Wallenstam — Interim / Quarterly Report 2019

Feb 5, 2020

WALLENSTAM

Year-end Report

JANUARY 1–DECEMBER 31, 2019

January 1–December 31, 2019

• The net asset value per share increased by SEK 9.00, 11 percent, during the period and amounted to SEK 91.30 (82.30).
• The Board of Directors will propose a dividend of SEK 1.90 per share (1.90), spread between two payments of SEK 0.95 each per share.
• Income from property management increased by about 10 percent and amounted to SEK 1,108 million (1,011).
• Rental income increased by just over 6 percent and amounted to SEK 2,026 million (1,910).
• Construction of properties amounted to SEK 3,322 million (2,198).
• On closing day, we had 3,135 apartments under construction.
• Changes in value of investment properties amounted to SEK 2,600 million (1,832).
• Profit before tax amounted to SEK 3,464 million (3,445) and profit after tax amounted to SEK 2,737 million (2,998), equivalent to SEK 8.5 per share (9.3).

October 1–December 31, 2019

• Income from property management increased by just over 1 percent and amounted to SEK 257 million (253).
• Rental income increased by just over 5 percent and amounted to SEK 515 million (488).
• Changes in value of investment properties amounted to SEK 1,590 million (764).
• Profit after tax amounted to SEK 1,699 million (1,229), equivalent to SEK 5.3 per share (3.8).

Comparisons in brackets refer to the corresponding period of the previous year unless otherwise stated.

---

HANS WALLENSTAM, CEO

A very good year

"We generated an increase in net asset value of SEK 9 per share during the first calendar year in the new business plan, of the SEK 40 which is our goal for 2023. Income from property management increased by 10 percent to just over SEK 1.1 billion and the surplus ratio came in at 75.5 percent. These are really excellent numbers, which once again show how well the operations and our business model are working."

"The strong demand for properties is affecting yield requirements and consequently also the valuation of the property holdings. The changes in value of our properties amounted to SEK 2.6 billion in 2019. It is extra satisfying to see that the changes in value from our efficient new production are making an increasing contribution to our value growth."

---

Wallenstam in brief

Number of investment properties: 218
Value of investment properties: SEK 52 billion
Market capitalization: SEK 37 billion
Occupancy rate, lettable area: 98%
Lettable area: 1.2 million sq.m
Number of apartments under construction: 3,135
Number of wind turbines: 66

75.5%
SURPLUS RATIO

Read more about Wallenstam on page 23.

Important events fourth quarter

During the quarter, construction started of 294 apartments in two projects. One project involves 161 rental apartments in the Rosendal district of Uppsala. The other project consists of 133 rental apartments in phase 3 of our urban development project Umami Park in Hallonbergen, Sundbyberg.

It was also confirmed that Wallenstam would be chosen as one of four anchor developers in an upcoming urban development project in Knivsta Municipality. The agreement also includes a land allocation of 250 apartments for Wallenstam.

In October, Marina Fritsche, Regional Director Gothenburg was appointed as Vice CEO of Wallenstam. The Board's decision means that Wallenstam now has two

Vice CEOs – Mathias Aronsson, Regional Director Stockholm, has been Vice CEO since 2007.

Wallenstam also acquired 8.5 percent of the shares in Tmpl, a property tech company which is developing a digital communication and service platform aimed at residential and commercial properties. Our own Wallenstam app, which began to be launched during the year for residents in our properties, was developed in collaboration with Tmpl.

On November 14, Wallenstam's new logo and visual identity were launched where Wallenstam's ant, which has been a symbol of the company since the 1950s, got a more stylish and modern design. Now it more clearly reflects the company's values, the modern products and the service that Wallenstam delivers.

Goal 2023 – Increase in net asset value of SEK 40 per share

In the business plan 2019–2023, Wallenstam's goal is to deliver an increase in net asset value of SEK 40 per share. The goal is measured from October 1, 2018 when the net asset value per share was SEK 79.20. On December 31, 2019, the net asset value per share was SEK 91.30, which represents an increase of SEK 9.00 per share during 2019 and SEK 12.10 per share in total during the business plan so far.

Net asset value

Net asset value describes the Group's total generated value and includes equity and deferred tax liability and amounted to SEK 29,501 million (26,574) on closing day. Deferred tax liability refers mainly to differences between carrying amounts and residual values for tax purposes in Group properties. A net deferred tax liability of SEK 5,322 million (4,595) was recognized in the balance sheet, which consists of a deferred tax asset of SEK 387 million (370) and a deferred tax liability of SEK 5,709 million (4,965). The non-current net asset value (EPRA NAV), which in addition to reversal of deferred tax liabilities also reverses the effects of unrealized changes in value of derivatives, amounted to SEK 29,778 million (26,595).

INCREASE IN NET ASSET VALUE, SEK/SHARE

WALLENSTAM | YEAR-END REPORT JAN 1–DEC 31, 2019

---

Comments by the CEO

Our anniversary year is now at an end and I can confirm that it was a very good year. It was especially nice in November, the very month when the company was established 75 years ago, to be able to unveil our new logo and graphic identity. I am personally very proud of the designed logo, which has received many positive reactions. The new design – with the ant and name in a modern style – reflects both our history and future.

We generated an increase in net asset value of SEK 9 per share during the first calendar year in the new business plan, of the SEK 40 which is our goal for 2023. Income from property management increased by 10 percent to just over SEK 1.1 billion and the surplus ratio came in at 75.5 percent. These are really excellent numbers, which once again show how well the operations and our business model are working.

High demand generates higher property values

Demand for properties is pretty incredible right now and is a natural consequence of the fact that we are in a low interest rate environment where properties are regarded as a safe investment option. The strong demand for properties is affecting yield requirements and consequently also the valuation of the property holdings. The changes in value of our properties amounted to SEK 2.6 billion in 2019. It is extra satisfying to see that the changes in value from our efficient new production are making an increasing contribution to our value growth. My opinion and that of many others is that the low interest rates will persist for a long time to come.

Sustainability in all decisions

During the year, we formed our sustainability department, which brings together all of the sustainability work that has been carried out over many years in the company and which is driving our sustainability initiatives and strategy work. Sustainability pervades all of our operations and all decisions, important ones as well as minor. We have been self-sufficient in renewable energy through our 66 wind turbines since 2013. In the energy area, we have installed some individual solar panels as a pilot project in selected properties. During 2020, we will continue these efforts on a larger scale in several of our buildings.

It is also gratifying that the European Investment Bank, EIB, has come in as a new financier in our energy-efficient rental apartment productions. For us, this represents a confirmation that we are working in a sustainable way, since a precondition for the financing is that the projects meet the EIB's requirements for "nearly-zero-energy building". The aim of the financing is also to support the construction of rental apartments and thereby reduce the serious housing shortage in Sweden's largest cities.

New production rate

Our new production is progressing as planned and we are continually starting new projects. We currently have more than 3,000 apartments under construction. Given the huge housing need that exists, it is important that those of us building rental apartments can maintain the production rate and provide our regions with new homes, particularly as cooperative apartment production has now decreased.

About 100,000 people have registered in our own queue for newly constructed apartments in Stockholm, Uppsala and Gothenburg.

We are keenly aware of how the market and demand are developing, and we are also testing other forms of housing. For example, we are now building co-living apartments, which will be introduced into our holdings during 2020. It will be exciting

to follow the development of modern collective living – through Colive. I hope and believe that this can be a popular product in today's society, like coworking has become, where we share workplaces.

Services, shops and restaurants important for office tenants

Of course we are also taking on challenges. One challenge currently facing many property companies is the fact that physical stores are being subjected to tough competition from e-commerce. In addition, we have the challenge of the ongoing work with the West Link project in Gothenburg, which will make access to the city more difficult for some time. For us, this work means an additional focus on finding different solutions for business activities in the ground floors of the properties so that we can create the right conditions for a lively streetscape. Offices account for the majority of our floor space in our commercial properties. For our office tenants, it is important that there are services, shops and restaurants that provide life and a pulse in the local area, while the businesses benefit from the customer potential of the office tenants. Therefore, we always take a holistic view of a property and an area, so that different activities can complement each other. The fact that our commercial properties are located in Gothenburg inner city is a strength. This gives us greater freedom of action and makes it easier for us to find creative and alternative solutions for each property. Our letting organization continually works close to the market in order to find the right mix for a lively and attractive inner city.

Thank you!

I would like to thank the Board and express a special thank you to Ulrica Jansson Messing, who quickly and very effectively took over the role of Chairman of the Board in connection with Christer Villard's tragic passing. I also want to thank all our fantastic employees whose dedicated work has enabled us to be so successful. I am looking forward with excitement and anticipation to an interesting 2020!

3 WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Consolidated income statement

SEK million	Note	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Rental income		2,026	1,910	515	488
Operating expenses		-497	-481	-145	-137
Net operating income, properties		1,529	1,429	370	351
Management costs and administrative expenses		-228	-211	-64	-62
Financial income		4	6	0	2
Financial expenses		-198	-212	-49	-37
Income from property management		1,108	1,011	257	253
Realized changes in value, financial instruments		-	-767	-	9
Participation in profits/losses of associated companies		-5	-	-1	-
Revenue, development property sales		324	535	10	427
Expenses, development property sales		-232	-421	-7	-333
Other income	1	298	426	54	87
Other expenses	1	-299	-436	-44	-118
Financial expenses, other	1	-25	-25	-8	-6
Profit before changes in value and impairment losses		1,169	324	261	319
Changes in value, investment properties		2,600	1,832	1,590	764
New construction		792	598	287	177
Other		1,808	1,234	1,303	587
Unrealized changes in value, financial instruments		-264	778	332	-83
Unrealized changes in value, synthetic options*		-40	-13	-5	4
Impairment losses and reversals, wind turbines		0	524	0	524
Profit before tax		3,464	3,445	2,178	1,528
Current tax		0	0	0	0
Deferred tax		-727	-447	-479	-299
Profit for the period, after tax		2,737	2,998	1,699	1,229
OTHER COMPREHENSIVE INCOME
Items that may be transferred to profit/loss for the period		0	0	-2	0
Items that may not be transferred to profit/loss for the period		60	2	1	-6
Tax attributable to other comprehensive income		-1	-2	0	1
Comprehensive income		2,796	2,998	1,698	1,224
DISTRIBUTION OF PROFIT FOR THE PERIOD
Profit for the period attributable to parent company shareholders		2,737	2,998	1,699	1,229
Average number of outstanding shares, thousands		323,000	323,854	323,000	323,198
Profit after tax, SEK per share; dilution does not occur		8.5	9.3	5.3	3.8

*Includes unrealized expenses connected with the execution of the scheme.

Note 1 – Bridge Income from natural energy management operations

As from 2019, Wallenstam has changed the presentation in the income statement due to the fact that Natural energy no longer constitutes a separate segment. All comparative periods have been restated. The previous line items "Income from natural energy management operations" have been replaced by the line items "Other income", "Other expenses", and "Financial expenses, other". Profit before changes in value and impairment charges were unchanged compared to previous periods.

SEK million	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Electricity revenue	292	415	52	80
Electricity expenses	-199	-300	-19	-77
Depreciation	-76	-95	-19	-24
Management costs and administrative expenses	-20	-31	-4	-10
Total electricity expenses	-295	-426	-42	-111
Financial expenses	-25	-25	-8	-6
Previously Income from natural energy management operations	-27	-35	2	-36

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Comments on the consolidated income statement

OCTOBER 1-DECEMBER 31

We feel that the market is still strong, particularly for offices and housing. Rental income increased by 6 percent compared to the previous year and amounted to SEK 515 million (488) during the quarter. The increase in revenue was mainly related to completed newly produced residential properties as well as new lets and renegotiations in commercial properties. Rental rates in renegotiated agreements increased by 8.5 percent. Net letting of commercial premises amounted to SEK -20 million during the quarter. In addition to this, SEK 8 million was added relating to cancelled leases for the purpose of enabling project implementation. Changes during the quarter related to the cancellation of a few but relatively large commercial contracts, among other things due to the City of Gothenburg's decision to relocate operations to their own properties. The occupancy rate for commercial premises, which was record high at the end of 2018, remained high at 96 percent (98). Operating expenses amounted to SEK 145 million (137). Net operating income improved by SEK 19 million, equivalent to just over 5 percent.

Interest expenses during the quarter were SEK 14 million higher compared to the previous year, of which SEK 11 million was a result of higher average debt and higher interest rate levels and SEK 3 million was due to the fact that interest components for site leasehold rights and land leases are now recognized as a financial expense. Capitalized interest amounted to SEK 23 million (18).

Income from property management amounted to SEK 257 million (253). Changes in the value of properties was positive and amounted to SEK 1,590 million (764) due to a continued positive market trend and value growth from our new production.

Swap interest rates rose during the fourth quarter, for example, the 10-year swap interest rate rose by 44 points. The rising swap interest rates had a positive impact on the development in value of interest rate derivatives, SEK 330 million (-101).

Profit after tax for the fourth quarter of 2019 amounted to SEK 1,699 million (1,229), which corresponds to earnings per share of SEK 5.3 (3.8).

During the year, the Group divested the business area that involved electricity sales to end customers. With the financial and organizational changes arising from this change, natural energy is not reported separately as its own segment as from October 2019.

JANUARY 1-DECEMBER 31

Rental income

Rental income for the year increased by SEK 117 million, which is equivalent to just over 6 percent, and amounted to SEK 2,026 million (1,910). Growth in rental income during the period was mainly the result of a continued positive market trend and occupations in our recently constructed rental properties. Rental income includes re-invoicing of increased property tax of about SEK 10 million.

Wallenstam's revenue is evenly distributed between residential properties and commercial premises. Our residential property holdings are fully let. This year's rent negotiations for residential properties resulted in an average increase of about 2 percent.

For our commercial properties, which are located in central locations in Gothenburg, we are still experiencing strong and stable demand, and especially for offices, which are our single largest type of commercial premises. Total rental income for our commercial properties in comparable holdings increased by 3.9 percent before increments, among other things as a result of successfully completed new lets and cost index escalations. Rental rates in renegotiated agreements increased by 7.7 percent. The surrender rate, which reflects how large a proportion of the cancellable leases are extended, amounted to 87 percent.

Net letting of commercial premises amounted to SEK -9 million during 2019. In addition to this, SEK 11 million was added relating to leases that were cancelled in order to enable future refinement and transactions. Changes during the year were primarily related to the fourth quarter of 2019 due to the fact that the City of Gothenburg is implementing changes to bring together operations in their own properties. The net occupancy rate is a volatile and unpredictable metric, which is affected by many factors, both external and internal. For instance, strategic business decisions to vacate for refinement, result in a negative trend initially. The metric is also hard to interpret in the shorter term as cancellations and new lets often come in blocks

RENTAL INCOME AND INCOME FROM PROPERTY MANAGEMENT

NET OPERATING INCOME AND SURPLUS RATIO

5 WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

that do not match each other. Nor have they any connection to the operating result since there is often a gap of at least 6-12 months between the signing of contracts and moving in/out. Internally, Wallenstam primarily follows the operations' occupancy rate, which we consider to be the metric that best reflects the performance of the business. Starting from 2020, our external communication will therefore focus on the occupancy rate. Our occupancy rate for commercial properties in terms of lettable area is still high and amounted to 96 percent (98) on closing day.

Operating expenses & net operating income

Operating expenses for the period amounted to SEK 497 million (481) and increased as a result of additional recently produced properties, higher costs for property maintenance from increased charges and increased property tax, among other things. Seasonal effects at Wallenstam consist mainly of variable operating expenses. These are usually highest during quarters one and four when expenses for heating and property maintenance are generally higher. Climate-related expenses were about SEK 6 million lower during 2019 than 2018. New tax assessment values meant that property tax increased compared to the previous year, which resulted in higher operating expenses of just over SEK 14 million. Even if the largest part of the increase for commercial properties is paid by the customers, the increased tax assessment values have a negative impact on the surplus ratio. As a consequence of new accounting rules, site leasehold rents are recognized within net financial items starting from 2019, which had a positive impact on operating expenses of SEK 12 million.

Net operating income increased by 7.1 percent and amounted to SEK 1,529 million (1,429). Additional efficient new production accounted for half of this growth and the existing holdings for the remainder. The surplus ratio was 75.5 percent (74.8).

Management costs and administrative expenses

Management costs and administrative expenses totaled SEK 254 million (251) and are distributed among property management, SEK 228 million (211), energy management, SEK 20 million (31) and property transactions SEK 6 million (9).

Financial income & expenses

Financial income amounted to SEK 4 million (6) and financial expenses totaled SEK 223 million (237), and are distributed between property operations and other, which mainly consisted of natural energy. Capitalized interest amounted to SEK 83 million (58).

The average debt for the year was SEK 2.3 billion higher than the previous year, due to continued investments in new production. The average interest rate on closing day, which reflects future interest to pay in relation to our loans, was 1.22 percent (1.06). This was higher compared to the previous year due to higher 3M STIBOR as well as higher fixed interest terms through derivative contracts. During the year, the average interest rate was 1.20 percent (1.35 percent excluding early redemption of derivative instruments).

Realized changes in value, financial instruments

During May and June 2018, interest derivative contracts with a market value of SEK -776 million were realized for the purpose of adapting the Group to the new corporate taxation rules, which apply starting from 2019.

Income from sales of development properties

A profit or loss from sales of development properties is recognized when the apartment or property is taken into possession by the purchaser. Apart from the cost, selling and marketing expenses are included, which are expensed as they arise.

Net profit from sales during the year amounted to SEK 92 million (114) and included sales of the development property Pälsjö (Mässhaken 2) in Helsingborg, apartments in the Vasagatan 33 project, individual co-op apartments as well as costs.

Other income & Other expenses

On April 1, the Group's electricity trading operations were sold to Jämtkraft. With the financial and organizational changes that arose from this sale, natural energy is not reported separately as its own segment as from October 2019. Income and expenses from electricity production as well as other income and expenses are recognized as other income and other expenses.

DISTRIBUTION, RENTAL VALUE

THE TEN LARGEST COMMERCIAL TENANTS

Tenant	Floor space, sq m
City of Gothenburg	24,077
Filmstaden AB	14,508
Essity Hygiene and Health AB	13,317
Academedia AB	11,382
Gothenburg Regional Archives	11,000
Västra Götaland County Council	10,108
ICA Fastigheter AB	6,906
Sandryds Handels AB	6,730
Folkuniversitetet	6,308
Frisk Service i Göteborg AB	6,212
Total	110,548

Our total commercial floor space is approximately 515,000 sq m.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Electricity revenue for the year was significantly lower than the previous year. This was mainly explained by the divestment of the electricity trading business area. Production of electricity increased, by 9 percent in total compared to the previous year, and amounted to 367 GWh (338). The price of electricity and renewable energy certificates decreased, however, which meant that sales from electricity production were also lower compared to the previous year.

Changes in value, investment properties

Changes in value of investment properties during the period amounted to SEK 2,600 million in total (1,832), of which the increase in value generated from our own work in our cost-efficient new construction accounted for SEK 792 million (598). Value growth from investment properties, which were in operation for one calendar year or more amounted to SEK 1,808 million (1,234). This was mainly a result of a continued strong rental market, higher net operating income and lower yield requirements of 11 and 12 points, respectively, on average during the fourth quarter for commercial premises and residential properties.

Unrealized changes in value, financial instruments

The change in value of financial instruments in the income statement includes changes in value of interest rate and electricity derivatives and holdings of listed and unlisted shares. The profit/loss is recognized in the income statement excluding changes in value from unlisted shares, which are recognized against other comprehensive income.

The value of interest rate and electricity derivatives developed negatively during the year, SEK -269 million (706) and SEK -15 million (68), respectively. The previous year was significantly affected by early redemption of interest rate derivatives, SEK 776 million. On closing day, the 10-year swap rate amounted to 0.68 percent, compared to 1.12 percent at the start of the year. The value of other financial instruments developed positively during the year, SEK 79 million in total (-1), of which SEK 19 million (5) is recognized in the income statement and SEK 60 million (-6) in other comprehensive income.

Unrealized changes in value, synthetic options

The Annual General Meeting on April 24, 2018 resolved to introduce a synthetic options scheme directed to all personnel. The term of the scheme runs until May 31, 2024 and the estimated cost in the event of a maximum outcome is SEK 330 million. At the start of the scheme in May 2018, personnel were invited to acquire the allocated number of options at a market price. The value of the synthetic options, which varies with Wallenstam's share price, increased during the year. The unrealized expense including costs connected to the scheme, amounted to SEK 40 million (13) during the year. To date, the total recognized obligation for the scheme amounts to SEK 53 million (13).

Taxes

The tax expense for the period, which consists in its entirety of deferred tax, amounted to SEK 727 million (447) net. Tax was calculated at 21.4 percent on current taxable income while deferred tax liabilities and receivables were calculated at the lower tax rate of 20.6 percent that applies starting from 2021. The tax expense for the year was positively impacted by SEK 28 million (312) as a result of remeasurement to the corporate tax rate of 20.6 percent. New corporate taxation rules have not impacted net profit for the year.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Consolidated balance sheet, condensed

SEK million	Dec 31, 2019	Dec 31, 2018
ASSETS
NON-CURRENT ASSETS
Investment properties	52,354	45,811
Wind turbines	1,109	1,167
Participations in associated companies	133	113
Financial assets	549	408
Financial derivative instruments	6	11
Other non-current assets	71	64
Total non-current assets	54,222	47,574
CURRENT ASSETS
Development properties	175	317
Financial derivative instruments	2	39
Other current assets	161	249
Cash and cash equivalents	129	83
Total current assets	467	688
Total assets	54,689	48,262
EQUITY AND LIABILITIES
EQUITY
Equity	23,792	21,609
Equity attributable to non-controlling interests	2	2
Total equity	23,794	21,611
NON-CURRENT LIABILITIES
Provisions for deferred tax	5,322	4,595
Other provisions	188	86
Interest-bearing liabilities	3,883	8,545
Financial derivative instruments	356	82
Lease liability	420	-
Other non-current liabilities	36	5
Total non-current liabilities	10,205	13,313
CURRENT LIABILITIES
Interest-bearing liabilities	19,998	12,699
Financial derivative instruments	2	-
Lease liability	1	-
Other current liabilities	689	639
Total current liabilities	20,690	13,338
Total equity and liabilities	54,689	48,262

WALLENSTAM | YEAR-END REPORT JAN 1–DEC 31, 2019

---

Comments on the consolidated balance sheet

OUR PROPERTIES

Development during the period

During the year, we invested a total of SEK 3,833 million (2,688), of which SEK 3,781 million (2,549) in investment properties and SEK 52 million (139) in development properties. New construction projects in progress involve 3,135 apartments. The total value of rental apartment and development projects in progress amounted to SEK 5.8 billion (3.6) on closing day.

From January 1, 2019, property companies must report the right of use to land granted with site leasehold rights as an asset and an equally large lease liability. The right of use value for the land has been estimated at SEK 402 million and is recognized as a part of the properties' value.

Investment properties

Changes in value affected the value of investment properties positively by SEK 2,600 million (1,832) in total, of which SEK 792 million (598) came from new construction of rental apartments and the remainder from properties that have been in operation for one calendar year or more.

For the commercial holdings, the average yield requirement amounts to 4.5 percent (4.6). For residential properties in operation, the average yield requirement amounts to 3.1 percent (3.3). The average yield requirement was 11-12 points lower on average compared to the previous quarter. The approved value of investment properties was SEK 52,354 million (45,811) at the end of the period.

Development properties

Development properties include the co-op apartment project New York at Gårdet in Stockholm and remaining apartments in the Vasagatan 33 project in Gothenburg. For new construction in progress, also see the table on page 10. The book value of Development properties amounted to SEK 175 million (317) at the end of the period.

Our markets

The cities in which we do business are characterized by strong growth and heavy demand for housing. Only a minor proportion of our rental apartments become available for rent due to relocation, and demand for finished, newly built rental apartments is high.

We build mainly rental apartments, but also cooperative apartments, for example when the land available for rental apartment construction is limited. Our flexible business model, where co-op apartment sales do not start until the project is approaching completion, makes it possible to convert a co-op apartment project into a rental apartment project if demand for co-op apartments is uncertain.

We see that demand is strong primarily for office space in Gothenburg, particularly in the central parts of the city, which is also reflected in the low vacancy rate.

Valuation

Investment properties

Wallenstam measures all of its investment properties internally at fair value. We enjoy good market and property intelligence through active monitoring, which provides us with a firm basis for performing internal valuations of our property holdings. However, we must emphasize that a property's fair value only becomes a reality when the property is sold, for which reason a valuation is always an estimation.

In its assessments of property values, Wallenstam has used different yield requirements. The yield requirements reflect market conditions and differ based on where the property is located and what type of property it is, e.g. housing or offices, etc.

A valuation is calculated based on a property's net operating income including site leasehold rents, set in relation to the yield requirement for each property.

As our properties are valued separately, no consideration is given to the portfolio premium that may exist in the property market.

New constructions of rental properties are measured at fair value, which is determined as cost plus the estimated surplus on the completion date in relation to the degree of completion of the construction. This is in turn based on expenses incurred.

Land rights and building rights for zoned land are measured at market value.

Development properties

Development properties are properties that we intend to construct in order to divest on completion, for example co-op apartment properties. Development properties are recognized at the lower of cost (investments incurred) and the estimated net realizable value. The profit/loss is recognized when the property or apartment is completed and handed over to the buyer.

TOTAL VALUE, PROJECTS IN PROGRESS

	Book value, SEK million
Land for future new production	759
Projects in progress, rental apartments	4,835
Development properties	175
Total projects in progress	5,769

CHANGES IN PROPERTY HOLDINGS, INVESTMENT PROPERTIES

	Book value, SEK million
Property holdings, January 1, 2019	45,811
+ Acquisitions	511
+ Construction	3,270
- Sales	-242
+ Unrealized changes in value, properties	2,602
+ Right-of-use asset, site leasehold right	402
Property holdings, December 31, 2019	52,354

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

NEW CONSTRUCTION IN PROGRESS, DECEMBER 31, 2019

Project	No. of apts.	Occupation*	Sq m**
STOCKHOLM
Umami Park, phase 1A, Sundbyberg	147	Q2 2019	12,000
Trollesunds gårdar, Bandhagen	158	Q3 2019	14,500
Norrgårdshusen, Österåker	128	Q4 2019	7,000
Terrassen Elva, Tyresö	54	Q1 2020	2,500
Allén, Tyresö	221	Q2 2020	13,500
Parkstråket 1, Haninge	155	Q3 2020	13,500
Söra Kvarter, Österåker	305	Q3 2020	15,500
Umami Park, phase 1B, Sundbyberg	75	Q3 2020	3,000
New York, Gärdet (co-op)	50	Q4 2020	3,500
Parkstråket 2, Haninge	131	Q4 2020	7,500
Umami Park, phase 2, Sundbyberg	141	Q4 2020	9,500
Umami Park, phase 3, Sundbyberg***	133	2021	10,000
UPPSALA
Flanören, Rosendal***	161	2021	7,500
GOTHENBURG
Vasagatan 33 (co-op)	30^{1}	Q3 2018	3,500
Sten Stures Kröningar, Regenten	29	Q3 2020	2,000
Elisedal	336	Q4 2020	24,000
Godhems Backe	138	Q4 2020	6,500
Kallebäcks Terrasser Kv. 9	165	2021	9,500
Kallebäcks Terrasser Kv. 11	270	2021	16,000
Kv. Rosengången, Mölnlycke Fabriker, Härryda	123	2021	7,000
Kv. Kvarnen, Mölnlycke Fabriker, Härryda	185	2022	10,500
Commercial
Kallebäcks Terrasser		2021	20,000
Mölnlycke Fabriker***		2021	20,000^{a}
Total	3,135		238,500

• Refers to estimated start of occupation. Occupation will occur gradually, often over several quarters.
  ** Number of sq m includes garage, and is rounded off to the nearest 500.
  *** Started during quarter 4, 2019.
  1 Of which, 19 apartments are sold and taken into possession by the buyer.
  a Relates to two sports centers and a multistorey carpark.

CHANGE, CONSTRUCTION IN PROGRESS

	No. of apts.
New construction in progress,
Oct 1, 2019	2,841
- Completed	0
+ Started	294
New construction in progress,
Dec 31, 2019	3,135

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

COMPLETED NEW CONSTRUCTION, 2019

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail sq m	Industry/ warehousing sq m	Education sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
GOTHENBURG
Stallbacken 26
(Project: Stallbacken Nivå5)	Åbyvågen 4 A-D	2019	5,778	-	-	98	-	592	-	6,468	109
UPPSALA
Kåbo 63:2
(Project: Tre vänner)	Torgny Segerstedts allé 71-81 / Prefektgatan 5-7 / Betty Petterssons gata 13	2019	6,114	156	106	-	-	-	-	6,376	141
Total			11,892	156	106	98	-	592	-	12,844	250

PROPERTY ACQUISITIONS, 2019

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail sq m	Industry/ warehousing sq m	Education sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
GOTHENBURG
Inom Vallgraven 60:9*
Lorensberg 54:9	Vasagatan 45	1979/2010	-	4,639	1,541	388	-	567	-	7,135	0
STOCKHOLM
Tyresö strand 1:18, Kringlan 1, 2, 4, 11 & 12**
UPPSALA
Kåbo 76:1**
Total			-	4,639	1,541	388	-	567	-	7,135	0

Land that was previously site leasehold right *Land

PROPERTY SALES, 2019

Name of property	Address	Year of construction/ conversion	Residential sq m	Office sq m	Retail sq m	Industry/ warehousing sq m	Education sq m	Garage sq m	Other sq m	Total sq m	No. of apts.
GOTHENBURG
Johanneberg 15:32	Volrat Thamsgatan 4	1950/1993	-	569	-	-	-	-	-	569	0
Inom Vallgraven 20:9	Kungsgatan 52 / Östra Hamngatan 39	1864/2008	-	-	1,767	-	-	-	-	1,767	0
HELSINGBORG
Mässhaken 2	Kantorsgatan 1-7	2018	5,116	-	-	-	-	-	-	5,116	96
STOCKHOLM
Älta 24:2 (del av)*
Total			5,116	569	1,767	-	-	-	-	7,452	96

*Land

PROPERTY HOLDING STRUCTURE AS OF DECEMBER 31, 2019

Lettable area, sq m	Residential sq m	Office sq m	Retail sq m	Industry/ware-housing sq m	Education sq m	Garage sq m	Other sq m	Total sq m	Distribu-tion, place	No. of apts.
Stockholm	287,049	25,499	18,358	15,355	4,479	49,580	3,292	403,612	34%	4,684
Uppsala	27,605	2,138	1,039	101	-	5,732	-	36,615	3%	542
Gothenburg	255,401	208,724	91,277	87,369	25,849	59,443	32,845	760,908	63%	4,128
Total	570,055	236,361	110,674	102,825	30,328	114,755	36,137	1,201,135	100%	9,354
Distribution by type of premises	47%	20%	9%	9%	2%	10%	3%	100%

ACQUISITION, CONSTRUCTION AND SALES OF INVESTMENT PROPERTIES

PROPERTY TYPE

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

12 WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

WIND POWER

On closing day, Wallenstam had 66 wind turbines in operation divided among 20 wind farms. The installed output amounted to 143 MW (143).

Wind turbines are measured at the lowest of cost less depreciation and impairment losses and the estimated net realizable value. Depreciation for the period amounted to SEK 76 million (95). Due to the introduction of IFRS 16, Leases, the right of use to land through land leases shall be recognized as a right-of-use asset and an equally large lease liability from January 1, 2019. Estimated value in use of land leases, based on so-called minimum rents, amounted on closing day to SEK 17 million (-) and is recognized as part of the wind power value. On December 31, 2019, the consolidated book value of wind turbines amounted to SEK 1,109 million (1,167). The renewable energy certificate inventory and guarantees of origin amounted to SEK 14 million (58) on closing day.

FINANCING

Equity

Shareholders' equity, including non-controlling interests amounted to SEK 23,794 million (21,611), equivalent to SEK 74 per share (67). The equity/assets ratio was 44 percent (45).

Interest-bearing liabilities

On closing day, outstanding bond loans amounted to SEK 3,950 million (3,450), the outstanding volume of commercial paper, with a framework amount of SEK 4 billion, amounted to SEK 3,993 million (3,503), and total interest-bearing liabilities amounted to SEK 24,302 million (21,244), of which the lease liability amounted to SEK 421 million (-). Of this liability, SEK 1.8 billion (0.7) consists of green loans, and SEK 1.0 billion of green bonds.

All the bond loans of SEK 3,950 million (2,950) are contained within the framework of our MTN program

138 new apartments for Majorna in Gothenburg

In the Godhems Backe project, we are building 138 new homes with proximity to services, communications and Slottsskogen's green areas. The project is planned to be completed by the end of 2020.

---

(Medium Term Notes), which has a total framework amount of SEK 5 billion. The terms and conditions of the green bonds are the same as for the other bonds with the addition that the issue proceeds can only be allocated to projects and assets that qualify according to Wallenstam's green framework. One green bond of SEK 500 million was issued in May and runs for two years with a variable interest rate of 3M STIBOR + 0.75%. Another green bond loan of SEK 500 million was issued in September and runs for two years with a variable interest rate of 3M STIBOR + 0.60%. The bond loans are listed on Nasdaq Stockholm.

The average remaining fixed interest term is 38 months (39). Of the loan portfolio, 41 percent (41) of the loans have fixed interest terms longer than one year. On closing day, the average interest rate on our loans was 1.22 percent (1.06).

Financing of the loan portfolio is mainly secured by mortgage deeds for properties. The bond loans are unsecured. The commercial paper program has underlying credit commitments for the outstanding volume of commercial paper at each date. Covenants are issued for this.

Lease liability

Due to the introduction of IFRS 16, Leases, from January 1, 2019 a lease liability is recognized equivalent to the rights of use for land leases and site leasehold rights as a separate line item. On December 31, 2019, the liability amounted to SEK 421 million.

Derivative instruments

Wallenstam's financial derivative instruments consist of interest rate and electricity derivatives. On closing day, Wallenstam had a net indebtedness in respect of derivative instruments of SEK 349 million compared to a net indebtedness of SEK 32 million on December 31, 2018. Of this, interest rate derivatives accounted for SEK -350 million (-82), electricity derivatives for SEK 2 million (49) and currency derivatives for SEK -1 million (-).

During 2019, the Group entered into new interest rate derivative contracts totaling SEK 1.7 billion with a maturity of 10 years. The total volume of outstanding interest rate derivatives, where Wallenstam pays fixed interest, amounts to SEK 9.7 billion (8.0).

Interest rate derivatives are used to obtain a desired interest maturity profile in a flexible, cost-efficient way. They are measured through discounting future cash flows at present value based on observable market interest rates and are classified at level 2. The arising deficit or surplus value for interest rate derivatives, which reflects how the Group's hedged interest rates relate to the market rate of interest on closing day, is recognized in the balance sheet and in unrealized changes in value, financial instruments in the income statement.

Electricity derivatives are used to mitigate the effect of market fluctuations by hedging income for future electricity production. These are measured at market value and the changes in value are continually recognized in the Group in the line item unrealized changes in value, financial instruments. As we do not apply hedge accounting for electricity derivatives, no reversal effect arises in unrealized changes in value in the consolidated income statement in connection with realization of electricity derivatives.

Currency derivatives are used to a limited extent in order to hedge purchasing from foreign countries. Hedge accounting is applied and therefore translation effects are recognized in other comprehensive income.

Available liquid assets

Available liquid assets, including available bank overdraft facilities and excluding blocked bank balances with Nasdaq Commodities of SEK 1 million (3) amounted to SEK 928 million (761). Approved overdraft facilities amounted to SEK 800 million (800). None of these were used on closing day (119). At the end of the year, the EIB (European Investment Bank) approved a credit facility of SEK 2,500 million for new production of energy-efficient rental apartments. The Group's approved credit facilities totaled SEK 6,500 million (4,000). For the SEK 2,500 million facility approved by the EIB, a drawdown notice of ten banking days is required. The other SEK 4,000 million was available for use on closing day.

On December 31, 2019, available liquid assets totaled SEK 4,928 million (4,761), of which SEK 3,993 million (3,503) represents a credit commitment for issued outstanding commercial paper. Accordingly, SEK 935 million (1,258) was available for use on closing day.

FIXED TERMS, AVERAGE INTEREST RATES, DECEMBER 31, 2019

Interest maturity structure	Amount, SEK million	Average interest rate, %	Proportion, %
0-1 year	14,181	1.35	59.4
1-2 year	-	-	-
2-3 year	-	-	-
3-4 year	-	-	-
4-5 year	1,000	0.64	4.2
5-6 year	1,500	0.86	6.3
6-7 year	1,500	1.00	6.3
7-8 year	1,500	1.16	6.3
8-9 year	1,500	1.18	6.3
>9 year	2,700	1.09	11.3
Total	23,881	1.22	100.0

AVAILABLE LIQUID ASSETS

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Consolidated statement of changes in equity

SEK million	- Equity attributable to parent company shareholders -
	Share capital	Other capital contributed	Other reserves	Profit brought forward	Non-controlling interests	Total equity
Opening equity, Jan 1, 2018	165	359	4	18,880	2	19,410
Profit for the period	-	-	-	2,998	-	2,998
Translation difference	-	-	0	-	-	0
Changes in value, currency derivatives	-	-	-1	-	-	-1
Changes in value, owner-occupied properties	-	-	8	0	-	8
Changes in value, financial instruments for sale	-	-	-6	16	-	10
Tax attributable to other comprehensive income	-	-	-2	0	-	-2
TRANSACTIONS WITH SHAREHOLDERS
Dividends	-	-	-	-583	-	-583
Repurchase of own shares	-	-	-	-229	-	-229
Closing equity, Dec 31, 2018	165	359	4	21,081	2	21,611
Opening equity, Jan 1, 2019	165	359	4	21,081	2	21,611
Profit for the period	-	-	-	2,737	-	2,737
Translation difference	-	-	1	-	-	1
Changes in value, currency derivatives	-	-	-1	-	-	-1
Changes in value, owner-occupied properties	-	-	1	-	-	1
Changes in value, financial instruments for sale	-	-	60	-	-	60
Tax attributable to other comprehensive income	-	-	-1	-	-	-1
Transactions with shareholders
Dividends	-	-	-	-614	-	-614
Closing equity, Dec 31, 2019	165	359	64	23,204	2	23,794

Consolidated statement of cash flows

SEK million	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Profit before changes in value and impairment losses*	1,169	324	261	319
Adjustment for items not included or arising in cash flow	10	-65	11	-45
Taxes paid	0	0	0	0
Cash flow before change in working capital	1,179	259	272	274
Change in working capital	174	111	-15	25
Cash flow from operating activities	1,353	370	257	299
INVESTMENTS/DIVESTMENTS
Investment in properties and individual co-op apartments	-3,812	-2,681	-998	-675
Investments in intangible assets & property, plant and equipment, and wind turbines	-45	-9	-13	-2
Investments in financial assets	-69	-106	-10	-6
Investments in associated companies	-25	-113	-	-113
Divestment of other securities held as non-current assets	-	35	-	35
Divestment of properties, development properties & property, plant and equipment	628	555	77	407
Cash flow from investing activities	-3,323	-2,319	-944	-354
FINANCING
Raised interest-bearing liabilities	18,050	10,278	6,450	473
Amortization of interest-bearing liabilities	-15,294	-7,856	-5,780	-429
Net change in overdraft facilities	-119	119	-	119
Advance payment futures contracts	-8	7	-2	7
Amortization of financial assets	-	68	-	-16
Dividends paid	-614	-583	-307	-291
Repurchase of own shares	-	-229	-	-25
Cash flow from financing activities	2,016	1,804	362	-162
Changes to liquid assets	46	-145	-325	-217
Cash and cash equivalents at beginning of the period	83	228	454	300
Cash flow for the period	46	-145	-325	-217
Cash and cash equivalents at the end of the period	129	83	129	83
Unutilized overdraft facilities at the end of the period	800	681	800	681
Blocked bank balances	-1	-3	-1	-3
Available liquid assets	928	761	928	761

*Includes interest paid and received, including gross flows from interest rate swap contracts, of SEK-296 million (-1,106) and SEK 3 million (0) respectively, of which SEK 83 million (58) was capitalized as a non-current asset.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Segments report

2019 SEK million	Gothenburg Jan-Dec	Stockholm Jan-Dec	Other Jan-Dec	Elimination Jan-Dec	Total Jan-Dec
INCOME STATEMENT
Rental income	1,402	648	-	-24	2,026
Operating expenses	-325	-172	-	-	-497
Net operating income	1,078	475	-	-24	1,529
Management costs and administrative expenses	-132	-105	-15	24	-228
Net financial items	-240	-113	158	-	-194
Income from property management	706	257	144	-	1,108
Unapportioned items
Participation in profits/losses of associated companies					-5
Sales result, development properties					92
Other income					298
Other expenses					-299
Financial expenses, other					-25
Profit before changes in value and impairment losses					1,169
Changes in value					2,295
Profit before tax					3,464
BALANCE SHEET
Investment properties	32,342	20,011	-	-	52,354
Wind turbines	-	-	1,109	-	1,109
Development properties	57	118	-	-	175
Unapportioned assets	-	-	-	-	1,051
Total assets					54,689
Equity	-	-	-	-	23,794
Interest-bearing liabilities and lease liabilities	13,366	9,278	1,658	-	24,302
Unapportioned liabilities	-	-	-	-	6,593
Total equity and liabilities					54,689
Property investments in progress including land	1,934	3,835	-	-	5,769
2018 SEK million	Gothenburg Jan-Dec	Stockholm Jan-Dec	Other Jan-Dec	Elimination Jan-Dec	Total Jan-Dec
INCOME STATEMENT
Rental income	1,317	617	-	-24	1,910
Net operating income, properties	1,007	445	-	-24	1,429
Income from property management	681	322	8	-	1,011
Unapportioned items
Realized changes in value, financial derivatives					-767
Sales result, development properties					114
Other income					426
Other expenses					-436
Financial expenses, other					-25
Profit before changes in value and impairment losses					324
Changes in value					3,121
Profit before tax					3,445
BALANCE SHEET
Investment properties	28,979	16,832	-	-	45,811
Wind turbines	-	-	1,167	-	1,167
Development properties	253	64	-	-	317
Unapportioned assets	-	-	-	-	967
Total assets					48,262
EQUITY	-	-	-	-	21,611
Interest-bearing liabilities	11,163	4,149	5,932	-	21,244
Unapportioned liabilities	-	-	-	-	5,407
Total equity and liabilities					48,262
Property investments in progress including land	1,275	2,297	-	-	3,572

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

The Wallenstam share

The Wallenstam B share is listed on Nasdaq Stockholm, Large Cap. During 2019, the Wallenstam share price increased by 37.7 percent. The property indices OMX Stockholm Real Estate and OMX Stockholm PI rose by 59.2 percent and 29.6 percent, respectively, during the same period.

At the end of the period, the Wallenstam share price was SEK 113.20 compared to SEK 82.20 at year-end 2018. The market capitalization was SEK 37,356 million (27,126) based on the total number of registered A and B shares. Equity per share amounted to SEK 74 (67).

Wallenstam has a mandate from the Annual General Meeting (AGM) to repurchase so many shares, such that the company's holding at any one time does not exceed 10 percent of all shares in the company. No shares were repurchased during 2019. On closing day, the company held a total of 7,000,000 treasury shares, repurchased at an average price of SEK 76.16 per share.

Dividend

In 2019, SEK 614 million was disbursed to the shareholders in total, spread between one payment date in May and one in October. In 2018, a total of SEK 583 million was disbursed.

The Board of Directors will propose a dividend of SEK 1.90 per share (1.90) to the Annual General Meeting for the 2019 financial year, spread over two payment dates of SEK 0.95 each per share.

The proposed dividend is equivalent to a yield of 1.7 percent (2.3), based on the share price at the end of the period. The share's total yield in 2019 calculated on the distributed dividend, was 40.0 percent (6.5).

Turnover

During 2019, the Wallenstam share had an average daily turnover on Nasdaq Stockholm of about SEK 21.6 million (24.0).

SHARE PRICE TREND 2015-2019

AVERAGE SHARE LIQUIDITY PER DAY

SHAREHOLDINGS, DECEMBER 31, 2019

	A shares	B shares	Equity, %	Votes, %
Hans Wallenstam and family, and company	34,500,000	48,902,000	25.27	62.18
AMF - Insurance and funds		32,710,000	9.91	5.16
Anna-Carin B Wallenstam and Anders Berntsson		19,300,000	5.85	3.05
Agneta Wallenstam		18,204,000	5.52	2.87
Henric and Ulrika Wiman		12,037,752	3.65	1.90
Bengt Norman		8,007,500	2.43	1.26
Monica and Jonas Brandström		7,413,326	2.25	1.17
Vanguard		5,990,458	1.82	0.95
David Wallenstam		5,640,000	1.71	0.89
Elin Wallenstam Sjögren		4,327,240	1.31	0.68
Other owners		125,967,724	38.17	19.89
Total number of shares	34,500,000	288,500,000
Repurchased shares*		7,000,000	2.11
Registered shares	34,500,000	295,500,000
Total registered shares	330,000,000		100.00	100.00

Total outstanding shares 323,000,000
The proportion of institutional ownership amounted to around 16 percent of equity and around 8 percent of votes.
Foreign ownership amounted to around 10 percent of equity and around 5 percent of the votes.
Source: Modular Finance, Monitor
*Repurchased own shares lack voting rights.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Parent Company

The parent company's primary operations are the performance of Group-wide services including financial services as well as trading in renewable energy certificates and guarantees of origin. In addition, the parent company owns a small number of properties.

Total revenue during the period amounted to SEK 456 million (389), of which rental income amounted to SEK 124 million (117).

Net profit for the period was impacted by changes in value of financial derivative instruments, SEK -323 million (761), mainly due to falling swap interest rate levels. Profit/loss from participations in Group companies for the year includes dividends from subsidiaries and amounted to SEK 33 million (3,106). The large difference between years was due to the fact that the Group carried out a review of its capital structure last year.

In the previous year, financial derivative instruments were affected by a large non-recurring item from early redemption of derivative contracts in May and June 2018 of SEK 776 million. An equivalent cost was then recognized as interest expense, and therefore the transaction did not have any net effect on profit. The previous year's interest expense, apart from interest expense from early redemption of contracts, was SEK 333 million. This year's interest expenses are lower compared to the previous year despite a higher average debt due to lower interest rates, a result of the early redemption of derivatives in 2018. Profit after tax amounted to SEK 234 million (3,538).

Investments in intangible assets and property, plant and equipment during the period amounted to SEK 22 million (15). Parent company external loans amounted to SEK 13,421 million (9,802) on closing day.

INCOME STATEMENT, PARENT COMPANY

SEK million	Jan-Dec 2019	Jan-Dec 2018
Management revenue	273	269
Rental income	124	117
Revenue, sales of renewable energy certificates	57	-
Other revenue	2	3
Total revenue	456	389
Management costs and administrative expenses	-359	-348
Operating expenses	-36	-52
Depreciation and impairment losses properties	-30	-30
Expenses, sales of renewable energy certificates	-52	-
Change in value, synthetic options scheme	-40	-13
Other expenses	-2	-3
Total expenses	-519	-446
Operating income	-63	-57
Profit/loss from participations in Group companies	33	3,106
Interest income and similar profit/loss items	455	381
Interest expenses and similar profit/loss items	-223	-1,109
Changes in value, derivative instruments	-323	761
Net financial items	-59	3,139
Profit/loss after financial items	-122	3,081
Appropriations	373	641
Tax on net profit/loss	-17	-185
Profit/loss after tax	234	3,538
OTHER COMPREHENSIVE INCOME
Changes in value, currency derivatives	-1	-1
Tax attributable to other comprehensive income	0	0
Comprehensive income	233	3,537

BALANCE SHEET, PARENT COMPANY

SEK million	Dec 31, 2019	Dec 31, 2018
Assets
Properties	1,340	1,361
Participations in Group companies	5,879	5,369
Financial derivative instruments	8	50
Receivables from Group companies	21,894	19,929
Other assets	206	248
Cash and cash equivalents	122	77
Total assets	29,449	27,034
Equity and liabilities
Equity	10,470	10,850
Provisions	84	32
Interest-bearing external liabilities	13,421	9,802
Liabilities to Group companies	4,994	6,152
Financial derivative instruments	357	82
Other liabilities	123	115
Total equity and liabilities	29,449	27,034

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Proposed dividend, repurchase and assignment of own shares etc.

The Board of Directors will propose that the Annual General Meeting approve the following:

• According to the company’s dividend policy, the amount available for distribution must never exceed profit before changes in value and impairment charges less participations in the profits of associated companies after standard tax. When determining the size of the dividend, consideration should be given to the Group’s investment requirements, need to strengthen its balance sheet and its position in general, and the ability of the Group to develop further in the future while maintaining its financial strength and freedom of action. Based on Wallenstam’s future investment plans, the Board proposes to reinvest a larger part of the profits in the business. For the 2019 financial year, the Board of Directors will therefore propose a maintained dividend of SEK 1.90 per share (1.90), spread over two payment dates of SEK 0.95 each per share. The record day for the first payment is proposed to be May 6, 2020, and November 4, 2020 for the second payment. The proposed dividend is equivalent to a yield of 1.7 percent (2.3), based on the share price at the end of the period.
• Authorization for the Board until the next AGM, on one or more occasions, to take decisions regarding the purchase of so many B shares on Nasdaq Stockholm, such that the company’s holding at any one time does not exceed 10 percent of all shares in the company.
• Authorization for the Board to take decisions regarding the assignment of the company’s own shares.
• Guidelines for remuneration to senior executives.

The work of the Board

Wallenstam’s Board was composed of five members until September 25, 2019. After Christer Villard’s passing, the Board was composed of four members. In 2019, the Board held eight recorded meetings in addition to day-to-day contacts. The Board’s most important task is to make decisions on strategic matters. In general, the Board handles matters of material importance for the Group. The Board work during the year focused in particular on strategy discussions, questions relating to market conditions and financing, compliance issues and investments.

The Board conducted an evaluation of its work during 2019. The evaluation was conducted under the leadership of the Chairman of the Board in the form of an open discussion within the Board. The evaluation found that the Board work is functioning very well.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Other information

OPPORTUNITIES & RISKS

Wallenstam’s opportunities and risks, and how we manage them, are presented in the 2018 Annual Report on pages 34–37. No significant changes have taken place since then.

SENSITIVITY ANALYSIS

As of December 31, 2019, the estimated market value of the properties amounted to around SEK 52 billion. A change in value of plus/minus 10 percent is thus equivalent to about plus/minus SEK 5.2 billion. A general change of 0.25 percentage points in property yield requirements is equivalent to about SEK -3.1 billion or SEK +3.7 billion.

A change in the interest rate of plus/minus 50 points is equivalent to about plus/minus SEK 67 million (62).

A change in the electricity price of 1 öre per kWh is equivalent to about plus/minus SEK 41 million (42) during valuation of wind turbines, while a change in the renewable energy certificate price of 1 öre per kWh is equivalent to about plus/minus SEK 21 million (23) during valuation of wind turbines.

TRANSACTIONS WITH RELATED PARTIES

Wallenstam’s related parties consist chiefly of Group companies. Board members, company management and their families and the companies they control are also related parties. Transactions with related parties mainly consist of administrative fees and the renting of premises between Group companies. Individuals related to Board members and the Group Management rent apartments. Insurance services are purchased from companies where members of Wallenstam’s Board of Directors are Board members, for a total equivalent to about SEK 4 million in net expenditure for the year. Giveaways for celebration of the company’s 75-year anniversary were purchased for SEK 0.3 million (-) from companies related to a Board member. In addition, a company to which one of Wallenstam’s Board members was related at the time of contracting, performed building contract services with a total contract value of SEK 86 million. The CEO is a joint owner (50 percent) of Aranea Holding AB. Aranea Holding AB owns 48 percent of Renew Group Sweden AB, a floorball equipment manufacturer. Aranea is a tenant of Wallenstam with an annual rental value equivalent to SEK 0.6 million.

Wallenstam’s involvement in environmental and social responsibility issues is described in more detail on pages 27–33 of the 2018 Annual Report. As part of its social responsibility work, the Wallenstam Group not only contributes financially to a number of organizations but also gives its time in the form of e.g. board work. As a result of such board positions, related party status arises in the case of the Rescue Mission in Gothenburg and Barn i Nöd (Swedish International Help for Children). During the year, the Rescue Mission in Gothenburg received contributions and discounts equivalent to SEK 3.2 million and Barn i Nöd received contributions of SEK 1.8 million. The Rescue Mission in Gothenburg and Barn i Nöd rent premises from Wallenstam equivalent to annual rental income of about SEK 4.8 million and SEK 0.1 million, respectively.

All transactions take place on market-related terms.

ACCOUNTING PRINCIPLES

This report was prepared in accordance with IAS 34. The accounting principles are unchanged compared to the 2018 Annual Report, and the accounting principles mentioned below have been adopted from 2019. The Parent Company’s accounting principles comply with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2.

New accounting principles that entered into force on January 1, 2019 and subsequently IFRS 16 Leases

The standard replaced IAS 17 on January 1, 2019 and means, among other things, that lessees must report leases in the balance sheet. Wallenstam does not apply the standard retrospectively. As a landlord and lessor, the change does not impact Wallenstam’s reporting. However, as a lessee, the handling of site leasehold rents and minimum rents for land for wind turbines is of importance. As of January 1 2019, the lease liability for site leasehold rents amounted to SEK 402 million and for minimum rents for land it amounted to SEK 18 million. The liability is recognized as a separate line item in the balance sheet, Lease liability. Corresponding right-of-use assets are recognized in the balance sheet and are included as part of the items Investment properties and Wind turbines, respectively. The expense for site leasehold rents is recognized as a financial expense. For minimum rents for land, the new standard means that the rent shall instead be distributed between depreciation and financial expenses, respectively. This means that financial expenses will be higher during the start of the lease term and will then decline in line with amortization of the liability. The depreciation is the same over the entire lease term. However, income from property management is only impacted by the accrual effect arising for the land leases, which is extremely marginal.

Calculation of key ratios is based on the current accounting, which means for example that net financial items includes interest for leases. Comparative figures for previous years have not been restated.

No other new and amended standards approved by the EU and interpretations from the IFRS Interpretations Committee are deemed to have a material impact on the Group’s financial position.

EVENTS AFTER THE END OF THE REPORTING PERIOD

In January, a decision from an arbitration board was announced in a case that involved a Wallenstam company. The ruling, which was in our favor, had no impact on the annual accounts for the year.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Key ratios – multi-year summary

Accumulated during period	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018	Mar 31, 2018	Dec 31, 2017
PROPERTY-RELATED KEY RATIOS
Net operating income, properties, SEK million	1,529	1,159	756	364	1,429	1,078	706	341	1,264
Surplus ratio, property management, %	75.5	76.7	75.6	73.2	74.8	75.8	75.0	73.0	74.3
Income from property management, SEK million	1,108	851	547	260	1,011	758	462	217	806
Changes in value, new construction	792	505	307	132	598	421	267	93	733
Value of investment properties, SEK million	52,354	49,793	48,757	47,289	45,811	44,360	43,446	42,187	41,410
Area, sq m (thousand)	1,201	1,199	1,188	1,181	1,186	1,197	1,196	1,175	1,145
Occupancy rate – lettable area, %	98	98	99	99	99	99	99	99	98
Development properties, net, SEK million	175	154	155	156	317	658	691	656	606
FINANCIAL KEY RATIOS
Profit after tax, SEK million	2,737	1,038	575	340	2,998	1,769	1,310	310	2,421
Return on equity, %	12.3	10.4	10.6	14.6	14.8	12.2	11.8	11.5	13.0
Return on total capital, %	7.2	6.1	6.2	9.5	9.7	8.4	8.3	7.2	8.0
Interest coverage ratio, times	6.3	7.0	7.4	1.5	1.3	1.2	1.1	3.6	3.8
Loan-to-value ratio, %	45	45	46	45	45	46	46	44	43
Average interest rate on closing day, %	1.22	1.23	1.24	1.25	1.06	0.98	1.01	1.90	1.88
Average fixed-interest term, months	38	40	41	44	39	36	38	34	36
Equity/assets ratio, %	44	43	43	44	45	44	44	44	44
Equity, SEK million	23,794	22,402	21,899	21,951	21,611	20,688	20,252	19,572	19,410
Net asset value, SEK million	29,501	27,666	27,047	27,011	26,574	25,608	25,113	24,548	24,314
Non-current net asset value (EPRA NAV), SEK million	29,778	28,210	27,449	27,210	26,595	25,560	25,110	25,123	24,915
Market capitalization, SEK million	37,356	36,828	32,406	30,971	27,126	27,786	26,582	25,031	26,037
Repurchase of shares, SEK million	-	-	-	-	229	204	182	147	235
Per share data
Profit after tax, SEK	8.5	3.2	1.8	1.1	9.3	5.5	4.0	1.0	7.4
P/E ratio, times	13.4	15.9	14.0	10.0	8.9	11.3	11.5	11.3	10.7
Cash flow from operating activities, SEK	4.2	3.4	2.1	1.1	1.1	0.2	-0.8	0.8	2.6
Equity, SEK	74	69	68	68	67	64	63	60	60
Net asset value per share, SEK	91.30	85.70	83.70	83.60	82.30	79.20	77.60	75.80	74.60
Share price, SEK	113.20	111.60	98.20	93.85	82.20	84.20	80.55	75.85	78.90
Shares outstanding, average, thousands	323,000	323,000	323,000	323,000	323,854	324,073	324,405	325,050	327,333
Shares outstanding at end of period, thousands	323,000	323,000	323,000	323,000	323,000	323,310	323,550	324,000	326,000

Quarterly overview

	Oct-Dec 2019	Jul-Sep 2019	Apr-Jun 2019	Jan-Mar 2019	Oct-Dec 2018	Jul-Sep 2018	Apr-Jun 2018	Jan-Mar 2018	Oct-Dec 2017
Rental income, SEK million	515	510	503	497	488	480	475	467	444
Net operating income, properties, SEK million	370	403	392	364	351	372	365	341	311
Surplus ratio, property management, %	71.8	79.0	77.9	73.2	71.9	77.4	76.8	73.0	70.0
Income from property management, SEK million	257	304	287	260	253	296	245	217	185
Return on equity, %	12.3	10.4	10.6	14.6	14.8	12.2	11.8	11.5	13.0
Earnings per share after tax, SEK	5.3	1.4	0.7	1.1	3.8	1.4	3.1	1.0	2.0
Cash flow per share from operating activities, SEK	0.8	1.3	1.0	1.1	0.9	1.0	-1.6	0.8	0.4
Equity per share, SEK	74	69	68	68	67	64	63	60	60
Net asset value per share, SEK	91.30	85.70	83.70	83.60	82.30	79.20	77.60	75.80	74.60
Share price, SEK	113.20	111.60	98.20	93.85	82.20	84.20	80.55	75.85	78.90

Earnings-based key ratios are calculated on the average number of outstanding shares; yield figures are calculated on rolling twelve-month profit or loss.

20 WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Report signatures

The Board and CEO certify that the Year-end report provides a fair view of the Parent Company's and Group's operations, financial position and results and describes the significant risks and uncertainties to which the Parent Company and Group Companies are exposed.

Gothenburg, February 5, 2020

Ulrica Jansson Messing
Chairman of the Board

Karin Mattsson
Board member

Anders Berntsson
Board member

Agneta Wallenstam
Board member

Hans Wallenstam
CEO

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Definitions

Share yield

The proposed dividend as a percentage of the share price at the end of the period.

Share total yield

The share price trend during the year including distributed dividend as a percentage of the share price at the start of the period.

Alternative performance measures (APM)

Wallenstam presents a number of financial measures that are outside IFRS definitions (Alternative performance measures, according to ESMA's guidelines) with the aim of enabling effective evaluation of the company's financial position and performance for investors and for the company's management. This means that these measures are not always comparable with measures used by other companies and shall therefore be considered as a complement to measures defined according to IFRS. Wallenstam applies these alternative key ratios consistently over time. The definitions describe how Wallenstam's key ratios are calculated. The key ratios are alternative performance measures according to ESMA guidelines unless otherwise stated.

The number of shares

The number of registered shares at any given time.
Number of shares outstanding: the number of registered shares less repurchased own shares at any given time.
Average number of shares: weighted average number of shares outstanding at any given time.

Residential property

Property, which predominantly consists of residential space.

Loan-to-value ratio

Interest-bearing liabilities and lease liability less cash and cash equivalents in relation to the Group's investments in properties, development properties and wind power at the end of the period.

Market capitalization

Share price multiplied by the number of registered shares on the closing day.

Net operating income

Rental income less operating and maintenance expenses, and property tax.

Development properties

Development properties refer to properties constructed with the intention of being sold after completion.

Rental value*

Rental income and the estimated market rent for vacant space.

Cash flow per share

Cash flow for the period in relation to the average number of shares outstanding.

Cash flow from operating activities per share

Cash flow from operating activities for the period in relation to the average number of shares outstanding.

Commercial property

Property, which predominantly consists of commercial space.

Non-current net asset value (EPRA NAV)

Equity with reversal of deferred tax liabilities and the net effect of unrealized changes in value of derivative instruments after tax and less adjusted in advance financial electricity contracts.

Net letting

New lets signed during the period less cancellations.

P/E ratio

Share price at the end of the period in relation to profit after tax for the average number of shares over the latest rolling 12-month period.

Earnings per share after tax

Profit after tax in relation to the average number of outstanding shares, in accordance with IFRS.

Return on equity**

Profit after tax in relation to average equity, calculated on a rolling 12-month basis.

Return on total capital**

Profit before tax with reversal of interest expenses and early redeemed derivatives for the latest rolling 12-month period in relation to average total capital employed.

Interest coverage ratio

Profit or loss before changes in value and impairment charges with reversal of net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period in relation to net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period.

Interest coverage ratio excl. early redeemed interest rate derivatives

Profit or loss before changes in value and impairment charges with reversal of net financial items and early redeemed interest rate derivatives for the latest rolling 12-month period in relation to net financial items for the latest rolling 12-month period.

Community property

Property, which is predominantly used by tax funded activities and is specifically adapted for community services.

Average interest

Interest expenses for the period including profit or loss on swap agreements realized during the period in relation to interest-bearing liabilities.

Equity/assets ratio

Equity in relation to total capital employed at the end of the period.

Net asset value

Equity with the addition of deferred tax liabilities.

Net asset value per share

The Group's net asset value in relation to the number of outstanding shares at the end of the period.

Occupancy rate – lettable area

Let floor space in relation to total floor space.

Changes in value, investment properties

Gains or losses from sales of investment properties during the period less expenses and the assessed market value of the properties at the previous reporting period and gains or losses from the change in the assessed market value of investment properties compared to the previous reporting period.
Changes in value, New construction: The increase in value is gradually recognized during the construction of the property until the first year the property is taken into operation. Change in value new construction recognizes the difference between the cost of construction of a new rental apartment and the value it has on completion.
Change in value Other: Refers to changes in the value of investment properties, which have been in operation for one calendar year or more.

Surrender rate

Proportion of leases extended in relation to the proportion of cancellable leases.

Surplus ratio

Net operating income as a percentage of rental income.

For further information, please refer to: www.wallenstam.se/glossary

*Operational key ratios, are not considered alternative key ratios according to ESMA's guidelines.

** Bridge alternative performance measures	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018	Sep 30, 2018	Jun 30, 2018	Mar 31, 2018	Dec 31, 2017
Equity, SEK million	23,792	22,400	21,897	21,949	21,609	20,686	20,250	19,570	19,408
Average equity, SEK million	22,329	21,708	21,278	20,813	20,305	19,795	19,421	19,024	18,665
Total assets, SEK million	54,689	52,459	51,177	49,945	48,262	46,655	45,625	44,426	43,673
Average total assets, SEK million	51,306	49,700	48,333	46,983	45,728	44,508	43,452	42,298	41,293

For average values, add the latest five periods and divide by five.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

This is Wallenstam

BUSINESS PLAN 2023

Goal

To achieve an increase in net asset value of SEK 40 per share starting from October 1, 2018 through December 31, 2023

Guiding principles

• We shall exceed customer expectations and improve the overall impression of Wallenstam every year through attractive apartments and premises as well as good service.
• Through our strong corporate culture, we shall be an attractive employer and improve our Engagement Index score every year.
• We shall reduce our environmental impacts every year, through initiatives within the focus areas energy, transports and resources.

Defined key ratios

• The equity/assets ratio should not be less than 30 percent.

VISION

Wallenstam shall be the natural choice of people and companies for housing and premises.

BUSINESS CONCEPT

We develop and manage people's homes and workplaces based on a high level of service and long-term sustainability in selected metropolitan areas.

WALLENSTAM TODAY

Wallenstam was founded in 1944 and celebrated 75 years as a company during 2019. The head office is located in Gothenburg. The company's B share is listed on Nasdaq Stockholm, Large Cap and Wallenstam is one of the larger listed property companies in Sweden.

Our residential properties are located in Stockholm, Uppsala and Gothenburg, while our commercial properties are concentrated towards inner city locations in Gothenburg. All in all, Wallenstam has approximately 9,400 apartments and 1,000 commercial tenants. Wallenstam is a major producer of homes in the regions where we operate and we mainly build rental apartments for our own property management.

Wallenstam is self-sufficient in renewable energy through its 66 own wind turbines in operation. Production covers our own properties' energy needs and those of our tenants.

Operations are conducted in the Stockholm business area and the Gothenburg business area.

Stockholm

The majority of our apartments, just over 5,000, are located in the Stockholm business area. Approximately 500 of these apartments are located in Uppsala. At present, most of our new construction also takes place in the Stockholm region, including Uppsala. The Stockholm business area had almost 1,900 apartments under construction on closing day.

Gothenburg

Our property holdings in Gothenburg consist of just over 4,000 apartments and about 900 commercial tenants that rent office and retail premises, mainly in inner city locations. The Gothenburg business area had almost 1,300 apartments under construction on closing day.

BUSINESS PROCESS

Wallenstam builds, develops and manages properties and areas based on the needs of people and society, and according to the wishes and requirements of customers and shareholders. We create value growth through construction, development and management as well as a high level of service and long-term sustainability. Profits are reinvested and used to develop the business further. Shareholders receive a share of the profits in the form of dividends.

WALLENSTAM | YEAR-END REPORT JAN 1-DEC 31, 2019

---

Calendar

| Publication of Annual Report 2019 | week commencing
March 16, 2020 |
| --- | --- |
| Interim report Q1, 2020 | April 28, 2020 |
| Annual General Meeting 2020, Gothenburg | April 28, 2020 |
| Interim report Q2, 2020 | July 17, 2020 |
| Interim report Q3, 2020 | October 22, 2020 |

This is information that Wallenstam is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 12:00 CET on February 5, 2020.

This interim report has not been subject to review by the company's auditors.

Contact

For further information, please contact Susann Linde, CFO and Head of IR

tel: +46 705-17 11 34

e-mail: susann.linde@wallenstam.se

W

in

^{}[]

f

Wallenstam AB (publ)

SE-401 84 Gothenburg

Visiting address: Kungsportsavenyen 2

Telephone +46 31-20 00 00

www.wallenstam.se

Co reg. no. 556072-1523