Castellum — Interim / Quarterly Report 2015

Oct 15, 2015

The picture shows the property Hornsberg 10 on Kungsholmen in Stockholm, which was acquired in September 2015.

Interim Report January-September 2015

Interim Report January-September 2015

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to SEK 41 billion, and comprises of commercial properties.

The real estate portfolio is owned and managed by six wholly owned subsidiaries with strong local presence in five growth regions: Eklandia Fastighets AB and Harry Sjögren AB in Greater Gothenburg (incl. Borås and Halmstad), Fastighets AB Briggen in the Öresund Region (Malmö, Lund, Helsingborg and Copenhagen), Fastighets AB Brostaden in Greater Stockholm, Aspholmen Fastigheter AB in Mälardalen (Örebro, Västerås and Uppsala) and Fastighets AB Corallen in Eastern Götaland (Jönköping, Linköping and Norrköping).

Castellum is listed on NASDAQ Stockholm Large Cap.

• Rental income for the period January-September 2015 amounted to SEKm 2,449 (SEKm 2,496 previous year).
• Income from property management amounted to SEKm 1,152 (1,112), corresponding to SEK 7.02 (6.78) per share, an increase of 4%.
• Changes in value on properties amounted to SEKm 818 (354) and on derivatives to SEKm 53 (–498).
• Net income after tax for the period amounted to SEKm 1,621 (773), corresponding to SEK 9.88 (4.71) per share.
• Net investments amounted to SEKm 2,412 (1,612) of which SEKm 847 (998) were new constructions, extensions and reconstructions, SEKm 1,844 (854) acquisitions and SEKm 279 (240) sales. Futhermore, 50% of the shares in Ståhls were acquired, with an underlying property value of SEK 2 billion, for SEKm 499.

Key ratios

	July-Sept 15	July-Sept 14	Jan-Sept 15	Jan-Sept 14
Rental income, SEKm	832	833	2,449	2,496
Net operating income, SEKm	597	599	1,675	1,698
Income from property management, SEKm	436	409	1,152	1,112
D:o SEK/share	2.66	2.49	7.02	6.78
D:o growth	+7%	+7%	+4%	+10%
Earnings after tax, SEKm	222	213	1,621	773
Net investments, SEKm	682	350	2,412	1,612
Net leasing, SEKm	– 30	2	7	75
Loan to value ratio	50%	52%	50%	52%
Interest coverage ratio	379%	345%	350%	319%
Long term net asset value (EPRA NAV) SEK/share	121	111	121	111
Actual net asset value (EPRA NNNAV) SEK/share	107	99	107	99

For more detailed information see www.castellum.se

Henrik Saxborn, CEO at Castellum The restructuring continues

Castellum's business development is proceeding along two main lines: We're gradually restructuring the real estate portfolio toward higher growth; we are implementing an effi ciency program for the Group.

Concerning the real estate portfolio, major divestments were carried out last autumn, SEK 3.3 billion, and our portfolio was temporarily reduced. This year on the other hand, we've made major acquisitions and invested a total of SEK 2.7 billion. We have also acquired half of Ståhls – with an underlying property value of approximately SEK 2 billion. The divested properties delivered – or would have delivered – lower income growth from property management. We estimate signifi cantly higher growth for the new acquisitions.

The price of this shift towards higher growth is a temporary and short-term decrease in the property yield of the portfolio, in exchange for a higher future growth. This is what we have already experienced somewhat this year. Income from property management was held to an increase of 2% during the fi rst half-year, while after three quarters, we delivered 4% growth, following an accelerated pace in growth rate – to 7% – occurring in the third quarter isolated.

Castellum can thus be expected to proceed with a higher portfolio turnover rate than previously prevailed. This doesn't mean that we will leave more regions, but we may sell individual objects or portfolios. We will also make larger acquisitions, for example, Castellum's recent central acquisition on Kungsholmen in Stockholm. There are currently many buyers in the commercial real estate market, resulting in intense competition for attractive objects: So far this year, properties totalling a value of SEK 100 billion have changed hands.

Our second main line of action, the Group-wide effi ciency project initiated in the spring of 2015, is to take effect in the next year. Limited demonstrated effect is expected to occur by year end, but this will be partly counterbalanced by investment costs pertaining to the common Group profi le implemented earlier in 2015.

The program will generate increased income and cost savings through more effi cient common processes within the Group. In all, the estimated effect amounts to eight to ten million Swedish kronor for 2015 and three times as much in 2016. Some examples of the effi ciency program include adjustment of the pricing model and lower media consumption as well as more effi cient purchasing.

Sustainable business has always been natural for us - something that we are good at. As an external proof Castellum has been rewarded with the highest rating "Green Star 2015 by the

international organization GRESB. This encourages us to continue improving and developing the sustainability performance.

Rental markets in the Swedish regions where Castellum operates continue strong and are developing well, except for the Öresund region. This region is adversely affected by the excessive addition of new offi ce space, and it constitutes a primary factor lying behind weak net leasing during the third quarter. In addition to a number of larger termination notices in the Öresund region, one major individual termination in western Sweden also carried a negative impact for net leasing. Weaker net leasing in the Öresund region also impacted property values negatively, for the quarter.

Castellum is fi nancially strong today, enjoying ample access to long-term funding and a loan to value ratio that has dropped to 50% during the year. This is mainly thanks to strong earnings and positive value growth during the period.

I can state that there has been a high level of activity in Castellum and take great pleasure in all of our solid project completions, including the Atollen project in central Jönköping and Djurgården in Linköping.

The Swedish stock market has long appreciated real estate companies with higher risk profi les. In an increasingly volatile business environment Castellum is a real estate company with lower risk. Castellum has occasionally been portrayed as the Swedish yoghurt-and-muesli alternative. A good description consistent with our view on sustainable value creation.

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.

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.

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.

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. That the operations are conducted in a responsible way is a prerequisite for the company's long-term successful business where the business decisions in all respects, high business morality, good business ethics, responsibility awareness and impartiality.

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%

Lease value per region

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. 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 effi cient energy usage, sustainable new constructions, good controll and continuously improved status in the properties, green customer relations and social commitment and responsibility in our regions. The Code of Conduct governs the Group's daily work.

Outcome

SEKm 2,412

net investments January-September 2015

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 customer risk 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

4,500 commercial contracts where the single largest contract accounts for approx. 2%

Customers and Organization

Customers - a reflection of the diverse Swedish economy

Castellum holds approx. 4,500 commercial contracts, with good risk diversifi cation regarding size of contracts, geography, type of premises, length of contracts and various customer industries. The single largest contract corresponds to approx. 2% of Castellum's total rental income.

Nine out of ten customers recommend Castellum

It is important that Castellum meets customer expectations: we deliver what we promise. An external customer survey is therefore carried out annually, the Satisfi ed Customer Index.

The latest survey, conducted in 2015, showed continued and consistent high marks for Castellum, with a weighted index of 80.

Nine out of ten customers surveyed, 88%, replied that they want to lease from Castellum again and gladly recommend Castellum as a landlord to others.

High leasing activity

Castellum's leasing activity is high. During 2015 to date, the organization has signed 499 new leases with a total annual value of SEKm 226. Robust leasing activities indicate the importance of taking care of customers and networks.

A decentralized and small-scale organization infers deep local knowledge and interaction

Castellum is the parent company and owns six local operating subsidiaries who owns and manage the Group properties, and this results in close relationships with customers and short decision-making processes. Well-anchored local bases provide conditions for thorough familiarity with the market. Castellum operates as one of the largest real estate companies, while remaining equipped to act as close to the market as the smallest.

Brand management that clearly reinforces advantages of being both big and small

Castellum's subsidiaries operate under their own names. To make the connection between the parent company and the subsidiaries clear and demonstrate the common strengths and local force a common visual identity has been launched during the period.

Each subsidiary is involved in the local business community through business associations where important contacts are forged with both current and prospective customers. Castellum, as one of the largest real estate owners on each local market, also contributes to regional development. Local subsidiaries operate through co-operation with municipalities and universities/colleges.

Satisfied employees

Castellum works actively to recruit and retain top-notch employees by offering a stimulating work environment, competence development and experience sharing.

Employee viewpoints about Castellum are regularly measured and the latest survey, conducted in 2014, shows a continued high index, 85 on a 100-point scale. This indicates that employees are satisfi ed with their work situation and have high confi dence in the company and management.

Castellum has about 300 employees.

Sustainable business

Castellum's sustainability efforts is based on continuous improvements with focus on the effi cient use of resources, a sustainable real estate portfolio and sustainable collaborations, as well as on social commitment and responsibility.

The Code of Conduct is the foundation of that Castellum's operations are conducted in a responsible way and the objective is to make sound and proper business decisions in all respects, high business morality, good business ethics, responsibility awareness and impartiality.

Castellum's current energy consumption is less than 40% of the business-sector average. In addition, a growing 20% of the real estate portfolio is environmentally classifi ed according to the Green Building, Miljöbyggnad or the BREEAM criteria.

Our contribution to positive development in the communities where Castellum is active involves various forms of ongoing collaborations. These include joint projects with customers, business colleagues, municipalities and educational institutions. During 2014, 60 young people received their introduction to working life through our apprenticeship program, as holiday workers, interns or trainees.

In September 2015, Castellum was awarded "Green Star 2015" by GRESB (Global Real Estate Sustainability Benchmark). "Green Star 2015" means that Castellum was awarded the highest rating in the global rating for industry-leading sustainability efforts in the category of offi ce and industrial properties. GRESB is an international industry-driven organization committed to enhancing and protecting shareholder value through annual assessment of sustainability activities in real estate sectors around the world. Over 700 real estate companies and funds participated in the 2015 assessment.

Market comments

Swedish economy

The Swedish economy continues to develop well, demonstrating strong GDP growth, still driven by investment and domestic consumption. Lately, exports of services have developed rapidly. However, the recovery in product exports is slow and geopolitical turmoil continues to dampen the mood. Levels of construction and infrastructure investments in Sweden show high activity.

The labour market has been positively affected by the stronger economy and currently exhibits an improvement in employment – for specifi c groups in particular. Despite steady growth, annual infl ation is expected to remain low, due to low commodity prices and low infl ation abroad. A stronger Swedish currency dampens infl ation and the exchange rate will play a key role for infl ation in Sweden.

Macro indicators

Source: SCB
GDP growth	1.1%	(Q2 2015 compared to Q1 2015)
Inflation	0.1%	(September 2015 compared to September 2014)
Unemployment	6.4%	(August 2015)

Rental market

During the year, the rental market strengthened in several of Castellum's markets and segments. In the Öresund region, however, a weaker development was noted, partly due to greater production of offi ce space.

Demand was stable and favourable in terms of both new constructions and existing facilities, with some variation attributable to geography and product. It was clear that demand for newly constructed offi ce space in certain markets with low vacancy rates drove rents somewhat higher for existing premises. Generally, rents remained unchanged for retail, warehouse and logistics premises. New constructions in Stockholm and Gothenburg remained stable and new premises on the rental market were in line with demand, whereas the supply of new offi ce space in Malmö dampened the rental market for existing offi ce space to some extent.

Property market

High activity continues in the Swedish real estate market and demand is strong in all Castellum's geographic markets and segments. Transaction volumes totalled SEK 100 billion (90) for the first three quarters. A growing

interest from international players was noted during the period, and Swedish players accounted for 72% (87%) of the transaction volume. Swedish real estate companies are still the largest among buyers, and real estate funds as well as Swedish real estate companies are the most active among sellers. Interest was strong for both office and retail properties and for warehouse and logistics properties, and in total, commercial properties accounted for approximately 80% (75%) of the transaction volume. Moreover, it is obvious that limited supply in the real estate market has led to increased interest in project properties.

It is Castellum's view that demand in the real estate market is strong but stable compared to the previous quarter, resulting in a price structure that generally remained unchanged.

Interest and credit market

During the period, the Riksbank focused on an infl ation target of 2%, continued its expansionary monetary policy and took historic decisions. The repo rate has remained unchanged since July, when the repo rate was lowered to –0.35% and the repo-rate path was adjusted downwards. Further purchases of government bonds have been announced. The repo-rate path indicates that an additional cut is possible in the near future. The repo rate is not expected to begin a slow rise until the second half of 2016.

In the spring, the 3-month Stibor interest rate, of such signifi cance to Castellum operations, moved downward quickly. Since then, the trend has been more stable but slightly downward. After the Riksbank's July decrease, the 3-month Stibor continued to fall to its lowest level around the August/September shift, and then moved slightly upward again during September.

During the year, the spread between long- and shortterm interest rates increased but the long-term interest rates remained historically low. The difference was mainly driven by a falling short-term interest rate.

Both the availability of bank fi nancing and fi nancing in the capital market are considered favourable. Credit margins on the capital market dropped during the beginning of the year but recently turned slightly upward. 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 2015 to SEKm 1,152 (1,112), equivalent to SEK 7.02 (6.78) per share - an increase with 4%. Income from property management rolling four quarters amounted to SEKm 1,490 (1,443) equivalent to SEK 9,09 per share (8.80) - an increase of 3%.

During the period, changes in value on properties amounted to SEKm 818 (354) and on derivatives to SEKm 53 (–498). Net income after tax for the period was SEKm 1,621 (773), equivalent to SEK 9.88 (4.71) per share.

Rental income

Group's rental income amounted to SEKm 2,449 (2,496). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,329 per sq.m., whereas for warehouse and industrial properties, it amounted to SEK 804 per sq.m. Rental levels, which are considered to be in line with the market, have in comparable portfolio increased by approx. 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 2015. Castellum's higher indexation is due to the Group's focus on index clauses with minimum upward adjustment in the contract portfolio, which offers protection against low infl ation and defl ation.

The average economic occupancy rate was 89.0% (88.4%). The total rental value for vacant premises on yearly basis amounted to approx. SEKm 436 (475). The rental income for the period includes a lump sum of SEKm 7 (9) as a result of early termination of a leases.

Gross leasing (i.e. the annual value of total leasing) during the period was SEKm 226 (241), of which SEKm 29 (49) were leasing of new constructions, extensions and

Rental value and economic occupancy rate

reconstructions. Notices of termination amounted to SEKm 219 (166), of which bankruptcies were SEKm 7 (12) and SEKm 16 (2) were notices of termination with more than 18 months remaining length of contract. Net leasing for the period thus totalled SEKm 7 (75), while amounting to SEKm –30 (2) for the isolated third quarter. Negative net leasing for the third quarter is primarily attributable to two factors: one major notice of termination totalling SEKm 23 with premises vacated in 15 months, and the tough rental market in the Öresund region where net leasing amounted to SEKm –19 for the third quarter.

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

Property costs

Property costs amounted to SEKm 774 (798) corresponding to SEK 306 per sq.m. (293). The costs includes SEKm 5 in transaction cost related to the acquisition of 50% of the shares of Ståhls. Consumption for heating during the period has been calculated to 91% (86%) of a normal year according to the degree day statistics.

Property costs

	Offi ce/	Warehouse/	2015	2014
SEK/sq. m	Retail	Industrial	Total	Total
Operating expenses	175	108	145	147
Maintenance	41	23	34	34
Ground rent	9	7	8	7
Real estate tax	73	23	51	47
Direct property costs	298	161	238	235
Leasing and property administration	–	–	68	58
Total	298	161	306	293
Previous year	298	158	293

Central administrative expenses

Central administrative expenses totalled SEKm 82 (79). This includes costs for a profi t-and-share-price related incentive plan for 9 persons in executive management of SEKm 8 (13).

Income from joint ventures

Income from joint ventures amounted to SEKm 11 (–) and refers to Castellum's 50% share of the income in Ståhls. For more information, see the section Joint venture on page 14.

Of this income, SEKm 14 refers to income from property management and SEKm –3 to tax.

Net interest

Net interest items were SEKm –455 (–507). The average interest rate level was 3.1% (3.4%). Net fi nancial income was positively affected by approx. SEKm 40 due to the average interest rate level decrease by 0.3%-units.

Changes in value

The real estate market is characterized by continued high activity and strong demand with stable prices compared to the fi rst half-year, when rising property prices were noted. To refl ect the price rise, Castellum lowered the required yield by the equivalent of approximately 10 basis points for the fi rst half-year, for internal valuation. No general change in required market yield was noted for the third quarter. At the end of the period the average valuation yield amounted to 6.8%. Factoring in value changes after acquisitions, and a number of individual property-level adjustments, along with sales, value changes for the period totalled SEKm 818. This is equivalent to approximately 2%. As each property is valued individually, the portfolio premium in the real estate market has not been taken into account. Changes in value for the third quarter mainly result from negative net leasing in the Öresund region.

Realized sale of real estate has resulted in a change in value of SEKm 100. Net sales price amounted to SEKm 279 after reduction for assessed deferred tax and transaction costs of SEKm 19. Hence the underlying property value, which amounted to SEKm 298, exceeded last valuation of SEKm 179 with SEKm 100.

The value in the interest derivatives portfolio has changed by SEKm 57 (–497), mainly due to changes in long-term

Income from Property Management per share Income over time

market interest rates. Castellum's currency derivatives has during the period changed SEKm 1 (–8) where the effective part of the value change of SEKm 5 (–7) 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 SEKm 869 (1,193). Fair values for the properties exceed their fi scal value by SEKm 20,710 (18,602) of which SEKm 1,669 (991) 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 3,998 (3,612).

Castellum has no current tax disputes.

Tax calculation 30-09-2015

	Basis	Basis
SEKm	current tax	deferred tax
Income from property management	1,152
D:o attributable to joint venture	– 14
Deductions for tax purposes
depreciations	– 517	517
reconstructions	– 319	319
Other tax allowances	11	– 6
Taxable income from property management	313	830
Properties sold	15	– 119
Changes in value on properties	–	718
Changes in value on derivatives	53	–
Taxable income before tax loss carry forwards	381	1,429
Tax loss carry forwards, opening balance	– 1,193	1,193
Tax loss carry forwards, closing balance	869	– 869
Taxable income	57	1,753
Tax according to the income statement for the period	– 13	– 386

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. 75% of the portfolio, is in the three major urban regions.

The commercial portfolio consists of 68% offi ce and retail properties as well as 29% warehouse and industrial properties. The properties are located from inner city sites to well-situated working-areas with good means of communication and services. The remaining 3% consist of projects and undeveloped land.

Castellum owns approx. 750,000 sq.m. of unutilized building rights and furthermore ongoing projects with remaining investments of approx. SEKm 900.

Investments

During the period, investments totalling SEKm 2,691 (1,852) were carried out, of which SEKm 847 (998) were new constructions, extensions and reconstructions and SEKm 1,844 (854) were acquisitions. Of the total investments SEKm 968 refer to Greater Stockholm, SEKm 627 to Mälardalen, SEKm 483 to Greater Gothenburg, SEKm 476 to the Öresund Region and SEKm 137 to Eastern Götaland. After sales of SEKm 279 (240) net investments amounted to SEKm 2,412 (1,612).

During the second quarter Castellum acquired 50% of the shares in Ståhls for SEKm 499. The company owns and manage properties in Norrköping and Linköping totalling approx. SEK 2 billion. See page 14 for more information.

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, 2015	37,599	583
+ Acquisitions	1,844	17
+ New constructions, extensions and reconstructions	847	9*
– Sales	– 179	– 4
+/– Unrealized changes in value	718	–
+/– Currency translation	– 3	–
Real estate portfolio on 30 September, 2015	40,826	605

*Parcelling / regulation

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. In the valuation of a property's future earnings capacity, consideration has been taken of potential changes in rental levels, occupancy rates and property costs - as well as an assumed infl ation level of 1.5%.

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 1,500 (1,500) 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 40,826 (37,599), corresponding to SEK 11,758 per sq.m.

Average valuation yield

	(excl. project/land and building rights)	SEKm
	Net operating income properties	1,869
+	Calculated index adjustment 2016, 0,5%	13
+	Real occupancy rate, 94% at the lowest	207
–	Property administration, 30 SEK/sq.m.	– 77
	Normalized net operating income (9 months)	2,012
	Valuation (excl. building rights of SEKm 435)	39,169
	Average valuation yield	6.8%

Investments Average valuation yield over time

Castellums' real estate portfolio 30-09-2015

	30-09-2015					January-September 2015
	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	86	470	8,184	17,431	484	1,373	92.1%	445	102	291	343
Öresund Region	66	414	5,803	14,024	406	1,309	83.6%	340	87	281	253
Greater Stockholm	54	372	5,476	14,707	404	1,447	84.0%	339	89	318	250
Mälardalen	79	438	5,762	13,140	400	1,216	90.9%	364	98	298	266
Eastern Götaland	26	192	2,564	13,385	185	1,290	94.1%	174	45	314	129
Total offi ce/retail	311	1,886	27,789	14,737	1,879	1,329	88.4%	1,662	421	298	1,241
Warehouse/industrial
Greater Gothenburg	104	676	5,444	8,046	386	760	91.6%	353	72	143	281
Öresund Region	42	282	1,883	6,682	161	761	87.5%	141	31	144	110
Greater Stockholm	52	287	3,047	10,603	222	1,031	91.1%	203	45	208	158
Mälardalen	37	183	1,223	6,680	104	757	88.5%	92	26	192	66
Eastern Götaland	10	54	218	4,056	22	542	84.7%	18	5	116	13
Total warehouse/industrial	245	1,482	11,815	7,969	895	804	90.2%	807	179	161	628
Total	556	3,368	39,604	11,758	2,774	1,098	89.0%	2,469	600	238	1,869
Leasing and property administration									171	68	– 171
Total after leasing and property administration									771	306	1,698
Development projects	18	82	880	–	52	–	–	30	13	–	17
Undeveloped land	31	–	342	–	–	–	–	–	–	–	–
Total	605	3,450	40,826	–	2,826	–	–	2,499	784	–	1,715

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 period. The discrepancy between the net operating income of SEKm 1,715 accounted for above and the net operating income of SEKm 1,675 in the income statement is explained by the deduction of the net operating income of SEKm 7 on properties sold during the year, as well as the adjustment of the net operating income of SEKm 47 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

	2015 Jan-Sept	2014 Jan-June	2014 Jan-Dec
Rental value, SEK/sq.m.	1,098	1,044	1,064
Economic occupancy rate	89.0%	88.4%	88.7%
Property costs, SEK/sq.m.	306	293	307
Net operating income, SEK/sq.m.	672	630	637
Property value, SEK/sq.m.	11,758	10,621	11,118
Number of properties	605	634	583
Lettable area, thousand sq.m.	3,368	3,666	3,329

		Rental income	Income from property management
SEKm	2015 Jan-Sept	2014 Jan-Sept	2015 Jan-Sept	2014 Jan-Sept
Greater Gothenburg	808	774	405	380
Öresund Region	487	522	240	229
Greater Stockholm	521	478	253	222
Mälardalen	449	418	202	185
Eastern Götaland	184	304	100	128
Total	2,449	2,496	1,200	1,144

The difference between the income from property management of SEKm 1,200 (1,144) above and the groups accounted income before tax of SEKm 2,020 (968) consists of unallocated income from property management of SEKm –48 (–32), changes in property value of SEKm 818 (354) and changes in values of interest rate derivatives of SEKm 53 (–498) and tax in joint venture of SEKm –3 (–).

Property value by property type Property value by region

Larger investments and sales

Larger projects

Property	Area, sq.m	Econ. occup. Oct 2015	Total inv., land incl. SEKm	Remain. inv. SEKm	Completed	Comment
Lindholmen 30:5, Gothenburg	9,243	22%	268	201	Q1 2017	New construction office
Drottningparken, Örebro	4,280	100%	100	56	Q3 2016	New construction office
Verkstaden 14, Västerås	6,100	100%	78	31	Q1 2016	Extension and reconstruction educations facilities
Projects completed/partly moved in
Algen 1, Jönköping	4,509	83%	140	18	Q3 2015	New construction retail/office/restaurant
Jägmästaren 1, Linköping	7,750	97%	109	6	Q1 2015	New construction retail
Visionen 3, Jönköping	2,478	88%	59	9	Q3 2015	New construction office
Varla 3:22, Kungsbacka	5,000	100%	42	0	Q1 2015	Extension and reconstruction warehouse
Boländerna 35:1, Uppsala	8,750	98%	38	0	Q1 2015	Reconstruction retail
Godståget 1, Stockholm	6,568	100%	31	0	Q2 2015	Extension and reconstruction warehouse

Larger acquisitions during 2015

Property	Area, sq.m	Econ. occup. Oct 2015	Acquisition SEKm	Access	Category
Hornsberg 10, Stockholm	14,886	100%	421	Sept 2015	Office
Park Allé 373, Roholmsvej 19-21 and Generatorvej 6-8, Copenhagen	51,525	80%	377	Jan 2015	Office/warehouse
Bromsgården 1, Gillet 22, Hållstugan 28 and Prästgården 12, Örebro	22,465	92%	344	May 2015	Office/retail
Marievik 27 and 30, Stockholm	13,100	70%	319	Jan 2015	Office, retail and parking facilities
Kärra 75:2 and 75:4, Gothenburg	16,000	98%	127	June 2015	Warehouse, office and retail
Lindholmen 28:1, Gothenburg	3,898	100%	115	Feb 2015	Office
Bangården 4, Solna	5,765	24%	63	May 2015	Project

Sales during 2015

Property	Area, sq.m	Underlying prop. price, SEKm	Trans. costs and deferred tax, SEKm	Net sales price, SEKm	Access	Category
Rankan 3 & 4, Sollentuna	–	198	– 15	183	July 2015	Land
Inom Vallgraven 22:3, Gothenburg	1,568	69	– 4	65	Feb 2015	Office/retail
Törestorp 2:51, Gnosjö	14,310	13	0	13	Jan 2015	Industrial
Tågarp 16:72, Malmö	2,054	13	0	12	Oct 2015	Industrial

Joint venture

In the second quarter of 2015, Castellum AB (publ) closed a deal with Heimstaden AB (publ) which meant that Castellum, through the subsidiary Corallen, acquired 50% of the shares in Ståhls property management company, corresponding to an investment of SEKm 499. Access was gained at month-end, May/June 2015. Castellum has the possibility of purchasing the remaining 50% to market value, no earlier than 18 months after the access in May/ June 2015.

The investment has contributed SEKm 11 to Castellum's results during this period. The carrying value of this investment thus totalled SEKm 510 as of September 30, 2015 and is accounted for according to the equity method. The real estate portfolio amounted to SEKm 1,979 as of September 30 and the loan-to-value ratio at that date was 46%. The interest-bearing fi nancing consists of loans in some of the largest Nordic banks and 100% of the interest rate is currently fl oating. Furthermore, the Group has tax loss carryforwards and is not expected to pay income tax next year.

Heimstaden owns the remaining 50% and has assigned property management as well as fi nancial management of Ståhls to Castellum. To elucidate on Castellum holdings, the Group's real estate portfolio, consolidated balance sheet and income statement as of September, 2015, will be accounted for below.

Property portfolio per 30-09-2015 30-09-2015						January-September 2015
	Property type	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
Distributed by city
Norrköping	Office/retail	12	92	1,187	12,876	86	1,246	87.0%	75	26	381	49
Norrköping	Warehouse/industrial	1	19	51	2,605	6	386	20.9%	1	1	67	0
Linköping	Office/retail	9	51	741	14,524	51	1,336	86.4%	44	15	390	29
Total		22	162	1,979	12,165	143	1,172	84.2%	120	42	346	78
	Leasing and property administration									8	70	– 8
	Total after leasing and property administration									50	416	70

Property value by property type Property value by city

Balance sheet per 30-09-2015

SEKm	30 Sept 2015
Assets
Investment properties	1,979
Other fixed assets	4
Current receivables	43
Liquid assets	156
Total assets	2,182

Shareholders' equity and liabilities

Total shareholders' equity and liabilities	2,182
Non interest-bearing liabilities	88
Interest-bearing liabilities	1,069
Deferred tax liability	122
Shareholders' equity	903

Income statement per 30-09-2015

SEKm	June-Sept 2015
Rental income	53
Property costs	– 21
Central administrative expenses	– 1
Net interest income/expense	– 4
Income from property management	27
Change in value properties	–
Current tax	–
Deferred tax	– 6
Net income	21
- of which Castellum's part of the joint venture (50%)	11

SEKm Castellum's part 50% Value of the part of the joint venture accounted for 30-09-2015

Net adjustment for goodwill and deferred tax consolidation	59
Shareholders' equity accounted for	451

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, 2015, a value of SEKm 41,711 (38,088) and are fi nanced by shareholders´s equity of SEKm 14,514 (13,649), deferred tax liabilities of SEKm 3,998 (3,612), interest bearing liabilities of SEKm 20,680 (18,446) and non interest bearing liabilities of SEKm 2,519 (2,381).

Interest bearing liabilities

At the end of the period Castellum had binding credit agreements totalling SEKm 30,650 (26,065) of which SEKm 25,846 (22,357) was long term and SEKm 4,804 (3,708) short term.

During the period SEKm 1,200 matured and SEKm 3,400 were issued under the MTN-program. Longterm bank credit facilities for a total of SEKm 6,500 have been renegotiated and an existing short term bank credit facility has been increased by SEKm 100.

After deduction of cash of SEKm 105 (47), net interest bearing liabilities were SEKm 20,575 (18,399), of which SEKm 6,400 (4,200) were MTN and SEKm 3,576 (1,280) outstanding commercial papers.

Most of Castellum's loans are short-term revolving loans, utilized in long-term binding credit agreements in Nordic banks. This means great fl exibility. Bonds issued under the MTN program and the commercial papers are a complement to the existing funding in banks and broaden 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 properties and/or fi nancial covenants. Outstanding commercial papers and bonds under the MTN-program are unsecured.

Net interest bearing liabilities amounted to SEKm 20,575 (18,399) of which SEKm 10,599 (12,919) were secured by

the company's properties and SEKm 9,976 (5,480) unsecured. The proportion of used secured fi nancing was thus 26% 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, 50% and 350% respectively. The average duration of Castellum's long-term credit agreements was 3.2 years (3.0). Margins and fees on long-term credit agreements had an average duration of 2.8 years (2.6).

Credit maturity structure 30-09-2015

	Credit		Utilized in
SEKm	agreements	Bank	MTN/Cert	Total
0-1 year	4,804	937	3,576	4,513
1-2 years	2,408	– 26	2,100	2,074
2-3 years	6,858	1,108	1,550	2,658
3-4 years	12,508	6,458	800	7,258
4-5 years	2,766	1,066	1,700	2,766
> 5 years	1,306	1,056	250	1,306
Total	30,650	10,599	9,976	20,575

Unutilized credit in long term credit agreements (more than 1 year) 5,271

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 2.5 years (2.8). The average effective interest rate as per September 30, 2015 was 2.9% (3.4%).

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. Interest rate derivatives is a cost effective and fl exible way 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 and fees are distributed in the table by reported underlying loans.

Interest rate maturity structure 30-09-2015

		Interest rate		Closing	Average fi xed
	Credit, SEKm	derivates SEKm	Net. SEKm	interest rate	interest rate term
0-1 year	19,275	– 9,550	9,725	2.9%	0.3 year
1-2 years	350	750	1,100	1.8%	1.6 years
2-3 years	–	1,350	1,350	3.1%	2.5 years
3-4 years	–	1,350	1,350	3.2%	3.4 years
4-5 years	950	2,150	3,100	2.5%	4.5 years
5-10 years	–	3,950	3,950	3.5%	6.4 years
Total	20,575	–	20,575	2.9%	2.5 years

Currency

Castellum owns properties in Denmark with a value of SEKm 963 (530), which means that the Group is exposed to currency risk. The currency risk is primarily related to when income statement and balance sheet in foreign currencies are translated into Swedish kronor.

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 market valuation. If the agreed interest rate deviates from the market interest rate, notwithstanding credit margins, there is a theoretical surplus or sub value in the interest rate derivatives where the non-cash-fl ow affecting changes in value are reported in the income statement. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not affected equity. 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.

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, 2015, the market value of the interest rate derivatives portfolio amounted to SEKm –1,287 (–1,344) and the currency derivative portfolio to SEKm –12 (–13). All derivatives are, as at the year end, classifi ed in level 2 according to IFRS 13.

Castellum's financial policy and commitments in credit agreements

	Policy	Committment	Outcome
Loan to value ratio	Not in the long run exceeding 55%	No more than 65%	50%*
Interest coverage ratio	At least 200%	At least 150%	350%
Funding risk
– average capital tied up	At least 2 years		3.2 years
– proportion maturing within 1 year	No more than 30% of outstanding loans and unutilized credit agreements		5%
– average maturing credit price	At least 1.5 years		2.8 years
– propotion capital market financing	No more than 50% of outstanding interest bearing liabilities		48%
– liquidity reserve	Secured credit agreements corresponding to SEKm 750 and 90 days upcoming loan maturities		Need: SEKm 3,012 Available: SEKm 7,483
Interest rate risk
– average interest duration	1.0-3.5 years	–	2.5 years
– proportion maturing within 6 months	At least 20%, no more than 55%	–	41%
Credit and counterparty risk
– rating restrictions	Credit institutions with high ratings, at least S&P BBB+		Satisfi ed
Currency risk
– translation exposure	Shareholders equity is not secured	–	Not secured
– transaction exposure	Handled if exceeding SEKm 25	–	Under SEKm 25

During the period Castellum's financial policy have been reviewed and revised.

* Castellum's definition of loan to value ratio has been changed and now includes liquid assets. The new definition is: "The Group's interest-bearing liabilities with liquid assets deducted, i.e., as a percentage of total fair value for the properties. In turn, fair-value considerations include a deduction for acquired properties not taken into possession, as well as value added for divested properties, still in Castellum possession, at the end of the period."

Consolidated statement of Comprehensive Income

SEKm	2015 July-Sept	2014 July-Sept	2015 Jan - Sept	2014 Jan - Sept	Rolling 4 quarters Oct 14 - Sept 15	2014 Jan - Dec
Rental income	832	833	2,449	2,496	3,271	3,318
Operating expenses	– 103	– 107	– 370	– 403	– 509	– 542
Maintenance	– 28	– 30	– 85	– 92	– 129	– 136
Ground rent	– 7	– 6	– 20	– 20	– 27	– 27
Property tax	– 44	– 44	– 129	– 129	– 170	– 170
Leasing and property administration	– 53	– 47	– 170	– 154	– 237	– 221
Net operating income	597	599	1,675	1,698	2,199	2,222
Central administrative expenses	– 21	– 23	– 82	– 79	– 111	– 108
Results from joint venture	9	–	11	–	11	–
– of which income from property management	12	–	14	–	14	–
– of which changes in property values	–	–	–	–	–	–
– of which tax	– 3	–	– 3	–	– 3	–
Net interest costs	– 152	– 167	– 455	– 507	– 612	– 664
Income from property management incl. results joint venture	433	409	1,149	1,112	1,487	1,450
– of which income from property management	436	409	1,152	1,112	1,490	1,450
Changes in value
Properties	– 62	– 3	818	354	808	344
Derivatives	– 84	– 132	53	– 498	– 109	– 660
Income before tax	287	274	2,020	968	2,186	1,134
Current tax	– 4	– 6	– 13	– 10	– 14	– 11
Deferred tax	– 61	– 55	– 386	– 185	– 113	88
Net income for the period/year	222	213	1,621	773	2,059	1,211
Other total net income Items that will be reclassified into net income
Translation difference of currencies	17	1	– 7	11	4	22
Change in value derivatives, currency hedge	– 13	– 1	5	– 7	– 2	– 14
Total net income for the period/year	226	213	1,619	777	2,061	1,219

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

Consolidated Balance Sheet

SEKm	30 Sept 2015	30 Sept 2014	31 Dec 2014
Assets
Investment properties	40,826	39,733	37,599
Share in joint venture	510	–	–
Other fixed assets	24	30	28
Current receivables	246	320	414
Liquid assets	105	174	47
Total assets	41,711	40,257	38,088
Shareholders' equity and liabilities
Shareholders' equity	14,514	13,207	13,649
Deferred tax liability	3,998	3,885	3,612
Other provisions	18	–	23
Derivatives	1,299	1,188	1,357
Interest-bearing liabilities	20,680	20,761	18,446
Non interest-bearing liabilities	1,202	1,216	1,001
Total shareholders' equity and liabilities	41,711	40,257	38,088
Pledged assets (property mortgages)	18,554	19,040	18,222
Contingent liabilities	40	–	–

Data per Share

	2015 July - Sept	2014 July - Sept	2015 Jan - Sept	2014 Jan - Sept	Rolling 4 quarters Oct 14 - Sept 15	2014 Jan - Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Income from property management, SEK	2.66	2.49	7.02	6.78	9.09	8.84
Income from prop. management after tax (EPRA EPS*), SEK	2.40	2.34	6.60	6.27	8.59	8.26
Earnings after tax, SEK	1.35	1.30	9.88	4.71	12.55	7.38
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Property value, SEK	249	242	249	242	249	229
Long term net asset value (EPRA NAV*), SEK	121	111	121	111	121	114
Actual net asset value (EPRA NNNAV*), SEK	107	99	107	99	107	100

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

*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).

Financial Key Ratios

	2015 July - Sept	2014 July - Sept	2015 Jan - Sept	2014 Jan - Sept	Rolling 4 quarters Oct 14 - Sept 15	2014 Jan - Dec
Net operating income margin	72%	72%	68%	68%	67%	67%
Interest coverage ratio	379%	345%	350%	319%	341%	318%
Return on actual net asset value	5.5%	6.6%	15.1%	8.0%	13.1%	7.6%
Return on total capital	5.0%	5.7%	8.1%	6.7%	7.1%	6.5%
Net investments, SEKm	682	350	2,412	1,612	271	– 529
Loan to value ratio	50%	52%	50%	52%	50%	49%

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 31-12-2013	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
Net income Oct-Dec 2014	–	–	–	–	–	438	438
Other total net income Oct-Dec 2014	–	–	–	11	– 7	–	4
Shareholders equity 31-12-2014	164,000	86	4,096	20	–13	9,460	13,649
Dividend, March 2015 (4.60 SEK/share)	–	–	–	–	–	– 754	– 754
Net income Jan-Sept 2015	–	–	–	–	–	1,621	1,621
Other total net income Jan-Sept 2015	–	–	–	– 7	5	–	– 2
Shareholders equity 30-09-2015	164,000	86	4,096	13	– 8	10,327	14,514

Cash Flow Statement

SEKm	2015 July-Sept	2014 July-Sept	2015 Jan-Sept	2014 Jan-Sept	Rolling 4 quarters Oct 14 - Sept 15	2014 Jan-Dec
Net operating income	597	599	1,675	1,698	2,199	2,222
Central administrative expenses	– 21	– 23	– 82	– 79	– 111	– 108
Reversed depreciations	3	3	9	9	12	12
Net interest rates paid	– 159	– 192	– 452	– 528	– 613	– 689
Tax paid	– 5	– 5	– 7	– 9	– 5	– 7
Translation difference of currencies	2	0	– 4	– 4	– 10	– 10
Cash fl ow from operating activities before change in working capital	417	382	1,139	1,087	1,472	1,420
Change in current receivables	23	58	– 73	41	– 26	88
Change in current liabilities	– 25	– 49	201	107	– 24	– 118
Cash fl ow from operating activities	415	391	1,267	1,235	1,422	1,390
Investments in new constructions, refurbishments and extensions	– 278	– 329	– 847	– 998	– 1,227	– 1,378
Property acquisitions	– 422	– 40	– 1,844	– 854	– 2,137	– 1,147
Change in liabilities at acquisitions of property	– 28	0	– 14	7	– 3	18
Property sales	18	19	279	240	3,116	3,077
Change in receivables at sales of property	195	0	241	– 101	100	– 242
Investment joint venture	– 22	–	– 499	–	– 499	–
Other investments	– 2	– 3	– 5	– 8	– 6	– 9
Cash fl ow from investment activities	– 539	– 353	– 2,689	– 1,714	– 656	319
Change in long term liabilities	197	– 41	2,234	1,280	– 81	– 1,035
Dividend paid	–	–	– 754	– 697	– 754	– 697
Cash fl ow from fi nancing activities	197	– 41	1,480	583	– 835	– 1,732
Cash fl ow for the period/year	73	– 3	58	104	– 69	– 23
Liquid assets opening balance	32	177	47	70	174	70
Liquid assets closing balance	105	174	105	174	105	47

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	2015 July-Sept	2014 July-Sept	2015 Jan-Sept	2014 Jan-Sept
Income	5	5	14	13
Operating expenses	– 16	– 17	– 63	– 58
Net financial items	– 2	3	1	13
Change in derivatives	– 84	– 132	53	– 498
Income before tax	– 97	– 141	5	– 530
Tax	22	31	– 1	116
Net income for the period/year	– 75	– 110	4	– 414
Comprehensive income for the parent company
Net income for the period/year	– 75	– 110	4	– 414
Items that will be reclassified into net income
Translation difference. foreign operations	13	1	– 5	7
Unrealized change, currency hedge	– 13	– 1	5	– 7
Total net income for the period/year	75	– 110	4	– 414
Balance sheet, SEKm		30 Sept 2015	30 Sept 2014	31 Dec 2014
Participations in group companies		6,030	5,869	6,030
Receivables, group companies		19,479	18,364	17,990
Other assets		184	93	181
Cash and bank		0	143	16
Total		25,693	24,469	24,217
Shareholders' equity		3,827	3,927	4,577
Derivatives		1,299	1,188	1,357
Interest bearing liabilities		18,526	18,597	16,280
Interest bearing liabilities, group companies		1,927	639	1,883
Other liabilities		114	118	120
Total		25,693	24,469	24,217
Pledged assets (receivables group companies)		15,630	15,675	15,200
Contingent liabilities (guaranteed com mitments for subsidiaries)		2,154	2,164	2,165

Accounting Principles

Castellum follows the EU-adopted IFRS standards. This interim report has been prepared according to IAS 34 Interim Financial Reporting and the Annual Accounts Act. During the period Castellum acquired 50% of the shares in Ståhls. The investment is accounted for according to the equity method and constitutes the part of the joint venture. Otherwise, accounting principles and methods for calculations have remained unchanged compared with the Annual Report of the previous year.

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	– 10/+ 10	–	0
Interest costs	– 76/– 15*	–	+

* Due to the interest-rate fl oor in credit agreements, Castellum is not able to take full advantage of negative interest rates. This results in a negative outcome, even for a one-percentagepoint reduction of the interest rate.

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	– 8,165	– 4,083	–	4,083	8,165
Loan to value ratio	63%	56%	50%	46%	42%

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.

Election Committee

At Castellum AB's Annual General Meeting held on March 19, 2015, it was resolved that the Election Committee for the Annual General Meeting 2016 should consist of the Chairman of the Board of directors and a representative from each of the three largest ownership registered or otherwise known shareholders, as per the last trading day of August 2015. If such a shareholder should not wish to appoint a member, the fourth largest shareholder should be consulted, and so on.

Castellum's Chairman of the Board has contacted the largest shareholders, and the Election Committee now consists of:

• Rutger van der Lubbe, appointed by Stichting Pensioenfonds ABP
• Johan Strandberg, appointed by SEB Fonder
• Björn Franzon, appointed by the Szombatfalvy family and Global Challenges Foundation
• Charlotte Strömberg, the Chairman of the Board

In total, the Election Committee represents approximately 16% of the total number of shares and votes in the company. Johan Strandberg has been appointed as Chairman of the Election Committee.

The Election Committee's task for the Annual General Meeting 2016 is to propose a Chairman for the Annual General Meeting, 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 Annual General Meeting 2017.

Shareholders are welcome to submit their proposals and views to the Election Committee by December 4, 2015, at the latest, 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 Annual General Meeting 2016 and on the company's website. The Annual General Meeting in Castellum AB will be held on March 17, 2016.

For further information see www.castellum.se.

Gothenburg October 15, 2015

Henrik Saxborn Chief Executive Offi cer

The Castellum Share

The Castellum share is listed on NASDAQ Stockholm Large Cap. At the end of the period the company had about 18,200 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for one foreign shareholders who has fl agged for holding over 5%, Stichting Pensioenfonds ABP. Castellum has no direct registered shareholder with holdings exceeding 10%. The ten single largest shareholders registered in Sweden are presented in the table below.

Shareholders on 30-09-2015 Shareholders	Number of shares thousand	Percentage of voting rights and capital
Lannebo Småbolag	4,876	3.0%
AMF Pensionsförsäkring AB	4,150	2.5%
Länsförsäkringar Fastighetsfond	3,466	2.1%
Stiftelsen Global Challenges Foundation	2,500	1.5%
SEB Sverigefond	2,290	1.4%
Kåpan Pensioner	2,180	1.3%
Carnegie Strategifond	2,000	1.2%
Magdalena Szombatfalvy	1,935	1.2%
Susanna Lööw	1,627	1.0%
Lannebo Mixfond	1,500	0.9%
Board and executive management Castellum	285	0.2%
Other shareholders registered in Sweden	56,633	34.6%
Shareholders registered abroad	80,558	49.1%
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 30-09-2015

The Castellum share price as at 30 September, 2015 was SEK 117.70 (109.80) equivalent to a market capitalization of SEK 19.3 billion (18.0), calculated on the number of outstanding shares.

During the period a total of 145 million (89) shares were traded, equivalent to an average of 769,000 shares (473,000) per day, corresponding on an annual basis to a turnover rate of 117% (72%). 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 this capital Castellum wants to create return and growth to low risk.

The long term net asset value (EPRA NAV) can be calculated to SEK 121 per share (111). The share price at the end of the period was thus 97% (99%) of the long term net asset value.

Net asset value	SEKm	SEK/share
Equity according to the balance sheet	14,514	89
Reversed
Derivatives according to balance sheet	1,299	8
Deferred tax according to balance sheet	3,998	24
Long term net asset value (EPRA NAV)	19,811	121
Deduction
Derivatives as above	– 1,299	– 8
Estimated real liability, deferred tax 5.0%*	– 1,019	– 6
Actual net asset value (EPRA NNNAV)	17,493	107

* 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 2 years with a nominal tax of 22%, giving a present value of deferred tax liability of 21%, 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 6%.

Earnings

Income from property management adjusted for nominal tax attributable to income from property management (EPRA EPS) amounted to SEK 8.59 (8.41) on rolling annual basis. This results in a share price yield of 7.3% (7.7%) corresponding to a multiple of 14 (13). Income from property management should be adjusted by a longterm increase in the property value and effective paid tax.

Net income after tax amounted on rolling annual basis to SEK 12.55 per share (6.55), which from the share price gives a yield of 10.7% (6.0%), corresponding to a P/E of 9 (17).

Dividend yield

The latest carried dividend of SEK 4.60 (4.25) corresponds to a yield of 3.9% (3.9%) 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 11% (25%), including a dividend of SEK 4.60.

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 1,490		1,490	1,490
Change in property value (on average 10 years)	440	40	840
D:o %	1.1%	0.1%	2.1%
Current tax, 5%	– 79	– 79	– 79
Earnings after tax	1,851	1,451	2,251
Earnings SEK/share	11.29	8.85	13.72
Return on actual long-term net asset value	10.3%	8.1%	12.6%
Earnings / share price	9.6%	7.5%	11.7%
P/E	10	13	9

EPRA Key ratios, rolling 12 months
		30 Sept 2015 30 Sept 2014 31 Dec 2014
EPRA Earnings (Income from property
management after tax), SEKm	1,083	1,029	1,355
EPRA Earnings (EPS) SEK/share	6.60	6.27	8.26
EPRA NAV (Long term net asset value), SEKm	19,811	18,280	18,618
EPRA NAV, SEK/share	121	111	114
EPRA NNNAV (Net asset value), SEKm	17,493	16,178	16,432
EPRA NNNAV, SEK/share	107	99	100
EPRA Vacancy Rate	11%	12%	11%

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

Growth, yield and fi nancial risk

	1 year	3 years average/year	10 years average/year
Growth
Rental income SEK/share	–1%	3%	6%
Income from prop. management SEK/share	3%	6%	7%
Net income for the year after tax SEK/share	91%	43%	7%
Dividend SEK/share	8%	8%	7%
Long term net asset value SEK/share	9%	7%	6%
Actual net asset value SEK/share	8%	7%	6%
Real estate portfolio SEK/share	3%	5%	7%
Change in property value	2.1%	1.2%	1.1%
Yield
Return on actual long term net asset value	12.8%	10.5%	10.6%
Return on actual net asset value	13.1%	10.6%	10.6%
Return on total capital	7.1%	6.3%	6.6%
Total yield of the share (incl. dividend)
Castellum	11%	14%	9%
NASDAQ Stockholm (SIX Return)	10%	17%	9%
Real Estate Index Sweden (EPRA)	32%	24%	12%
Real Estate Index Europe (EPRA)	25%	20%	5%
Real Estate Index Eurozone (EPRA)	20%	18%	5%
Real Estate Index Great Britain (EPRA)	25%	23%	3%
Financial risk
Loan to value ratio	50%	51%	49%
Interest coverage ratio	341%	315%	302%

Calendar

Year-end Report 2015	20 January 2016, around 1 pm
Annual report 2015	mid-February 2016
Annual General Meeting 2016	17 March 2016
Interim Report January-March 2016	13 April 2016
Half-year Report January-June 2016	13 July 2016
Interim Report January-September 2016	12 October 2016
Year-end Report 2016	19 January 2017

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 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

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

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

CASTELLUM HARRY

Harry Sjögren AB

Kråketorpsgatan 20, 431 53 Mölndal Telephone +46 31-706 65 00 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 Gothenburg • Visiting address Kaserntorget 5

Phone +46 31-60 74 00 • Email info@castellum.se • www.castellum.se

Domicile: Göteborg • Corporate identity no. 556475-5550