Castellum — Interim / Quarterly Report 2010

Jul 13, 2010

Castellum has during the spring 2010 continued the improvements in the central located property Borgaren 1, Örebro.

Half-year Report January-June 2010

Half-year Report January-June 2010

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to approx. SEK 30 billion, and comprises of commercial properties.

The real estate portfolio is owned and managed by six completely owned subsidiaries with strong local roots in five growth regions: Greater Gothenburg (incl. Borås, Halmstad and Alingsås), the Öresund Region (Malmö, Lund and Helsingborg), Greater Stockholm, Mälardalen (Örebro, Västerås and Uppsala) and Eastern Götaland (Jönköping, Linköping, Värnamo and Växjö).

Castellum is listed on NASDAQ OMX Stockholm AB Large Cap.

• Rental income for the period January-June 2010 amounted to SEKm 1,367 (SEKm 1,346 corresponding period previous year).
• Income from property management amounted to SEKm 537 (557), equivalent to SEK 3.27 (3.40) per share, a decrease with 4%.
• Changes in value on properties amounted to SEKm 366 (–814) and on interest rate derivatives to SEKm –89 (68).
• Net income after tax for the period amounted to SEKm 603 (–133), equivalent to SEK 3.68 (–0.81) per share.
• The investments amounted to SEKm 456 (566) of which SEKm 373 (566) where new constructions, extensions and reconstructions.

	2010 Jan-June	2009 Jan-June	2009	2008	2007	2006	2005	2004	2003	2002
Income from property management, SEK/share	3.27	3.40	6.89	5.93	5.63	5.38	5.00	4.52	4.07	3.77
Change previous year	– 4%	+18%	+16%	+5%	+5%	+8%	+11%	+11%	+8%	+14%
Net income after tax, SEK/share	3.68	– 0.81	0.98	– 4.04	9.07	10.21	7.89	5.59	2.68	4.00
Change previous year	pos.	neg.	pos.	neg.	–11%	+29%	+41%	+108%	–33%	–30%
Dividend, SEK/share			3.50	3.15	3.00	2.85	2.62	2.38	2.13	1.88
Change previous year			+11%	+5%	+5%	+9%	+11%	+12%	+13%	+15%
Property value, SEKm	30,032	28,917	29,267	29,165	27,717	24,238	21,270	19,449	18,015	17,348
Investments, SEKm	456	566	1,165	2,738	2,598	2,283	1,357	1,268	1,108	1,050
Loan to value	52%	53%	52%	50%	45%	45%	45%	45%	48%	48%

Business Concept

Castellum's business concept is to develop and add value to its real estate portfolio, focusing on the best possible earnings and asset growth, by offering customised commercial properties, through a strong and clear presence in fi ve Swedish growth regions.

Objective

Castellum's operations are focused on cash fl ow growth, which along with a stable capital structure provide the preconditions for good growth in the company, while at the same time offering shareholders a competitive dividend.

The objective is an annual growth in cash fl ow, i.e. income from property management per share, of at least 10%. In order to achieve this objective, investments of at least SEKm 1,000 per year will be made. All investments will contribute to the objective of growth in income from property management within 1-2 years and have a potential asset growth of at least 10%. Sales of properties will take place when justifi ed from a business standpoint and when an alternative investment with a higher return can be found.

Strategy for Funding

Capital structure

Castellum will have a stable capital structure, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%.

Purchase or transfer of own shares shall be available as a method to use for adjusting the company's capital structure to the company's capital need and as payment or funding of real estate investments. Own shares may not be traded for the sole purpose of capital gain.

Dividend

At least 60% of income from property management after full tax deduction will be distributed, however investment plans, consolidation needs, liquidity and fi nancial position in general will be taken into account.

The stock and credit markets

Castellum will work for a competitive total return in the company's share in relation to the risk and for a high liquidity.

However, all actions will be made from a long term perspective and the company will have a frequent, open and fair reporting to shareholders, the capital and credit markets as well as media, yet without disclosing any individual business relation.

In the long term Castellum will be one of the largest listed real estate companies in Sweden.

Customers and organization

Decentralized and small-scale organization

Castellum's operations are run in a small-scale organization consisting of six wholly owned subsidiaries which own and manage the properties under their own brands. By having local roots the subsidiaries make close relations with the customers, and good knowledge of the market situation and rental development within each market area. Property management is carried out by own personnel.

Subsidiaries with strong brands

Castellum's six subsidiaries have about 35 employees each. The subsidiaries organizations are not identical but are in principal made up of a Managing Director, 3-5 market areas, business developers and 3-5 employees within fi nance and administration. Each market area employs one property manager with one assistant, one person working with leasing and 2-4 facility managers, where everyone has customer contact. The fl at organization gives a short decision making process and creates a customer oriented and active organization. Castellum's subsidiaries operate under their own names which are strong brands on each local market.

Measuring, comparing and controlling

Castellum measures and compares the subsidiaries' management effi ciency and asset value growth in the real estate portfolio. Within the group experiences are shared between the companies and specialist expertise can therefore be made available to the whole organization.

Castellum's operations are controlled by rules for decision making and work allocation, policies and instructions. Policies are in place for among others fi nance and fi nancial work, information, information safety, environment, insurance, electricity and personnel.

The customers - a reflection of Swedish domestic economy

Castellum has approx. 4,400 commercial contracts, with good risk exposure regarding both geography, type of premises, length of contracts and fields of industry of the customer. The single largest contract corresponds to approx. 1% of Castellum's total rental income.

Satisfied customers

It is important that Castellum meets the customers' expectations. To follow up and evaluate efforts made, an external customer survey is carried out annually, Satisfi ed Customer Index.

The latest survey which was carried out 2009 and included warehouses, industry- and retail properties, continues to show consistently high marks for Castellum. A large portion of the surveyed customers replies willing to lease from Castellum again and gladly recommends Castellum as a landlord to others.

Commercial leases

Commercial leases are signed for a certain period of time, generally 3-5 years, where the period of notice is 9 months.

The leases normally include a base-rent and an index clause, which provides for an adjustment of the rent corresponding to a certain percentage or connected to the infl ation, and also additions for the tenant's share of the property's total costs for heating, cooling and property tax.

Employees

Castellum is working actively in order to hire and keeping good employees by offering a stimulating work environment, competence development and sharing of experiences both internally and externally

The employees' view on Castellum is regularly measured and the survey shows that the employees are pleased and have a great faith in the company and its management.

The group has approx. 230 employees.

Responsible business

Since 1995 Castellum has been working with sustainable issues such as developing the properties in those cities were the subsidiaries are present, a common set of values for actions towards employees, customers and vendors as well as active work on environmental issues.

The environmental work is focused on effi cient energy consumption and improving the properties' environmental status. Two of Castellum's subsidiaries, Fastighets AB Brostaden and Harry Sjögren AB, have been assigned Green Building Corporate Partner by the EU, which can be seen as a receipt for long-term effi cient work in decreasing the energy consumption. Eklandia Fastighets AB has during 2009 received the fi rst BREEAM-certifi cate for Sweden in a new property in Gothenburg.

Malmö, Lund and Helsingborg

Gothenburg

Örebro, Uppsala Greater Stockholm and Västerås

Central, Northern and Eastern Jönköping, Linköping, Värnamo and Växjö

Southern Greater Gothenburg, Borås, Halmstad and Alingsås

Income, Costs and Results

Comparisons, shown in brackets, are made with the corresponding period previous year except in parts describing assets and fi nancing, where comparison are made with the end of previous year. For defi nitions see Castellum's website, www.castellum.se

Income from property management, i.e. net income excluding changes in value and tax, amounted to SEKm 537 (557), equivalent to SEK 3.27 (3.40) per share. The decrease amounted to 4% and is above all an effect of higher costs for snow removal and heating during the fi rst quarter. The income from property management during the second quarter improved by 3% which is mainly an effect of investments made.

FÖRVALTNINGSRESULTAT PER AKTIE Income from Property Management per share

During the period, changes in value on properties amounted to SEKm 366 (-814) and on interest rate derivatives to SEKm –89 (68). Net income for the period was SEKm 603 (-133), equivalent to SEK 3.68 (-0.81) per share.

Rental income

Group rental income amounted to SEKm 1,367 (1,346). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,209 per sq.m., whereas it for warehouse and industrial properties amounted to SEK 711 per sq.m. Rental levels, which are considered to be in line with the market, have increased by approx. 0.8% in comparable portfolio compared with previous year, of which 0.3% units is increased property tax which is charged to the customer.

Rental value and economic occupancy rate

The average economic occupancy rate was 88.7%, which is lower than at the year-end, but slightly higher compared with previous quarter. The total annual rental value for vacant premises during the period amounted to approx. SEKm 370.

The gross leasing (i.e. the annual value of total leasing) during the period was SEKm 115 (122), of which SEKm 13 (4) were leasing on new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 104 (149), of which bankruptcies were SEKm 3 (16), hence net leasing amounted to SEKm 11 (–27). The time difference between reported net leasing and the effect in income thereof is estimated to between 9-18 months.

Net leasing

The demand during the second quarter for premises was still good for all Castellum's property types and markets. Rental levels are expected to remain stable.

Property costs

Property costs amounted to SEKm 507 (482) corresponding to SEK 317 per sq.m. (303). The increase is chiefl y an effect of higher costs of approx. SEKm 25 for snow removal and a colder fi rst quarter compared to last year but also higher property tax due to higher tax assessment values of on average 10% for offi ce and retail properties. Most of the property tax is charged to the customer why the effect on the result will be limited. Energy consumption for heating during the period has been calculated to 113% (90%) of a normal year according to the degree day statistics.

Property costs, SEK/sq.m.

	Offi ce/	Warehouse/
	Retail	Industrial	Total
Operating expenses	226	147	188
Maintenance	44	23	33
Ground rent	6	4	5
Real estate tax	67	17	44
Direct property costs	343	191	270
Leasing and property administration (indirect)	–	–	47
Total	343	191	317
Previous year	319	169	303

Central administrative expenses

Central administrative expenses were SEKm 39 (39). This includes costs for a profi t and share price related incentive plan for 10 persons in executive management of SEKm 5 (7).

Net financial items

Net fi nancial items were SEKm –284 (–268). The average interest rate level was 3.7% (3.7%).

Interest rate levels

Changes in value

The transaction volumes on the Swedish property market is still high and amounted during the fi rst half-year to SEK 38 billion for larger sales, which is higher than for the same period the previous year. The pricing of the commercial transactions, which are concentrated to the major urban regions, are higher than at the year-end, mainly due to an increasing demand from both Swedish and foreign investors.

Castellum assesses that the gradual increase in demand during the fi rst half-year has led to increasing property prices, where the main change relates to major urban regions and properties with long term leases. In view of this, the required yield in the internal valuation has been reduced with an average of 0.1%-units. This is the major part of the accounted change in value of SEKm 366 (–814), corresponding to approx. 1% of the property value. The changes in value includes sales of SEKm 6 which consists of four properties in Gothenburg where the sale price of SEKm 57 exceeded the valuations at the year-end with 12%.

Castellum uses interest rate derivatives in order to achieve the desired interest rate maturity structure. If the agreed interest rate deviates from the market interest rate there is a theoretical surplus or sub value in the interest rate derivatives, where the non cash fl ow effecting changes in value are reported in the income statement. The value has changed, due to changes in long term market interest rates and the time factor, with SEKm –89 (68) and the value was SEKm –954 (–865) at the end of the period.

Tax

The nominal corporate tax rate in Sweden is 26.3%. Due to the possibility to make depreciations for tax purposes, reconstructions deductible for tax purposes, and to use tax loss carry forwards there are in principle no paid tax costs. Paid tax occur because a few subsidiaries are not allowed to make fi scal group contributions.

Remaining tax loss carry forwards can be calculated to SEKm 1,859 (1,885), while the properties' fair value exceed their fi scal value by SEKm 13,378 (12,624). As deferred tax liability a full nominal 26.3% tax of the net difference is reported, SEKm 3,029 (2,824).

The National Tax Board autorities carried out a tax audit in Castellum last year which was completed without comments. Castellum has no ongoing formal tax issues.

Tax Calculation 2010-06-30	Basis	Basis
SEKm	current tax	deferred tax
Income from property management	537
Deductions for tax purposes
depreciations	– 290	290
reconstructions	– 103	103
reconstructions, adjustement previous years	– 18	18
Other tax allowances	7	– 1
Taxable income from property management	133	410
Properties sold	0	– 14
Changes in value on properties	–	360
Changes in value on interest rate derivatives	– 89	–
Taxable income before tax loss carry forwards	44	756
Tax loss carry forwards, opening balance	– 1,885	1,885
Tax loss carry forwards, closing balance	1,859	– 1,859
Taxable income	18	782
Of which 26.3% current/deferred tax	– 5	– 206

Accounting Principles

Castellum follows the by the EU adopted IFRS standards and the interpretations of them (IFRIC). This half-year report has been prepared according to IAS 34 Interim Financial Reporting. Accounting principles and methods for calculations have remained unchanged for the group compared to the Annual Report previous year.

Real Estate Portfolio

The real estate portfolio, which consists entirely of Swedish properties, is found in Greater Gothenburg, the Öresund Region, Greater Stockholm, Mälardalen and Eastern Götaland. The main focus with approx. 75% of the portfolio is in the three major urban regions.

The commercial portfolio consists of 65% offi ce and retail properties as well as 31% warehouse and industrial properties. The properties are located from inner city sites (except in Greater Stockholm from inner suburbs) to wellsituated working-areas with good means of communication and services.

Castellum owns 820,000 sq.m. unutilized building rights. Castellum has ongoing projects with remaining investments of approx. SEKm 500.

Investments

During the year the real estate portfolio has changed according to the table below.

Changes in the real estate portfolio
	Value, SEKm	Number
Real estate portfolio on 1 January, 2010	29,267	590
+ Acquisitions	83	1
+ New constructions, extensions and
reconstructions	373	–
– Sales	– 51	– 4
+/– Unrealized changes in value	360	–
Real estate portfolio on 30 June, 2010	30,032	587

During the period investments totalling SEKm 456 (566) were made, of which SEKm 83 (0) were acquisitions and SEKm 373 (566) new constructions, extensions and reconstructions. Of the total investments SEKm 176 related to Greater Gothenburg, SEKm 100 to Mälardalen, SEKm 87 to Eastern Götaland, SEKm 50 to the Öresund Region and SEKm 43 to Greater Stockholm.

Investments

Internal valuations

Castellum assesses the value of the properties through internal valuations. These are based on a 10-year cash fl ow-based model with an individual valuation for each property of both its future earnings capacity and the required market yield. Projects in progress have been valued using the same principle, but with deductions for remaining investments. Sites with building rights have been valued on the basis of an estimated market value per square metre. In order to ensure and validate the quality of the internal valuations, an external valuation representing over 50% of the portfolio is made every year-end. The difference between the internal and external values has historically been small.

Based on these internal valuations the value of the properties was assessed to SEKm 30,032 (29,267), corresponding to approx. SEK 9,100 per sq.m.

Average valuation yield (excl. project/land and building rights) SEKm

Average valuation yield	7.2%
Valuation excl. building rights of SEKm 436	28,419
Normalized net operating income (6 months)	1,023
Property administration, 30 SEK/sq.m.	– 48
Property costs to a normal year	22
Real occupancy rate, 94% at the lowest	115
Adjusted for:
Net operating income properties	934

Investment over SEKm 30

Larger ongoing projects

Name of property	Area	Econ. occup. sq.m. rate June 2010	Total inv., SEKm	Remain inv. SEKm	Completed	Comment
Visionen 3, Jönköping	7,700	50%	115	5	Q 4 2010	New construction offi ce premises
Betongblandaren 10, Stockholm	14,900	50%	115	22	Q 1 2011	Reconstruction retail premises
Varuhuset 1, Jönköping	11,000	100%	105	35	Q 4 2010	New construction retail premises
Boländerna 28:3 and 30:2, Uppsala	11,900	100%	96	21	Q 4 2010	Reconstruction and extension retail
Boländerna 30:2, Uppsala	14,000	43%	64	62	Q 4 2011	Reconstruction and extension retail
Vägmästaren 5, Kungsbacka	3,000	100%	49	13	Q 4 2010	New construction offi ce premises
Kärra 72:36, Gothenburg	6,450	0%	39	39	Q 2 2011	New construction warehouse/logistic
Grusbädden 3, Helsingborg	6,300	100%	35	7	Q 3 2010	Extension warehouse premises

Larger acquisitions during 2010

	Area	Econ. occup. Investment
Name of property	sq.m. rate June 2010		SEKm	Admission	Comment
Backa 107:4, Gothenburg	22,700	100%	83	April 2010	Industrial property

Castellum's real estate portfolio 30-06-2010

			30-06-2010					January-June 2010
	No. of	Area thous.	Property value	Property value	Rental value	Rental value	Economic occupancy	Rental income	Property costs	Property costs	Net operating income
	properties	sq.m.	SEKm	SEK/sq.m.	SEKm	SEK/sq.m.	rate	SEKm	SEKm	SEK/sq.m.	SEKm
Offi ce/retail
Greater Gothenburg	75	396	5,265	13,281	251	1,268	94.9%	239	66	333	173
Öresund Region	52	324	4,771	14,723	229	1,414	87.3%	200	60	373	140
Greater Stockholm	45	314	3,683	11,728	207	1,316	78.1%	161	55	348	106
Mälardalen	70	325	3,257	10,021	173	1,062	90.9%	157	53	328	104
Eastern Götaland	49	298	2,466	8,277	142	955	89.3%	127	50	332	77
Total offi ce/retail	291	1,657	19,442	11,730	1,002	1,209	88.2%	884	284	343	600
Warehouse/industrial
Greater Gothenburg	99	644	4,425	6,869	232	720	92.3%	214	59	184	155
Öresund Region	42	296	1,655	5,599	100	681	84.5%	85	26	179	59
Greater Stockholm	38	202	1,656	8,196	95	940	89.1%	85	28	268	57
Mälardalen	40	170	947	5,584	59	696	90.7%	54	18	205	36
Eastern Götaland	35	186	730	3,919	46	495	85.5%	39	12	136	27
Total warehouse/industrial	254	1,498	9,413	6,285	532	711	89.5%	477	143	191	334
Total	545	3,155	28,855	9,146	1,534	973	88.7%	1 361	427	270	934
Leasing and property administration									74	47	– 74
Total after leasing and property administration									501	317	860
Development projects	10	61	782	–	19	–	–	7	6	–	1
Undeveloped land	32	–	395	–	–	–	–	–	–	–	–
Total	587	3,216	30,032	–	1,553	–	–	1,368	507	–	861

The table above relates to the properties owned by Castellum at the end of the period and refl ects the income and costs of the properties as if they had been owned during the whole period. The discrepancy between the net operating income of SEKm 861 accounted for above and the net operating income of SEKm 860 in the income statement is explained by the deduction of the net operating income of SEKm 2 on properties sold during the period, as well as the adjustment of the net operating income of SEKm 3 on properties acquired/completed during the period, which are recalculated as if they had been owned or completed during the whole period.

Property value by property type Property value by region

Office/retail 65%	Warehouse/industrial 31%
	Projects and
	undeveloped land 4%

Property related key ratios Segment information

	2010 Jan-June	2009 Jan-June	2009 Jan-Dec
Rental value, SEK/sq.m.	973	964	969
Economic occupancy rate	88.7%	89.6%	89.8%
Property costs, SEK/sq.m.	317	303	300
Net operating income, SEK/sq.m.	545	562	571
Property value, SEK/sq.m.	9,146	8,984	9,036
Number of properties	587	587	590
Lettable area, thousand sq.m.	3,216	3,171	3,199

		Rental income	Income from property management
	2010	2009	2010	2009
SEKm	Jan-June	Jan-June	Jan-June	Jan-June
Greater Gothenburg	451	437	205	205
Öresund Region	285	282	122	121
Greater Stockholm	247	246	93	99
Mälardalen	215	214	71	78
Eastern Götaland	169	167	59	66
Total	1,367	1,346	550	569

The discrepancy between the income above from property management of SEKm 550 (569) and the groups accounted income before tax of SEKm 814 (–189) consists of unallocated income from property management of SEKm –13 (–12), changes in property value of SEKm 366 (–814) and changes in values of interest rate derivatives of SEKm –89 (68).

Financing

Financing 30-06-2010

Shareholders' equity and net asset value

Shareholders' equity was SEKm 9,721 (9,692).

The net asset value, using an estimated discounted real deferred tax liability of 5%, can be calculated as follows.

Net asset value 30-06-2010
	SEKm SEK/share
Equity according to the balance sheet	9,721	59
Reversed
Interest rate derivatives, balance sheet	954	6
Deferred tax, balance sheet 26,3%	3,029	19
Long term net asset value (EPRA NAV*)	13,704	84
Deduction
Interest rate derivatives as above	– 954	– 6
Estimated real liability, deferred tax 5%	– 576	– 4
Actual net asset value (EPRA NNNAV*)	12,174	74

*EPRA, European Public Real Estate Association, is an association for listed real estate owners and investors in Europe, which among other things, sets standards for financial reporting. A part of that is key ratios EPRA EPS (Earnings Per Share), EPRA NAV (Net Asset Value) and EPRA NNNAV (Triple Net Asset Value).

Interest-bearing liabilities

The half-year has been marked by the increase of short-term interest rates due to expectations that the Swedish "Riksbank" would increase the repo rate, while long-term market rates have decreased. After the end of the period the Riksbank decided to increase the repo rate by 0.25%-units with effect from July 7, 2010. The long-term market rates are not directly affected by the Riksbank's decision, but by other external factors.

The access to funding and credit margins is considered stable and Castellum's ability to obtain long term credits is continued good.

Loan maturity structure

During the period Castellum has signed new agreements of SEKm 600. As of 30 June, 2010 Castellum had long term binding credit agreements totalling SEKm 16,762 (16,262), long term bonds totalling SEKm 200 (500), short term binding credit agreements totalling SEKm 820 (1,220) and a commercial paper program of SEKm 4,000 (4,000). After deduction of liquid assets of SEKm 12 (8), net interest bearing liabilities were SEKm 15,663 (15,286), of which SEKm 707 (0) refers to outstanding commercial papers.

Loans in banks are secured by pledged mortgages and/ or fi nancial covenants. Bonds and in cases when there are outstanding commercial papers, theese are unsecured. The fi nancial covenants state a loan to value ratio not exceeding 65% and an interest coverage ratio of at least 150% which Castellum fulfi l with good margin, 52% respectively 289%.

The average duration of Castellum's long term credit agreements was 5.0 years (5.5). Margins and fees on long term credit agreements had an average duration of 2.7 years (3.2).

Loan maturity structure 30-06-2010

Long term, SEKm	Credit agreements	Utilized
1 - 2 years	200	–
2 - 3 years	5,500	5,000
3 - 4 years	500	–
4 - 5 years	–	–
> 5 years	10,562	9,262
Total long term credit agreements	16,762	14,262
Total short term credit agreements (0-1 year)	1,727	1,401
Total credit agreements	18,489	15,663
Unutilized credit in long term credit agreements		1,099

Interest rate maturity structure

The average effective interest rate as of 30 June 2010 was 3.6% (3.8%). The market interest rate for an equal portfolio, regarding both current market rate and credit margin, can be assessed to 3.0% (3.1). The average fi xed interest term on the same date was 2.7 years (2.8).

In order to secure a stable and low net cash fl ow of interest income/costs over time, Castellum has chosen a relatively long fi xed interest term. Castellum has also chosen to work with interest rate derivatives, which is a cost effective and fl exible way of extending loans with short term interest rates to achieve the desired fi xed interest term.

Interest rate maturity structure 30-06-2010

SEKm	Amount, SEKm	Average interest rate
0 - 1 year	6,113	1.8%
1 - 2 years	600	4.6%
2 - 3 years	1,950	4.7%
3 - 4 years	2,600	4.6%
4 - 5 years	900	4.7%
5 - 10 years	3,500	4.8%
Total	15,663	3.6%

Interest rate derivatives

According to the accounting standard IAS 39 interest rate derivatives are subject to market valuation, which means that there is a theoretical surplus / sub value if the stipulated interest rate varies from the current market rate, where the change in value, for Castellum, should be accounted for in the income statement.

As of 30 June, 2010, the market value of the interest rate derivative portfolio amounted to SEKm –954 (–865).

Consolidated Income Statement
	2010	2009	2010	2009	Rolling 12 months	2009
SEKm	April - June	April - June	Jan - June	Jan - June	July 09 - June 10	Jan - Dec
Rental income	693	677	1,367	1,346	2,715	2,694
Operating expenses	– 117	– 114	– 303	– 269	– 546	– 512
Maintenance	– 30	– 32	– 53	– 56	– 124	– 127
Ground rent	– 5	– 5	– 8	– 10	– 19	– 21
Real estate tax	– 37	– 31	– 69	– 62	– 134	– 127
Leasing and property administration	– 38	– 45	– 74	– 85	– 144	– 155
Net operating income	466	450	860	864	1,748	1,752
Central administrative expenses	– 22	– 21	– 39	– 39	– 81	– 81
Net fi nancial items	– 141	– 134	– 284	– 268	– 557	– 541
Income from property management	303	295	537	557	1,110	1,130
Changes in value
Properties	320	– 417	366	– 814	153	– 1,027
Interest rate derivatives	– 36	177	– 89	68	– 55	102
Income before tax	587	55	814	– 189	1,208	205
Current tax	– 3	2	– 5	– 5	– 10	– 10
Deferred tax	– 154	– 13	– 206	61	– 302	– 35
Net income for the period/year	430	44	603	– 133	896	160

Since there are no minority interests the entire net income is attributable to the shareholders of the parent company.

Data per Share
	2010	2009	2010	2009	Rolling 12 months	2009
	April - June	April - June	Jan - June	Jan - June	July 09 - June 10	Jan - Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Income from property management, SEK	1.85	1,80	3.27	3,40	6.77	6.89
Income from property management
after tax (EPRA EPS), SEK	1.66	1.77	3.06	3.32	6.67	6.93
Earnings after tax, SEK	2.62	0,27	3.68	– 0,81	5.46	0.98
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Property value of properties, SEK	183	176	183	176	183	178
Long term net asset value (EPRA NAV), SEK	84	79	84	79	84	82
Net asset value (EPRA NNNAV), SEK	74	71	74	71	74	73

Since there is no potential common stock (e.g. convertibles), there is no effect of dilution.

Financial Key Ratios
	2010	2009	2010	2009	Rolling 12 months	2009
	April - June	April - June	Jan - June	Jan - June	July 09 - June 10	Jan - Dec
Net operating income margin	67%	66%	63%	64%	64%	65%
Interest coverage ratio	315%	320%	289%	308%	299%	309%
Return on net asset value	19.1%	1.9%	13.2%	– 3.0%	10.1%	1.6%
Return on total capital	10.3%	0.2%	8.0%	0.1%	6.2%	2.1%
Investments, SEKm	201	268	456	566	1,055	1,165
Loan to value ratio	52%	53%	52%	53%	52%	52%

Consolidated Balance Sheet
		30 June 2010	30 June 2009		31 Dec 2009
SEKm Assets
Investment properties		30,032	28,917		29,267
Other fi xed assets		16	13		13
Current receivables		148	171		188
Cash and bank		12	12		8
Total assets		30,208	29,113		29,476
Shareholders' equity and liabilities
Shareholders' equity		9,721	9,399		9,692
Deferred tax liability		3,029	2,724		2,824
Interest rate derivatives		954	899		865
Long term interest-bearing liabilities		15,675	15,250		15,294
Non interest-bearing liabilities		829	841		801
Total shareholders' equity and liabilities		30,208	29,113		29,476
Pledged assets (property mortgages)		17,701	16,693		18,281
Contingent liabilities		–	–		–
Changes in Equity
	Number of outstanding shares,			Retained
SEKm	thousand	Share capital	Reserves	earnings	Total equity
Shareholders' equity 31-12-2008	164,000	86	20	9,943	10,049
Dividend, March 2009	–	–	–	– 517	– 517
Net income January-June 2009	–	–	–	– 133	– 133
Shareholders' equity 30-06-2009	164,000	86	20	9,293	9,399
Net income July-December 2009	–	–	–	293	293
Shareholders' equity 31-12-2009	164,000	86	20	9,586	9,692
Dividend, March 2010	–	–	–	– 574	– 574
Net income January-June 2010	–	–	–	603	603
Shareholders' equity 30-06-2010	164,000	86	20	9,615	9,721
Cash Flow Statement
SEKm	2010 April - June	2009 April - June	2010 Jan - June	2009 Jan - June	2009 Jan - Dec
Net operating income	466	450	860	864	1,752
Central administrative expenses	– 22	– 21	– 39	– 39	– 81
Reversed depreciations	1	1	3	3	7
Net fi nancial items paid	– 162	– 147	– 269	– 316	– 611
Tax paid	– 1	3	– 4	– 13	– 10
Cash fl ow from operating activities before	282	286	551	499	1,057
change in working capital
Change in current receivables	– 35	– 2	5	44	62
Change in current liabilities	– 70	– 58	20	– 94	– 129
Cash fl ow from operating activities Investments in new const., refurb,.exten.	177 – 201	226 – 268	576 – 373	449 – 566	990 – 1,039
Property acquisitions	–	–	– 83	–	– 118
Change in liabilities at acquisitions of property
	– 8	–	– 8	– 6	3
Property sales	–	–	54	–	36
Change in receivables at sales of property Other net investments	6 – 2	– 1	33 – 2	– 0	– 35 – 8
Cash fl ow from investment activities	– 205	– 267	– 379	– 572	– 1,161
Change in long term liabilities	602	500	381	643	687
Dividend paid	– 574	– 517	– 574	– 517	– 517
Cash fl ow from fi nancing activities	28	– 17	– 193	126	170
Cash fl ow for the period / year	0	– 58	4	3	– 1
Cash and bank, opening balance	12	70	8	9	9
Cash and bank closing balance	12	12	12	12	8

Opportunities and Risks

Opportunities and risks in the cash flow

Increasing market interest rates is normally over time an effect of economic growth and increasing infl ation, which is thought to give higher rental income. This is in part due to that the demand for premises is thought to increase, leading to reduced vacancies and hence the potential for increasing market rents and in part due to that the index clause in the commercial contracts is compensating the increasing infl ation.

An economic boom therefore means higher interest costs but also higher rental income, while the opposite relationship is true during a recession. The change in rental income and interest costs does not take place at the exact same time, why the effect on income in the short term may occur at different points in time.

Sensitivity analysis - cash fl ow

	Effect on income, SEKm	Probable scenario
	+/– 1% (units)	Boom	Recession
Rental level	+27/–27	+	–
Vacancies	+31/–31	+	–
Property costs	–10/+10	–	0
Interest costs	–56/+ 9*	–	+

* with the assumption that the interest rate level never goes below 0%

Opportunities and risks in property values

Castellum reports its properties at fair value with changes in value in the income statement. This means that the result in particular but also the fi nancial position may be more volatile. The values of the properties are determined by supply and demand, where the prices mainly depends on the properties' expected net operating income and the buyer's required yield. An increasing demand gives lower required yields and hence an upward adjustment in prices, while a weaker demand has the opposite effect. In the same way, a positive real development in net operating income gives an upward adjustment in prices, while a low real growth has the opposite effect.

In property valuations consideration should be taken to an uncertainty range of +/– 5-10%, in order to refl ect the uncertainty that exist in the assumptions and calculations made.

Sensitivity analysis - change in value
Properties	–20%	–10%	0	+10%	+20%
Changes in value, SEKm –6,006 Loan to value ratio	65%	–3,003 58%	0 52%	+3,003 47%	+6,006 43%

Financial risk

Ownership of properties presumes a working credit market. Castellum's greatest fi nancial risk is to lack access to funding. The risk is reduced by low loan to value ratio and long term credit agreements.

The Parent Company

The parent company Castellum AB is responsible for matters concerning the stock market such as consolidated reports and stock market information and the credit market such as funding and fi nancial risk management.

The parent company takes part in property related operations through involvement in the Board of the subsidiaries.

	2010	2009	2010	2009
INCOME STATEMENT, SEKm	April-June	April-June	Jan-June	Jan-June
Income	3	3	7	7
Operating expenses	– 16	– 17	– 28	– 31
Net fi nancial items	7	5	8	12
Changes in value, interest
rate derivatives	– 36	177	– 89	68
Income before tax	– 42	168	– 102	56
Tax	11	– 44	26	– 15
Net income for the period	– 31	124	– 76	41
		30 June	30 June	31 Dec
BALANCE SHEET, SEKm		2010	2009	2009
Participations in group companies		4,087	4,087	4,087
Receivables, group companies		15,969	15,989	16,608
Other assets		254	230	230
Cash and bank		0	0	0
Total			20,310 20,306 20,925
Shareholders' equity		3,041	3,125	3,691
Interest bearing liabilities		14,313	14,948	14,082
Interest bearing liabilities,
group companies		1,815	1,140	2,109
Interest rate derivatives		954	899	865
Other liabilities		187	194	178
Total			20,310 20,360 20,925
Pledged assets (receivables
group companies)		14,674	15,258	15,214
Contingent liabilities (guaranteed
commitments for subsidiaries)		1,362	300	1,362

Signing of the Report

The Board of Directors and the Chief Executive Offi cer assure that the Half-year Report provide a fair view of the parent company's and the Group's operations, fi nancial position and result as well as describes signifi cant risks and uncertainties that the parent company and the companies included in the Group are faced with.

Gothenburg July 13 2010

Jan Kvarnström Per Berggren Marianne Dicander

Chairman Board member Alexandersson

Board member

Ulla-Britt Fräjdin-Hellqvist Christer Jacobson Board member Board member

Göran Lindén Johan Skoglund Håkan Hellström

Board member Board member CEO

Auditors' Report

Independent Auditors' Report on Review of Half-year Financial Information.

To the Board of Directors of Castellum AB

Corporate indetity number: 556475-5550

Introduction

We have reviewed the half-year report for Castellum AB (publ), corporate identity number 556475-5550, for the period January 1 – June 30, 2010. The Board and the Managing Director are responsible for the preparation and presentation of this half-year report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this half-yearly report based on our review.

Scope of Review

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by FAR. A review of interim fi nancial information consists of making inquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the Standards on Auditing in Sweden RS and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all signifi cant matters that might be identifi ed in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying half-year report is not prepared, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.

Gothenburg 13 July 2010

Carl Lindgren Ingemar Rindstig Authorized Public Authorized Public Accountant Accountant

The Castellum Share

The Castellum share is listed on NASDAQ OMX Stockholm AB Large Cap. At the end of the period the company had about 8,900 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for one foreign shareholder who have fl agged for holding over 5%, Stichting Pensioensfonds ABP. Castellum has no direct registered shareholders with holdings exceeding 10%. The ten single largest Swedish shareholders can be seen in the table below.

Shareholders on 30-06-2010	Number of shares	Percentage of voting rights
	thousand	and capital
AMF Pensionsförsäkrings AB	9,831	6.0%
AFA Sjukförsäkrings AB	8,670	5.3%
László Szombatfalvy	5,000	3.1%
Magdalena Szombatfalvy	4,935	3.0%
Andra AP-fonden	3,319	2.0%
Tredje AP-fonden	2,169	1.3%
Nordea Funds Sweden	2,143	1.3%
AFA Trygghetsförsäkring AB	1,653	1.0%
Lannebo Småbolag	1,550	1.0%
Swedbank Robur Småbolag Sverige	1,365	0.8%
Other shareholders registered in Sweden	45,448	27.7%
Shareholders registered abroad	77,917	47.5%
Total outstanding shares	164,000	100.0%
Repurchased shares	8,007
Total registered shares	172,007

There is no potential common stock (eg. convertibles.)

Distribution of shareholders by country 31-03-2010

Sweden 52%	USA 21%
Of which:
Funds, insurance comp etc 26%
Private persons, private comp 20%	Great Britain 11%
AP-funds 4%
2% Trusts, associations etc.	Luxembourg 5%
	France 2%
	Other 9%

The Castellum share price as at 30 June, 2010 was SEK 71.10 (49.10) equivalent to a market capitalization of SEK 11,7 billion (8.1), calculated on the number of outstanding shares.

During the year a total of 77 million (107) shares were traded, equivalent to an average of 627,000 shares (880,000) per day, corresponding on an annual basis to a turnover rate of 96% (135%).

Growth, yield and financial risk

During the last 12-month period the total yield of the Castellum share has been +52% (–9%), including dividend of SEK 3.50 (3.15).

Total yield of the share (incl. dividend)	3 years	10 years
	July 09-June 10average/yearaverage/year
Castellum	+52%	– 1%	+15%
NASDAQ OMX Stockholm (SIX Return) +32%		– 5%	+2%
Real Estate Index Sweden (EPRA)	+52%	– 3%	+15%
Real Estate Index Europe (EPRA)	+30%	– 20%	+5%

Valuation - share price related key figures

Earnings Capacity

Income from property management before tax amounted on rolling annual basis to SEK 6.77 per share (6.45), which compared to the share price at the end of the period gives a multiple of 11 (8).

Income from property management after tax relating to income from property management (EPRA EPS) amounted on rolling annual basis to SEK 6.67 (6.38) which gives a multiple of 11 (8).

Net income after tax amounted on rolling annual basis to SEK 5.46 per share (–5.15), which gives a multiple of 13 (negative).

Net asset value

The long term net asset value (EPRA NAV) can be calculated to SEKm 13,704 (13,381) corresponding to 84 SEK per share (82). The share price at the end of the period was thus 85% (88%) of the net asset value.

Actual net asset value (EPRA NNNAV) can be calculated to SEKm 12,174 (11,979), corresponding to 74 SEK per share (73). The share price at the end of the period was thus 96% (90%) of the net asset value.

Share price/net asset value

Dividend Yield

The proposed dividend of SEK 3.50 (3.15) corresponds to a yield of 4.9% (6.4%) based on the share price at the end of the period.

The share's dividend yield

The Castellum share's price trend and turnover since IPO may 23, 1997 until July 8, 2010

Calendar

Interim Report January-September 2010 October 19, 2010, around 11 o'clock Year-end Report 2010 January 25, 2011 Annual Report 2010 During February, 2011 Annual General Meeting 2011 March 24, 2011 Interim Report January-March 2011 April 19, 2011 Half-year Report 2011 July 12, 2011 Interim Report January-September 2011 October 18, 2011 Year-end Report 2011 January 24, 2012 Annual General Meeting 2012 March 22, 2012

www.castellum.se

On Castellum's website it is possible to download as well as subscribe to Castellum's Pressreleases and Interim Reports.

For further information please contact Håkan Hellström, CEO, or Ulrika Danielsson, Finance Director, telephone +46 31-60 74 00 or visit Castellum's website.

Subsidiaries

Aspholmen Fastigheter AB

Nastagatan 2, SE-702 27 Örebro Telephone +46 19-27 65 00 Fax +46 19-27 65 19 orebro@aspholmenfastigheter.se www.aspholmenfastigheter.se

Fastighets AB Briggen

Fredriksbergsgatan 1, Box 3158, SE-200 22 Malmö Telephone +46 40-38 37 20 Fax +46 40-38 37 37 fastighets.ab@briggen.se www.briggen.se

Fastighets AB Brostaden

Bolidenvägen 14, Box 5013, SE-121 05 Johanneshov Telephone +46 8-602 33 00 Fax +46 8-602 33 30 info@brostaden.se www.brostaden.se

Fastighets AB Corallen

Lasarettsgatan 3, Box 148, SE-331 21 Värnamo Telephone +46 370-69 49 00 Fax +46 370-475 90 info@corallen.se www.corallen.se

Eklandia Fastighets AB

Theres Svenssons gata 9, Box 8725, SE-402 75 Gothenburg Telephone +46 31-744 09 00 Fax +46 31-744 09 50 info@eklandia.se www.eklandia.se

Harry Sjögren AB

Kråketorpsgatan 20, SE-431 53 Mölndal Telephone +46 31-706 65 00 Fax +46 31-706 65 29 info@harrysjogren.se www.harrysjogren.se

In the event of confl ict in interpretation or differences between this report and the Swedish version, the latter will have priority.

Castellum AB (publ) • Box 2269, SE-403 14 Gothenburg, Sweden • Visiting address Kaserntorget 5 Telephone +46 31-60 74 00 • Fax +46 31-13 17 55 • E-mail info@castellum.se • www.castellum.se Org nr 556475-5550