ILLUSTRATION: BEDDINGEN, HOUSING, AALBORG, DENMARK

ANNUAL REPORT

2017/18

(1 February 2017 - 31 January 2018)

TK-development

TABLE OF CONTENTS

Page

3 Summary
4 Consolidated financial highlights and key ratios
5 strategic focus changed, asset sales to be accelerated and impairment losses recognised
9 Financial review
12 Markets
14 Segment results
15 Property development
20 Discontinuing activities
27 Other Discontinuing activities
28 Business concept and knowledge resources
32 Financial targets
33 Risks
36 Shareholder information
40 Corporate governance
43 Board of Directors
46 The Executive Board
47 Statement by the Board of Directors and Executive Board on the Annual Report
48 Independent auditor's report
52 Consolidated financial statements
94 Parent Company financial statements
109 Company information

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SUMMARY

STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

In December 2017, the Board of Directors resolved to change TK Development's strategic focus. Going forward, focus will be on the Danish and Swedish property development business, while efforts will be made to divest the Group's other activities over a period of two years.
The main focus will be on urban development, housing, retail and business projects and often a combination of these segments. Going forward, Management does not expect to execute shopping centre projects that may expose TK Development to significant risk. The background to adjusting the segmentation is Management's realisation that development and ownership of shopping centres has historically caused the Group substantial losses, and that shopping centre development is unlikely to generate satisfactory results in the future.
Due to these strategic measures and the wish to carry out asset sales earlier than previously planned, impairment losses totalling DKK 405 million were recognised on the Group's asset management activities in Q3 2017/18.
The Board of Directors allocated equity of DKK 500 million to the property development segment as at 31 October 2017. This is considered an appropriate amount of equity for the Group's future property development activities, and the goal is to achieve an annual return on equity of 15-20% before tax.
As a result of the above, the Polish activities were transferred to the asset management business, and the Group's asset management activities were subsequently renamed discontinuing activities.
As previously announced, the net proceeds from the divestment of these activities will be distributed to the shareholders.

FINANCIAL PERFORMANCE IN 2017/18

The result before tax for 2017/18 was a loss of DKK 372.3 million against a profit of DKK 13.0 million) in 2016/17. The full-year performance was in line with the Group's most recent guidance.
The result breaks down into a profit of DKK 39.6 million from the property development business, which is generally experiencing a high level of activity, and a loss of DKK 411.9 million from the discontinuing activities.
The result after tax was a loss of DKK 379.0 million against a profit of DKK 7.1 million for 2016/17.
Total assets amounted to DKK 2,271.1 million at 31 January 2018 against DKK 2,852.9 million at 31 January 2017. Consolidated equity stood at DKK 922.8 million compared with DKK 1,293.7 million at 31 January 2017, for a solvency ratio of 40.6%.

PROFIT GUIDANCE FOR 2018/19

For financial year 2018/19, Management expects a consolidated profit of DKK 80-90 million before tax.
The target of a return on equity in the property development segment of 15-20% p.a. before tax is maintained, and fulfilment of this target is reflected in the Group's profit guidance.
The profit guidance is based on Management's expectations, including timing estimates, for a number of specific projects, of which several have been presold and are currently in progress.

*) Adjusted for tax included in Income from investments in joint ventures.

Segment	Profit/loss before tax	Equity tie-up	Solvency ratio	Total assets	Assets broken down by country
Property development	39.6	513.2	66.1%	776.0
Property development comprises development of real estate in Denmark and Sweden. Focus going forward will be on urban development, housing, retail and business projects and often a combination of these segments. The level of activity in this business area is generally high.					Denmark Sweden
Discontinuing activities	-411.9	409.6	27.4%	1,495.1
TK Development's discontinuing activities comprise all the Group's activities outside Denmark and Sweden as well as completed properties in operation in Denmark. Completed properties in operation in Denmark include BROEN Shopping, Esbjerg, Sillebroen Shopping, Frederikssund, Ringsted Outlet and Amerika Plads, underground car park, Copenhagen.					Denmark Poland Baltics Czech Republic Germany

MANAGEMENT COMMENTARY | SUMMARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

CONSOLIDATED FINANCIAL HIGHLIGHTS AND KEY RATIOS

DKKm 2013/14 2014/15 2015/16 2016/17 2017/18

FINANCIAL HIGHLIGHTS

Net revenue	330.7	854.7	327.8	401.5	785.9
Value adjustment of investment properties, net	-9.5	-3.5	-25.0	0.0	-25.0
Gross profit/loss	102.5	93.3	-67.3	83.1	-268.4
Income from investments in joint ventures	37.5	30.1	30.4	48.8	13.9
Operating profit/loss (EBIT)	48.2	42.4	-152.6	51.8	-339.4
Financing, etc.	-86.9	-57.9	-39.5	-38.5	-35.0
Profit/loss before tax and writedowns, etc.	-36.6	42.1	3.6	25.5	34.2
Profit/loss before tax	-42.8	-25.2	-191.0	13.8	-373.7
Profit/loss for the year	-49.0	-37.7	-222.3	7.1	-379.0
Comprehensive income for the year	-55.5	-44.4	-223.7	8.0	-370.9
Balance sheet total	3,347.1	2,845.2	2,808.8	2,852.9	2,271.1
Investment properties	103.2	78.1	53.3	53.1	28.1
Total project portfolio	2,334.6	2,121.7	2,013.6	2,155.2	1,516.5
Equity	1,553.7	1,509.4	1,285.7	1,293.7	922.8
Cash flows for the year	0.4	17.4	-17.1	4.8	-6.2
Net interest-bearing debt, end of year	1,435.1	1,000.4	1,099.4	1,196.2	953.6

KEY RATIOS

Return on equity (ROE)	-3.4 %	-2.5 %	-15.9 %	0,6 %	-34.2
Solvency ratio (based on equity)	46.4 %	53.1 %	45.8 %	45.3 %	40.6 %
Equity value in DKK per share	15.8	15.4	13.1	13.2	9.4
Price/book value (P/BV)	0.4	0.6	0.5	0.7	0.8
Number of shares, end of year	98,153,335	98,153,335	98,153,335	98,153,335	98,153,335
Average numbers of shares	74,870,019	98,153,335	98,153,335	98,153,335	98,153,335
Earnings per share (EPS) in DKK	-0.7	-0.4	-2.3	0.1	-3.9
Dividend in DKK per share	0	0	0	0	0
Listed price in DKK per share	6.7	9.0	7.2	9.7	7.1

KEY RATIOS ADJUSTED FOR WARRANTS

Return on equity (ROE)	-3.4 %	-2.5 %	n/a	n/a	n/a
Solvency ratio (based on equity)	46.4 %	53.1 %	n/a	n/a	n/a
Equity value in DKK per share	15.8	15.4	n/a	n/a	n/a
Diluted earnings per share (EPS-D) in DKK	-0.7	-0.4	n/a	n/a	n/a

The calculation of key ratios was based on the 2017 guidelines issued by The Danish Finance Society.

For a definition of key ratios, reference is made to note 1 in the consolidated financial statements.

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STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

In December 2015, TK Development defined a number of strategic goals and initiatives intended to streamline TK Development into a pure developer business. The main elements of this strategy were to focus on property development activities in Denmark, Sweden and Poland, while the Group's asset management activities were to be matured and optimised for purposes of selling them off within a period of 3-5 years and distributing net proceeds to the shareholders.

As announced in the Company's interim report for Q1-Q3 2017/18, the Board of Directors subsequently reviewed the Company's business platform, strategic focus and capital tie-up and in that connection took stock of developments since the strategic goals were announced.

Since 2015, targeted efforts have been made to execute the strategy, and the Company has come a long way in a number of areas, especially in terms of generating satisfactory returns on its property development activities in Denmark and Sweden.

By contrast, the process of maturing and optimising the Company's portfolio of assets under management has not been satisfactory. Realising that the Group has not succeeded in maturing all of these assets as quickly as had been anticipated and that it will likely take longer than previously assumed to obtain selling prices matching the original expectations, the Board of Directors in December 2017 resolved to:

confine property development activities to the Danish and Swedish markets going forward and to divest the activities in Poland;
work to divest the asset management activities as quickly as possible; and
recognise impairment losses of a total of DKK 405 million as a result of the decision to change the Group's strategic focus and accelerate the sale of its asset management activities.

NEW STRATEGIC FOCUS - PROPERTY DEVELOPMENT IN DENMARK AND SWEDEN

Going forward, the Group will only have activities in the Danish and Swedish markets.

The Danish market has shown a satisfactory performance in the past few years, and it has a strong pipeline for the next few years. The Group has a good organisation and strong skills in the Danish market, and business opportunities are rich. Accordingly, Management expects satisfactory returns for the Group's shareholders from this market in the years ahead.

BROEN Shopping, shopping centre, Esbjerg - opening on 10 April 2017

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

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STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

The Swedish market also offers an attractive potential, and the Company has generally succeeded in completing projects in this market with limited equity tie-up. Management also expects the Swedish market to generate satisfactory returns for shareholders going forward.

Business opportunities are found in the Polish market as well, but, compared against requirements for capital tie-up and the risk profile, the anticipated return is no longer considered attractive. Against this background, Management found it would be more appropriate to allocate the capital to the less risky markets of Denmark and Sweden, and the goal is to divest the Polish activities within the next two years.

Focus going forward will be on urban development, housing, retail and business projects and often a combination of these segments. Going forward, Management does not expect to execute shopping centre projects that may expose TK Development to significant risk. The background to adjusting the segmentation is Management's realisation that development and ownership of shopping centres has historically caused the Group substantial losses, and that shopping centre development is unlikely to generate satisfactory results in the future. As a general rule, projects will only be initiated if they have been fully or partially presold to investors and if the capital tie-up can be kept to a minimum.

ACCELERATING ASSET SALES AND RECOGNISING IMPAIRMENT LOSSES

In December 2017, the Board of Directors decided to divest the Group's activities outside Denmark and Sweden as well as its Danish asset management activities as soon as possible in order to free up capital for the Company's shareholders and focus on the property development business in Denmark and Sweden.

Due to the decision to divest the Polish activities and to sell the activities in Germany and the Baltics sooner than originally intended, the Company will be selling its land within a short timeframe.

The process of maturing and optimising the Company's portfolio of shopping centres has not been satisfactory, and the Board of Directors realised that the Group has not been able to mature all of these assets as quickly as hoped. There is still a maturing potential, but it will likely take longer than previously assumed to obtain selling prices matching the original expectations.

Based on the Group's forward-looking focus on its property development business and given the current economic climate, tying up capital in asset management activities for a longer period is not considered attractive. Accordingly, the assets will be divested as soon as possible. The asset management activities have subsequently been renamed discontinuing activities. The net proceeds from the divestment of these activities will be distributed to the shareholders.

As a consequence of the decisions to change the strategic focus and accelerate the sale of assets, the Board of Directors recognised impairment losses on a number of assets. Impairment losses of a total of DKK 405 million were recognised – DKK 225 million in Poland, DKK 120 million in Denmark and DKK 60 million in other markets. The impairment losses are described in more detail in the section on Discontinuing activities as all losses are related to activities that are now included in this segment.

SEGMENT REPORTING

At the same time, the Board of Directors decided to adjust the segmentation of the Group's activities. Due to the decision to sell off the Polish activities, these activities are now included under discontinuing activities for reporting purposes. As mentioned above, these activities were previously called asset management activities. The Group's activities are currently divided into the following segments:

Property development – which includes property development activities in Denmark and Sweden.
Discontinuing activities – which include all activities outside Denmark and Sweden as well as completed, unsold properties in operation in Denmark.

The segment results stated in this annual report have been determined based on the above segmentation, implying that property development includes the Danish and Swedish property development activities for the full year, and that the Polish activities are recognised under discontinuing activities for the full year. The comparative figures have been restated accordingly.

The Board of Directors allocated equity of DKK 500 million to the property development segment as at 31 October 2017 and still targets an annual return on equity of 15-20% before tax going forward. This was considered to be an appropriate amount of tied-up equity going forward.

TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | MANAGEMENT COMMENTARY

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STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

PROFIT GUIDANCE FOR 2018/19

For financial year 2018/19, Management expects a consolidated profit of DKK 80-90 million before tax.

The target of a return on equity in the property development segment of 15-20% p.a. before tax is maintained, and fulfilment of this target is reflected in the Group's profit guidance.

The profit guidance is based on Management's expectations, including timing estimates, for a number of specific projects, of which several have been presold and are currently in progress.

The expectations stated in this annual report, including earnings forecasts, are inherently subject to risks and uncertainties, and actual results may differ from the guidance provided. Expectations may be impacted by factors generally affecting the sector as well as the factors referred to under Risk management and in note 2 to the consolidated financial statements, Accounting estimates and judgments.

CHANGE OF MANAGEMENT

As announced in the Company's interim report for Q1-Q3 2017/18, the Board of Directors wishes to complete a generational change at CEO level and has launched a search for a new group CEO. The search for a new CEO is progressing according to plan and will continue over the coming months.

The current CEO, Frede Clausen, will step down on 31 March 2018. Executive Vice President Robert Andersen will serve as interim CEO from 31 March 2018 and until such time as a new CEO is appointed.

Frede Clausen has been a member of the Executive Board since 1992 and has served as CEO since 2002.

BOARD OF DIRECTORS

An extraordinary general meeting held in September 2017 elected two new members to the Board of Directors while one member resigned. The Board of Directors is currently composed of five members. Peter Thorsen is chairman and Henrik Heideby deputy chairman. All board members have offered themselves for re-election.

DIVIDEND

The Board of Directors recommends to the annual general meeting that no dividend be declared in respect of the 2017/18 financial year.

EVENTS AFTER THE BALANCE SHEET DATE

Except as described in the management commentary, no significant events have occurred after the balance sheet date that may affect the Company's financial position.

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TK, IN BRIEF

PROPERTY DEVELOPMENT

The Group's strategic focus is on development of real estate in Denmark and Sweden.

DISCONTINUING ACTIVITIES

These activities will be divested as soon as possible.
Net proceeds from the divestment will be distributed to shareholders.

PROFIT GUIDANCE

In 2018/19, the Group expects to generate a pre-tax profit of DKK 80-90 million.

PROFIT GUIDANCE. PROPERTY DEVELOPMENT

Profit guidance for the property development business includes a return on equity of 15-20%.

Key events in the financial year

JULY

Handover of Strædet, Køge, phase 1, to the investor

AUGUST

Conditional agreement on the sale of 1,700 sqm of youth housing units - construction commenced

DECEMBER

Handover of Strædet, Køge, phase 2, to the investor

DECEMBER

Strategic focus changed, profit guidance lowered

JANUARY

Handover of DomusPro retail park, Vilnius

JANUARY

Handover of 1,200 sqm supermarket, Hjørring

January 2017

APRIL

Handover of 3,200 sqm retail park in Oskarshamn, Sweden, to the investor

AUGUST

Construction of owner-occupied residential units at Beddingen, Østre Havn, Aalborg, initiated

DECEMBER

Construction of Outlet Moravia, Ostrava, Czech Republic and Bielany, phase 4, Warsaw, Poland, commenced

APRIL

Opening of Broen Shopping, Esbjerg

SEPTEMBER

Opening of Strædet, Køge

JANUARY

Sale of 2,650 sqm rental housing units at Østre Havn, Aalborg

MAY

Handover of Amerika Have owner-occupied residential units commenced

NOVEMBER

Construction of Nordisk Film cinema in Broen Shopping initiated

JANUARY

Presale of 8,000 sqm retail park in Södertälje, Sweden

Construction in progress (sqm)

Denmark
29,700 sqm
Czech Republic
11,700 sqm
Poland
29,950 sqm
Sweden
8,000 sqm

Equity, total assets and solvency

TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | MANAGEMENT COMMENTARY

FINANCIAL REVIEW

PROFIT/LOSS

The result before tax for 2017/18 was a loss of DKK 372.3 million$^{4)}$ against a profit of DKK 13.0 million$^{4)}$ in 2016/17. The full-year performance was in line with the Group's most recent guidance. The result after tax was a loss of DKK 379.0 million against a profit of DKK 7.1 million for 2016/17.

The pre-tax result breaks down into a profit of DKK 39.6 million from the property development business, which is generally experiencing a high level of activity, and a loss of DKK 411.9 million from the discontinuing activities.

The pre-tax profit for Q4 2017/18 was DKK 25.0 million, of which the property development business generated DKK 17.9 million and the discontinuing activities DKK 7.1 million.

Management considers the result for the year highly unsatisfactory. The result may be specified as follows:

	DKKm
Loss for the year before tax	372.3
Impairment losses/value adjustments, discontinuing activities	407.9
Profit before impairment losses	35.6
Other losses, discontinuing activities	4.0
Profit, property development activities	39.6

The Group originally expected a pre-tax profit in the DKK 100-120 million range for 2017/18. The difference between the expected and the actual result is attributable to impairment losses on the discontinuing activities, significantly reduced earnings from the Strædet project in Køge due, among other things, to the bankruptcy of a contractor, and the handover of a project being postponed to financial year 2018/19.

Revenue

Revenue came to DKK 785.9 million, up from DKK 401.5 million in 2016/17. Revenue varies from year to year depending on the

$^{4)}$ Adjusted for tax included in Income from investments in joint ventures.

projects handed over to investors, as revenue is generally not recognised until handover of the project and thus transfer of risk to the investor has taken place.

Gross profit/loss

The gross result was a loss of DKK 268.4 million against a profit of DKK 83.1 million in 2016/17. In addition to the impairment losses described above, the gross result primarily reflects the earnings effect of projects handed over in the property development business, the operation of the Group's wholly-owned completed properties and fee income.

The most important projects handed over are described in the section on Property development.

Income from investments in joint ventures

The profit from joint ventures was DKK 13.9 million, against DKK 48.8 million in 2016/17. The contribution from the property development business primarily includes profits from the sale and handover of projects, including America Have in Copenhagen, and the sale of land. The contribution from the discontinuing activities includes the operation of the Group's partially-owned completed properties, the below-mentioned impairment loss on the Group's investment in the joint venture owning two shopping centres in operation in Poland in which TK Development has an ownership interest of 30%, and reversal of a DKK 15 million impairment loss on Ringsted Outlet on the back of a higher occupancy rate and an improved operating performance.

The key joint venture projects are:

Property development projects:
- Development projects, Østre Havn, Aalborg, Denmark
- Housing project, Amerika Have, Copenhagen, Denmark
- SporbyenScandia, Randers, Denmark

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

FINANCIAL REVIEW

Discontinuing activities:
- BROEN Shopping, shopping centre, Esbjerg, Denmark
- Ringsted Outlet, Denmark
- Amerika Plads, underground car park, Copenhagen, Denmark
- Two 30%-owned shopping centres in Poland

Staff costs and other external expenses

Staff costs and other external expenses amounted to DKK 84.1 million against DKK 79.7 million in 2016/17. The costs for 2017/18 include salary etc. of DKK 4.0 million for CEO Frede Clausen during the release period. Of the total costs of DKK 84.1 million, DKK 28.4 million relate to the discontinuing activities.

Financing

Net financing expenses amounted to DKK 35.0 million against DKK 38.5 million in 2016/17.

BALANCE SHEET

Total assets amounted to DKK 2,271.1 million at 31 January 2018 against DKK 2,852.9 million at 31 January 2017.

Investment properties

Net of the year's value adjustment of DKK -25 million, the carrying amount of the Group's investment property is DKK 28.1 million. TK Development also has investment properties in joint ventures.

Investments in and receivables from joint ventures

Net investments in and receivables from joint ventures amounted to DKK 434.8 million at 31 January 2018 against DKK 474.1 million at 31 January 2017. The decline primarily reflects impairment losses, investments in BROEN Shopping and the share of the year's profit of joint ventures less dividend distributions, etc.

Deferred tax assets

Deferred tax assets totalled DKK 59.9 million at 31 January 2018 against DKK 75.4 million at 31 January 2017. The deferred tax assets relate exclusively to the Group's Danish activities, as the Group's foreign tax assets have been written off. Based on existing budgets and profit forecasts as well as a number of timing estimates, the measurement is subject to uncertainty.

Projects in progress or completed

The total project portfolio amounts to DKK 1,516.5 million against DKK 2,155.2 million at 31 January 2017. The decline derives from a combination of impairment losses, investments in projects in progress, including phase 3 of Strædet, Køge, and Domus Vista in Frederiksberg, and the decrease resulting from the handover of projects sold, including phase 2 of Strædet, Køge, and prepayments from clients. Total prepayments from clients amounted to DKK 221.1 million at 31 January 2018 against DKK 72.5 million at 31 January 2017.

As a sizeable proportion of the Group's assets, primarily the discontinuing activities, have been written down to net realisable value, the measurement is subject to uncertainty. If actual developments deviate from expectations, this may give rise to a need to adjust the impairment losses recognised. Reference is made to note 2 to the consolidated financial statements, Accounting estimates and judgments.

Land portfolio

Projects in progress and completed projects also include the Group's land portfolio, which amounted to DKK 290 million at 31 January 2018 compared with DKK 453 million at 31 January 2017. Of the total land portfolio at 31 January 2018, DKK 125.2 million is placed in discontinuing activities.

Deposits in custody and escrow accounts

Deposits in custody and escrow accounts amounted to DKK 122.3 million against DKK 23.4 million at 31 January 2017. This

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FINANCIAL REVIEW

amount includes deposits for which the conditions for release have not yet been met and client prepayments that are released as projects are handed over and certain conditions met.

Equity

Consolidated equity stood at DKK 922.8 million at 31 January 2017 against DKK 1,293.7 million at 31 January 2017. The solvency ratio was 40.6% as compared with 45.3% at 31 January 2017. A strong solvency ratio is a key priority for Management, and the aim is to maintain a solvency ratio of about 40%. The change in equity was primarily attributable to the loss for the year.

Liabilities

The Group's liabilities totalled DKK 1,348.3 million at 31 January 2018 compared with DKK 1,559.2 million at 31 January 2017. The decline mainly reflects lower payables to credit institutions.

CASH FLOWS

Cash flows for the year were a net outflow of DKK 6.2 million against a net inflow of DKK 4.8 million in 2016/17.

Cash flows from operating activities were a net inflow of DKK 213.7 million (2016/17: net outflow of DKK 32.5 million), reflecting a substantial decline in funds tied up in projects due primarily to handover of phase 2 of Strædet, Køge, dividend distributions from joint ventures and in increase in funds tied up in receivables, as well as interest payments and operations.

Cash flows from investing activities were a net outflow of DKK 1.5 million (2016/17: net outflow of DKK 1.0 million).

Cash flows from financing activities were a net outflow of DKK 218.4 million, reflecting project funding raised for projects in progress and a reduction of balances with credit institutions in connection with handover of projects sold to investors (2016/17: net inflow of DKK 38.3 million).

FINANCIALS

Net interest-bearing debt amounted to DKK 953.6 million at 31 January 2018 against DKK 1,196.2 million at 31 January 2017. At 31 January 2018, project funding of DKK 414.6 million fell due by the end of January 2019. Most of these facilities have either been extended after the balance sheet date or are expected to be repaid before maturity upon handover of the relevant projects to investors.

TK Development renegotiates its operating and project funding agreement with its main banker once a year. After the balance sheet date, the agreement was extended until 30 April 2019.

TK Development usually finances its projects through traditional bank funding. Loan agreements usually contain a number of covenants to be met at specific intervals.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

MARKETS

In Management's assessment, current property market sentiments are generally very positive. Generally brisk investor interest, reasonable opportunities for financing property acquisitions and the persistently low level of interest rates and excess liquidity in the market combine with volatile equity markets to make property investments increasingly attractive to investors in terms of risk and return.

As concerns the Danish activities, focus going forward will be on urban development, housing, retail and business projects and often in a combination of these segments. In light of the continued population growth in major cities and towns and, by extension, the continual need for new housing, Management will continue to prioritise the development and execution of residential projects in such locations. In the Swedish market, the Group focuses on the retail segment while also exploring several project opportunities in the residential segment.

As a general rule, projects will only be initiated if they have been fully or partially presold to investors and if the capital tie-up can be kept to a minimum.

Management aims for a diversified project portfolio and focuses mainly on major projects but will also execute small and medium-sized projects that can be completed over a relatively short period of time and offer a reasonable earnings potential without the need to tie up large amounts of capital for prolonged periods. Such projects will typically be combined residential and retail projects.

The Group's markets are generally experiencing considerable investor interest in retail, office and residential projects in attractive locations in major cities and towns. Location and quality are key investing parameters. For prime-location properties where the risk of vacancies is relatively limited, return requirements are relatively low and expected to remain stable or to decline slightly over the coming year. Selling prices for properties in secondary locations are under pressure.

The Danish market in particular is attracting strong foreign investor interest with foreign-held investments taking up an even greater share of property investments in Denmark, primarily in Copenhagen and the capital region. Foreign investors previously showed a particular interest in the retail segment, but are currently increasing their focus on the residential and office segments. In the years ahead, investors are expected to increasingly look beyond major cities and towns for property investment opportunities offering higher returns.

Prospective investors in the Group's projects typically consist of high-net-worth individuals, local or major property companies, institutional investors and foreign investors.

RETAIL

Denmark

Population growth in major Danish cities and towns is spurring demand for new retail shops and development of existing shopping areas. National and international chains, including supermarket chains and retail chains, are still looking to expand at a controlled pace. Identifying attractive locations is a prerequisite for expansion, and if the location is right, more tenants will also be interested in new small-town locations. Prime-location rent levels are expected to remain more or less flat in the years ahead, whereas secondary location rents will remain under pressure.

Investors, local as well as international, are generally showing a fair amount of interest, primarily in prime locations in major cities and towns. In the years ahead, investors are expected to increasingly look beyond major cities and towns for property investment opportunities offering higher returns.

Sweden

TK Development is focused on developing prime-location superstores and mixed projects in major cities and towns.

Project location remains key to tenants, and the gap between primary and secondary locations continues to widen. Retail chains seem set on expanding in major cities, particularly Stockholm and Gothenburg, but also in other of Sweden's major cities and towns, while at the same time international chains

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MARKETS

are entering the Swedish market. The high annual population growth that Stockholm is experiencing these years is spurring demand for new retail shops and development of existing shopping areas, whether they are retail parks or shopping centres. Prime-location rent levels are stable, while secondary location rents are under pressure.

Both local and international investors are showing a high level of interest, primarily in prime-location projects, and return requirements, which are fairly low for these projects, are expected to remain stable in the upcoming period.

RESIDENTIAL

Denmark

The Danish residential market is attractive, particularly in the largest cities. New housing, rented as well as owner-occupied, is needed in cities and towns with significant population growth. The migration towards major cities and towns is expected to continue in the years ahead.

Rental housing rents are currently relatively high and expected to remain stable in the period ahead. Residential rental properties are attracting great investor interest. This interest is focused on locations in Copenhagen and other major towns and cities with high population growth. Prospective investors

are typically high-net-worth individuals, local or major property companies, institutional investors and foreign investors.

The market for the development and sale of owner-occupied housing to private individuals is also attractive. Owner-occupied units are in high demand. Selling prices have trended upwards over the past year and have reached a relatively high level, which is expected to remain stable in the upcoming period.

OFFICE

Denmark

The Danish office market is seeing a good deal of interest in projects in major cities and towns. Projects in attractive locations appeal to tenants and investors alike, and demand for office space is growing in step with declining unemployment rates. There is a wide gap between vacancy rates for primary and secondary locations. Fair demand for new premises with a good layout is expected in the years ahead. Prime-location rent levels are expected to be relatively stable, while secondary-location rents are expected to remain under pressure. Selling prices for prime-location office properties are expected to ease upwards during the next year.

Owner-occupied housing units, Beddingen, Østre Havn, Aalborg, Denmark - scheduled for handover in late 2018

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

SEGMENT RESULTS

TK Development's segments comprise property development and discontinuing activities.

FINANCIAL PERFORMANCE 2017/18 (DKKM)

Profit/loss	2017/18	Property development	Discontinuing activities	Tax
Revenue	785.9	664.5	121.4	-
Gross profit/loss	-268.4	27.5	-295.9	-
Income from investments in joint ventures	13.9	60.6	-45.3	-1.4
Costs, including amortisation/depreciation of non-current assets	84.9	56.2	28.7	-
Operating profit/loss	-339.4	31.9	-369.9	-1.4
Income from investments in associates	0.7	0.7	-	-
Financing, net	-35.0	7.0	-42.0	-
Profit/loss before tax	-373.7	39.6	-411.9	-1.4
Tax on profit/loss for the year	5.3
Profit/loss for the year	-379.0

BALANCE SHEET STRUCTURE AT 31 JANUARY 2018 (DKKM)

Balance sheet	31 January 2018	Property development	Discontinuing activities
Assets
Investment properties	28.1	-	28.1
Investments in joint ventures	294.8	40.4	254.4
Non-current receivables	127.7	2.5	125.2
Other non-current assets	73.1	71.0	2.1
Projects in progress or completed	1,516.5	311.0	1,205.5
Current receivables*1	99.7	252.5	-152.8
Cash and cash equivalents, escrow accounts, etc.	131.2	98.6	32.6
Assets	2,271.1	776.0	1,495.1
Equity and liabilities
Equity	922.8	513.2	409.6
Credit institutions	1,218.7	179.9	1,038.8
Other payables	129.6	82.9	46.7
Equity and liabilities	2,271.1	776.0	1,495.1
Solvency ratio	40.6%	66.1%	27.4%

*1 including DKK 217.6 million balance between the two segments.

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PROPERTY DEVELOPMENT

The Group's primary business area is property development. Its strategic focus is on property development in Denmark and Sweden. As a consequence of the Board of Directors' decision to divest the Group's activities in Poland, all its Polish activities are now included under the discontinuing activities. The comparative figures have been restated accordingly.

The level of activity is generally high in both the Danish and the Swedish property development business. Pipeline projects are moving ahead at a good pace on the back of robust tenant and investor interest. Work is ongoing on a number of major projects, which supports the Group's strategic goal of a return on equity of 15-20% p.a. before tax in the property development business as from financial year 2018/19.

Property development - Denmark and Sweden
DKKm	2017/18	2016/17
Revenue	664.5	106.7
Gross profit/loss	27.5	26.7
Profit/loss of joint ventures	60.6	75.7
Profit/loss before tax	39.6	60.9
	31 January	31 January
	2018	2017
Total assets	776.0	938.2
Equity tie-up	513.2	531.3

The profit before tax for 2017/18 was DKK 39.6 million against a profit of DKK 60.9 million in 2016/17. Revenue grew significantly relative to last year, boosted primarily by the handover of phases 1 and 2 of Strædet, Køge. The contribution ratio was 4.1% as compared with 25.0% in 2016/17. The lower contribution ratio was attributable mainly to a relatively low profit on Strædet, Køge, due partly to substantial additional costs as a result of the bankruptcy of a contractor.

Projects handed over

The key projects handed over in financial year 2017/18 were as follows:

Retail park, Oskarshamn, Sweden

TK Development has completed a 3,200 sqm retail park project in Oskarshamn, Sweden. The project was handed over to the investor in Q1 2017/18 along with an option to expand the project by 4,700 sqm.

Strædet, development of town centre, Køge, Denmark

The 19,000 sqm retail project along with parking facilities of about 13,000 sqm have been sold under a conditional sale agreement to Finnish-based Citycon. The project is being handed over to Citycon in three phases. The initial phase, totalling 4,400 sqm and comprising a cinema and restaurants, was com

Strædet, Køge, Denmark - opening of phase 2 on 28 September 2017

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PROPERTY DEVELOPMENT

pleted in May 2017 and handed over to Citycon in July 2017. Phase 2, comprising about 12,000 sqm, was handed over to Citycon at the end of 2017. The overall project is described in detail on page 17. In addition, a number of the residential units included in the project were handed over to the buyers in January 2018.

Amerika Have, residential project, Copenhagen, Denmark

Kommanditaktieselskabet Danlink Udvikling (DLU), owned on a 50/50 basis by Udviklingsselskabet By & Havn I/S and TK Development, has developed a project at Amerika Plads in a 50/50 joint venture with AP Pension. The project – Amerika Have – comprises residential units of about 12,000 sqm and business premises of about 500 sqm targeting the general public. A total of 121 high-quality apartments have been constructed, 120 of which have been sold (Q3 2017/18: 119). The process of developing, constructing and selling the project has been highly satisfactory.

Supermarket, Hjørring, Denmark

TK Development has developed, sold and handed over a 1,200 sqm supermarket in Hjørring. The project was let to Netto and sold to ATP-Ejendomme A/S.

SporbyenScandia, Randers, Denmark

In a joint venture with private investors, TK Development is working on an area in Randers, where the plan is to develop some 140,000 sqm of retail shops, housing units, offices, etc., see below. Work is ongoing to sell the building rights for some of the building plots, and the rights for one of the plots were sold and handed over to private investors in January 2018.

Project portfolio

At 31 January 2018, the development potential of the Danish and Swedish project portfolios was some 350,000 sqm. TK Development is currently involved in construction projects comprising some 80,000 sqm, including projects in progress in the segment comprising discontinuing activities. These projects are progressing satisfactorily.

PROJECT OUTLINE

The outline below lists the key projects of the property development portfolio. The outline includes projects in wholly-owned companies as well as in joint ventures. In addition, TK Development's activities include a number of small and medium-sized projects in the Group's primary segments – retail, office and residential – as well as combinations of these segments.

Project	City/town	Country	Segment	TKO's ownership share of area (sqm)	TKO's ownership interest	Construction start requested construction start	Opening/expected opening
In progress
Strædet	Køge	DK	Mix	8,300	100%	March 2015	2018
Domus Vista	Frederiksberg	DK	Residential	5,300	100%	October 2016	Spring 2018
Havnehus 1, Østre Havn	Aalborg	DK	Residential	2,450	1) 50%	February 2017	Spring 2018
Beddingen 7A, Østre Havn	Aalborg	DK	Residential	3,500	1) 50%	June 2017	Late 2018
Nyhavnsgade 3, Østre Havn	Aalborg	DK	Residential	1,325	1) 50%	Early 2018	Early 2019
Vanløse Allé	Vanløse	DK	Residential	1,700	100%	August 2017	Autumn 2018
Not initiated
Aarhus South, phase 2	Aarhus	DK	Retail	2,800	100%	2019	2020
Ejby Industrivej	Copenhagen	DK	Office	6,300	100%	-	-
Beddingen 5, Østre Havn	Aalborg	DK	Residential	3,050	1) 50%	Mid-2018	Late 2019
Offices, Østre Havn	Aalborg	DK	Office	6,500	1) 50%	Continuously	Continuously
Havnehus 2, Østre Havn	Aalborg	DK	Residential	2,325	1) 50%	Continuously	Continuously
The New Yard, Tårnhuset, Beddingen	Aalborg	DK	Residential	1,900	50%	2018	2020
SporbyenScandia (sold conditionally)	Randers	DK	Mix	4,700	50%	Continuously	Continuously
SporbyenScandia	Randers	DK	Mix	61,250	50%	Continuously	Continuously
Kulan commercial district	Gothenburg	SE	Mix	55,000	100%	2019	2021
Arninge Entré commercial district	Stockholm	SE	Mix	50,000	100%	2019	2021
Retail park, Södertälje	Södertälje	SE	Retail	8,000	100%	Early 2018	Spring 2019
Property development, total floor space			approx. 225,000

1) Share of profit on development is 70%.

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PROJECTS IN PROGRESS

Strædet, development of town centre, Køge, Denmark

Adjacent to Køge Station and the town centre shopping area, TK Development is building a 34,300 sqm project comprising a retail project of about 19,000 sqm, public service facilities of just under 9,000 sqm, including a town hall and a rehabilitation centre, and residential units totalling about 6,300 sqm. In addition, the project comprises parking facilities of about 13,000 sqm. The building rights for the town hall and the rehabilitation centre have been sold to the Municipality of Køge.

The 19,000 sqm retail project has been sold to Finnish-based Citycon together with parking facilities of about 13,000 sqm. The project is being handed over to Citycon in three phases.

The initial phase, totalling some 4,000 sqm and comprising a cinema and restaurants, was completed in May 2017 and handed over to the buyer in July 2017. Construction of phase 2 of some 12,000 sqm was challenged, and therefore delayed, by the bankruptcy of a contractor in August 2017. The shops opened at the end of September 2017, and phase 2 was handed over to the investor in December 2017. The third and final phase of the project, totalling some 3,000 sqm, is expected to be completed in 2018.

The current occupancy rate for the total retail project is 92% (Q3 2017/18: 92%). Tenants include Irma, Fakta, H&M, Bones, Kings & Queens, Sportigan, Wagner, Gina Tricot, Deichmann and a six-screen Nordisk Film cinema.

The significant positive earnings effect which at the beginning of the financial year was expected to show in 2017/18 in connection with handover of the project to the investor has failed to materialise. This was partly attributable to substantial repair and completion costs as a result of the bankruptcy of a contractor, see above, including additional costs for the extended construction time and additional construction management.

Moreover, TK Development is involved in a few disputes and arbitration proceedings in relation to the project. Together with its external advisers, Management has considered these issues and made provisions for potential losses.

In the context of the 6,300 sqm residential project, TK Development is currently developing about 3,000 sqm of housing units in Rådhusstrædet. A total of 28 residential units will be constructed, consisting of both owner-occupied units and two-storey town houses. A total of 60% of the units have been

sold. Some of the units have been completed, and a number of apartments were handed over to the buyers in January 2018. Construction of the remaining units was completed after the balance sheet date, and these units will be handed over as and when sold.

Domus Vista, youth housing units, Frederiksberg, Copenhagen, Denmark

In Frederiksberg, TK Development has sold a 5,300 sqm youth housing project under a conditional sale agreement to Koncenton, which has taken over the letting process as part of the deal. Construction began in October 2016, and the completed project is expected to be handed over to the investor in spring 2018.

Beddingen 7A, owner-occupied housing units, Østre Havn, Aalborg, Denmark

In the area previously occupied by Aalborg Shipyard at Stuhrs Brygge, TK Development is developing a business and residential park through a company owned on a 50/50 basis with Frederikshavn Maritime Erhvervspark. One of the projects comprises about 7,000 sqm of owner-occupied prime-location units at Beddingen. The presale of the 43 apartments has begun, and more than 50% have been presold (Q3 2017/18: 40%). Construction commenced in mid-2017, and the apartments are expected to be ready for occupation in late 2018.

Havnehus 1, rental housing units, Østre Havn, Aalborg, Denmark

Another of the projects at Østre Havn is a 4,900 sqm rental property. This project has been sold to a private investor, who will also handle the letting process. The sale will be executed on a forward funding basis, meaning that the investor will pay for the project in step with its completion. Construction began in early 2017 and is scheduled to be completed and handed over to the buyer in spring 2018.

Nyhavnsgade 3, rental housing units, Østre Havn, Aalborg, Denmark

The Nyhavnsgade project, also at Østre Havn, is a rental property of some 2,650 sqm. The project has been sold to a private investor, who will also handle the letting process. The sale will be executed on a forward funding basis, meaning that the investor will pay for the project in step with its completion. Construction began in early 2018 and is scheduled to be completed and handed over to the buyer in early 2019.

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PROPERTY DEVELOPMENT

Youth housing units, Vanløse, Denmark

In Vanløse, TK Development has sold a 1,700 sqm youth housing project under a conditional sale agreement to Koncenton, which took over the letting process as part of the deal. Construction commenced in August 2017, and the completed project is expected to be handed over to the investor in autumn 2018.

SELECTED PROJECTS NOT INITIATED

Beddingen 5A, rental housing units, Østre Havn, Aalborg, Denmark

The Beddingen 5A project is also located at Østre Havn. The project, which comprises some 6,100 sqm, has been sold under a conditional sale agreement to a private property company. The investor will handle the letting process. Construction is expected to commence in mid-2018 and is scheduled to be completed and handed over to the buyers in late 2019.

The New Yard, Tårnhuset, owner-occupied housing units, Beddingen, Østre Havn, Aalborg, Denmark

The project comprises some 3,800 sqm of owner-occupied units and will be developed in collaboration with a private property developer. A building permit for the project has been obtained and the presale will begin in spring 2018. Construction is expected to commence in 2018 and is scheduled to be completed and handed over to the buyers in 2020.

SporbyenScandia, Randers, Denmark

In a joint venture with private investors, TK Development is working on an area previously occupied by Bombardier, the train manufacturers, in Randers, where the plan is to develop some 140,000 sqm of retail shops, housing units, offices, etc. The local development plan for the area has been adopted, and the joint venture took over the area in December 2017. The project is attracting a good deal of interest from both investors and users. Work is currently ongoing to sell the building rights for a number of the area's building plots, and several agreements are in place. TK Development has concluded agreements for the sale of 12,000 sqm of residential building rights to private investors, of which 8,100 sqm were assigned to the buyer in January 2018, and a conditional agreement for the sale of 5,500 sqm of residential buildings rights to a housing association. In addition, negotiations on the sale of other building plots are at an advanced stage, and work is ongoing concerning the development of a combined supermarket and housing project.

Arninge Entré, commercial district, Stockholm, Sweden

In Arninge in Stockholm, the municipal authorities have appointed TK Development as their preferred partner for the development of an area that is to serve as the entry point to the town centre of Arninge. TK Development is currently engaged in the planning process together with the municipal authorities. The project is expected to comprise about 50,000 sqm, primarily retail stores, with a possible option of including office premises

Sporbyen, Randers, Denmark - extract from the general plan for the area

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PROPERTY DEVELOPMENT

as well. Both tenants and investors have shown considerable interest in the project, and work on the planning, letting and sale will proceed during the months ahead. The local development plan for the area is expected to be available in autumn 2019. Construction is expected to commence in late 2019 with completion scheduled for 2021.

Retail park, Södertälje, Sweden

TK Development is currently developing an 8,100 sqm retail park in Södertälje. The project has been fully let (Q3 2017/18: 88%), with tenants including Willy's (supermarket), Lager 157 and a fitness chain. The project has been sold to Svenska Handelsfastigheter on a forward funding basis, meaning that Svenska Handelsfastigheter will pay for the project in step with its completion. Construction was initiated after the balance sheet date, and the retail park is expected to be handed over to the investor in spring 2019.

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T K

DISCONTINUING ACTIVITIES

The Group's discontinuing activities (formerly asset management activities) comprise the operation of the Group's completed properties and investment properties as well as land and development projects in markets where the Group wishes to eventually discontinue its activities. Due to the decision to sell off the Polish activities, these activities are now included under the discontinuing activities. The comparative figures have been restated accordingly.

TK Development's activities outside Denmark and Sweden will, together with its completed properties in operation in Denmark, be divested as soon as possible, and the net proceeds will be distributed to the shareholders. The Group's discontinuing activities make up 65% of its total assets.

Discontinuing activities
DKKm	2017/18	2016/17
Revenue	121.4	294.8
Gross profit/loss	-295.9	56.4
Profit/loss of joint ventures	-45.3	-27.7
Profit/loss before tax	-411.9	-47.9
	31 January 2018	31 January 2017
Total assets	1,495.1	1,914.7
Equity tie-up	409.6	762.4
Number of centre employees	19	16

Impacted by impairment losses totalling DKK 407.9 million, of which DKK 405.4 million was recognised in Q3 2017/18, see below, the result before tax from the Group's discontinuing activities was a loss of DKK 411.9 million.

The process of maturing and optimising the Company's portfolio of shopping centres has not been satisfactory, and towards the end of 2017, the Board of Directors acknowledged that the Group has not succeeded in maturing all of these assets as quickly as had been anticipated.

The economy is expanding, but the effects have failed to filter through to consumer spending in physical shops. This has resulted in cutthroat competition among rival shopping centres, and the competitive landscape is further affected by continued e-commerce growth. As a consequence, many traditional centres are reporting relatively flat revenue growth, which is putting rent levels under pressure.

Previous assumptions regarding the maturing and optimisation of some centres have turned out to be overly optimistic. There is still a maturing potential, but it will likely take longer than

previously assumed to obtain selling prices matching the original expectations.

Based on the Group's forward-looking focus on its property development business and given the current economic climate, tying up capital in these discontinuing activities for a longer period is not considered attractive. Accordingly, the assets will be divested as soon as possible.

As a consequence, the Board of Directors recognised a number of impairment losses in Q3 2017/18. The impairment losses are related to activities that are now included under discontinuing activities and break down as follows:

Project	DKKm
Land, Poland	60.0
Galeria Sandecja, Nowy Sącz, Poland	100.0
Investment in joint venture with two centres, Poland	65.4
Total loss, Poland	225.4
Sillebroen, Frederikssund, Denmark	120.0
Total loss, Denmark	120.0
Investment property, Germany	25.0
Land, other countries	35.0
Total other countries	60.0
Total impairment losses	405.4

Poland

An impairment loss of DKK 60 million was charged on three plots of land in Poznan, Sosnowiec and Bytom, respectively, which the Group has owned for a number of years. Due to their size and to regulatory issues, the short-term development of these plots of land is difficult, and given the plans to divest the Polish activities, including land, within two years, there is no longer a viable basis for maintaining the previous valuations. The plots of land have been written down to net realisable value.

The centre in Nowy Sącz has been exposed to significant competition from a rival centre for a number of years. Maturing and optimisation efforts during the past few years have improved the asset, but its full and previously anticipated potential is no longer expected to be realised within the 2-year period during which the Polish activities are expected to be sold off. Management decided to sell the centre as soon as possible, as a result of which it was written down by DKK 100 million.

The two 30%-owned shopping centres in Tarnów and Jelenia Góra, respectively, have also been affected by severe competition. The situation facing the centres is improving but at a slower pace than expected. Due to a postponement of a sale of the centres, TK Development has had to pay a larger than expected

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advance return to the joint venture partner. TK Development recognised an impairment loss of DKK 26 million on the investment in financial year 2016/17 and wrote down its value by an additional DKK 65 million to DKK 0 in Q3 2017/18.

Denmark

Sillebroen Shopping was planned and built in 2006-2010 based on market analysis and realised pre-letting. The project had not been presold.

Despite a number of stimulatory maturing and optimisation activities, including the establishment of a cinema and a fitness centre, revenue has remained flat. The centre has additional maturing potential, but it will take longer than previously assumed to realise it.

The centre is therefore unlikely to fetch the previously expected selling price in the short term. Against this background, in combination with current business conditions, Management found that a prolonged maturing process would be futile and made a decision to sell the centre. The value of the centre was consequently reduced by DKK 120 million to its expected net realisable value.

Other markets

In the Group's other markets, i.e. Germany, the Baltics and the

Czech Republic, the value of land and projects has been written down/adjusted by DKK 60 million. These impairment losses relate partly to a plot of land in Riga, Latvia, the development of which has proven more difficult than anticipated, and partly to two assets in Germany where development efforts have so far failed to produce satisfactory results.

The Group's completed properties at 31 January 2018:

	Country	Type	TKO's ownership interest	Project area sqm	Current occupancy rate
Projects in wholly-owned companies
Completed projects
Sillebroen Shopping, Frederikssund	Denmark	Shopping centre	100%	26,400	92%
Galeria Sandecja, Nowy Sącz	Poland	Shopping centre	100%	17,500	99%
Aabenraa	Denmark	Retail park	100%	4,200	81%
Brønderslev	Denmark	Retail property	100%	1,200	100%
Investment properties
Lüdenscheid	Germany	Mix	100%	14,000	50%
Joint venture projects
BROEN Shopping, Esbjerg	Denmark	Shopping centre	35%	29,800	94%
Galeria Nowy Rynek, Jelenia Góra *)	Poland	Shopping centre	30%	24,800	93%
Galeria Tarnovia, Tarnów *)	Poland	Shopping centre	30%	17,000	93%
Ringsted Outlet	Denmark	Outlet centre	50%	13,200	92%
Amerika Plads, underground car park	Denmark	Car park	50%	32,000	n/a
Total				180,100

*) Galeria Tarnovia and Galeria Nowy Rynek are owned through a joint venture with Heitman, and TK Development's ownership interest is 30%. Net of the impairment loss recognised in Q3 2017/18, the value of TK Development's ownership interest is DKK 0 million, and TK Development is not liable for the company's liabilities. As the centres are now considered to be immaterial to the Group, they will no longer be treated as separate assets.

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DISCONTINUING ACTIVITIES

The completed retail park at Most has been sold. The sale was completed in Q3 2017/18.

As at 31 January 2018, the Group's discontinuing activities comprise completed projects and investment properties, excluding joint venture projects, totalling DKK 899.9 million (Q3 2017/18: DKK 898.0 million), and land and development projects in Poland, the Czech Republic, the Baltics and Germany totalling DKK 333.7 million (Q3 2017/18: DKK 346.3 million).

The net asset value (NAV) per share for the discontinuing activities is shown below. NAV reflects equity, DKK 409.6 million, distributed on the total number of shares in the Company, 98,153,335, corresponding to a value of DKK 4.2 per share on a sale at carrying amounts. The total assets of the discontinuing business are DKK 1,712.7 million¹, corresponding to DKK 17.4 per share, and the total liabilities are DKK 1,303.1 million, corresponding to DKK 13.2 per share.

Outlet Moravia, Ostrava, Czech Republic - sold conditionally to CPI Property Group

¹ Before offsetting of DKK 218 million balance with property development.

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ITK

DISCONTINUING ACTIVITIES

BROEN SHOPPING, SHOPPING CENTRE, ESBJERG, DENMARK

Opening	April 2017
Leasable area	29,800 sqm, including a 5,000 sqm supermarket
Occupancy rate	94% (Q3 2017/18: 93%)

In association with CapMan Real Estate, TK Development has built a new 29,800 sqm shopping centre, BROEN Shopping, at Esbjerg Railway Station. The centre opened on 10 April 2017. TK Development's ownership interest is 35%.

94% of the total space has been let. Tenants include Kvickly, H&M, Fitness.dk, Bahne, Mr., Kings & Queens, Esprit, Monki, Imerco, Sportmaster, Gina Tricot, Café Vivaldi, Nielsens and Deichmann.

BROEN Shopping attracted a large number of visitors for its opening ceremony on 10 April 2017. The footfall is expected to be some 2.8 million in the first year of operation and to increase during the running-in period which every new centre goes through. For a new centre, BROEN Shopping is generating satisfactory revenue, and revenue is expected to grow in the years ahead.

A lease has been concluded with Nordisk Film Cinemas for the establishment of an eight-screen cinema in connection with the centre. Construction commenced at the end of 2017, and the cinema is expected to open in spring 2019. The cinema will strengthen the centre's leisure profile and position BROEN Shopping as a preferred destination of visitors from Esbjerg and the surrounding region.

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DISCONTINUING ACTIVITIES

SILLEBROEN SHOPPING, SHOPPING CENTRE, FREDERIKSSUND, DENMARK

Opening	March 2010
Leasable area	26,400 sqm, including about 4,000 sqm of supermarket unit
Occupancy rate	92% (Q3 2017/18: 92%)
Footfall 2017	3.1 million

Planned operational measures:

Boost the occupancy rate by signing agreements with new tenants to further strengthen Sillebroen's position as a preferred shopping destination.
Optimise restaurants etc.

As an important step towards attracting footfall and growing Sillebroen's revenue, an agreement was made with Nordisk Film Cinemas on the establishment of a 1,400 sqm cinema in the centre, and the new cinema opened in August 2016. The positive effect of the cinema opening is an important contribution to the ongoing optimisation of the tenant mix.

The centre's tenant mix improved considerably in 2016 despite the closing of the Fona store as, in addition to the new Nordisk Film cinema, Imerco, Søstrene Grene and Normal all opened outlets in the centre. However, Fakta closed its supermarket at the beginning of 2017. The closing of the Fona and Fakta stores has prevented satisfactory developments in both footfall and centre revenue.

A lease has been signed with Fitness.dk, which opened a fitness centre in October 2017. Management believes this addition will help attract more customers and strengthen the centre's position as a preferred shopping destination for the area's consumers.

In addition, efforts have been made to attract new restaurants, and Burger King opened a restaurant in the centre in late 2017.

As announced in the interim report for Q1-Q3 2017/18, operational results are generally not satisfactory, and both footfall and revenue need to be strengthened further to improve the operational performance. It will take longer than previously assumed and longer than desired to achieve a satisfactory operational performance. The Board of Directors aims for a quick sale of the property, and the value of the property has been written down by DKK 120 million, as described above, with a view to effecting its sale without any further maturing of the centre.

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DISCONTINUING ACTIVITIES

GALERIA SANDECJA, SHOPPING CENTRE, NOWY SĄCZ, POLAND

Opening	October 2009
Leasable area	17,500 sqm, including a 5,000 sqm hypermarket
Occupancy rate	99% (Q3 2017/18: 97%)
Footfall 2017	2.1 million

Planned operational measures:

Retain a high occupancy rate.
Continue to convert temporary leases into ordinary leases on terms and conditions satisfactory to the Group.
Extend the non-terminable period of contracts with key tenants where this has not already been done.
Optimise the tenant mix by, i.e., replacing weak tenants.

Having been strongly affected for some time by a competing centre that opened in autumn 2013, Galeria Sandecja is once again rallying, although at a slower pace than previously expected, as described in the interim report for Q1-Q3 2017/18. Various initiatives implemented in the past few years, including efforts to create a strong mix of tenants on the ground floor and upgrade the first floor, have helped stop the negative trend in revenue and footfall. Both revenue and footfall grew in 2017 relative to 2016. The centre's food court was also upgraded in 2017.

In light of the improved situation, a letting strategy for the next year has been defined. The process of converting short-term leases into ordinary leases with long non-terminable periods continues, and efforts will be made to extend the non-terminable period of contracts with key tenants where this has not already been done. The occupancy rate is 99%.

In spite of these measures, operational results are not yet satisfactory, and optimisation/improvement efforts are expected to continue for several years. As described above, the value of the property has been written down by DKK 100 million with a view to effecting its sale without any further maturing of the centre.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

DISCONTINUING ACTIVITIES

RINGSTED OUTLET, RINGSTED, DENMARK

Opening	March 2008
Leasable area	13,200 sqm
Occupancy rate	92% (Q3 2017/18: 93%)
Footfall 2017	1.8 million

Planned operational measures:
- Optimise the tenant mix.
- Boost the occupancy rate (dialogue is ongoing with several prospective tenants).
- Make preparations for contemplated expansion of the centre with a second phase.

The favourable trend of the past few years continued in 2017, and the centre continues to grow in terms of both revenue and footfall.

Continuous efforts are being made to optimise the tenant mix, and the centre has been strengthened significantly over the past two years. A number of new tenants opened outlets in the centre in 2016, and 2017 also saw new store openings by, among others, Schiesser, Lindt, Ecco, Betty Barclay, Kappa, Skechers, H&M, Lacoste and Moss Copenhagen. A few tenants have left to make way for stronger brands. The occupancy rate is 92%. Constructive dialogue is ongoing with several prospective tenants, and it is expected that the outlet centre will become even stronger in the course of the coming year.

As a consequence of the centre's improved letting situation and operational performance, DKK 15 million of the impairment loss recognised on the project in prior financial years was reversed in Q4 2017/18.

Ringsted Outlet is a 50/50 joint venture. The other 50% stake is owned by CapMan Real Estate. Over the coming year, the owners will continue to develop Ringsted Outlet and further explore opportunities for expanding the centre, while at the same time investigating its sales potential.

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OTHER DISCONTINUING ACTIVITIES

In addition to completed properties, the Group's discontinuing activities comprise land and development projects in markets where the Group wishes to eventually discontinue its activities.

Amounting to DKK 333.7 million at 31 January 2018, these plots of land and development projects consist of:

	DKKm	Of which land	Of which projects in progress
Poland	254.4	74.7	179.7
Czech Republic	56.6	27.8	28.8
Baltic States	21.0	21.0	0.0
Germany (one plot of land)	1.7	1.7	0.0
Total	333.7	125.2	208.5

The Company's project in Russia has been sold to a private investor, and TK Development has thus exited the Russian market altogether.

Poland

The Polish activities comprise three plots of land and a residential project under development in Warsaw. Efforts will be made to sell and/or develop the land as soon as possible. The housing project is described below.

MetroBielany, residential project, Bielany, Warsaw, Poland

In Warsaw, TK Development is developing a residential project of owner-occupied units totalling about 51,000 sqm. The project is being built in four phases, and the first two phases, totalling 22,700 sqm, have been completed and for the most part sold and handed over to private users.

Phase 3 comprises about 15,650 sqm and consists of 263 residential units and service facilities. Construction is progressing according to plan, and the housing units are scheduled for completion in April 2018. The sales process is progressing satisfactorily with 91% (Q3 2017/18: 81%) of the units sold. The units will be handed over to the buyers during the course of a few months starting in April.

Phase 4 will comprise about 12,500 sqm and consist of 227 residential units and service facilities. The presale has begun, and 23% of the units have been sold. Construction commenced in December 2017 with completion of the residential units scheduled for autumn 2019.

Poland's relatively rapid urbanisation is boosting demand for new homes. This makes the Polish housing market attractive.

The Warsaw owner-occupied housing market is driven by stable to slightly rising prices, a low level of interest rates and confidence in sustained economic growth, and the project is experiencing robust demand for its owner-occupied units.

While TK Development aims to divest its activities in Poland, the Group will naturally stand by the guarantees provided to the buyers of the project's owner-occupied units. The guarantees provided by TK Development are backed by similar guarantees from the executing contractor.

Czech Republic

The Group's activities in the Czech Republic comprise a plot of land and an outlet project under development in Ostrava. Efforts will be made to sell and/or develop the land as soon as possible. The outlet project is described below.

Outlet Arena Moravia, Ostrava, Czech Republic

As part of the termination of the Group's Czech activities and in order to optimise values, the Board of Directors has, as previously announced, decided to develop and complete the Outlet Arena Moravia development project in Ostrava. The outlet centre will comprise about 17,000 sqm to be built in two phases, with the initial phase covering about 11,700 sqm. Construction of the initial phase of the project has begun. The initial phase consists of some 70 shops, and binding leases have been signed for more than half the space. The project has been sold under a conditional sale agreement to CPI Property Group, a major international property group with properties in 11 countries. The initial phase is expected to be handed over to the investor in late 2018.

Baltic States

At 31 January 2018, the Group's Baltic activities comprised two plots of land in Riga. Efforts will be made to sell and/or develop the land as soon as possible. At the end of January 2018, TK Development handed over the final phase, comprising 4,550 sqm, of an 11,300 sqm retail park in Vilnius, Lithuania, to the investor, which is a fund managed by Baltic Horizon Fund, and TK Development has now exited the Lithuanian market altogether.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

BUSINESS CONCEPT AND KNOWLEDGE RESOURCES

The Group's mission

The overall mission of TK Development is to generate value through real estate development.

The Group operates in the property development and services environments and specialises in providing the enabling and creative link between tenants and investors.

Strategy for property development activities

Developing projects from the conceptual phase through to project completion based on one of several models:

Pre-sold projects (forward funding/forward purchase)
Projects with partners
Projects for TK Development's own account in anticipation of strong letting and sales potential
Services third parties

Strategy for discontinuing activities

The Group's discontinuing activities will be divested as soon as possible in order to free up capital and focus on the property development business in Denmark and Sweden.

Net proceeds from the divestment of the discontinuing activities will be distributed to the Company's shareholders.

BUSINESS CONCEPT

The Group's primary business area is property development with the future strategic focus being on property development in Denmark and Sweden.

In addition, the Group has a range of activities that are being discontinued.

PROPERTY DEVELOPMENT

TK Development is a networking business. Based on its close business relationships, the Group has over time built a strong, extensive network of tenants and investors, with whom it regularly concludes contracts. The Group is predominantly a knowledge-based service provider specialising in providing the enabling, creative link between tenants, investors, architects, construction companies and other business partners.

TK Development aims to be the preferred property development partner in the retail segment and an attractive business partner within the office and residential segments, interacting with clients, tenants and investors on a foundation of insight and mutual trust.

Defining values

TK Development pursues a range of fundamental values that define the Group. Laying down guidelines for the conduct of TK Development's employees, these values define how TK Development wishes to be perceived.

Sound business acumen
Results-driven
Innovative and creative
Reliable
Keeping it simple
Committed

In collaboration with tenants and investors, TK Development plans and organises the construction of new buildings and the expansion or conversion of real property based on tenant needs and investor requirements. The Group develops the projects, which involves obtaining regulatory permits, letting the premises, supervising construction and contracting with construction companies and subcontractors for the execution of construction projects.

As concerns the Danish activities, focus going forward will be on urban development, housing, retail and commercial projects and often a combination of these segments. In light of the continued population growth in major cities and towns and, by extension, the continual need for new housing, Management will continue to prioritise the development and execution of residential projects in such locations. In the Swedish market, the Group focuses on the retail segment while also exploring several project opportunities in the residential segment.

As a general rule, projects will only be initiated if they have been fully or partially presold to investors and if the capital tie-up can be kept to a minimum.

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BUSINESS CONCEPT AND KNOWLEDGE RESOURCES

	Denmark	Sweden
Urban development	■	■
Stores/superstores	■	■
Shopping street properties	■
Offices	■
Mixed	■	■
Residential	■	■

TK Development applies various models in its approach to property development:

For the Group's own account with or without pre-selling projects. Projects may be financed by the Group itself or by the buyer in step with project completion (forward funding). As a general rule, projects will only be initiated if they have been fully or partially presold to investors and the capital tie-up can be kept to a minimum.
Together with business partners throughout the construction period.
Services third parties.

Client relations

The Group's principal clients are tenants and investors. TK Development works continually to develop new, improved services to make the Group an even more attractive business partner.

Tenants

Over time, TK Development has built close partnership relations with a large number of companies, including in particular retail chains looking to establish new stores.

Leveraging its accumulated in-depth knowledge of tenant needs and requirements, TK Development is able to develop retail solutions that meet tenants' requirements as to design and location. Thanks to its close relations with a wide range of retail chains, the Group is also able to put together an attractive retail mix that optimises tenant revenues.

Over the years, TK Development has developed and executed a substantial number of office projects, primarily corporate headquarters, and has therefore gained broad experience in developing attractive office projects that match the requirements of both tenants and investors.

Investors

Likewise, TK Development has built close relations with a large number of Danish and foreign real estate investors.

The Group has in-depth knowledge of investor needs and requirements. As part of its service offering, TK Development offers standardised international contracts and a smooth process from commencement to handover.

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

Project and risk management

New projects are initiated based on a careful assessment of their earnings potential as well as their complexity, completion time, capital tie-up, including balance sheet and cash flow impact, and other resource deployment. Project location, regulatory requirements, pre-letting, constructional requirements and market conditions are also considered. As a general rule, projects will only be initiated if they have been fully or partially presold to investors and the capital tie-up can be kept to a minimum.

Mitigating risk

A number of management tools are employed to ensure a satisfactory project process. Construction is typically not commenced until satisfactory pre-letting, i.e. at least 60%, has been achieved. If a project has been sold, construction will not be commenced until the Group expects to be able to meet any requirements that need to be satisfied in order for the investors to complete the sale. The Group is usually able to meet such requirements.

Forward funding

TK Development aims to secure the sale of projects at an early stage and strives to strengthen investor commitment through forward funding, meaning that investors pay for the project in step with completion. Forward-funding agreements with investors are usually concluded before construction is commenced. This ensures that the capital tie-up is kept to an absolute minimum, implying a lower balance sheet impact and minimised risk.

The diagram below illustrates the Group's capital tie-up in a project without forward funding and a project with forward funding.

Building green

The Group is experiencing growing demand for green building from both tenants and investors. TK Development is able to offer green building solutions as and when requested by its clients. Several of the Group's projects have been constructed as green building projects and certified to BREEAM, LEED or equiv

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

BUSINESS CONCEPT AND KNOWLEDGE RESOURCES

alent standards.

Environment

TK Development is aware of the general public focus on reducing the environmental footprint, including reducing CO₂ emissions and prioritising green building.

When the Group acquires sites for its projects, the land is tested for contamination. If a plot of land is found to be contaminated, the Group will clean up the land for its intended use before starting construction, or the land in question will not be acquired.

When developing projects, the Group strives to strike the right balance between environmental and social concerns and revenue generation. This includes considering materials used, design, energy consumption and environmental impact.

The Group aims for its projects to cause the smallest possible environmental impact. TK Development works with tenants and investors to develop appropriate environmental solutions for the development and implementation of new projects, striving to make sure its completed projects use as little energy as possible and provide a healthy indoor climate and thus a sound working environment for the people who will eventually be working in the buildings.

DISCONTINUING ACTIVITIES (FORMERLY ASSET MANAGEMENT)

TK Development's discontinuing activities comprise all the Group's activities outside Denmark and Sweden as well as completed properties in operation in Denmark.

These activities comprise the operation of the Group's completed properties and investment properties as well as land and development projects in markets where the Group wishes to eventually discontinue its activities. As of 31 October 2017, the Group's Polish activities form part of its discontinuing activities.

The discontinuing activities will be divested as soon as possible, and the net proceeds will be distributed to shareholders.

KNOWLEDGE RESOURCES

TK Development develops quality projects. Combined with the know-how and qualifications of its employees, the Group's close relations with tenants and investors play an instrumental role in minimising the risks of individual projects. This is key to developing projects that meet the requirements of both tenants and investors and generate satisfactory earnings for the Group.

Employees

For purposes of generating value, TK Development relies on the know-how and qualifications of its employees, and the Group strives to maintain an optimal mix of staff with special expertise in all key areas of real estate development. The Group's employees include project developers, letting managers, legal and financial project controllers and engineers.

The diagram below illustrates the Group's funds tied up in projects, in scenarios both with and without forward funding.

TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | MANAGEMENT COMMENTARY

T K

BUSINESS CONCEPT AND KNOWLEDGE RESOURCES

Competence building

To continuously enhance the skills of its employees and, by extension, its value creation, TK Development maintains a strong focus on training and continuing professional development, the aim being to secure the strongest possible platform for maximising the value of each individual project.

In addition to strengthening the Group's knowledge resources, skills enhancement helps reinforce TK Development's position as an attractive workplace for both current and future employees.

Project organisation

TK Development aims to be an inspiring workplace where know-how and experience gained from individual projects is accumulated and shared across the organisation so as to continually strengthen the know-how and expertise of the Group and its employees.

In order to ensure high quality in all services provided by the Group to tenants and investors – along with effective progress and quick decision-making in the development of individual projects – the Group's staff is organised in a matrix set-up that may be illustrated as follows:

In this matrix organisation, all the specialist competencies required to execute a project, from the first rough sketches to completion, are represented in the project group charged with carrying the project through from A to Z.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

FINANCIAL TARGETS

TK Development pursues group-wide solvency and liquidity targets for the purpose of ensuring sufficient future financial resources.

The Group has issued a commitment to its main banker to maintain a group solvency ratio of at least 30%, as measured at the presentation of interim and annual reports. In addition, Management has adopted a 40% solvency target for the Group, calculated as the ratio of equity to total assets.

The Group has pursued liquidity covenants for a number of years. In short, a liquidity covenant means that in order to assume substantial liquidity-consuming liabilities the Group must

at all times maintain cash resources corresponding to its fixed costs for the next six-month period, excluding cash flows from projects sold but including project liabilities materialising within the next six months. The covenant is a liquidity target for the whole Group and a commitment to the Group's main banker. The covenant must be calculated and met before liquidity-intensive projects can be acquired and commenced.

The Group's solvency and liquidity covenants were both met in the year under review.

Average Entrib, commercial district, Stockholm, Sweden - construction scheduled for late 2019

TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | MANAGEMENT COMMENTARY

RISKS

RISK MANAGEMENT

For purposes of developing the Group's strategy and overall goals, the Board of Directors and the Executive Board have identified the most significant business risks and seek continually to ensure that risk is managed effectively. In managing risk, the Group's main concern is to ensure that projects are only commenced if estimated earnings match the project's complexity, completion time, capital tie-up and other resource deployment. As a general rule, projects will only be initiated if they have been fully or partially presold to investors and the capital tie-up can be kept to a minimum.

Management remains strongly focused on the Group's financial management and on strengthening financial resources, including managing and optimising TK Development's loans. As mentioned above, the Group's solvency and liquidity targets are also core elements of its risk management.

As part of its broader assessment of potential risks and scarcity factors, the Board of Directors regularly considers issues relating to the project portfolio, properties, market conditions, financing, IT and staffing.

The Board of Directors receives regular reports on the Group's risk exposures, and risk factors are considered carefully in all decisions concerning major projects.

The Group's principal risks, apart from general risks, are described below.

FINANCIAL REPORTING RISKS

In applying the Group's accounting policies, Management makes a number of significant accounting estimates and judgments that materially affect the annual report, particularly the measurement of certain assets. A significant part of the Group's total assets consists of ongoing and completed projects. These projects are reviewed for impairment based on a specific assessment of each individual project, including project budgets and the expected future development potential. For additional information, see note 2 to the consolidated financial statements.

BUSINESS RISKS

TK Development's most significant business risk exposure is to the risks generally associated with property development.

As regards the Group's development activities, the most significant business risks other than those generally associated with the industry are as follows:

As a developer, the Group's future earnings depend on the inflow of new projects and thus on the future availability of new building sites and regulatory permits (planning legislation, local development plans, building permits, etc.) concerning the location, size and use of its properties.
In developing new projects, the Group is subject to both overall and detailed time schedules. Time is of the essence in complying with agreements made with tenants and investors and a significant factor in ensuring that the individual projects progress according to plan and, accordingly, that the Group generates the projected earnings. Postponing a project may mean, for instance, that lease agreements lapse, that tenants become entitled to compensation and, ultimately, that the investor is no longer under an obligation to buy the project.
Where a sales agreement is concluded before all lease agreements have been signed, the Group assumes a calculated risk that the remaining premises cannot be let on terms providing a satisfactory return.
As concerns sold projects, construction will not be commenced until the Group expects to be able to meet any requirements that may need to be satisfied in order for the investor to complete the sale. The Group is usually able to meet such requirements. However, if the sale is not completed, the Group may ultimately have to keep the relevant property on its own books, thus facing an unexpected capital tie-up.
Where agreements with investors and contractors, for example, have not been adequately aligned, the Group assumes an additional project development risk in that it may have to rectify defects or other issues which the contractor is either not obliged or not able to address.

As regards the Group's discontinuing activities, the most significant business risks other than those generally associated with the industry are as follows:

TK Development relies on a well-functioning retail sector. Adverse developments in the retail sector, for example due to economic trends or an increase in e-commerce, may result in weaker demand for retail rental premises and thus lower rental income and property prices.

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RISKS

It is essential that completed, operating shopping centres attract a satisfactory footfall and achieve satisfactory revenue as this affects tenants' ability to pay rent to the Group and the letting situation in general, including the re-letting potential.

The Group's completed projects are also exposed to a letting risk in relation to lease agreements expiring while the Group owns the relevant properties. If the Group fails to renew these agreements or to sign new leases, or if the agreements can only be entered into on less favourable terms, it could have a material adverse impact on the Group.

Part of the Group's rental income is revenue-based. The Group's total rental income under these lease agreements depends partly on the tenant's ability to maintain a certain revenue from the premises in question. The proportion of such revenue-based rent may vary considerably depending on the nature of the brand, the store and the products. Failure on the part of the tenant to generate sufficient revenue to trigger the revenue-based portion of the overall rental income could have a material adverse impact on the Group.

FINANCIAL RISKS

Financing and liquidity risks

Having sufficient cash resources as well as access to project financing is essential for TK Development. In Management's opinion, sufficient project finance options are currently available to the Group. However, funding options vary from project to project, depending on type, location and status, including letting and selling status.

The Group's current debt to credit institutions consists of both operating and project credits. TK Development has entered into a general agreement with the Group's main banker for both types of financing. The agreement, which is usually renegotiated once a year, was recently extended after the end of the financial year and now runs until 30 April 2019.

In addition, the Group has entered into project-financing agreements with a number of Danish and foreign banks and will continue to rely on such financing agreements going forward. Project credits are usually granted with different terms to maturity, depending on the specific project.

A number of the Group's loan agreements contain provisions on cross default, which means that the lender may consider default on a loan under a loan agreement as default of a number of other loan agreements. Other loan agreements contain certain project-related conditions (covenants) which the Group is required to observe. Moreover, the Group has issued a commitment to its main banker to comply with certain conditions (liquidity and solvency covenants). If these covenants are not met, the Group's operating and/or project credit facilities may be terminated.

Several of the Group's loan agreements contain provisions giving the banks a discretionary option to terminate the agreement. In such cases, continued funding therefore depends on the bank's subjective assessment of the quality and profitability of the facility in question as well as of the value of the collateral provided by Group. If the Group fails to meet its commitments under such agreements with its banks, the agreements risk being terminated. There is a risk that TK Development will not have adequate capital resources to meet substantial repayment demands.

Credit risks

The credit risks associated with financial assets correspond to the values recognised in the balance sheet. TK Development is not exposed to any significant credit risks related to individual clients, given that the title to a sold project does not pass to the buyer until payment has been effected.

Interest-rate risks

A substantial proportion of the Group's interest-bearing debt is floating-rate loans, meaning that higher interest rates will increase the Group's interest expense. A 1 percentage point change in the interest rate on the Group's floating-rate loans, including loans in joint ventures, will have a direct impact after tax of about DKK 5 million. The Group considers on an ongoing basis whether to hedge interest-rate risks through interest-rate swaps or similar agreements. In addition, higher interest rates will, all other things being equal, affect investor return requirements and, by extension, real property prices.

Currency risks

TK Development's Danish subsidiaries operate almost exclusively in DKK, while its foreign subsidiaries generally operate in their local currency or alternatively EUR. The Group seeks to minimise currency risk as much as possible by concluding related agreements in the same currency. The Group seeks, for instance, to conclude purchase and sales agreements, construction contracts and financing agreements for a given project in the same currency. The Group's principal currency risks are believed to relate mainly to foreign subsidiary net results,

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RISKS

intra-group balances and foreign-exchange adjustments of the Group's investments in foreign subsidiaries. See also note 27 to the consolidated financial statements.

LEGAL RISKS

TK Development regularly enters into agreements with various contracting parties, such as investors, contractors, tenants, etc. These agreements involve opportunities and risks that are assessed and addressed prior to contract execution. From time to time, the Group is involved in disputes and lawsuits. The Group is not a party to any lawsuits that, either individually or collectively, are expected to materially affect the Group's earnings.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

SHAREHOLDER INFORMATION

THE SHARES

Stock exchange	Nasdaq Copenhagen
Index	SmallCap
Share capital	DKK 98,153,335
Denomination	DKK 1
Number of shares	98,153,335
Share classes	One
Number of votes per share	One
Voting restrictions	None
Restrictions on transferability	None
ISIN code	DK0010258995
Shareholders holding more than 5%	Ownership and voting share (%)
---	---
Strategic Capital ApS / Strategic Investments A/S
Copenhagen, Denmark	13.14%
Kirk & Thorsen Invest A/S and Thorsen A/S
(Peter Thorsen)
Vejle, Denmark	10.76%
Kurt Daeli and Dava 1 ApS
Charlottenlund, Denmark	10.02%

The table below provides a breakdown of shares held by the members of the Board of Directors and the Executive Board.

	Number of shares^{a)}	Ownership and voting share (%)	The year's change in shareholding^{a)}
Board of Directors:
Peter Thorsen	10,565,848	10.76%	2,321,295
Henrik Heideby	150,000	0.15%	0
Arne Gerlyng-Hansen	254,533	0.26%	0
Anne Skovbro Andersen	0	0.0%	0
Michael Bruhn	0	0.0%	0
Executive Board:
Frede Clausen	718,023	0.73%	0
Robert Andersen	476,667	0.49%	0
Total	12,165,071	12.39%	2,321,295

a) Shareholdings include all shares held by all members of the entire household as well as companies controlled by the above persons.

Residential units, Amerika Have, Copenhagen, Denmark - completed in May 2017

TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | MANAGEMENT COMMENTARY

SHAREHOLDER INFORMATION

Share price development

On 31 January 2018, the shares of TK Development A/S were quoted at a price of DKK 7.1 per share, corresponding to a market capitalisation of DKK 699 million.

The price of TK Development A/S's shares developed as follows during the year under review:

Trading volume

During the year under review, the share was traded on 251 days for a total trading volume of DKK 467 million against DKK 248 million the year before. A total of 20,735 trades were completed (2016/17: 14,062 trades), comprising a total of 46,939,349 shares (2016/17: 31,188,423 shares).

CAPITAL AND SHARE STRUCTURE

TK Development A/S's shares are not divided into share classes, and all shares rank equally. Each share carries one vote. TK Development's articles of association contain no restrictions governing share ownership, the number of shares that a shareholder may hold or share transferability. Since all shareholders thus have equal rights, the Board of Directors considers the share structure to be appropriate.

Management reviews on a regular basis the Group's capital structure as well as the need for any adjustments. Management's overall aim is to maintain a capital structure that supports the Group's earnings potential, while at the same time providing the best possible ratio of equity to debt with a view to maximising returns for the Company's shareholders. In Management's opinion, the current capital and share structure is consistent with this aim.

SHAREHOLDER AGREEMENTS

Management is not aware of any shareholder agreements between TK Development A/S's shareholders.

RULES ON AMENDMENT OF THE COMPANY'S ARTICLES OF ASSOCIATION

The articles of association of TK Development A/S may only be amended by resolution of the shareholders in general meeting pursuant to the provisions of the Danish Companies Act. Requests for the inclusion of specific proposals in the agenda of the annual general meeting must be submitted in writing to the Board of Directors. If such request is made not later than six weeks before the general meeting is to be held, the shareholder is entitled to have the business placed on the agenda. If the Board of Directors receives the request later than six weeks before a general meeting is to be held, the Board will decide whether the request was submitted in due time to be placed on the agenda.

At a general meeting, resolutions may only be adopted in respect of proposals on the agenda and any proposed amendments. If the general meeting is to consider proposed amendments to the articles of association, the essentials of such proposal must be stated in the convening notice. The adoption of a resolution to amend the Company's articles of association requires the affirmative vote of at least two-thirds of both the votes cast and of the voting share capital represented at the general meeting.

SHARE-BASED INCENTIVE PROGRAMMES

TK Development currently has no share-based incentive programmes.

DIVIDENDS AND DIVIDEND POLICY

TK Development's long-term objective is to distribute a portion of the profit for the year as dividends or, alternatively, through share buyback programmes. Such distributions will always be carried out with due regard for the Group's capital structure, solvency, cash resources and investment plans. Moreover, the Board of Directors aims to divest the Group's discontinuing activities as soon as possible. Net proceeds from the sale will be distributed to the shareholders.

GENERAL MEETINGS

The general meeting of shareholders is the supreme authority of TK Development A/S in all corporate matters, subject to the limitations provided by Danish law and TK Development A/S's articles of association. The annual general meeting must be held in the municipality of TK Development A/S's registered office in due time to allow the Company to comply with time limits for holding its general meeting and for filing its annual report. General meetings are convened by the Board of Directors.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

The annual general meeting will be held at 3 p.m. on 26 April 2018 at Aalborg Kongres & Kultur Center, Radiosalen, Aalborg, Denmark.

SHAREHOLDER INFORMATION

Extraordinary general meetings are held following a resolution by the shareholders in general meeting or by the Board of Directors, at the request of the auditors of TK Development A/S or at the written request of shareholders collectively holding at least 5% of the total share capital.

All business transacted at general meetings, with the exception of amendments to the articles of association or a resolution to dissolve the Company, is decided by a simple majority of votes unless otherwise provided by applicable legislation, see article 6 of the Company's articles of association.

REGISTRATION OF SHARES

The Company's register of shareholders is kept by VP Investor Services A/S, Weidekampsgade 14, DK-2300 Copenhagen S. All shares are registered in book-entry form and must be held through a Danish bank or other institution authorised to be registered as the custodian of such shares in accounts maintained in the computer system of VP Securities A/S, Weidekampsgade 14, DK-2300 Copenhagen S. The shares must be registered to named holders and may not be transferred to bearer.

POWERS OF THE BOARD OF DIRECTORS

Powers to issue new shares

The Board of Directors is authorised to increase the share capital by issuing new shares with a total nominal value of DKK 7,010,953 with pre-emptive rights for the Company's existing shareholders. Such increase may be for cash payment only.

The Board of Directors is also authorised to increase the Company's share capital by a nominal value of up to DKK 9,815,333, equal to 10% of the share capital, without pre-emptive rights for the Company's existing shareholders. The Board of Directors has been granted this authorisation for purposes of being able to optimise the Group's financing and capital structure.

The authorisation for the Board of Directors to issue new capital amounts to 17.1% of the Company's share capital.

Treasury shares

At the annual general meeting held in April 2015, the shareholders renewed the authorisation to the Board of Directors to acquire, on behalf of the Company, treasury shares with a nominal value of up to 10% of the share capital for purposes of optimising the Group's capital structure. The authorisation is valid for a period of five years from the date of adoption of the resolution at the annual general meeting.

INSIDER RULES

TK Development's Management and employees are allowed to trade in the Company's shares during a six-week window following the publication of annual and interim reports and any other comprehensive profit announcements. If Management or employees are in possession of inside information which may influence the pricing of TK Development's shares, they are not allowed to trade in the shares even during a six-week window.

INVESTOR RELATIONS

TK Development aims to keep its investors and shareholders informed on all relevant matters. Accordingly, Management has adopted a communication strategy and an IR policy to support open and clear communication with all stakeholders and to ensure that information is disclosed based on the principle of equal treatment of all investors.

The Company's website, www.tk-development.com, contains all company announcements issued during the past several years, updated share prices and information on the Group's projects. When investor presentations are published in connection with the announcement of annual and interim financial results, they are also made available on the Company's website. All investor information is published in both Danish and English.

During the three-week lead-up to the quarterly presentation of financial statements, the Company does not disclose information on market-related and financial matters or on the Company's current performance and position. During these silent periods, Management seeks not to hold any investor meetings or similar activities.

Additional information on TK Development A/S's shares may be found on Nasdaq Copenhagen's website (www.nasdaqomxnor-dic.com). Reference is also made to the section on corporate governance on the Company's website, www.tk-development.com.

SIGNIFICANT AGREEMENTS THAT WILL BE AMENDED OR TERMINATED IN THE EVENT OF A CHANGE OF CONTROL

TK Development has not entered into any agreements that will terminate or be renegotiated in the event of a change of control of the Group.

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SHAREHOLDER INFORMATION

FINANCIAL CALENDAR

Financial calendar
Annual report 2017/18	22 March 2018
Annual general meeting	26 April 2018
Interim report Q1 2018/19	12 June 2018
Interim report H1 2018/19	19 September 2018
Interim report Q1-Q3 2018/19	12 December 2018

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CORPORATE GOVERNANCE

TK Development's Board of Directors and Executive Board remain focused on corporate governance, and the Board of Directors reviews its position on the recommendations on corporate governance at least once a year. In a few areas, the Company does not comply with the recommendations, but instead explains its reasons for not complying with a specific recommendation. The Board of Directors believes that TK Development A/S complies with the current recommendations on corporate governance.

A detailed account of the Board of Directors' position on the corporate governance recommendations issued by the Committee on Corporate Governance may be found at www.tk-development.com/governance_2017_18.

Those of the Committee's recommendations that are not complied with are listed below:

Corporate social responsibility

In light of the Company's size and activities and the markets in which the Group operates, the Board of Directors has decided not to adopt policies on corporate social responsibility. The Board of Directors regularly assesses the need to adopt policies for this area.

Retirement age

Attaching greater importance to qualifications than to age, TK Development has not fixed an age of retirement for the members of the Board of Directors. This recommendation is not included in the corporate governance recommendations effective for financial years starting on or after 1 January 2018.

Remuneration policy

The Board of Directors has decided for the time being not to set limits for the portion of the total pay package that may be accounted for by variable pay components as bonus will only be paid if the return on equity is at least 8%.

The Board of Directors believes that the interests of the Executive Board and the shareholders are continually aligned due to the fact that bonus is paid only if the return on equity for a financial year is at least 8%. The Board has therefore not found it necessary to lay down criteria ensuring that qualifying periods for variable pay components extend beyond one financial year.

BOARD OF DIRECTORS

Composition and rules for appointment and replacement

According to the Company's articles of association, the Board of Directors must be composed of not less than four and not more than seven members. The current Board of Directors consists of five members elected by the shareholders in general meeting. Management considers the composition of the Board of Directors to be appropriate in light of the Company's current activities and needs. In Management's opinion, the current board members possess the financial, strategic and business expertise required to serve on the board of an international business such as TK Development. Board members are elected at the general meeting for terms of one year. Members of the Board of Directors are eligible for re-election.

The qualifications of the members of the Board of Directors cover a wide spectrum, including strategic management, international relations, capital structure, real estate, retailing, risk assessment and risk management, investor relations, business development and accounting and finance.

The qualifications of the individual board members are listed in the Board of Directors section below. The Board of Directors considers all of its members to be independent of the Company.

Self-assessment

Once a year, the Board of Directors systematically evaluates its work and qualifications with a view to continuously improving the quality and efficiency of its work.

Based on the latest self-assessment of the Board's work, a decision was made to accelerate the search for qualified board candidates, including female candidates and candidates with relevant real estate experience. Two new members were elected to the Board of Directors at an extraordinary general meeting held in September 2017.

Management considers the composition of the Board of Directors to be appropriate in light of the Company's current activities and needs, and the current members of the Board of Directors are considered to possess the financial, strategic and business expertise required to serve on the board of an international business such as TK Development. The number of board members is considered appropriate given the Company's needs.

REMUNERATION OF THE BOARD OF DIRECTORS

Members of the Board of Directors receive a fixed remuneration and are not eligible for the Company's bonus and incentive programmes. Board members are paid a basic fee. The Chairman is

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CORPORATE GOVERNANCE

paid three times the basic fee and the Deputy Chairman twice the basic fee. The basic fee for 2017/18 was DKK 160,000. The Board of Directors will recommend to the annual general meeting that the basic fee remain unchanged at the current level of DKK 160,000 for 2018/19.

In addition, the Board of Directors will recommend to the annual general meeting that the members of the Board of Directors be paid as follows for serving on board committees:

Audit committee: DKK 50,000 per member, but DKK 100,000 to the committee chairman
Nomination committee: DKK 25,000 per member, including the committee chairman
Remuneration committee: DKK 25,000 per member, including the committee chairman

REMUNERATION OF THE EXECUTIVE BOARD

Remuneration policy

Once a year, the Board of Directors reviews and determines the remuneration to be paid to the members of the Executive Board based on the recommendation of the remuneration committee. The overall pay package and its composition are determined by the results achieved, the qualifications of the members of the Executive Board and the Board of Directors' wish to ensure the Company's continued ability to attract, retain and motivate qualified executives – taking into account the Company's general situation and performance. Once a year, the Board of Directors compares the remuneration paid to the Executive Board to that of executive boards of comparable companies with international activities.

The remuneration paid to members of the Executive Board consists of a fixed and a variable component. The variable component consists of a short-term and a long-term incentive scheme. The total pay package consists of a fixed salary, bonus, defined contribution pension of 2% of the basic salary and other benefits, including a company-paid car, telephone, an IT solution and newspaper, as well as health insurance and warrants.

The remuneration policy, which was most recently adopted at the 2011 general meeting, is disclosed on the Company's website, www.tk-development.com.

Remuneration

Remuneration to members of the Executive Board is disclosed in note 7 to the consolidated financial statements. The remuneration for 2017/18 was based on the most recently adopted guidelines. CEO Frede Clausen was given notice in December 2017 and will resign on 31 March 2018. The Board of Directors chose not to release the CEO of his duties, and a severance agreement was signed under which Frede Clausen will receive 12 months' salary during the notice period plus just under three months' salary for work performed up until the beginning of the release period. The remuneration for the Executive Board includes DKK 4 million for salary and benefits during the release period. The members of the Executive Board are currently not eligible for any share-based incentive programmes.

Retention and severance programmes

Under the Executive Board's service agreements, individual Executive Board members may give notice of termination no later than three months after the occurrence of an extraordinary event (change of control), such termination to take effect 12 months after notice has been given. The Executive Board member may demand to be released from his or her duties during the period of notice, with the usual remuneration being payable during such period.

Members of the Executive Board are not subject to any other specific severance terms. The term of notice for Executive Board members is 12 months on the part of the Company and six months on the part of the executive.

It is company policy to ensure that Executive Board members are provided with incentives to make a committed and dedicated effort in the interests of the Company and its shareholders in the event of a merger, takeover bid or other extraordinary situations. Accordingly, the Board of Directors may decide, on the basis of a specific assessment, to pay a retention bonus whereby Executive Board members receive a special consideration, which is not to exceed 12 months' fixed salary, for example in the event that the Company merges with another company or if another company takes over all the Company's activities, subject to approval by the general meeting.

BOARD COMMITTEES

The current board committees comprise an audit committee, a nomination committee and a remuneration committee. The composition and terms of reference of each committee, including information on which members have special qualifications, appear from TK Development's website, along with information about the most important activities during the year and the number of meetings held by each committee.

MANAGEMENT COMMENTARY | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

CORPORATE GOVERNANCE

None of the committees have independent decision-making powers, and their duties are merely to prepare proposals to be considered and decided on by the Board of Directors. The Board of Directors is thus fully responsible for any decisions made on the committees' recommendations.

STATUTORY REPORT ON DIVERSITY, CF. SECTION 99B OF THE DANISH FINANCIAL STATEMENTS ACT

TK Development has opted to post its statutory report on diversity on its website instead of including it in the management commentary. The report on diversity is available at www.tk-development.com/diversity_2017_18.

STATUTORY REPORT ON CORPORATE GOVERNANCE, CF. SECTION 107B OF THE DANISH FINANCIAL STATEMENTS ACT

TK Development has opted to post its statutory corporate governance report on its website instead of including it in the management commentary. The statement on corporate governance is available at www.tk-development.com/CGS_107b_2017_18.

STATUTORY REPORT ON CORPORATE SOCIAL RESPONSIBILITY, CF. SECTION 99A OF THE DANISH FINANCIAL STATEMENTS ACT

In addition to carrying on profitable business activities, TK Development is committed to meeting and expanding the Group's ethical, social and environmental responsibilities as a business enterprise.

TK Development generally supports the ten principles of but is not a signatory to the UN Global Compact.

In light of the Company's size and activities and the markets in which the Group operates, the Board of Directors has decided not to adopt policies for voluntary incorporation of corporate social responsibility, including policies for human rights, climate impact and environmental issues. The Board of Directors regularly reviews the need to adopt policies for this area.

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BOARD OF DIRECTORS

Name	Born	Appointed	Term expires	Independence 1)	Audit committee 2)	Nomination committee 3)	Remuneration committee 4)
Peter-Thorsen (Chairman)	1966	2012	April 2018	Independent	M	C	C
Henrik Heideby (Deputy Chairman)	1949	2015	April 2018	Independent	C		M
Arne Gerlyng-Hansen	1956	2013	April 2018	Independent		M
Anne Skovbro Andersen	1969	2017	April 2018	Independent		M
Michael Bruhn	1959	2017	April 2018	Independent	M		M

1) See section 3.2.1 of the Recommendations on Corporate Governance issued by Nasdaq Copenhagen.
2) C=chairman of the committee, M=member of the committee.

PETER THORSEN

Chairman of the Board of Directors

Born 1966

Joined the Board of Directors 2012

Term expires April 2018

Board committees Chairman of the nomination committee and the remuneration committee and member of the audit committee

Educational background

1992 MSc (Business Administration and Auditing)

Employment

1992-1994 Accountant, More Stevens

1994-1997 Marketing Manager, Group CFO & International Controller, KEW Industri A/S

1997-1997 CFO, Electrolux Hvidevarer A/S

1997-1998 CFO, Marwi International A/S (Incentive A/S)

1998-2000 CEO, Basta Group A/S

2001-2005 CEO, Bison A/S

2005-2008 CEO, Louis Poulsen Lighting A/S

2007-2008 Group Chief Executive, Targetti Poulsen

2008- CEO, Kirk & Thorsen Invest A/S

Special qualifications

Management, strategy, accounting and finance, business development and real estate.

Executive positions

Kirk & Thorsen A/S (and two subsidiaries); Thorsen A/S (and a subsidiary).

Chairman of the board of directors

Genan Holding A/S; IC Group A/S; Investeringsselskabet af 24. februar 2015 A/S.

Member of the board of directors

Droob ApS; Kirk & Thorsen A/S (and a subsidiary); Thorsen A/S (and a subsidiary).

Management committees and other fiduciary positions

None.

HENRIK HEDEBY

Deputy Chairman of the Board of Directors

Born 1949

Joined the Board of Directors 2015

Term expires April 2018

Board committees Chairman of the audit committee and member of the remuneration committee

Educational background

1974 Diploma in Business Administration (Management Accounting and Business Finance)

1996 Executive Programme, Stanford University

Employment

1984-1988 CEO, Dansk Kapitalanlæg A/S

1988-1990 Manager, FIH

1990-1992 Deputy CEO, FIH

1992-1998 CEO, FIH

1998-2001 CEO, Alfred Berg Bank A/S

2001-2014 Group CEO and President, PFA

Special qualifications

Management, strategy, accounting and finance, risk management, retailing and M&A.

Executive positions

HanCa Holding ApS.

Chairman of the board of directors

Blue Equity Management A/S; Carlsberg Byen P/S (and 32 subsidiaries); Greystone Capital Partners A/S; Kirk & Thorsen Invest A/S.

Member of the board of directors

FIH A/S (deputy chairman); IC Group A/S (deputy chairman).

Management committees and other fiduciary positions

Chairman of the audit committee of IC Group A/S; chairman of the audit committee of FIH A/S.

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1K BOARD OF DIRECTORS

Born 1956
Joined the Board of Directors 2013
Term expires April 2018
Board committees Member of the nomination committee

Educational background

1981 Law graduate from the University of Copenhagen
1984 Attorney

Employment

1981-1983 The law firm of Advokaterne Amaliegade 4, Copenhagen K
1983-2004 The law firm of Nielsen Nørager, Frederiksberggade 16, Copenhagen K
1985-1992 Tutor and associate professor in the law of obligations at the University of Copenhagen
2004- CEO, Harald Nyborg A/S

Special qualifications

Retailing, law, management and business development.

Executive positions

Arpema ApS; Arpema Holding ApS; Harald Nyborg A/S (and 15 subsidiaries); Skerris Holding A/S.

Chairman of the board of directors

Two subsidiaries of Harald Nyborg A/S; Habro Holding ApS (and four subsidiaries).

Member of the board of directors

32 subsidiaries of Harald Nyborg A/S; Skerris Holding A/S.

Management committees and other fiduciary positions

Member of Sydbank's Committee of Representatives and of Community Council Funen; member of the Retail Trade Committee under the Confederation of Danish Enterprise.

ANNE SKOVBRO ANDERSEN

Born 1969
Joined the Board of Directors 2017
Term expires April 2018
Board committees Member of the nomination committee

Educational background

1995 MSc (Engineering), Department of Development and Planning, Aalborg University
2001 PhD, Department of Architecture and Design, Aalborg University

Employment

1996-2000 PhD student, Research Centre for Forest and Landscape, Ministry of the Environment
2000-2002 Researcher, Research Centre for Forest and Landscape, Ministry of the Environment
2002-2003 Project Manager, National Planning Department, Department of the Ministry of the Environment
2003-2005 Project Manager, Finance Department, City of Copenhagen
2005-2006 Project Manager, Ministry of Environment
2006-2007 Team Manager, Centre for Urban Development, Finance Department, City of Copenhagen
2007-2010 Chief Planner, Centre for Urban Development, Finance Department, City of Copenhagen
2012-2013 Interim Director General, Healthcare Department, City of Copenhagen
2010-2015 Director, Finance Department, City of Copenhagen
2015- Director of Philanthropy (CPO), Realdania

Special qualifications

Urban development, architecture and design, strategy and management.

Executive positions

Realdania.

Chairman of the board of directors

Bolius Boligejernes Videncenter A/S.

Member of the board of directors

BLOXHUB; Realdania By & Byg A/S; The C40 Cities Climate Leadership Group (and a subsidiary).

Management committees and other fiduciary positions

None.

BOARD OF DIRECTORS

Born 1959
Joined the Board of Directors 2017
Term expires April 2018
Board committees Member of the audit committee and of the remuneration committee

Educational background

1989 MSc (Business Administration and Auditing)
1995 State-authorised estate agent
2001 Chartered Surveyor

Employment

1978-1987 Revisionsfirmaet Sven Halberg
1987-1991 CEO, Mäckler Group
1991-1993 Adviser, Baltica Bank
1993-2001 Self-employed, Michael Bruhn Erhverv (MBE)
2001-2004 Senior Partner, DTZ Denmark
2004-2013 Partner and Head of Nordic, Valad Property Group
2013- CEO, PFA Ejendomme A/S

Special qualifications

Real estate acquisitions and management, accounting, management, strategy and business development.

Executive positions

Ejendomsselskabet Portland Towers P/S; Ejendomsselskabet Portland Towers Komplementar ApS; Gershøj Bruhn A/S (and a subsidiary); Lunikvej 2, Greve K/S; PFA Barnaby Komplementar ApS; PFA Boliger A/S (and two subsidiaries); PFA Ejendomme A/S (and three subsidiaries); PFA Kollegier ApS.

Chairman of the board of directors

Fjernvarmecentralen Avedøre Holme; Industri- og Grundejerforeningen Avedøre Holme; PFA Pakhusene Aarhus Havn ApS (and a subsidiary); Pumpe- og Digelaget Avedøre Holme, six subsidiaries of PFA Ejendomme A/S; 33 subsidiaries of PFA Boliger A/S.

Member of the board of directors

Alsik Estate P/S; ATPFA K/S; Carlsberg Byen Komplementar ApS (deputy chairman); Carlsberg Byen P/S (deputy chairman); Ejendomsforeningen Danmark; Ejendomsselskabet Axeltorv 2 P/S; Ejendomsselskabet Axeltorv 2 Komplementar ApS; Ejendomsselskabet Norden I K/S; Ejendomsselskabet Portland Towers P/S; Ejendomsselskabet Portland Towers Komplementar ApS; Ejendomsudvikling Kronborg Strand P/S; Gartnerbyen P/S; Gartnerbyen Komplementar ApS; Gershøj Bruhn A/S (and a subsidiary); Komplementarselskabet Alsik Estate ApS; Komplementarselskabet Borgen Sønderborg ApS; K/S Kristensen Partners I; PFA Barnaby P/S; P/S Borgen Shopping; Refshaleøen Holding A/S (and a subsidiary); Taulov Dryport A/S.

Management committees and other fiduciary positions

Danske Boligejendomme P/S; Ejendomsselskabet Norden IV K/S; Ejendomsselskabet Norden VIII K/S.

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T K

THE EXECUTIVE BOARD

President and CEO

Born 1959

Member of the Executive Board of TK Development A/S since 1992.

Executive positions

Sporbyen Komplementarselskab ApS; SporbyenScandia 6 ApS; Frede Clausen Holding ApS.

Chairman of the board of directors

Komplementarselskabet Beddingen ApS; SporbyenScandia 1 P/S; SporbyenScandia 2 P/S; SporbyenScandia 3 P/S; SporbyenScandia 4 P/S; SporbyenScandia 5 P/S; Step Re CSP Invest I A/S; The Yard, Beddingen P/S, Cernat A/S.

Member of the board of directors

BROEN Shopping A/S; Ejendomsselskabet Beddingen 5 ABC P/S; Euro Mall Luxembourg JV S.à r.l.; Euro Mall Ventures S.à r.l.; Kommanditaktieselskabet Danlink-Udvikling; Komplementarselskabet Beddingen 5ABC ApS; Komplementarselskabet DLU ApS; Ringsted Outlet Center P/S; SporbyenScandia P/S; SPV Ringsted ApS; K/S Købmagergade 59, st.; Palma Ejendomme A/S; PE Skagen ApS.

Management committees and other fiduciary positions

None.

Executive Vice President

Born 1965

Member of the Executive Board of TK Development A/S since 2002.

Executive positions

Amerika Plads C P/S; BROEN Shopping A/S; Ejendomsselskabet Beddingen 5 ABC P/S; Kommanditaktieselskabet Danlink-Udvikling; Komplementarselskabet Amerika Plads C ApS; Komplementarselskabet Beddingen ApS; Komplementarselskabet Beddingen 5ABC ApS; Komplementarselskabet DLU ApS; Ringsted Outlet Center P/S; Ringsted Retail Company ApS; SPV Ringsted ApS; The Yard, Beddingen P/S; Palma Ejendomme A/S; PE Skagen ApS.

Chairman of the board of directors

None.

Member of the board of directors

Ejendomsselskabet Beddingen 5 ABC P/S; Kommanditaktieselskabet Danlink-Udvikling; Kommanditaktieselskabet Østre Havn; Komplementarselskabet Beddingen ApS; Komplementarselskabet Beddingen 5ABC ApS; Komplementarselskabet DLU ApS; Ringsted Outlet Center P/S; SporbyenScandia P/S; SporbyenScandia 1 P/S; SporbyenScandia 2 P/S; SporbyenScandia 3 P/S; SporbyenScandia 4 P/S; SporbyenScandia 5 P/S; SPV Ringsted ApS; The Yard, Beddingen P/S; Østre Havn Aalborg ApS; Palma Ejendomme A/S; PE Skagen ApS.

Management committees and other fiduciary positions

None.

The companies are members of the TK Development Group and are partly owned, directly or indirectly, by TK Development A/S.

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STATEMENT BY THE BOARD OF DIRECTORS AND EXECUTIVE BOARD ON THE ANNUAL REPORT

The Board of Directors and the Executive Board today considered and approved the annual report of TK Development A/S for the financial year 1 February 2017 – 31 January 2018.

The annual report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for listed companies.

In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's assets, liabilities and financial position at 31 January 2018 and of the results of the Group's and the parent company's operations and cash flows for the financial year 1 February 2017 – 31 January 2018.

Furthermore, in our opinion, the management commentary includes a fair review of the development in the Group's and the parent company's operations and financial matters, the results for the year, the parent company's financial position and the Group's financial position in general as well as a description of the principal risks and uncertainties which the parent company and the Group face.

We recommend that the annual report be adopted at the Annual General Meeting.

Aalborg, 22 March 2018

EXECUTIVE BOARD

Frede Clausen
President and CEO

Robert Andersen
Executive Vice President

BOARD OF DIRECTORS

Peter Thorsen
Chairman

Henrik Tonsgaard Heideby
Deputy Chairman

Arne Gerlyng-Hansen

Anne Skovbro Andersen

Michael Bruhn

STATEMENT BY THE BOARD OF DIRECTORS AND EXECUTIVE BOARD | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

INDEPENDENT AUDITOR'S REPORT

To the shareholders of TK Development A/S

Opinion

We have audited the consolidated financial statements and the parent financial statements of TK Development A/S for the financial year 01.02.2017 - 31.01.2018, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting policies, for the Group as well as for the Parent. The consolidated financial statements and the parent financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act.

In our opinion, the consolidated financial statements and the parent financial statements give a true and fair view of the Group's and the Parent's financial position at 31.01.2018, and of the results of their operations and cash flows for the financial year 01.02.2017 - 31.01.2018 in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act.

Our opinion is consistent with our audit book comments issued to the Audit Committee and the Board of Directors.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor's responsibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor's report. We are independent of the Group in accordance with the International Ethics Standards Board of Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of Regulation (EU) No 537/2014.

We were appointed auditors of TK Development A/S for the first time before 1995. We have been reappointed annually by decision of the general meeting for a total contiguous engagement period of more than 23 years up to and including the financial year 2017/18.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements and the parent financial statements for the financial year 2017/18. These matters were addressed in the context of our audit of the consolidated financial statements and the parent financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Measurement of projects in progress and completed projects

The Group's projects in progress and completed projects were carried at DKK 1,516.5 million at 31 January 2018, see note 18, corresponding to 67% of the Group's total assets.

Management tests capitalised amounts for impairment on a continuous basis to ensure that the carrying amounts of project portfolios are reduced if they exceed expected net realisable values.

Projects in progress and completed projects written down to expected net realisable value were carried at DKK 1,137.3 million at 31 January 2018, and the consolidated profit before tax for the financial year 2017/18 was reduced by impairment losses on land and projects totalling DKK 317.5 million.

In reviewing for impairment those of the Group's projects in progress and completed projects that have been written down to expected net realisable value, Management makes a number of significant accounting estimates and judgments that have a material effect on the annual report. The measurement of projects in progress and completed projects is therefore considered a key audit matter.

Reference is made to notes 2 and 18 to the consolidated financial statements.

How the matter was addressed in the audit

We obtained an understanding of Management's process for and control of the measurement of individual plots of land and projects.

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INDEPENDENT AUDITOR'S REPORT

We challenged the basis for Management's measurement, comprising all significant projects in progress and completed projects, and ensured that the methods and principles applied were consistent with those applied last year.

Development projects in progress and land:

We analysed and tested the key elements included in Management's impairment testing of development projects in progress and land, specifically performing the following procedures:

We tested Management's timing estimates for initiation and completion of development projects, comparing them against previous estimates and underlying documentation.
We reviewed cost budgets for the completion of projects, including Management's comparison of budgeted and realised project costs and explanations for deviations, agreements with external parties and historical data for similar development projects.
We reviewed expected selling prices for completed development projects based on yield required by investors by checking prices against sales agreements already concluded, current selling prices for similar development projects or against external assessments or market reports.

Completed properties in operation:

We analysed and tested Management's estimates of the net realisable values of completed properties under asset management, specifically performing the following procedures:

We assessed the future letting situation, including rent levels, opportunities for letting vacant premises, etc., comparing budgeted rental income for the coming year against rental income realised during the current year and testing whether the assumptions concerning rent for vacant premises are supported by market data.

We assessed expected operating and maintenance costs.

We tested Management's expectations regarding yield required by investors by way of a comparison against expectations for the preceding year, an assessment of property locations and types and a comparison against external assessments and market reports.

We assessed whether the note disclosures are appropriate and complete.

Measurement of investments in joint ventures

TK Development's share of equity in joint ventures was DKK 294.8 million at 31 January 2018.

The key audit matters in relation to our audit of the Group's investments in joint ventures are essentially the same as those referred to above regarding the measurement of the Group's projects in progress and completed projects, as the Group's assets in joint ventures mainly consist of similar projects in progress and completed projects.

In addition, the Group's joint ventures have investment properties, which are measured at fair value. The valuation of these investment properties has been made on the basis of a discounted cash flow model under which future cash flows are discounted to present value on the basis of Management's estimates of required yields.

The measurement of investments in joint ventures is considered a key audit matter as changes in assumptions and estimates may have a significant effect on the annual report.

Reference is made to notes 2 and 10 to the consolidated financial statements.

How the matter was addressed in the audit

Our audit of the measurement of the Group's investments in joint ventures at 31 January 2018 comprised audit procedures similar to those described above in respect of the measurement of projects in progress and completed projects.

As concerns the measurement of the Group's share of the carrying amounts of investment properties, we also reviewed the valuation models applied and assessed current yields against valuation reports and external market analyses.

We assessed whether the note disclosures are appropriate and complete.

Deferred tax assets

Deferred tax assets totalled DKK 59.9 million at 31 January 2018. The deferred tax assets relate exclusively to the Group's Danish activities, as the tax assets relating to the Group's foreign activities have been written off.

INDEPENDENT AUDITOR'S REPORT | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

INDEPENDENT AUDITOR'S REPORT

The measurement of deferred tax assets is considered a key audit matter as changes in assumptions and estimates concerning the future use of tax assets may have a significant effect on the annual report.

Reference is made to notes 2 and 17 to the consolidated financial statements.

How the matter was addressed in the audit

We tested the basis of the budgets and profit forecasts underlying Management's estimates and compared the budget assumptions applied against the specific project budgets tested as described above.

We consulted our internal tax experts for purposes of assessing the Group's scope for utilising current loss carryforward and joint taxation opportunities.

We assessed whether the note disclosures are appropriate and complete.

Statement on the management commentary

Management is responsible for the management commentary.

Our opinion on the consolidated financial statements and the parent financial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act.

Based on the work we have performed, we conclude that the management commentary is in accordance with the consolidated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the management commentary.

Management's responsibilities for the consolidated financial statements and the parent financial statements

Management is responsible for the preparation of consolidated financial statements and parent financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group's and the Parent's ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Group or the Entity or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the consolidated financial statements and the parent financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and the parent financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements.

As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements and the parent fi

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nancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's and the Parent's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
Conclude on the appropriateness of Management's use of the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Parent's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group and the Parent to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements and the parent financial statements, including the disclosures in the

notes, and whether the consolidated financial statements and the parent financial statements represent the underlying transactions and events in a manner that gives a true and fair view.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements and the parent financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Copenhagen, 22 March 2018

Deloitte
Statsautoriseret Revisionspartnerselskab
Business Registration No 33 96 35 56

Jan Bo Hansen
State-Authorised
Public Accountant
mne9395

Lars Andersen
State-Authorised
Public Accountant
mne27762

INDEPENDENT AUDITOR'S REPORT | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S

CONSOLIDATED FINANCIAL STATEMENTS

INCOME STATEMENT

DKKm	Note	2017/18	2016/17
Net revenue	4	785.9	401.5
Project costs	5	-1,029.3	-318.4
Value adjustment of investment properties, net		-25.0	0.0
Gross profit/loss		-268.4	83.1
Income from investments in joint ventures	10	13.9	48.8
Gross profit/loss including income from investments in joint ventures		-254.5	131.9
Other external expenses	6	20.2	21.2
Staff costs	7	63.9	58.5
Total		84.1	79.7
Profit/loss before financing and depreciation		-338.6	52.2
Depreciation and impairment of non-current assets		0.8	0.4
Operating profit/loss		-339.4	51.8
Income from investments in associates	9	0.7	0.5
Financial income	11	9.6	9.9
Financial expenses	12	-44.6	-48.4
Total		-34.3	-38.0
Profit/loss before tax		-373.7	13.8
Tax on profit/loss for the year	13	5.3	6.7
Profit/loss for the year		-379.0	7.1

EARNINGS PER SHARE IN DKK

Earnings per share (EPS)	14	-3.9	0.1

COMPREHENSIVE INCOME STATEMENT

Profit/loss for the year	-379.0	7.1
Items that may be re-classified to profit/loss:
Foreign-exchange adjustments, foreign operations	11.8	3.4
Value adjustment of available-for-sale financial assets	0.0	0.1
Value adjustments of hedging instruments	-1.0	-0.3
Tax on other comprehensive income, see note 21	-2.7	-1.4
Other comprehensive income after tax from joint ventures	0.0	-0.9
Other comprehensive income for the year	8.1	0.9
Comprehensive income for the year	-370.9	8.0

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CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEET

DKKm	Note	31 Jan 2018	31 Jan 2017
ASSETS
Non-current assets
Other fixtures and fittings, tools and equipment		3.6	1.3
Property, plant and equipment		3.6	1.3
Investment properties	16	28.1	53.1
Investment properties		28.1	53.1
Investments in joint ventures	10	294.8	277.2
Investments in associates	9	5.1	4.9
Receivables from joint ventures		125.2	185.3
Receivables from associates		2.5	8.9
Other securities and investments		4.5	5.0
Financial assets		432.1	481.3
Deferred tax assets	17	59.9	75.4
Other non-current assets		59.9	75.4
Non-current assets		523.7	611.1
Current assets
Projects in progress or completed	18	1,516.5	2,155.2
Trade receivables	19	22.0	10.7
Receivables from joint ventures		14.8	11.6
Receivables from associates		6.4	0.0
Other receivables		20.7	13.4
Prepayments		35.8	12.9
Receivables		99.7	48.6
Other securities and investments		4.1	4.1
Deposits in blocked and escrow accounts		122.3	23.4
Cash and cash equivalents		4.8	10.5
Current assets		1,747.4	2,241.8
ASSETS		2,271.1	2,852.9

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BALANCE SHEET

DKKm	Note	31 Jan 2018	31 Jan 2017
EQUITY AND LIABILITIES
Equity
Share capital	20	98.2	98.2
Other reserves	21	-0.3	-8.4
Retained earnings		824.9	1,203.9
Equity		922.8	1,293.7
Liabilities
Provisions	22	0.3	0.9
Deferred tax liabilities	17	0.7	13.8
Non-current liabilities		1.0	14.7
Credit institutions	23	1,218.7	1,433.3
Trade payables		69.8	72.7
Corporate income tax		8.3	2.9
Provisions	22	4.8	1.9
Other debt	25	41.5	28.4
Deferred income		4.2	5.3
Current liabilities		1,347.3	1,544.5
Liabilities		1,348.3	1,559.2
EQUITY AND LIABILITIES		2,271.1	2,852.9

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CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

DKKm	Share capital	Other reserves	Retained earnings	Total equity
Equity at 1 February 2016	98.2	-9.3	1,196.8	1,285.7
Profit/loss for the year	0.0	0.0	7.1	7.1
Other comprehensive income for the year	0.0	0.9	0.0	0.9
Total comprehensive income for the year	0.0	0.9	7.1	8.0
Equity at 31 January 2017	98.2	-8.4	1,203.9	1,293.7
Profit/loss for the year	0.0	0.0	-379.0	-379.0
Other comprehensive income for the year	0.0	8.1	0.0	8.1
Total comprehensive income for the year	0.0	8.1	-379.0	-370.9
Equity at 31 January 2018	98.2	-0.3	824.9	922.8

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CONSOLIDATED FINANCIAL STATEMENTS

CASH FLOW STATEMENT

DKKm	2017/18	2016/17
Operating profit/loss	-339.4	51.8
Adjustments for non-cash items:
Income from investments in joint ventures	-13.9	-48.8
Value adjustment of investment properties	25.0	0.0
Depreciation, non-current assets	0.6	0.4
Impairment, projects in progress and completed	317.5	12.2
Provisions	2.3	-3.3
Foreign-exchange adjustment	-2.0	-1.9
Increase/decrease in investments in projects, etc.	357.4	-130.8
Increase/decrease in receivables	-41.2	35.6
Dividend from joint ventures	62.5	40.3
Increase/decrease in receivables from joint ventures	-9.5	-1.6
Sale of joint ventures	0.3	4.6
Investments in joint ventures	-0.6	-5.4
Changes in deposits on blocked and escrow accounts	-98.2	72.8
Increase/decrease in payables and other debt	9.9	2.2
Cash flows from operations	270.7	28.1
Interest paid, etc.	-64.9	-63.4
Interest received, etc.	8.4	8.6
Corporate income tax paid	-0.5	-5.8
Cash flows from operating activities	213.7	-32.5
Investments in equipment, fixtures and fittings	-2.9	-0.8
Sale of equipment, fixtures and fittings	0.1	0.1
Dividend from associates	0.6	0.0
Increase/decrease in receivables from joint ventures	4.3	-1.0
Investments in joint ventures	-4.1	-6.6
Purchase of securities and investments	0.0	-5.9
Sale of securities and investments	0.5	13.2
Cash flows from investing activities	-1.5	-1.0
Raising of project financing	108.5	210.9
Reduction of project financing/repayments, credit institutions	-326.9	-172.6
Cash flows from financing activities	-218.4	38.3
Cash flows for the year	-6.2	4.8
Cash and cash equivalents, beginning of year	10.5	5.6
Foreign-exchange adjustment of cash and cash equivalents	0.5	0.1
Cash and cash equivalents at year-end	4.8	10.5

The figures in the cash flow statement cannot be inferred from the consolidated financial statements alone.

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TABLE OF CONTENTS, NOTES, CONSOLIDATED FINANCIAL STATEMENTS

Page

58 Note 1. Accounting policies
67 Note 2. Accounting estimates and judgments
70 Note 3. Segment information
72 Note 4. Net revenue
72 Note 5. Project costs
72 Note 6. Other external expenses
72 Note 7. Staff costs
73 Note 8. Fees payable to the auditors elected at the General Meeting
73 Note 9. Investments in associates
74 Note 10. Investment in joint ventures
77 Note 11. Financial income
77 Note 12. Financial expenses
78 Note 13. Tax on profit/loss for the year
78 Note 14. Earnings per share in DKK
78 Note 15. Dividends
79 Note 16. Investment properties
80 Note 17. Deferred tax
82 Note 18. Projects in progress or completed
82 Note 19. Trade receivables
83 Note 20. Share capital
83 Note 21. Other reserves
84 Note 22. Provisions
84 Note 23. Credit institutions
85 Note 24. Operating leases
85 Note 25. Other debt
85 Note 26. Contingent assets and liabilities as well as security furnished
87 Note 27. Financial risks and financial instruments
91 Note 28. Transactions with related parties
92 Note 29. Post-balance sheet events
92 Note 30. Approval of Annual Report for publication
93 Note 31. Overview of group companies

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T K

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

The consolidated financial statements of TK Development A/S for 2017/18 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for the annual reports of listed companies, see the Danish Executive Order on Adoption of IFRSs issued in pursuance of the Danish Financial Statements Act. TK Development A/S is a public limited company registered in Denmark.

The consolidated financial statements are presented in millions of DKK unless otherwise stated. DKK is the presentation currency for the Group's activities and the functional currency of the parent company.

The consolidated financial statements are presented on the basis of historical cost, with the exception of investment properties, derivative financial instruments and financial assets classified as available for sale, which are measured at fair value.

IMPLEMENTATION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS

The implementation of new and amended financial reporting standards and interpretations effective as from 1 February 2017 has not given rise to any changes to the accounting policies and therefore has no effect on earnings per share.

The accounting policies are consistent with those applied last year, as described below.

STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE

At the date of publication of this annual report, a number of new or amended financial reporting standards and interpretations had not yet entered into force or been adopted by the EU and have therefore not been incorporated into the annual report.

IFRS 15 – Revenue from Contracts with Customers

IFRS 15 replaces IAS 18 – Revenue and IAS 11 – Construction Contracts and relevant interpretations. IFRS 15 introduces a single, but comprehensive model for recognition of revenue and contains extended guidance on interpretation of the rules relative to IAS 18 and IAS 11.

TK Development intends to implement IFRS 15 in the 2018/19 financial year by applying the more lenient transition provisions, according to which comparative figures need not be restated

and the impact of implementation is to be recognised in retained earnings as of 1 February 2018. IFRS 15 will not be applied to contracts completed before 1 February 2018.

The core principle of IFRS 15 is that an entity will recognise revenue to reflect the transfer of control of the goods or services sold to the customer. Moreover, IFRS 15 contains special rules on the recognition of costs related to obtaining or fulfilling contracts with customers as well as more extensive disclosure requirements.

Preliminary analysis indicates that the implementation will bring forward the time of recognition of parts of the Group's revenue. The change primarily concerns projects which under IAS 18 and IAS 11 could not be recognised under the percentage of completion method, but which, due to the Group's right to payment for the work performed, must going forward be recognised over time. It is estimated that some DKK 6 million will be recognised in retained earnings under equity as at 1 February 2018. The final amount may vary from this estimate, but any variation is expected to be insignificant.

IFRS 16 – Leases

IFRS 16 replaces the current standard on leases, IAS 17. Under IFRS 16, virtually all leases must be recognised in the balance sheet of the lessee as a lease liability and as an asset representing the lessee's right to use the underlying asset. The new standard does not distinguish between operating and finance leases.

TK Development intends to implement IFRS 16 in the 2019/20 financial year by applying the more lenient transition provisions, according to which comparative figures need not be restated and the impact of implementation is to be recognised in retained earnings as of 1 February 2019. Moreover, the Group will apply the remaining transition relief provisions to the widest extent possible, including as concerns low-value leased assets and leases with a remaining term of less than 12 months at 1 February 2019.

At 31 January 2018, TK Development had concluded leases classified as operating leases according to IAS 17 with total future minimum lease payments under non-terminable leases totalling DKK 12.4 million not recognised in the balance sheet. Preliminary analysis indicates that these leases will also meet the definition of leases under IFRS 16, and at 1 February 2019 the Group will therefore recognise an asset and a related lia

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES, CONTINUED

bility regarding these leases, unless they qualify as low-value assets or leases with a remaining term of less than 12 months.

The volume of leases can change in the period until 1 February 2019, and it has not yet been determined how large a share of the above-mentioned future minimum lease payments contain service elements that, according to IFRS 16, are not to be recognised in the lease liability or the right-of-use asset.

Following the implementation of IFRS 16, rental expenses will generally be recognised as depreciation of the recognised asset and as interest on the lease liability, respectively, as opposed to the current practice of recognising leasing expenses as operating expenses.

IFRS 9 - Financial Instruments

IFRS 9 replaces IAS 39 – Financial Instruments: Recognition and Measurement and outlines the requirements for the treatment of financial assets and financial liabilities in terms of classification and measurement, hedge accounting and impairment.

TK Development intends to implement IFRS 9 in financial year 2018/19 without restating comparative figures in pursuance of the standard's transition provisions.

The measurement of the Group's financial assets and liabilities under IFRS 9 will essentially be identical to the measurement under the current practice, i.e. IAS 39. Implementing IFRS 9 will therefore have a negligible effect on presentation and measurement at TK Development.

Except as described above, none of the new or amended standards are expected to significantly affect the annual report in the coming years other than the additional disclosure requirements prescribed.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements comprise the parent company, TK Development A/S, and entities controlled by the parent company. The parent company is considered to exercise control when it holds, directly or indirectly, more than 50% of the voting rights or is otherwise able to exercise or actually exercises a controlling influence.

Entities in which the Group, directly or indirectly, holds between 20% and 50% of the voting rights and exercises significant influence but not control are considered associates.

Entities controlled jointly with other investors are considered joint ventures.

The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries by adding together items of a uniform nature. The financial statements used for consolidation are prepared in accordance with the Group's accounting policies. Financial statement items of subsidiaries are recognised 100% in the consolidated financial statements.

On consolidation, intra-group income and expenses, shareholdings, balances and dividends as well as gains on transactions between consolidated entities are eliminated. Losses are eliminated to the extent that no impairment has occurred.

The consolidated financial statements include subsidiaries, joint ventures and associates throughout the period of ownership.

BUSINESS COMBINATIONS

Newly acquired or newly established entities are recognised in the consolidated financial statements as from the date of acquisition or establishment. The date of acquisition is the date on which control of the entity is effectively transferred to the acquirer. Sold or wound-up entities are recognised in the consolidated income statement until the date of sale or winding-up. Comparative figures are not restated to reflect acquired, sold or wound-up entities.

On acquisition of new entities over which the Group obtains control, the purchase method is applied, under which the identifiable assets, liabilities and contingent liabilities of the acquired entities are measured at fair value at the acquisition date. Restructuring provisions are only recognised in the pre-acquisition balance sheet if they constitute a liability for the entity acquired. The tax effect of revaluations is taken into account.

The purchase consideration for an entity consists of the fair value of the consideration paid for the entity acquired. If the final determination of the consideration is conditional upon one or more future events, the effect thereof is recognised at fair value at the date of acquisition. Costs directly attributable to the acquisition are recognised directly in profit or loss as in-

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NOTE 1. ACCOUNTING POLICIES, CONTINUED

curred.

Positive balances between (i) the purchase consideration, the value of any non-controlling interests in the acquired entity plus the fair value of previously acquired equity investments, and (ii) the fair value of the assets, liabilities and contingent liabilities acquired are recognised as goodwill in the balance sheet under intangible assets, and the goodwill amount is tested for impairment at least once a year. If the carrying amount of the asset exceeds its recoverable amount, it is written down to such lower recoverable amount. Any negative balances are recognised in profit or loss as income.

Gains or losses on the sale or winding-up of subsidiaries, joint ventures and associates resulting in the cessation of control, joint control or significant influence, respectively, are determined as the difference between (i) the fair value of the sales proceeds or winding-up proceeds plus the fair value of any remaining equity investments, and (ii) the carrying amount of net assets at the date of sale or winding-up, including goodwill, less any non-controlling interests. The gain or loss thus calculated is recognised in profit or loss together with accumulated foreign exchange adjustments previously recognised in other comprehensive income.

ASSOCIATES/JOINT VENTURES IN THE CONSOLIDATED FINANCIAL STATEMENTS

In the consolidated financial statements, investments in joint ventures and associates are recognised and measured according to the equity method, under which investments are measured at the proportionate share of the joint venture's/associate's carrying amount, determined according to the Group's accounting policies, with the addition of goodwill and plus or less any proportionate intra-group gains or losses.

The proportionate share of the joint venture's/associate's profit/loss after tax and the proportionate elimination of unrealised intra-group gains and losses are recognised in profit or loss, less any impairment of goodwill. The proportionate share of all transactions and events recognised in the joint venture's/associate's other comprehensive income is recognised in consolidated other comprehensive income.

Investments in joint ventures and associates with a negative equity value are measured at DKK 0. Receivables and other non-current financial assets considered to be part of the overall investment are written down by any remaining negative equity value. Trade receivables and other receivables are written down to the extent that they are considered uncollectible. A provision for the remaining negative equity value is recognised only if the Group has a legal or constructive obligation to cover the relevant joint venture's or associate's liabilities, and an outflow of the Group's resources is likely to be required to settle the obligation.

FOREIGN CURRENCY TRANSLATION

A functional currency is determined for each of the reporting entities in the Group. The functional currency is the currency used in the primary financial environment in which the reporting entity in question operates. Transactions denominated in currencies other than the individual entity's functional currency are considered foreign-currency transactions and are translated into the functional currency at the exchange rates ruling at the transaction date on initial recognition. Exchange differences arising between the exchange rate at the transaction date and the exchange rate at the payment date are recognised in profit or loss under financial items.

Receivables, payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated into the functional currency at the exchange rates ruling at the balance sheet date. Realised and unrealised exchange gains and losses are recognised in profit or loss under financial items. Property, plant and equipment and intangible assets, projects in progress and completed projects and other non-monetary assets acquired in foreign currency and measured based on historical cost are translated at the exchange rates at the transaction date. Non-monetary items that are revalued at fair value are translated at the exchange rate ruling at the date of revaluation.

When entities presenting their financial statements in a functional currency other than Danish kroner (DKK) are recognised in the consolidated financial statements, items in the income statement are translated at periodic average exchange rates, and items in the balance sheet are translated at the exchange rates ruling at the balance sheet date. If the periodic average exchange rates deviate significantly from the actual exchange rates at the transaction dates, the actual exchange rates are used instead.

Exchange rate differences arising on the translation of foreign entities' opening balance sheet items at the exchange rates ruling at the balance sheet date and on the translation

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES, CONTINUED

of income statement items from periodic average exchange rates to the exchange rates at the balance sheet are recognised in other comprehensive income. Exchange differences arising as a result of changes recognised directly in the equity of the foreign reporting entity are also recognised in other comprehensive income.

Foreign exchange adjustments of balances with foreign subsidiaries that are considered part of the parent company's total investment in the relevant subsidiary are recognised in other comprehensive income in the consolidated financial statements.

When associates/joint ventures presenting their financial statements in a functional currency other than DKK are recognised in the consolidated financial statements, income statement items are translated at periodic average exchange rates, and balance sheet items are translated at the exchange rates ruling at the balance sheet date. Exchange rate differences arising on the translation of foreign entities' opening balance sheet items at the exchange rates ruling at the balance sheet date and on the translation of income statement items from periodic average exchange rates to the exchange rates at the balance sheet are recognised in other comprehensive income. Exchange differences arising as a result of changes recognised directly in the equity of the foreign reporting entity are also recognised in other comprehensive income.

DERIVATIVE FINANCIAL INSTRUMENTS

On initial recognition, derivative financial instruments are measured at fair value at the settlement date.

Subsequently, the derivative financial instruments are measured at fair value at the balance sheet date. Positive and negative fair values of derivative financial instruments are recognised under other receivables or other payables, respectively.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a fair value hedge of recognised assets or liabilities are recognised in profit or loss together with changes in the value of the hedged asset or liability.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as effective hedges of future transactions are recognised in other comprehensive income. Any ineffective portion is recognised immediately

in profit or loss. When the hedged transactions are realised, the accumulated changes are recognised as part of the cost of the relevant transactions.

Changes in the fair value of derivative financial instruments used to hedge net investments in foreign subsidiaries are recognised in the consolidated financial statements under other comprehensive income to the extent that the hedge is effective. Any ineffective portion is recognised immediately in profit or loss. On disposal of the relevant foreign entity, the accumulated value adjustments are taken to profit or loss.

Derivative financial instruments that do not qualify for hedge accounting are considered trading portfolios and are measured at fair value. Any fair value changes are recognised in profit or loss under financial items as they occur.

INCOME STATEMENT

Revenue

The sales method is used to recognise income on projects sold, see IAS 18–Revenue. Thus, profits are recognised once the project has been sold, construction completed and all essential elements of the sales agreement fulfilled, including delivery and transfer of risk to the buyer.

The percentage of completion method is used for projects meeting the definition of a construction contract, see IAS 11. Thus, the revenue for the year on these projects corresponds to the selling price of the work performed during the year. The recognised profit is the estimated profit on the project, calculated on the basis of its stage of completion. Reference is made to the section on construction contracts below.

Where the Group is in charge of development, letting, construction management, etc. on behalf of investors and receives fee income for such services, the fee income is recognised as income as the services are provided.

Where a sold project comprises several instalment deliveries and where these are separately identifiable and the financial effect of each instalment delivery can be individually assessed and reliably measured, the profit from the individual instalment delivery is recognised when all significant elements of the agreement have been fulfilled.

Rental income on completed projects and investment properties is accrued and recognised in accordance with the leases

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NOTE 1. ACCOUNTING POLICIES, CONTINUED

concluded.

For other income, the sales method is used.

Revenue is measured as the fair value of the consideration received or receivable. If interest-free credit has been agreed for the consideration receivable beyond the usual credit period, the fair value of the consideration is determined by discounting the future payments. The difference between the fair value and nominal value of the consideration is recognised in profit or loss as financial income over the extended credit period by using the effective interest method.

Construction contracts

When the outcome of a construction contract can be estimated reliably, revenue and construction costs are recognised in profit or loss by reference to the stage of completion of the project at the balance sheet date (the percentage of completion method).

When the outcome of a construction contract cannot be measured with a sufficient degree of reliability, revenue corresponding to the construction costs incurred during the period is recognised if it is probable that such costs will be recovered.

Project expenses

This item consists of all costs relating to projects incurred to generate the year's revenue and includes direct project costs, including 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 maintenance and depreciation resulting from the project development activity and proportionately attributable to the project development capacity utilised.

Moreover, the item includes any impairment losses on projects in progress or completed projects and recognition as an expense of project development costs to the extent that the relevant projects are not expected to be realised.

Value adjustment of investment properties etc. Changes in the fair values of investment properties are recognised in profit or loss under the item Value adjustment of investment properties, net.

Realised gains and losses on the sale of investment properties are determined as the difference between the carrying amount

and the selling price and are also recognised in profit or loss under the item Value adjustment of investment properties, net.

Other external expenses

The item Other external expenses includes administrative expenses, costs of premises and car expenses.

Income from investments in joint ventures and associates in the consolidated financial statements

The proportionate share of joint ventures' and associates' profit/loss after tax, adjusted for the proportionate elimination of unrealised intra-group gains and losses, less any impairment of goodwill, is recognised in consolidated profit or loss. The proportionate share of all transactions recognised in the joint venture's/associate's other comprehensive income is recognised in consolidated other comprehensive income.

Financial income and expenses

Financial income and expenses include interest income and expenses, realised and unrealised exchange gains and losses on foreign currency transactions, payables and securities as well as amortisation of financial liabilities.

Interest income and expenses are accrued, based on the principal and the effective interest rate. The effective interest rate is the discount rate used to discount expected future payments related to the financial asset or the financial 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 acquisition, construction or production of assets are capitalised as part of the cost of the relevant asset. Other borrowing costs are taken to profit or loss.

Tax on profit/loss for the year

Tax for the year, which consists of the year's current tax and changes in deferred tax, is recognised in profit or loss with respect to the portion attributable to the profit or loss for the year and directly in equity or other comprehensive income with respect to the portion attributable to entries directly in equity or other comprehensive income.

Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax paid on account. The current tax charge for the

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year is calculated based on the tax rates and rules applicable at the balance sheet date.

Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities, except deferred tax on temporary differences arising on initial recognition of either goodwill or a transaction which is not a business combination and which does not affect the profit or loss or taxable income upon initial recognition.

Deferred tax is calculated on the basis of the planned use of the individual asset or the settlement of the individual liability. Deferred tax assets, including the tax base of tax loss carry-forwards, are recognised in the balance sheet at the value at which the asset is expected to be realised, either by setoff against deferred tax liabilities or as net tax assets for setoff against future positive taxable income within the same joint taxation entity. Based on an individual and specific assessment, it is considered at each balance sheet date whether it is likely that sufficient taxable income will be produced in future for the deferred tax asset to be utilised. If it is considered that an individual tax asset cannot be utilised, it is written down against profit or loss.

Deferred tax is recognised on temporary differences related to investments in subsidiaries, joint ventures and associates, unless the parent company is able to control when the deferred tax is to be realised and it is likely that the deferred tax will not crystallise as current tax within the foreseeable future. There is no deferred tax on investments in subsidiaries, joint ventures and associates, as any dividends distributed and any gains earned on the sale of such entities are tax-free for the Group. Deferred tax in respect of recaptured losses previously deducted in foreign subsidiaries is recognised on the basis of a specific assessment of the intention with each individual subsidiary.

Deferred tax is measured based on the tax rules and rates in the respective countries that will apply under the legislation in force at the balance sheet date when the deferred tax is expected to crystallise as current tax. Any changes in deferred tax resulting from changed tax rates and tax rules are recognised in profit or loss, unless the deferred tax is attributable to items previously recognised directly in equity or in other comprehensive income. In such case, the change in deferred tax is also recognised directly in equity or in other comprehensive income.

The parent company is taxed jointly with all Danish subsidiaries. The parent company is the designated joint taxation management company. The total income tax charge payable by the jointly taxed entities is distributed between the jointly taxed Danish entities in proportion to their taxable income.

Balances arising under the interest deduction limitation rules laid down in the Danish Corporation Tax Act have been distributed between the jointly taxed entities according to the joint taxation agreement concluded.

BALANCE SHEET

Investment properties

Properties are classified 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 cost of the property and any costs directly attributable to the acquisition.

Subsequently, investment properties are measured at fair value, which represents the price at which it is estimated that the property can be sold to an independent buyer at the balance sheet date. The valuation is generally made on the basis of a discounted cash flow model under which future cash flows are discounted to present value on the basis of a given rate of return. The rate of return is fixed for each individual property. Where a sales process is ongoing, the selling price discussed will be used as a basis for the valuation if the price is found to correctly reflect the fair value.

Changes in the fair value are recognised in profit or loss under Value adjustment of investment properties, net in the financial year in which the change occurs.

Projects in progress and completed projects

Projects in progress and completed comprise real property projects.

The project portfolio is recognised at the direct costs incurred, including interest during the project period, plus a share of the relevant indirect project costs. Where this is considered necessary, the projects have been written down to a lower value. Capitalised amounts are tested for impairment on a continuous basis to ensure that the carrying amounts of project portfolios are reduced if they exceed expected net realisable values.

Additions for indirect project costs are calculated as a percent-

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age of staff costs, project materials, the cost of premises and maintenance and depreciation resulting from project development and proportionately attributable to the project development capacity utilised.

Prepayments from clients on sold projects in progress (forward funding) are deducted, and any negative net amount, determined for each individual project, is included in the item Prepayments received from clients.

Receivables

Receivables comprise trade receivables, receivables from joint ventures, receivables from associates and other receivables. Receivables are classified as loans and receivables, which are financial assets with fixed or determinable payments that are not quoted in an active market and are not derivative financial instruments.

On initial recognition, receivables are measured at fair value and subsequently at amortised cost, which usually corresponds to nominal value less provisions for bad debts. Impairment losses on receivables are calculated on the basis of an assessment of the individual receivables.

Financial assets and liabilities are set off against each other in the balance sheet if the Company has a right of setoff and at the same time intends or is under a contractual obligation to realise assets and liabilities simultaneously.

Prepayments comprise expenses incurred relating to subsequent financial years. Prepayments are measured at cost in the balance sheet.

Construction contracts

When the outcome of a construction contract can be estimated reliably, the construction contract is measured at the selling price of the work performed as of the balance sheet date (the percentage of completion method) less any amounts invoiced on account and provisions for bad debts. The selling price is measured on the basis of the stage of completion at the balance sheet date and the total revenue expected from the individual construction contract.

The 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.

If the outcome of a construction contract cannot be measured reliably, the construction contract is measured at the construction costs incurred if it is probable that they will be recovered. If it is probable that the total construction costs will exceed total contract revenue, the estimated loss is recognised immediately as an expense.

The individual construction contract in progress is recognised in the balance sheet under receivables or payables, depending on whether its net value is a receivable or a payable.

Equity

Dividends are recognised as a liability at the time of adoption at the general meeting.

Pension obligations etc.

The Group's pension obligations consist of defined contribution plans under which regular, fixed contributions are paid to independent pension companies etc. The contributions are recognised in profit or loss in the period during which the employees have performed the work entitling them to the pension contribution. Contributions payable are recognised in the balance sheet as a liability.

Provisions

Provisions are recognised when, as a consequence of an event occurring before or at the balance sheet date, the Group has a legal or constructive obligation, and it is probable that there may be an outflow of economic benefits to meet the obligation.

The item includes provisions for rent guarantees, such provisions being based on experience with rent guarantees and on an individual assessment of the individual leases.

Provisions are measured as the best estimate of the costs required to settle the liabilities at the balance sheet date. Provisions with an expected term of more than 12 months are classified as non-current liabilities and measured at present value.

Financial liabilities

Non-current financial liabilities are measured at cost at the time of borrowing, equivalent to the proceeds received after transaction costs. Subsequently, financial liabilities are measured at amortised cost, such that the difference between the proceeds and nominal value is recognised in profit or loss as a financial expense over the term of the loan.

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Other financial liabilities are recognised at amortised cost, which usually corresponds to the nominal value.

Operating lease payments are recognised in profit or loss on a straight-line basis over the lease term.

Financial liabilities, which comprise payables to credit institutions, trade payables and other payables, are classified as financial liabilities measured at amortised cost.

Deferred income comprises income received for subsequent financial years. Deferred income is measured at cost in the balance sheet.

CASH FLOW STATEMENT

The cash flow statement is presented according to the indirect method, based on the operating profit or loss, and shows cash flows generated from operating, investing and financing activities, as well as cash and cash equivalents at the beginning and end of the financial year.

Cash flows from operating activities are calculated as the operating profit or loss, adjusted for non-cash operating items, changes in working capital and paid financial income, financial expenses and corporate income tax.

Cash flows from investing activities comprise payments made in connection with the purchase and sale of enterprises, property, plant and equipment and other non-current assets.

Cash flows from financing activities consist of changes in the parent company's share capital and associated costs, the raising and repayment of loans, other repayments on interest-bearing debt as well as the payment of dividend.

Due to Management's choice to include income from investments in joint ventures in operating profit or loss, cash flows from joint ventures are presented under cash flows from operating activities or cash flows from investing activities based on a specific assessment of the actual circumstances in each joint venture.

Cash flows in currencies other than the functional currency are recognised in the cash flow statement using periodic average exchange rates, unless these rates deviate significantly from the actual exchange rates at the transaction dates.

In preparing the cash flow statement, opening balance sheets and cash flows in foreign currencies are translated on the basis of the foreign exchange rates prevailing at the balance sheet date. This eliminates the effect of exchange differences on the period's movements and cash flows. Interest paid is shown separately. Consequently, project interest for the period is not included in liquidity movements resulting from the project portfolio. Thus, the figures in the cash flow statement cannot be inferred directly from the financial statements.

Cash and cash equivalents comprise cash at bank and in hand.

SEGMENT INFORMATION

Segment information has been prepared in accordance with the Group's accounting policies and is based on the Group's internal management reporting.

The Group's activities are divided into the following segments:

Property development activities
Discontinuing activities

The disclosures in note 3 reflect this segmentation.

In December 2017, the Board of Directors decided to divest the Group's Polish activities. As a consequence, all the Group's Polish activities are now included under discontinuing activities. At the same time, a decision was made to allocate the previously unallocated costs to the property development segment and to transfer the previously unallocated balance sheet items, primarily tax, to the individual segments. The comparative figures have been restated accordingly.

The Group's primary business area is property development, comprising development of real estate in Denmark and Sweden.

The Group's discontinuing activities comprise all its activities outside Denmark and Sweden as well as completed properties in operation in Denmark.

Non-current segment assets comprise assets used directly in the operating activities of the segment, including intangible assets, property, plant and equipment and investments in joint ventures and associates. Current segment assets comprise assets directly attributable to the operating activities of the segment, including projects in progress and completed projects, trade receivables, other receivables, prepayments, deferred

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tax assets, deposits in custody and escrow accounts, etc.

Segment liabilities comprise liabilities resulting from the operating activities of the segment, including trade payables, payables to credit institutions, provisions, other payables, etc.

DEFINITIONS OF FINANCIAL RATIOS

Return on equity:
- Profit/loss excluding non-controlling interests x 100
- Average equity excluding non-controlling interests

Solvency ratio (equity):
- Equity excluding non-controlling interests x 100
- Total assets

Book value per share, DKK:
- Equity excluding non-controlling interests x 100
- Number of shares

Price/book value (P/BV):
- Market price
- Book value per share

Earnings per share, DKK:
- Profit/loss excluding non-controlling interests
- Average number of outstanding shares

Diluted earnings per share, DKK:
- Diluted profit/loss excluding non-controlling interests
- Average number of diluted shares

Dividend per share, DKK:
- Parent company dividend per share

NOTE 2. ACCOUNTING ESTIMATES AND JUDGMENTS

Several items cannot be measured with certainty, but only estimated. Such estimates comprise judgments made on the basis of the information available at the reporting date, including assumptions and expectations regarding future events, particularly in relation to the Group's projects in progress and completed projects.

Estimates and underlying assumptions are reviewed on an ongoing basis. If the assumptions and expectations applied in relation to future events do not materialise, it could have an adverse effect on the Group and result in a need to make adjustments in subsequent financial years. Changes to accounting estimates are recognised in the accounting period during which they occur.

In applying the accounting policies described, Management has made a number of significant accounting estimates and judgments that have materially affected the annual report.

The financial result for 2017/18 was impacted by impairment losses and value adjustments totalling DKK 407.9 million, of which DKK 405.4 million was recognised in Q3 2017/18. The impairment losses concern the Group's discontinuing activities and were caused by the Board of Directors' decision to divest the Group's Polish activities within a period of two years and accelerate the sale of other discontinuing activities.

The impairment losses and value adjustments were recognised as follows:

Investment property:
- A total of DKK 25 million related to a negative value adjustment of the Group's German investment property made due to the failure of planned development efforts to produce satisfactory results for the Group.

Completed properties in operation:
- A total of DKK 100 million related to Galeria Sandeja in Nowy Sącz, Poland, while a total of DKK 122.5 million related to Danish completed properties in operation, of which Sillebroen Shopping in Frederikssund, Denmark, accounted for DKK 120.0 million. The process of maturing and optimising these centres has not been satisfactory, and the Board of Directors notes that the Group has not been able to mature the assets as quickly as had been anticipated. There is still a maturing potential, but it will likely take longer than previ

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ously assumed to obtain selling prices matching the original expectations. Based on the Group's forward-looking focus on its property development business and given the current economic climate, tying up capital in these activities for a longer period is not considered attractive. Accordingly, the assets will be divested as soon as possible.

Land and development projects:

A total of DKK 35 million related to impairment of a plot of land in Latvia and a plot of land in Germany, which have both proven more difficult to develop than previously assumed.
A total of DKK 60 million related to impairment of three Polish plots of land which the Group has owned for a number of years. Due to their size and to regulatory issues, these plots of land are difficult to develop in the short term, and the Board of Directors' decision to wind up the activities in Poland and thus to sell these plots of land within a short period of time has caused a reduction of their carrying amounts.

Investments in and receivables from joint ventures:

A total of DKK 65.4 million related to impairment of the Group's investment in a joint venture owning two shopping centres in operation in Poland. The operating performance and earnings of these centres are improving but at a slower pace than expected, and a postponed sale will mean that TK Development will be required to pay a larger preferred return to the joint venture partner than previously expected.

The carrying amount at 31 January 2018 of completed properties in operation within the segment comprising discontinuing activities was DKK 871.8 million.

The carrying amount at 31 January 2018 of land and development projects within the segment comprising discontinuing activities was DKK 333.7 million.

No impairment losses were charged on the Group's property development activities in 2017/18. The carrying amount of these activities was DKK 311.0 million at 31 January 2018.

PROJECTS IN PROGRESS AND COMPLETED PROJECTS

The Group's overall project portfolio may be specified as follows:

Development projects, including land (property development).
Completed properties in operation (discontinuing activities).
Land and development projects in markets where the Group wishes to eventually discontinue its activities (discontinuing activities).

All three project categories are affected by price fluctuations in the property markets in which the Group operates and by general economic trends. Declining rent levels and lower prices for land and property may have a material adverse effect on the Group. The Group may also be significantly impacted by changes to investors' return requirements for real property investments.

Each category within the Group's project portfolio is subject to a number of risks which may impact the valuation. Other than those mentioned above, the most significant risks relate to the following areas:

Development projects, including land - property development

In addition to rent levels and property prices, as described above, regulatory approvals and compliance with time schedules are key risk factors in relation to the Group's development projects.

Regulatory approvals

As a developer, the Group's future earnings depend on the inflow of new projects and thus on the future availability of new building sites and regulatory permits (planning legislation, local development plans, building permits, etc.) concerning the location, size and use of its properties. Changes in local development plans or other factors that make obtaining building permits difficult or restrict the supply of building sites could have an adverse effect on the Group.

Compliance with time schedules

In developing new projects, the Group is subject to both overall and detailed time schedules. Time is of the essence in complying with agreements made with tenants and investors and a significant factor in ensuring that the individual projects progress according to plan and, accordingly, that the Group generates earnings as projected. Postponing a project may mean, for instance, that lease agreements lapse, that tenants become entitled to compensation and, ultimately, that the investor is no longer under an obligation to buy the project.

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NOTE 2. ACCOUNTING ESTIMATES AND JUDGMENTS, CONTINUED

Completed properties in operation – discontinuing activities

The valuation of completed properties under discontinuing activities is based on a number of assumptions and expectations regarding future letting, including rent levels, opportunities for letting vacant premises and expectations regarding investors' return requirements, etc.

Land and development projects – discontinuing activities

Reference is made to the section above on Development projects, including land – property development, as the risks pertaining to these two categories are largely similar.

Valuation at 31 January 2018

Projects are reviewed for impairment based on a specific assessment of each individual project, including available project budgets and expectations as to future development prospects.

Representing a carrying amount of DKK 1,516.5 million at 31 January 2018, projects in progress and completed projects make up a substantial proportion of the Group's total assets. The result for the year was reduced by DKK 317.5 million as a result of changed indications of impairment of projects in progress and completed projects, see above. Accumulated impairment losses total DKK 567.6 million, and the carrying amount of projects in progress and completed projects written down to expected net realisable value was DKK 1,137.3 million, of which DKK 1,116.3 million related to assets under management.

As a sizeable proportion of the Group's projects in progress and completed projects have been written down to net realisable value, implying that a subsequent sale is not expected to produce a profit, the measurement is subject to uncertainty. If the actual development process in relation to individual projects deviates from expectations, this may give rise to a need to revise the impairment losses recognised, which may have a material adverse effect on the Group.

INVESTMENTS IN AND RECEIVABLES FROM JOINT VENTURES

Joint venture activities comprise both development projects in the property development business area and completed projects in operation (discontinuing activities). The investments are measured according to the equity method and are written down to a lower value where this is considered necessary.

Investments in and receivables from joint ventures are reviewed for impairment based on a specific assessment of each individual joint venture, including the underlying projects and investment properties. The associated risks are largely identical to those referred to above under Projects in progress and completed projects. If the applied assumptions change or if the actual development process deviates from expectations, the value may differ from the value determined at 31 January 2018.

An impairment loss of DKK 65.4 million was recognised on investments in joint ventures in financial year 2017/18, see above. The carrying amount of investments in and receivables from joint ventures at 31 January 2018 was DKK 434.8 million.

INVESTMENT PROPERTIES

The Group's investment properties are measured in the balance sheet at fair value. The valuation is based on a discounted cash flow model under which expected future cash flows are discounted to net present value on the basis of a given rate of return. If the applied assumptions change, the value may differ from the value determined at 31 January 2018. The value adjustment in financial year 2017/18 was DKK -25.0 million. The carrying amount of investment properties amounted to DKK 28.1 million at 31 January 2018.

DEFERRED TAX ASSETS

A deferred tax asset of DKK 59.9 million was recognised in the balance sheet at 31 January 2018. The tax asset related mainly to tax loss carryforwards in jointly taxed Danish entities. The tax asset was measured based on the current rules on loss carryforward and joint taxation and under a going concern assumption as regards each individual subsidiary. A change in the conditions and assumptions for loss carryforward and joint taxation could significantly reduce the value of the tax assets relative to the value determined at 31 January 2018.

The measurement of tax assets is based on current budgets and profit forecasts for a five-year period, in which the first three years are based on an assessment of specific projects in the Group's project portfolio and the last two on profit forecasts based on specific projects in the project portfolio with a time horizon beyond three years as well as various project opportunities.

Due to the significant uncertainties associated with these estimates, provisions have been made for the risk that projects are postponed or not implemented and the risk that project

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profits fall short of expectations. A change in the conditions and assumptions for budgets and profit forecasts, including time estimates, could significantly reduce the value of the tax assets relative to the value determined at 31 January 2018, which could have an adverse effect on the Group's results of operations and financial position.

Accumulated impairment losses increased by DKK 46.0 million during financial year 2017/18 to stand at DKK 321.6 million at 31 January 2018.

Joint taxation

The Group was previously jointly taxed with its German subsidiaries for a number of years. The recapture of tax losses in respect of the jointly taxed German entities amounted to DKK 347.7 million at 31 January 2018. Retaxation in full would trigger a tax charge of DKK 97.4 million at 31 January 2018. No provision has been made for retaxation liabilities as Management does not plan to make any changes to the Group that would result in retaxation in full or in part. Should Management take a different view, this could have an adverse effect on the Group's results of operations and cash flows.

RECEIVABLES

Receivables are reviewed for impairment based on a specific assessment of each individual receivable. If the applied assumptions change, the value may differ from the value determined at 31 January 2018. The carrying amount of receivables was DKK 51.6 million at 31 January 2018.

CLASSIFICATION OF PROJECTS

In applying the accounting policies described, Management makes a number of significant accounting estimates and judgments in relation to the classification of the Group's projects. The Group's projects are generally classified as projects in progress or completed projects under current assets. A few projects with a longer time horizon are classified as investment properties as and when they are constructed/acquired for the purpose of generating rental income and/or capital gains. The measurement of individual projects depends on their classification, and the estimates made by Management in classifying projects may therefore affect the Group's results of operations and equity.

REVENUE RECOGNITION

The sales method is used to recognise income on projects sold, see IAS 18, Revenue. Revenue on projects that can be classified

as construction contracts is recognised according to IAS 11. Where a sold project comprises several instalment deliveries and where these are separately identifiable and the financial effect of each instalment delivery can be individually assessed, the profit from the individual instalment delivery is recognised when all significant elements of the agreement have been fulfilled, and thus in accordance with IAS 18. Thus, Management specifically assesses each individual project for the purpose of determining recognition principle and method.

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NOTE 3. SEGMENT INFORMATION

The Group's internal reporting to the Parent Company's Board of Directors is organized into two business areas:

Property development activities
Discontinuing activities

These business areas represent the Group's operating segments, as defined by IFRS 8.

The Group's primary business area is property development, comprising development of real estate in Denmark and Sweden.

The Group's discontinuing activities comprise all its activities outside Denmark and Sweden as well as completed properties in operation in Denmark.

The accounting policies used in compiling the segment information are identical to the Group's accounting policies; see the description above.

31 Jan 2018	Property development	Discontinuing activities	Profit/loss before tax	Tax	Total
Net revenue, external customers	664.5	121.4			785.9
Impairment losses on projects in progress or completed	0.0	-317.5			-317.5
Value adjustment of investment properties, net	0.0	-25.0			-25.0
Gross profit/loss	27.5	-295.9			-268.4
Income from joint ventures	60.6	-45.3	15.3	-1.4	13.9
Financial income	7.0	2.6			9.6
Financial expenses	0.0	-44.6			-44.6
Depreciation and impairment	0.5	0.3			0.8
Shares of profit or loss in associates	0.7	0.0			0.7
Profit/loss before tax	39.6	-411.9	-372.3	-1.4	-373.7
Segment assets	776.0	1,495.1			2,271.1
Investments in joint ventures	40.4	254.4			294.8
Investments in associates	3.7	1.4			5.1
Capital expenditure (*)	2.9	0.0			2.9
Segment liabilities	262.8	1,085.5			1,348.3

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31 Jan 2017	Property development	Discontinuing activities	Profit/loss before tax	Tax	Total
Net revenue, external customers	106.7	294.8			401.5
Impairment losses on projects in progress or completed	-5.0	-6.7			-11.7
Gross profit/loss	26.7	56.4			83.1
Income from joint ventures	75.7	-27.7	48.0	0.8	48.8
Financial income	7.2	2.7			9.9
Financial expenses	-0.2	-48.2			-48.4
Depreciation and impairment	0.4	0.0			0.4
Shares of profit or loss in associates	0.7	-0.2			0.5
Profit/loss before tax	60.9	-47.9	13.0	0.8	13.8
Segment assets	938.2	1,914.7			2,852.9
Investments in joint ventures	170.6	106.6			277.2
Investments in associates	3.5	1.4			4.9
Capital expenditure *1	0.8	0.0			0.8
Segment liabilities	406.9	1,152.3			1,559.2

*1 Capital expenditure comprises additions to intangible assets and property, plant and equipment.

Geographical information

TK Development operates primarily on the markets in Denmark, Sweden and Poland. Because of the Group's accounting policies for recognizing sold projects, revenue in the individual countries may vary substantially from one year to another.

For the purpose of presenting information about geographical areas, the information about the distribution of revenue on geographical segments was prepared on the basis of project location.

	Net revenue, external customers		Non-current assets *1
	2017/18	2016/17	2017/18	2016/17
Denmark	660.8	138.7	2.9	0.4
Sweden	38.4	6.7	0.0	0.0
Poland	33.9	209.3	0.4	0.6
Czech Republic	39.1	24.6	0.3	0.3
Germany	1.4	12.4	28.1	53.1
Lithuania	11.0	8.8	0.0	0.0
Other countries **1	1.3	1.0	0.0	0.0
Total	785.9	401.5	31.7	54.4

1 Non-current assets comprise intangible assets and property, plant and equipment.
*1 Net revenue for other countries comprises the remaining revenue, including revenue in the countries for which no specific amount is indicated for the individual year.

Non-current assets relate primarily to the Group's investment property in Germany; see note 16.

Information about major customers

In 2017/18, The Group sold two projects to single customers where the revenue on the project exceeded 10% of the Group's total revenue. The revenue on these projects amounted to DKK 467.9 million and DKK 97.3 million respectively. In the 2016/17 financial year, the Group did not sell any projects to single customers where the revenue on the project exceeded 10% of the Group's total revenue.

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NOTE 4. NET REVENUE

	2017/18	2016/17
Sale of projects and properties	692.4	311.6
Rental income	57.3	60.6
Sale of services	36.2	29.3
Total net revenue	785.9	401.5

NOTE 5. PROJECT COSTS

	2017/18	2016/17
Project costs	711.8	306.7
Impairment losses on projects in progress or completed	317.5	11.7
Project costs, total	1,029.3	318.4

NOTE 6. OTHER EXTERNAL EXPENSES

	2017/18	2016/17
Administrative expenses	10.8	11.1
Cost of premises	6.0	6.4
Cars, operating expenses	3.4	3.7
Other external expenses, total	20.2	21.2

NOTE 7. STAFF COSTS

	2017/18	2016/17
Fees for Board of Directors	1.5	1.3
Salaries, etc. for the Parent Company's Executive Board; see below *)	11.4	7.4
Other salaries	45.3	43.3
Defined contribution pension plans	0.7	0.7
Other social security costs	3.6	4.5
Other staff costs	1.4	1.3
Total staff costs	63.9	58.5
Average number of employees	72	76
Number of employees at year-end	70	73

Salaries, etc. for the Parent Company's Executive Board:

2017/18	Salary	Pension	Total
Frede Clausen *)	8.1	0.1	8.2
Robert Andersen	3.1	0.1	3.2
Salaries, etc., total	11.2	0.2	11.4
2016/17
Frede Clausen	4.1	0.1	4.2
Robert Andersen	3.1	0.1	3.2
Salaries, etc., total	7.2	0.2	7.4

including provision of DKK 4 million for salary etc. for Frede Clausen in the release period.

In addition, the Executive Board has the usual free benefits, including free company car. The value of this amounted to DKK 0.11 million and DKK 0.14 respectively per Executive Board member in 2017/18 (2016/17: DKK 0.17 million per Executive Board member).

72/109 | TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. STAFF COSTS, CONTINUED

Defined contribution plans

The Group has entered into defined contribution plans with the majority of the employees in Danish group companies. According to these plans, the group companies pay a monthly amount of 2 % of the relevant employees' basic salaries to independent pension companies.

An amount of DKK 0.9 million was expensed for defined contribution plans in the 2017/18 financial year (2016/17: DKK 0.9 million).

No employees in the Group are comprised by defined benefit plans.

NOTE 8. FEES PAYABLE TO THE AUDITORS ELECTED AT THE GENERAL MEETING

	2017/18	2016/17
Statutory audit	1.2	1.2
Other assurance reports	0.1	0.0
Tax consultancy	0.1	0.3
Other services	0.1	0.0
Total	1.5	1.5

The fee paid to Deloitte Statsautoriseret Revisionspartnerselskab for non-audit services amounts to DKK 0.3 million and concerns various tax and accounting advisory services as well as the preparation of valuation reports in connection with non-cash contributions.

NOTE 9. INVESTMENTS IN ASSOCIATES

	2017/18	2016/17
Cost at 1 February	23.7	23.7
Cost at 31 January	23.7	23.7
Revaluations and impairment at 1 February	-18.8	-19.3
Foreign-exchange adjustments, beginning of year	0.1	0.0
Share of profit/loss for the year after tax	0.7	0.5
Dividend	-0.6	0.0
Revaluations and impairment at 31 January	-18.6	-18.8
Carrying amount at 31 January	5.1	4.9

In the consolidated balance sheet, investments in associates are measured according to the equity method after deduction of any impairment. The Group's associates appear from the Overview of group companies, note 31.

TK Development has no associates that are individually material to the Group.

Income from investments in not individually material associates is shown below:

	2017/18	2016/17
Other income from associates	0.7	0.5
Total income from investments in associates	0.7	0.5

Financial disclosures for not individually material associates:

	2017/18	2016/17
The Group's share of profit/loss for the year	0.7	0.5
The Group's share of equity	5.1	4.9

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 73/109

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. INVESTMENT IN JOINT VENTURES

In the consolidated balance sheet, investments in joint ventures are measured according to the equity method, equal to the proportionate share of the individual joint ventures' carrying amount, determined according to the Group's accounting policies, with the addition of goodwill and less any proportionate intercompany profits or losses, etc.

The Group's joint ventures comprise projects within the Group's primary and secondary business areas that - regardless of the ownership interest - are jointly controlled with other parties in accordance with shareholders' or similar agreements. These joint ventures are organized as separate legal entities, and, based on the agreements concluded, the parties have rights to the net assets only.

Joint ventures appear from the overview of group companies in note 31.

The Group's material joint ventures are the following:

	Ownership interest/voting rights
	Reg. office	31 Jan 2018	31 Jan 2017	Activity
Euro Mall Luxembourg JV S.à r.l. (until 31 October 2017, subsequently immaterial)	Luxembourg	30%	30%	Property development/Discontinuing activities
Ringsted Outlet Center P/S	Denmark	50%	50%	Discontinuing activities
Kommanditaktieselskabet Danlink Udvikling	Denmark	50%	50%	Property development/Discontinuing activities
Kommanditaktieselskabet Østre Havn	Denmark	50%	50%	Property development
BROEN Shopping A/S	Denmark	35%	35%	Discontinuing activities

In a few cases, the Group's joint ventures are subject to restrictions as concerns the transfer of funds in the form of dividends or the repayment of loans to the Group.

The Group has no unrecognized shares of losses in joint ventures, neither for the 2017/18 financial year nor on an accumulated basis.

2017/18	Euro Mall Luxembourg JV S.à r.l. (incl. subsidiaries)*	Ringsted Outlet Center P/S	Kommanditaktieselskabet Dan-link Udvikling	Kommandit-aktieselska-bet Østre Havn	BROEN Shopping A/S	Immaterial joint ventures	Total
Ownership interest	30%	50%	50%	50%	35%
Comprehensive income statement
Net revenue	36.5	17.3	14.4	142.3	30.9
Financial income	0.0	0.0	63.1	0.0	0.0
Financial expenses	33.1	5.4	2.7	0.0	13.2
Tax on profit/loss for the year	-1,0	0.3	1.1	0.0	2.8
Profit/loss for the year	-5.2	34.0	69.3	19.3	23.3	12.0
Other comprehensive income	-1,0	0.0	0.0	0.0	0.0	0.0
Total comprehensive income	-6.2	34.0	69.3	19.3	23.3	12.0
The Group's share of profit/loss for the year
	-1.6	17.0	34.7	9.6	8.2	6.1	73.9
Group adjustments (gains/losses, etc. on the sale of joint ventures)	-64.9	0.0	4.1	0.8	0.0	0.0	-60.0
Income from investments in joint ventures	-66.5	17.0	38.8	10.4	8.2	6.1	13.9
The Group's share of total comprehensive income for the year
	-66.8	17.0	38.8	10.4	8.2	6.1	13.6
Dividend received	0.0	0.0	62.5	0.0	0.0	0.0

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. INVESTMENTS IN JOINT VENTURES, CONTINUED

*) Euro Mall Luxembourg JV S.à r.l. is a joint venture with Heitman in which TK Development has an ownership interest of 30%. TK Development's ownership interest was written off in financial year 2017/18 because TK Development has had to pay a larger than expected advance return to the joint venture partner as a result of the postponed sale. TK Development is not liable for the liabilities of the company or its subsidiaries. As the joint venture is now considered to be immaterial to the Group, it will no longer be included in TK Development's reporting. TK Development does not expect the joint venture to generate earnings for the Group in the longer term either, and it is therefore not included as of 31 January 2018 in the information below.

31 Jan 2018	Ringsted Outlet Center P/S	Kommanditaktie-selskabet Dan-link Udvikling	Kommandit-aktieselska-bet Østre Havn	BROEN Shopping A/S	Immaterial joint ventures	Total
Balance sheet
Non-current assets	0.3	11.7	0.0	932.8	0.0
Current assets	238.7	233.8	141.1	2.4	110.9
Non-current liabilities except trade payables and provisions	0.0	0.0	0.0	424.6	0.0
Current liabilities except trade payables and provisions	101.8	125.1	45.3	170.0	79.6
Non-current liabilities	0.0	0.0	0.0	429.6	0.0
Current liabilities	103.0	129.1	93.0	182.3	94.5
Cash and cash equivalents	10.4	0.0	3.7	0.1	20.3
Equity	136.0	116.4	48.1	323.3	16.4
TK Development's share of equity	68.0	58.2	24.0	113.2	7.8	271.1
Group adjustments, etc.	0.0	0.0	5.9	17.3	0.5	23.7
Investments in joint ventures	68.0	58.2	29.9	130.5	8.3	294.8
2016/17	Euro Mall Luxembourg JV S.à r.l. (incl. subsidiaries)	Ringsted Outlet Center P/S	Kommanditaktie-selskabet Dan-link Udvikling	Kommandit-aktieselska-bet Østre Havn	BROEN Shopping A/S	Immaterial joint ventures
---	---	---	---	---	---	---
Ownership interest	30%	50%	50%	50%	35%
Comprehensive income statement
Net revenue	34.4	13.5	13.0	57.2	0.0
Financial income	0.1	0.1	0.4	0.0	0.0
Financial expenses	36.0	2.4	2.6	0.1	0.0
Tax on profit/loss for the year	3.0	0.0	0.0	0.0	0.1
Profit/loss for the year	-13.0	1.3	5.4	32.8	161.4	0.2
Other comprehensive income	-3.3	0.0	0.0	0.0	0.0	0.0
Total comprehensive income	-16.3	1.3	5.4	32.8	161.4	0.2
The Group's share of profit/loss for the year	-3.9	0.7	2.6	16.4	56.5	0.0
Group adjustments (gains/losses, etc. on the sale of joint ventures)	-26.0	-0.1	-0.3	3.0	0.0	-0.1
Income from investments in joint ventures	-29.9	0.6	2.3	19.4	56.5	-0.1
The Group's share of total comprehensive income for the year	-30.8	0.6	2.3	19.4	56.5	-0.1
Dividend received	0.0	0.0	25.0	10.5	0.0	4.8

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 75/109

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. INVESTMENTS IN JOINT VENTURES, CONTINUED

31 Jan 2017	Euro Mall Luxembourg JV S.à r.l. (incl. subsidiaries)	Ringsted Outlet Center P/S	Kommandit-aktieselskabet Dan-link Udvikling	Kommandit-aktieselskabet Østre Havn	BROEN Shopping A/S	Immaterial joint ventures	Total
Balance sheet
Non-current assets	714.7	0.6	75.3	0.0	730.7	0.0
Current assets	36.0	201.9	234.8	81.8	8.7	26.3
Non-current liabilities except trade payables and provisions	446.6	0.0	0.0	0.0	0.0	0.0
Current liabilities except trade payables and provisions	217.3	95.4	134.9	34.5	401.6	2.2
Non-current liabilities	446.6	0.0	0.0	0.0	0.0	0.0
Current liabilities	229.3	100.9	139.7	56.6	439.4	17.1
Cash and cash equivalents	27.4	12.6	0.0	0.3	0.1	4.2
Equity	74.8	101.6	170.4	25.2	300.0	9.2
TK Development's share of equity	22.5	50.8	85.2	12.6	105.0	4.0	280.1
Group adjustments, etc.	-24.1	0.0	-0.2	5.9	13.3	0.6	-4.5
Investments in joint ventures	-1.6	50.8	85.0	18.5	118.3	4.6	275.6
Transferred to off set in receivables							1.6
Investments in joint ventures, total							277.2

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. FINANCIAL INCOME

	2017/18	2016/17
Interest, cash and cash equivalents, etc.	0.0	0.1
Interest income from joint ventures	7.9	7.5
Interest income from associates	0.1	0.1
Other interest income	0.7	0.2
Financial income from loans and receivables	8.7	7.9
Foreign-exchange gains from other comprehensive income	0.9	0.0
Profit from sale of other securities and investments	0.0	2.0
Total financial income	9.6	9.9
Which breaks down as follows:
Interest income, etc. from financial assets not measured at fair value through profit and loss	8.7	7.9
Other financial income	0.9	2.0
Total financial income	9.6	9.9

NOTE 12. FINANCIAL EXPENSES

	2017/18	2016/17
Interest expenses, credit institutions	61.8	62.4
Other interest expenses	1.8	0.9
Foreign-exchange losses and capital losses on securities	0.2	0.0
Other financial expenses	1.2	1.5
Of which capitalized financial expenses	-21.2	-18.1
Foreign-exchange losses from other comprehensive income	0.8	0.0
Loss on financial assets	0.0	1.7
Total financial expenses	44.6	48.4
Which breaks down as follows:
Interest expenses on financial liabilities not measured at fair value through profit and loss	44.4	46.7
Other financial expenses	0.2	1.7
Total financial expenses	44.6	48.4

An interest rate of 1.0 – 6.0 % is used to capitalize interest on projects in progress, depending on the interest rate applicable to the individual project loans (2016/17: 1.0 – 6.0 %).

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 77/109

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. TAX ON PROFIT/LOSS FOR THE YEAR

	2017/18	2016/17
Current corporate income tax	5.8	1.1
Adjustment regarding tax relating to prior year(s)	0.0	0.4
Change in deferred tax	-0.5	5.2
Tax on profit/loss for the year	5.3	6.7
The tax on the profit/loss for the year results as follows:
Tax calculated based on the Danish tax rate 22 % (2016/17: 23,5 %)	-82.2	3.0
Difference in tax rate, foreign subsidiaries	5.8	-0.4
Adjustment relating to prior year(s)	0.0	0.4
Tax effect of:
Non-taxable income/expenses	29.0	0.3
Forfeiture of losses written down in prior years	6.3	9.5
Change in impairment of tax assets, incl. reversal of prior years' impairment regarding the forfeiture of this year's losses	46.1	-6.2
Other	0.3	0.1
Tax on profit/loss for the year	5.3	6.7
Effective tax rate	-1.5 %	48.5 %

NOTE 14. EARNINGS PER SHARE IN DKK

	2017/18	2016/17
Earnings in DKK per share (EPS)	-3.9	0.1
Profit/loss for the year	-379.0	7.1
Shareholders' share of profit/loss for the year	-379.0	7.1
Average number of shares in circulation of nom. DKK 1	98,153,335	98,153,335

NOTE 15. DIVIDENDS

In the 2017/18 financial year, no dividends were distributed to the Company's shareholders for the 2016/17 financial year. At the Annual General Meeting on 26 April 2018, the Board of Directors recommends that no dividends be declared to the Company's shareholders in respect of the 2017/18 financial year.

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. INVESTMENT PROPERTIES

	31 Jan 2018	31 Jan 2017
Cost at 1 February	106.8	107.2
Foreign-exchange adjustments, beginning of year	0.0	-0.4
Cost at 31 January	106.8	106.8
Revaluations at 1 February	53.7	53.9
Foreign-exchange adjustments, beginning of year	0.0	-0.2
Revaluations for the year	25.0	0.0
Revaluations at 31 January	78.7	53.7
Carrying amount at 31 January	28.1	53.1
Rental income, investment properties	1.4	1.6
Direct operating expenses, premises let	-0.7	-0.3
Direct operating expenses, vacant premises	-1.7	-1.6
Net income from investment properties before financing and tax	-1,0	-0.3

Investment properties:

	Location	Ownership in %	Year acquired	Sqm
Lüdenscheid	Germany	100 %	1994-1998	16,500

The Group's investment property is measured at fair value (Fair-value hierarchy: Level 3). The valuation of the property is based on a discounted cash-flow model over a ten-year period and a return requirement of 7 % p.a. (2016/17: 6.25 %). The fair-value measurement is based on expected rental income and operating expenses and results in a value adjustment in the 2017/18 financial year of DKK -25 million, due, among other things, to a changed return requirement and lower expected rent. Part of the property has not been let, and work is proceeding on a development plan aimed at optimizing and subsequently selling the whole property. There have been no changes to the methods used for calculating fair values in the current financial year. No transfers between the different levels of the fair-value hierarchy have been made in the current financial year, and the services of external appraisers have not been used for the valuation.

Otherwise, the most significant non-observable input data is an average rent per square metre of DKK 492 (31 January 2017 DKK 497) based on full occupancy.

An increase in the return requirement will result in a decline in the property's fair value, while an increase in the occupancy rate and/or the average rent per square metre will cause the fair value of the property to rise. In Management's opinion, there is not necessarily a direct relationship between changes to the rent per square metre and changes to the return requirement.

Future minimum rent on non-terminable lease contracts:

	31 Jan 2018	31 Jan 2017
Within 1 year from reporting date	0.1	0.1
Within 1 - 5 years from reporting date	0.4	0.2
After 5 years from reporting date	0.0	0.0
Total	0.5	0.3

A few lease agreements concluded for completed investment properties stipulate a period during which the agreement is non-terminable by the tenant. Generally, the term of the lease agreements can be extended.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 79/109

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. DEFERRED TAX

	31 Jan 2018	31 Jan 2017
Deferred tax assets/tax liabilities at 1 February, net	61.6	67.5
Foreign-exchange adjustment, beginning of year	-0.4	-0.1
Deferred tax for the year recognized in profit or loss for the year	0.5	-5.2
Deferred tax for the year recognized in other comprehensive income	-2.7	-0.3
Other additions, net	0.2	-0.3
Deferred tax assets/tax liabilities at 31 January, net	59.2	61.6
Deferred tax relates to:
Property, plant and equipment	0.2	0.2
Other non-current assets	21.3	13.8
Current assets	38.5	7.4
Untaxed reserve relating to Sweden	-2.0	-2.0
Provisions	1.3	7.9
Temporary differences	59.3	27.3
Value of tax loss(es)	321.5	309.9
Impairment of tax assets	-321.6	-275.6
Total	59.2	61.6
Deferred tax recognized in balance sheet breaks down as follows:
Deferred tax assets	59.9	75.4
Deferred tax liabilities	-0.7	-13.8
Deferred tax assets/tax liabilities at 31 January, net	59.2	61.6
Deferred tax assets not recognized in balance sheet:
Value of tax losses	271.5	221.6
Other non-current assets	21.3	26.4
Current assets	27.6	20.0
Provisions	1.2	7.6
Total	321.6	275.6
Deferred tax liabilities not recognized in balance sheet:
Contingent retaxation liabilities attaching to German subsidiaries	97.4	97.4

The Company controls whether the retaxation liability will be triggered. It is not the Company's intention for such taxation to be triggered.

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. DEFERRED TAX, CONTINUED

31 Jan 2018	Deferred tax assets/tax liabilities at 1 February, net	Recognized in profit/loss	Recognized in other comprehensive income	Other additions, net	Foreign exchange adjustments, beginning of year	Deferred tax assets/tax liabilities at 31 January, net
Property, plant and equipment	0.2	0.0	0.0	0.0	0.0	0.2
Other non-current assets	13.8	7.4	0.0	0.0	0.1	21.3
Current assets	7.4	33.5	-2.7	0.2	0.1	38.5
Untaxed reserve relating to Sweden	-2.0	0.0	0.0	0.0	0.0	-2.0
Provisions	7.9	-6.6	0.0	0.0	0.0	1.3
Temporary differences	27.3	34.3	-2.7	0.2	0.2	59.3
Value of tax losses	309.9	11.4	0.0	0.0	0.2	321.5
Impairment of tax assets	-275.6	-45.2	0.0	0.0	-0.8	-321.6
Total	61.6	0.5	-2.7	0.2	-0.4	59.2

Deferred tax recognized in other comprehensive income:
Tax on foreign-exchange adjustments, foreign operations
-2.7
Total
-2.7

31 Jan 2017	Deferred tax assets/tax liabilities at 1 February, net	Recognized in profit/loss	Recognized in other comprehensive income	Other additions, net	Foreign exchange adjustments, beginning of year	Deferred tax assets/tax liabilities at 31 January, net
Property, plant and equipment	0.3	-0.1	0.0	0.0	0.0	0.2
Other non-current assets	10.5	3.0	0.0	0.0	0.3	13.8
Current assets	22.6	-15.0	-0.3	-0.3	0.4	7.4
Untaxed reserve relating to Sweden	-2.8	0.8	0.0	0.0	0.0	-2.0
Provisions	7.7	0.1	0.0	0.0	0.1	7.9
Temporary differences	38.3	-11.2	-0.3	-0.3	0.8	27.3
Value of tax losses	310.9	-1.7	0.0	0.0	0.7	309.9
Impairment of tax assets	-281.7	7.7	0.0	0.0	-1.6	-275.6
Total	67.5	-5.2	-0.3	-0.3	-0.1	61.6

Deferred tax recognized in other comprehensive income:
Tax on foreign-exchange adjustments, foreign operations
-0.3
Total
-0.3

The total tax asset comes from the Danish part of the joint taxation. In the Danish joint taxation the tax losses can be carried forward perpetually. In the most recent financial years, TK Development has realized positive accounting results within the Danish joint taxation.

The valuation of the tax asset is based on existing budgets and profit forecasts for a five-year period. For the first three years, budgets are based on an evaluation of specific projects in the Group's project portfolio. The valuation for the next two years has been based on specific projects in the project portfolio with a longer time horizon than three years as well as various project opportunities. These valuations are subject to substantial uncertainty, for which reason a provision has been made for the risk that projects are postponed or not implemented and the risk that project profits fall below expectations.

The impairment of the tax asset relates mainly to Danish tax losses that can be carried forward perpetually, as well as Polish and Czech losses.

Reference is made to note 2, Accounting estimates and judgments.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 81/109

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. PROJECTS IN PROGRESS OR COMPLETED

	31 Jan 2018	31 Jan 2017
Projects in progress or completed, excl. interest, etc.	2,018.7	2,214.6
Capitalized interest, etc.	286.5	313.0
Payments received on account	-221.1	-72.5
Impairment	-567.6	-299.9
Total projects in progress or completed	1,516.5	2,155.2
Which breaks down as follows:
Development projects and land (development)	311.0	927.6
Completed projects in operation (discontinuing activities)	871.8	1,120.1
Other land and development projects (discontinuing activities)	333.7	107.5
Total projects in progress or completed	1,516.5	2,155.2

The carrying amount of the portion of the project portfolio on which impairment losses have been recognized is DKK 1,137.3 million (2016/17: DKK 1,464.4 million) of which DKK 1,116.3 million relates to discontinuing activities (2016/17: DKK 1,133.2 million).

NOTE 19. TRADE RECEIVABLES

	31 Jan 2018	31 Jan 2017
Receivables from tenants	3.9	4.0
Other trade receivables	18.1	6.7
Total trade receivables	22.0	10.7
Impairment for the year recognized in the income statement	0.7	0.1
	31 Jan 2018	31 Jan 2017
Impairment at 1 February	8.5	9.4
Correction of opening balance	0.0	0.1
Disposals for the year	-4.7	0.0
Foreign-exchange adjustments, beginning of year	0.5	0.1
Applied for the year	-0.2	-1.2
Provisions for the year	0.8	0.6
Reversed provisions	-0.1	-0.5
Impairment at 31 January	4.8	8.5

Any impairment is made to the net realizable value, equal to the sum total of future net cash flows that the receivables are expected to generate. Impairment losses on receivables are calculated on the basis of an assessment of the individual receivables.

The carrying amount of receivables written down to net realizable value based on an individual assessment amounts to DKK 0.8 million. The corresponding amount at 31 January 2017 amounted to DKK 1.3 million. The majority of the written-down receivables are past due. There are no major past due but not impaired receivables.

In by far the most cases, receivables from tenants are secured by deposits or other guarantees, which are included in the basis for any impairments.

No interest income on impaired receivables was recognized as revenue in the 2017/18 financial year or in the comparative year.

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20. SHARE CAPITAL

The sharecapital consist of 98,153,335 shares of each DKK 1. The share capital has been paid up in full. The shares are not divided into several share classes, and no shares are subject to special rights.

	31 Jan 2018	31 Jan 2017
Number of shares at 1 February	98,153,335	98,153,335
Number of shares at 31 January	98,153,335	98,153,335

The Group did not hold treasury shares in the 2017/18 financial year or in the comparative year.

NOTE 21. OTHER RESERVES

	Reserve for value adjustment for available-for-sale financial assets	Reserve for value adjustment of hedging instruments	Reserve for foreign exchange adjustments	Total
Other reserves at 1 February 2016	-0.1	-1.5	-7.7	-9.3
Other comprehensive income:
Other comprehensive income after tax in joint ventures	0.0	0.1	-1.0	-0.9
Exchange-rate adjustment, foreign operations	0.0	0.0	3.4	3.4
Value adjustment of financial assets - available-for-sale	0.1	0.0	0.0	0.1
Value adjustment of hedging instruments	0.0	-0.3	0.0	-0.3
Deferred tax on other comprehensive income	0.0	0.0	-0.3	-0.3
Corporate income tax on other comprehensive income	0.0	0.0	-1.1	-1.1
Other reserves at 31 January 2017	0.0	-1.7	-6.7	-8.4
Other comprehensive income:
Exchange-rate adjustment, foreign operations	0.0	0.0	11.8	11.8
Value adjustment of hedging instruments	0.0	-1.0	0.0	-1.0
Deferred tax on other comprehensive income	0.0	0.0	-2.7	-2.7
Other reserves at 31 January 2018	0.0	-2.7	2.4	-0.3

The reserve for value adjustment of financial assets available for sale comprises the accumulated net change in the fair value of financial assets classified as available for sale. The reserve is dissolved as the relevant financial assets are sold or expire.

The reserve for value adjustment of hedging instruments comprises the accumulated net change in the fair value of interest-rate hedging contracts concluded to hedge future transactions.

The reserve for foreign-exchange adjustments comprises all foreign-exchange adjustments arising on the translation of financial 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 recognized in other comprehensive income in respect of the relevant subsidiary are transferred to the profit or loss.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 83/109

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NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22. PROVISIONS

	31 Jan 2018	31 Jan 2017
Provisions at 1 February	2.8	6.1
Applied during the year	-1.5	-3.3
Reversed rent guarantees	-0.5	0.0
Provisions for the year	4.3	0.0
Provisions at 31 January	5.1	2.8
Expected maturity dates of the liabilities provided for:
0 - 1 year	4.8	1.9
1 - 5 years	0.3	0.9
Provisions at 31 January	5.1	2.8

Provisions consist of rent guarantee liabilities for sold properties and relate to guarantees issued by the Group in a few cases towards the buyers of the properties. Rent guarantee liabilities have been calculated based on experience with rent guarantees and an individual assessment of each lease.

NOTE 23. CREDIT INSTITUTIONS

	31 Jan 2018	31 Jan 2017
Payables to credit institutions are recognized as follows in the balance sheet:
Current liabilities	1,218.7	1,433.3
Total payables to credit institutions	1,218.7	1,433.3
Fair value	1,212.5	1,423.2
Carrying amount	1,218.7	1,433.3

The fair value has been determined at the present value of future principal repayments and interest payments by using the effective interest method (Fair value hierarchy: Level 2).

At 31 January, the Group had the following loans and credits:

Loans	Maturity	Fixed/variable	Effective rate		Carrying amount		Fair value
			2017/18	2016/17	2017/18	2016/17	2017/18	2016/17
Bank DKK	2018	variable	2.6 - 5.3 %	2.9 - 4.2 %	417.3	572.2	417.3	572.2
Bank DKK	2020	fixed	5 %	5 %	490.0	495.0	483.8	484.9
Bank SEK	2018	variable	3.2 - 3.8 %	3.4 - 3.8 %	28.6	25.1	28.6	25.1
Bank PLN	2018-2019	variable	4.7 %	4.7 - 5.0 %	23.1	59.9	23.1	59.9
Bank CZK	2018	variable	3.6 - 4.1 %	3.6 - 4.0 %	6.2	27.2	6.2	27.2
Bank EUR	2018-2019	variable	2.4 - 4.0 %	2.4 - 4.5 %	253.5	253.9	253.5	253.9
Total					1,218.7	1,433.3	1,212.5	1,423.2

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NOTE 24. OPERATING LEASES

For the years 2017-2021, operating leases for the rental of office premises, office machines and operating equipment have been concluded. The leases have originally been concluded for a one to five-year period with fixed lease payments that are index-adjusted annually. The leases are non-terminable for the period mentioned, after which it is expected that the majority can be renewed for one to three-year periods.

Future minimum lease payments according to non-terminable lease contracts break down as follows:

	2017/18	2016/17
Within 1 year	6.0	7.7
Within 1 - 5 years	6.4	8.4
After 5 years	0.0	0.0
Total	12.4	16.1
Minimum lease payments for the year recognized in the income statement	7.4	7.7

NOTE 25. OTHER DEBT

	31 Jan 2018	31 Jan 2017
Employee-related payables	7.3	3.7
Holiday pay obligations	7.3	7.3
Derivative financial instruments (hedging instruments)	0.5	0.7
Other debt	26.4	16.7
Other debt, total	41.5	28.4
Broken down as follows under liabilities:
Current liabilities	41.5	28.4
Other debt, total	41.5	28.4

The carrying amount of employee related payables consisting of salaries, personal income tax, social security contributions, holiday pay, etc., project related costs and other costs payable 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 reporting date and which are to be taken in the following financial year(s).

Derivative financial instruments concern interest-rate hedging contracts and are classified as financial liabilities used as hedging instruments, measured at fair value.

NOTE 26. CONTINGENT ASSETS AND LIABILITIES AS WELL AS SECURITY FURNISHED

Contingent assets

A contingent asset in the form of deferred tax assets not recognized appears from note 17.

Contingent liabilities and security furnished

	31 Jan 2018	31 Jan 2017
Surety and guarantee commitments on behalf of associates	10.0	10.0
Surety and guarantee commitments on behalf of joint ventures	241.5	74.0
Other surety and guarantee commitments	12.8	46.7
Carrying amount of projects in progress or completed furnished as security to credit institutions	1,381.9	1,966.0
Carrying amount of escrow account deposits, etc., investments, receivables and investment properties as security to credit institutions	327.5	259.0

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 85/109

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 26. CONTINGENT ASSETS AND LIABILITIES AS WELL AS SECURITY FURNISHED, CONTINUED

The below figures in brackets are comparative figures for 2016/17.

The amounts stated for surety and guarantee commitments on behalf of associates and joint ventures are the upper limits.

The Group's project portfolio amounts to DKK 1,516.5 million (DKK 2,155.2 million), of which DKK 1,381.9 million (DKK 1,966.0 million) has been furnished as security to the credit institutions that have granted building credits or mortgage credit loans. The carrying amount of escrow account deposits, etc. and other assets, DKK 327.5 million (DKK 259.0 million) consists of security furnished in the form of escrow accounts, etc. DKK 122.3 million (DKK 23.4 million), investment properties DKK 28.1 million (DKK 53.1 million), investments in joint ventures DKK 130.8 million (DKK 136.4 million), and receivables DKK 46.3 million (DKK 46.1 million).

TK Development has entered into construction contracts regarding the execution of projects. The total remaining contract sum amounts to DKK 347.3 million (DKK 223.7 million).

Usual performance bonds have been furnished for construction works performed. The 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.

TK Development can in some cases be required to make the necessary funds available to joint ventures in step with the development and execution of specific projects, or might be required to contribute further capital where this is necessary. In a few cases guarantees have been granted for budget overruns on projects that have been handed over at the design stage.

TK Development is occasionally involved in disputes and lawsuits, but is not currently a party to any lawsuits that, either individually or collectively, are expected to materially affect the Group's earnings. However, TK Development is party to the following lawsuit that is of relevance due to its scope:

In the summer of 2002, De Samvirkende Købmænd, a trade association of grocery retailers, filed a complaint with the Nature Protection Board of Appeal (Naturklagenævnet) in respect 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. The Nature Protection 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. At the beginning of 2011, the High Court gave judgment in favour of De Samvirkende Købmænd. Neither the owner of the centre nor any company in the TK Development Group is a direct party to the case, but the High Court's judgment may have the effect that the Field's department store will have to be redesigned following negotiations with the relevant local authorities. As a result of the judgment, the owner of Field's may have to incur the financial burden of causing the necessary changes to the building layout, and in that connection it cannot be ruled out that a claim may be made against the Group. Regardless of the judgment, Management still believes the risk of this case to be negligible.

The contingent retaxation liability attaching to German subsidiaries regarding which no provisions for deferred tax have been made amounts to DKK 97.4 million (DKK 97.4 million). The Company controls whether the retaxation liability will be triggered. It is not the Company's intention for such taxation to be triggered.

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NOTE 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS

Capital management

The Group's capital structure consists of equity, cash and cash equivalents and payables to credit institutions.

The 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 earnings potential, 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.

Financial targets

The Group has adopted a solvency target corresponding to a solvency ratio of 30 %, and compliance with this target also represents a covenant that commits the Group vis-à-vis its main banker. This target was met throughout the financial year. Furthermore, the Board of Directors has adopted a goal of achieving a solvency ratio of about 40 %, calculated as the ratio of equity to total assets. The solvency ratio was 40.6 % at 31 January 2018 (31 January 2017: 45.3 %).

Liquidity covenant

The Group has used liquidity covenants for quite some years. In short, the liquidity covenant expresses that the Group's cash resources – to enable the Group to cover liabilities requiring substantial liquidity – must at any time correspond to the fixed 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.

The covenant represents a liquidity target for the whole Group and a commitment to the Group's main banker. The covenant must be calculated and met before projects requiring liquidity can be acquired and initiated.

The covenant is expressed as follows: $$L + K > E + O + R$$, where:

L = The TK Development Group's free cash resources in the form of deposits with banks and the value of listed Danish government and mortgage bonds with a term to maturity of less than five years.
K = The TK Development Group's amounts available on committed operating credit facilities from time to time.
E = The planned impact on cash resources from the projects which the TK Development Group is obliged to complete within six months, including the new/expanded project, taking into account committed project credit facilities from financial institutions and forward funding.
O = The TK Development Group's cash non-project-related capacity costs for the following six months less management fees falling due within six months. In addition, pre-agreed project fees from final 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 operating credit facilities for the following six months.

The Group's liquidity covenant was met during the year under review.

Dividend policy

TK Development's long-term policy is to distribute a portion of the year's profit as dividends or alternatively via a share repurchase programme. This will always be done with due regard for the Group's capital structure, solvency, cash resources and investment plans.

In addition, the Board of Directors aims to divest the Group's discontinuing activities as soon as possible. The net proceeds from the divestment will be distributed to the Company's shareholders.

Breach of loan agreements

Neither TK Development nor any group enterprises were in breach of any loan agreements in the 2017/18 financial year.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 87/109

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NOTE 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS, CONTINUED

Categories of financial instruments

	31 Jan 2018	31 Jan 2017
Other securities and investments, non-current	4.5	5.0
Financial assets held to maturity	4.5	5.0
Trade receivables	22.0	10.7
Receivables from joint ventures	140.0	196.9
Receivables from associates	8.9	8.9
Other receivables	20.7	13.4
Cash, cash equivalents, blocked and escrow accounts	127.1	33.9
Loans and receivables	318.7	263.8
Securities	4.1	4.1
Financial assets available for sale	4.1	4.1
Credit institutions	1,218.7	1,433.3
Trade payables	69.8	72.7
Other debt	41.0	27.7
Financial liabilities measured at amortized cost	1,329.5	1,533.7
Derivative financial instruments entered into to hedge interest rates	0.5	0.7
Hedging instruments	0.5	0.7

The Group's risk management policy

As a consequence of its activities, TK Development is exposed to fluctuations in foreign-exchange and interest rates. The overall objective of the Group's risk policy is to manage risks and exposures and thus minimize the negative effects on earnings and cash flows. To the extent possible, the Parent Company manages the Group's financial risks centrally and coordinates the Group's liquidity management, including the raising of funds and the investment of surplus funds.

Foreign-exchange risks

The 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 financing of the individual projects, whether raised with credit institutions or by forward funding, is raised in the same currency as the currency agreed upon in a sale or expected to be used for the project sale. Likewise, the main rule is for construction contracts to be concluded in the project invoicing currency. In the cases where the Company concludes the construction contract in a different 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 derivative financial instruments. In the 2017/18 financial year and in the comparative year, the Group did not enter into any forward agreements or other financial instruments.

Interest-rate risks

As a main rule, the TK Development Group finances its projects in progress by way of short-term, floating-rate bank loans or by forward funding, generally based on a fixed interest rate. Other interest-bearing debt is largely subject to variable interest (floating-rate debt). At 31 January 2018 the Group has one interest swap entered into to hedge interest rates. The principal of this contract amounts to EUR 18 million and it will expire in 2019.

Based on the Group's risk policy, Management regularly assesses whether a portion of its floating-rate loans should be hedged by financial instruments.

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NOTE 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS, CONTINUED

Liquidity risks

The Group manages its liquidity risks by using continuous short-term cash budgets and long-term cash budgets that cover several years. The Group aims to continuously secure an optimum liquidity buffer to make efficient use of its cash resources in case of unforeseen fluctuations in cash withdrawals. The Group aims to optimize its liquidity buffer by the sale of completed projects and plots of land, by raising loans or by entering into forward funding agreements for its projects in progress.

Credit risks

In connection with the sale of the Group's projects the title to a project does not pass to the investor until payment has been effected. Thus, 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.

The maximum credit risks associated with securities, equity investments, trade receivables, other receivables, cash and cash equivalents and deposits in blocked and escrow accounts correspond to their carrying amounts. The impairment losses for the year relating to trade receivables appear from note 19.

Impairment losses on other financial assets amount to DKK 65.4 million in the financial year 2017/18 (2016/17: DKK 0.9 million). The carrying amount of other receivables written down to net realizable value amounts to DKK 0 million (2016/17: DKK 0 million).

Foreign-exchange risks relating to recognized assets and liabilities

2017/18	Cash, cash equivalents, blocked accounts and securities	Receivables	Credit institutions	Liabilities	Unsecured net position
EUR	0.0	0.4	-39.8	-1.1	-40.5
SEK	0.0	0.0	-7.0	0.0	-7.0
PLN	4.6	7.3	-0.3	-5.8	5.8
CZK	0.1	8.7	-0.3	0.0	8.5
31 Jan 2018	4.7	16.4	-47.4	-6.9	-33.2
2016/17
EUR	1.3	64.7	-34.0	0.0	32.0
SEK	0.0	0.0	-2.8	0.0	-2.8
PLN	4.6	4.3	-0.2	-5.2	3.5
CZK	0.0	0.4	-0.8	0.0	-0.4
31 Jan 2017	5.9	69.4	-37.8	-5.2	32.3

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 89/109

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NOTE 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS, CONTINUED

Sensitivity of equity to foreign-exchange fluctuations	2017/18	2016/17
Effect if the EUR rate were 10 % lower than the actual rate	3.2	-2.5
Sensitivity of profit/loss to foreign-exchange fluctuations	2017/18	2016/17
Effect if the EUR rate were 10 % lower than the actual rate	3.2	-2.5

The Group's major foreign-exchange exposure relates to EUR. The above calculations show the effect on equity and profit 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 impact on profit or loss and equity.

Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities

2017/18	Date of revaluation/maturity				Effective rate in %
	0 - 1 year	1 - 5 years	> 5 years	Total
Other securities and investments, non-current	0.6	3.9	0.0	4.5	3%
Other securities and investments, current	4.1	0.0	0.0	4.1	0%
Trade receivables	22.0	0.0	0.0	22.0	0%
Receivables from joint ventures	14.8	125.2	0.0	140.0	0 - 8%
Other receivables	20.7	0.0	0.0	20.7	0%
Deposits with credit institutions (cash, cash equivalents and blocked and escrow accounts)	127.1	0.0	0.0	127.1	0 - 1%
Receivables from associates	6.4	2.5	0.0	8.9	0 - 6%
Trade payables	-69.8	0.0	0.0	-69.8	0%
Other debt	-41.5	0.0	0.0	-41.5	0%
Payables to credit institutions	-572.0	-646.7	0.0	-1,218.7	2.4 - 5.3%
Interest payments on loans	-37.2	-42.1	0.0	-79.3
Total at 31 January 2018	-524.8	-557.2	0.0	-1,082.0
2016/17	Date of revaluation/maturity				Effective rate in %
---	---	---	---	---	---
	0 - 1 year	1 - 5 years	> 5 years	Total
Other securities and investments, non-current	0.6	4.4	0.0	5.0	3%
Other securities and investments, current	4.1	0.0	0.0	4.1	0%
Trade receivables	10.7	0.0	0.0	10.7	0%
Receivables from joint ventures	11.6	185.3	0.0	196.9	0 - 8%
Other receivables	13.4	0.0	0.0	13.4	0%
Deposits with credit institutions (cash, cash equivalents and blocked and escrow accounts)	33.9	0.0	0.0	33.9	0 - 1%
Receivables from associates	0.0	8.9	0.0	8.9	0 - 6%
Trade payables	-72.7	0.0	0.0	-72.7	0%
Other debt	-28.4	0.0	0.0	-28.4	0%
Payables to credit institutions	-736.2	-697.1	0.0	-1,433.3	2.4 - 5%
Interest payments on loans	-52.6	-76.2	0.0	-128.8
Total at 31 January 2017	-815.6	-574.7	0.0	-1,390.3

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NOTE 27. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS, CONTINUED

The fair value at 31 January 2018 of outstanding interest swaps entered into to hedge interest-rate risks on floating-rate loans amounts to DKK 0.5 million. The interest swap contract expires in 2019. The income statement was not affected by hedge inefficiency in the 2017/18 financial year or in the year of comparison.

With regard to interest-rate sensitivity, an increase in the interest level of 1% p.a. compared to the interest level at the reporting date in respect of the Group's variable-interest deposits with and payables to credit institutions would have a negative impact on the profit or loss for the year, and thus on equity, of DKK 4.7 million for a full year. A fall in the interest level of 1% p.a. would result in a corresponding positive impact on the profit or loss for the year and on equity. For the 2016/17 financial year, the interest-rate sensitivity in case of a change in the interest level of 1% p.a. would have a DKK 7.1 million impact for a full year.

Liquidity risks

The maturity dates of financial liabilities are specified 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. The TK Development Group's liquidity reserve consists of cash and cash equivalents as well as unutilized operating credit facilities.

	31 Jan 2018	31 Jan 2017
The liquidity reserve breaks down as follows:
Cash and cash equivalents	4.8	10.5
Unutilized operating credit facilities	29.5	16.6
Total	34.3	27.1
Deposited funds for later release	122.3	23.4
Total liquidity reserve	156.6	50.5

NOTE 28. TRANSACTIONS WITH RELATED PARTIES

The Company has no related parties with a controlling interest.

The Company has the following related parties:

Board of Directors and Executive Board (and their related parties)
Joint ventures and associates; see the Overview of group companies, note 31.

	2017/18	2016/17
Board of Directors and Executive Board (and their related parties):
Remuneration, Board of Directors	1.5	1.3
Remuneration, Executive Board, see note 7a)	11.4	7.4
Joint ventures:
Fees	2.4	2.2
Interest income	7.9	7.5
Guarantee commission	0.5	0.0
Receivables (balance)	140.0	196.9
Associates:
Fees	1.2	0.9
Interest income	0.1	0.1
Receivables (balance)	8.9	8.9

a) including provision of DKK 4 million for salary etc. for Frede Clausen in the release period.

Suretyships and guarantees have been issued on behalf of joint ventures and associates; see note 26.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 91/109

NOTES, CONSOLIDATED FINANCIAL STATEMENTS

NOTE 28. TRANSACTIONS WITH RELATED PARTIES, CONTINUED

Apart from the above, there were no transactions with related parties in the year under review. In accordance with the accounting policies, transactions with subsidiaries are eliminated in the consolidated financial statements.

No security or guarantees had been furnished for balances owing to or by related parties at the reporting date.

Receivables and payables are settled by payment in cash. No losses were realized on receivables from related parties. In 2017/18 an impairment of DKK 65.4 million was made to provide for losses on receivables from joint ventures (2016/17: DKK 0 million).

NOTE 29. POST-BALANCE SHEET EVENTS

No such post-balance sheet events have occurred as could change the assessment of the Annual Report.

NOTE 30. APPROVAL OF ANNUAL REPORT FOR PUBLICATION

At the board meeting on 22 March 2018, the Board of Directors approved the Annual Report for publication. The Annual Report will be submitted to the Company's shareholders for adoption at the Annual General Meeting on 26 April 2018.

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NOTE 31. OVERVIEW OF GROUP COMPANIES

No parent companies other than the listed company TK Development A/S prepare consolidated financial statements.

Subsidiaries

Name	Reg. office	Ownership interest	Name	Reg. office	Ownership interest
TK Bygge-Holding A/S	Aalborg	100%	Euro Mall Targówek III Sp. z o.o.	Warsaw	100%
TKD Projekt A/S	Aalborg	100%	Euro Mall Polska XV Sp. z o.o.	Warsaw	100%
Kommanditaktieselskabet Frederikssund Shoppingcenter	Aalborg	100%	TK Polska Development II Sp. z o.o.	Warsaw	100%
Driftsselskabet Frederikssund ApS	Aalborg	100%	Euro Mall Polska XXVII Sp. z o.o.	Warsaw	100%
Euro Mall Holding A/S	Aalborg	100%	Euro Mall Polska XXVIII Sp. z o.o.	Warsaw	100%
Projektselskabet Køge Centrum P/S	Aalborg	100%	Euro Mall Polska XXIX Sp. z o.o.	Warsaw	100%
Komplementarselskabet TK-DK ApS	Aalborg	100%	TK Czech Operations s.r.o.	Prague	100%
Domus Vista ApS	Aalborg	100%	Euro Mall Ceske Budejovice s.r.o.	Prague	100%
Englandsvej 45 P/S	Aalborg	100%	TK Czech Development III s.r.o.	Prague	100%
Komplementarselskabet Englandsvej 45 ApS	Aalborg	100%	Euro Mall City s.r.o.	Prague	100%
Vanløse Alle 92 P/S	Aalborg	100%	Euro Mall Event s.r.o.	Prague	100%
Komplementarselskabet Vanløse Alle 92 ApS	Aalborg	100%	UAB TK Development Lietuva	Vilnius	100%
Euro Mall Sweden AB	Stockholm	100%	SIA TKD Retail Park	Riga	100%
TK Development Sweden Holding AB	Stockholm	100%	SIA "KK"	Riga	100%
TK Projekt AB	Stockholm	100%	Euro Mall Luxembourg S.A.	Luxembourg	100%
EMÖ Projekt AB	Stockholm	100%	Euro Mall Czech & Slovakia Invest B.V.	Amsterdam	100%
EMÖ Center AB	Stockholm	100%	TK Development Bau GmbH	Berlin	100%
TK Utveckling AB	Stockholm	100%	TK Development GmbH	Berlin	100%
Enebyängen Fastighets AB	Stockholm	100%	TKH Datzeborg Grundstücksgesellschaft mbH	Berlin	100%
Retail Park 3 AB	Stockholm	100%	TKH Oranienburg Grundstücksgesellschaft mbH	Berlin	100%
TKD Suomi OY	Helsinki	100%	TKH Mahlow Wohnungsbaugesellschaft mbH i likv.	Berlin	100%
OY TKD Construction Finland	Helsinki	100%	EKZ Datzeborg Scan-Car GmbH	Berlin	100%
TK Polska Operations S.A.	Warsaw	100%	EKZ Datzeborg Scan-Car GmbH & Co. KG	Berlin	100%
Euro Mall Polska X Sp. z o.o.	Warsaw	100%

The companies are included in the consolidated financial statements by full consolidation.

Joint ventures

Kommanditaktieselskabet Østre Havn	Aalborg	50%	SporbyenScandia 4 P/S	Aalborg	50%
Østre Havn ApS	Aalborg	50%	SporbyenScandia 5 P/S	Aalborg	50%
Ringsted Outlet Center P/S	Aalborg	50%	SporbyenScandia 6 ApS	Aalborg	50%
SPV Ringsted ApS	Aalborg	50%	Ejendomsselskabet Beddingen 5 ABC P/S	Aalborg	50%
Ringsted Retail Company ApS	Aalborg	50%	Komplementarselskabet Beddingen 5 ABC ApS	Aalborg	50%
Kommanditaktieselskabet Danlink-Udvikling	Copenhagen	50%	The Yard, Beddingen P/S	Aalborg	50%
Komplementarselskabet DLU ApS	Copenhagen	50%	Komplementarselskabet Beddingen ApS	Aalborg	50%
SporbyenScandia P/S	Aalborg	50%	BROEN Shopping A/S	Aalborg	35%
Sporbyen Komplementarselskab ApS	Aalborg	50%	Euro Mall Polska XIV Sp. z o.o.	Warsaw	30%
SporbyenScandia 1 P/S	Aalborg	50%	Euro Mall Polska XXIII Sp. z o.o.	Warsaw	30%
SporbyenScandia 2 P/S	Aalborg	50%	Euro Mall Ventures S.à r.l.	Luxembourg	20%
SporbyenScandia 3 P/S	Aalborg	50%	Euro Mall Luxembourg JV S.à r.l.	Luxembourg	30%

The companies are recognized in the consolidated financial statements according to the equity method.

Associates

Step Re CSP Invest I A/S	Herning	50%	Tøjborg ApS	Ikast-Brande	20%
Amerika Plads C P/S	Aalborg	25%	Camacuri s.r.o.	Prague	45%
Komplementarselskabet Amerika Plads C ApS	Aalborg	25%

The companies are recognized in the consolidated financial statements according to the equity method.

NOTES, CONSOLIDATED FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 93/109

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PARENT COMPANY FINANCIAL STATEMENTS

INCOME STATEMENT

DKKm	Note	2017/18	2016/17
Other external expenses		3.7	3.6
Staff costs	3	5.7	1.6
Total		9.4	5.2
Operating profit/loss		-9.4	-5.2
Income from investments in group enterprises	5	-423.1	-48.6
Financial income	6	59.7	68.5
Financial expenses	7	-1.9	-2.3
Total		-365.3	17.6
Profit/loss before tax		-374.7	12.4
Tax on profit/loss for the year	8	4.2	5.5
Profit/loss for the year	9	-378.9	6.9

COMPREHENSIVE INCOME STATEMENT

Profit/loss for the year	-378.9	6.9
Items that may be re-classified to profit/loss:
Value adjustment of available-for-sale financial assets	0.0	0.1
Other comprehensive income after tax in group enterprises	8.0	1.0
Other comprehensive income for the year	8.0	1.1
Comprehensive income for the year	-370.9	8.0

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PARENT COMPANY FINANCIAL STATEMENTS

BALANCE SHEET

DKKm	Note	31 Jan 2018	31 Jan 2017
ASSETS
Non-current assets
Investments in group enterprises	5	5.0	384.4
Receivables from group enterprises		1,013.0	989.2
Financial assets		1,018.0	1,373.6
Deferred tax assets	10	6.5	5.3
Other non-current assets		6.5	5.3
Non-current assets		1,024.5	1,378.9
Current assets
Prepayments		0.4	0.5
Receivables		0.4	0.5
Other securities and investments		4.1	4.1
Cash and cash equivalents		0.0	0.2
Current assets		4.5	4.8
ASSETS		1,029.0	1,383.7

PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 95/109

PARENT COMPANY FINANCIAL STATEMENTS

BALANCE SHEET

DKKm	Note	31 Jan 2018	31 Jan 2017
EQUITY AND LIABILITIES
Equity
Share capital	11	98.2	98.2
Other reserves	11	0.0	-8.0
Retained earnings		824.6	1,203.5
Equity		922.8	1,293.7
Liabilities
Provisions	12	28.8	23.6
Non-current liabilities		28.8	23.6
Credit institutions	13	63.3	62.1
Trade payables		0.6	1.0
Corporate income tax		6.9	1.6
Other debt		6.6	1.7
Current liabilities		77.4	66.4
Liabilities		106.2	90.0
EQUITY AND LIABILITIES		1,029.0	1,383.7

96/109 | TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | PARENT COMPANY FINANCIAL STATEMENTS

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PARENT COMPANY FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

DKKm	Share capital	Other reserves	Retained earnings	Total equity
Equity at 1 February 2016	98.2	-9.1	1,196.6	1,285.7
Profit/loss for the year	0.0	0.0	6.9	6.9
Other comprehensive income for the year	0.0	1.1	0.0	1.1
Total comprehensive income for the year	0.0	1.1	6.9	8.0
Equity at 31 January 2017	98.2	-8.0	1,203.5	1,293.7
Profit/loss for the year	0.0	0.0	-378.9	-378.9
Other comprehensive income for the year	0.0	8.0	0.0	8.0
Total comprehensive income for the year	0.0	8.0	-378.9	-370.9
Equity at 31 January 2018	98.2	0.0	824.6	922.8

PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 97/109

PARENT COMPANY FINANCIAL STATEMENTS

CASH FLOW STATEMENT

DKKm	2017/18	2016/17
Operating profit/loss	-9.4	-5.2
Adjustments for non-cash items:
Exchange-rate adjustments	-0.1	-0.3
Increase/decrease in receivables	-54.3	-57.2
Increase/decrease in payables and other debt	4.5	0.2
Cash flows from operations	-59.3	-62.5
Interest paid, etc.	-1.9	-2.1
Interest received, etc.	59.8	68.5
Corporate income tax paid	0.0	-2.8
Cash flows from operating activities	-1.4	1.1
Repayment, short term credit institutions	0.0	-0.9
Raising of financing, short term credit institutions	1.2	0.0
Cash flows from financing activities	1.2	-0.9
Cash flows for the year	-0.2	0.2
Cash and cash equivalents, beginning of year	0.2	0.0
Cash and cash equivalents at year-end	0.0	0.2

The figures in the cash flow statement cannot be inferred from the parent company financial statements alone.

98/109 | TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | PARENT COMPANY FINANCIAL STATEMENTS

TABLE OF CONTENTS, NOTES, PARENT COMPANY FINANCIAL STATEMENTS

Page

100 Note 1. Accounting policies
101 Note 2. Accounting estimates and judgments
101 Note 3. Staff costs
101 Note 4. Fees payable to the auditors elected at the General Meeting
102 Note 5. Investments in group enterprises
102 Note 6. Financial income
102 Note 7. Financial expenses
103 Note 8. Tax on profit/loss for the year
103 Note 9. Distribution of net profit/loss
103 Note 10. Deferred tax assets
104 Note 11. Share capital and other reserves
104 Note 12. Provisions
104 Note 13. Credit institutions
105 Note 14. Operating leases
105 Note 15. Contingent assets and liabilities as well as securities furnished
106 Note 16. Financial risks and financial instruments
108 Note 17. Transactions with related parties
108 Note 18. Post-balance sheet events
108 Note 19. Approval of Annual Report for publication

NOTES, PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 99/109

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

The financial statements of the Parent Company for 2017/18 are presented in compliance with the International Financial Reporting Standards, as adopted by the EU, and in accordance with Danish disclosure requirements for annual reports of listed companies; see the Executive Order on IFRS issued in pursuance of the Danish Financial Statements Act.

The parent financial statements are presented in DKK, which is the Company's presentation currency.

The parent financial statements are presented on the basis of historical cost, with the exception of investments in group enterprises, which are measured according to the equity method.

Generally, the Parent Company applies the same accounting policies regarding recognition and measurement as the Group. The cases where the Parent Company's accounting policies deviate from those of the Group are described below. For a detailed overall description of accounting policies, reference is made to note 1 to the consolidated financial statements.

IMPLEMENTATION OF NEW AND AMENDED FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS ISSUED BY IFRIC

The parent financial statements for 2017/18 have been presented in accordance with the financial reporting standards (IFRS/IAS) and IFRIC interpretations applicable for financial years beginning at 1 February 2017.

With effect from 1 February 2017, a number of new and amended financial reporting standards and interpretations have been implemented with no effect on recognition and measurement.

The accounting policies have been consistently applied with those of the previous financial year.

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 financial reporting standards and interpretations had not yet entered into force or been adopted by the EU. Thus, they have not been incorporated into the Annual Report. None of the above-mentioned standards and interpretations are expected to materially affect the financial statements for the next financial years.

CASES WHERE THE PARENT COMPANY'S ACCOUNTING POLICIES DEVIATE FROM THOSE OF THE GROUP

Translation of foreign-currency items

Foreign-exchange adjustments of receivables from or payables to subsidiaries that are considered part of the Parent Company's total investment in the relevant subsidiary are recognized in the income statement under financial items. Such foreign-exchange adjustments are recognized in other comprehensive income in the consolidated financial statements.

Investments in group enterprises

In the parent financial statements, investments in group enterprises are recognized and measured according to the equity method, which means that the investments are measured at the proportionate share of the group enterprises' carrying amount, determined according to the Parent Company's accounting policies, with the addition of goodwill and plus or less any proportionate intercompany profits or losses.

The proportionate share of the group enterprise's results after tax and the proportionate elimination of unrealized intercompany profits and losses are recognized in profit or loss, less any impairment of goodwill. The proportionate share of all transactions and events recognized in the group enterprises' other comprehensive income is recognized in other comprehensive income.

Investments in group enterprises with a negative equity value are measured at DKK 0. Receivables and other non-current financial assets considered to be part of the overall investment are written down by any remaining negative equity value. Trade receivables and other receivables are written down to the extent that they are considered uncollectible. A provision for the remaining negative equity value is only recognized if the Parent Company has a legal or constructive obligation to meet the relevant group enterprise's liabilities, and the obligation is expected to result in an outflow of resources from the Group.

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING ESTIMATES AND JUDGMENTS

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 financial 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 significant accounting estimates and judgments that have materially affected this Annual Report:

Investments in and receivables from group enterprises

The need to make provisions for losses on investments in and receivables from group enterprises is based on a specific assessment of each individual group enterprises. If the applied assumptions change or if the actual course of events deviates from the expected development, the value may deviate from the value determined at 31 January 2018. The carrying amount of investments in group enterprises amounted to DKK 5.0 million and receivables from group enterprises to DKK 1,013.0 million at 31 January 2018.

NOTE 3. STAFF COSTS

	2017/18	2016/17
Fees for Board of Directors	1.5	1.3
Salaries, etc. for the Parent Company's Executive Board; see below a)	11.4	7.4
Other salaries and staff costs, etc.	0.3	0.4
Reinvoiced via service agreements	-7.5	-7.5
Total staff costs	5.7	1.6
Average number of employees	2	2
Number of employees at year-end	2	2

a) including provision of DKK 4 million for salary etc. for Frede Clausen in the release period.

For salaries, etc. for the Parent Company's Executive Board and fees for the Board of Directors reference is made to note 7 in the consolidated financial statements.

Defined contribution plans

The Company has entered into defined contribution plans with the employees in the Company. According to these plans, the Company pays a monthly amount of 2% of the relevant employees' basic salaries to independent pension companies.

An amount of DKK 0.2 million was expensed for defined contribution plans in the 2017/18 financial year (2016/17: DKK 0.2 million).

No employees in the Company are comprised by defined benefit plans.

NOTE 4. FEES PAYABLE TO THE AUDITORS ELECTED AT THE GENERAL MEETING

	2017/18	2016/17
Statutory audit	0.5	0.5
Tax consultancy	0.0	0.3
Other services	0.1	0.0
Total	0.6	0.8

NOTES, PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 101/109

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 5. INVESTMENTS IN GROUP ENTERPRISES

	31 Jan 2018	31 Jan 2017
Cost at 1 February	1,627.3	1,127.3
Additions for the year	0.0	500.0
Cost at 31 January	1,627.3	1,627.3
Impairment at 1 February	-1,600.3	-1,552.7
Foreign-exchange adjustments	8.0	1.0
Share of profit/loss for the year	-422.9	-49.2
Changes in intercompany profits/losses	-0.2	0.6
Impairment at 31 January	-2,015.4	-1,600.3
Carrying amount at 31 January	-388.1	27.0
Investments in group enterprises recognized in balance sheet breaks down as follows:
Financial assets	5.0	384.4
Set off against receivables from group enterprises	-364.3	-333.8
Provisions	-28.8	-23.6
Carrying amount at 31 January	-388.1	27.0

In the Parent Company's balance sheet, investments in group enterprises are measured according to the equity method and are equal to the individual subsidiaries' carrying amount, determined according to the Group's accounting policies, with the addition of goodwill and less any intercompany profits or losses, etc.

Overview of investments in group enterprises:

Name	Reg. office	Ownership interest
TK Bygge-Holding A/S	Aalborg	100%
TK Development Bau GmbH	Berlin	100%
TK Development GmbH	Berlin	100%

The ownership interests shown above are the Company's direct holdings.

NOTE 6. FINANCIAL INCOME

	2017/18	2016/17
Interest income from group enterprises	58.7	67.7
Financial income from loans and receivables	58.7	67.7
Other financial income	1.0	0.8
Total financial income	59.7	68.5

Which breaks down as follows:

Interest income from financial assets not measured at fair value through profit and loss	58.7	67.7
Other financial income	1.0	0.8
Total financial income	59.7	68.5

NOTE 7. FINANCIAL EXPENSES

	2017/18	2016/17
Interest expenses, credit institutions	1.9	2.0
Miscellaneous interest expenses	0.0	0.1
Foreign-exchange losses and capital losses on securities	0.0	0.2
Total financial expenses	1.9	2.3

Which break down as follows:

Interest expenses on financial liabilities not measured at fair value through profit and loss	1.9	2.1
Other financial expenses	0.0	0.2
Total financial expenses	1.9	2.3

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 8. TAX ON PROFIT/LOSS FOR THE YEAR

	2017/18	2016/17
Current corporate income tax	5.4	0.0
Adjustment regarding tax relating to prior year(s)	0.0	0.7
Change in deferred tax	-1.2	4.8
Tax on profit/loss for the year	4.2	5.5
The tax on the profit/loss for the year results as follows:
Calculated tax based on the Danish tax rate of 22% (2016/17: 22%)	-82.5	2.7
Adjustment regarding tax relating to prior year(s)	0.0	0.7
Tax effect of:
Non-deductible expenses/non-taxable income	93.2	10.7
Other	0.2	-0.6
Change in value adjustment	-6.7	-8.0
Tax on profit/loss for the year	4.2	5.5

NOTE 9. DISTRIBUTION OF NET PROFIT/LOSS

The Board of Directors proposes that the net profit/loss for the year be carried forward to next year.

NOTE 10. DEFERRED TAX ASSETS

	31 Jan 2018	31 Jan 2017
Deferred tax assets at 1 February	15.6	28.4
Disposals for the year	-5.5	-12.8
Deferred tax assets at 31 January	10.1	15.6
Value adjustment at 1 February	-10.3	-18.3
Value adjustment for the year	6.7	8.0
Value adjustments at 31 January	-3.6	-10.3
Carrying amount at 31 January	6.5	5.3
Deferred tax assets relate to:
Current assets	-1.7	-1.7
Temporary differences	-1.7	-1.7
Value of tax losses	11.8	17.3
Impairment of tax assets	-3.6	-10.3
Total	6.5	5.3

The change in deferred tax assets for the year has been recognized in the income statement.

Deferred tax assets not recognized in balance sheet:
Value of tax losses	3.6	10.3
Deferred tax liability not recognized in balance sheet:
Contingent retaxation liability attaching to German subsidiaries	97.4	97.4

The Company controls whether the retaxation liability will be triggered. It is not the Company's intention for such taxation to be triggered.

NOTES, PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 103/109

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 11. SHARE CAPITAL AND OTHER RESERVES

Share capital

Reference is made to note 20 in the consolidated financial statement.

Other reserves

	Reserve for value adjustment for available-for-sale financial assets	Reserve for foreign exchange adjustments, etc. in group enterprises	Total
Other reserves at 1 February 2016	-0.1	-9.0	-9.1
Other comprehensive income:
Value adjustment of available-for-sale financial assets	0.1	0.0	0.1
Other comprehensive income after tax in group enterprises	0.0	1.0	1.0
Other reserves at 31 January 2017	0.0	-8.0	-8.0
Other comprehensive income:
Value adjustment of available-for-sale financial assets	0.0	0.0	0.0
Other comprehensive income after tax in group enterprises	0.0	8.0	8.0
Other reserves at 31 January 2018	0.0	0.0	0.0

NOTE 12. PROVISIONS

	31 Jan 2018	31 Jan 2017
Provisions at 1 February	23.6	23.6
Provisions for the year	5.2	0.0
Provisions at 31 January	28.8	23.6
Expected maturity dates of the liabilities provided for:
1 - 5 years	28.8	23.6
Provisions at 31 January	28.8	23.6

Provisions relate to provisions for negative equity in subsidiaries.

NOTE 13. CREDIT INSTITUTIONS

	31 Jan 2018	31 Jan 2017
Payables to credit institutions are recognized as follows in the balance sheet:
Current liabilities	63.3	62.1
Total payables to credit institutions	63.3	62.1
Fair value	63.3	62.1
Carrying amount	63.3	62.1

At 31 January, the Parent Company had the following loans and credits:

Loans	Maturity	Fixed/ variable	Effective rate		Carrying amount		Fair value
			2017/18	2016/17	2017/18	2016/17	2017/18	2016/17
Bank DKK	2018	variable	3.6 - 4.2 %	3.8 - 4.2 %	28.8	28.1	28.8	28.1
Bank EUR	2018	variable	2.4 %	2.4 - 2.5 %	34.5	34.0	34.5	34.0

The fair value has been determined at the present value of future principal repayments and interest payments by using the effective interest method (Fair value hierarchy: Level 2).

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 14. OPERATING LEASES

For 2018-2020, operating leases for the rental of operating equipment have been concluded. The leases have been concluded for a four-year period with fixed lease payments. The leases are non-terminable for the period mentioned, and will expire in 2020/21.

Future minimum lease payments according to non-terminable lease contracts break down as follows:

	31 Jan 2018	31 Jan 2017
Within 1 year	0.2	0.2
Within 1 - 5 years	0.3	0.5
Total	0.5	0.7
Minimum lease payments for the year recognized in the income statement	0.2	0.3

NOTE 15. CONTINGENT ASSETS AND LIABILITIES AS WELL AS SECURITIES FURNISHED

Contingent assets

Contingent assets in the form of tax assets not recognized appear from note 9.

Contingent liabilities and securities furnished

	31 Jan 2018	31 Jan 2017
Surety and guarantee commitments on behalf of group enterprises	1,140.5	1,285.4
Surety and guarantee commitments on behalf of joint ventures	241.2	69.8
Surety and guarantee commitments on behalf of associates	10.0	10.0
Carrying amount of investments in group enterprises furnished as security to credit institutions	5.0	0.0
Other surety and guarantee commitments	7.6	7.6

The below figures in brackets are comparative figures for 2016/17.

The amounts stated for surety and guarantee commitments on behalf of group enterprises are the upper limits. At 31 January 2018, the subsidiaries had drawn an amount of DKK 1,051.4 million (DKK 1,140.8 million) on their credit facilities.

In addition, the Company has guaranteed the liabilities of group enterprises in relation to construction contracts, and other project related contracts.

The Company is the management company for the Group's Danish jointly taxed companies, and has unlimited, joint and several liability together with the other jointly taxed companies for all corporate income taxes arising under the joint taxation scheme and for withholding taxes in these companies. Corporate income tax payable for the Danish jointly taxed companies amounted to DKK 6.9 million at 31 January 2018 (DKK 1.6 million).

NOTES, PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 105/109

NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 16. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS

Categories of financial instruments	31 Jan 2018	31 Jan 2017
Receivables from group enterprises	1,013.0	989.2
Cash and cash equivalents	0.0	0.2
Loans and receivables	1,013.0	989.4
Securities	4.1	4.1
Financial assets available for sale	4.1	4.1
Credit institutions	63.3	62.1
Trade payables	0.6	1.0
Other debt	6.6	1.7
Financial liabilities measured at amortized cost	70.5	64.8

For a description of the Company's capital management, risk management policy, foreign-exchange risks, interest-rate risks, liquidity risks and credit risks, reference is made to note 27 in the consolidated financial statements.

Foreign-exchange risks relating to recognized assets and liabilities

In the 2017/18 financial year and the comparative year, the Company did not enter into any forward agreements or other derivative financial instruments to hedge foreign-exchange risks in the Company.

2017/18	Cash, cash equivalents and securities	Receivables	Credit institutions	Unsecured net position
EUR at 31 January 2018	0.0	385.9	-34.5	351.4
2016/17
EUR at 31 January 2017	0.1	115.5	-34.0	81.6
Sensitivity of profit/loss and equity to foreign-exchange fluctuations			2017/18	2016/17
Effect if the EUR rate were 10 % lower than the actual rate			-27.4	-6.4

The Company's major foreign-exchange exposures relate to EUR. The above calculations show the effect on equity and profit or loss if the rate of exchange for EUR had been 10% lower than the actual rate. A corresponding increase in the foreign-exchange rate would have a corresponding positive impact on profit or loss and equity.

As all foreign-exchange adjustments relating to the above-mentioned financial instruments are recognized in the income statement, any exchange-rate fluctuations will have the same effect on profit or loss and equity.

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NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 16. FINANCIAL RISKS AND FINANCIAL INSTRUMENTS, CONTINUED

Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities

	0 - 1 year	1 - 5 years	Total	Effective rate in %
2017/18
Securities	4.1	0.0	4.1	0%
Receivables from group enterprises	0.0	1,013.0	1,013.0	0 - 8%
Payables to credit institutions	-63.3	0.0	-63.3	2.4 - 4.2%
Interest payments on loans	-0.5	0.0	-0.5
Trade payables	-0.6	0.0	-0.6	0%
Other debt	-6.6	0.0	-6.6	0%
Total at 31 January 2018	-66.9	1,013.0	946.1
2016/17
Securities	4.1	0.0	4.1	0%
Receivables from group enterprises	0.0	989.2	989.2	0 - 8%
Cash and cash equivalents	0.2	0.0	0.2	0%
Payables to credit institutions	-62.1	0.0	-62.1	2.4 - 4.2%
Interest payments on loans	-1.3	0.0	-1.3
Trade payables	-1.0	0.0	-1.0	0%
Other debt	-1.7	0.0	-1.7	0%
Total at 31 January 2017	-61.8	989.2	927.4

With regard to interest-rate sensitivity, an increase in the interest level of 1% p.a. compared to the interest level at the reporting date in respect of the Company's variable-interest deposits with and payables to credit institutions would have a negative impact on the profit or loss for the year, and thus on equity, of DKK 0.5 million for a full year. A fall in the interest level of 1% p.a. would result in a corresponding positive impact on the profit or loss for the year and on equity. For the 2016/17 financial year, the interest-rate sensitivity in case of a change in the interest level of 1% p.a. would have an impact of about DKK 0.5 million for a full year.

Liquidity risks

The maturity dates of financial liabilities are specified 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. The Company's liquidity reserve consists of cash and cash equivalents as well as unutilized credit facilities. Reference is also made to note 27 in the consolidated financial statements.

Breach of loan agreements

During the financial year and the previous year, the Company was not in breach of any loan agreements.

NOTES, PARENT COMPANY FINANCIAL STATEMENTS | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 107/109

NOTES, PARENT COMPANY FINANCIAL STATEMENTS

NOTE 17. TRANSACTIONS WITH RELATED PARTIES

The Company has no related parties with a controlling interest. The Company has the following related parties:

Board of Directors and Executive Board (and their related parties)
Associates, joint ventures and group enterprises; see the Overview of group companies, note 31 in the consolidated financial statements.

	2017/18	2016/17
Board of Directors and Executive Board (and their related parties)
Remuneration, Board of Directors	1.5	1.3
Remuneration, Executive Board	11.4	7.4
Joint ventures and group enterprises
Management fee to group enterprises (cost)	1.0	1.0
Interest income from group enterprises	58.7	67.7
Receivables from group enterprises (balance)	1,013.0	989.2
Costs allocated to group enterprises according to service agreements concluded	7.5	7.5
Guarantee commission from group enterprises	1.0	0.8
Capital increase in group enterprises	0.0	500.0

Surety and other security furnished for related parties appear from note 15.

Apart from this, no securities or guarantees had been furnished for balances owing to or by related parties at the reporting date. Receivables and payables are expected to be settled by payment in cash. No losses were realized on receivables from related parties.

Apart from the above, there were no transactions with related parties in the year under review.

NOTE 18. POST-BALANCE SHEET EVENTS

Reference is made to note 29 in the consolidated financial statements.

NOTE 19. APPROVAL OF ANNUAL REPORT FOR PUBLICATION

Reference is made to note 30 in the consolidated financial statements.

108/109 | TK DEVELOPMENT A/S | ANNUAL REPORT 2017/18 | NOTES, PARENT COMPANY FINANCIAL STATEMENTS

TK Development A/S

CVR no.:
24256782

ISIN code:
DK0010258995 (TKDV)

Municipality of registered office:
Aalborg, Denmark

Website:
www.tk-development.com

e-mail:
[email protected]

Executive Board:
Frede Clausen and Robert Andersen

Board of Directors:
Peter Thorsen, Henrik Heideby, Arne Gerlyng-Hansen, Anne Skovbro Andersen og Michael Bruhn.

Aalborg
Vestre Havnepromenade 7
DK-9000 Aalborg
T: (+45) 8896 1010

Copenhagen
Delta Park 45
DK-2665 Vallensbæk Strand
T: (+45) 8896 1010

The Annual General Meeting will be held at 3 p.m. on 26 April 2018 at Aalborg Kongres & Kultur Center, Radiosalen, Europa Plads 4, DK-9000 Aalborg.

Stockholm
Gamla Brogatan 36-38
S-111 20 Stockholm
T: (+46) 8 751 37 30

Vilnius
Gynéju str. 16
LT-01109 Vilnius
T: (+370) 5231 2222

Warsaw
ul. Mszczonowska 2
PL-02-337 Warsaw
T: (+48) 22 572 2910

The Annual Report has been prepared in a Danish and an English version. In case of discrepancy between the Danish-language original text and the English-language translation, the Danish text shall prevail.

Prague
Karolínská 650/1
CZ-186 00 Prague 8
T: (+420) 2 8401 1010

COMPANY INFORMATION | ANNUAL REPORT 2017/18 | TK DEVELOPMENT A/S | 109/109

AI assistant

Agat Ejendomme — Annual Report 2017

3421_rns_2018-03-22_2bc862e4-837e-4a37-b98e-2ef8722f1426.pdf

ANNUAL REPORT

STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

FINANCIAL PERFORMANCE IN 2017/18

PROFIT GUIDANCE FOR 2018/19

CONSOLIDATED FINANCIAL HIGHLIGHTS AND KEY RATIOS

FINANCIAL HIGHLIGHTS

KEY RATIOS

KEY RATIOS ADJUSTED FOR WARRANTS

STRATEGIC FOCUS CHANGED, ASSET SALES TO BE ACCELERATED AND IMPAIRMENT LOSSES RECOGNISED

NEW STRATEGIC FOCUS - PROPERTY DEVELOPMENT IN DENMARK AND SWEDEN

ACCELERATING ASSET SALES AND RECOGNISING IMPAIRMENT LOSSES

SEGMENT REPORTING

PROFIT GUIDANCE FOR 2018/19

CHANGE OF MANAGEMENT

BOARD OF DIRECTORS

DIVIDEND

EVENTS AFTER THE BALANCE SHEET DATE

PROPERTY DEVELOPMENT

DISCONTINUING ACTIVITIES

PROFIT GUIDANCE

PROFIT GUIDANCE. PROPERTY DEVELOPMENT

JULY

AUGUST

DECEMBER

DECEMBER

JANUARY

JANUARY

APRIL

AUGUST

DECEMBER

APRIL

SEPTEMBER

JANUARY

MAY

NOVEMBER

JANUARY

PROFIT/LOSS

Revenue

Gross profit/loss

Income from investments in joint ventures

Staff costs and other external expenses

Financing

BALANCE SHEET

Investment properties

Investments in and receivables from joint ventures

Deferred tax assets

Projects in progress or completed

Land portfolio

Deposits in custody and escrow accounts

Equity

Liabilities

CASH FLOWS

FINANCIALS

MARKETS

RETAIL

Denmark

Sweden

MARKETS

RESIDENTIAL

Denmark

OFFICE

Denmark

FINANCIAL PERFORMANCE 2017/18 (DKKM)

BALANCE SHEET STRUCTURE AT 31 JANUARY 2018 (DKKM)

Projects handed over

Retail park, Oskarshamn, Sweden

Strædet, development of town centre, Køge, Denmark

Amerika Have, residential project, Copenhagen, Denmark

Supermarket, Hjørring, Denmark

SporbyenScandia, Randers, Denmark

Project portfolio

PROJECT OUTLINE

PROJECTS IN PROGRESS

Strædet, development of town centre, Køge, Denmark

Domus Vista, youth housing units, Frederiksberg, Copenhagen, Denmark

Beddingen 7A, owner-occupied housing units, Østre Havn, Aalborg, Denmark

Havnehus 1, rental housing units, Østre Havn, Aalborg, Denmark

Agat Ejendomme Annual Report 2017