15,109. SEK m 11,521. SEK m 1,161. SEK m 531. SEK m 233 SEK 4.8 KEY FIGURES. Number of apartments. Fair value. Rental income, annualised

(1)

(2)

Number of apartments

15,109

Fair value

SEK m 11,521

Rental income, annualised

SEK m 1,161

Net operating income, annualised

SEK m 531

Profit after tax

SEK m 233

Earnings per share

SEK 4.8

(3)

Comments from the CEO

2

History 4

Business concept & Strategies

5

Market overview

8

Property portfolio

12

Property management

28

Refurbishment 30

Employees & Organization

32

Tenants 34

Sustainability 36

Financing 38

Acquisition analysis business combination 42

The share

43

Earnings capacity

45

Corporate governance report

46

Board of Directors

50

Management 52

FINANCIAL REPORTING

Directors’ Report

55

Consolidated income statement

62

Consolidated statement of

comprehensive income

62

Consolidated balance sheet

63

Change in consolidated equity

64

Consolidated statement of cash flows

65

Parent Company – Income statement

66

Parent Company – Balance sheet

67

Change in consolidated equity,

Parent Company

68

Statement of cash flows,

Parent Company

69

Notes 70

Auditors’ Report

93

(4)

Uppsala 6% Norrköping 12% Gothenburg 5% Eskilstuna and Strängnäs 15% Greater Stockholm 62%

PROPERTY PORTFOLIO (LETTABLE AREA)

In February D. Carnegie & Co acquired a property

portfolio of about SEK 3 billion that includes 3,400

apartments, from Kvalitena AB and other sellers.

Trading on NASDAQ First North with the

D. Carnegie & Co share began on April 9.

The Company raised SEK 690 million in April through a

rights issue, exercising the full allotment option.

In July the Company acquired property holdings of about

9,300 apartments valued at SEK 6.5 billion, through the

acquisition of Hyresbostäder i Sverige II AB. As a result,

D. Carnegie & Co became the largest listed residential

property management Company in Sweden. The deal also

included Graflunds, an organization with 100 employees

and 50 years of experience in property management.

During the year the Company acquired properties for a

total value of SEK 11.1 billion.

Rental income amounted to SEK 608.7 million.

Net operating income was SEK 257.6 million.

Income from property management amounted to

SEK 42.4 million.

Proﬁt after tax amounted to SEK 233.1 million.

Earnings per share amounted to SEK 4.8.

D. Carnegie & Co’s existing property portfolio comprising about 1.2 million m² of lettable area distributed among 15,109 apartments is primarily concentrated to the growth areas of Greater Stockholm.

D. CARNEGIE & CO IN BRIEF

D. Carnegie & Co is a dedicated residential

real estate Company

specialising in residential units

in Greater Stockholm.

The business model is to own

and manage properties and to gradually refurbish

apartments in connection with the natural turnover

of tenants.

(5)

Greater Stockholm 62%

FOR APPRECIATION

Demand for housing in the Greater Stockholm region will be greater than the

supply for the foreseeable future. This demand is expected to reach 200,000

residential units in 2020. D. Carnegie & Co has become the largest listed

residential property management Company in this market with current property

holdings of more than 15,000 apartments. The holdings have excellent

improvement potential and by reinvesting all surplus over the next few years,

the Company will generate strong growth in value. In addition, the Company

will have its own management organization with extensive experience and

expertise, creating reliability and cost-effectiveness.

In addition to growth in value in the existing portfolio, the Company plans to

grow through acquisitions, while maintaining its investment criteria.

(6)

Acquisitions and IPO

influence the year

Dear shareholders and other stakeholders in D. Carnegie & Co.

It is time to sum up our first year, which has been particularly eventful.

I am pleased to report that we both met our growth targets with a

wide margin and made a healthy profit. The Company now has a new

business focus specialising in housing through the acquisitions of

properties totaling SEK11 billion, we completed a rights issue and

we were listed on NASDAQ First North.

On February 27, 2014 we acquired properties valued at approximately SEK 3 billion

through the acquisition of Stendörren Bostäder AB. In connection with the acquisition,

we became a Company with a clear focus on housing and now have an attractive property

portfolio. We will continue to acquire new properties, refurbish existing properties and

develop new building rights. The properties are strategically located in the so-called

Million Programme areas in the Greater Stockholm region.

Good opportunities to refurbish the portfolio

A cornerstone of our strategy is to increase revenues by refurbishing and raising the

stand-ard of individual apartments to be able to raise rents. To do so we use Bosystem, a solution

that makes it possible to refurbish individual apartments without having to evacuate an

entire building or the apartments in a single stairwell. The tenants greatly appreciate this

approach because they do not need to vacate the apartment during refurbishment. We

expect to be able to refurbish 7-10 percent of our portfolio annually at a reasonable cost

using this method. We can usually charge 30-40 percent more in rent after improving the

standard of an apartment. Moreover, experience shows that tenants welcome this type of

refurbishment and that they feel the increase in rent is reasonable. Consequently

D. Carnegie & Co has opportunities to gradually raise rents in addition to the annual

rent adjustments.

Strong investor interest

On April 9, 2014 trading began in the Company’s shares on NASDAQ First North and a

rights issue was completed simultaneously that raised a total of SEK 690 million. Investor

interest was strong and the offer was oversubscribed ten times in the process, giving us

2,700 new shareholders.

In July 2014 we acquired an additional 9,300 apartments from a Norwegian-Swedish fund

structure, making D. Carnegie & Co the largest listed dedicated residential property

management Company in Sweden. The properties are strategically located and

comple-ment our current portfolio. The deal also included Graflunds, an organization with 50

years of experience in property management. Through the acquisition of Graflunds we

have created one of the most experienced and professional property management teams in

Sweden. D. Carnegie & Co can therefore handle all operation and management of its

properties with its own staff, which will further increase our proﬁtability. Since our

(7)

prop-erties were acquired at different times during the year, it is difﬁcult to get a clear picture of

our annual returns. This problem will naturally disappear over time, but to simplify the

situation for our stakeholders, we have compiled our annual earnings capacity in a separate

report included in this annual report. Nevertheless, it is clear that even though we acquired

the greater part of our portfolio in the second half of the year, we can still report a

perfor-mance that demonstrates a reasonable earning capacity, we can also conclude that more

remains to be done. Our goal is to improve our proﬁt margin rental income less operating

and maintenance costs to at least 50 percent in the next year or so.

Great potential

Our goal is to continue to grow our property portfolio through acquisitions and

improve-ment of properties, as well as to develop building rights for our own properties. We believe

that growth prospects are promising, with large potential for improvements and

develop-ment. We have now built an organization that will allow us to effectively implement our

business concept. Moreover, no indications suggest that the pressure on the housing

market will ease up any time in the foreseeable future. Since we focus on properties in

Greater Stockholm or within commuting distance to the capital, we expect a continued

non-existent vacancy rate.

In addition, in early 2015 we also completed a reﬁnancing of the majority of our loan

portfolio, which will both lead to lower average interest rates and ensure that capital

and interest rates are secured for a considerable time to come. In summary, most of our

indicators are pointing upwards and we look forward to an even better 2015.

Stockholm, 24 March 2015

ULF NILSSON

(8)

The company name D. Carnegie & Co was used

for the first time in 1803 by Scotsman David

Carnegie in Gothenburg for his import and export

business. The original business was discontinued,

however, and in 1907 the D. Carnegie & Co real

estate company and the D. Carnegie & Co Porter

brewery were formed.

In the 1960s the Company changed its focus from real estate to banking and the

properties were sold. The current Company D. Carnegie & Co was registered in 1994 and

listed as the Parent Company to Carnegie Investment Bank (previously

the banking ﬁrm Langenskiöld and Carnegie Fondkommission).

The following year the real estate Company Stendörren began

operations with the acquisition and refurbishment of Million

Programme properties.

Real estate Company once again

After the Swedish National Debt Ofﬁce took over ownership

of the subsidiaries in 2008 following a prolonged conciliation

process, the owners decided in 2013 to ﬁnd a new business for

D. Carnegie & Co. In September of that year the Company signed

an agreement with Kvalitena AB to acquire 80 percent of shares in

D. Carnegie & Co. In February 2014 the Company acquired appartments from Kvalitena

AB for SEK 3 billion.

Sweden’s largest

In April 2014, D. Carnegie & Co launched a rights

issue at the same time that the Company was listed on

NASDAQ First North; the offering of shares was ten

times oversubscribed and gave the Company 2,700

new owners. Approximately 15,000 apartments were

acquired in 2014, making D. Carnegie & Co Sweden’s

largest listed dedicated residential real estate Company.

From import and export

to properties

(9)

MANAGE

REFURBISH

DEVELOP

Low vacancy and low risk

BUSINESS CONCEPT

D. Carnegie & Co is a dedicated residential real estate company. The business concept is

to take a long-term approach to acquire, manage and refurbish the property portfolio with

good potential for improvement in the Million Programme (Miljonprogrammet) areas.

Apartments are gradually refurbished in connection with the natural turnover of tenants

using the fast and cost-effective “Bosystem” refurbishment method, which is appreciated

by tenants who do not have to vacate the apartment during the refurbishment process.

The Company also refurbishes facades, stairwells, exterior environments and similar

projects. The result substantially elevates property values and cash flow.

Moreover, this strategy generates signiﬁcant added value for D. Carnegie & Co by

developing building rights in existing holdings.

VISION

To develop and refurbish the entire portfolio into attractive homes in mint condition.

To be an innovative real estate company that creates added value for tenants, owners

and society at large.

(10)

GOAL

The Company’s goal is to have a completely refurbished portfolio within a decade through

cost-effective external and internal upgrades and refurbishments.

The upgrades will provide the properties with growth in value of 8-10 percent per year

through increased cash flow and net operating income, while lowering return

require-ments, which will lead to further growth in value.

In the long term, the proﬁt margin will exceed 50 percent.

The loan to value (LTV) ratio will never exceed 70, and bank loans are generally secured

by mortgages on the properties. See page 38 for more information.

10 years

The entire portfolio will be

refurbished within ten years

8–10%

Goal for growth in value per year

(11)

STRATEGY

Based on the current approximately 1,200,000 m

2

, D. Carnegie & Co’s strategy is to

continue to expand its property holdings in the Million Programme areas, especially in

the Greater Stockholm region, which will continue to undergo strong growth while the

housing shortage persists. Consequently the vacancy risk and therefore the risk in the

investment will remain low. The Million Programme areas in Stockholm also have the

highest potential for rent increases because of generally low rents combined with the

largest housing shortage.

The portfolio, which is efﬁciently managed by the Company’s own management

organiza-tion, is gradually being refurbished based on the natural turnover of tenants and using the

Bosystem refurbishment method. The properties are strategically located in areas with

good infrastructure, common recreation areas and excellent services. The portfolio initially

had some maintenance needs, which means the properties can be acquired at a favorable

price.

Having the property portfolio in a geographically deﬁned area also offers advantages

from a management perspective; local ofﬁces staffed by local personnel are sensitive to and

support the needs of the tenants. Moreover, ongoing refurbishments require good logistics

and warehousing within a reasonable distance.

D. Carnegie & Co applies a funding model with both bank loans and equity to achieve an

efﬁcient capital structure that offers good return on equity without high risk.

(12)

Market overview

D. Carnegie & Co is active in the Swedish housing market and is

impacted by a number of macroeconomic factors. Population growth

and low interest rates benefit the real estate industry, which

contin-ues to thrive.

Economic trends

The Swedish economy has experienced both an upswing and a decline since the crisis in

the fall of 2008 and the economic recovery is slow. One important reason is that exports

have not provided the boost needed to trigger growth. A growth rate of about 2 percent

would be reasonable to expect for 2015.

The weak macroeconomic trend, which is a consequence of weak global demand, has

cre-ated excess capacity in the economy. Investments have been subjected to downward

pres-sure while unemployment remains relatively high, even though the number of people

employed is the highest ever. Because of the recession, inflation has been very low in recent

years and nominal interest rates are down at historically low levels. The Riksbank cut

interest rates to zero in late October. In addition, the forecast for the future of the repo rate

was revised downwards substantially. In February 2015 the Riksbank implemented the

historic drop to minus interest rates; the low interest rates are expected to continue well

into 2016. Meanwhile, these low interest rates have in turn provided support for assets

such as equities and real estate.

The real estate market in Sweden

The real estate industry has generally been rather stable, beneﬁtting from population

growth and the current surge in urbanization. Low interest rates also beneﬁt the real estate

industry. The transaction pace in the Swedish real estate market was at a record high in

2014. The year ended with a strong fourth quarter when properties worth about SEK 69

billion were sold; the annual volume ended up at an impressive record-high SEK 160

billion. The most heavily traded segment was ofﬁce buildings, closely followed by rental

residential properties; the major cities attract the strongest interest, both in the most

desirable locations and the so-called secondary locations. Sales relating to rental

residential properties reached record levels during the year at SEK 37 billion.

Population growth in the Greater Stockholm region is a strong driving force for

conver-sion and new construction of housing. Population growth in the region has been around

2 percent annually in recent years, which means that about 30,000 to 40,000 people move

to the Greater Stockholm region every year. This strong trend drives demand for housing.

There is also political pressure to increase new construction, or at least to maintain at

(13)

current levels. The main threat is the political turmoil with regulatory and tax changes

that affect both demand and funding costs for newly built housing. Other geographic

sub-markets where the Company is active are also experiencing both a housing shortage

and population growth, which indicates a low risk on the revenue side.

The Swedish rental market

The Swedish rental market is characterized by an extensive history of rent control. The

current rent-setting system has its foundation in the “utility value principle” and collective

negotiations between the landlord and a tenant organization. Rent is set through collective

negotiations and governed by what is charged for a comparable apartment in a similar area

according to the “utility value principle,” which in turn is based on the regulations of the

Swedish Tenancy Act (chapter 12 of the Swedish Land Code 1970:994).

Stockholm currently has a housing shortage of about

110,000 homes

This shortage is expected to increase to 200,000

homes by 2020

(14)

Housing shortage

Demand for housing is high, especially in growth areas where net migration is greatest.

Almost half of Sweden’s municipalities state that there is a housing shortage in the

municipality. The number of rental units is declining and the major cities in particular

have long waiting times. Since 2006, the number of public rental flats has been cut in

half in downtown Stockholm and the number of privately owned rental units is now half

as large as in the early 1970s. The decrease is due to conversions to condominiums

(owner-occupied flats) and a reduced proportion of rental units among newly constructed

rental apartments.

There is a rapid migration to Stockholm and the population is growing in both numbers

of people and as a percentage of the population of the entire country. Since 1980, the

Greater Stockholm region has increased by 600,000 residents who represent 22 percent of

the total population today. According to the County Council, an additional 300,000

homes are needed by 2030. The average new construction has been signiﬁcantly lower in

recent years at a rate of about 10,000 homes per year. The surrounding municipalities are

experiencing strong pressure to build homes as a result of the large population growth in

the Greater Stockholm region. The situation is similar in the markets where D. Carnegie

& Co is active: stable population growth, a large housing shortage and an insufﬁcient

addition of new rental units to achieve a balanced market.

Number of completed housing

units in Stockholm County Housing needs (600 units per 1000 residents) 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 200 9 2011 2013 Population growth in Stockholm County Number

Source: Statistics Sweden

(15)

Rent level

A variety of factors influence the level of rents in the Greater Stockholm region, such as

proximity to downtown Stockholm, communications and standard, and there is a constant

discussion about how different factors affect utility value. The average difference between

a rental unit in central Stockholm and one in the outer suburbs is estimated at 30 percent.

According to statistics from the Tenants' Association, the average standard rent is lowest

in the outer suburbs at SEK 900 per square meter and highest in the part of the inner city

called the B area, SEK 1,300. The “innermost” part of the inner city is called the A area,

where the average standard rent is somewhat lower, about SEK 1,190. This situation is

reasonable because about 30 percent of apartments in the B area are newly built and

command a higher rent. The apartments that are newly constructed or refurbished in

out-lying areas have a higher rent than centrally located non-refurbished flats in the A areas.

Sources:

Fastighetsägarföreningen (Real Estate Owners Association) NIER

Savills

Bostadsförmedlingen i Stockholm (Stockholm Housing Service) Statistics Sweden Tenants’ Association 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Construction year 1965–1975 Construction year 1991– SEK average annual rent/m2

1,500

Source: Statistics Sweden

AVERAGE RENT MILLION PROGRAMME VS NEW CONSTRUCTION

New construction

Million Programme

(16)

Focus on Stockholm

and Mälardalen

D. Carnegie & Co’s property portfolio consists of dated residential

properties and buildings with development potential, located in the

growth areas of Stockholm and Mälardalen. Fair value as of

December 31, 2014 was SEK 11,521 million.

D. Carnegie & Co’s current property portfolio of

about 1.2 million m² of lettable area, distributed

among 15,109 apartments, is primarily concentrated

to the growth areas of the Greater Stockholm region.

PROPERTY HOLDINGS

City/Neighborhood Lettable area Number of apartments Fair value Dec. 2014 Kista/Husby 109,966 1,528 1,198,300 Bromsten/Rinkeby 112,053 1,305 1,121,320 Sollentuna 33,582 454 433,000 Flemingsberg 40,107 573 386,000 Vårby/Vårberg 76,029 770 645,000 Jordbro 79,482 1,112 822,000 Södertälje 164,240 2,110 1,788,470 Bro 43,621 540 373,020 Märsta 56,614 675 541,000 Uppsala 72,316 938 659,000 Eskilstuna 141,445 1,904 1,203,800 Strängnäs 35,373 411 393,700 Norrköping 134,657 1,899 1,067,800 Gothenburg 64,899 890 471,000 Other (land, building

rights, etc.) 4,508 0 417,410

(17)

KISTA/HUSBY

Kista and Husby are located about 10 kilometers north of downtown Stockholm. A broad

initiative has been underway here for several years to promote positive social and economic

development in the area - known as the “Järva lift” ( Järvalyftet). Many people and

busi-ness want to move here because of the good communications and the proximity to the

Järvafältet nature reserve. The area also has one of Europe’s largest IT clusters with

world-leading companies and a wide range of culture, sports, shops and services. Many of

the residential buildings in Kista and Husby were built as part of the Million Programme

in the 1960s and 1970s.

BREAKDOWN OF SPACE

KEY FIGURES

Number of apartments 1,528 Lettable area 109,966 m² Rent net, full year SEK 110,480 thousand Occupancy rate, housing 94.6% Carrying amount

properties SEK 1,198,300 thousand Net operating income

(budget 2015) SEK 47,164 thousand Average rent SEK 1,062/m² Percentage refurbished apartments 6%

1 bedroom 3.3% 2 bedrooms 33.6% 3 bedrooms 40.3% 4 bedrooms 12.9% Other 9.9%

(18)

BROMSTEN/RINKEBY, SPÅNGA

Bromsten, Rinkeby and Spånga are located just 10 kilometers northwest of downtown

Stockholm. The area is a mix of apartment buildings, townhouses/terrace houses and

single-family homes, with several forests and recreation areas. The range of leisure

activi-ties and sports is large and there are many centers with libraries, grocery stores, shops and

other amenities. It takes 10 to 18 minutes to get to central Stockholm by subway and

commuter train. Many of the residential buildings in Bromsten, Rinkeby and Spånga were

built as part of the Million Programme in the 1960s and 1970s.

BREAKDOWN OF SPACE

KEY FIGURES

properties SEK1,121,320 thousand Net operating income

(budget 2015) SEK 47,069 thousand Average rent SEK 1,030/m² Percentage refurbished apartments 3.2%

1bedroom 2.5% 2 bedrooms 15.3% 3 bedrooms 49.0% 4 bedrooms 21.5% Other 11.7%

(19)

SOLLENTUNA

Sollentuna Municipality, with approximately 68,000 inhabitants, is just north of

Stock-holm. Business and commercial centers are interspersed with natural green areas and a

variety of cultural activities. Sollentuna is steadily growing thanks to its attractive location

for both residents and businesses, as well as its proximity to the center of Stockholm and

Arlanda Airport. The municipality has several major shopping centers, efﬁcient services

and proximity to beautiful nature. Several residential areas in the municipality were built

as part of the Million Programme in the late 1960s.

KEY FIGURES

Number of apartments 454 Lettable area 33,582 m² Rent net, full year SEK 34,627 thousand Occupancy rate, housing 95.4% Carrying amount

properties SEK 433,000 thousand Net operating income

BREAKDOWN OF SPACE

1bedroom 7.2% 2 bedrooms 27.6% 3 bedrooms 42.4% 4 bedrooms 12.7% Other 10%

(20)

FLEMINGSBERG

Flemingsberg is located in southwest Stockholm. Stockholm County Council, Huddinge

Municipality and Botkyrka Municipality have formulated a development plan – Vision

Flemingsberg 2030 – for the area. The aim is for Flemingsberg to become one of the most

important centers for education, knowledge-intensive industry, science and business

creation in the Greater Stockholm region. In 2030 Flemingsberg will be a city and center

for 70,000 people. The central location and excellent living environment will make

Flemingsberg attractive to many people in the future.

BREAKDOWN OF SPACE

KEY FIGURES

(budget 2015) SEK 12,942 thousand Average rent SEK 961/m² Percentage refurbished apartments 0.2%

(21)

VÅRBY/VÅRBERG

Vårby and Vårberg are part of Huddinge Municipality and are part of the Stockholm

met-ropolitan area. Apartment buildings dominate the area, which offers efﬁcient public

trans-portation, including a subway to downtown Stockholm. There is good access to green

spaces and homes are located close to a nature reserve, beach and marina. There are plans

to refurbish and expand the Vårby commercial center so that it can offer attractive,

efﬁ-cient amenities and become a natural meeting place for area residents.

KEY FIGURES

BREAKDOWN OF SPACE

(22)

JORDBRO

Jordbro is a municipal district in Haninge Municipality, Stockholm County, with about

9,500 inhabitants. The community offers efﬁcient public and commercial services, a

well-developed child care system and elementary schools, as well as a vibrant business

community. Efﬁcient communications include the commuter train to Stockholm and a

modern highway network. Jordbro also offers scenic surroundings, nature reserves and

sports facilities. Apartment buildings built in the 1950s, 1960s and 1970s dominate the

south end of Jordbro, while the northern part consists mainly of single-family homes.

KEY FIGURES

BREAKDOWN OF SPACE

(23)

SÖDERTÄLJE

Södertälje Municipality, with approximately 92,000 inhabitants, is strategically located in

the Mälardalen and Greater Stockholm regions. There are many sports and cultural clubs,

a vibrant commercial center, a strong business community and an efﬁcient infrastructure,

all within commuting distance to Stockholm. The Sormland countryside also offers many

green recreational areas. Two major enterprises in Sweden – Scania and Astra Zeneca – are

located in Södertälje.

KEY FIGURES

BREAKDOWN OF SPACE

(24)

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%

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20 D. Carnegie & Co AB (publ) ANNUAL REPORT 2014

BRO

Upplands-Bro is located in the heart of Mälardalen and is sometimes described as one of

Stockholm's most scenic municipalities. There are 130 kilometers of shoreline along Lake

Mälaren and an archipelago with about 50 islands, creating opportunities for high-quality

living. This location is popular among families with children, seniors and students. Thanks

to a growing industry and business community, fewer and fewer of the municipality's

approximately 25,000 residents have to commute from the municipality for work.

Upplands-Bro is investing in improving the business environment and continually

attract-ing new people and businesses to the community.

KEY FIGURES

(budget 2015) SEK 18,942 thousand Average rent SEK 978/m² Percentage refurbished apartments 0%

BREAKDOWN OF SPACE

(25)

MÄRSTA

Märsta is the main community of Sigtuna Municipality, Stockholm County, located

half-way between Uppsala and Stockholm. People have lived and worked here for over 1,000

years, and today Sigtuna is a central location for business and cultural initiatives. About

24,000 people live here. Good communications include proximity to Arlanda Airport, the

E4 highway and the railway station. Proximity to both Uppsala and Stockholm have

con-tributed to the town’s expansion and make the municipality ideal for start-up companies.

Sigtuna Municipality is in fourth place in terms of number of nights spent in hotels in

Sweden.

KEY FIGURES

BREAKDOWN OF SPACE

(26)

UPPSALA

Uppsala is Sweden’s fourth largest municipality with over 200,000 inhabitants. The

popu-lation is continuously growing – in recent years at a rate of 3,000 to 4,000 people per year.

With its proximity to Stockholm (67 kilometers) and Arlanda (35 kilometers), Uppsala

occupies a strategic geographical position. The city offers a wide range of cultural, sports,

services and commercial amenities. Uppsala is one of the world's foremost science hubs,

with two highly ranked universities and University Hospital, which is a tertiary referral

hospital. These facilities have created opportunities for advanced research, resulting in a

number of successful companies in ﬁelds such as biomedicine and IT.

KEY FIGURES

BREAKDOWN OF SPACE

(27)

ESKILSTUNA

Eskilstuna is located about 110 kilometers of Stockholm in the heart of Södermanland.

With approximately 100,000 inhabitants and a strong industrial tradition, Eskilstuna is

one of Mälardalen's fastest growing cities. This growth places high demands on new and

attractive housing for both current and new residents. The area includes a college, efﬁcient

infrastructure, a well-developed business community and a good cooperative climate.

Eskilstuna also offers a wide range of services, culture, sports, and commercial amenities as

well as scenic areas.

KEY FIGURES

BREAKDOWN OF SPACE

(28)

STRÄNGNÄS

Strängnäs is centrally located in the expanding Mälardalen region. Residents enjoy both

small-town charm and proximity to the collective range of opportunities of the Greater

Stockholm region. Many people and businesses are attracted to Strängnäs because of its

central location. Its rich and diverse economy includes an array of small businesses and

pharmaceutical companies, as well as the electronics industry and more traditional

industries. Strängnäs is also ranked as one of Sweden’s best logistics hubs with shipping

to Mälardalen and the Greater Stockholm region.

KEY FIGURES

BREAKDOWN OF SPACE

(29)

NORRKÖPING

D. Carnegie & Co has strong conﬁdence in the real estate market in Östergötland. The

property portfolio consists of 1,899 apartments and a limited number of premises in the

Hageby, Inner City and Marielund neighborhoods, which makes the Company one of the

largest private players in Norrköping. Östergötland is a growing region where the city of

Norrköping has much to offer. It is home to large industrial and commercial enterprises,

as well as a growing university, and its strategic location includes Stockholm within

commuting distance.

KEY FIGURES

properties SEK 1,067,800 thousand Net operating income

BREAKDOWN OF SPACE

(30)

GOTHENBURG

Gothenburg is growing rapidly and is Sweden’s second largest city. The vision for 2030 is

to create room for 680,000 residents and 80,000 new jobs. Today an average of about

3,000 homes per year are built in Greater Gothenburg. According to the Gothenburg

Chamber of Commerce, the pace of construction is too slow, leading to a housing

short-age. Future residential properties must therefore be developed and adapted to future needs.

There is every reason to believe that demand for D. Carnegie & Co’s rental housing in the

Gothenburg region will be greater than the supply for the foreseeable future.

KEY FIGURES

(budget 2015) SEK 16,011 thousand Average rent SEK//m² 914/m² Percentage refurbished apartments 0%

BREAKDOWN OF SPACE

(31)

MILLION PROGRAMME

PROVIDED GOOD RESIDENTIAL

QUALITY OF LIFE

The Million Programme is the common name for the political

housing construction initiative in Sweden between 1965 and 1974.

It was the result of a debate in the Riksdag in 1965, after which a

million homes were built over a decade to help ease the housing

shortage, eliminate overcrowding and raise housing standards. It

came to be Sweden’s largest housing policy initiative and decisively

improved housing for millions of people.

Construction methods were streamlined as a result of the Million Programme. Repetition

and economies of scale were the cornerstones of both the architecture and the aesthetics.

The focus was on building homes that were light, easily furnished and easy to clean. Large

kitchens featured generous work surfaces and each room had flooring tailored to the

appli-cation. Floor plans were simple and efﬁcient, facilitating replacement of plumbing and

wiring along with other necessary upgrades today.

New neighborhoods grew up, especially in the Stockholm suburbs. The construction

projects also resulted in the development of urban design and aesthetic visions. Building

large, tall buildings allowed room for services, transportation, parks and green spaces.

The Stockholm subway/underground network was expanded during the same period and

the number of cars on the road sharply increased, which also had an impact on urban

plan-ning. The goal was to bring good communications to areas, at the same time that people

and cars would have to meet as little as possible. Garages/car parks were hidden

under-ground and often had elevator service directly up to the stairwells. Bicycle and pedestrian

paths were built and outside these areas large networks of motorways and highways were

planned to facilitate transportation.

• 100,000 apartments were built per year between 1965 and 1974

• Streamlined construction methods and labor resources

• Industrialized construction process based on repetitions and

economies of scale

(32)

Resource-efficient

and skilled property

management

The acquisition of Graflunds provided D. Carnegie & Co with

a strong management organization that has extensive experience

and expertise.

D. Carnegie & Co’s acquisition of HBS II included Graflunds’ management organization.

Management and operation of D. Carnegie & Co and Graflunds have been integrated

since October 1, 2014 and the portfolio of about 15,000 residential apartments are now

managed by the Company’s own staff.

Graflunds, which is headquartered in Eskilstuna, has been managing housing since the

1950s. The Company has an efﬁcient organization that now beneﬁts from a strong brand

and increased ﬁnancial resources.

Personal responsibility

Graflunds has long worked to create an efﬁcient management organization that keeps its

promises to tenants, owners and other stakeholders. The Company strives to keep costs in

mind at all levels and continually works with improvement measures. The employees are

out in the residential areas and each one has a personal responsibility to carry out the job in

a professional manner.

Based on a situation with limited resources, Graflunds has worked efﬁciently to increase

revenue with little effort and without unnecessary costs.

The goal is for tenants to experience a high level of comfort in their housing environment

at a reasonable cost. If the Company also raises rents, room is created to maintain and

invest in the properties and thus increase net operating income. Graflunds worked

accord-ing to this paradigm previously and continues to do so even after the merger with

D. Carnegie & Co.

Hire expertise

The merger between D. Carnegie & Co and Graflunds created an organization large

enough to make it possible to change roles and commitments. Where the Company

previously may have chosen to engage outside tradesmen and construction services to a

greater extent, procedures to hire necessary skills have now been initiated.

(33)

THIS IS GRAFLUNDS

The Company was founded in 1950 by builder Gunnar Graflund. It was owned and operated by the Graflund family until the

late 1990s. From the beginning, the Company built, owned and managed properties. Today Graflunds is a modern

management organization with a focus on housing. Graflunds has local offices in 13 locations. Management, accounting,

human resources, information, communication, IT, operations engineering, environmental issues and contracts are all handled

from headquarters in Eskilstuna. Local offices for Graflunds’ residential areas in Eskilstuna are also based at headquarters.

“ Graflunds is an efﬁcient management

organization that keeps its promises to

tenants, owners and other stakeholders.”

(34)

Flexible refurbishment – a

better solution for everyone

To refurbish housing, D. Carnegie & Co has exclusive rights to

Bosystem, which is a refurbishment method in which the process is

simplified, industrialized and systematized.

Bosystem is a cost-effective refurbishment method based on in-house project

manage-ment. The Company uses its own, often directly imported materials delivered straight to

the property and locally hired construction ﬁrms.

The method is designed to overhaul the plumbing and refurbish Million Programme

apartments conveniently for both residents and the property owner. The system is based

on taking advantage of the natural turnover of tenants; when a tenant moves out, that

particular apartment is refurbished. In an average Million Programme area, typical

turnover is 10-15 percent per year, including relocation through the internal waiting list

for those who want to move to newly refurbished apartments. The entire area is then

refurbished in about six to ten years.

Take advantage of economies of scale

Because of its large property holdings, D. Carnegie & Co can take advantage of economies

of scale and continuity to maintain a ﬁnancially sound approach to the refurbishments.

Bosystem has developed a complete product range for the entire apartment, thereby

simplifying, industrializing and systematizing the refurbishment process in several steps.

(35)

VACANCY

INCREASED

CASH FLOW

HIGHER RENT

LOWER COST

RENOVATION

This method also creates a better situation for the

residents who do not need to live with the problems

and stress associated with a traditional refurbishment

project where they must vacate the apartment.

Renovating only vacant apartments offers many

advantages. The expense of moving out quite simply

is not relevant. The refurbishment experience is far

more pleasant for the tenants.

Substantial cost savings

Experiences from completed refurbishments using the method show substantial cost

sav-ings. The cost of refurbishment using this method is usually half that of traditional

refur-bishment methods. Going from the bare frame to newly refurbished costs an average of

about SEK 5,000 per square meter. With such a large price difference, an upgraded

stand-ard can also be added for the refurbishment, which will beneﬁt both the tenant and

prop-erty owner.

By refurbishing the apartments one by one, as soon as the ﬁrst refurbished apartment is

completed, the property owner can raise the rent to the level that the increased standard

permits. The initial investment will be smaller and lead to increased revenue. In addition,

the period when no rent is paid during the refurbishment is limited to six to eight weeks.

By taking advantage

of the natural turnover

of tenants, the high

costs of vacating

the apartment and

planning can be

avoided.

6–8 weeks.

Vacancy period with loss of rent: two months

Refurbishment costs

are lower and the

standard is higher

with the use of

Bosystem.

Refurbishment leads

to rent increases and

lower maintenance

costs.

Higher revenues and

lower costs lead to

higher net operating

income, which

improves cash flow

and raises property

value

.

(36)

CEO

PROPERTY

MANAGEMENT IMPROVEMENTSPROJECTS AND FINANCE & STAFF

COMMITTEES BOARD OF DIRECTORS BUSINESS DEVELOPMENT AND ANALYSIS

Motivated employees

important cornerstone

D. Carnegie & Co has grown substantially during the first year

because of the merger with Graflunds, and around the turn of the

year, 135 people were employed. Creating common fundamental

values has been an important component to promote employee

motivation and commitment moving forward.

The basic values are commitment, responsiveness, accountability and good business

practices. It is important for all employees to work based on these values in order to

achieve the goals of both satisﬁed customers and satisﬁed owners.

There are a total of 13 property management ofﬁces; each ofﬁce has an area manager, as

well as a variable number of administrative assistants, caretakers and technicians.

Management organization has the support of staff positions in ﬁnance, IR, information

and communication, HR, operations technology, business development, procurement and

project coordination. A total of 135 employees work at D. Carnegie & Co.

One of the Company’s main goals is to increase customer satisfaction in all areas and

employees are the most important component in this effort. Efforts to continuously

improve conditions for employees are therefore a top priority. Each employee and each

workgroup must have a job description that is clear, understandable and relevant in order

for the employee to be motivated to perform do a good job.

(37)

MARIA ALLERT, administrative assistant

Engaging tenants in dialog is important to create a pleasant environment.

Maria Allert is one of the

people who has direct contact.

Along with a caretaker, she is responsible for a residential area in

Eskilstuna. Maria is originally from Mexico and she believes that her background is helpful for

those who come from another country and who may have problems with the language and the

culture. “I see the tenants as individuals, not as an apartment number,” she says. Sometimes it’s

important just to listen without interrupting. Maybe I can’t do anything right away, but I always try to

show that I would like to find a solution”.

LEIF WALLIN, procurement and project coordinator

Leif Wallin has been at Graflunds for 42 years.

As a young man, he helped to build the areas called

the Million Programme.

“I get angry when I hear the words Million Programme mentioned as an insult,” he says.

“People forget what its purpose was. If we hadn’t built, there would have been a shortage of one

million homes! When the buildings are being refurbished now, I can contribute my knowledge on

how they once were built.”

SUNE ERIKSSON, Operations Manager

As operations manager, Sune Eriksson is responsible for the synergy between D. Carnegie & Co

and Graflunds following the merger with regard to energy issues.

He has been at Graflunds for

13 years and built up the organization for efficient energy use there.

“With the merger, we are big enough to be well-positioned in procurement processes,” he says.

The effort to find new systems to save energy continues. As of November 2015, all of our energy

will come from wind power. That feels good, in terms of both the environment and finances”.

NUMBER OF EMPLOYEES 135

We follow a model with five verbs that reflect our work. Employees

who feel committed (WANT), informed (KNOW) have the relevant

skills (CAN) and the right authority (DO) and who also feel responsible

for their mission (SHOULD) have the best prospects for doing a

good job.

40% women 60% men

FUNDAMENTAL VALUES

(38)

Satisfied tenants are

the foundation of the

business

The business model is based on people wanting to live in

D. Carnegie & Co's homes. To ensure customer satisfaction, each

year a customer survey is carried out that forms the basis of much

of the management work, ranging from maintenance and caretaking

to focused initiatives to meet the specific requirements of the tenants.

D. Carnegie & Co has approximately 15,000 apartments. It is important to the Company

for the tenants to enjoy their homes and to feel that the Company is responsive to their

needs. Graflunds has extensive experience communicating with the residents and

respond-ing to tenant needs. Each year a customer survey is conducted to capture views and

opinions that subsequently serve as the basis for improvement initiatives. One third of

the residents get to answer questions continually.

The questionnaire covers everything from how easily residents feel it is to get in touch

with the manager to the quality of the refurbishments and maintenance. The result is then

used as the basis for statistics on the residents and can be broken down into smaller units.

This approach makes it possible to compare different regions, blocks or stairwells, as well

as different ages, etc. The Company can then take measures based on these statistics that

are adapted to the various needs. It also becomes easier to beneﬁt from good practices

found in the different management areas. The idea is that if the tenants are satisﬁed with

(39)

0 5 10 15 20 25 30 35 40 0 10% 20% 30% 40% 50% 60% 70% 80% 2010 2011 2012 2013 2014

SERVICE INDEX – TRENDS IN RECENT YEARS

“ Views and opinions serve as the

basis of the change process”

their living situation, they are more willing to pay rent and might even be willing to pay a

little more. Satisﬁed and proud tenants also contribute to a stronger image of the

residen-tial areas and increased security. The survey is also a tool to build the D. Carnegie & Co

and Graflunds brands.

D. Carnegie & Co has engaged Aktiv Bo, an independent Company with extensive

expe-rience of customer surveys in many different real estate companies, to measure customer

satisfaction and compile the results. At the heart of the customer survey is the Service

Index, which reflects how satisﬁed tenants are with their landlord and the quality of the

management. D. Carnegie & Co’s aims to achieve an 80-percent customer satisfaction score

in 2016. Last year, the Company improved from about 69 percent to about 73 percent.

80%

Aim to achieve an

80-percent customer

satisfaction score in 2016

The Service Index shows that the Company is headed in the right direction. In 2014, 73 percent of tenants were satisfied with their landlord.

(40)

Sustainability and finances

go hand in hand

Environmental initiatives are important for D. Carnegie & Co. In

addition to ensuring that waste management and waste sorting are

efficient in the residential areas, the Company actively works to save

energy and to choose suppliers who offer the most environmentally

sound options. In addition to the environmental aspect, these

solu-tions are also often the most economical. But it is also important for

the Company to ensure that ethical values are upheld and that

D. Carnegie & Co contributes to the construction of a sustainable society.

Energy

D. Carnegie & Co continually works to improve energy efﬁciency in the properties, for

both economic reasons and for the sake of the environment. Each month consumption is

monitored with respect to heat, water and electricity. At the same time that we strive to

ensure that our tenants are satisﬁed, we focus on efforts to reduce our consumption of both

water and energy. The best environmental improvement is the kilowatt-hour that does not

even get used.

Since 2008, Graflunds has worked with forecast-driven heat supply: the energy supply

adapts to the weather and the outdoor temperature. This system is now being

implement-ed in the rest of our property holdings. Beginning on January 1, we initiatimplement-ed a

collabora-tion with the Wallenstam company, Svensk Naturenergi, in which D. Carnegie & Co has

contracted to buy green electricity generated by wind power, to be renegotiated every three

years. The Company, which also owns Scandinavia's largest geothermal plant in the Kista/

Husby area, is also exploring opportunities for alternative heating systems. PCB

decon-tamination in accordance with regulatory requirements has begun and in some cases has

been completed in the Company's properties.

D. Carnegie & Co continually works to reduce energy consumption, in part by using

forecast-driven heating. ₀ 60 30 90 120 150 180 2010 2011 2012 2013 2014 kWh/m2

(41)

Sponsorship and social responsibility

Sponsorship is an integral component of marketing at D. Carnegie & Co. The

overarch-ing objective is to strengthen the brand and to contribute to positive social development.

Sponsorship may arise with respect to activities or organizations engaged in efforts that

beneﬁt the tenants and/or contribute to improved integration. Some examples of such

sponsorship can be found in Eskilstuna where D. Carnegie & Co, along with other

hous-ing associations, supports a local sports association involved in track and ﬁeld activities for

children and teenagers during summer vacation. The program caters primarily to residents

of neighborhoods that do not have access to other activities. The program culminates in a

mini-Olympics where participants show what they have learned during the summer.

D. Carnegie & Co provides premises to the NGO Missing People and arranges theme

days and recreational activities out in the residential areas together with the tenants'

association.

D. Carnegie & Co supports the “Hockey for everyone” initiative in Husby. In December D. Carnegie & Co worked with Hammarby Bandy to arrange a family day on ice. Husby, Rinkeby and Jordbro residents were offered bus transportation and equipment to try skating. Figure skating sisters Victoria and Joshi Helgesson, who receive annual grants from D. Carnegie & Co, were also there and demonstrated their programs.

(42)

Financing

D. Carnegie & Co strives to achieve a balance between debt

financ-ing and equity, with the objective that the equity ratio should not fall

below 30 percent. D. Carnegie & Co essentially assumed

responsi-bility for that financing that was linked to the properties associated

with the properties acquired in 2014. D. Carnegie & Co’s average

interest rate was 3.6 percent in 2014.

CREDIT MARKET

In 2014 the Riksbank lowered its policy rate, the repo rate, on two occasions. At the

beginning of the year the repo rate was 0.75 percent and at year-end it was 0.00 percent.

Access to liquidity in the banking market has improved over the year. Low short-term and

long-term interest rates were typical of 2014. Interest rates are at historically low levels.

FINANCE FUNCTION

The ﬁnance function will support the Company’s core business by minimizing the cost of

debt capital in the long term. This function is responsible for managing existing debt,

providing new borrowing for investments and acquisitions, streamlining cash management

and limiting ﬁnancial risks. More information on ﬁnancial risks can be seen in Note 19.

The work is regulated and governed by the ﬁnancial policy established by the Board of

Directors once a year. The finance policy clarifies the responsibilities in financial matters

and the rules for reporting, monitoring and control. Financial issues of strategic

impor-tance are addressed by D. Carnegie & Co’s Board of Directors.

RAISING CAPITAL

Running a real estate Company is capital intensive. The total asset base, which is

essential-ly the same as the value of the properties, is ﬁnanced by equity, debt and other capital. The

distribution between these three components depends on various factors such as the cost

of the various forms of ﬁnancing, the focus of the property portfolio and the risk aversion

of shareholders and creditors.

D. Carnegie & Co’s assets on December 31, 2014 amounted to SEK 12,824 million (-).

These assets include equity of SEK 3,251 million (-), debt capital SEK 8,140 million (-)

and other capital SEK 1,433 million (-).

Equity

Equity is the difference between assets and liabilities. Shareholders have a percentage of

equity based on their shareholdings. D. Carnegie & Co has one class of shares; ordinary

shares are divided into class A shares and class B shares with different voting rights.

D. Carnegie & Co's equity ratio (the proportion of equity in relation to total capital) is

25 percent (-).

(43)

In connection with the acquisition of Hyresbostäder i Sverige II AB, D. Carnegie & Co

issued three convertible bonds, each for SEK 340 million, which are held by the seller.

Debt capital

Debt capital comprises interest-bearing liabilities. At year-end, interest-bearing liabilities

accounted for 63 percent (-) of total ﬁnancing. Loan to value (LTV), interest-bearing

lia-bilities with properties as collateral in relation to the fair value of the properties at the end

of the period, amounted to 58 percent (-). Interest-bearing liabilities without properties as

collateral primarily comprise convertible bonds totaling SEK 1,020 million and vendor

notes totaling SEK 243 million that D. Carnegie & Co issued in connection with

acquisi-tions. In order to limit interest rate risk, D. Carnegie & Co has chosen to swap 30.9

per-cent (-) of the interest-bearing liabilities, SEK 2,511 million (-), against a ﬁxed rate with a

long maturity. (-). During the year the Company borrowed SEK 1063 million (-) in new

loans. All ﬁnancing is denominated in SEK. At year-end cash and cash equivalents totaled

SEK 253 million (-).

Other capital

Other capital primarily comprise deferred tax liabilities, accounts payable, deferred

income, derivatives and accrued expenses. Total ﬁnancing from other capital amounted to

SEK 1,433 million (1) and accounted for 11 percent (29) of D. Carnegie & Co’s total

funding as of December 31.

AVERAGE INTEREST RATE AND FIXED-INTEREST TERM

D. Carnegie & Co's average borrowing rate for interest-bearing liabilities at year-end

amounted to 3.2 percent (-). The average ﬁxed interest term at year-end taking interest

rate derivatives into account was 1.1 years (-).

MATURITY

At year-end the average maturity was 2.1 years (-). In 2015, credit facilities will mature for

a total of SEK 3,167 million (-). In 2014 D. Carnegie & Co initiated a process to

renego-tiate existing loans in accordance with the Company’s adopted ﬁnancial policy. This

rene-gotiation was completed on March 5, 2015 (see table and graph on page 41).

DERIVATIVES

D. Carnegie & Co uses derivatives to reduce interest rate risk and to achieve the desired

ﬁxed interest term. The derivatives included a total of SEK 2,511 million (-) at year-end,

representing 30.9 percent (-) of the interest-bearing liabilities. D. Carnegie & Co has one

type of derivative: interest rate swaps. An interest rate swap is an agreement between two

parties to exchange interest payments with each other. D. Carnegie & Co has chosen to

swap variable interest rates for ﬁxed rates in all of its swap agreements. Floating Stibor

rates are obtained for the swaps, preferably with a three-month maturity and a ﬁxed

(44)

interest rate, which varied at year-end between 3.04 and 5.68 percent. No premium is paid

for the interest rate swaps. The counterparties for the swaps are Deutsche Pfandbriefbank

and Handelsbanken.

Valuation of derivatives

The value of swaps changes with changes in market interest rates and when maturity is

reduced. At maturity, the value is always zero. In 2014, the change in value of derivatives

was SEK -65.2 million (-) for the swap agreements. The total capitalized value change for

the derivatives, which was SEK -65.2 million (-) includes the derivative liability that was

part of the acquired Hyresbostäder i Sverige II AB of SEK -51.0 million; the remainder

comprises the realized changes in value amounting to SEK -14.2 million (-). Fair value at

year-end was therefore SEK -65.2 million (-) for interest rate swaps. All changes in value

of derivatives during the period July 4, 2014 to December 31, 2014 have been recognized

in the income statement. Hedge accounting has not been applied.

LENDERS AND COLLATERAL

The loan portfolio is divided among seven credit institutions: Danske Bank, Deutsche

Pfandbriefbank, Handelsbanken, HSH, Nykredit, SBAB and Swedbank. Real estate

mortgages of SEK 6,356 million (-) were provided as collateral for the majority of

inter-est-bearing liabilities to credit institutions. In addition, D. Carnegie & Co has pledged

collateral in the form of shares in the property-owning subsidiary of SEK 3,754 million (-)

as well as the Parent Company guarantee from D. Carnegie & Co, see Note 23 for more

information.

COVENANTS AND RISK-TAKING

D. Carnegie & Co’s ﬁnancial risk-taking and position can be inferred from key ﬁgures

such as the equity ratio, the interest coverage ratio and the LTV ratio. Credit agreements

with banks and credit institutions sometimes set limits, known as covenants, for these

three key ratios. D. Carnegie & Co’s own targets are well in line with the banks'

require-ments. D. Carnegie & Co’s target for 2014 was that the equity ratio would be at least 30

percent. For 2015, the target is for the equity ratio to continue to be at least 30 percent.

Those banks that have a covenant for the equity ratio have set a lower limit of 25-30

per-cent. D. Carnegie & Co’s target is that the interest coverage ratio should be at least 1.5 xx,

which is in line with the banks’ requirements. D. Carnegie & Co does not have its own

target for the loan-to-value ratio, while the banks’ requirements vary between 60 and

70 percent depending on factors such as the collateral. D. Carnegie & Co meets all of the

banks' targets and requirements as of the balance sheet date and expects that we will

con-tinue to do so in 2015. The equity ratio was 25 percent (-), adjusted equity ratio was

32 percent (-), the interest coverage ratio was 1.5 xx (-), the loan-to-value ratio was

63 percent (-) and the loan-to-value ratio for properties was 58 percent (-).

(45)

0 1,000 500 1,500 2,000 2,500 3,000 3,500 2015 2016 2017 2018 2021 SEK million 0 1,000 500 1,500 2,000 2,500 3,000 3,500 2015 2016 2017 2018 2019 2020 2021 2022 SEK million

INTEREST RATE TERM AND LOAN MATURITY DEC. 31, 2014 (excluding convertible bonds and vendor notes)

INTEREST RATE TERM AND LOAN MATURITY MARCH 5, 2015 (excluding convertible bonds and vendor notes)

DERIVATIVES DEC. 31, 2014

Maturity SEK million Interest Percentage SEK million Percentage

2015 5,218 3.02% 78% 3,167 47% 2016 - - 0% 893 13% 2017 1,469 3.97% 22% 1,656 25% 2018 - - 0% 842 13% 2019 - - 0% 0 0% 2020 - - 0% 0 0% 2021 - - 0% 130 2% 2022 - - 0% 0 0% Total/average 6,687 3.23% 100% 6,687 100%

Amounts in SEK million Nominal amounts Percentage Dec. 31, 2014Fair value Dec. 31, 2014Fair value* Change for the period

Nominal swaps 2,511 100% -65 -51 -14

Total 2,511 100% -65 -51 -14

Maturity

Maturity Fixed interest term

Fixed interest term

*Acquisition of Hyresbostäder i Sverige II AB

Maturity SEK million Interest Percentage SEK million Percentage

2015 3,249 2.0% 49% 966 15% 2016 - - 0% 1,065 16% 2017 - - 0% 0 0% 2018 - - 0% 841 13% 2019 - - 0% 0 0% 2020 795 2.1% 12% 795 12% 2021 - - 0% 130 2% 2022 2,606 3.2% 39% 2,853 43% Total/average 6,650 2.47% 100% 6,650 100%

(46)

Acquisition of

Hyres-bostäder i Sverige II AB

On July 4, 2014, D. Carnegie & Co acquired Hyresbostäder i Sverige II AB.

D. Carnegie & Co owns 100 percent of the share capital and votes in Hyresbostäder i

Sverige II AB. In connection with the acquisition and as part of the purchase price, a

pri-vate placement of 26,000,000 newly issued shares took place to the seller. The issue price

of the issued shares was set at SEK 46.20 per share, based on the average price during the

three trading days prior to the acquisition on July 4, 2014. The company was brought into

the Group on July 4, 2014. The acquired business contributed sales of SEK 355 million,

earnings on managed properties of SEK 79.4 million, and earnings of SEK 39.0 million

for the period July 4, 2014 to December 31, 2014. The acquisition has been accounted for

as a business combination. Properties and ﬁnancial instruments are valued at their fair value.

The difference between fair and book value for other assets and liabilities has not been

deemed to be material. The fair value of the acquired claims was SEK 216 million, which

corresponds to the amount which is expected to be collected. Goodwill arose primarily due

to the fact that deferred tax calculated according to standard accounting rules deviates

from the value ascribed to deferred tax during negotiations between the parties to the

transaction. According to standard accounting practice, deferred tax is calculated

accord-ing to the nominal tax rate of 22 percent on the difference between the fair value and the

tax value. In conjunction with transactions, the deferred tax is commonly negotiated based

on the probability that it will become due and payable and a time factor of when any

pay-ment will take place. Acquisition-related costs of SEK -15.3 million were incurred in

con-nection with the business acquisition.

ACQUIRED NET ASSETS SEK thousand

Properties 6,601,732

Deferred tax asset 11,207

Other assets 456,506

Interest-bearing liabilities -2,866,694 Interest-bearing derivatives -50,939

Other liabilities -148,023

Recognised deferred tax liabilities at closing -296,611 Additional deferred tax liability according to PPA -666,954

Acquired net assets 3,040,224

Cash settled purchased price -1,317,421 Cash and cash equivalents in acquired subsidiary 135,902

Change in group cash and cash equivalents in relation to acquisition -1,181,519 ESTIMATED GOODWILL

SEK thousand

Purchase price:

Cash payment 1,317,421

Issuance related to acquisition, 26,000,000 shares 1,201,200

Vendor note 200,000

Convertible bonds related to acquisition 1,020,000

Purchase price HBS II shares, 100% of shares 3,738,621

Acquired net assets -3,040,224

(47)

The D. Carnegie & Co

share

The