Castellum — Interim / Quarterly Report 2014

Oct 15, 2014

The picture show the University in Halmstad which was acquired in March 2014.

Interim Report January-September 2014

Interim Report January-September 2014

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to SEK 40 billion, and comprises of commercial properties.

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

Castellum is listed on NASDAQ Stockholm Large Cap.

• Rental income for the period January-September 2014 amounted to SEKm 2,496 (SEKm 2,431 previous year).
• Income from property management amounted to SEKm 1,112 (1,015), corresponding to 6.78 SEK (6.19) per share, an increase of 10%.
• Changes in value on properties amounted to SEKm 354 (301) and on derivatives to SEKm –498 (440).
• Net income after tax for the period amounted to SEKm 773 (1,405), corresponding to SEK 4.71 (8.57) per share.
• Net investments amounted to SEKm 1,612 (874) of which SEKm 998 (1,145) were new constructions, extensions and reconstructions, SEKm 854 (185) acquisitions and SEKm 240 (456) sales.
• After the reporting period Castellum has, through the wholly owned subsidiary Fastighets AB Briggen, sold the Hansa shopping mall in central Malmö for SEKm 609.

	2014 Jan-Sept	2013 Jan-Sept	2013	2012	2011	2010	2009	2008	2007	2006	2005
Income from property management, SEK/share	6.78	6.19	8.21	7.65	7.15	6.96	6.89	5.93	5.63	5.38	5.00
Change previous year	+10%	+7%	+7%	+7%	+3%	+1%	+16%	+5%	+5%	+8%	+11%
Net income after tax, SEK/share	4.71	8.57	10.41	8.98	4.34	11.98	0.98	– 4.04	9.07	10.21	7.89
Change previous year	– 45%	+97%	+16%	+107%		–64% +1,122%	pos.	neg.	–11%	+29%	+41%
Dividend, SEK/share			4.25	3.95	3.70	3.60	3.50	3.15	3.00	2.85	2.62
Change previous year			+8%	+7%	+3%	+3%	+11%	+5%	+5%	+9%	+11%
Properties fair value, SEKm	39,733	37,505	37,752	36,328	33,867	31,768	29,267	29,165	27,717	24,238	21,270
Net investments, SEKm	1,612	874	1,081	2,545	1,908	1,279	1,129	2,710	2,559	1,823	889
Loan to value	52%	52%	52%	53%	51%	50%	52%	50%	45%	45%	45%
Interest coverage ratio	319%	292%	292%	284%	278%	299%	309%	255%	287%	343%	315%

For more detailed information see Castellum Annual Report.

2 Castellum Interim Report January-September 2014 Castellum Interim Report January-September 2014

Henrik Saxborn, CEO at Castellum We continue to deliver

During the third quarter, Castellum continues to deliver in line with our ambitious growth objectives. Income from property management has increased by 10% during the fi rst nine months of 2014 – even though the stable Swedish economy has been affected by Europe's weak development and geopolitical turmoil.

Our income from property management is the result of a focus on generating cash fl ow growth with low risk. I note that our model also works in a zero infl ation environment. One reason for why it works is our contract structure, with leases designed to withstand weaker macroeconomic cycles.

Effi cient management – which I sometimes call the "daily slogging" of our highly empowered employees – enables us to reduce operating expenses. Lower interest rates also have a positive impact on net income.

On September 30, the total value of Castellum's real estate portfolio amounted to approx. SEK 40 billion – an increase of about SEK 2 billion since the beginning of the year. This was achieved partly by net investments totalling SEKm 1,612, and partly by positive changes in value and project profi ts. Our strategy is to work with low fi nancial risk. The loan-to-value ratio, which is not to exceed 55%, was 52% at the end of the third quarter.

During the latest quarter, we acquired a further SEKm 500 in MTNs (Medium Term Notes). This means that we have now gained further manoeuvring space: Today we have unused long-term credits amounting to SEK 1.1 billion are long-term.

After this reporting period, Hansa in central Malmö was sold. The property mainly consists of a shopping mall and housing – segments that Castellum does not prioritize. Our current focus is to structure Castellum's portfolio to obtain growth in the longer term. It is against this background that the sale of Hansa should be seen.

We're now focusing on those transactions where properties with lower growth are exchanged for objects within Sweden's fastest growing regions. In the short term, this may mean that we make acquisitions with slightly lower yields than traditionally – but with far greater future potential. I am confi dent that this process can be implemented without negatively affecting Castellum's positive development in income from property management.

During the quarter has some personal changes in the senior management been done. On October 7, Ulrika Danielsson entered her newly created position as CFO of Castellum with the mandate to coordinate fi nancing issues and capital-structure

considerations. Ola Orsmark and Cecilia Fasth have entered as CEOs at Fastighets AB Briggen and Eklandia Fastighets AB, respectively.

Looking ahead, I can note that right now we are operating on three strong markets:

• The rental market, which is characterized both by low vacancy rates in the central parts of our operating districts, and by low new-construction volumes.
• The real estate market, which is characterized by strong demand in Sweden.
• The fi nancial market, which continues to provide good access to capital at a reasonable interest rate.

I see a change occurring in net leasing in the rental market. Last year, the increase in net leasing was primarily due to our ongoing projects. Our existing properties now contribute the high fi gures, and this will lead to lower vacancy rates in the future.

Castellum will continue to deliver growth in income from property management by increasing its portfolio turnover rate as well as by further developing the portfolio and investing in regions where Sweden is growing. I'm convinced that by continuing to build Castellum on the concepts of quality and density we are heading in the right direction. Furthermore, our clear dividend policy means that shareholders know precisely how Castellum's property management income will be distributed.

On rolling four quarters, the Castellum share yield has been 25% – dividends included.

Henrik Saxborn CEO

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.

Strategy for the property portfolio and its management

Development of commercial properties in growth regions

Geography and category

Castellum's real estate portfolio is located in the fi ve growth regions Greater Gothenburg, Öresund Region, Greater Stockholm, Mälardalen and Eastern Götaland. This together with rational property management and a strong presence in the market, provide for good business opportunities.

The real estate portfolio shall consist of commercial properties with general and fl exible premises for offi ce, retail, warehouse, logistics and industry purposes.

Property portfolio

The real estate portfolio shall be continuously enhanced and developed in order to improve cash fl ow. Castellum shall continue to grow with customers' demand, mainly through new constructions, extensions and reconstructions but also through acquisitions.

All investments shall 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.

Customer focus through local organizations

Customers

Castellum shall be perceived as a customer focused company. This is achieved by developing long-term relations and supplying premises and service meeting customer demands.

Organization and employees

Service and property management shall be delivered by a decentralized organization with wholly owned subsidiaries with strong local presence. Property management shall be carried out mainly by own personnel.

Castellum shall have skilled and committed employees, which is achieved by being an attractive workplace with good development possibilities.

The business shall contribute to a sustainable development, in view of ecological, social and economic aspects.

Strategy for funding

Strong balance sheet with low financial and operational risk

Capital structure

Castellum shall have low fi nancial risk. The choosen risk key ratios are loan to value and interest coverage ratio. Purchase or transfer of own shares shall be available as a method for adjusting the company's capital structure to the company's capital need and as payment or funding of real estate investments. Company owned shares may not be traded for short term purpose of capital gain.

The stock and credit markets

Castellum will work for a competitive total return on the company's share relative to risk and also strive for high liquidity.

All actions will be made from a long-term perspective and the company will hold frequent, open and fair reports to shareholders, the capital and credit markets and the media, without disclosing any individual business relationship.

Low operational risk

Castellum's real estate portfolio has a geographical distribution to fi ve Swedish growth regions and shall consist of different types of commercial premises. The risk within in the customer portfolio shall be kept low.

Overall objective

Castellum's overall objective is an annual growth in cash fl ow, i.e.income from property management per share, of at least 10%

Strategic tools

Outcome

Investments

In order to achieve the overall objective of 10% growth, net investments of at least 5% of the property value will be made yearly. This is currently equivalent to approx. SEKm 2,000.

Subsidiaries

One of the three largest real estate owners in each local market.

Strategic tools

Customer and employee satisfaction

In order to develop the Group as well as customer relations, the customers' level of satisfaction shall be measured regularly. Customer and employee satisfaction shall constantly improve.

Sustainability

Focus on using energy more effi ciently, sustainable new constructions, known and continuously improved status in the properties, green customer relations and social commitment and responsibility at our cities.

Lease value per region

Strategic tools Outcome

Capital structure

Loan to value ratio not permanently exceeding 55%. Interest coverage ratio of at least 200%.

Dividend

At least 50% of pre-tax property management income shall be distributed. Investment plans, consolidation needs, liquidity and fi nancial position in general will be taken into account.

The stock and credit markets

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

Low operational risk

Commercial portfolio in fi ve growth regions distributed on different cathegories with general, fl exible premises. The risk within the customer portfolio shall be kept low using diversifi cation over many fi elds of business, length and size of contracts.

Loan to value ratio Interest coverage ratio

4,800 commercial contracts where the single largest contract accounts for approx. 2%

Market comments

Swedish economy

The Swedish economy showed increased activity during the second quarter and continues to improve. However, the economic picture is divided between a strong domestic demand, which provides growth, and an export market – normally the major driving force for Swedish economic recovery – which is developing slowly. The slow export market is partly due to weak development in some parts of the world, where geopolitical turmoil has further dampened the mood.

The labour market will be positively impacted by the stronger economy and is currently showing steady improvement. Employment and labour supply are increasing at a similar pace. However, despite a stronger economic situation, infl ationary pressures are assumed to remain low.

Macro indicators

Unemployment	7.4%	(August 2014)
Inflation	–0.4%	(September 2014 compared to September 2013)
GDP growth	2.6%	(Q2 2014 compared to Q2 2013)
Source: SCB

Rental market

On the whole, the rental market is positive, with stable demand and unchanged or increased rental levels in markets with low vacancy rates. However, an increase in demand is noted in some geographic markets and real estate products, such as newly constructed offi ce space in prime locations and fl exible warehouse and logistics facilities. Construction of new offi ce space in Gothenburg and Stockholm was in line with the previous year, but the assessment is that there is still margin for further new construction. A slight increase in new construction is noted for Castellum's markets outside the major urban regions. It is an increase from low levels and consequently, no risk of oversupply was considered to exist.

Property market

During the period, real estate market activity is the highest since 2008, and the transaction volume for the first three quarters of the year amounted to approx. SEK 90 billion (65). A widened interest in geographic markets and segments could also be noted. This resulted in higher activity outside the central areas of major urban regions. For example, greater focus is placed on projects and hotels, and an increase in diverse portfolio transactions. The strong demand is due to improved opportunities of raising capital and increased propensity for risk.

Swedish real estate companies dominated the buyer side, and Swedish real estate investors accounted for about 87% (90%) of the volume. Office properties were still the largest single segment, and commercial properties accounted for approx. 75% (65%) of the total transaction volume.

Castellum notes that an increase in value in several geographic markets and segments is seen for the first three quarters of 2014. However, pricing as a whole is considered to have remained unchanged since the previous quarter.

Interest and credit market

At their meeting in September, the Swedish Riksbank decided to hold the repo rate unchanged at 0.25% in order to help push the current low infl ation rate towards the infl ation target of 2%. For this to succeed, the repo rate needs to remain low for a considerable time to come. The Swedish Riksbank does not deem it appropriate to begin raising the repo rent until the end of 2015.

The Stibor interest rate – signifi cant for Castellum operations – dropped during the fi rst half-year and then again when the Swedish Riksbank cut the repo rate in early July. Since then, the Stibor rate has remained virtually unchanged, whereas long-term rates have kept falling since the beginning of the year.

Both the availability of bank fi nancing and credit market fi nancing are considered to be good. During the year, credit margins in the capital market have fallen while credit margins for bank fi nancing are expected to remain stable.

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 comparisons 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 for the period January-September 2014 to SEKm 1,112 (1,015), equivalent to SEK 6.78 (6.19) per share - an increase with 10%. Income from property management rolling four quarters amounted to SEKm 1,443 (1,317) equivalent to SEK 8.80 per share (8.03) - an increase of 10%.

During the period, changes in value on properties amounted to SEKm 354 (301) and on derivatives to SEKm –498 (440). Net income after tax for the period was SEKm 773 (1,405), equivalent to SEK 4.71 (8.57) per share.

Rental income

Group's rental income amounted to SEKm 2,496 (2,431). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,272 per sq.m., whereas for warehouse and industrial properties, it amounted to SEK 772 per sq.m. Rental levels, which are considered to be in line with the market, have in comparable portfolio increased by 1% compared with previous year, which mainly is an effect from indexation and can be compared with the usual industry index clause (October to October), which was –0.1% in 2014. Castellum's higher indexation is due to the Groups focus on index clauses with minimum upward adjustment in the contract portfolio, which offers protection against defl ation and a higher than usual indexation in a low infl ationary environment.

The average economic occupancy rate was 88.4% (88.4%). The total rental value for vacant premises on yearly basis amounted to approx. SEKm 475 (464).

The rental income for the period includes a lump sum

Rental value and economic occupancy rate

Gross leasing (i.e. the annual value of total leasing) during the period was SEKm 241 (265), of which SEKm 49 (74) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 166 (184), of which bankruptcies were SEKm 12 (19) and SEKm 2 (9) were notices of termination with more than 18 months remaining length of contract.

Net lease for the period was hence SEKm 75 (81) and for the third quarter isolated SEKm 2 (19).

The time difference between reported net leasing and the effect in income thereof is estimated to be between 9-18 months.

Property costs

Property costs amounted to SEKm 798 (819) corresponding to SEK 293 per sq.m. (303). Consumption for heating during the period has been calculated to 81% (104%) of a normal year according to the degree day statistics.

Property costs

Net leasing

SEK/sq. m Retail Industrial Total Operating expenses 181 105 147 Maintenance 41 25 34 Ground rent 8 7 7 Real estate tax 68 21 47 Direct property costs 298 158 235 Leasing and property administration – – 58 Total 298 158 293 Previous year 313 172 303	Offi ce/	Warehouse/	2014	2013
				Total
				161
				33
				7
				46
				247
				56
				303

Central administrative expenses

Central administrative expenses totalled SEKm 79 (67). This includes costs for a profi t-and-share-price related incentive plan for 10 persons in executive management of SEKm 13 (6).

Net interest

Net interest items were SEKm –507 (–530). The average interest rate level was 3.4% (3.7%). Net fi nancial income was positively affected by approx. SEKm 50 due to the average interest rate level decrease by 0.3%-units. Other effects on the interest cost can be explained by a larger credit portfolio.

Changes in value

The real estate market the third quarter is characterized by continued high activity and strong demand. The general increase in prices that was noted during the fi rst half year remains, and the downward adjustment of the average valuation yield of 0.1% in the internal valuations remains fi rm. This, together with acquisition gains, project gains and individual adjustments on property level has resulted in a change in value totaling SEKm 350. The sale of 6 properties adds another change in value of SEKm 4. Net sales price amounted to SEKm 240 after reduction for assessed deferred tax and transaction costs of SEKm 16. Hence the underlying property value, which amounted to SEKm 256, exceeded last valuation of SEKm 236 with SEKm 20.

The value in the interest derivatives portfolio has changed by SEKm –497 (441), mainly due to changes in long-term market interest rates. Castellum's currency derivatives, with the purpose to hedge currency fl uctuations in the Danish investments, has during the period changed SEKm –8 (–2) where the effective component of the value changes of SEKm –7 (–1) is accounted for in other total net income.

Tax

The nominal corporate tax rate in Sweden is 22%. Due to the possibility to deduct depreciation and reconstructions for tax purposes, and to utilize tax loss carry forwards, the paid tax is low. Paid tax occurs since a few subsidiaries have no possibilities to group contributions for tax purpose. Remaining tax loss carryforwards can be calculated to

Income from Property Management per share Income over time

SEKm 1,089 (921). Fair values for the properties exceed their fi scal value by SEKm 19,646 (18,570) of which SEKm 896 (830) relates to the acquisition of properties accounted for as asset acquisitions. As deferred tax liability, a full nominal 22% tax of the net difference is reported, reduced by the deferred tax relating to asset acquisitions, i.e., SEKm 3,885 (3,700).

Castellum has no current tax disputes.

In June, the Swedish Committee on Corporate Taxation published its main proposal "Neutral corporate tax - for increased effi ciency and stability". One of the key issues is the limited deductibility of fi nancial expenses. For Castellum, this limitation means, everything else equal, and notwithstanding the sale of real estate, value changes of derivatives and the use of tax-loss carry forwards, higher paid taxes of about SEKm 100 annually. The fi nal report is currently open for comments and the committee proposes effect as of January 1, 2016.

Tax calculation 30-09-2014

SEKm	Basis current tax	Basis deferred tax
Income from property management	1,112
Deductions for tax purposes
depreciations	– 521	521
reconstructions	– 235	235
Other tax allowances	21	25
Taxable income from property management	377	781
Properties sold	0	– 124
Changes in value on properties	–	350
Changes in value on interest rate derivatives	– 498	–
Taxable income before tax loss carry forwards	– 121	1,007
Tax loss carry forwards, opening balance	– 921	921
Tax loss carry forwards, closing balance	1,089	– 1,089
Taxable income	47	839
Tax accoring to the income statement	– 10	– 185

Real Estate Portfolio

The real estate portfolio is located in Greater Gothenburg, the Öresund Region, Greater Stockholm, Mälardalen and Eastern Götaland. The main focus, which represents approx. 73% of the portfolio, is in the three major urban regions.

The commercial portfolio consists of 65% offi ce and retail properties as well as 30% 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. The remaining 5% consist of projects and undeveloped land.

Castellum owns approx. 800,000 sq.m. of unutilized building rights and ongoing projects with remaining investments of approx. SEKm 900.

Investments

During the period, investments totalling SEKm 1,852 (1,330) were carried out, of which SEKm 998 (1,145) were new constructions, extensions and reconstructions and SEKm 854 (185) were acquisitions. Of the total investments SEKm 1,089 refers to Greater Gothenburg, SEKm 284 to Mälardalen, SEKm 195 to Greater Stockholm, SEKm 163 to Eastern Götaland and SEKm 121 to the Öresund Region. After sales of SEKm 240 (456) net investments amounted to SEKm 1,612 (874).

During the period 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, 2014	37,752	626
+ Acquisitions	854	14
+ New constructions, extensions and reconstructions	998	–
– Sales	– 236	– 6
+/– Unrealized changes in value	350	–
+/– Currency translation	15	–
Real estate portfolio on 30 September, 2014	39,733	634

Property value

Internal valuations

Castellum assesses the value of the properties through internal valuations, as at the year end, corresponding to level 3 in IFRS 13.

The valuations 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. Properties with building rights have been valued on the basis of an estimated market value per square metre, on average approx. SEK 1,100 (1,045) per sq.m. 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 valuations has historically been small.

Based on these internal valuations, property value at the end of the period were assessed to SEKm 39,733 (37,752), corresponding to SEK 10,621 per sq.m.

Average valuation yield

	(excl. project/land and building rights)	SEKm
	Net operating income properties	1,845
	+ Estimated index adjustment 2015, 0.5%	13
	+ Real occupancy rate, 94% at the lowest	212
–	Property administration, 30 SEK/sq.m.	– 82
	Normalized net operating income (9 months)	1,988
	Valuation (excl. building rights of SEKm 580)	37,388
	Average valuation yield	7.1%

Investments Average valuation yield over time

Castellums' real estate portfolio 30-09-2014

	30-09-2014					January-September 2014
	No. of properties	Area thous. sq.m	Property value SEKm	Property value SEK/sq.m	Rental value SEKm	Rental value SEK/sq.m	Economic occupancy rate	Rental income SEKm	Property costs SEKm	Property costs SEK/sq.m	Net operating income SEKm
Office/retail
Greater Gothenburg	87	488	7,738	15,849	488	1,331	91.3%	445	104	285	341
Öresund Region	63	398	5,832	14,669	420	1,408	85.2%	358	101	337	257
Greater Stockholm	49	336	4,431	13,189	346	1,373	83.3%	288	77	307	211
Mälardalen	72	387	4,509	11,637	332	1,144	91.0%	303	81	277	222
Eastern Götaland	57	341	3,459	10,143	274	1,072	88.6%	243	74	288	169
Total offi ce/retail	328	1,950	25,969	13,315	1,860	1,272	88.0%	1,637	437	298	1,200
Warehouse/industrial
Greater Gothenburg	103	660	5,353	8,113	375	757	91.6%	343	72	146	271
Öresund Region	44	325	2,110	6,487	183	754	85.7%	157	38	159	119
Greater Stockholm	52	282	2,630	9,336	212	1,003	87.2%	185	43	204	142
Mälardalen	37	183	1,173	6,401	101	735	89.9%	91	25	180	66
Eastern Götaland	30	175	733	4,198	69	526	89.2%	61	14	107	47
Total warehouse/industrial	266	1,625	11,999	7,385	940	772	89.1%	837	192	158	645
Total	594	3,575	37,968	10,621	2,800	1,044	88.4%	2,474	629	235	1,845
Leasing and property administration									154	58	– 154
Total after leasing and property administration									783	293	1,691
Development projects	14	91	1,495	–	65	–	–	35	14	–	21
Undeveloped land	26	–	270	–	–	–	–	–	–	–	–
Total	634	3,666	39,733	–	2,865	–	–	2,509	797	–	1,712

The table above relates to the properties owned by Castellum at the end of the period and reflects the income and costs of the properties as if they had been owned during the whole year. The discrepancy between the net operating income of SEKm 1,712 accounted for above and the net operating income of SEKm 1,698 in the income statement is explained by the deduction of the net operating income of SEKm 4 on properties sold during the year, as well as the adjustment of the net operating income of SEKm 18 on properties acquired/completed during the year, which are recalculated as if they had been owned or completed during the whole period.

Property related key ratios Segment information

	2014 Jan-Sept	2013 Jan-Sept	2013 Jan-Dec
Rental value, SEK/sq.m.	1,044	1,030	1,036
Economic occupancy rate	88.4%	88.4%	88.4%
Property costs, SEK/sq.m.	293	303	307
Net operating income, SEK/sq.m.	630	608	608
Property value, SEK/sq.m.	10,621	10,170	10,285
Number of properties	634	633	626
Lettable area, thousand sq.m.	3,666	3,625	3,623

		Rental income	Income from property management
SEKm	2014 Jan-Sept	2013 Jan-Sept	2014 Jan-Sept	2013 Jan-Sept
Greater Gothenburg	774	760	380	368
Öresund Region	522	498	229	201
Greater Stockholm	478	466	222	192
Mälardalen	418	412	185	161
Eastern Götaland	304	295	128	118
Total	2,496	2,431	1,144	1,040

The difference between the income from property management of SEKm 1,144 (1,040) above and the groups accounted income before tax of SEKm 968 (1,756) consists of unallocated income from property management of SEKm –32 (–25), changes in property value of SEKm 354 (301) and changes in values of interest rate derivatives of SEKm –498 (440).

Property value by property type Property value by region

Larger investments and sales

Larger projects Property	Area, sq.m	Econ. occup. Oct 2014	Total inv., land incl. SEKm	Remain. inv.	SEKm Completed	Comment
Dragarbrunn 20:4, Uppsala	10,020	90%	242		14 Q4 2014	Extension and reconstruction office
Lundbyvassen 8:1, Gothenburg	8,900	100%	219		31 Q4 2014	New construction office
Algen 1, Jönköping	4,509	35%	136		50 Q1 2015	New construction retail/office/restaurant
Jägmästaren 1, Linköping	7,750	92%	109		36 Q1 2015	New construction retail
Spejaren 3, Huddinge	6,331	100%	83		12 Q4 2014	New construction retail
Verkstaden 14, Västerås	6,100	100%	78		76 Q1 2016	Extension and reconstruction school
Visionen 3, Jönköping	2,478	88%	59		56 Q3 2015	New construction office
Varla 3:22, Kungsbacka	5,000	100%	42		16 Q1 2015	Extension and reconstruction warehouse
Boländerna 35:1, Uppsala	8,750	98%	38		6 Q2 2015	Reconstruction retail
Kärra 74:3, Gothenburg	9,305	0%	33		15 Q4 2014	Extension and reconstruction logistic
Godståget 1, Stockholm	6,568	100%	31		30 Q4 2014	Extension and reconstruction warehouse
Projects completed/partly moved in
Lindholmen 28:3, Gothenburg	9,459	95%	272		12 Q2 2013	New construction office*
Fullriggaren 4, Malmö	5,599	60%	156		18 Q1 2013	New construction office*
Atollen 3, Jönköping	5,963	78%	153		10 Q4 2013	New construction office/retail/residentials*
Kulan 3, Helsingborg	9,689	100%	83		7 Q2 2014	New construction logistic
Solsten 1:118, Härryda	6,534	100%	57		4 Q3 2014	New construction warehouse
Högspänningen 1, Västerås	4,040	70%	47		3 Q3 2014	New construction logistic/office
Larger acquisitions during 2014 Property	Area, sq.m	Econ. occup Oct 2014	Acquisition SEKm		Access	Category
Fanan 26, 30, 39, 43, 47, 49, 51,						Offi ce/retail/education facilities/warehouse
Fanborgen 3 and 4, Halmstad	43,485	94%	637		March 2014	and library
Solsten 1:118 and Solsten 1:155, Härryda	5,061	100%	86			June 2014 Warehouse/office and building right
Dumpern 7, Huddinge	6,792	100%	70		June 2014 Logistic
Larger sales during 2014 Property	Area,,sq.m	Underlying prop. price, SEKm	Trans. costs and deferred tax, SEKm	Net sales price, SEKm Access		Category
St Botulf 11, Lund	4,878	118	– 9		109 Oct 2014	Office/residential
Renseriet 25, Stockholm	4,215	79	– 4		75 Feb 2014	Offi ce/warehouse
Erik Dahlberg 2, Helsingborg	842	23	– 2		21 April 2014	Offi ce/retail

* The remaining investment volume will be used as the vacant spaces are rented.

Financing

Castellum shall have a low fi nancial risk, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%. Castellum's assets had on September 30, 2014, a value of SEKm 40,257 (38,113) and are fi nanced by shareholders´s equity of SEKm 13,207 (13,127), deferred tax liabilities of SEKm 3,885 (3,700), interest bearing liabilities of SEKm 20,761 (19,481) and non interest bearing liabilities of SEKm 2,404 (1,805).

Interest bearing liabilities

At the end of the period Castellum had binding credit agreements totalling SEKm 26,080 (24,300) of which SEKm 21,656 (21,859) was long term binding and SEKm 4,424 (2,441) short term binding.

During the period SEKm 1,000 were issued under the MTN-program and a new credit agreement of SEKm 500 were signed.

After deduction of cash of SEKm 174 (70), net interest bearing liabilities were SEKm 20,587 (19,411), of which SEKm 4,200 (3,200) were MTN and SEKm 1,297 (1,014) outstanding commercial papers.

Most of Castellum's loans are short-term revolving loans, utilized in long-term binding credit agreements in the largest Nordic banks. This means great fl exibility in the choice of interest rate base, interest rate period and tied up capital. Bonds issued under the MTN program and the commercial papers are a complement to the existing funding in banks and broadens the funding base. At the end of the period the fair value of the liabilities is in principle in line with the value accounted for.

Long-term loan commitments in banks are secured by pledged mortgages in poperties and/or fi nancial covenants. Outstanding commercial papers and bonds under the MTN-program are unsecured.

Net interest bearing liabilities amounted to SEKm 20,587 (19,411) of which SEKm 15,090 (15,197) were secured by the company's properties and SEKm 5,497 (4,214) unsecured. The proportion of used secured fi nancing was thus 38% of

the property value. The fi nancial covenants state a loan-tovalue ratio not exceeding 65% and an interest coverage ratio of at least 150%, which Castellum fulfi ls with comfortable margins, 52% and 319% respectively. The average duration of Castellum's long-term credit agreements was years 2.8 (3.4). Margins and fees on long-term credit agreements had an average duration of 1.8 years (2.4).

Credit maturity structure 30-09-2014

	Credit	Utilized in
SEKm	agreements	Bank	MTN/Cert	Total
0-1 year	4,424	834	2,997	3,831
1-2 years	8,808	5,708	–	5,708
2-3 years	3,507	1,307	1,000	2,307
3-4 years	6,708	5,108	1,000	6,108
4-5 years	507	7	500	507
> 5 years	2,126	2,126	–	2,126
Total	26,080	15,090	5,497	20,587
	Unutilized credit in long term credit agreements			1,069

Interest rate maturity structure

In order to secure a stable and low net interest cash fl ow the interest rate maturity structure is distributed over time. The average fi xed interest term on the same date was 2.6 years (2.7). The average effective interest rate as per September 30, 2014 was 3.2% (3.5%).

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. Interest rate derivatives is a cost effective and fl exible way of extending loans with short term interest rates to achieve the desired fi xed interest term. In the interest rate maturity structure, interest rate derivatives are accounted for in the earliest time segment in which they can mature.

Credit margins are distributed in the interval of the underlying loans.

Interest rate maturity structure 30-09-2014

		Interest rate		Closing
	Credit. SEKm	derivates SEKm	Net. SEKm	interest rate
0-1 year	20,587	– 9,950	10,637	3.0%
1-2 years	–	1,100	1,100	2.6%
2-3 years	–	750	750	2.4%
3-4 years	–	1,350	1,350	3.1%
4-5 years	–	1,550	1,550	3.3%
5-10 years	–	5,200	5,200	3.7%
Total	20,587	–	20,587	3.2%

Currency

Castellum owns properties in Denmark with a value of SEKm 488 (466), which means that the Group is exposed to a currency risk. The currency risk is primarily related to when income statement and balance sheet in foreign exchange are translated into Swedish currency. In accordance with the fi nancial policy, between 60-100% of investments in foreign subsidiaries are to be fi nanced in local currency.

Interest rate and currency derivatives

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. According to the accounting standard IAS 39, derivatives are subject to

Castellum's financial policy and commitments in credit agreements

market valuation. 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-cashfl ow affecting changes in value are reported in the income statement. Castellum also has derivatives in order to hedge currency fl uctuation in its investment in Denmark. As for currency derivatives, a theoretical surplus/sub value occurs if the agreed exchange rate deviates from the current exchange rate, where the effective portion of value changes is accounted for in other total income. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not affected equity.

To calculate the market value of derivatives, market rates for each term and, where appropriate, exchange rates, as quoted on the market at the closing date are used. Interest rate swaps are valued by discounting future cash fl ows to present value while instruments containing options are valued at current repurchase price.

As of September 30, 2014, the market value of the interest rate derivatives portfolio amounted to SEKm –1,184 (–687) and the currency derivative portfolio to SEKm –4 (4). All derivatives are, as at the year end, classifi ed in level 2 according to IFRS 13.

	Policy	Committment	Outcome
Loan to value ratio	Not in the long run exceeding 55%	No more than 65%	52%
Interest coverage ratio	At least 200%	At least 150%	319%
Interest rate risk
– average fixed interest term	1-4,5 years*	–	2.6 years
– proportion maturing within 6 months	No more than 50%	–	45%
Currency risk
– investment	60%-100% funded in local currency	–	76%
– other currency risks	Not allowed	–	No exposure
Funding risk	At least 50% of interest bearing liabilities have a duration	–
	of at least 2 years		62%
Counterparty risk	Credit institutions with high ratings, at least "investment grade"	–	Satisfi ed
Liquidity risk	Liquidity reserve in order to fulfi ll payments due	–	SEKm 1,069 unutilized credit agreements
	* * Mandate in financial policy have, in accordance with the Board's decision, changed during the year from 0.5-3 years to 1-4.5 years.

Credit agreement maturity structure Interest rate maturity structure

Consolidated statement of Comprehensive Income

SEKm	2014 July–Sept	2013 July–Sept	2014 Jan–Sept	2013 Jan–Sept	Rolling 4 quarters Oct 13 - Sept 14	2013 Jan–Dec
Rental income	833	809	2,496	2,431	3,314	3,249
Operating expenses	– 107	– 111	– 403	– 437	– 549	– 583
Maintenance	– 30	– 28	– 92	– 88	– 129	– 125
Ground rent	– 6	– 6	– 20	– 19	– 27	– 26
Property tax	– 44	– 43	– 129	– 128	– 170	– 169
Leasing and property administration	– 47	– 45	– 154	– 147	– 209	– 202
Net operating income	599	576	1,698	1,612	2,230	2,144
Central administrative expenses	– 23	– 18	– 79	– 67	– 108	– 96
Net interest costs	– 167	– 177	– 507	– 530	– 679	– 702
Income from property management	409	381	1,112	1,015	1,443	1,346
Changes in value
Properties	– 3	182	354	301	381	328
Derivatives	– 132	53	– 498	440	– 509	429
Income before tax	274	616	968	1,756	1,315	2,103
Current tax	– 6	– 6	– 10	– 12	– 4	– 6
Deferred tax	– 55	– 107	– 185	– 339	– 236	– 390
Net income for the period/year	213	503	773	1,405	1,075	1,707
Other total net income Items that will be reclassified into net income
Translation difference of currencies	1	– 5	11	1	20	10
Change in value derivatives, currency hedge	– 1	2	– 7	– 1	– 13	– 7
Total net income for the period/year	213	500	777	1,405	1,082	1,710

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

Data per Share

	2014 July–Sept	2013 July–Sept	2014 Jan–Sept	2013 Jan–Sept	Rolling 4 quarters Oct 13 - Sept 14	2013 Jan–Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Income from property management, SEK	2.49	2.32	6.78	6.19	8.80	8.21
Income from prop. management after tax (EPRA EPS*), SEK	2.34	2.17	6.27	5.90	8.41	8.04
Earnings after tax, SEK	1.30	3.07	4.71	8.57	6.55	10.41
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Property value, SEK	242	229	242	229	242	230
Long term net asset value (EPRA NAV*), SEK	111	104	111	104	111	107
Actual net asset value (EPRA NNNAV*), SEK	99	95	99	95	99	97

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

Financial Key Ratios

	2014 July–Sept	2013 July–Sept	2014 Jan–Sept	2013 Jan–Sept	Rolling 4 quarters Oct 13–Sept 14	2013 Jan–Dec
Net operating income margin	72%	71%	68%	66%	67%	66%
Interest coverage ratio	345%	315%	319%	292%	313%	292%
Return on actual net asset value	6.6%	14,3%	8.0%	14.3%	8.5%	13.2%
Return on total capital	5.7%	7,8%	6.7%	6.6%	6.4%	6.4%
Net investments, SEKm	350	28	1,612	874	1,819	1,081
Loan to value ratio	52%	52%	52%	52%	52%	52%

*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, e.g. the key ratios EPRA EPS (Earnings Per Share), EPRA NAV (Net Asset Value) and EPRA NNNAV (Triple Net Asset Value).

Consolidated Balance Sheet

SEKm	30 Sept 2014	30 Sept 2013	31 Dec 2013
Assets
Investment properties	39,733	37,505	37,752
Other fixed assets	30	29	31
Current receivables	320	315	260
Cash and bank	174	176	70
Total assets	40,257	38,025	38,113
Shareholders' equity and liabilities
Shareholders' equity	13,207	12,822	13,127
Deferred tax liability	3,885	3,649	3,700
Derivatives	1,188	666	683
Long term interest-bearing liabilities	20,761	19,676	19,481
Non interest-bearing liabilities	1,216	1,212	1,122
Total shareholders' equity and liabilities	40,257	38,025	38,113
Pledged assets (property mortgages)	19,040	18,500	18,375
Contingent liabilities	–	–	–

Changes in Equity

SEKm	Number of outstanding shares, thousand	Share capital	Other capital contribution	Currency transl. reserve	Currency hedge reserve	Retained earnings	Total equity
Shareholders equity 31-12-2012	164,000	86	4,096	–12	8	7,887	12,065
Dividend, March 2013 (3.95 SEK/share)	–	–	–	–	–	– 648	– 648
Net income Jan-Sept 2013	–	–	–	–	–	1,405	1,405
Other total net income Jan-Sept 2013	–	–	–	1	– 1	–	0
Shareholders equity 30-09-2013	164,000	86	4,096	– 11	7	8,644	12,822
Net income Oct-Dec 2013	–	–	–	–	–	302	302
Other total net income Oct-Dec 2013	–	–	–	9	– 6	–	3
Shareholders equity 31-12-2013	164,000	86	4,096	– 2	1	8,946	13,127
Dividend, March 2014 (4.25 SEK/share)	–	–	–	–	–	– 697	– 697
Net income Jan-Sept 2014	–	–	–	–	–	773	773
Other total net income Jan-Sept 2014	–	–	–	11	– 7	–	4
Shareholders equity 30-09-2014	164,000	86	4,096	9	– 6	9,022	13,207

Cash Flow Statement

SEKm	2014 July-Sept	2013 July-Sept	2014 Jan-Sept	2013 Jan-Sept	Rolling 4 quarters Oct 13 - Sept 14	2013 Jan-Dec
Net operating income	599	576	1,698	1,612	2,230	2,144
Central administrative expenses	– 23	– 18	– 79	– 67	– 108	– 96
Reversed depreciations	3	3	9	8	12	11
Net interest rates paid	– 192	– 207	– 528	– 511	– 718	– 701
Tax paid	– 5	– 5	– 9	– 17	– 4	– 12
Translation difference of currencies	0	1	– 4	– 1	– 8	– 5
Cash fl ow from operating activities before change in working capital	382	350	1,087	1,024	1,404	1,341
Change in current receivables	58	42	41	– 64	83	– 22
Change in current liabilities	– 49	98	107	125	38	56
Cash fl ow from operating activities	391	490	1,235	1,085	1,525	1,375
Investments in new constructions, refurbishments and extensions	– 329	– 346	– 998	– 1,145	– 1 ,436	– 1,583
Property acquisitions	– 40	– 33	– 854	– 185	– 854	– 185
Change in liabilities at acquisitions of property	0	– 4	7	16	5	14
Property sales	19	351	240	456	471	687
Change in receivables at sales of property	0	– 27	– 101	– 19	– 88	– 6
Other investments	– 3	– 2	– 8	– 13	– 13	– 18
Cash fl ow from investment activities	– 353	– 61	– 1,714	– 890	– 1,915	– 1,091
Change in long term liabilities	– 41	– 312	1,280	582	1,085	387
Change long term receivables	–	–	–	3	–	3
Dividend paid	–	–	– 697	– 648	– 697	– 648
Cash fl ow from fi nancing activities	– 41	– 312	583	– 63	388	– 258
Cash fl ow for the period/year	– 3	117	104	132	– 2	26
Cash and bank opening balance	177	59	70	44	176	44
Cash and bank closing balance	174	176	174	176	174	70

The Parent Company

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

The parent company takes part in property-related operations through capital allocation and involvement in subsidiary Boards.

Income statement SEKm	2014 July-Sept	2013 July-Sept	2014 Jan-Sept	2013 Jan-Sept
Income	5	4	13	12
Operating expenses	– 17	– 12	– 58	– 49
Net financial items	3	3	13	12
Dividend / Group contributions	– 132	53	– 498	440
Income before tax	– 141	48	– 530	415
Tax	31	– 10	116	– 91
Net income for the period/year	– 110	38	– 414	324
Comprehensive income for the parent company
Net income for the period/year	– 110	38	– 414	324
Items that will be reclassified into net income
Translation difference. foreign operations	1	– 2	7	1
Unrealized change, currency hedge	– 1	2	– 7	– 1
Total net income for the period/year	– 110	38	– 414	324
Balance sheet, SEKm		30 Sept 2014	30 Sept 2013	31 Dec 2013
Participations in group companies		5,869	5,838	5,869
Receivables, group companies		18,364	17,491	18,137
Other assets		93	146	119
Cash and bank		143	131	52
Total		24,469	23,606	24,177
Shareholders' equity		3,927	4,372	5,038
Derivatives		1,188	666	683
Interest bearing liabilities		18,597	17,511	17,315
Interest bearing liabilities, group companies		639	902	998
Other liabilities		118	155	143
Total		24,469	23,606	24,177
Pledged assets (receivables group companies)		15,675	15,050	14,928
Contingent liabilities (guaranteed com mitments for subsidiaries)		2,164	2,165	2,166

Accounting Principles

Castellum follows the EU-adopted IFRS standards and interpretations (IFRIC). This interim report has been prepared according to IAS 34 Interim Financial Reporting and the Annual Accounts Act. Accounting principles and methods for calculations have remained unchanged compared with the Annual Report of the previous year except for IFRIC 21. IFRIC 21 states that levies, for Castellum property taxes, shall be recognized when the obligation arises which occurs annually on January 1. Unconsumed share of the liability is recognized as prepaid costs. The change has no affect on profi t.

Opportunities and Risks for Group and Parent Company

Opportunities and risks in the cash flow

Over time, increasing market interest rates normally constitute an effect of economic growth and increasing infl ation, which is expected to result in higher rental income. This is partly due to the fact that the demand for premises is thought to increase. This leads, in turn, to reduced vacancies and hence to the potential for increasing market rents. It is also partly due to the fact that the index clause in commercial contracts compensates for increased 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 changes in rental income and interest cost do not take place at the exact same time, which is why the effect on income in the short run may occur at different points in time.

Sensitivity analysis - cash fl ow

Effect on income next 12 months
	Effect on income, SEKm		Probable scenario
	+/– 1% (units)	Boom	Recession
Rental level / Index	+ 33/– 33	+	–
Vacancies	+ 38/– 38	+	–
Property costs	– 11/+ 11	–	0
Interest costs	– 83/+ 33	–	+

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. Property values are determined by supply and demand, where prices mainly depend on the properties' expected net operating incomes and the buyers' required yield. An increasing demand results in lower required yields and hence an upwarded adjustment in prices, while a weaker demand has the opposite effect. In the same way, a positive development in net operating income results in an upward adjustment in prices, while a negative development has the opposite effect.

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

Sensitivity analysis - change in value

Properties	– 20%	– 10%	0%	+ 10%	+ 20%
Changes in value, SEKm	– 7,947	– 3,973	–	3,973	7,947
Loan to value ratio	65%	58%	52%	48%	44%

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 a low loan-to-value ratio and long-term credit agreements.

Event after the reporting period

As previously announced, Castellum has through the wholly owned subsidiary Fastighets AB Briggen, sold the Hansa shopping mall in central Malmö for SEKm 609. The change of possession will take place October 17, 2014.

Election Committee

At Castellum AB's Annual General Meeting held on March 20, 2014, it was resolved that the election committee for the 2015 AGM should consist of the chairman of the board of directors plus a representative from each of the three largest ownership registered or otherwise known shareholders (as per the last trading day of August 2014). If any of these shareholders does not wish to appoint a member, the fourth largest shareholder should be consulted, and so on.

Castellum's chairman of the board has now contacted the largest shareholders, and the election committee hereby consists of:

• Rutger van der Lubbe; appointed by Stichting Pensioenfonds ABP
• Björn Franzon; appointed by Magdalena Szombatfalvy as well as Stiftelsen Global Challenges Foundation
• Johan Strandberg; appointed by SEB Fonder
• Charlotte Strömberg; the chairman of the board

In total, the election committee represents approx. 17% of the total number of shares and votes in the company. The election committee will appoint a chairman among its members.

The election committee's task for the 2015 AGM is to propose a chairman for the AGM, the number of members of the board of directors, members of the board of directors and chairman of the board of directors. The election committee will also propose remuneration to members of the board of directors. Finally, the election committee will propose principles for appointing the election committee for the 2016 AGM.

Shareholders are welcome to submit their proposals and views to the election committee by December 5, 2014, at the latest. Please send to Castellum AB, Att: Charlotte Strömberg, Box 2269, 403 14 Gothenburg, or by e-mail to charlotte.stromberg@castellum.se.

The Election Committee's proposals will be announced in the notice for the 2015 Annual General Meeting and on the company's website. The Annual General Meeting for Castellum AB is planned to be held on March 19, 2015.

For further information see www.castellum.se.

Gothenburg October 15, 2014

Henrik Saxborn Chief Executive Offi cer This Interim Report has not been examined by the company's auditors.

The Castellum Share

The Castellum share is listed on NASDAQ Stockholm Large Cap. At the end of the period the company had about 14,990 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for two foreign shareholders who has fl agged for holding over 5%, Stichting Pensioenfonds ABP and Blackrock. Castellum has no direct registered shareholders with holdings exceeding 10%. The ten single largest Swedish shareholders are presented in the table below.

Shareholders on 30-09-2014 Shareholders	Number of shares thousand	Percentage of voting rights and capital
Stiftelsen Global Challenges Foundation	5,000	3.0%
Länsförsäkringar Fastighetsfond	3,484	2.1%
Lannebo Småbolag	3,177	1.9%
Kåpan Pensioner	2,180	1.3%
Magdalena Szombatfalvy	1,935	1.2%
Susanna Lööw	1,627	1.0%
SEB Sverigefond Stora Bolag	1,429	0.9%
Tredje AP-fonden	1,406	0.9%
SEB Sverigefond Småbolag	1,141	0.7%
Andra AP-fonden	989	0.6%
Board and executive management Castellum	303	0.2%
Other shareholders registered in Sweden	45,148	27.5%
Shareholders registered abroad	96,181	58.7%
Total registered 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 30-09-2014

The Castellum share price as at 30 September, 2014 was SEK 109.80 (91.65) equivalent to a market capitalization of SEK 18.0 billion (15.0), calculated on the number of outstanding shares.

During the period a total of 89 million (84) shares were traded, equivalent to an average of 473,000 shares (445,000) per day, corresponding on an annual basis to a turnover rate of 72% (68%). The share turnover is based on statistics from NASDAQ, Chi-X, Burgundy, Turquoise and BATS Europe.

Net asset value

Net asset value is the total equity which the company manages to its owners by creating return and growth given a certain level of risk.

The long term net asset value (EPRA NAV) can be calculated to SEK 111 per share (104). The share price at the end of the year was thus 99% (88%) of the long term net asset value.

Net asset value	SEKm	SEK/share
Equity according to the balance sheet	13,207	81
Reversed
Derivatives according to balance sheet	1,188	7
Deferred tax according to balance sheet	3,885	23
Long term net asset value (EPRA NAV)	18,280	111
Deduction
Derivatives as above	– 1,188	– 7
Estimated real liability, deferred tax 5.0%*	– 914	– 5
Actual net asset value (EPRA NNNAV)	16,178	99

* Estimated real deferred tax liability net has been calculated to 5% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realized in 3 years with a nominal tax of 22%, giving a present value of deferred tax liability of 20.7%, and that the properties are realized in 50 years where 33% are sold directly with a nominal tax of 22% and that 67% are sold indirect through company disposals where the buyers tax discount is 6%, which gives a present value of deferred tax liability of 5.8%.

Earnings

Income from property management adjusted for nominal tax attributable to income from property management (EPRA EPS) amounted to 8.41 (7.79) on rolling annual basis. This results in a share price yield of 7.7% (8.2%). Net income after tax amounted on rolling annual basis to SEK 6.55 per share (13.20), which from the share price gives a yield of 6.0% (14.4%).

Dividend yield

The latest carried dividend of SEK 4.25 (3.95) corresponds to a yield of 3.9% (4.3%) based on the share price at the end of the period.

Total share yield

During the last 12-month period the total yield of the Castellum share has been 25% (8%), including a dividend of SEK 4.25.

Net asset yield including long-term change in value

In companies managing real assets, such as real estate, the income from property management only refl ects part – albeit a large part – of the overall result. The defi nition of a real asset is that its value is protected. This means that over time – and with proper maintenance – the real asset increases in value to compensate for infl ation.

The net asset value – i.e., the denominator of the yield ratio income/capital – is adjusted annually in accordance with

IFRS regulations for changes in value. In order to provide an accurate fi gure of the yield, the numerator – i.e., income – must be similarly adjusted. Therefore, the recorded net income has to be supplemented with a component of value changes as well as with effective tax to provide an accurate view of income and yield.

One problem is that changes in value can vary greatly between years and quarters, thus leading to volatile results. However, by being a long-term player with stable cash fl ow and a balanced real estate portfolio, Castellum is able to make use of long-term value changes.

Net asset yield and earnings including long-term change in value

			Sensitivity analysis
		–1%-unit	+1%-unit
Income from prop. management rolling 12 months 1,443		1,443	1,443
Change in property value (on average 10 years)	512	118	905
D:o %	1.3%	0.3%	2.3%
Current tax, 5%	–79	–79	–79
Earnings after tax	1,876	1,482	2,269
Earnings SEK/share	11.44	9.04	13.84
Return on actual long-term net asset value	11.3%	8.9%	13.6%
Earnings / share price	10.4%	8.2%	12.6%

Yield earnings per share

Growth, yield and fi nancial risk		3 years	10 years
	1 year	average/year	average/year
Growth
Rental income SEK/share	3%	5%	6%
Income from prop. management SEK/share	10%	7%	7%
Net income for the year after tax SEK/share	neg	neg	6%
Dividend SEK/share	8%	6%	7%
Long term net asset value SEK/share	7%	5%	7%
Actual net asset value SEK/share	4%	4%	6%
Real estate portfolio SEK/share	6%	6%	8%
Change in property value	1.0%	0.3%	1.3%
Yield
Return on actual long term net asset value	11.0%	9.1%	11.2%
Return on actual net asset value	8.5%	8.8%	11.2%
Return on total capital	6.4%	5.9%	7.0%
Total yield of the share (incl. dividend)
Castellum	25%	14%	12%
NASDAQ Stockholm (SIX Return)	16%	21%	12%
Real Estate Index Sweden (EPRA)	27%	19%	14%
Real Estate Index Europe (EPRA)	21%	19%	6%
Real Estate Index Eurozone (EPRA)	18%	16%	8%
Real Estate Index Great Britain (EPRA)	18%	21%	4%
Financial risk
Loan to value ratio	52%	52%	49%
Interest coverage ratio	313%	294%	297%

The share's dividend yield Share price/net asset value

The Castellum share's price trend and turnover since the IPO May 23, 1997 until September 30, 2014

Calendar

Year-end Report 2014	21 January 2015, around 1pm
Annual Report 2014	mid-February 2015
Annual General Meeting 2015	19 March 2015
Interim Report January-March 2015	15 April 2015
Half-year Report January-June 2015	15 July 2015
Interim Report January-September 2015	15 October 2015
Year-end Report 2015	20 January 2016

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 Henrik Saxborn, CEO, tel +46 705 60 74 50 or Ulrika Danielsson, CFO, tel +46 706 47 12 61.

Subsidiaries

Aspholmen Fastigheter AB

Rörvägen 1, Box 1824, 701 18 Örebro Telephone +46 19-27 65 00 Telefax +46 19-27 65 19 orebro@aspholmenfastigheter.se www.aspholmenfastigheter.se

Fastighets AB Corallen

Bataljonsgatan 10, Box 7, 551 12 Jönköping Telephone +46 36-580 11 50 info@corallen.se www.corallen.se

Fastighets AB Briggen

Riggaregatan 57, Box 3158, 200 22 Malmö Telephone +46 040-38 37 20 info@briggen.se www.briggen.se

Eklandia Fastighets AB

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

Fastighets AB Brostaden

Tjurhornsgränd 6, Box 5013, 121 05 Johanneshov Telephone +46 8-602 33 00 Telefax +46 8-602 33 30 info@brostaden.se www.brostaden.se

Harry Sjögren AB

Kråketorpsgatan 20, 431 53 Mölndal Telephone +46 31-706 65 00 Telefax +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, 403 14 Göteborg • Besöksadress Kaserntorget 5 Telefon 031-60 74 00 • Telefax 031-13 17 55 • E-post info@castellum.se • www.castellum.se Säte: Göteborg • Org nr: 556475-5550