. Such estimates consist of assessments based on the most recent information available at the time of presenting the fi nancial statements. It may be necessary to change previous estimates based on changes in the assumptions underlying the estimate or based on supplementary information, additional experience or subsequent events.

In connection with the practical application of the accounting policies described, Management has made a number of signifi cant accounting estimates and assessments that have materially aff ected this Annual Report:

Deferred tax assetsTh e valuation has been based on the existing possibilities for carrying forward losses and for group pooling. A change in the conditions for carrying forward losses and group pooling could result in the value of the tax assets being either higher or lower than the carrying amount computed at 31 January 2009. Moreover, the valuation has been based on existing budgets and profi t forecasts for a fi ve-year period. Th e carrying amount of deferred tax assets totalled DKK 33.1 million at 31 January 2009.

Investments in group enterprisesTo assess the need for impairment of investments in group enterprises in the Parent Company’s fi nancial statements, the values in use of the cash-fl ow-generating units to which the investment relates must be calculated. Calculating the value in use assumes that an estimate of future expected cash fl ows in the individual cash-fl ow-generating unit has been made and that a reasonable discount rate has been determined. If the actual course of an investment deviates from the expected development, this may necessitate adjustments to the impairment recognized. Th e carrying amount of investments in group enterprises totalled DKK 1,159.9 million at 31 January 2009.

Note 1. Eff ect of changes to accounting policies

Th e implementation of IFRIC 11 has resulted in the following changes to the Parent Company’s fi nancial statements:

Equity at 31 January 2007

Income statement 2006/07

Equity at 31 January 2008

Income statement 2007/08

Amount according to previous accounting policies 1,661.6 0.0 1,687.3 25.6Value of incentive schemes of subsidiaries. Th is value has also been added to the cost of the investments. 2.1 0.0 3.9 0.0

Tax eff ect of the above adjustment 0.0 0.0 0.0 0.0Amount according to changed accounting policies 1,663.7 0.0 1,691.2 25.6


Note 5. Staff costs

2008/09 2007/08Fees for Supervisory Board 2.3 1.9Salaries, etc. for the Parent Company’s Executive Board; see table below 10.2 11.4Bidragsbaserede pensionsordninger 0.0 0.0Social security costs 0.7 0.0Other salaries and staff costs 0.8 1.2Reinvoiced via service agreements -9.3 -10.7Total staff costs 4.7 3.8

Average number of employees 2 2

Number of employees at year-end 2 2

Salaries, etc. for the Parent Company’s Executive Board:

Salary Pension Bonus Retention bonus Warrants Total


Salary Pension Bonus Retention bonus Warrants Total


Note 6. Share-based remuneration Th e group has two incentive programmes

December 2005 programmeOn 30 December 2005, the Supervisory Board issued warrants to the Executive Board and other executive staff for the subscription of 826,000 shares, each with a nominal value of DKK 20. Subsequently, 136,000 warrants have lapsed, leaving a total of 690,000 active warrants at the balance sheet date. Th e allocation of warrants is subject to the relevant employees still being employed at the time of exercising the warrants.

Th is is a four-and-a-half-year warrant scheme with the fi rst exercise opportunity after three and a half years and with a further three-year (max.) lock-up period in respect of any gain on the acquired shares in excess of the subscription amount. Th is means that shares at up to a market value equal to the subscription amount may be divested without restrictions, while shares exceeding a market value equal to the subscription amount can be disposed of no earlier than during a three-year period after subscription, such that up to one-sixth of these shares can be disposed of in each of the six windows during the three-year period. Th e above-mentioned 690,000 warrants correspond to approx. 2.5 % of the share capital.


• following publication of the preliminary announcement of 2008/09 annual fi nancial results (from around 30 April 2009)• following publication of the interim report for the six months ending 31 July 2009 (from around 30 September 2009)• following publication of the preliminary announcement of 2009/10 annual fi nancial results (from around 30 April 2010)

Th e subscription price per share of nominally DKK 20, before any deduction for dividend, has been fi xed at DKK 74.54 in the fi rst exercise window, DKK 77.05 in the second window and DKK 80.63 in the third window.

Based on a share price of DKK 57.81 and a dividend of DKK 0 per share per year, the value of the warrants has been calculated at DKK 6.6 million, using the Black-Scholes formula. Th e amount will be expensed currently over the period until May 2009. Th e calculation has been based on an expected future


Number of warrants 31.1.2009 31.1.2008Outstanding warrants at 1 February 690,000 704,000Warrants issued during the year 698,000 0Lapsed due to termination of employment -12,000 -14,000Exercised during the year 0 0Outstanding warrants at 31 January 1,376,000 690,000

Number of warrants exercisable at the balance sheet date 0 0

Share-based remuneration recognized in the income statement 1.6 0.7

For the outstanding warrants at 31 January 2009, the average exercise prices ranged from DKK 78.96-85.40 per warrant (2007/08: DKK 74.54-80.63 per warrant). Th e average term to expiry was 20 months (2007/08: 21 months).

volatility of 30 % and an interest level of 3 %. In addition, it has been assumed that the warrants will be exercised in the intermediate exercise period.


May 2008 programmeAt the Annual General Meeting on 27 May 2008, the Supervisory Board of TK Development was authorized to issue warrants for a total of up to nominally DKK 14,000,000 (700,000 shares, each with a nominated value of DKK 20) to the Executive Board and other executive staff members in the Group. On 5 June 2008, the Supervisory Board decided to exercise this authorization and issued 170,000 warrants to the Executive Board and 528,000 warrants to other executive staff members, a total of 698,000 warrants. Subsequently, 12,000 warrants have lapsed, leaving a total of 686,000 active warrants at the balance sheet date.

Under the four-year warrant scheme, warrants can be exercised at the earliest three years after the grant date, and any shares subscribed for are subject to an additional lock-up period of up to three years. Th is means that shares up to a market value equal to the subscription amount, plus tax liability, can be disposed of without limitation, while shares in excess of such amount can be disposed of, at the earliest, during six trading windows in the three-year lock-up period, such that up to 1/6 of such shares can be disposed of during each window. Th e 686,000 warrants correspond to approx. 2.5 % of the share capital.


• following publication of the preliminary announcement of 2010/11 annual fi nancial results (from around 30 April 2011);• following publication of the interim report for the six months ending 31 July 2011 (from around 30 September 2011); and• following publication of the preliminary announcement of 2011/12 annual fi nancial results (from around 30 April 2012).

Th e subscription price per share has been fi xed on the basis of the average listed market price during the period 9–20 June 2008, with an annual 8 % adjustment to refl ect an advance return to existing shareholders. Th us, based on a price of DKK 66.9 per share of nominally DKK 20, the subscription price, before a deduction for any dividend, can be calculated at DKK 83.4, DKK 86.2 and DKK 90.2 for the exercise of warrants in the three respective six-week periods.

Based on a share price of DKK 66.9 and a dividend of DKK 0 per share per year, the value of the warrants has been calculated at DKK 11.9 million, using the Black-Scholes formula. Th e amount will be expensed periodically over the term of the incentive scheme. Th e calculation is based on an anticipated future volatility of 40 % and an interest level of 5 % p.a. In addition, it has been assumed that the warrants will be exercised in the intermediate exercise period.


Th e development in outstanding warrants is shown below:


Note 8. Investments in group enterprises

2008/09 2007/08Cost at 1 February 1,285.4 831.1Additions for the year 4.2 1.8Capital investments 0.0 452.6Disposals for the year -56.2 0.0Capital adjustment, etc. 0.0 0.0Cost at 31 January 1,233.4 1,285.5

Impairment at 1 February -457.9 -448.7Impairment for the year -16.8 -9.2Reversal relating to disposals 29.5 0.0Impairment at 31 January -445.2 -457.9

Setoff s at 1 February 354.8 397.4Impairment set off against receivables/provisions 16.9 -42.6Setoff s at 31 January 371.7 354.8

Carrying amount at 31 January 1,159.9 1,182.4

Investments in group enterprises are recognized at cost. Investments and receivables were subjected to an impairment test at 31 January. In the cases where the cost exceeds the recoverable amount, it is written down to such lower value.

Impairment is recognized in the line ”Income from investments in group enterprises”.

Income from investments:

Impairment for the year; see above -16.8 -9.2Gains on sale and liquidation 0.5 0.0Total income from investments -16.3 -9.2

Overview of investments in group enterprises:

Name Reg. offi ce Ownership interest

TK Bygge-Holding A/S Aalborg 100 %TK Development Bau GmbH Berlin 100 %TK Development GmbH Berlin 100 %TKD Nordeuropa A/S * Aalborg 48 %* On the basis of TK Development A/S’ 100 % direct and indirect ownership of the company, the company is considered an affi liated company.

Th e ownership interests shown above are the Company’s direct holdings.

Note 7. Fees payable to the auditors elected at the General Meeting

2008/098 2007/08Total fees, Deloitte 0.2 0.1Total fees, Nielsen & Christensen 0.6 0.2Total fees 0.8 0.3

Fees break down as follows:Audit services, Deloitte 0.2 0.1Audit services, Nielsen & Christensen 0.3 0.2Other services, including tax and VAT, Deloitte 0.0 0.0Other services, including tax and VAT, Nielsen & Christensen 0.3 0.0


Note 10. Financial expenses

2008/09 2007/08Interest expenses, credit institutions 15.8 43.4Interest expenses, group enterprises 5.4 14.7Foreign-exchange losses and capital losses on securities 0.1 0.1Other fi nancial expenses 0.1 0.0Total fi nancial expenses 21.4 58.2

which break down as follows:Interest expenses on fi nancial liabilities not measured at fair value through profi t and loss 21.3 58.1Other fi nancial expenses 0.1 0.1Total fi nancial expenses 21.4 58.2

Note 9. Financial income

2008/09 2007/08Interest, cash and cash equivalents, etc. 0.3 0.4Interest income from group enterprises 49.6 84.5Interest income, instruments of indebtedness 0.0 14.8Financial income from loans, advances and receivables 49.9 99.7Total fi nancial income 49.9 99.7

which breaks down as follows:Interest income from fi nancial assets not measured at fair value through profi t and loss 49.9 99.7

Note 11. Corporate income tax

2008/09 2007/08Accrued corporate income tax -1.7 8.4Adjustment regarding accrued tax relating to prior years 0.0 1.1Change in deferred tax -23.3 -10.5Tax on profi t/loss for the year -25.0 -1.0

Th e tax on the net profi t/loss for the year results as follows:Danish tax rate 0.6 8.5Adjustment relating to prior years 0.0 1.1Tax eff ect of:Non-deductible costs 4.3 0.1Change in value adjustment -1.0 0.7Change of tax rate 0.0 0.1Change in non-capitalized tax asset relating to:Losses carried forward, group pooling -33.1 -11.5Other 4.2 0.0Tax on net profi t/loss for the year -25.0 -1.0

Deferred tax asset at 1 February 9.7 0.9Deferred tax for the year recognized in profi t or loss for the year 23.4 10.5Adjustment relating to prior years recognized in the income statement 0.0 -1.7Deferred tax asset at 31 January 33.1 9.7


Note 12. Goodwill

31.1.2009 31.1.2008Cost at 1 February 7.7 7.7Additions 0.0 0.0Disposals 0.0 0.0Cost at 31 January 7.7 7.7

Amortization and impairment at 1 February 2.6 2.6Impairment for the year 0.0 0.0Amortization and impairment at 31 January 2.6 2.6


Goodwill relates to the purchase of a business partner’s activities in Central Europe.

At 31 January 2009, Management carried out an impairment test of the carrying amount of goodwill. Th e recoverable amount is based on the value in use, determined by means of expected cash fl ows on the basis of budgets for the comming 3 years, approved by Management, and further 2 years prognosis. In the calculation of the recoverable amount, a discount rate of 10 % before tax has been used. Th e impairment test did not give rise to any recognition of impairment.

Note 13. Deferred tax asset

31.1.2009 31.1.2008Deferred tax asset at 1 February 10.5 1.0Change of tax rate 0.0 -0.1Additions for the year 33.0 11.3Disposals for the year -5.5 -1.7Deferred tax asset at 31 January 38.0 10.5

Value adjustment at 1 February -0.8 -0.1Value adjustment for the year -4.1 -0.7Value adjustments at 31 January -4.9 -0.8


Th e deferred tax asset relates to:Property, plant and equipment 0.0 -1.3Short-term assets -1.4 0.0Provisions 1.5 1.5Other 0.0 -1.2Value of tax losses 37.9 11.5Impairment of tax asset -4.9 -0.8Total deferred tax asset 33.1 9.7

Th e contingent retaxation liability attaching to German subsidiaries, regarding which no provisions have been made, amounts to DKK 87.9 million (2007/08 DKK 87.9 million). Th e Company will check whether such tax liability will be triggered, but this is believed to be highly unlikely.


Note 14. Securities

31.1.2009 31.1.2008Listed securities 0.1 0.1Unlisted securities (equity interests) 3.9 3.9Total securities 4.0 4.0

Securities consisting of listed shares and unlisted equity interests are classifi ed as “fi nancial assets available for sale”. Listed securities consist of listed shares and are measured at fair value. Unlisted equity interests are not traded in an active market. As the fair value of these equity interests cannot be determined with a suffi cient degree of reliability, they are measured at cost.

Note 15. Cash and cash equivalents

31.1.2009 31.1.2008Free cash and cash equivalents 0.1 0.5Escrow accounts and other accounts that the Group cannot fully dispose of 8.3 13.4Total cash and cash equivalents 8.4 13.9

It is assessed that there are no credit risk.

Note 16. Share capital

Th e share capital consists of 28,043,810 shares of DKK 20 each (nom. DKK 560,876,200). Th e share capital has been paid up in full. Th e shares are not divided into several share classes, and no shares are subject to special rights or restrictions, including restrictions with regard to the payment of dividend and repayment of capital. No changes occurred in the 2008/09 fi nancial year.

Changes in the share capital over the past fi ve years:Number in thousands Nominal value Changes Year-end Changes Year-end

2004/05 0.0 14,021.9 0.0 280.42005/06 14,021.9 28,043.8 280.4 560.92006/07 0.0 28,043.8 0.0 560.92007/08 0.0 28,043.8 0.0 560.92008/09 0.0 28,043.8 0.0 560.9

Th e Company holds no Treasury Shares.


Note 18. Provisions

31.1.2009 31.1.2008Rent guarantees for properties sold at 1 February 4.1 5.9Applied during the year -1.8 -1.8Provisions for the year 0.0 0.0Rent guarantees for properties sold at 31 January 2.3 4.1

Other provisions at 1 February 17.7 17.9Applied during the year 0.0 -0.2Provisions for the year 1.5 0.0Other provisions at 31 January 19.2 17.7

Provisions at 31 January 21.5 21.8

Expected maturity dates of the liabilities provided for:0-1 year 1.6 1.81-5 years 19.9 20.0> 5 years 0.0 0.0Provisions at 31 January 21.5 21.8

Rent guarantee liabilities for sold properties have been calculated based on experience with rent guarantees and on an individual assessment of the individual leases.

Other provisions consist of provisions for negative equity in subsidiaries.

Note 17. Payables to credit institutions

Payables to credit institutions are recognized as follows in the balance sheet: 31.1.2009 31.1.2008Long-term liabilities 80.0 190.0Short-term liabilities 105.4 79.8Total payables to credit institutions 185.4 269.8

Financial liabilities are off set against trade receivables and tied-up cash and cash equivalents, to the extent that the Company has a right of setoff and also intends or is contractually obliged to realize assets and liabilities at the same time. No setoff s were made in the year under review or the previous fi nancial year.

Fair value 185.4 269.8

Carrying amount 185.4 269.8

At 31 January, the Parent Company had the following loans and credits:

Fixed/ vari-able

Eff ective rate Carrying amount Fair valueLoans Maturity 2008/09 2007/08 2008/09 2007/08 2008/09 2007/08Bank DKK 2009-2010 variable 6 - 7% 6 - 7% 185.4 269.8 185.4 269.8


Note 20. Other debt

31.1.2009 31.1.2008Other debt related to employees 7.3 7.3Other costs payable 0.1 3.8Other debt, total 7.4 11.1

Splitted in balance sheet as followsLong-term liabilities 2.5 0.0Short-term liabilities 4.9 11.1Other debt, total 7.4 11.1

Th e carrying amount of payables consisting of salaries, A-tax, social security contributions, holiday pay, etc., project-related costs and other costs is equal to the fair value of these payables. Holiday pay obligations represent the Group’s liability to pay salary during holiday periods to which the employees had earned entitlement by the balance sheet date and which are to be taken in the following fi nancial year(s).

Note 19. Operating leases

For the years 2006-2009, operating leases for the rental of operating equipment have been concluded. Th e leases have been concluded for a three-year period with fi xed lease payments that are index-adjusted annually. Th e leases are non-terminable for the period mentioned, after which they can be renewed for three- to fi ve-year periods. Th e annual lease payments are expensed in the income statement.

Future, minimum lease payments according to non-terminable lease contracts break down as follows:

31.1.2009 31.1.2008Within 1 year 0.1 0.2Within 1-5 years 0.0 0.1After 5 years 0.0 0.0Total 0.1 0.3

Note 21. Contingent assets and liabilities as well as security furnished

Contingent assets

Th e Group has no contingent assets

Contingent liabilities and security furnished 31.1.2009 31.1.2008Surety and guarantee commitments on behalf of group enterprises and associates 1,721.4 1,735.0

Th e amounts shown below in brackets are comparative fi gures for 2007/08.

Th e amounts stated for surety and guarantee commitments on behalf of group enterprises are the upper limits.

At 31 January 2008, the subsidiaries had drawn an amount of DKK 1,250.4 million (DKK 2,275.6 million) on their credit facilities, while the amount drawn by joint ventures totalled DKK 0.0 million (DKK 17.7 million). In addition, the Company has issued guarantees for its group enterprises’ and joint ventures’ ongoing and completed projects.

Th e contingent retaxation liability attaching to German subsidiaries, regarding which no provisions have been made, amounts to DKK 87.9 million (DKK 87.9 million). Th e Company will check whether such tax liability will be triggered, but this is believed to be highly unlikely.


Note 22. Financial risks and fi nancial instruments

Categories of fi nancial instruments 31.1.2009 31.1.2008Receivables from group enterprises 725.7 962.6Other receivables 0.0 0.1Cash and cash equivalents 8.4 13.9Loans, advances and receivables 734.1 976.6

Securities 4.0 4.0Financial assets available for sale 4.0 4.0

Credit institutions 185.4 269.8Payables to group enterprises 0.0 175.3Trade payables 0.9 0.6Other debt 7.4 11.1Financial liabilities measured at amortized cost 193.7 456.8

Th e Company’s risk management policyAs a consequence of its activities, TK Development is exposed to fl uctuations in foreign-exchange and interest rates. Th e overall objective of the Company’s risk policy is to manage risks and exposures and thus minimize the negative eff ects on earnings and cash fl ows. To the extent possible, the Parent Company manages the Group’s fi nancial risks centrally and coordinates the Group’s liquidity management, including the raising of funds and the investment of surplus funds.

Foreign-exchange risksTh e Company primarily hedges its foreign-exchange risks by matching the currency of payments received with the currency of payments made. Management regularly assesses, based on a specifi c assessment, whether any of the Company’s foreign-exchange risks should by hedged by forward agreements or other fi nancial instruments. Th e Company did not enter into any forward agreements in the 2008/09 fi nancial year or the previous fi nancial year.

Interest-rate risksBy virtue of being a parent company, the Company has a number of intercompany receivables and payables. To the extent possible, Management aims to ensure that the interest rates for these intercompany receivables and payables, which are generally subject to a fi xed interest rate, do not vary signifi cantly. Other interest-bearing debt is largely subject to variable interest (fl oating-rate debt). Management regularly assesses whether a portion of the fl oating-rate debt should be hedged by fi nancial instruments. No fi nancial instruments were used in the 2008/09 fi nancial year or the previous year to hedge interest-rate risks.

Liquidity risksTh e Company manages its liquidity risks by using continuous short-term cash budgets and long-term cash budgets that cover several years. Th e Company aims to continuously secure an optimum liquidity buff er to make effi cient use of its cash resources in case of unforeseen fl uctuations in cash withdrawals.

Credit risksGenerally, the Company’s activities do not generate credit risks as such, with the exception of credit risks relating to receivables from group enterprises.

Foreign-exchange risks relating to recognized assets and liabilitiesAs stated above, no forward agreements or other derivative fi nancial instruments were used in the 2008/09 fi nancial year or the previous year to hedge foreign-exchange risks in the Company.




tutes Liabilities Unsecured net position

EUR at 31 January 2009 8.3 121.0 0.0 -2.4 126.9



tutes Liabilities Unsecured net position

EUR at 31 January 2008 13.4 206.7 -1.1 -6.1 212.9

Sensitivity of profi t/loss and equity to foreign-exchange fl uctuations 2008/09 2007/08Eff ect if the EUR rate were 10 % lower than the actual rate -9.5 -16.0

Th e Company’s major foreign-exchange exposures relate to EUR. Th e above calculations show the eff ect of 10 % exchange-rate fl uctuations on equity and profi t or loss if the rate of the relevant currency had been 10 % lower than the actual rate. A corresponding increase in foreign-exchange rates would have a corresponding positive impact on profi t or loss and equity.

As all foreign-exchange adjustments relating to the above-mentioned fi nancial instruments are recognized in the income statement, any exchange-rate fl uctuations will have the same eff ect on profi t or loss and equity.

Interest-rate risks and the dates of revaluation or maturity regarding fi nancial assets and liabilities:

Date of revaluation/maturity0-1 year 1-5 years > 5 years Total Eff ective rate

in %2008/09Securities 4.0 0.0 0.0 4.0 0 - 3 %Receivables from group enterprises 0.0 725.7 0.0 725.7 6 - 8 %Other receivables 0.0 0.0 0.0 0.0 0 %Deposits with credit institutions 8.4 0.0 0.0 8.4 3 - 5 %Payables to credit institutions -105.4 -80.0 0.0 -185.4 6 - 7 %Trade payables -0.9 0.0 0.0 -0.9 0 %Other debt -4.9 -2.5 0.0 -7.4 0 %

Total at 31 January 2009 -98.8 643.2 0.0 544.4

Date of revaluation/maturity0-1 year 1-5 years > 5 years Total Eff ective rate

in %2007/08Securities 4.0 0.0 0.0 4.0 0 - 3 %Receivables from group enterprises 0.0 962.6 0.0 962.6 6 - 8 %Other receivables 0.1 0.0 0.0 0.1 0 %Deposits with credit institutions 13.9 0.0 0.0 13.9 3 - 5 %Payables to credit institutions -79.8 -190.0 0.0 -269.8 6 - 7 %Trade payables -0.6 0.0 0.0 -0.6 0 %Other debt -11.1 0.0 0.0 -11.1 0 %

Total at 31 January 2008 -73.5 772.6 0.0 699.1



With regard to interest-rate sensitivity, an increase in the interest level of 1 % p.a. compared to the interest level at the balance sheet date in respect of the Company’s variable-interest deposits with and payables to credit institutions would have a negative impact on the profi t or loss for the year, and thus on equity, of DKK 1.3 million for a full year. A fall in the interest level of 1 % p.a. would result in a corresponding positive impact on the profi t or loss for the year and on equity. For the 2007/08 fi nancial year, the interest-rate sensitivity in case of a change in the interest level of 1 % p.a. would have a DKK 1.9 million impact for a full year.

Liquidity risksTh e maturity dates of fi nancial liabilities are specifi ed for the individual categories of liabilities in the notes, with the exception of trade payables and other debt largely falling due for payment within one year. Th e Company’s liquidity reserve consists of cash and cash equivalents as well as unutilized credit facilities.

Breach of loan agreements

During the fi nancial year and the previous year, the Company was not in breach of any loan agreements.

Note 23. Transactions with related partiesTh e Company has no related parties with a controlling interest.

Related parties with signifi cant infl uence in the Company and the Group are specifi ed below:

• Supervisory Board and Executive Board (and their related parties) • Joint ventures and group enterprises; see the overview of group companies on page 95.

2008/09 2007/08Supervisory Board and Executive Board (and their related parties)Holding of shares, in terms of number 2,382,934 1,971,234Obligation towards Executive Board, retention bonus 0.0 5.7Obligation towards Executive Board, employee bonds 1.1 0.1

Remuneration, etc. to the Supervisory Board and Executive Board, see note 5.

Joint ventures, associates and group enterprisesInterest income from group enterprises 49.6 84.5Interest expenses, group enterprises -5.4 -14.7Interest income, instruments of indebtedness 0.0 14.8Receivables from group enterprises 725.7 962.6Payables to group enterprises 0.0 175.3Impairment for the year regarding investment in group enterprises 16.8 9.2Accumulated impairment regarding investment in group enterprises 445.2 457.9

Costs allocated to group enterprises according to service agreements concluded 9.3 10.7

Th e Company has received no dividends from subsidiaries.

Suretyships and guarantees have been issued on behalf of joint ventures and associates; see note 32 in the Annual Report for the Group.

Apart from the above, there were no transactions with related parties in the year under review.



Note 24. Post-balance sheet events

No other events aff ecting the Company other than those mentioned in the Management’s review have occurred after the balance sheet date.

Note 25. Accounting policies

Reference is made to the description of accounting policies for the Group and the Parent Company on page 58

Note 26. New IFRS and IFRIC interpretations

Reference is made to note 36 in the Consolidated Financial Statements.

Documents

UK_annual_report_0809