Pioneer Property Group ASA

Annual Report • Mar 20, 2017

Pioneer Property Group ASA 2016

and the contract of the contract of

Report for the period 1 January -31 December 2016

The 2016 Board of Directors report Pioneer Property Group ASA.

Highlights of the 2016 annual report

• Total revenues in 2016 were MNOK 217 and with a pre-tax profit of MNOK 286.

• Revenues and profitability were in line with expectations, and represent the Company's new quarterly run-rate level after the completed acquisitions in the second half of the year..

-The Company had total assets of MNOK 4,423, where Investment Property (132 preschools and 1 retirement home) were valued at MNOK 4,042 in addition to a cash balance of MNOK 349 and other receivables MNOK 31. Total debt was MNOK 2,568 and with total equity of MNOK 1,855.

• Towards the end of the year PPG commissioned a valuation report from Newsec, the value of the properties are adjusted for this in the fourth quarter.

-In 2015 PPG initiated its quarterly dividend payments to its preference shareholders equivalent to NOK 1,875 per preference share per quarter, and the Company's ambitions is to continue to pay these dividends quarterly going forward, as described in PPG's Articles of Association.

Operations and location

Pioneer Property Group ASA (PPG) is a real estate company focusing on providing high-quality properties for government-backed care-services. The company's current portfolio consists of 117 Norwegian kindergartens, 14 Finnish kindergartens, 1 Swedish kindergarten and 1 Swedish retirement home, the Norwegian kindergartens are centrally located in the largest cities and which house a total of over eleven thousand children. All the properties are leased out on long-term triplenet contracts to large kindergarten operators, including Norlandia Care Group, Espira, and Touhula. The Company's headquarter is in Oslo, Norway.

Pioneer Property Group ASA has prepared a report on Corporate Governance and Sustainability in accordance with The Norwegian Accounting Act §3-3b og §3-3c. The report is available to the public at the company's headquarter in Rådhusgata 23, Oslo

Going concern

In accordance with the Accounting Act § 3-3, we confirm that the financial statements have been prepared under the assumption of going concern.

Accounting policies:

The annual financial statements have been drawn up in accordance with International Standards for Financial Reporting (IFRS).

Comments the financial statements

The annual report gives an accurate overview of the Group's financial development throughout the year. There have been no events after the end of the fiscal year 2016, which have had any material impact on the financial status of the Company.

Research and development

The group is not involved in any R & D activities.

Work environment, equal opportunities and discrimination

There are no employees in Pioneer Property Group ASA. The Board of Directors consists of 2 woman and 3 men.

External environment

The Company's operations do not result in pollution or spillage harmful to the external environment.

Financial risks

The Company is exposed towards various financial risks, but the Board of Directors view the total exposure to be at a controllable level. Some of the most important risk factors are:

The market risk of a general increase in interest rate levels, and there through also an increase of the financial cost of loans to the Company.

Credit risk relating to banks or other financial institutions' willingness to loan money, which may restrict the Company's ability to take up new loans in the futures.

Liquidity risk in the case of unforeseen delay of cash payments on income and/or unexpected costs.

The Board of Directors and management performs ongoing assessments of the most important financial risk factors, and also evaluates the necessity of implementing specific measures, such as fixing interest rates. Specific measures are considered in light of the Company's total financial risk exposure.

Total comprehensive income

The Board of Directors propose the following allocation of the net income of 233 567 TNOK:

Transfer to other reserves:
-----------------------------	--

Total:

233 567 TNOK

233 567 TNOK

Responsibility Statement of the Board of Directors

We confirm, to the best of our knowledge, that the set of financial statements for the financial year ending 31 December 2016 have been prepared in accordance with IFRS, and gives a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole.

We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the financial year and their impact on the set of financial statements, a description of the underlying principal risks and uncertainties, and major related parties' transactions.

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Roger Adolfsen Leader Board of Directors Sandra Henriette Riise

Board member

Geir Hjort Board member Runar Rønningen

Even Carlsen Board member Nina Hjørdis Torp Høisæter Board memeber

CEO

Responsibility Statement of the Board of Directors

We confirm, to the best of our knowledge, that the set of financial statements for the financial year ending 31 December 2016 have been prepared in accordance with IFRS, and gives a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole.

We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the financial year and their impact on the set of financial statements, a description of the underlying principal risks and uncertainties, and major related parties' transactions.

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Sandra Henriette Riise	Geir Hjort
Board member	Board member
Nina Hjørdis Torp Høisæter	Runar Rønningen
Board memeber	CEO

Responsibility Statement of the Board of Directors

We confirm, to the best of our knowledge, that the set of financial statements for the financial year ending 31 December 2016 have been prepared in accordance with IFRS, and gives a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole.

We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the financial year and their impact on the set of financial statements, a description of the underlying principal risks and uncertainties, and major related parties' transactions.

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA Roger Adolfsen Geir Hjort Sandra Henriette Riise Leader Board of Directors Board member Board member Even Carlsen Nina Hiørdis Torp Høisæter Runar Rønningen Board member Board memeber CEO

Responsibility Statement of the Boerd of Directors

We confirm, to the best of our knowledge, that the set of financial statements for the financial year ending 31 December 2016 have been prepared in accordance with IFRS, and gives a true and fair view of the Group's assets, liabilities, financial position and profit or loss as a whole.

We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the financial year and their impact on the set of financial statements, a description of the underlying principal risks and uncertainties, and major related parties' transactions.

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Roger Adolfsen	Sandra Henriette Riise	Geir Hjort
Leader Board of Directors	Board member	Board member
Even Carlsen	Nina Hjørdis Torp Høisæter	Runar Rønningen
Board member	Board memeber	CEO

Consolidated Income Statement

NOK thousand	Note	2015	2016
Income from rent	218	129 319	217 548
Other income	$\overline{2}$	$-223$	193
Total Income		129 097	217 741
Expenses related to property	8
Payroll expenses	15	314	450
Other operating expenses	8	31943	27 302
Total Expenses		32 256	27 752
Fair value adjustment on investment properties	12		242 392
Operating profit (EBIT)		96 840	432 380
Finance income	13	7 1 2 2	2707
Finance expenses	13	62 189	148 563
Currency expenses	13		812
Net Finance		-55 067	$-146668$
Profit/(loss) before tax		41773	285712
Income taxes	10	5610	52 145
Profit/(loss) for the period		36 163	233 567
Proposed dividends
Total distributed		36 163	233 567
Consolidated Statement of Comprehensive Income:
NOK thousand	Note	2015	2016
Profit/(loss) for the period		36 163	233 567
Total other comprehensive income, net of tax		c,	×,
Comprehensive income for the period		36 163	233 567
Profit or loss for the period attributable to
All shareholders of Pioneer Property Group ASA		36 163	233 567
Comprehensive income for the period attributable to
Ordinary shareholders of Pioneer Property Group ASA		6 1 7 9	184 817
Earnings per share (NOK)
Basic earnings per preference share	6	4.61	7,500
Basic earnings per ordinary share	6	0,700	18,831
Dividend per preference share
Dividend per ordinary share	6 6	4.61	7,500

NOK thousands	Note	31.12.2015	31.12.2016
Assets
Investment property	12	3413174	4 042 640
Other non-current assets			21 214
Total non-current assets		3413174	4 063 854
Trade and other receivables	16	10 607	9574
Cash and cash equivalents	7	195 329	349 733
Total current assets		205 936	359 307
Total assets		3619111	4 4 23 161
Equity and liabilities
Share capital	17	16314	16314
Share premium	17	1585148	1548585
Retained earnings		36 163	289856
Total equity		1637625	1854756
Borrowings	9	1698 190	2416177
Deferred tax	10	15844	60097
Other non-current liabilities		139 508	9339
Total non-current liabilites		1853542	2 485 614
Borrowings	9	86793	38 391
Current tax payable	10	7363	7891
Other current liabilities		33787	36 509
Total current liabilities		127 944	82791
Total liabilities		1981485	2 568 405
Total equity and liabilities		3619111	4 4 2 3 1 6 1

Oslo, Beard of Directors and Chief Executive Officer of Pionegr Property Group ASA

andr

α Roger Adolfsen
Leader Board of Directors

Sandra Henriette Riise Board member

Even Carlsen Board member Nina Hjørdis Torp Høisæter Board memeber

Kur

Geir Hjort Board member Runar Rønningen CEO

NOK thousands	Note	31.12.2015	31.12.2016
Assets
Investment property	12	3413174	4042640
Other non-current assets			21 214
Total non-current assets		3413174	4063854
Trade and other receivables	16	10 607	9574
	7	195 329	349733
Cash and cash equivalents
Total current assets		205 936	359 307
Total assets		3619111	4 4 2 3 1 6 1
Equity and liabilities
Share capital	17	16314	16314
Share premium	17	1585148	1548585
Retained earnings		36 163	289 856
Total equity		1 637 625	1854756
Borrowings	9	1698 190	2416177
Deferred tax	10	15844	60 097
Other non-current liabilities		139 508	9 3 3 9
Total non-current liabilites		1853542	2485614
Borrowings	9	86793	38 391
	10	7363	7891
Current tax payable
Other current liabilities		33787	36 509
Total current liabilities		127 944	827791
Total liabilities		1981485	2568405
Total equity and liabilities		3619111	4 423 161

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Roger Adolfsen
Leader Board of Directors

Even Carlsen Board member

Sandra Henriette Riise Board member

Board memeber

Nina Hjørdis Torp Høisæter

Runar Rønningen CEO

Geir Hjort
Board member

NOK thousands	Note	31.12.2015	31.12.2016
Assets
Investment property	12	3413174	4 042 640
Other non-current assets			21 214
Total non-current assets		3413174	4 063 854
Trade and other receivables	16	10 607	9574
Cash and cash equivalents	7	195 329	349 733
Total current assets		205 936	359 307
Total assets		3619111	4 4 2 3 1 6 1
Equity and liabilities
Share capital	17	16 314	16 314
Share premium	17	1585148	1548585
Retained earnings		36 163	289 856
Total equity		1637625	1854756
Borrowings	g	1698 190	2416177
Deferred tax	10	15844	60 097
Other non-current liabilities		139 508	9339
Total non-current liabilites		1853542	2485614
Borrowings	9	86793	38 391
Current tax payable	10	7363	7891
Other current liabilities		33787	36 509
Total current liabilities		127944	82791
Total liabilities		1981485	2568405
Total equity and liabilities		3619111	4 4 2 3 1 6 1

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Roger Adolfsen Leader Board of Directors Sandra Henriette Riise Board member

Geir Hjort
Board member

Even Carlsen Board member Nina Hjørdis Torp Hølsæter Board memeber

Runar Rønningen CEO

NOK thousands	Note	31.12.2015	31.12.2016
Assets
Investment property	12	3413174	4 042 640
Other non-current assets			21 214
Total non-current assets		3413174	4 063 854
Trade and other receivables	16	10 607	9574
Cash and cash equivalents	7	195 329	349733
Total current assets		205 936	359 307
Total assets		3619111	4423161
Equity and ilabilities
Share capital	17	16314	16314
Share premium	17	1585 148	1548585
Retained earnings		36 163	289 856
Total equity		1637625	1854756
Borrowings	9	1698190	2416177
Deferred tax	10	15844	60 097
Other non-current liabilities		139 508	9339
Total non-current liabilites		1853542	2485614
Borrowings	9	86793	38 391
Current tax payable	10	7363	7891
Other current liabilities		33787	36 509
Total current liabilities		127 944	82791
Total liabilities		1981485	2568405
Total equity and liabilities		3619111	4 4 23 161

Oslo,

Board of Directors and Chief Executive Officer of Pioneer Property Group ASA

Roger Adolfsen
Leader Board of Directors

Sandra Henriette Riise Board member

Geir Hjort
Board member

Even Carlsen Board member

Nina Hjørdis Torp Hølsæter Board memeber

Runar Rønningen
CEO

Consolidated Statement of Changes in Equity

	Attributable to owners of the parent
NOK thousands	Share capital	Share premium	Retained earnings	Total Equity
Balance at 31 December 2015	16 3 14	1585148	36 163	1 637 625
Profit/(loss) for the period Proposed dividends		$-36563$	233 567	233 567 $-36563$
Other changes			20 1 26	20 126
Total comprehensive income for the period	0	$-36563$	253 693	217 131
Balance at 31 December 2016	16 3 14	1 548 585	289 856	1854756

Consolidated Statement of Cash Flows

NOK thousands	Note	2015	2016
Cash flows from operating activities:
Profit before income tax		41 773	285712
Adjustments for:
Fair value adjustments on investment property			$-242392$
Interest expense - net
Borrowing cost
Taxes paid			$-7279$
Profit/loss on sale of fixed assets			70
Changes in working capital:
Trade receivables	16	$-807$	225
Trade payables			2722
Other accruals		128 377	$-68892$
Cash generated from operations		169 343	$-29834$
Interest paid
Income tax paid
Net cash generated from operating activities		169 343	$-29834$
Cash flows from investing activities:
Proceeds from sale of properties			1 2 3 7
Purchase of property	12	$-3413174$	$-368$ 185
Purchase of net other assets
Other long term receivables
Proceeds from sale of shares and bonds			-70
Net cash used in investing activities		$-3413174$	$-367018$
Cash flows from financing activities:
Proceeds from debt to financial institutions	9	1837698	1676 110
Proceeds from other borrowings	9
Repayments of debt to financial institutions	9		-1 088 291
Proceeds from shares issued	17	1631477
Repayment of shares issued	17	$-30015$
Dividends paid to owners of the parent	6		$-36563$
Dividends paid to non-controlling interests
Net cash from financing activities		3 439 161	551 256
Net change in cash and cash equivalents		195 329	154 404
Cash and cash equivalents at beginning of period	7		195 329
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at period end	$\overline{\mathbf{7}}$	195 329	349 733

Note 1 | Accounting Principles

1.1 General information

Pioneer Property Group ASA (the 'Company') and its subsidiaries (together, the 'Group') invests in kindergarden, preschool properties and retirement homes and rent the properties out on long term leases. The Group holds investment properties in Norway, Sweeden and Finland.

Pioneer Property Group ASA is a public limited company incorporated and domiciled in Norway. The adress of the Company's registered office is Rådhusgata 23, 0158 Oslo,

The Company was incorporated 5 January 2015. The Group was formed 12 May 2015 after the acquistions of Pioneer Public Properties | AS, Pioneer Public Properties || AS, Pioneer Public Properties III AS and Pioneer Public Properties IV AS. In 2016 the group founded Pioneer Public Properties V AS that bought real estate companies in Norway, Sweden and Finland See note 11.

The consolidated interim financial statements covers the period from 1 January 2016 to 31 December 2016 (Q1-Q4 column)

1.2 Basis of preparation

The annual consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The interim consolidated financial statments have been prepared under the historical cost convention, as modified by fair value adjustments to investment properties.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estiamtes are significant to the consolidated financial statements are disclosed in note 4.

The consolidated financial statements have been prepared on a going concern basis.

All financial numbers are presented in thousand NOK, unless otherwise stated.

1.3 Consolidation

Subsidiaries:

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition related costs are expensed as incurred.

Acquisition of subsidiaries or other entities not viewed as a business combination

An acquisition of entities not comprising any business activities is viewed as a purchase of assets. The acquisition cost is allocated to the acquired assets and no deferred tax is calculated for temporary differences that arise at their initial recognition

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

1.4 Changes in accounting principles

The financial statements and accompanying notes are in accordance with standards currently effective under IFRS as adopted by the EU.

A number of new standards and amendments to standards and interpretations are effective for periods beginning after 31 December 2016, and have not been applied in preparing these annual consolidated financial statement. None of the new Standards are expected to have a significant effect on the consolidated financial statements of the Group. The following new standards have not been implemented in the preparation of these financial statements:

• IFRS 9 Financial instruments 2018
• IFRS 15 Revenue from contracts with customers 2018
• IFRS 16 Leases 2019

IFRS 9 "Financial Instruments" regulates the classification measurement and recognition of financial assets and financial obligations. The complete version of IFRS 9 was issued in July 2014. It replaces IAS 39. IFRS 9 classified financial assets in three categories, really value through other comprehensive income, fair value through profit and amortized cost. Measuring categories determined by first time accounting. Classification depends on entity's business model for managing its financial instruments and characteristics of the cash flows.

For financial liabilities continued mainly regulation from IAS 39. IFRS 9 simplifies the requirements for hedge accounting something in relation to the current rules under IAS 39. The standard represents a change in relation to the assessment of losses claim. Current rules only require first provision when it occurrence of a loss event, while new regulations require provision for anticipated requirements. The standard is effective for accounting beginning 1.1.2018 or later. Group have not yet completed the evaluation of the impact IFRS 9 will have on the Group.

IFRS 15 replaces the existing standards for revenue (IAS 11 and IAS 18) with effect from 01.01.2018. IFRS 15 introduces 1:05 step method of accounting income: 1. Identification of the contract with the customer, 2. Identification of the delivery commitments, 3. Determination the transaction price, 4 Allocation of the transaction price and 5 Recognition of income as commitments to be met. The standard may result changes in relation to the timing of revenue recognition and measurement of income. The group has still not completed the assessmentwhat effect IFRS 15 will have for the group

IFRS 16 LEASES

IASB issued a new standard for leasing 13 January 2016. The standard is effective for fiscal years beginning after 01/01/2019. The standard requires that the lessee capitalizes a right of use with corresponding liability for any material leases. The Group has not yet completedassessing the impact of IFRS 16 will have on the Group.

1.5 Investment properties

Property held with the purpose of achieving rental income, increase in value or both are classified as investment property. Investment property also include property under development for future use as investment property. Investment property is initially recognised at cost included transaction costs.

Upon purchase of property management assess whether the purchase constitute purchase of a business or purchase of an asset in accordance with IFRS 3. Transaction costs include stamp duty, lawyer's fees and commission to bring the property to the condition that is necessary to put the property into operation. Recognised value also include replacement cost for parts of the existing investment property at the time when the cost is incurred and the terms for recognition has been met.

After initial recognition the investment property is then recognised at fair value. Profit or loss from changes in fair value are presented in the income statement when they arise.

Subsequent costs relating to investment property are included in the carrying amount if it is probable that they will result in future economic benefits for the investment property and the costs can be measured reliably. Expenses relating to operations and maintenance of the investment property are charged to the income statement during the financial period in which they are incurred.

Investment properties are derecognised when they are sold or are permanently out of operations and no future economic benefit is expected if disposed of. All gains or losses relating to sales or disposal are presented in the income statement the same year as disposal. Gains or losses from disposal of investment property is the difference between net selling price and the carrying amount of the asset in the previous year's financial statements.

1.6 Lease agreements

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, the right to use an asset for an agreed period of time.

All the Group's properties are leased out under operating leases. The properties are incuded in the balance sheet as Investment Property.

Revenue comprise of rental income from the properties. Lease income on operating leases is recognized over the term of the lease on a straight line basis.

1.7 Real estate related costs and other costs

Costs directly related to the operations of existing properties are recognized as real estate related costs, other costs are included as administrative costs. Costs are recognised as they are accrued.

1.8 Financial assets

1.8.1 Classification

The group classifies its financial assets in the following category: Loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Currently the Group only holds financial assets in the category loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as noncurrent assets. The group's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents' in the balance sheet

1.8.2 Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

1.8.3 Impairment of financial assets

Assets carried at amortised cost:

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

1.9 Trade receivables

Trade receivables are amounts due from customers for rental of premises. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are

classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

1.10 Cash and cash equivalents

Cash and cash equivalents includes bank deposits.

1.11 Share capital

The Company has two classes of shares, ordinary shares and preference shares. Both classes are classified as equity.

1.12 Trade payables and other short term payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.13 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

1.14 Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

1.15 Interest income

Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate.

1.16 Current and deferred income tax

Tax on income in the interim periods are accrued using the tax rate that would be applicable to expected annual profit.

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in Norway. Management periodically evaluates positions taken in tax calculations with respect to situations in which applicable tax regulation is subject to interpretation. Management establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit. Deferred income tax is

determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

1.17 Dividend distribution

The Company has two classes of shares, ordinary shares and preference shares. The preference shares are entitled to annual dividend payments amounting to NOK 7,50 per preference share, if the General Assembly approves payment of dividends. If payable, the dividend payments will be made quarterly with NOK 1,875 per preference share.

The quarterly dividend distribution to the preference shares is recognised as equity in the Group's financial statements in the period in which the dividends are approved by the General Assembly.

Divdend distribution to Ordinary shares is recognised as a liability in the Group's financial statement in the period in which the dividend is approved by the Company's shareholders in the General Assembly to payment.

1.18 Segements

The Group's only business is to own and rent out preschool properties and retirement homes. All properties are in the same business segment. All properties are in Norway, Sweeden and Finland.

1.19 Cash flow

The statement of cash flow has been prepared using the indirect method, and in accordance with IAS 34 a condensed statement is presented.

2.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by management under guidance by the Board of Directors. Management identifies, evaluates and act upon financial risks.

a) Market risk

Market risk is the risk that future cash flows in the form of interest payments change as a result of changes in market interest rates. Management and the Board of Directors agree on an acceptable level of interest rate exposures, which are monitored continously by management. The level of interes rate exposure is determined based on an assesment of existing cash flows, general assesment of financial condition and available liquidity.

(i) Fair value interest rate risk

The Group holds interest bearing assets in terms for cash deposits. Fluctuations in interest would yield a higher or lower interest income. At the current level of cash deposits a change in interest rate of +/- 1 % would not be material for the financial statements.

The Group's interest rate risk arises from long-term borrowings. The Group holds several types of borrowings. refer to note 9 for details. Borrowings at fixed rates expose the Group to fair value interest rate risk.

(ii) Cash flow interest rate risk

Exposure to cash flow interest rate risk is assessed continuously. The need for a fixed rate is under constant review in relation to the Group to withstand adverse fluctuations in profit due to higher interest rates. Management's assessment is that the Group's current financial position does not indicate a further need for fixed interes rates.

If the interest rate had been +/- 1 % in Q4 2016 the result after tax would be +/- MNOK 6.1 million, all other conditions unchanged and assuming a floating interest rate on 100% of the Company's borrowings.

The average effective interest rate of the Group's borrowings was at period end 31 December 2016: 3,3 %

b) Credit risk

Credit risk is the risk of loss when a party is unable to redeem their obligations to the Group.

Credit risk is managed on Group basis. Credit risk arises from cash and cash equivalents, and credit exposures customers, including outstanding receivables and committed transactions. Managment assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on ratings. The utilisation of credit limits is monitored regularly.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties

Exposure to credit risk at the end of the period:	31.12.2016	31.12.2015
Accounts receivable	582	807
Other Short term receivable	8992	9801
Cash balance	341 681	195 329
Total exposure	351 255	205 937

The credit risk related to outstanding to related parties and banks is considered to be low.

c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its obliagtions at maturity without incurring a significant increase in finance cost or not being able to meet its obliagtions at all. The risk also includes that the Group must forfeit investment oportunities. Cash flow forecasting is performed at Group level. Group management monitors the Group's liquidity requirements to ensure that it has sufficient cash to meet operational needs while maintaining suffiecient headroom to avoid breaches in convenants on relevant borrowing facilities (refer to note 9), as well as capability to pay out quarterly dividends to holders of preference shares. The monitoring takes into account the Group's debt financing plans and covenant compliance.

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:

Maturity of financial liabilities at the end of the period:

	maturity of miditoidi nubilities at the cha of the period. 31.12.2016
	$<$ 3mnths	$3m-1v$	1v-2v	$2v-5v$	$>5$ v
Borrowings (bank)	9724	28 667	64932	721 045	642 531
Interest on borrowings (bank)	13418	36 26 2	46710	149 695	177 907
Bond loans	$\sim$	C. Morris	$\left( \bullet \right)$	1 000 000	$\bullet$
Interest on bond loans	16 000	48 000	64 000	152 000	÷
Other liabilities

	31.12.2015
	$<$ 3 mnths	$3m-1v$	1v-2v	2v-5v	>5v
Borrowings (bank)	9901	29 942	190 450	340 854	645719
Interest on borrowings (bank)	11 366	33727	38 050	107761	194 518
Bond loans	۰	46 500	59 900	478 150	$\mathcal{L}(\mathbf{R})$
Interest on bond loans	9 2 3 5	27 705	36940	39 235	92
Other liabilities	33787	œ.	139 508	Ю,	۳

d) Currency risk

Currency risk is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. Currency risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the reporting currency of the consolidated entity. The risk is that there may be an adverse movement in the exchange rate of the denomination currency in relation to the base currency before the date when the transaction is completed.

As the Group has subsidiaries in Sweden and Finland where the currencies are SEK and EUR, respectively, the company is exposed to currency risk as the Group's consolidated finacial statements is reported in NOK.

2.2 Capital management

The group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders holding ordinary shares,
return capital to shareholders, issue new shares or sell assets to reduce deb balance sheet plus net debt.

$\epsilon$

Gearing ratio at the end of the period	31.12.2016	31.12.2015
Total borrowings	2463220	1923099
Less: Cash and cash equivalents	349 733	195 329
Net debt	2 113 486	1727770
Total equity	1854756	1637625
Total capital	3968243	3 365 395
Gearing ratio	53%	51%

Note 3 | Segment summary

The Group's business is to own and manage investment properties in Norway, Sweden and Finland and rent them out to operators of pre-school and retirement homes. There is no material difference in risk and margins in the different investment properties. The Group is therefore considered to operate in one business area and in
three geographical area

The Group have seven customers: Norlandia Barnehagene, Kidsa Barnehager, Espira Barnehagene, Suomen
Tenava Päiväkodit, Norlandia Förskolor, Touhula and Casparssons Vårdhem.

Geographical segment 2016:

NOK thousand	Norway	Sweden	Finland	Group
Income from rent	212785	1 208	3554	217 548
Other income	193	۰		193
Total Income	212978	1 208	3554	217 741
Expenses related to property		×
Payroll expenses	450			450
Other operating expenses	24 543	231	2529	27 302
Total Expenses	24 993	231	2529	27 752
Fair value adjustment on investment properties	259 545	$-10230$	$-6923$	242 392
Operating profit (EBIT)	447 530	$-9252$	$-5898$	432 380
Finance income	2705		2	2707
Finance expenses	146 998	223	1 342	148 563
Currency expenses	1613	157	-959	812
Net Finance	$-145907$	$-381$	$-381$	$-146668$
Profit/(loss) before tax	301 624	$-9633$	$-6279$	285712
Income taxes	56 123	$-2408$	$-1570$	52 145
Profit/(loss) for the period	245 501	$-7225$	-4 709	233 567

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seld om equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of items in the statement of financial position within the next financial year are addressed below.

a) Fair value of Investment Properties.

The fair value of investment properties is assessed quarterly by management. The Investements Properties are on a regular bas is subject to on-site inspections and technical evaluations.

The properties are valued using a combination of discounted cash flow models and market based property yield. The Investment Properties are measures at level 3. All significant inputs are disclosed in note 12. All cash flows used in the calculations are based on long term contracts. Management assess the cash flows to be stable without material uncertainty. The critical accounting estimates in the calculation, based on management's judgement is the yield.

The yield is calculated per investment property. The prime yield for pre-school properties is 5,25%. Factor such as the property's location in relation to a major city, net-population change, size of the property/per child, year of build and whether or not the property is on a leased land(Norwegian: festetomt).

The average gross yield for the investement property portfolio is 5,8 %. Refer to note 12 for sensitivities.

The valuation report is commissioned from a well know and reputable company, and for 2016 a valuation report was commissioned from Newsec.

Note 5 | Contingencies and commitments

$\chi$

The Group has no contingent liabilities nor commitments at 31 December 2016.

$\sim$ 10 $^{-1}$

Note 6 | Earnings per share

a) Basic

a) basic.
The Group's preference shares are entitled to a fixed dividend of NOK 7.50 per annum, if the General Assembly approves
payment of dividends. To calculate the earnings per share the entitled dividend to the prefer

Calculation of earnings per share for the period	Q1	Q2	Ο3	Q4	31.12.2016
Net profit	17 128 165	19 081 912	-18 817 066	216 173 785	233 566 796
Less pref share dividends	$-12$ 187 500	-12 187 500	$-12$ 187 500	$-12$ 187 500	-48 750 000
Profit attributable to ord shares	4 940 665	6894412	$-31004566$	203 986 285	184 816 796
Weighted avg ord shares	9814470	9814470	9814470	9 814 470	9814470
EPS to ord shares	0.50	0.70	0.00	20.78	18.83

b) Diluted

As per 31 December 2016 no rights are issued which cause diluted earnings per share to be different to basic earnings per share.

Refer to note 17 for information related to the classes of shares.

Note 7 | Cash and cash equivalents

Cash and cash equivalents	31.12.2016	31.12.2015
Bank deposits	349733	195 329
Total	349733	195 329

There are no restricted funds at the end of the period.

$\mathbf{X}$

Note 8 | Expenses

Specification of expenses related to properties

Abcompanion of expenses related to broberties	31.12.2016 31.12.2015
Maintenance properties
Total expenses related to properties

Specification of other operating expenses		31.12.2016 31.12.2015
Management fee	11861	13525
Other operating expenses	15 44 1	18418
Total other operating expenses	27 302	31943

$\alpha$

Note 9 | Borrowings

Interest-bearing liabilities and available cash and cash equivalents constitute the capital of the Group.
The Group's main source of financing are bank loans, bond loans in the Norwegian bond market and shareholder loans.

Summary of external bank- and bond loans by tranche as of 31 December 2016

NOK thousand	31.12.2016	31.12.2015
Non-current
Commercial bank loans	659 395	404 086
Husbank loans (state bank)	769 113	772937
Bonds in Pioneer Public Properties II AS		174 425
Bonds in Pioneer Public Properties III AS		346742
Bonds in Pioneer Public Properties AS	987 669
Total	2416177	1698 190
NOK thousand	31.12.2016	31.12.2015
Current
Commercial bank loans	7356	19 151
Husbank loans (state bank)	31 036	20 692
Bonds in Pioneer Public Properties II AS		20 000
Bonds in Pioneer Public Properties III AS		26 950
Bonds in Ploneer Public Properties AS
Total	38 391	86793
NOK thousand	31.12.2016	31.12.2015
Total non-current and current
Commercial bank loans	666751	423 237
Husbank loans (state bank)	800 149	793 629
Bonds in Pioneer Public Properties II AS		194 425
Bonds in Pioneer Public Properties III AS		373 692
Bonds in Pioneer Public Properties AS	987 669
Total	2 454 569	1784983

a) bank borrowings

The Group's bankloans are with Husbanken, DNB, SR-Bank, Handelsbanken, Swedbank and Danske Bank. The bank borrowings mature until 2035. Of the total bank borrowings per 31 December 2016 NOK 581 million are on a fixed rate. The remaining NOK 1 466 million are on floating rates.

b) Bond loans

The Group has issues one bonds:
Pioneer Public Property (ticker PPU01) at Oslo Børs amounting to NOK 1 000 million with maturity Mai 2021. The bond is a senior secured
Callable bond with voluntary redemption at specified p

Summary of bond loans:

Bonds	Book value 31.12.2016	Marked value 31.12.2016	Coupon	Term
ppp	000 000	1047500	$NIBOR + 5.25%$	2016/2021
Transaction costs	$-13701$
Amortization	1370
Total bond	987 669	1 047 500
Whereof current

Book value	Marked value	Coupon	Term
200 000	202 000	$NIBOR + 5$ %	2013/2018
385 000	386 694	NIBOR + 4.5 %	2014/2019
$-24896$
8013
568 117	588 694
987 669	47 269
	31.12.2015	31.12.2015

In the Bond agreement entere into are there limitations on the borrower (PPP):

• The Group have to maintain an Equity of minimum 25 per cent on a consolidated basis
  - The Group maintains Cash and Cash Equivalents of minimum NOK 75 million on a consolidated basis
  - Make sure that the ratio between Uns

The recognised value of assets pledged as security for bank borrowings as per 31 December 2016

	31.12.2016	31.12.2015
Investment property	4 042 640	3413174
Total pledged assets	4 042 640	3413174

Note 10 | Income taxes

Income tax expense is recognised based on management's estimate of the weighted average annual income tax rate expected for the full
financial year. The estimated average annual tax rate used for the year to date 31 Decemb

Tax expense	Q1 16	Q 2 16	Q3 16	Q4 16	2016
Profit before tax	22 838	25 4 43	$-25089$	262 521	285712
Adjustments for:
- temporary differences					165 259
- Permanent differences					-242 392
Taxable result for the period	22838	25 4 43	$-25089$	262 521	208 580
Income tax expense for the period	5709	6 3 6 1	$-6272$	46 347	52 145
Estimated effective tax rate for the period	25 %	25%	25%	18 %	18 %

Change in deferred tax/deferred tax asset YTD	Properties	Deferred loss	Other	Total
As per 1 January 2016			15844	15844
Recognized upon acquisition of assets			4591	4 5 9 1
Change in the period			39 662	39 662
As per 31 December 2016			60 097	60 097

		Investment	loss carried
Change in deferred tax/deferred tax asset		properties	forward	Other items	Total
As per 1 January 2016				15844	15844
Recognized upon acquisition of assets		п	٠	4591	4591
Change in the period				39 662	39 662
As per 31 December 2016				60 097	60 097
Current income tax liabilities	2016	2015
Current income tax	7891	7 363
Change in prior years
Total current income tax liabilities	7 891	7 363

Note 11 | Changes in Group structure, aquisitions during the year and subsidiaries

In 2016 the Group bought real estate companies in Sweden, Finland and Norway. The Group also founded a Norwegian holding company PPPV AS The Group consists of the following subsidiaries per 31 December 2016:

Company Name	Location	Percent of stock
Pioneer Public Properties AS	Norway	100 %
Pioneer Public Properties I AS	Norway	100 %
Bodø Eiendomsselskap AS	Norway	100 %
Vestlandske Eiendomsselskap AS	Norway	100 %
Tromsø Eiendomsselskap AS	Norway	100 %
Pioneer Public Properties II AS	Norway	100 %
Idunsvei 8 Eiendom DA	Norway	100 %
Oslo Barnehager Eiendom AS	Norway	100 %
Vifo Romeriket Eiendom AS	Norway	100 %
Bergen Barnehager Eiendom AS	Norway	100 %
Pioneer Public Properties III AS	Norway	100 %
Service Property AS	Norway	100 %
Bjørgene Barnehage AS	Norway	100 %
Brådalsfjellet Barnehage AS	Norway	100 %
Dragerskogen Barnehage AS	Norway	100 %
Dvergsnestangen Barnehage AS	Norway	100 %
Furuholmen Barnehage AS	Norway	100 %
Garhaug Barnehage AS	Norway	100 %
Gullhella Barnehage AS	Norway	100 %
Gåserud Barnehage AS	Norway	100 %
Halsnøy Kloster Barnehage AS	Norway	100 %
Helldalsåsen Barnehage AS	Norway	100 %
Høytorp Fort Barnehage AS	Norway	100 %
Kløverenga Barnehage AS	Norway	100 %
Kniveåsen Barnehage AS	Norway	100 %
Krystallveien Barnehage AS	Norway	100 %
Kuventræ Barnehage AS	Norway	100 %
Litlasund Barnehage AS	Norway	100 %
Løvestad Barnehage AS	Norway	100 %
Marthahaugen Barnehage AS	Norway	100 %
Myraskogen Barnehage AS	Norway	100 %
Nordmo Barnehage AS	Norway	100 %
Opaker Barnehage AS	Norway	100 %
Opsahl Barnehage AS	Norway	100 %
Ormadalen Barnehage AS	Norway	100 %
Rambjøra Barnehage AS	Norway	100 %
Ree Barnehage AS	Norway	100 %
Romholt Barnehage AS	Norway	100 %
Rubbestadneset Barnehage AS	Norway	100 %
Rå Barnehage AS	Norway	100 %
Salamonskogen Barnehage AS	Norway	100 %
Skolegata Barnehage AS	Norway	100 %
Skåredalen Barnehage AS	Norway	100 %
Snurrefjellet Barnehage AS	Norway	100 %

Solknatten Barnehage AS	Norway	100%
Stongafjellet Barnehage AS	Norway	100 %
Sundbyfoss Barnehage AS	Norway	100 %
Tjøsvoll Barnehage AS	Norway	100 %
Torsbergskogen Barnehage AS	Norway	100 %
Ulsetskogen Barnehage AS	Norway	100 %
Vagletjørn Barnehage AS	Norway	100%
Vannverksdammen Barnehage AS	Norway	100 %
Vanse Barnehage AS	Norway	100 %
Veldetun Barnehage AS	Norway	100 %
Østrem Barnehage AS	Norway	100 %
Åbol Barnehage AS	Norway	100%
Århaug Barnehage AS	Norway	100 %
Pioneer Public Properties IV AS	Norway	100 %
Kidsa Bygg AS	Norway	100 %
Kidsa Eiendom AS	Norway	100 %
Kidsa AS	Norway	100 %
Kidsa Eiendom II AS	Norway	100 %
Norlandia Barnehagebygg AS	Norway	100 %
Arken Barnehage Eiendom AS	Norway	100 %
Kidsa Hylkje AS	Norway	100 %
Kidsa Sandgotna AS	Norway	100%
Kidsa Ladegården AS	Norway	100 %
Kidsa Festtangen AS	Norway	100 %
Kidsa Øvre Sædal AS	Norway	100 %
Kidsa Kokstad AS	Norway	100 %
Kidsa Øvsttun AS	Norway	100%
Kidsa Øyrane AS	Norway	100 %
Pioneer Public Properties V AS	Norway	100 %
Kidsa Ospeli Eiendom AS	Norway	100%
Soløyvannveien 100 AS	Norway	100 %
ITS Solbarnehager AS	Norway	100 %
Norlandia Barnehagene Porsgrunn AS	Norway	100%
Pioneer Public Finland OY	Finland	100 %
Kiinteistö OY Akaan Tenavajoti	Finland	100 %
Kiinteistö OY Lohjan Tenavajoti	Finland	100 %
Kiinteistö Esoo Palolammentie OY	Finland	100 %
Kiinteisö Hyvinkään Pavinmäenkatu OY	Finland	100 %
Kiinteistö Keravan Kurkela OY	Finland	100%
Kiinteistö Bromkuja Kirkkonummi OY	Finland	100 %
Päiväkotikiinteistö Klaukkala Pikkutikankuja OY	Finland	100 %
päiväkotikiinteistö Aapraminkaari Vantaa OY	Finland	100 %
Päiväkotikiinteistö Vihti Nummela OY	Finland	100 %
Päiväkotikiinteistö Touhula Karistonkatu Lahti OY	Finland	100 %
Oulunsalon Tetrilänku KOY	Finland	100 %
Touhula Ritaharju KOY	Finland	100%
Kangasala Ilkontie KOY	Finland	100 %
Päiväkoti Ylöjärvi rimpitie OY	Finland	100 %
Casparssons Fastighetsbolag AB	Sweden	100 %

The Group rents out the investment properties on long term triple net contracts, with an exception on the properties leased to Espira, one of the Group's three customers (ref note 3). On average there are 16 years remaining on the lease agreements. All agreements are fully CPI-adjusted annually. The Group does not have any future maintenance capital expenditure on properties as all maintenance is carried by the tenant as agreed upon in the lease agreements. The properties are primarily located in the greater Oslo area, Bergen, the greater Stavanger area, Bodø and Tromsø and certan locations in Sweden and Finland. See the Company's web site for a full list and map of all the properties. The investment properties are valued in accordance with the fair value method and all have been valued in accordance with valuation Level 3. The yield level of the properties has been determined on the basis of their unique risk and transactions made at the respective location according to the location price method. At the end of the year, the Group commissioned an external cash-flow valuation for all the individual properties from Newsec.

Newsec has in this report valuated each property on an individual basis using a combination of discounted cash-flow analysis and property yield level. The prime-yield used as a benchmark of individual yield assumptions in Newsec's analysis was 5,25%, and a number of individual factors for each property were applied to assess the individual yield for the respective property/location.

Sensitivity analysis

A property analysis is an estimate of the value that an investor is willing to pay for the property at a given time. The valuation is made on the basis of generally accepted models and certain assumptions on different parameters. The market value of the properties can only reliably established in a transaction between two independent parties. An uncertainty interval is stated in the property values and is between +/- 5 per cent in a normal market. A changed property value of +/-5 per cent affects the Groups's property value by +/- NOK 202 million.

If yield is changed by 1 per cent the book value of the properties change with MNOK -580, and with -0,5 MNOK 370. If the rent cahnged by $+/-$ 5 per cent value of the properties change with MNOK 202

		Yield sensitivity
		$-0.5%$	0.0%	1,0%
	$-5%$	4 2 1 0 , 3	3 840,5	3 2 6 0, 2
NOI sensitivity	0%	4412.4	4 042,6	3 4 6 2.3
	5%	4614.5	4 2 4 4 , 8	3664,5

Note 13 | Net financial items

NOK thousands	2016	2015
Interest income	2707	7 1 2 2
Currency expense	812	$\overline{\phantom{a}}$
Interest expense	148 563	62 189
Net financial items	146 668	55 067

$\label{eq:4.1} \widehat{\mathfrak{sl}}_{\mathbb{C}}(\mathbb{C})=\mathbb{C}(\mathbb{C})\otimes\mathbb{C}(\mathbb{C})$

$\bar{z}$

Note 14 | Related-party transactions

Related party	Relation to the Group
Roger Adolfsen	Chairman of the Board and owner of Mecca Invest AS
Sandra Henriette Riise	Board member
Geir Hiort	Board member
Even Carlsen	Board member and owner of Grafo AS
Nina Hiørdis Torp Høisæter	Board member
Runar Rønningen	CEO Pioneer Capital Partners AS
Pioneer Capital Partners AS	Shareholder and Deliverer of managment services
Hospitality Invest AS	Substantial shareholder
Grafo AS	Substantial shareholder
Kevenstern AS	Substantial shareholder
Mecca Invest AS	Substantial shareholder
Norlandia Care Group AS	Controlled by substantial shareholders, refer to note 17
Pioneer Bidco I AS	Controlled by substantial shareholders, refer to note 17
Kidsa Drift AS	Controlled by substantial shareholders, refer to note 17
Kidsa Barnehager AS	Controlled by substantial shareholders, refer to note 17
Acea Properties AS	Controlled by substantial shareholders, refer to note 17

Indirect ownership of shares by board member:

	Ord. Shares	Pref. shares
Roger Adolfsen	2938912	437 805
Even Carlsen	1773386	338 600
Runar Rønningen		59 650

The Group had the following material transactions with related parties:

Transactions with related parties	Q116	Q 2 16	Q316	Q4 16	2016
Rent revenue from Norlandia Care Group AS including subsidiaries	14 845	14 845	14 845	14 845	59 380
Rent revenue from Kidsa Drift including subsidiaries	9775	9775	9 7 7 5	9 7 7 5	39 099
Management fee to Pioneer Capital Partners AS including subsidiaries	2830	2830	2830	3 3 7 2	11 861
Purchase of shares from related parties (refer to note 11)	$\blacksquare$		100 127		100 127

Receivables from related parties	31.12.2016
Kidsa Barnehager AS	29 535

The outstanding balances between the related parties are unsecured. The receivables occurred in late December, it is
expected that these will be settled early in 2017, therefor it is not calculated interest on these receiv

Note 15 | Payroll

The company does not have any employees. Refer to Note 14 for information regarding management fee to Pioneer
Management AS, a fully owned subsidiary of Pioneer Capital Partners AS. The Board og Directors receives an annua

$\sim$

Note 16 | Trade receivables

	31.12.2016	31.12.2015
Trade Receivables	582	807
Other Receivables	8992	9801
Total Receivables	9.574	10 607

No provisions have been made for loss in receivables
None of the receivables are due.

Note 17 | Share capital and shareholder information

2016	Share value in NOK
			Number of Ordinary Preference		Total
	shares	shares	shares	Share premium
At 31 December 2016		16 314 470 9 814 470 6 500 000		1548585441	1 564 899 911

The Company have two classes of shares, ordinary shares and preference shares. The face value per share for both ordinary and preference shares classes is NOK 1. Share premium for all shares issued in the period is of NOK 96 per share.

About the shares

The differences between the share classes are differing voting rights and differing rights to the Company's profit. Besides voting rights, the difference between the Company's share classes is that the preference shares entail a preferential right to the Company's profit through a preferential right over ordinary shares to dividends. The regulations on voting rights and dividends are decided upon by the Shareholders' Meeting and can be found in the Articles of Association.

The ordinary share

The Company's ordinary share confers one vote unlike the preference shares that confer one-tenth of a vote.

The preference share

The Company's preference shares confer a preferential right over ordinary shares to an annual dividend of NOK 7.50 per preference share. Dividend payments are made quarterly with NOK 1.875 per preference share, if approved by the General Assembly. The preference share does not otherwise confer a right to dividend. If the general meeting decided not to pay dividends or to pay dividends that fall below NOK 1.875 per preference share during a quarter, the difference between paid dividends and NOK 1.875 per preference share shall be accumulated and adjusted upwards with an annual interest rate of 5 per cent until full dividends have been distributed. No dividends may be distributed to the ordinary shareholders until the preference shareholders have received full dividends including the withheld amount. Any difference between NOK 1.875 per preference share and the dividend paid per preference share is accumulated for each quarter.

Detailed information regarding dividends, issues and redemption can be found in the Company's Articles of Association, available in the prospectus at the Company's website.

Top 10 shareholder 31.12.16	Ord shares	Pref shars
Hospitality Invest AS	39,87 %	0,02%
HI Capital AS	2.34%	2.79 %
Eidissen Consult AS	14,45 %	4,22 %
Grafo AS	14.45 %	4.22 %
Klevenstern AS	14,45 %	4,39 %
Mecca Invest AS	14.45 %	4.39 %
Avanza Bank AB	$0.00\%$	10.13 %
Skandinaviska Enskilda bank AB	0,00%	9,43 %
J.P. Morgan bank Luxembourg SA	0,00%	4,24 %
Skandinaviska Enskilda bank AB	0,00%	3,55%
Other minority shareholders	$0.00 \%$	52,62 %
Total	100 %	100 %
Related party:
Pioneer Capital Partners	$0.00 \%$	2,54 %
Norlandia Care Group AS	$0.00 \%$	1.53%
Acea Properties AS	0,00%	0,56%
Northstar Properties AS	0.00%	0,29%

Note 18 | Operational leases

$\tilde{Q}$

Properties are leased out on long term triple net contracts to solid pre-school operators (Espira, Norlandia Preschools, Kidsa Drift
and Norlandia förskolor) of which all have lease guarantees from Norlandia Care Group.

Future payments under non-cancellable operating leases are as follows in nominal amounts excluding CPI adjustments

	31.12.2016
Within 1 year	228 696
Between 1 and 5 years	961445
After 5 years	4 366 560

Note 19 I Subsequent events

No material subsequent events have occurres since the end of the fourth quarter 2016

Independent Auditor's Report

To the General Meeting of Pioneer Property Group ASA

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Pioneer Property Group ASA. The financial statements comprise:

• The financial statements of the parent company, which comprise the balance sheet as at 31 December 2016, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
• The financial statements of the group, which comprise the balance sheet as at 31 ۰ December 2016 and income statement, statement of changes in equity, cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion:

• The financial statements are prepared in accordance with the law and regulations.
• The accompanying financial statements give a true and fair view of the financial position of the parent company as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
• The accompanying financial statements give a true and fair view of the financial $\bullet$ position of the group as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Description of key audit matter

How the key audit matter was addressed in the audit

Valuation of investment properties

The Group's value of investment properties in the financial statements amounts to NOK 4 042 640 000 equivalent to 91,4% of the group's total assets. The valuation of the properties is performed by an external party, Newsec, and is described in note 12 to the financial statements. The amount and the complexity and judgement involved in the valuation, lead us to identify this as a risk area in our audit.

Our audit procedures included, among others, involving our internal valuation specialists to assist us in evaluating the assumptions and methodologies used by Newsec, in particular those relating to the discounted cash flow model and market based yield for the rental properties. We also focused on the adequacy of the Group's disclosures about those assumptions to which the outcome of the valuation is most sensitive, that is, those that have the most significant effect on the determination of the value of the properties. We have also evaluated Newsec's competence and independence in performing the valuation of the investment properties.

Bond

Pioneer Property Group ASA has issued one bond on the Oslo Stock Exchange in the amount of NOK 1 000 000 000 equivalent to 39,0% of total group liabilities. Due to the substantial amount, and the structure and terms of the bond agreement, this issue was deemed significant to our audit. The bond is described in note 9 to the financial statements.

Our audit procedures included, among others, a review of the bond agreement focusing on the limitations for the group, as well as our own calculations to ensure that all the covenants in the bond agreement were met, and that the classification were in accordance with IFRS requirements.

Other information

Management is responsible for the other information. The other information comprises the Board of Directors' report, statements on Corporate Governance and Corporate Social Responsibility, but does not include the financial statements and our auditor's report thereon.

Independent Auditor's Report 2016 Pioneer Property Group ASA - Page 2 of 5

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

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

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director (management) are responsible for the preparation and fair presentation of the financial statements of the parent company in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and fair presentation of the financial statements of the group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the parent company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The financial statements of the group use the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

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

As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs), we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• obtain sufficient appropriate audit evidence regarding the financial information of $\bullet$ the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's

report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors' report

Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Drammen, 20 March 2017 BDO AS

$\epsilon$

Eli-Ann Murberg Casso State Authorised Public Accountant

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